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Federal Reserve Bank
of Dallas
Annual Report
to the
Boord of Directors
Submitted by
R. R. Gilbert, President
February 1, 19 47
•
CONFIDENTIAl
CONTENTS
Page
Business Activity in 1946 in the Eleventh Federal Reserve
District ..................................................................................
5
Treasury Financing ..................................................................
8
Government Security Market.................................................... 10
Member Bank Reserves and Related Factors.......................... 12
Weekly Reporting Member Banks-United States .................... 14
Weekly Reporting Member Banks-Eleventh Federal Reserve
District .................................................................................. 15
Internal Operations .................................................................. 16
Research Activities ................................................................
Legal Activities ....................................................................
Labor Union Activities..........................................................
Personnel Activities ..............................................................
Retirement System ................................................................
Pay Roll Deductions for Bond Purchases ............................
Bank Examinations ..............................................................
Regulation of Consumer Credit.. ..........................................
Membership in the System....................................................
Changes in Capital Stock. .....................................................
Nonmember Banks ................................................................
Par Banks -------·················-··················--·-···········-·-···············
New Bank Organizations........................................................
Bank Failures ············---------------·------------------------··················
Federal Reserve Credit..........................................................
Federal Reserve Note Circulation..........................................
Deposits of Member Banks----------·------------·-----·---·-----------------Member Bank Reserve Balances.. ------·-·-·------·---··--------------·--·Cash Department Operations................................................
Check Collections·····················-·····---·--··--------······-················
Check Routing Symbol Program... ·-------------------·-·----·--------··Fiscal Agency Operations ......................................................
Custodian Activities ········-----·---·-·-···············-·-·-·--·---··-··-··--··-·
Cuisine Service ···········-············-----·----·--·-·--··--·---··---·------······
3
16
17
18
19
21
22
22
23
23
24
25
25
26
26
27
28
29
30
31
31
32
33
34
35
BUSINESS ACTIVITY IN 1946
IN THE ELEVENTH FEDERAL RESERVE DISTRICT
Business activity in the Eleventh Federal Re erve Disu·ict during
1946 1·eached boom proportions. Many of the basic postwar production and labor problems were met with much less impact upon
the district's economic activity than might have been expected.
Su,stained high consumer demand throughout the year and substantially higher prices during the last half of 1946 contributed
to the high levels which characterized most lines of business
activity. Agriculture, so imp01tant in the economy of this district,
also enjoyed another very favorable year. Acreage in cultivation,
the volume of production of many of the important crops, and net
farm income advanced to levels considerably above those reached
during 1945.
Reflecting the expan ion in retail sales, total sales of reporting
department stores in the district were 28 per cent higher in 1946
than in the preceding year. Moreover, each month in 1946 reflected
total sales of department stores substantially above the sales of the
corresponding month in 1945. The cumulative increase in department tore sale reached its peak, as compared with 1945,
in September 1946 and then tapered off slightly, indicating, along
with other indexe of retail trade, that by the end of the third
quarter of 1946 the expansive factors were beginning either to
lose some of their force or to be checked somewhat by the appearance of stronger restrictive factors such as partial atisfaction of
backlog demand, reluctance to buy as freely at the more inflated
prices, and an increasing value awarenes which encouraged
greater selectivity in buying with respect to quality.
An increasing use of retail credit became evident during 1946.
Cash sales as a percentage of total sales of department stores
declined from 52 per cent in January to 42 per cent in September
and October but rose to 45 per cent by the end of 1946. Charge
account ratios, on the other hand, ro e from 45 per cent in January
to 52 per cent in December. The use of in talment sales by department tores wa comparatively unimportant and howed little variation during the year. Payment of charge accounts became les
prompt as the year progressed. Early in 1946, the average collection period of charge accounts was 45 day~, whereas by December
it had lengthened to approximately 56 days. De pite the lengthen-
s
ing of the collection period, charge accounts still are being paid
more promptly than before the war. The elimination of charge
account control from the provisions of Regulation Won December
1, 1946 may contribute to a further lengthening of the collection
period.
Merchandise tocks of department stores showed practically an
uninterrupted rise throughout the year. In January 1946, the
seasonally adjusted monthly index of merchandise stocks stood
at 179, whereas by December it had risen to 364. On the basis
of latest available figure , inventories of many oft goods in
relation to sales equaled or exceeded 1941 levels. On the other
hand, inventories of major household appliances continued low
in the department stores of the district, despite some improvement
reflected in the latter part of the year. There is considerable evidence, however, that department store buyers in the di trict have
recognized the possibility of accumulating excessive inventories
and are following a more caution buying policy and a more active
policy with respect to disposal of excess stocks.
Manufacturing employment and total nonagricultural employment in Texas increased steadily through the first three quarters of
1946. Although data are available only through October 1946,
indications are that the generally favorable employment situation
continued throughout the year. The postwar decline in nonagricultural employment in this area and the much sharper decline
in manufacturing employment ran their courses during the first
and second months of 1946. Late in 1946, nonagricultural employment in Texas was about four per cent below the wartime peak but
almost 25 per cent higher than the December 1940 level, whereas
manufactlll"ing employment, although 28 per cent below the wartime peak, was 65 per cent above the 1940 level. Shortages of certain types of skilled labor and of skilled office workers still exist
in some localities, although, in general, an adequate supply of
labor appears to be available. Generally speaking, the southwest
area seems to be in a better position with respect to the supply of
labor than a1·e some other sections of the United States.
Although data are not available to confirm the view, it appears
from reports that the productivity of labor increased appreciably
in this district after mid-1946. Turnover rates declined, labor attitudes improved somewhat, and a smoother flow of materials
apparently permitted more efficient utilization of labor with a
consequent higher productivity.
6
Removal of many controls upon constTuction late in 1945, under
of high demand, stimulated a substantial increase in
construction activity in the district during early 1946. The value
of contracts awarded for all types of construction totaled $85,000.000 in May 1946, the highest level attained since the peak of war
construction in 1942. In the same month residential contract awards
reached an all-time peak of $51,000,000. During the latter half
of the year a major decline in construction activity occurred in
the district. Factors contributing to the decline were the reimpo ition of strict controls upon nonresidential con truction, highly inflated building costs, shortages of numerous essential material ,
and uncertainty with respect to government policies. Notwith ·Landing that decline, 1946 was a boom year for the construction indu try in the district, with an estimated $570,000,000 in construction
contracts awarded during the year, a compared with a prewar
peak of $450,000,000 in 1941.
~onditions
Perhaps the most striking development in 1946 in the petroleum
industry was the very heavy sustained demand for it products, in
contrast to some expectations that petroleum requirements would
be reduced substantially during the year. In the dist1·ict a new
all-time peak in production was reached in June 1946. Although
production declined steadily during the remainder of the year,
daily average production in 1946 was 50 per cent above the 19391940 average. Despite shortages of pipe and other materials, more
wells were drilled in Texas during 1946 than in any year since
1941. Preliminary reports indicate an addition to proven reserves
sufficient to offset current production.
Estimated acreage of crops harvested in Texas in 1946 was
approximately 27,700,000 acres, as compared with 27,300,000
acres harvested in 1945. Substantial increases in acreage of wheat,
grain sorghums, and cotton more than offset declines in corn, oats,
and barley. Total acreage harvested also increased in Oklahoma
and Arizona, whereas slight declines occurred in New Mexico
and Louisiana.
Despite rather unfavorable gxowing seasons in some parts of
the district, total agricultural production during 1946 was very
high. Production of wheat, grain orghum , peanuts, and Irish
and sweet potatoes was considerably a bove average and substantially above 1945. Other crops which exceeded 1945 totals and
ten-year average :figures included hay, citrus fruits, and commercial truck crops. Production of cotton was less than the short crop
of 1945 and equaled only about half the average production for
7
the ten-year period 1935-1944. The district corn crop, except in
Louisiana, wa slightly larger in 1946 than the small Grop produced during the previous year, although the 1946 crop was subtantially below average.
