Full text of Annual Report of the Federal Reserve Bank of Dallas : Annual Report to the Board of Directors (1947)

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Federal Reserve Bank
of Dallas
Annual Report
to the
Board of Directors
Submitted by

R. R. Gilbert, President
January 31 , 1948

•
CONFIDENTIAL

CONTENTS
Page

Business Activity in 1947 in the Eleventh Federal Reserve
District ................................................................................ 3
Treasury Financing .................................................................. 8
Government Securities MarkeL.·-·----············-··········-··············· 10
Member Bank Reserves and Related Factors............................ 13
Weekly Reporting Member Banks-United States.................... 15
Weekly Reporting Member Banks-Eleventh Federal Reserve
District ................................................................................ 16
Internal Operations .................................................................. 17
Research Activities .............................................................. 17
Bank and Public Relations Activities.................................. 19
l..egal Activities .................................................................... 20
Auditing Activities .............................................................. 21
Personnel Activities .........................................................•.... 21
Retirement System ................................................................ 24
Pay Roll Deductions for Bond Purchases............................ 24
Bank Examinations .............................................................. 24
Regulation of Consumer Credit............................................ 25
Membership in the System........----····················-··-·--······-··· 26
Changes in Capital Stock...................................................... 27
Nonmember Banks ................................................................ 27
Par Banks .. .......................................................................... 28
New Bank Organizations............................·--··················--· 28
Bank Failures ...................................................................... 29
Federal Reserve Credit.. ·--·-····-------························----······-··· 29
Federal Reserve Note Circulation........................................ 30
Deposits of Member Banks.................................................. 32
Member Bank Reserve Balances.......................................... 32
Cash Department Operations...........................................____ 33
Check Collection .................................................................. 34
Check Routing Symbol Program..................•_..................... 35
Fiscal Agency Operations...................................................... 36
Custodian Activities .............................................................. 38
Cuisine Service ·····························----------····------·················· 39
Federal Reserve Bank Budget.............................................. 39
Interest Charge on Outstanding Federal Reserve Notes...... 40
Retirement of FDIC Capital Stock...................................... 40
I

BUSINESS ACfiVITY IN 1947 IN THE ELEVENTH
FEDERAL RESERVE DISTRICf
Business activity in this district during 1947 can be best under·
stood against the background of major developments affecting the
national economy. These developments include: resumption of the
upward trend of all important business indexes about midyear,
following a period of leveling off in expectation of a recession;
relative tranquility in labor relations; industrial production at the
highest monthly levels since VJ-Day; civilian employment setting
new records, and wage increases affecting most of the workers of
the Nation; initiation of the largest volume of residential construction since 1926 and the greatest amount of industrial construe·
tion since the midwar peak; gross national production in excess
of $230 billion; personal income of approximately $195 billion,
with more than $160 billion going into personal consumption
expenditures; a sharp gain in output and sales of durable goods
and in capital goods formation; net exports rising to a new peace·
time peak and draining off more than 5 percent of the national
product; a rise of 15 percent in the index of wholesale prices, of
7 percent in retail prices, and of 8 percent in the consumers' price
index; and a continuing notable expansion in the use of consumer
credit. These developments were for the most part distinctly infta·
tionary in their effects on the national economy, increasing its
vulnerability to shocks which might arise from prolonged indus·
trial work stoppages, decline in construction activity, a bad crop
year, sharp curtailment in foreign trade, or collapse of the eco·
nomic structure of western Europe.
Business in this district was likewise more brisk and confident
during the second half of 1947 than in the first half. At the beginning of the year growing consumer resistance to rising pricesmanifested chiefly in greater selectivity in buying and more con·
cern about the quality of merchandise-and widely publicized
forecasts that the postwar boom in business was heading for a
recession during the second or third quarter of the year inspired
caution among retailers of soft goods and of off-brand durables,
leading to curtailment in orders and advance commitments and
3

to special efforts to reduce inventories. During this time adjusted
indexes of sales at district department stores showed a tendency
to level off or drop slightly from the high levels of the previous
year. A significant change occurred, however, as the year progressed, and both consumers and businessmen noted the continuation of inflationary forces and the failure of prices to come down.
Consumer buying increased, and businessmen began replenishing inventories more actively. Concurrently, rising trends began
in other fields of activity, and export trade, after declining moderately from the peak reached in May, made partial recovery
during the second half of the year, adding support to both the
price structure and the national income.
Total sales of reporting department stores in this district for
the year exceeded those of 1946 by 7 percent. In retail furniture
stores the gain in total sales was somewhat greater, amounting to
11 percent. Gains in sales in both groups of stores were especially
rapid during the fourth quarter of the year, and the termination
on November 1 of the restrictions of Regulation W on the terms
of instalment credit caused a significant increase in credit sales
of furniture stores.
Indicative of cautious inventory policies among department
stores of the district, orders outstanding month by month until
December were down from the totals for corresponding months
in 1946, the margin of difference running to more than 50 percent in the period from March through June, but diminishing
thereafter as store executives developed more confidence during
the third and fourth quarters. The value of merchandise on hand
at the beginning of the year was high by comparison with the
situation a year earlier, but as a result of energetic efforts to
reduce excessive inventories of soft goods, coupled with sharp
cut-backs in orders, the margin of year-to-year increase in value
of stocks dropped to 8 percent by midyear-less than offsetting
the effect of rising prices-and remained at or near that figure
for the rest of the year. The upturn in sales during the second half
of the year, of course, also contributed to holding stocks down to
conservative levels.
Increased use of credit was an important factor in the gains
made in wholesale and retail trade during the year. Rapid expansion of commercial loans at banks reflected the increase in use
4

of credit by wholesalers and retailers for carrying inventories.
Consumer credit of all types showed significant gains. Nationally,
charge accounts increased nearly 20 percent from January to the
end of November, and total instalment sale credit registered a
gain of more than 60 percent during the same period, although
still falling considerably short of the record total of such credit
outstanding at the end of 1941. At department stores and furniture stores in this district the ratio of credit sales to total sales
increased during the year, constituting 61 percent of deparhnent
store sales and 83 percent of furniture store sales during Decemher, as compared with 56 percent and 78 percent, respectively, in
December 1946. Collection rates on both charge accounts and
instalment contracts, though generally lower than in 1946, were
regarded by most retailers as satisfactory, and many stores made
aggressive bids for new credit accounts.
Industrial operations in this district rose to record levels for
a peacetime year during 1947 although continuing shortages of
iron and steel limited expansion of output of many durable goods
plants, and uncertainties early in the year concerning the market
outlook for soft goods deterred expansion by many producers of
apparel, textiles, and wood products. Employment in manufacturing establishments in Texas increased steadily during the last
half of the year and in December was at a peacetime high of about
348,000, as compared with 330,000 a year earlier and a prewar
average of about 185,000. Improved efficiency of labor in many
plants and a labor force generally more stable than in 1946
resulted in a more orderly delivery of many materials, improved
scheduling of work, and consequent better utilization of workers.
P~duction of crude oil in the district increased steadily during the first 10 months of 1947 to an all-time peak of 2,593,000
barrels daily in October, when most fields produced at maximum
efficiency rates of recovery, and declined only slightly in the subsequent two months. Daily average production for the year was
8 percent greater than in 1946 and 82 percent above the prewar
(1935-39) average. Refineries on the Texas coast advanced production above rated capacity in order to meet essential requirements, and, despite shortages of pipe and other materials, the
total footage drilled and the number of exploratory wells completed exceeded prior records in the district. Preliminary esti·
5

mates indicate also that additions to proved reserves of petroleum
more than offset the very large amount of crude oil produced.
The value of awards for construction declined abruptly early
in 1947, but renewed optimism concerning the outlook for business and support of residential construction by Governmentguaranteed loans bolstered awards after midyear. Total construction contract awards during 1947 amounted to $684,000,000, or
about $120,000,000 above 1946 and more than three times the
prewar average. Many projects started in 1946 and delayed by
shortages of labor and materials were completed during 1947,
and a very large amount of new construction was initiated. Total
construction put in place in the district far exceeded that in any
prior peacetime year.
Industrial capacity was enlarged significantly during the year
by extensive facility expansions in every important industry in
the district. Fourteen large chemical projects calling for total
expenditures of at least $200,000,000 were announced or initiated,
all except one being for the Texas coastal area. Completion of
these and smaller projects also initiated during 1947 will make
the Gulf Coastal Area the largest and most important chemical
center in the world. The petroleum and natural gas industries
likewise undertook sizable expansion programs, adding to capacity with new natural-gasoline, recycling, and carbon-black plants,
catalytic refineries, and record-breaking pipe-line construction.
Several large facilities and numerous smaller installations were
provided in the building-materials, food-processing, paper and
paper-products, sulphur, potash, smelting, apparel, rubber, and
wood-products industries. These facility expansions were accom·
panied by power, water, rail, and port expansion programs which
will enlarge significantly the industrial growth potential of this
district.
The acreage of crops harvested in Texas during the year, estimated at 28,696,000 acres compared with 26,937,000 acres harvested in 1946, was the largest acreage since 1937. Major acreage
increases were in cotton, which increased 2,300,000 acres above
the acreage of 1946, and wheat, which increased about 1,300,000
acres. The acreages of rye, :O.axseed, rice, hay, cowpeas, and peanuts were also larger, but reductions occurred in the case of corn,
oats, barley, grain sorghums, and potatoes. The total acreage of
6

crops harvested in Arizona, Louisiana, New Mexico, and Oklahoma also increased.
Due to increased total acreage and generally higher yields,
agricultural production in the district was maintained at a very
high level during 1947, and the production of several farm
commodities set new records. The wheat crop harvested in Texas
was about double the crop of 1946 and three times the 10-year
(1936-45) average. The Texas cotton crop was the largest since
1937, and the production of peanuts has been exceeded in only
two previous years. Rice production in 1947 also reached a new
high, and a near-record citrus crop was harvested. There was a
reduction, however, from the previous year in the production of
com, grain soghums, all potatoes, and peaches.
As a result of the increased volume of production and generally higher prices, principally cotton and cottonseed, wheat,
and rice, the total value of all crops produced in Texas during
1947 reached an all-time high of $1,446,219,000. This total is
55 percent above that of 1946 and about double the value of
crops produced in 1945. A substantial reduction, however, was
registered in the total value of citrus and commercial truck crops
harvested in the State during the year.
Prolonged drought during the summer and fall in the western
part of the district sharply reduced the supply of range feeds and
delayed the planting and development of winter grains. Supplemental feeding was extensive, however, and livestock were in fair
to good condition as the year ended. Reflecting the tight feed
situation and continued high prices, the number of cattle received
at the Fort Worth and San Antonio markets in 1947 was about
13 percent greater than the volume received during the preceding year. Receipts of hogs also were considerably higher. Receipts
of calves, however, were fractionally lower, while sheep receipts
fell 24 percent below the heavy marketings of 1946.
Prices received by Texas farmers during 1947 averaged well
above those of 1946. The most noteworthy increases occurred in
the prices of grains, meat animals, milk cows, and eggs, while
moderate increases were noted for cotton, cottonseed, and dairy
products. Prices received for sweet potatoes and hay averaged
about the same as in the previous year, but those received for
chickens, citrus fruits, and wool were generally lower.
7

TREASURY FINANCING
Among the outstanding developments in Treasury fiscal operations during 1947 were a continuation of the policy of retirement
of Government securities by cash as the budgetary surplus and
Treasury balances permitted, the offering on October 1 of a new
issue of 2lh percent nonmarketable Treasury bonds due October 1,
1965, and a continuation of the successful policy of encouraging
the public to continue to hold and purchase United States savings bonds.
Marketable issues of Government securities redeemed by cash
during 1947 amounted to $10,854,000,000, including $1,897,000,000 of Treasury bills, $5,863,000,000 of certificates of
indebtedness, $2,251,000,000 of Treasury notes, and $843,000,000 of Treasury bonds. On the other hand, during the year savings bonds and other nonmarketable obligations and special issues
increased $7,410,000,000, resulting in a net reduction in the
interest-hearing debt of $3,444,000,000. As a result of an increase
of $1,188,330,000 during the year in the non-interest-hearing
debt and an increase of $6,691,000 in the amount of matured
debt on which interest had ceased, the net reduction in the total
public debt during 1947 amounted to $2,249,000,000, a decline
from $259,149,000,000 to $256,890,000,000.

On December 31, 1946, Treasury bills outstanding totaled
$17,033,000,000. Beginning in mid-April 1947, a series of four
weekly reductions of $200,000,000 each in offerings of Treasury
bills, followed immediately by two further weekly reductions of
$100,000,000 each, combined to reduce the amount of Treasury
bills outstanding on May 22 to approximately $16,000,000,000.
Thereafter, except for a $200,000.,000 reduction on June 26,
weekly offerings of Treasury bills approximated maturities until
the first week in November, when reductions of $100,000,000 a
week were made for a period of six weeks. During the last half
of December, weekly bill offerings equaled maturities, and at the
end of 1947 outstanding Treasury hills totaled $15,136,000,000.
With the announcement of an eleven-month certificate of indebtedness dated August 1, 1947, the Treasury initiated the policy of
concentrating maturities of certificates of indebtedness on a quarterly basis. During the remainder of the year this policy was
observed, with certificates being offered to mature on July 1 and
8

October 1, 1948, and January 1, 1949. In addition, two issues
of Treasury notes offered during the year were dated to mature
on October 1, 1948, and January 1, 1949. On December 31, 1947,
certificates outstanding amounted to $21,219,710,000, as compared with $29,987,149,000 outstanding on the same date a year
earlier, or a decline during the period of $8,767,439,000. The
reduction in the amount of certificates outstanding was accounted
for by the cash redemptions summarized above and the exchange
of slightly more than $2,900,000,000 of certificates due Decem·
her 1, 1947, for Ilh percent Treasury notes due January 1, 1949.
During 1947, the Treasury continued the policy of emphasiz.
ing the retirement by cash of maturing and callable securities
held by the Federal Reserve hanks and the commercial hanks,
as S6Y2 percent of the securities retired by cash were so held.
This percentage contrasted with approximately 72 percent in 1946.
The percentage of maturing and callable Government securities
redeemed by cash in 1947 also was substantially less than during
1946-ahout 23.5 percent as compared with 51.7 percent in 1946.
It should he remembered, however, that the very large amount
of securities retired by cash in 1946 absorbed a substantial proportion of the excessively large Treasury balances accumulated
largely from the Victory Loan, and, consequently, the volume of
cash redemptions during 1947 was governed more significantly
by the amount of funds available from the budgetary surplus.
In addition, as previously indicated, during 1947 approximately
$1,897,000,000 of Treasury hills were retired by cash, in contrast with the policy in 1946, when weekly maturities of Treasury
hills were refunded in full.

On September 29, 1947, the Treasury offered a new 18-year
nonmarketable 2Y2 percent Treasury bond to institutional investors and to commercial and industrial hanks holding savings
deposits or issuing time certificates of deposits. Subscriptions to
the issue, which was offered at least in part to provide an investment medium for accumulated bona fide investment funds, were
limited according to a formula. Total sales of this issue were
reported at $970,220,000, of which $257,210,000 were taken
by hanks.
The Treasury continued to emphasize, through the constant
efforts of its Savings Bond Division and a special promotional
campaign during June and July, the importance to individuals
9

of continuing to hold and to buy United States savings bonds.
Especial emphasis was placed upon the Bond-A-Month Plan, which
offers to individuals not employed on a fixed wage or salary basis'
the same automatic bond-buying privileges that the pay roll
deduction plan affords to millions of wage and salary earners.
During 1947, sales of savings bonds in the United States totaled
$6,694,158,000, while total redemptions amounted to $5,109,·
517,000. In this district, however, redemptions exceeded sales by
$19,193,000, the total redemptions amounting to $246,194,000
as compared with sales of $227,001,000.
The Treasury ended the year 1947 with a balance in its Gen·
eral Fund of $3,097,000,000, as compared with a balance of
$3,502,000,000 a year earlier.