· Movement of cattle, calves, and sheep into the Fort Worth
and San Antonio markets, though fluctuating considerably with
changes in prices and developments in the field of price control,
was maintained at a high level during 1946, although considerably below the record volume which moved into those markets in
1945.
Value of farm crops in 1946 in Te ·as is estimated at $946,000,000, or about 27 per cent above the value of the 1945 crop.
Preliminary reports indicate that the value of animals and aii'imal
products produced in the State during 1946 totaled about $200,000,000, bringing the estimated total gross value of farm products
to almost $1,150,000,000.
Prices received by farmers dming 1946 generally averaged well
above pdce received in 1945. After the mid-summer suspension
and the sub equentTemoval of price ceilings, prices of most farm
commoditie increa ed sharply, with prices for most classes of
livestock reaching record level . The general opinion seems to
prevail that prices of many of the important agriculhual products
are vulnerably high and that a general oftening of agricultural
prices is to be expected in 1947. In support of thi view, price
weaknesses began to appear in the last quarter of 1946, notably,
the sharp drop in cotton price in November, the subsequent break
in the butter market. and the severe decline in the prices of citrus
fruits during December.
TREASURY FINANCING
The outstanding development during 1946 in Treasury fiscal
operations was the retirement between March 1 and December 15,
inclusive, of $23,200,000,000 of marketable public debt. A second significant development was the continued emphasis placed
upon the sale of United States savings bonds, as evidenced by the
two bond promotion campaign conducted between June 6 and
· July 4, and November 11 and December 7.
It became evident early in 1946 that ca h receipts of the
Treasury would run larger than had been anticipated; moreover,
cash expenditures were reduced somewhat more sharply than
earlier budget estimates indicated. It was obvious that the Treas8
ury would not need to enter the market to borrow additional funds
but, on the contrary, would be in a position to use a very substantial part of its cash balances, which totaled $25,855,000,000 at
the end of February 1946, for debt retirement purposes.
Although the Treasury's debt retirement program was a flexible
one in the sense that decisions were made more or less currently
as the program progressed, it may be con ·luded that Treasury considerations involved the use of as much as possible of the Treasury's cash balances for the retirement of maturing and callable
United States Government securities, emphasizing particularly the
retirement by cash of as large a percentage as practicable of maturing and callable issues of Government securities held by commercial banks and the Federal Reserve banks and, econdly, the
retirement by cash, if possible, of the entire amount of all maturing and callable bond issues and notes, thus reducing the total
interest cost.
In the course of the Treasury's debt retirement program, 100
per cent of all bonds maturing or callable was redeemed by cash;
68.4 per cent of maturing notes and 43.5 per cent of maturing
certificates of indebtedness also were retired by ca h. Cash redemptions during the period of the debt retirement program totaled
51.7 per cent of the $44,900,000,000 of matured and called Government securities.
The maturity distribution of the marketable public debt changed
somewhat as a consequence of the debt retirement program. Debt
due or callable within one year decreased from 35.2 per cent of the
total marketable public debt on February 28, 1946 to 31.1 per cent
on December 15, 1946.
In line with the policy of demonetizing the public debt to the
greatest extent practicable, 51.7 per cent of the marketable Government securities redeemed by cash was held by the commercial
banks, while Federal Reserve banks held approximately 20.4 per
.cent of such securities.
The over-all effect of the debt retirement program upon the
size of the public debt was a reduction of $23,200,000,000 in
marketable public debt and a decline in the total public debt from
$279,200,000,000 to $258,700,000,000 on December 15, 1946.
The discrepancy of $2,700,000,000 resulted from a decrease of
$700,000,000 in total nonmarketable public issues and an increase
of $3,400,000,000 in special issues. On December 31, 1946, the
total gross public debt amounted to $259,149,000,000, and the
9
Treasury's cash balance was approximately $3,138,000,000. The
type of issue and the amounts involved in the Treasury's debt
retirement program are shown below:
Tupe of
Josue
% Ctfs.
1.0 ote_
3% Bonds
1956-46
7
• Ctfs.
% Ctfs.
% Ctfs.
3 Bonds
1948-46
3¥1 Bonds
1949-46
0.90Notes
%Ctfs.
7 Ctfs.
7 Ctf .
%Ctf.
~ ~ Ctfs.
Notes
Total
Pz
(Amounta in miUions of doUars)
DateDtte
Amount
Amoac.nt
or Called 0-utatandina Redeemed
for Cash
Per Cent
of ]88UC
Mar. 1
Mar. 15
. 4,147
1,291
1,014
1,291
24.5
100.0
Mar. 15
Apr.1
1\Iay 1
June 1
489
489
4,811
1,579
4,799
1,991
1,579
2,025
June 15
1,036
June 15
July 1
ug. 1
ept. 1
819
4,910
2,470
4,336
3,44{)
3,778
3,768
3,261
'44,934
Oct. l
()V.]
Dec. 1
Dec.l5
Cash Redemption by HoWer
F&deru.l
Reserve
Com1'ttMcial
Banks
Other
II older•
Btt?tkB
s
233
76
623
1,007
100.0
41.4
100.0
42.2
77
547
362
247
213
1,018
964
603
253
1,175
1,036
100.0
205
530
301
819
1,994
1,246
1,995
2,000
2,000
500
3,261
$23,240
100.0
40.6
50.6
46.0
58.1
52.9
13.3
100.0
51.7
87
434
425
1,000
594
732
1,055
1,028
0
2,222
$12,014
363
740
482
357
0
540
4,750
$
158
208
199
426
307
560
289
523
463
615
500
499
s 6,476
Although actual :figures of results obtained are not available,
it is believed that the two promotion campaigns for the sale of
United States savings bonds were reasonably successful. Those
promotions, which were mo1·e in the character of advertising campaigns than sales campaigns, were designed to inform the public
of the :financial soundness of investing in United States savings
bonds and the advantages to individuals in their own self-interest
to increase their purchases of savings bonds and to hold such
securities until maturity. Each promotion received the general
upport of newspapers, radio networks, magazines, banks, businesses, and civic leaders throughout the country. In this district,
the cooperation of various agencies and individuals able to lend
·upport to the promotions was very encouraging.
GOVERNMENT SECURITY MARKET
Several important developments during 1946 affected the demand for and the supply of Government securities, causing substantial fluctuations in prices. The degree of price fluctuations
varied considerably among the various types of issues. For the
year, average net declines of 2~-'J points and 1% points, respectively, occurred in the intermediate and long-term partially taxexempt Treasury bonds and taxable Treasury bonds eligible for
purchase by commercial banks. On the other hand, prices of retricted issues showed an average net increase of 11/2 points.
10
YIELDS- U.S. TREASURY BONDS AND NOTES
PERC.~EII~T------------,------------~'-16
.60
1.80
1946
1945
During the early months of the year, circumstances created a
strong demand for Govemment bonds which resulted in price
advances. These included: general expectation that the existing
System policy with respect to the maintenance of the pattern of
interest rates would remain in effect, a general carcity of offerings
in the market of inte1·mediate and long-term bonds, and the
realization that no new long-term Government issues were in
prospect. At the same time, the reserve positions of commercial
banks were relatively easy because of the decrease in Trea ury
balances at the Federal Reserve hanks, the decline in currency in
circulation, and the increase in the monetary gold stock. Moreover,
some commercial banks were borrowing from Lhe Federal Reserve
hanks at the preferential discount rate in order to add to holdings
of intermediate and long-term bonds.