GOVERNMENT SECURITIES MARKET
Developments in the Government securities market during 1947
were influenced strongly by Federal Reserve System policy affect·
ing the pattern of interest rates, the impact of Treasury fiscal oper·
ations on bank reserves, and the strengthening demand of private
borrowers for financing through the capital markets.
Average yields on long-term taxable Government securities followed a comparatively level trend during the first five months of
the year, varying between 2.21 percent and 2.19 percent. Following an increase in average yields during June and July of about
.03 percent, the yield curve again leveled out until early October,
when a declining price trend turned the yield curve upward dur·
ing the remainder of the year.
After a period of strength during the first two months of the
year, prices on high-grade corporate bonds remained relatively
steady until early September, when weakening prices resulted in
an increase in average yields on those issues from 2.52 percent
on September 1 to 2.91 percent on December 31. As a consequence of these price movements of Government securities and
high-grade corporales, the spread between the yields of these issues
widened from approximately .27 percent during the early months
of the year to about .47 percent during December.
Probably the outstanding event of the year in terms of its influence upon the course of the Government securities market was the
10

decision of the Federal Open Market Committee to eliminate the
posted buying rate and the repurchase option on Treasury bills.
This action, which was taken on July 10, 1947, signaled a change
in policy regarding the pattern of rates and was promptly followed
by a steady increase in the average discount rate on new offerings
of Treasury bills, with the consequence that the rate advanced from
the 3jg percent level which had been in effect prior to July 10
to an average rate of .951 percent on the last issue offered in
December. In the meantime, the rates on new issues of Treasury
certificates of indebtedness rose from the 'Vs percent rate on 12month certificates in effect in July to 11/s percent on the 13-month
note issue of December 1. In addition, during December the Treas·
ury announced a 12-month Il/s percent certificate offering to be
dated January 1, 1948. This firming of short-term rates on Government securities exerted some influence on private short-term
interest rates, introduced an element of uncertainty in the financial
markets, and was a contributing factor in the trend of the market price of Government bonds.
In its efforts to maintain a stable and orderly Government securities market, the Federal Open Market Committee was at differ·
ent times a seller and buyer of Government securities for System
and Treasury accounts. During July, August, and September, when
a strong demand for intermediate and longer term Government
securities prevailed, the Committee made substantial sales of
Treasury bonds for Government investment accounts, the total In
July amounting to $609,000,000 and in August to $300,000,000.
Sales for Government accounts continued during September, but
in smaller volume. During the same months, transactions for the
System account also were effected, with the consequence that the
net sales of Treasury bonds for System and Treasury accounts
amounted to $1,042,000,000 from July 1 through the first week
in October.
Beginning in October, an unusually large volume of corporate
borrowing at attractive rates, absorption of almost a billion dollars of investment funds by the sale of nonmarketable 2lf2 percent Series A 1965 Treasury bonds of the G type, and increasing
evidence that the monetary and credit authorities intended to use
their powers more vigorously to curb the mounting inflation produced a sharp decline in Government bond prices and, also, in
the prices of corporales and municipals. Between the week ended
11

November 12 and the week ended December 2\ purchases of
Government bonds for the System account amounted to approximately $1,000,000,000. Such vigorous support, which extended
virtually to the entire list of bonds, checked the decline in prices,
although downward price pressures persisted.
YIELDS ON TREASURY AND CORPORATE SECURITIES
WEEKLY AVERAGES OF DAILY FIGURES

PER CENT

3

~~~

5 HIGH GRADE
CORPORATE BONDS

'
/'

--...,... "j-,_,,,,.-.......
f"'

__,., ,...,.__.,

~

.,......_.,_~--~
~ •.,.l''-.,..r .

u.s.

GOVERNMENT
SECURITIES 1

2

I'"

I
•

~

I

CERTIFICATES OF INDEBTEDNESS
(9 - ·12 MONTHS)

•

I
TREASURY BILLS
(NEW ISSUES)

0 ~----------------~~----------------~--------------------~--------------------~ 0
1944

1946

1945

1947

On December 24, the Federal Open Market Committee reached
the decision to lower the support price for Government bonds. This
decision, which did not involve a change in policy hut merely
reflected a reappraisal of events within the policy of maintaining
a stable and orderly Government securities market, touched off
considerable selling. Consequently, during the week ended Decemher 31, the System purchased approximately $1,143,000,000 of
Government bonds in supporting action to maintain an orderly
market and to protect the 2Y2 percent rate on the longest term
marketable Government bonds.
12

The decline in the prices of Government securities during the
interval between January 1 and December 31, 1947 is indicated
by the price changes of certain key issues. The longest term Government bonds, the restricted 2lf2s of 67/72, were quoted on
January 2 at a bid price of 102-28/32 and ended the year on
December 31 at a price of 100-8/32. During the same period
the unrestricted or hank-eligible 2lf2s of 67/72 declined from
106-8/32 to 101, while the 2s of 52/ 54 moved downward from
102-29/32 to 101-4/32. On December 31, the most distant dated
maturity of Treasury bills was quoted at a bid price of .96 percent discount, in contrast with the .375 percent discount for the
comparable maturity on January 2, 1947; and the most distant
dated certificates were quoted at .86 percent discount on Jan·
uary 2, as compared with 1.10 percent for the comparable matu·
rity on December 31.

MEMBER BANK RESERVES AND RELATED FACTORS
The net increase during 1947 of $1,760,000,000 in the reserve
balances of member banks in the United States resulted chiefly
from an increase in the monetary gold stock and a decrease in
Treasury cash, the effect of which was only partially offset by a
decrease in Federal Reserve credit and an increase in Treasury
and nonmember deposits at Federal Reserve hanks. Although
required reserves of member hanks increased substantially during the year, because of the growth in customer deposits at those
banks, the increase was at a slower rate than in reserve balances,
with the result that excess reserves at the year-end totaled $1,499,000,000, the highest level in nearly two years. The changes in factors affecting reserve balances are presented in the following table:
SUPPLY AND USE OF MEMBER BANK RESERVE FUNDS
(Amounts in millions of dollars)
Clunogea

Dec_,er 11, Dec_,er 11,
1147
tl41

Reserve bank credit _ _ _ _ _$23,180
Monetary gold stock
22,754
Treasury and national bank currency_ 4.558
Money in circulatio
28,863
Treasury cub
1,336
Treasury deposits with Reserve hanks_
870
Nonmember deposits
960
Other Federal Reserve accounts
564
Total __

$24,093
20,529
4,562
28,951
2,272
393
822
607

Member hank reserve balances held._ 17,899
Estimated required reserves
16,400
Estimated excess reserves
1,499

16,139
15,579

13

560

Cluln gu
tlult
RedUA:ed

tlult

Added to
ReNMlee

RUfli"'>U

._913
S+2.225
-

88

-

936

-

4

+477
+138

-

s

43

3,292

t+l,760
+ 821
939

+

$1,532

Throughout 1947, there were alternate periods of ease and
tightness in the reserve positions of member banks occasioned by
such factors as Treasury transactions, :financial transactions with
foreign countries, effects of Treasury and Federal Reserve policy
actions, and the interplay of numerous other factors upon bank
reserves. The pressure upon reserves was strongest and most per·
sistent in the first half of the year when the Treasury retired in
part maturing issues of marketable Government securities, the
effects of which more than counterbalanced the increases in
reserves resulting from the inflow of gold and the return flow of
currency from circulation. In that period, required reserves showed
an irregular downward trend and reserve balances reflected a corresponding decrease. In the last half of the year, when there was
a relatively small amount of debt retirement, reserve positions
were somewhat easier, since there was an accelerated inflow of
gold and a substantial increase of Federal Reserve credit in use.
While required reserves rose steadily during that period, because
of the growth in customer deposits at member banks, reserve bal·
ances increased even more rapidly and at the year-end were at
peak levels.
The Federal Reserve System's holdings of Government securities were maintained near peak levels during the first two months
of the year and then declined sharply during the subsequent four
months. After midyear, however, there was a gradual but irreg·
ular upward movement. On December 31, 1947, total holdings
aggregated $22,559,000,000, or $791,000,000 lower than at the
end of 1946. Moreover, there were some marked shifts in the
composition of the Government security porfolio of the System.
Treasury bills, which represented 63.1 percent of Government
securities held by the System at the end of 1946, declined to 50.7
percent of the total on December 31, 1947, and during the year,
holdings of certificates of indebtedness declined from 32.1 per·
cent to 30.1 percent. On the other hand, holdings of Treasury
bonds, which constituted only 3.3 percent of the System's total
portfolio at the end of 1946, rose to 12.7 percent at the end of
1947. Treasury notes also assumed greater importance in the
System's portfolio of Government securities, rising from 1.5 percent of the total to 6.5 percent. The accompanying table sets forth
the changes in total holdings and in the composition of the Sys·
tem's portfolio:
14

HOLDINGS OF GOVERNMENT SECURITIES BY THE
FEDERAL RESERVE SYSTEM

(Amounts in millions of dollare)
'1'~

of s-new

D ... 11,

D ... 11,
11.66

Pti'I'CMlC

of 'l'o&ol

li,J1'

50.7

Treasury bills-total
111,433
Under repurchase option__ _
Other
11,433
Certificates of indebtedness_ _ 6,796
Treasury notes
1,477
Treasury bonds
2,85S
Total
122,559

50.7
30.1
6.5
12.7

100.0

114,745
4,906
9,839
7,496
355
754

123,350

Pti'I'Cet&t

of 'l'ot41
63.1
21.0

4.2.1
32.1
1.5
3.3
100.0

Ntlt
ClwiAII•

t--3,312
---4,906
+1,594
- 700
+1,122

+2.099

~

791

During the first half of 1947, the decrease in total holdings and
the change in the composition of holdings were occasioned largely
by the cash redemption of short-term Government securities. In the
subsequent six months, however, the changes reflected adjustments
in investment policies of member banks and in Treasury and Federal Reserve policies. Following the elimination of the posted rate
and repurchase option on Treasury bills at midyear, and the sub·
sequent rise in interest rates on Treasury hills and certificates of
indebtedness, many commercial hanks began to increase their
holdings of these securities. In the :final quarter, when prices of
Treasury bonds reacted sharply, commercial hanks generally
lightened their investments in Treasury bonds and added substantially to holdings of short-term securities. In that period, the Fed·
eral Open Market Committee made large purchases of Treasury
bonds to maintain an orderly Government securities market.

WEEKLY REPORTING MEMBER BANKS-

UNITED STATES
During 1947, changes in the principal asset and liability items
of weekly reporting member banks in the United States were influenced chiefly by the fiscal operations of the Treasury, the heavy
demands from business and industry for hank credit, and the large
net imports of gold. In the first six months, the dominating influence was the Treasury retirement of hank-held Government securities which resulted in sharp declines in deposits and in holdings
of Government securities. Mter midyear, the accelerated increases
in bank loans to customers and in gold imports brought about a
substantial growth in deposits, hut the increase in required
reserves necessitated some further liquidation of Government
securities. For the year, total deposits showed a net increase of
15

$1,899,000,000, and these funds were used chiefly to increase
aggregate loans and investments by $362,000,000 and reserves
with Federal Reserve hanks by $1,505,000,000.
The loans of reporting banks reflected a moderate counter-toseasonal expansion during the first half of 1947, and then rose
sharply during the remaining six months, with the net increase
for the year amounting to $3,912,000,000 or 20.1 percent. Most
of this gain occurred in commercial, industrial, and agricultural
loans which rose $3,312,000~000, although there were increases
of $970,000,000 in real estate loans and of $649,000,000 in
"all other" loans which include instalment loans to consumers.
The increases in these types of loans were partially offset by a
decrease of $1,053,000,000 in the several types of security loans.
In contrast with the increase in loans, the investments of reporting
hanks declined by $3,550,000,000 during 1947. The largest
change was the $2,961,000,000 reduction in certificates of indebtedness occasioned by the partial retirement of certain maturing
issues and sales in the open market by some banks to obtain funds
to adjust reserve positions. There were also reductions of $564,000,000 in Treasury notes and of $869,000"000 in Treasury
bonds. On the other hand reporting hanks added to their investment portfolios $568,000,000 of Treasury bills and $276,000,000
of other securities.

WEEKLY REPORTING MEMBER BANKS-ELEVENTH
FEDERAL RESERVE DISTRICT
In this district, the changes in the principal asset and liability
items followed the same general pattern as those at reporting
banks in the United States, and are attributable to the same major
influences. The increase of $217,000,000 in total deposits of
reporting hanks in the district reflected gains of $160,000,000 in
adjusted demand deposits, of $64,000,000 in interbank deposits,
and of $22,000,000 in time deposits, which were offset in part
by a decrease of $29,000,000 in Government deposits.
The total loans of these banks declined seasonally during the
first half of the year but increased rapidly thereafter. On December 31, 1947, total loans of $1,025,000,000 were $160,000,000