Prices of Treasury bonds eligible for purchase by commercial
hanks began to ea e early in March, reflecting the tightening of
rese1·ve positions caused by the initial effects of the Treasury debt
retirement program and other Treasury operations and an increase
in the market supply resulting from the large-scale shifts of institutional investors out of bank-eligible securities into the restricted
issues. Prices of restricted bonds turned downward early in April
primarily as a result of the following influences: (a) the prospects
of the availability of other types of investments at more favorable
11
rates, (b) the difficulty experienced by nonbank investors in rai ing, through the ale of bank-eligible issues at favorable prices,
the funds with which to purchase re lricted bonds, and (c) the
emphasis placed upon the amount of the Victory Loan i sues that
might be sold during May and June by nonbank investor . The
declines were accentuated later a the result of the elimination of
the preferential discount rate of lj~ per cent on Government ecurities maturing within one year and the removal of the limit of 1,4
point on daily price changes in the over-the-counter market. Although there were temporary recoveries in Government secmity
prices from time to time, the market drifted downward until late
November. The factors affecting the market adversely included
the drain on bank reserves as a result of the debt retirement program, the increase in money in circulation, recurring rumors of
the Treasury's intention to issue a new long-term 2lf2 per cent
bond, persistent selling of bonds held in Government trust funds,
a slight fu·ming in some short-term interest rates, and the sharp
declines in stock prices late in August and in September. The
Government security market tumed upward late in November and
continued generally firm until the end of the year.
MEMBER BANK RESERVES AND RELATED FACTORS
During 194·6, estimated excess reserves of member banks
throughout the nation declined by approximately $920,000,000
as reserve balances held by such banks increased $239,000,000
and estimated required reserves increased $1,159,000,000. The
principal factors influencing member bank reserves were transactions related to Treasury financing, changes in the volume of
currency in circulation, and an expanding loan volume.
During the first quarter of 1946, the reserve positions of member banks were relatively easy and reflected the large volume of
reserve-exempt war loan deposits and the return flow of currency
from circulation of approximately $630,000,000. The reserve
positions of member banks tightened noticeably a a result of two
factors: the withdrawal of substantial sums from the reserveexempt war loan deposits, after the inaugmation of the Treasury's
debt retirement program on March 1 and the increase in the
volume of currency in circulation, which became apparent in May
and continued for the remainder of the year. Although Federal
Reserve bank credit was utilized from time to time to moderate
the effect of Trea ury and currency tran actions upon member
bank reserves, the total Re erve bank credit outstanding on Decem12
her 31, 1946 was approximately $754,000,000 less than on January 2, 1946. The changes in factors affecting reserve balances are
presented in the following table:
SUPPLY AND USE OF MEMBER BANK RESERVE FUNDS IN THE
UNITED STATES
(Amounts in millions of dollars)
Dec. S1,
Jan. 1!,
1946
19~8
24,093
Reserve bank crediL
Monetary gold stock_________ 20,529
Treasury and national bank
cnrrency.______________ 4,561
l\loney in circulation_ ..
-- 28,951
Treasury cash______ ··-- ____ 2,271
Treasury deposits with Reserve
banks ____ ---··--·-···
393
822
onmember deposits.. _
Other Federal Reserve accounts 607
Total __
... - ---
that
that
Reduced
s
24,847
ReservetJ
754 (- )
20,065 $ %4(+)
4,352
28,491
2,306
209( +)
771
1,299
497
378(-)
477(-)
460( +)
35(-)
110(
$1 ,324
$1,563
~
Member bank reserve balances
held_ .._____ •. ___ _
16,139
15,579
Estimated required reserves
Estimated excess reserves_ ..
560
Chattoe•
Change•
Added to
R ese?'llea
15,900
14,420
1,480
+>
239(+)
1,159( +)
920(-)
The Federal Reserve Sy tern's holdings of Government securities reached an all-time peak on December 11, 1946 at $24,128,000,000, surpassing the former peak established on January 2 of
the same year. During 1946, rather significant changes occurred
in the compo ition of the Government security portfolio of the
System. Trea ury bill , which repre ented 52.6 per cent of the
Government securities held by the System as of January 2, 1946,
increased to 63.1 per cent of the System's holdings. On the other
hand, Treasury note declined in importance in the System's hold.ing of Government ecurities from 6.4 per cent on January 2,
1946 to 1.5 per cent by December 31, 1946. Certificates of indebtedness also declined in relative importance from 37.1 per cent to
32.1 per cent of the portfolio during the period.
These changes were the result principally of the Treasury' debt
retirement program during the la L ten months of 1946. A subtantial amount of Treasury notes and certificates of indebtedness
held by the System was retired by cash by the Treasury. In addition, as commercial banks found their re er e positions tightened
omewhat a a re ult of the debt retirement program, the Federal
Reserve banks acquired a larger amount of the available Treasury
bills.
Declining f1·om the peak reached in mid-December, the Federal
Reserve System's holdings of Government securities totaled $23,13
350,000,000 on December 31, 1946, or approximately $741,000,000 less than the System's holding on January 2, 1946. During
the first quarter of 1946, the System' holdings of Government
ecurities followed a steadily declining trend. During the last three
quarters of the year the trend of holdings was upward, interspersed, however, from week to week wjth rather substantial fluctuations as the System made purchases and sales of Government
ecurities to moderate the effect of Treasury operations upon bank
reserves.
HOLDINGS OF GOVERNMENT SECURITIES BY THE
FEDERAL RESERVE SYSTEM
(Amounts in millions of dollars)
Tupe of SBouritll
Dlloember 81, Per c....t
1946
of Total
Treasury bills-total
__ .814,745
Under repurchase option_.__ 4,906
Other - - - - --- - - 9,839
Certificates of indebtedness___ 7,496
Treasury notes - --- - - 355
Treasury bonds
754
TotaL_ _______________ 23,350
63.1
21.0
42.1
32.1
1.5
3.3
100.0
Jtsfi/IUI,f"/1 ' ·
1946
$12,660
4,681
7,979
3,941
1,543
947
$24,091
Per Cent
of Total
Net
Cll4,.ge
52.6
19.5
s 2',065(+)
33.1
1,860(+)
1,445(-)
1,188(-)
225(+)
37.1
6.4
193(-)
3.9
100.0
$
741(-)
WEEKLY REPORTING MEMBER BANKS
UNITED STATES
During most of 1946, changes in the principal asset and liability
items of the weekly reporting member banks1 in the United States
' ere influenced largely by fiscal operations of the Treasury. As
the Treasury drew heavily upon its war loan deposits and utilized
those funds to retire Government securities, Government deposits
of the weekly reporting member banks declined very sharply.
Furthermore, many banks reduced their balances with corre.spondents in order to obtain funds to meet the war loan calls of
the Treasury.
The major changes in the asset and liability items of the weekly
1·eporting banks between January 2, 1946 and December 31, 1946
included a decline of $12,469,000,000 in total deposits, caused
hy a decline in United States Govemment deposit from $16,704,000,000 to $1,864,000,000 and a decline of $1,562,000,000
in interbank deposits, offset by increases in adjusted demand
deposits and time deposits of $2,915,000,000 and $1,018,000,000,
respectively; a decline of $12,645,000,000 in the weekly reporting member banks' holdings of Government ecurities; and an
increase of $804,000,000 in total loans.
1Selected member banks in leading cities which report principal asset and liability
jtems weekly to the Federal Reserve banks.
14
As indicated in the preceding paragraph, the weekly reporting
member banks obtained the funds to meet the decline in total
deposits from $75,448,000,000 to $62,979,000,000 by reducing
their holdings of United States Government securities and by drawing on their balances with correspondent banks.
Major changes in the loan portfolios of the weekly reporting
banks included an expansion of slightly more than $3,000,000,000
in commercial, industrial, and agricultural loans and substantial
increases in real estate loans and consumer loans. During the
year, bank loans to brokers and dealers in securities and other
loans for security trading declined very sharply from the very high
level which had been reached at the end of December 1945. These
two related categories of loans declined from a total of $5,749,000,000 on January 2, 1946 to $2,493,000,000 on December 31,
1946. That decline in security loan reflected the substantial
liquidation of loans which had arisen in connection with the Victory Loan Drive late in 1945 and the elimination of margin
trading.