higher than a year earlier and constituted 46 percent of total
loans and investments as compared with 41 percent at the end
of 1946. The increase of $151,000,000 in commercial, industrial,
16

and agricultural loans accounted for most of the expansion in
total loans, the increases in real estate loans, and in "all other"
loans being largely offset by declines in security loans.
The investments of reporting hanks in the district, although
$16,000,000 smaller on December 31, 1947 than a year earlier,
showed a much smaller percentage decline than those at all report·
ing hanks in the United States. Although there were sharp reductions during the year in holdings of Treasury hills, certificates of
indebtedness, and Treasury notes, holdings of Treasury bonds
increased $98,000,000, or 13.2 percent, as against a decline of
2.9 percent for reporting hanks in the United States. Investments
in other securities increased $20,000,000, or 22.6 percent, as
compared with a gain of 6.9 percent for reporting hanks in the
United States.
There are presented below in tabular form principal asset and
liability items of the weekly reporting member banks in this district as of December 31, 1946 and 1947, showing in addition,
the amount of change during the year and the percentage change
in each item for the weekly reporting member hanks in the district
and in the United States:
( A111011nte in Millione of Doll4r•J

Eletl8ftU. F«<ef'fll R..,e DUtriot PentmttJge Ckafllle
Dee. 11
Dflll. II,
Net
Ellnl...tl&
United
1141
1141
C'lt4tll1•
Diatrict
Statu

Deposits-total
12,968
Demand deposita-edjuated
1,852
Time deposits
385
United States Government deposita__
24
Interbank deposits
707
Loans
1,025
Investments
1,227
United States Government eecuritie&- 1,118
Other securities _
109
Balances with correspondents
323

$2,751
1,692
363
53
643
865
1,243
1,154
89
290

1+217
+160
+ 22
- 29
+ 64
160
- 16
- 36
20
33

+

+
+

+ 7.8
9.5
6.1
-54.7
9.9
18.5
- 1.3
- 3.1
+22.5
11.4

+
+
+
+

+

+

2.6

+ 4.5

+
3.8
-56.4

+ 3.5

+20.1
- 7.9
- 9.3
+ 6.9
9.7

+

INTERNAL OPERATIONS
RESEARCH ACTIVITIES

The activities of the Research Department during 1947 were
directed in large part toward improving and establishing on a firm
basis a number of services which had been introduced during
the preceding year, training and developing staff members of the
department to a point of greater efficiency, and carrying on the
basic statistical and reporting functions required of the department. Satisfactory progress was made in these respects, although
the problem of obtaining and retaining junior staff members has
proved difficult and, in fact, has not been solved.
17

The basic statistical and reporting services of the department,
including the collection of data for numerous statistical series
widely used by banks and business firms in this district and the
preparation of such continuing studies as the annual retail credit
survey, the annual and midyear studies of member bank operating
ratios, the annual survey of Qwnership of demand deposits, and
other statistical presentations, required a substantial part of the
department's operating time throughout the year. In addition, new
projects, including a survey of business loans of commercial banks
and a survey of agricultural loans of commercial banks, together
with an increasing number of requests for a miscellany of statis·
tical and economic information, were handled satisfactorily.
The staff of the Research Department cooperated fully in the
development of the expanded bank and public relations function
of the bank. Economic data were prepared and booklets published
to supply the background information for eight Bankers' Forums,
which were held as part of this bank's bank and public relations
program. The bank's radio program, "Your Southwest Business
Review," presented each Saturday evening over Station WFAA570, Dallas, has continued to be prepared and presented by the
Research Department. Officers of the department and senior staff
members also participated in our bank and public relations pro·
gram by addressing numerous groups and by maintaining rather
wide contacts with business and banking leaders in the district.
Publications of the department, and especially the feature
articles which have appeared regularly in the Monthly Business
Review and the Agricultural News Letter, have created wide inter·
est among business, agricultural, and banking groups in the dis·
trict. A large number of requests for additional copies of such
publications from sources both within and outside of the district indicate their favorable reception. At the close of 1947, the
Monthly Business Review had a regular circulation of 2,946, with
593 names having been added to the mailing list during the year.
The Agricultural News Letter had a regular circulation of 2,126
at the close of 1947, as 372 names, including 103 County Agri•
cultural Agents and Assistant County Agricultural Agents of Texas
and 92 Veterans Administration Training Officers in Texas, Lou·
isiana, and Mississippi, were added to the mailing list lluring the
year.
18

BANK AND PUBLIC RELATIONS ACTIVITIES

Early in 1947, the Board of Directors formally approved a
broad and comprehensive bank and public relations program
for the bank, the major objectives of which were achieved during
the year. The following summary outlines briefly the principal
activities:
Bank officers and representatives made 139 visits to non·
member banks and 675 visits to member banks which in·
cluded 96 per cent of all member banks in the district.
Representatives of the bank made 25 addresses to meetings
of bank, civic, and trade organizations at which the attendance
approximated I, 700 persons. Bank representatives attended
120 other meetings of various types sponsored by bank, civic,
and educational organizations at which the attendance aggregated 31,000 persons. A total of 1,218 individuals, consisting
of 442 students, 500 bankers, and 276 businessmen and
others, visited the bank and its branches.
The bank sponsored eight Bankers' Forums which were
held at Shreveport and Monroe, Louisiana; Weslaco, Sherman, Greenville, and Amarillo, Texas; Durant, Oklahoma;
and Roswell, New Mexico. The area covered by these forums,
consisting of 77 counties and parishes, included 125 member
banks and 100 nonmember banks. Booklets were prepared
for each area, as a basis for forum discussions, and a wide
demand for them developed after each meeting. In all instances, the forums were well received by bankers in attendance.
The bank sponsored its third annual forum for bank supervisory authorities and their staffs in the Eleventh Federal
Reserve District, at which subjects of broad general interest
to bank supervisors and examiners were presented by recog·
nized authorities in the fields of law, banking, and economics.
The bank's weekly radio program, "Your Southwest Business Review," over Station WFAA-570, Dallas, Texas, was
continued throughout 1947.

On April23, 1947, the bank sponsored a joint meeting of
deans of colleges of business and directors of bureaus of
business research of the state universities of the Southwest
19

with representatives of the Federal Reserve Banks of Dallas
and Kansas City~ at which mutual problems of regional
research were discussed.
The bank sponsored a dinner meeting attended by a representative group of leading businessmen and senior bankers
in Dallas and by the Board of Directors of the bank and
its branches honoring The Chairman of the Board of Governors of the Federal Reserve Syste~ who made the principal
address of the meeting.
LEGAL ACTMTIES

The Bank was not involved in any civil suits during 1947, hut
it was named defendant in an unfair labor practice charge filed
with the National Labor Relations Board by the Office Employees
International Union, AFL, on behalf of certain former employees
whose services were terminated in February. The Regional Office
of the National Labor Relations Board conducted an informal
investigation, but after the enactment of the National Labor-Man·
agement Relations Act in August, which specifically exempted
Federal Reserve hanks, that Board decided not to assume jurisdiction. In view of the particular interest of this bank and of the
general public in this labor legislation, Counsel prepared and
presented to the directors and officers a summary of the various
provisions embodied in the legislation as enacted.
Counsel assisted the Examination Department in processing an
application of a national hank for the power to qualify and serve
as executor of an estate, and in processing applications for
membership by state hanks, and for the benefit of the department,
prepared a comprehensive memorandum concerning the factors
required by law to be considered in passing upon membership
applications. An analysis was made of the liability insurance and
workmen's compensation insurance policies carried by the bank,
and a summary was prepared of the principal features of these
insurance policies, incorporating suggestions for procedure to be
followed upon the occurrence of accidents and injuries apparently
covered by such policies. For the guidance of the Transit Department, an intensive analysis was made of the statutes of New Mexico, · Oklahoma, and Texas relating to the conditional or delayed
payment of checks presented to hanks in those states for payment,
and in the light of this analysis this bank's practices in dealing
20

with New Mexico and Oklahoma banks were changed to conform
more nearly to the applicable state laws. In addition to these
specific activities, Counsel advised the officers through written and
oral opinions on various other legal problems that arose during
the year and assisted in preparing answers to inquiries from member banks and others interested in federal laws and regulations
administered by the Board of Governors of the Federal Reserve
System.
AUDITING ACTIVITIES

The examining staff of the Board of Governors made a regular
examination of this bank and its branches during January and
February 1947. In addition, the Auditing Department maintained
throughout the year the audit frequency schedule as adopted by
the Conference of Auditors of Federal Reserve banks and approved
by the Audit Review Committee of the Board of Directors of this
bank. During the year the Audit Review Committee held quarterly
meetings for the purpose of reviewing audit reports and discussing
audit procedures with the General Auditor. The General Auditor
consulted frequently with the officers of the bank regarding new
accounting methods and changes in accounting procedures.
PERSONNEL ACTMTIES

The plan for job classification and salary administration which
had been in the process of development since mid-1946 was
approved by the Board of Directors of this bank and by the Board
of Governors of the Federal Reserve System, and became effective on October 1, 1947. In developing the plan, all jobs at the
Head Office and branches below the officer level were analyzed
and evaluated, 16 salary grades were established with minimum
and maximum salaries for each grade, and intermediate rates
between the minimum and maximum for each grade were adopted
to serve as a basis for a consistent policy of merit increases.
A manual of procedure for the administration and maintenance
of the plan was prepared for the use of the supervisory staff. When
the plan became effective, salary adjustments totaling $23,629
were granted to 115 employees receiving compensation below the
minimum of their respective job grades to bring them within the
appropriate salary range.
On December 31, 1947, the personnel of the bank and its
branches, including officers and employees, totaled 920 persons
as compared with 1,108 on December 31, 1946. The net reduc·
21

tion of 188 employees during the year reflected a continuation
of the downward trend in effect since August 1943, when the
number of officers and employees was at an all-time peak of 1,582.
The decrease in personnel during 1947 reflected chiefly a further
marked decline in the work of the Fiscal Agency and RFC-CCC
Departments where salaries are recoverable from Governmental
agencies, but some reduction in personnel was effected in certain
other departments where increased efficiency permitted the handling of a larger volume of work with fewer employees. Although
it was necessary to terminate the services of a considerable number of surplus employees during the year, it was possible, through
a system of departmental transfers, to retain the services of the
most efficient employees and to release those employees whose
work was least efficient.
TOTAL NUMBER OF EMPLOYEES. BY MONTH. 1944-1947
FEDERAL RESERVE BANK

a: DALLAS

~uypvr-------------------------~-------------------r----------------,-------------------------~~

··.....•.....········.
•••••••• ••••••••••••••••••••••••

TOTAL EMPLOYEES

12001-----------------+----------··.._··_"'-+''•........~---~-------------------11200

.............................................
...,

-

.., .•..•..

EMPI..OI'EES•SALARIES

~-----'~~-L---~-~~~~~==+---------------------~~-------~~

1'~-~'~~~--~~---j------~

1946

1945

1947

The bank's basic salary rates were raised substantially during
1947 through a 10 percent general increase on January 1, merit
increases granted to numerous employees during the year, and
special adjustments when the plan for job classification and sal·
ary administration was instituted. In consequence, the average
annual salary of employees on December 31, 1947, amounted to
$2,371 as compared with $2,107 on December 31, 1946, a net
increase of $264, or 12 percent, during the year. On the other
22

hand, through a reduction in personnel, the annual salary rate of
officers and employees at the Head Office and branches was reduced
by $141,900 during the year and on December 31, 1947, amounted
to $2,335,600.
The combined rate of personnel turnover at the Head Office
and branches declined to 38 percent in 1947 from 47 percent
in 1946. While there were increases in the rates of turnover at
the El Paso and Houston Branches, they were more than offset
by sharp declines at the Head Office and San Antonio Branch.
Since the Selective Service Act became effective in 1940, 285
employees have served in the military forces. Prior to December
31, 1947, a total of 157 veterans had been reemployed, but 49
of them subsequently resigned to accept other employment or to
return to college. Pursuant to an understanding reached between
the Board of Governors and the Presidents of Federal Reserve
banks, the special benefits accorded to employees entering military
service under a plan adopted in 1940 have been terminated with
respect to employees entering military service after January 1,
1948.
On December 31, 1947, approximately 89 percent of the bank's
personnel was enrolled under the Blue Cross insurance plan for
hospitalization, medical, and surgical services, under which the
bank pays two-thirds of the cost of coverage. During the year, that
organization paid approximately $17,000 for hospital, medical,
and surgical services rendered to 246 officers and employees of
this bank, or their dependents. Total premiums paid during the
year by the bank and its personnel amounted to about $30,800.
On March 1, 1947, a suggestion system was inaugurated
whereby cash prizes are awarded to employees who make worthwhile suggestions designed to increase operating efficiency. Dur·
ing the year 337 suggestions were submitted, of which 36 were
accepted and for which cash awards of $440 were made.
In February 1947, a counseling service was instituted ~t the
Head Office whereby employees may discuss in private their personal problems with designated counselors on the staff of the
Personnel Department. Numerous employees have availed themselves of this service.
During the year, the bank adopted the policy of recognizing
all officers and employees who have had 25 or more years of con23

tinuous service. During the year, dinner meetings honoring the
94 officers and employees having 25 or more years of continuous
service were held in the cities in which the four offices are located,
at which occasions service emblems were presented to the honorees.
It is contemplated that similar dinners will be held each year hereafter for such employees, and that the honor guests on those occasions will be the officers and employees who attain 25 years of
continuous service during the preceding year.
RETIREMENT SYSTEM

During the past year there were no material changes in the rules
and regulations of the Retirement System of the Federal Reserve
banks. This hank's rate of current contribution was maintained at
10.1 percent of total pay roll throughout the year. During 1947,
fourteen retirements were effected, and one death claim was paid,
bringing the number of retirements and of death claims paid to
64 and 28, respectively, since March 1, 1934, when the Retire·
ment System was inaugurated.
PAY ROIL DEDUCTIONS FOR BOND PURCHASES

During 1947, the officers and employees of the hank purchased
Government securities in the amount of $140,000 through the pay
roll deduction plan, or $39,000 less than in 1946. At the end of
the year, approximately 45 percent of officers and employees were
still enrolled in the plan and authorized deductions were at a rate
of 5 percent of the total pay roll of the bank. It is significant, however, that the deductions for those still enrolled in the plan average above 10 percent of their respective salaries. Since the pay roll
deduction plan was inaugurated in April 1941, purchases of savings bonds by officers and employees of the hank have aggregated
$1,353,000.
BANK EXAMINATIONS

The activity of the Examination Department increased suhstan·
tially during 1947 as a result of the expansion in state hank membership and in the examination of applicants for membership and
of applicants to organize national hanks. During the year the staff
participated in 173 examinations as compared with 145 in 1946.
The following table summarizes the operations of the department
for 1947 compared with 1946:
24

/oinl
ExamiMtiom
Independent

ExamiMtiom
1946
1947
State Member Banka
2
4
12
State Bank Applicuata for Membership,_ _ _ 7
1
1
Separate Trust Departmenta__
Holding Company Affiliates
0
0
Applications to organize National Banke
0
0
ToT.u.s

0

17

with State or
other Federal

Allencies

1946
118
2
10
0

1947
130
6
11
2

135

156

5

7

During 1947 one national bank in the district was granted
authority to exercise trust powers in connection with a specific
estate. At the end of the year 86 national banks and 14 state member banks held general authority to engage in trust undertakings.
General voting permits were issued to two holding company
affiliates to vote the owned or controlled stock of affiliated mem·
her hanks, bringing to three the number of such permits outstand·
ing at the end of the year.
REGULATION OF CONSUMER CREDIT

Regulation W, as revised effective December 1, 1946, remained
in force through November 1, 1947. Early in June the President
of the United States announced that in concurrence with the recommendation of the Board of Governors he intended to vacate
the executive order upon which Regulation W was based because
he did not believe that such order and regulation, predicated on
emergency or war powers, should continue indefinitely in peacetime after Congress had had opportunity to consider the matter
of passing enabling legislation. During July 1947, the Congress
enacted legislation authorizing the continuance of consumer credit
regulation until November 1, 1947. During the months preceding
the termination of the regulation, considerable confusion devel·
oped among many registrants regarding the status of the regula·
tion, and certain registrants showed a disposition to disregard its
provisions. This hank endeavored to deal with such cases effectively, yet with reasonableness and understanding.
In carrying out administrative responsibilities during the first
10 months of 1947, this bank, through its fiel4 investigators, vi~
ited 1,103 business enterprises to ascertain whether they were
complying with the provisions of the regulation.
This bank issued exemptions from the provisions of the regulation covering credits to finance the repair or replacement of prop·
25

erty damaged in connection with two disasters which investigation developed were of such a nature as to affect a substantial
number of people in the stricken areas.
On October 27, 1947, or immediately prior to the termination
of the regulation, this hank forwarded to all registrants a copy