The largest declines in weekly reporting member banks' holdings of Government securities were in United States certificates of
indebtedness and United States Treasury notes, which declined
approximately $6,758,000,000 and $5,167,000,000, respectively,
during 1946. Weekly reporting member banks increased their
holdings of United States Govemment bonds only moderately, as
the total advanced from $26,747,000,000 on January 2, 1946 to
26,902,000,000 on December 31, 1946.
WEEKLY REPORTING MEMBER BANKS-ELEVENTH
FEDERAL RESERVE DISTRICT
Changes 1·eflected in the principal as et and liability accounts
of the weekly reporting member banks1 in this district followed the
same general pattern that was characteristic for all weekly reporting member banks in the United States, although the relative
change varied somewhat from the national pattern with respect to
certain items.
Total deposits of the weekly reporting member banks in the
district declined somewhat less than was tlue in the case of the
weekly reporting banks in 101leading cities throughout the coun1Selected member banks in leading cities of the district which report principal asset
and liability items weekly to the Federal Reserve Bank of Dallas.
15
try, and adju ted demand deposits and time deposits increased
relatively more in this district.
Loans of the weekly reporting member hanks in the district increased 15.2 per cent during the year 1946, as compared with an
increase of 5.1 per cent for the weekly reporting banks in the
nited Stale . Changes in holdings of United States Government
ecur.ities were closely similar in the district and in the United
States as a whole, but holding of other ecurities by the weekly
reporting member banks in the di trict increased 25.8 per cent,
as compared with an increa e of 1.4 per cent for the weekly reporting member banks in the United State .
There are presented below in tabular form principal asset and
liability items of the weekly reporting member banks in this
di txict as of January 2, 1946 and December 31, 1946, showing,
in addition, the amount of change which occurred during the period
and the percentage change in each item for the weekly reporting
member banks in the district and in the United States:
( Amo11nts in Millions of dollars)
Eleventh F'edera.L Reserve District
Net
December 31, January S,
Change
191,6
191,6
__ _ _ $2,432
Deposits-total _____
Demand depo its-adjusted .. _ _ 1,475
50
United tall' Government deposits_
587
Interbank deposits _ _ _
320
Time depo~it _.
Loans ___ .... ___ - - - -·- - - - - - - 787
Inve tments ________ ... ______ 1,080
United State~ Government. _____ 1,002
78
______
Other securities ___ _
Balances with corre pondents_ _ _ 250
$2,806
1,331
501
694
280
683
1,496
1,434
62
313
374(-)
144( +)
451 (-)
107(-)
40 ( +)
104( +)
416(-)
432(-)
16 ( +)
63(-)
Percentage Cll.ange
Eleventh United
States
District
-13.3
+10.8
-90.0
-15.4
+14.3
+15.2
-27.8
-30.1
+25.8
-20.1
-16.5
+ 7.9
-88.8
-12.7
+ 1.1
5.1
-24.2
-26.0
+ 1.4
-13.9
+
INTERNAL OPERATIONS
RESEARCH ACTIVITIE
During 194.6, the research function of the bank was expanded
to include a number of new services to the banks of the district and
to busines , industry, and agriculture in thi area. These new
services, which include the publication of a monthly Agricultural
News Letter, the pre entation of a weekly radio prog1:am, "Your
Southwest Business Review," over Station KGKO, Dallas, the
preparation and presentation of rather comprehensive economic
and banking data in connection with a program of bankers' f0111Ills,
and the improvement and expansion of the Monthly Business Re?:iew to include each month a special study of an economic problem
of interest to this southwe tern area, were possible only because
of the employment and development during the year of specialist
16
in the various fields of economic activity. All of these projects,
which were undertaken on a more or less experimental basis, have
proven to be of sufficient value to warrant continuation.
There has been a noticeable increase in interest in the publications and special studies of the Research Department, reflected by
an increasing number of requests for such materials not only from
sources within the district but from outside. Likewise, the volume
of correspondence from banks, businesses, and trade associations
requesting various types of economic data and information has
increased significantly. The broader services referred to in the
preceding paragraph may have created an awareness in the minds
of bankers and others of the resea1·ch services available to them
through this bank, and, consequently, may be partly responsible
for the increase in the number of inquiries. Every effort has been
made to handle such requt-sts as promptly and efficiently as possible because of the public relations factors involved.
During the year progress was made on a program of personal
contacts with co-operating business firms by staff members of the
department, in order to improve and build up the hank's reporting
eries of business and credit data. A program of periodic personal
contacts with a number of leading business executives in the
Dallas area also has proved valuable in appraising current business trends and developments.
Statistical and re earch project such as the study of operating
ratios, the retail credit survey, and the analysis of the ownership
of bank deposits which have been a part of the research function
of this ba·nk for several years, were continued, along with the
miscellany o.f statistical and reporting services which the bank has
supplied as a routine feature of its research activities.
The year 1946 was, in a sense, a year of experiment and staff
development in. the Research Department. Generally speaking,
organizational changes in the department have been completed
and much progress was made toward obtaining an adequate staff
and in training staff members in the policies of the bank as they
relate to the research function.
LEGAL ACTIVITIES
During 1946, Counsel for the bank consulted frequently with
the other officers and rendered numerous written and oral opinions
on various legal problems involving federal and state banking
laws and regulations, negotiable instruments, state laws on inheritance and administration of estates, taxation, public depositories,
17
and other related legal subjects. Counsel reviewed and approved
from a legal standpoint all operating bulletins issued by the bank,
all insurance contracts, and all other contracts and leases executed
during the year in which the bank or its branches were interested
parties. Inquiries from member banks and others interested in
federal laws and regulations administered by the Board of Governors and thi bank were referred to Counsel, and answers to
such inquiries were approved by him. All applications of banks
for membership in the Federal Reserve System and of banks and
others for voting permits, and all legal documents submitted in
support of such applications were submitted to Counsel, who
furnished written opinions regarding the legal aspects of such
applications and documents in accordance with the procedure required by the Board of Governors. Similar legal opinions were
furnished with re pect to charter amendments and amendments to
by-law required to be submitted by state member banks for
transmittal to the Board of Governors. Counsel also prepared
memoranda analyzing the legal aspects of proposed federal legislation dealing with bank holding companies, industrial loans and
guaranties, branch banking, and other banking problems. The
bank was not involved in any lawsuits during the year, although
it had a substantial interest in a representation suit filed in May
with the National Labor Relations Board by the Office Employees
International Union, AFL, requesting certification as the representative of the employees at the Head Office for collective bargaining purposes. Counsel consulted frequently with the bank's
officers and with interested staff members of the Board of Governors on legal and practical phases of how best to pt·otect the
interests of this bank and the Federal Reserve System.
LABOR UNION ACTIVITIES
During April 1946, application cards for union membership
were circulated among the employees at the Head Office by the
Office Employees International Union, affiliated with the American
Federation of Labor. Subsequently the bank was officially notified
that the union had filed a petition with the Regional Director of
the National Labor Relations Board requesting certification as
representative of the Head Office clerical workers, other than
upervisory employee .
During July, the Board of Governors and the union filed briefs
with the National Labor Relations Board, setting forth their
respective views regarding the application of the National Labor
Relations Act to Federal Reserve banks.
18
On November 15, the National Labor Relations Board in Washington ordered an election at the Head Office on November 26,
reserving to the bank the right to a full hearing on the jurisdictional
and other issues before any collective bargaining agent could he
certified.