of the statement of the Board of Governors which called attention
to the dangers inherent in undue relaxation of terms on instal·
ment credit and urged the maintenance of sound credit conditions
in the interest of economic stability.
During the session of Congress which convened November 15,
1947, the Senate passed a joint resolution which would have
authorized the regulation of consumer instalment credit through
March 15, 1949, but no action on the hill was taken by the House
of Representatives prior to the adjournment of the Congress.
MEMBERSIDP IN THE SYSTEM

In the Eleventh Federal Reserve District the following 14 state
hanks and 6 national hanks, of which 15 were newly organized
institutions, were admitted to membership in the Federal Reserve
System during 1947.
Name of Bank

Location

Deposit&
December 31,1947

Hampton Oaks State Bank_____ __............. Houston, Texas ........$ 2,528,000
Bastrop Bank and Trust Co·-·-·-·---·····Bastrop, Louisiana.. 6,629,000
Lovington National Bank............................Lovington, N. M.1 •••• 1,484,000
Security First National Bank of Hugo.......Hugo, Oklahoma• ··- 2,846,000
Waxahachie Bank and Trust Company.......Waxahachie, Texas.. 4,278,000
Boswell State Bank.............................._......Boswell, Oklahoma1 ••
370,000
1
Citizens State Bank_·-····-··-····-·······-·······yeleta, Texas •••••••• ••
683,000
First National Bank in Grand Prairie.........Grand Prairie, Texas1 1,265,000
First State Bank...................................•.......Premont, Texas1 ••••• •
723,000
Hereford State Bank.........~---················-····Hereford, Texas1 •••••• 1,573,000
Southwest National Bank of El Paso.........El Paso, Texas1 •••••••• 4,784,000
Citizens State Bank......_......•......................Anton, Texas1 •••••••••• 1,082,000
First State Bank.....·-···-···············-·········--LaMarque, Texas1 ••_
789,000
Security State Bank_..·-·-··- ·····-·········----Littlefield, Texas1 .•.• 1,027,000
West Carroll National Bank of Oak Grove...Oak Grove, La.1 • • ••••••
856,000
First State Bank of Green's Bayou.............Houston, Texas1 •••• ••
478,000
First State Bank.......... ·-······-·-····-·----·-··---·Junction, Texas1 ••• • ••
401,000
Texas Bank and Trust Company of Dallas..Dallas, Texas............ 22,862,000
427,000
First State Bank of Gieggton...................... Greggton, Texas1 ____
National Bank of Sweetwater....•- ......~.......Sweetwater, Texas1 •• 1,021,()()()8
1

Primary organizations.
2Cooversion of state nonmember bank.
•As of January 3, 1948-d.ate of opening for business.

26

Due to the withdrawal of one state bank from membership and
the voluntary liquidation of another, membership in the Federal
Reserve System in this district during the year showed a net
increase of only 18 banks, and, on December 31, 1947, totaled
614 banks, consisting of 474 national banks and 140 state banks.
The state bank membership in the district is now at the highest
level since 1924 and ranks fifth among Federal Reserve districts.
The net increase of 12 in state bank membership during 1947 was
the l~ugest for any Federal Reserve district and constituted 48
percent of the net increase for the System; moreover, inquiries
from eligible state banks indicate that a further sizable increase
may occur during 1948.
CHANGES IN CAPITAL STOCK

The paid-in capital stock of the Federal Reserve Bank of Dallas
rose to a new all-time peak of $7,303,750 on December 31, 1947,
but the net increase of $438,400 during the year was only about
one-half that during 1946. The new member banks admitted to
the System purchased capital stock of this bank totaling $98,600;
304 other member banks increased their holdings of capital stock
of this bank by $347,500 as a consequence of increases in their
capital and surplus accounts. The cancellation of capital stock of
this bank in the amount of S7,700 was occasioned by the voluntary liquidation of one former member bank and the voluntary
withdrawal from membership of another bank.
The number of existing member banks which increased their
own capital and surplus was larger in 1947 than in 1946, but
the amount of the increase was much smaller, indicating that the
upward adjustment occurred chiefly at the smaller and medium
sized banks. Banks generally recognize the need for strengthen·
ing their capital structures to bring about a better relationship
with risk assets and deposits; in consequence most banks have
continued to follow conservative dividend policies and some banks
have sold additional stock to the public.
NONMEMBER BANKS

The following 15 nonmember state banks in the district, including one succession, began operation during 1947:
Z1

Bank

Locarion

First State Bank............·-···-··-·-·--····-- - ·--············Big Sandy, Texas
Union State Bank...................................................Carrizo Springs, Texas
South Fort Worth State Bank......................................Fort Worth, Texas
West Side State Bank..................................................Fort Worth, Texas
First State Bank.-.................................................................Frisco, Texas
Garland State Bank.............................................................Garland, Texas
The First State Bank........................................................Hawkins, Texas
Commercial State Bank....................................................Houston, Texas
Lake Jackson State Bank..........................................Lake Jackson, Texas
Mansfield Bank and Trust Company......................Mansfield, Louisiana
Mansfield State Bank...........- ........................................Mansfield, Texas
The Security State Bank....................................................Mabank, Texas
Highland Park State Bank........................................San Antonio, Texas
First State Bank.................·--·-······-··--- ·-····Socorro, New Mexico
Winkler County State Bank....·-·---··--·-········--··········Wink, Texas

The effect of these additions upon the total number of non·
member banks was offset in part by consolidations, liquidations,
and admissions to membership in the Federal Reserve System.
On December 31, 1947, there were 392 nonmember banks in the
district, or seven more than at the end of 1946.
PAR BANKS

On December 31, 1947, 896 active commercial banks in the
district, or 29 more than a year earlier, were remitting at par
for checks drawn on themselves. It is significant that during 1947
all newly organized institutions and four former nonpar banks
agreed to remit at par and no par bank withdrew from the par
list. At the end of 1947 the number of nonpar banks in the dis·
trict had been reduced to 109, comprising 59 banks in Texas,
48 banks in Louisiana, and 2 banks in Oklahoma.
NEW BANK ORGANIZATIONS

A total of 113 newly organized banks throughout the United
States, excluding successions and. conversions, opened for business during 1947, representing a decline of 31 from the number
opened in 1946. The new organizations were again concentrated
in the Atlanta, Chicago, and Dallas Federal Reserve Districts,
where about 60 percent of all new organizations occurred in 1947
as compared with 52 percent in 1946. This district, which had
30 new organizations in 1947 as compared with 16 in 1946, led
all other districts, while the Atlanta and Chicago Federal Reserve
28

Districts ranked second and third, with 19 and 18 new organiza·
tions, respectively, in 1947 as compared with 29 and 30, resp~
tively, in 1946.
BANK FAILURES

The year 1947 was notewo;rthy for the continued absence of
bank failures, representing the sixth consecutive year in which
there were no bank failures in this district and the third consecutive year in which none was reported in the United States. The
continued high level of business and industrial activity, with the
consequent increase in the demand for bank credit and the unusually high level of farm income, contributed to the growth in
hank deposits and the favorable earnings records of commercial
banks generally throughout .the country. Moreover, generally
favorable economic conditions have enabled banks to hold their
losses to a minimum and to make substantial recoveries on assets
previously charged off. It should be pointed out, however, that
the marked increase in bank loans during the past year and the
return of greater flexibility in prices of Treasury and other bonds
have increased significantly the risk element inherent in the loan
and investment portfolios of commercial banks. These circumstances, combined with the strengthening of competition among
business enterprises as the supply of goods becomes more plentiful, render more difficult the problems of maintaining sound credit
and banking conditions and of preventing the development of
troublesome situations.
FEDERAL RESERVE CREDIT

Changes in the general credit situation and adjustments in
Federal Reserve policy to cope more effectively with developments
were reflected in the volume and character of Federal Reserve
credit in use in the district during 1947. Among the significant
developments were the sharp increase in deposits at member
hanks, the rapid growth in member bank loans to customers, the
periodic withdrawal of war loan deposits, the continuance of the
Treasury program of retiring bank-held Government obligations,
the elimination of the posted rate and repurchase option on Treasury bills, the rise in short-term interest rates, and the decline in
prices of Treasury bonds. The impact of these factors had the
effect, at certain periods, of tightening the reserve positions of
many member banks. To meet temporary deficiencies in required
29

reserves, 15 member banks borrowed intermittently from this
bank an aggregate of $152,000,000, or $71,000,000 more than
in 1946. Borrowing was most pronounced in the latter months of
the year when the combined effect of several factors had the
greatest impact upon bank reserves. On December 12, this bank's
outstanding loans to member banks reached the year's peak at
$16,500,000. During the first nine months of the year, when the
posted rate and repurchase option on Treasury bills were in
effect, 26 banks exercised the privilege of selling to this bank
Treasury hills amounting to $389,145,000 at a rate of 3,4 per
cent discount per annum. Of the $405,745,000 of Treasury bills