During the ten days preceding the election, a committee of employees opposed to unionization and the labor union group campaigned vigorously, distributing literature and holding several
public meetings. The President of the bank issued a statement on
the unionization question, which was read to employees assembled
at a general meeting, and copies of his statement were mailed to
employees at their home addresses.
The election resulted in 375 employees voting against the union
and in 180 employees voting for the union. On December 27, the
Regional Director of the National Labor Relations Board addressed a joint letter to Counsel for this bank and to the organizer
for the union, stating that the Board had closed the case as of
December 17, 1946.
PERSONNEL ACTMTIES
On December 31, 1946, the personnel of this bank and its
branches, including officers, totaled 1,108 employees, or a net
reduction of 114 during the year. This decrease reflects a continuation of the trend in effect since August 1943, when the number of
employees was at an all-time peak of 1,582. The decrease in per·
TOTAL NUMBER OF EMPLOYEES, BY MONTH,I944-1946
FEDERAL RESERVE BANK OF DALLAS
NUMSE:';!!R---------,-----------,,--------..::;~
1500
...•....•..!I
···.................·········.......
.
~.....
1200
I
.,..
.............
/
......~...........t.:::. .-.- .-.
••••••
TOTAL EMPLOYEES
-----ll200
..........................
900·~~------+--------~--------1900
.. ~....
,..........
~MPLOYEES ·SALARIES
"'"'••'
' • -.. .,
RECOVERABLE
--r ...... ,.',~ .........
600~~~~~~:=~~~--~-~·~,_~~--~..~·-_..i'
..~~----~~~-~~--~600
v
I
-
EMPLOYEES-SALARIES
NOT RECOVERABLE
'. . . . .,. ,
~ ~
............,
"'~ .......
300~-------+--------~-------~~0
Q
I
J
I
I
F M A M J J A S 0 N 0 J F N A M J J
1944
1945
19
I
A S 0 N 0 J F M A M J
J
1946
A S 0 N 0
Q
onnel during 1946 was made possible by the marked decline in
the volume of work of the Fiscal Agency and RFC-CCC departments. In some other departments, the increased volume of work
necessitated an expansion in personnel. In adjusting for the variations in the volume of work among departments, a number of shifts
in the assignments of employees were made in order to retain the
most proficient employees. The accompanying chart shows the
trend in the number of employees during the past three years,
broken down between employees whose salarie are recoverable
from governmental agencies and those whose salaries are chargeable to the hank.
The hank's basic salary rates were raised sub tantially during
1946 tqrough a 15 per cent general increase on May 1 and numerous merit increases granted during the year. The increases had
the effect of raising aggregate annual salarie by about $410,000.
At the end of the year, the average annual salary of employees
amounted to $2,107, reflecting an increa e of $363, or 21 per
cent, during the year.
The rate of personnel turnover declined to 4 7 per cent in 1946
from 67 per cent in 1945. A substantial improvement occurred at
all four offices, hut the turnover rates at El Paso and San Antonio
were quite high. The declining turnover rate i attributable to the
higher level of salaries and the realization by employees that with
the easing of the labor situation it is more difficult to find suitable
positions elsewhere at comparable salaries.
Since the Selective Service Act became effective in 1940, 285
employees, including seven employees who entered in 1946, have
erved in the military forces. Prior to December 31, 1946, a total
of 152 returning veterans had been re-employed, but 40 of them
subsequently resigned to accept other employment or to return to
college.
. The personnel administration has been expanded and strength·
ened through the following:
The enlargement of the scope of activitie of the Personnel
Department and the addition of new employees trained to
handle the new activities.
The institution of a revised vacation policy, under which
extra days of vacation are granted to officer and employees
with more than nine years of continuou ervice. The vacation schedule, computed on a graduated basis according to
years of service, provides for a maximum of four weeks'
vacation for those with 25 years or more of continuous service.
20
The adoption of a revised insurance plan for hospitaliza. tion, medical, and surgical services, under which the bank
pays two-thirds of the cost of the coverage for officers and
employees and for certain of their dependents. On December
31, approximately 85 per cent of the personnel was enrolled
under the plan.
The formulation of a program to analyze and evaluate
each job within the bank, the results of which will constitute
the basis for a new Personnel Classification Plan. This program will be completed during the spring of 1947.
The resumption of the training program for college students interested in banking as a career. During the summer of
1946, four war veterans with two or more years of college
work were employed and rotated among various department
of the bank.
The reopening during December of the employees' recreation room which had been utilized for work space during the
war period.
The installation of facilities through a leased wire anangement for furnishing music in the dining rooms during the
lunch period.
The establishment of a house organ and the employment
of an editor.
RETIREMENT SYSTEM
The Board of Trustees of the Retirement System of the Federal
Reserve banks at its annual meeting on June 5, 1946 adopted
amendments to its rules and regulations providing for a liberalization of benefits for employees upon retirement. The principal
changes included:
A new definition of "final average salary" to mean the ten
consecutive years of creditable service during which salary
was highest instead of twenty consecutive years in effect theretofore.
The removal of certain limitations on pension allowances.
Assumption by the Reserve banks of the entire cost of the
prior service benefits for the period from 1934 to 1943.
To cover the liability incuned by the Retirement System as a
result of these changes, the Reser~e banks made a lump-sum contribution of approximately $2,100,000, and the rates of current
21
contribution by the banks have been increased to an average of
9.97 per cent of total pay roll from an average of 9.35 per cent.
The lump-sum contribution of this bank amounted to $101,493,
and its rate of current contribution was increased to 10.1 per cent
of total pay roll from 9.5 per cent.
During 1946, four retirements were effected and one death
claim was paid, bringing the number of retirements and death
claims paid to 49 and 27, respectively, since March 1, 1934, when
the Retirement System was instituted.
PAY ROLL DEDUCTIONS FOR BOND PURCHASES
Throughout the war period, special efforts were made to encourage officers and employees to purchase savings bonds through
the pay roll deduction plan. For a long period prior to the close
of the war all officers and employees were enrolled under the plan,
and this bank led all other Reserve banks in the percentage of pay
roll deducted for bond purchases. Mter the close of the Victory
Loan Drive late in 1945, employees were advised that these facilities would be continued for the benefit of those who desired to
utilize the plan as a means of saving regularly. It is significant that
at the end of 1946, about 56 per cent of the officers and employees
was enrolled in the plan, and authorized deductions were at a rate
of 6.5 per cent of pay roll. During the year, total deductions for
bond purchases aggregated $179,000, or $68,000 less than in
1945. Since the pay roll deduction plan was inaugurated in April
1941, purchase,s of savings bonds by officers and employees of the
bank have aggregated $1,213,000.
BANK EXAMINATIONS
The expansion in state bank membership, examinations of applicants for membership, and investigation of applicants desiring
to organize national banks have had the effect of increasing the
activity of the Examination Department of the bank. During 1946,
the staff made 145 examinations, as compared with 127 during
1945. A summary of activities during 1946 is shown in the following table:
Independent
Examinations
State member bank
..2
State bank applicants for membership___ }
1
Separate trust departments
Applications to organize national hanks_ .0
Total - - - - - - - -·
4
22
1oint
Examinations
with State
Authorities
118
2
10
0
130
Investigations
0
6
0
5
11
During 1946, two member banks in this district were granted
authority to exercise hust powers. At the end of the year, 87
national banks and 14 state member banks held that authority.
This bank sponsored its second annual forum for bank supervisory authorities in the Eleventh Federal Reserve District on
December 6, 1946. Subjects of broad general interest to bank
supervisors and examiners were presented by recognized authorities in the fields of business and economics. These forums, in
addition to their educational value, assist in maintaining good
relations with other bank supervisory agencies and in generating
a better understanding of mutual problems. They also provide an
occasion for becoming better acquainted with staff members of the
various agencies, which is an aid in the smooth and effective
handling of such problems.
REGULATION OF CONSUMER CREDIT
In the spring of 1946, the Board of Governors, in co-operation
with the Federal Reserve banks, inaugurated a program to amplify
and strengthen the administration of Regulation W and the enforcement of its provisions. The important features of this program
included: ( 1) maintaining continued co-operation of state and
federal supervisory authorities with respect to lenders under their
respective jurisdictions and (2) an increase in the number of
regist~·ants investigated. The policy of endeavoring to obtain compliance 'with the provisions of the regulation through educational
measures has been continued.
In carrying out its administrative responsibilities, this bank,
through its field investigators, visited 2,057 business enterprises
to see that they were complying with the provisions of the regulation. In the case of the relatively few registrants found to be violating willfully the provisions of the regulation, appropriate action
was taken to obtain compliance.
Effective December l, 1946, the Board of Governors revised
Regulation W, narrowing its scope by confining it to instalment
credit, including that arising from purchases of major durable
goods.
MEMBERSHIP IN THE SYSTEM
In the Eleventh Federal Reserve District, 11 state banks and
four national banks, of which nine were newly organized institution.s, were admitted to membership in the Federal Reserve System
during 1946:
23
Bank
Location
Deposits
December 31 , 1946
First State Bank of Odem ......................... Odem, Texas ................
838,000
Commercial State Bank of El Campo ...... .El Campo, Texas.......... 4,695,000
The San Benito Bank & Trust Company ..San Benito, Texas........ 7,085,000
First State Bank of Corpus Christi 1 ......... Corpus Christi, Texas.. 4,834,000
597,000
Citizens State Bank 1 ...... . ..... .. ................ . ... Broken Bow, Okla.......
Roswell State Bank1 .......................... ... ......Roswell, New Mexico..
944,000
College Station State Bank1 ..... ..... ........ .... College Station, Texas
835,000
East End State BanP............................... Houston, Texas ............ 2,180,000
Gruver State Bank1 .... ............ . ........ ......... . Gruver, Texas..............
706,000
Fidelity Bank and Trust Company...........Houston, Texas............ 1,334,000
The Grant County State Bank 1 •.•.•••.. . .• . ....Bayard, ew Mexico....
213,000
National City Bank of Dallas 2 •••••••••••••••••• Dallas, Texas ................ 39,751,000
Oak Lawn Iational Bank of Dallas 1 ....... .Dallas, Texas................ 1,750,000
Fair Park National Bank of Dallas 1 ...... . .. Dallas, Texas .................. ( ot open
for business)
The Farmers ational Bank of Rule 3 •.• •. . .Rule, Texas.................. 1,447,000
1 Primary
organizations
of state member bank
3 Conversion of state nonmember bank
2 Conversion
Due to conversions, consolidations, and liquidations, memberhip in the Federal Reserve System in this district during the year
howed a net increase of 10 banks and, on December 31, 1946,
totaled 596 banks, consisting of 468 national banks and 128 state
banks. The state bank membership in this district is now at the
highest level since 1924 and ranks sixth among Federal -Reserve
districts.
The net increase of ten banks in state bank membership during
1946 was the largest of any Federal Reserve district and constituted 40 per cent of the net increase for the System; moreover,
inquirie from eligible state banks indicate that a further sizable
increase may occur during 1947.
CHA GES IN CAPITAL STOCK
The paid-in capital stock of the Federal Reserve Bank of Dallas
reached a new all-time peak of $6,865,350 on December 31, 1946,
a net increase of $858,200 during the year. The new member banks
admitted to the System purchased capital stock of this bank totaling $59,800; 295 other member banks increased their holdings
of capital stock of this bank by $803,600 as a consequence of
increases in their capital and surplus accounts. During the year,
cancellations of capital stock of this bank aggregated $5,200,
24
occasioned by the voluntary liquidation of two former member
banks and reductions in the capital structures of two member
banks.
Purchases of additional stock by existing· member banks, which
accounted for most of the increase in the capital stock of this bank,
indicate that about one-half of our member banks increased their
0\'lil capital and surplus accoun_ts during 1946. In recognition of
tbe need for strengthening their capital structures, numerous banks
old substantial amounts of new stock to the public, and banks
generally followed conservative dividend policies.
It is interesting to note that the net increase during 1946 was
nearly as large as the bank' s total paid-in capital stock of $921,800 on the opening date of November 16, 1914. The paid-in
capital stock of the bank has increased each year during the 32
years of its existence except in the depression years of 1932 and
1933, when member bank failures, liquidations, and capital readjustments had the effect of reducing this bank's paid-in capital
by about $400,000.
NO MEMBER BANKS
Nine nonmember state banks in this district, including one con·
version from a national bank, began operation during 1946:
Bank
Location
The Carrollton State Bank.... ----------- ---------------------------- -Carrollton, Texas
Greenville Avenue State Bank.. __________________ ___ ____________ ____ ______ _Dallas, Tex~
Merchants State Bank __________________________________________________________ Dallas, Texas
Riverside State Bank ___ _________________ _____ ____ __ __ __ ____ ____________ _F ort Worth, Texa;~
The Port City State Bank _______________ ________ ___ ___ ___ __ ________________ Houston, Texas
Nederland State Bank ___________________ ______ ____ __ _______ ___ ___________ Nederland, Texas
Jefferson State Bank. _____ ____ ________ ___ _____________________________ San Antonio, T~xas
First State Bank.. ___________________ __________ ____________________ __ __________ _Silverton, Texas
First State Bank ..----- ----------------------------------------------- --------Thornton, Texas
The effect of these additions upon the total number of nonmember banks was offset largely by consolidations, liquidations, and
admissions to membership in the Federal Reserve System. On
December 31, 1946. there were 385 nonmember hanks in the
district, or only two more than at the end of 1945.
PAR BANKS
On December 31, 1946, 867 active commercial hanks in the
di trict, or 19 more than a year earlier, were remitting at par for
checks drawn on themselves. The trend toward par clearance in
the district is indicated by the fact that during 1946 all newly
organized banks and six former nonpar banks agreed to remit at
25
par. During 1945, the Board of Governors and the Federal Reserve
banks adopted a stronger enforcement policy with respect to the
absorption of exchange charges, and, as a result, the banks in the
larger cities have discontinued that practice. Since many of the
business organizations receiving checks on nonpar banks now require the drawer of a check to pay any exchange charge that is
made, local pressure is exerted upon such banks to pay at par the
checks drawn upon them. At the end of 1946, the number of nonpar banks in the district had been reduced from 120 to 113, consisting of 62 hanks in Texas, 49 banks in Louisiana, and two banks
in Oklahoma.
NEW BANK ORGANIZATIONS
A total of 143 newly organized hanks throughout the United
States, excluding successions and conversions, opened for business
during 1946, as compared with 118 during 1945. The Chicago and
Atlanta Federal Reserve Districts had the largest number of new
organizations during 1946, with 30 and 29, respectively. This district had 16 new organizations. The absence of and need for banking facilities in certain communities, the desire for additional
banking facilities in other communities, and the favorable earnings
record of hanks generally during the past few years doubtless have
been the principal factors motivating new hank organizations. In
an effort to avoid the development of an over-banked condition,
bank supervisory authorities continued to analyze carefully each
application for a new charter in order to satisfy themselves as to
the capital adequacy of the proposed bank, the need for the facilities, the character and financial responsibility of the organizers and
proposed management, and the future prospects for success.
BANK FAILURES
It is significant that 1946 represented the fifth consecutive year
in which there were no bank failures in this district and the second
consecutive year in which no bank suspensions were reported in
the United States. During the six-year period since 1940, only 22
bank failures, including one in this district, have occurred in the
United States. In that period, however, the prosperity of business
enterprises generally, the rising price level, the increase in incomes
of individuals, and the increases in bank deposits and in holdings
of Government securities have combined to decrease the losses on
new loans, to permit recoveries on large amounts of charged-off assets, and to increase the earnings of banks generally. The tempering
of some of the hazards ordinarily involved in bank operations undoubtedly has contributed to the favorable record with respect to
26
hank failures. Under present and prospective conditions, witlt
the attendant increases in the hazards of operating business enterprises and of meeting demands for credit, the problems of maintaining sound banking conditions and of preventing the development of troublesome situations will become more difficult.
FEDERAL RESERVE CREDIT
Member banks in the district increased substantially during
1946 the use of Federal Reserve credit through both direct borrowing and the sale to this bank of Treasury bills under repurchase
option. Some of the contributing factors were the withdrawal of
most of the large war loan deposits held at the beginning of the
year, the general expansion in member bank loans to customers,
and the increase in the investment holdings of country banks. These
factors generated a large-scale shifting of funds, which had its
principal impact upon the larger banks that held the major portion
of war loan and interbank deposits. The country banks generally
met the demand for funds through the withdrawal of balances
from correspondents. The general effect was a large and fairly
continuous decline in deposits at most of the larger banks which
found it necessary to make substantial reductions in investments,
large withdrawals from their balances with correspondents, and
some use of Federal Reserve credit. In consequence, 16 member
hanks borrowed intermittently from this bank an aggregate of
$81,000,000, largely for the purpose of adjusting their reserve
positions during periods of temporary deficiencies in funds. Borrowing was most pronounced during the later months of the year,
when the cumulative effects of the several factors had their greatest impact upon bank reserves. On November 19, member bank
borrowings reached the year's peak at $9,275,000. In addition to
the direct 'boiTowings, 40 banks exercised the privilege of selling
to this bank Treasury bills under repurchase option. During the
year these banks sold to this bank Treasury bills amounting to
$714,495,000 at a rate of 3/s per cent discount per annum, of
which $595,983,000 were repm·chased and $129,581,000 were
redeemed by this bank at maturity. At the end of the year the bank
held Treasury bills amounting to $16,600,000 under repurchase
option, as compared with $27,669,000 at the end of 1945.
During 1946, this bank's participation in Government securities
held by the System Open Market Account averaged $877,000,000,
a compared with $762,000,000 in 1945. It is the practice of the
Federal Open Market Committee to carry interest-bearing securities on its books at face value. When such securities are purchased
27
in the open market at premium prices, the premiums are set up in
a separate asset accmmt and amortized over the life of the securities. The amounts of the outstanding premium balance in the System Open Market Account and in this bank's participation in it
are shown below.
Premium Balance in
System A count
Date
December 31, 1945.
- - - - - $13,574,000.00
December 31, 1946___________________
This Bank's
Participation
in Premium Balance
593,819.58
9,920,569.54
496,097.93
FEDERAL RESERVE NOTE CIRCULATION
Federal Reserve notes of this bank in circulation, which had
expanded sharply during the war period and had reached an alltime peak of $627,000,000 in mid-December 1945, returned to
a more normal pattern of seasonal fluctuation during 1946. The
return flow of currency from circulation during the early months
of 1946 reduced the total to approximately $587,000,000, or by
about $40,000,000 under the all-time peak. In subsequent months
the usual seasonal expansion in circulation occurred, reaching a
high for the year of $613,000,000 early in November, but by the
end of Lhe year the total had declined again to about $604,000,000. This amount was $14,000,000 below the total at the end of
1945.
FEDERAL RESERVE NOTE CIRCULATION
FEDERAL RESERVE BANK OF DALLAS
Ml LLIONS OF OOLLARS
MIL L 10NS OF OOL L ARS
60 0
v
50
400
30 0
20 0
~
100
50
0
fl
Jl
1940
I
;Y
7
y
~ ~ 600
500
400
300
200
I00
50
i
I
1941
II
1942
I
I I
1943
28
I
0
1944
1945
1946
There were marked changes during the year in the circulation
of the several denominations of Federal Reserve notes. The sharp
increase in the circulation of notes of the $100 denomination suggests that the hoarding of currency, which apparently has continued in substantial volume, was principally in this denomination
after the Treasury Department in May 1945 requested financial
institutions to make reports to the Federal Reserve banks on unusual currency transactions, particularly those involving large
denomination currency. The principal decline occurred in the circulation of notes of denominations of $20 and under. The sharp
decline in the circulation of the $5 denomination was due to the
fact that the Treasury Department was able to supply sufficient
amounts of $5 silver certificates to meet the demand for that denomination. The following table shows the circulation of Federal
Reserve notes of this bank by denomination as of the close of 1946
and 1945:
Denomination
5
10
20
50
100
500
1,000
5,000
10,000
Amount in Circulation
(In thousands of dollars)
December 31, 1946
December 31, 1945
$ 37,134
$ 15.739
152,053
137,882
245,679
230,734
42,542
45,329
107,175
138,180
15,114
13,409
20,373
20,905
155
140
320
290
Net Change
(-)
14,171 (-)
14,945 (-)
2,787
31,005
1,705
532 (
15 (-)
30 (-)
s 21,395
<+>
<+>
(+)
+)
It is significant to note that the combined circulation of Federal
Reserve notes of all Federal Reserve banks showed a net increase
of $310,000,000 during 1946. The note circulation of the Federal
Reserve Banks of Atlanta, Dallas, and San Francisco declined substantially, partially offsetting the increases at other Federal Reerve banks. The decline at the San Francisco bank amotmted to
approximately 11 per cent, while at the Atlanta and Dallas banks
the decline was only about 21fz per cent.
DEPO ITS OF MEMBER BANKS
The total deposits of member banks in this district, after having
shown a very rapid expansion during the war period, turned downward during 194·6. Principal factors contributing to the decline
29
were Treasury withdrawals of war loan deposits, which were utilized to retire outstanding Government securities held largely by
commercial and Federal Reserve banks; reduction of interbank
deposits; and a large net out-of-district movement of funds on
accom1t of commercial transactions. Total deposits of member
banks in the district during December averaged $5,344,000,000,
or $217,000,000 lower than the average for December 1945, not·
withstanding substantial increases in the deposits of individuals
and corporations and of states and political subdivisions.
The net decline in deposits during the year was more than accounted for by the decrease at reserve city bank , where the impact
of the Treasury's debt retirement program was most pronounced.
Despite the decline of interbank and war loan deposits at counlt-y
banks, total deposits at those banks during December averaged
about $60,000,000 higher than in the closing month of 1945.
Time deposits at both cia ses of banks continued to expand
during 1946, though at a lower rate than during the preceding
year.
MEMBER BANK RESERVE BALANCES
The reserve balances of member banks in the district fluctuated
within comparatively narrow limits during 1946. The average of
such balances during December amounted to $772,000,000, or
only $23,000,000 higher than during December 1945. The net
increase dming 1946 was the smallest shown during any year since
1940. Factors limiting the rise in reserve balances during the year
were the general contraction in deposits of member banks and
the trend among banks toward fuller employment of available
funds.
The sharp reduction in reserve-exempt war loan deposits and a
substantial increase in private deposits, which required reserves,
brought about a gradual, though significant, increase in the required reserves of member banks.
During December, required reserves averaged $680,000,000,
or $70,000,000 greater than in December 1945. In consequence,
the excess reserves of member banks averaged only $91,000,000
in December 1946, as compared with $138,000,000 in December
1945. Nevertheless, excess reserves of member banks in this district continue relatively high in comparison with those of banks in
other Federal Reserve districts.
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MEMBER BANK RESERVE BALANCES, REQUIRED RESERVES AND EXCESS RESERVES
E\.EVENTH FEDERAL RESERVE DISTRICT
CASH DEPARTMENT OPERATIONS
The changes in the principal operations of the Cash Department
during 1946 as compared with 1945 are set forth below:
Incoming and outgoing shipments of currency and coin
numbered 73,329, or slightly more than during 1945.
The number of notes received and counted totaled 106,339,000, an increase of 1,486,000 over the number in 1945.
The number of coins received and counted totaled 150,000,000, or an increase of 35 per cent over the preceding
year.
The number of wire transfers of funds handled totaled
69,000 involving $12,000,000,000. These figures rep1·esent
increases of 16 and 14 per cent, respectively, over those for
1945.
Securities held in custody for member hanks and others
amounted to $944,000,000 on December 31, 1946, or a net
decrease of $428,000,000 during the year. The decrease reflected chiefly the withdrawal by banks of collateral pledged
to secure war loan deposits, which declined sharply during
the year.
The number of interest coupons clipped totaled 157,000,
an increase of 8, 700 as compared with 1945.
CHECK COLL'ECTIONS
The volume of check collections reached a new peak in 1946,
this being the fourteenth consecutive year in which the volume of
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transactions has exceeded that of the preceding year. During the
year, the Transit departments of the Head Office and branches
handled 105,000,000 checks aggregating $31,300,000,000. These
totals represent increases over those in 1945 of 9.5 per cent in the
number of items and 16.3 per cent in amount. A new record for
one day was established on November 8, 1946, when 733,000
items were handled, or 198,000 more than on the previous peak
day recorded in 1944.
The above figures do not reflect fully the over-all expansion in
the departments' activities, since substantial increases occurred in
those classes of items which require multiple handling, while de·
creases occurred in certain classes of items requiring single
handling. Although the number of Government paper checks
handled, totaling 18,545,000, was 19 per cent le than in 1945,
the number of Government card checks, payable through this bank,
which require several operations, increased to 6 100,000, repreenting an increase of 47 per cent.
CHECK ROUTING SYMBOL PROGRAM
In June 1945, a new plan involving a routing ymbol to be
imprinted on checks of all par remitting banks was introduced to
the banking system. The plan, sponsored jointly by the American
Bankers A sociation and the Federal Reserve System, has as its
purpose the simplification of check collection, thereby increasing
the efficiency and speed of collecting out-of-town checks. The
ymbols, constituting a series of numbers, readily identify the
Federal Reserve bank or branch at which checks of a given bank
are receivable for collection. As the use of the plan becomes more
general, it is anticipated that banks lind the public will gain benefits through reduced float, fewer sorting and routing errors, and
quicker return of unpaid items. A systematic educational and promotional campaign has been carried on, particularly among bankers and printers of bank stationery, in order to induce as many
par banks as possible to imprint the symbol upon their respective
checks. A recent survey indicated that 93 per cent of the par banks
in this district now have the symbols imprinted on some of their
checks, and 32 per cent of the check pa sing through the four
offices of this bank had the symbols in the location suggested by
the American Bankers A sociation. It is hoped that through continued educational work the entire check collection system can be
converted to the routing symbol plan in the latter part of 1947.
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FISCAL AGENCY OPERATIONS
Fiscal Agency operations of this bank were on a greatly reduced
scale during 1946, reflecting the termination of organized war loan
drives and the absence of offerings of new issues of marketable
Government securities. In consequence, the organization of the department was readjusted downward in accordance with the volume
and scope of current activities. The principal activities relating to
Government securities performed during 1946 included:
Handling of weekly offerings of Treasury bills to refund
maturing issues, with the volume of transactions down about
32 per cent from 1945.
Allotting of $617,000,000 of certificates of indebtedness
on exchange subscriptions and redeeming $707,000,000 of
maturing issues.
Redeeming of Treasury bonds and notes aggregating $299,000,000.
Selling of United States savings bonds aggregating $225,000,000 and Treasury savings notes amounting to $44,300,000, reflecting decreases of 52 per cent and 72 per cent,
respectively, from the volume during 1945.
Redeeming of savings bonds totaling $322,000,000, an increase of 19 per cent over 1945, and of Treasury savings notes
aggregating $163,000,000, or about the same amount as
during 1945.
Holding for safekeeping the savings bonds of individual
owners. On December 31, such holdings totaled 176,500
savings bonds with a maturity value of $15,800,000, as compared with holdings of 192,000 savings bonds having a maturity value of $17,500,000 at the end of 1945. The net
reduction was occasioned by the withdrawal of 58,200 savings
bonds and the deposit of 42,700 other savings bonds.
Verifying deposits of registration stubs covering the issuance of Armed Forces leave bonds by Army finance officers in
this district and, to a limited extent, issuing and redeeming
~uch bonds.
The number of institutions in the district qualified as issuing
agents for Series E savings bonds on December 31 totaled 1,261,
or a decline of 679 during the year. The institutions terminating
their qualifications as issuing agents were chiefly nonfinancial
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businesses. It appears, however, that business institutions generally have retained for the benefit of employees the pay roll deduction plan for the systematic purchase of savings bonds. On December 31, there were 944· agents in the district qualified to pay savings bonds, a slight increase over 1945. During 1946, this bank
received $177,700,000 of withheld taxes from 555 banks in the
district which had qualified as depositaries.
CUSTODIAN ACTIVITIES
The custodian activities of the RFC-CCC Department during
1946 included:
Performing of work in connection with releasing lessees
from accountability for physical assets under the Defense
Plant Corporation's Agreement of Lease. As the lessees' and
the corporation's engineers made physical inventories of the
82 defense plants in the district and prepared assets property
records, these records were reconciled with the inventory records maintained by this bank. About one-third of the work
had been completed by the end of 1946, when the activities
being perfonned by this bank were terminated.
Servicing of loans to business enterprises made under the
RFC blanket participation agreements. Prior to December
31, 1946, 298 banks in the district had executed agreements
with the RFC, under which 522 loans had been made.
Servicing of business enterprise loans made to veterans
under the Servicemen's Readjustment Act of 1944. On December 31, 1946, 536 such loans, aggrega6ng $1,677,000,
were outstanding in this district. About 10 per cent of such
loans had to be taken over by the Reconstruction Finance
Corporation, which either sold the mortgaged property or
made demands under the guaranties executed by the Veterans
Administration.
Purchasing and servicing for the RFC Mortgage Company
of veterans' home loans which are guaranteed or insured by
the Veterans Administration.
Paying of premiums to producers of structural clay products, merchants gypsum liner, hardwood flooring, pig iron,
and cast iron soil pipe for speeding up the production of
materials for the construction of housing for veterans. The
volume of such payments was relatively small in this district.
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During 1946, notes in the amount of $34,880,000, acquired
under the 1944 and 1945 Government loan programs and secured
by 356,500 bales of cotton, were repaid by producers and the
cotton was released to them. Cotton producers' notes aggregating
$1,115,000, secured by 9,700 bales of cotton from the 1946 crop,
were received during the latter part of the year. On December 31,
this bank held notes aggregating only $1,094,000, secured by
9,500 bales of cotton. During 1946, the bank paid Certificates o[
Interest having a value of $14,466,000 which had been issued to
lending agents in connection wilh loans made against cotton pro·
duced in 1944 and 1945. A total of 155,000 bales of cotton was
reconcentrated during the year, and storage charges were paid on
84,000 bales held in warehouse .
CUISINE SERVICE
During 1946, the expense of operating the bank's dining room
service totaled $86,448, as compared with $74,118 in 1945, although 7,300 fewer meals were served. The salaries paid to employees, plus the bank's contributions to the Retirement System,
accounted for the major share of the increase in total expense, and
the cost of food, which averaged about 29 cents per meal, increased
approximately 15 per cent. Since total receipts for meals served
amounted to only $48,452 during 1946, this bank absorbed about
$38,000, or 44 per cent, of the total expense, as compared with 33
per cent in 1945. In May 1946, the Board of Governors authorized
the Federal Reserve banks to absorb a maximum of 50 per cent
of total cafeteria expense in comparison with a maximum of
33% per cent in effect pl'eviously.
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@FedFRASER