held at the end of 1946 and purchased during 1947, a total of
$330,590,000 was repurchased by five member banks and $75,155,000 was either redeemed at maturity or exchanged for new
issues.
During 1947, this bank's participation in Government securities in the System Open Market Account averaged $913,000,000
as compared with $877,000,000 in 1946. It is the practice of
the Federal Open Market Committee to carry interest-hearing
securities on its books at face value. When such securities are
purchased in the open market at premium prices, the premiums
are set up in a separate asset account and amortized over the life
of the securities. The amounts of the outstanding premium balance in the System Open Market Account and in this hank's participation in it are shown below:
Premium Balance in

System Open Market

Date

Account

December 31, 1946'------ -December 31, 1947

- t 9,920,569.54
52,436,500.25

TIW&mk's
Participation in
Premium Balance
$ 496,097.93
2,803,622.36

The marked increase in the premium balance during 1947
reflects the effects of the Federal Open Market Committee's heavy
purchases in the open market at premium prices of Treasury
bonds to carry out the policy of maintaining an orderly Government securities market.
FEDERAL RESERVE NOTE CIRCULATION

Federal Reserve notes of this bank in circulation declined
sharply during the first five months of 1947, reflecting a seasonal
return flow of currency from circulation, and reached the year's
low point at $569,600,000 toward the end of May. In the remain·
30

ing months of the year, circulation increased very rapidly because
the usual seasonal demands for currency were accentuated by the
marketing of large crops at high prices, the cash redemption of
Armed Forces Leave Bonds, the increased activity in trade and
industry, and the high level of consumer incomes. Just prior to
the Christmas holiday this bank's note circulation reached a new
all-time peak of $632,500,000, or $63,000,000 above the year's
low point and $5,500,000 above the previous peak reached in
December 1945. While there was a sharp decline in the final week
of the year, total circulation on December 31, 1947, amounted to
$624,700,000, about $20,000,000 higher than at the end of 1946.
·FEDERAL RESERVE NOTE CIRCULATION
FEDERAL RESERVE BANK OF DALLAS

1941

1942

1943

1944

1945

1946

1947

In contrast with the situation in 1946, the circulation of the
several denominations of Federal Reserve notes in 1947 showed
relatively small net changes. While the amount of outstanding notes
of each denomination up to $500 was larger on December 31,
1947, than a year earlier, the largest increase again occurred in
the $100 denomination. The steady growth in the circulation of
that denomination, as well as the large amount outstanding, seems
to indicate that it is being used to an increasing extent by persons
desiring to hold large amounts of currency either for convenience,
hoarding purposes, or for large cash transactions. This may he due
to the fact that notes of this denomination are of a convenient size
31

for handling and attract less attention than notes of the larger
denominations. It will he observed from the accompanying table
that the circulation of notes in denominations of $1,000 and above
declined during 1947:
FEDERAL RESERVE NOTES IN CIRCULATION BY DENOMINATIONS
(In thousands of dollars)

Denomination

$

5
10
20
50

100
500
1,000
5,000
10,000

December 31,1946
• 15,739
137,882
230,734
45,329
138,180
15,114
20,905
140
290

December 31,1947
• 18,323
140,375
232,782
47,028
149,649
15,302
20,845
110
210

Net Change
2,584
2,493
2,048
1,699

t+

+
+
+
+ 11,469

.....

188
60

30
80

DEPOSITS OF MEMBER BANKS

The total deposits of member hanks in this district, after having
declined substantially during 1946, increased sharply to a new
all-time peak in 1947. The increase, which occurred at hanks in
all size groups and in all sections of the district, resulted primarily
from the large gains in loans and investments of banks, the record
income derived from heavy marketings of livestock and agricultural products at high prices, the record level of business and
industrial activity, and the substantial net disbursements of gov·
emment funds in this area. Total deposits of all member hanks in
the district during December 1947 averaged $5,834,000,000, or
a net increase of $489,000,000 over the average for December
1946. The increase occurred chiefly in the demand deposits of
individuals, partnerships, and corporations, although there were
moderate increases in interbank deposits and in time deposits.
MEMBER BANK RESERVE BALANCES

The reserve balances of member hanks in the district fluctuated
within narrow limits during the first five months of 1947, and then
rose rapidly during the remaining months of the year. The average
of such balances in December amounted to $847,000,000, or about
$73,000,000 higher than the average in December 1946. From the
accompanying chart it will he observed that the moderate down·
ward readjustment in required reserves during the early months
of the year was followed by a sharp increase in subsequent months
and that the trend throughout the year closely paralleled the
changes in reserve balances. The excess reserves of member hanks
32

in the district, which had declined substantially during 1946, were
maintained at a fairly steady level throughout 1947, and were
higher relative to required reserves than those in any other Federal
Reserve district.
MEMBER BANK RESERVE BALANCES,REQUJRED RESERVES AND EXCESS RESERVES
ELEVENTH

~

RESERVE DISTRICT

CASH DEPARTMENT OPERATIONS

The volume of operations of the Cash Department increased
substantially during 1947. The principal changes in the operations
during 1947 as compared with 1946 are set forth below:

.

Incoming and outgoing shipments of currency and coin
numbered 84,299 in the aggregate amount of $1,197,000,000, representing increases over 1946 of 10.,970 in the number of shipments and of $63,000,000 in amount.
The number of pieces of currency received and counted
during 1947 rose to 109,331,000 with a value of $607,000,000. While there was an increase over 1946 of 2,993,000 in
number, the value decreased $11,700,000, indicating that
fewer bills of the larger denominations were received.
The number of coins received and counted totaled 184,721,000, with a value of $13,708,000, representing increases
over 1946 of 35,400,000 in number and of $2,431,000 in
amount.
33

The number of wire transfers of funds handled for member
hanks amounted to 72,000 involving $13,860,000,000. These
figures represent increases of 4 percent and 14 percent,
respectively, over those during 1946.
Securities held in custody for member banks and others
amounted to $871,000,000 on December 31, 1947, or a
net decrease of $74,000,000 during the year. The decrease
reflected the further withdrawal· by banks of collateral
pledged to secure war loan deposits and the redemption of
securities previously ~eld in safekeeping.
The number of interest coupons clipped from securities
held in custody totaled 125,000, a decrease of 32,000 as compared with 1946, largely because the Treasury Department
in 1946 eliminated coupons on new issues of certificates of
indebtedness.
During 1947, the hank obtained delivery of 13 currency counting machines which were installed at the Head Office, and opera·
tions will he further mechanized at the branches as soon as other
machines now on order are delivered. Experience with these
machines indicates that the mechanized operations enable currency
counters and sorters to increase substantially their daily production and, at the same time, to reduce the number of miscounts.
Data maintained on production indicate that the average number
of notes counted and sorted per employee per day increased by
about 3,500, or 30 percent, during 1947, reflecting the results
of mechanization and the general increase in the efficiency of
employees.
CHECK COLLECTION

During each of the past 15 years the volume of cash and non·
cash collection items handled by the hank reached a new peak.
In 1947, the Transit Departments of the Head Office and branches
handled 107,000,000 checks aggregating $35,644,000,000. These
totals represent increases over those in 1946 of 2 percent in the
number of items handled and of 14 percent in the amount involved.
The peak day in 1947 occurred on March 4 when 542,000 items
were handled, hut this number was well below the all-time record
of 733,000 items handled on November 8, 1946. The over-all
expansion in the departments' activities are not fully reflected in
these :figures since the most pronounced increases occurred in those
M

classes of items which require multiple handling while decreases
occurred in certain classes of items requiring a single handling.
To expedite the collection of cash items, the bank instituted the
practice of forwarding them by air mail or air express where that
service would reduce the collection time or facilitate handling by
the receiving bank. Effective August 1, 1947, Federal Reserve
banks adopted a uniform policy of reimbursing member banks
for postage or other transportation costs on cash items sent direct
to other Federal Reserve banks and branches in order to encourage direct routing and thus speed up the presentation and collection of checks. While 2ll member banks in this district have been
granted the direct sending privilege, only 46 of them make use of
it regularly.
In 1947, this bank was able to obtain and began the extensive
use of IBM Proof Machines in handling country checks. The use
of this equipment has increased operating efficiency and made
possible the handling of a greater volume of work with fewer
employees. Additional equipment now on order should be available about the middle of 1948, permitting the extension of mechanization to both the primary and secondary processing of country checks.
CHECK ROUTING SYMBOL PROGRAM

The program instituted in 1945 for the purpose of having a
routing symbol placed on the checks of all par-remitting banks
continued to make satisfactory progress during 1947. The routing symbol, constituting a series of numbers, readily identifies the
Federal Reserve bank or branch at which checks of a given bank
are receivable for collection. When the use of the symbol becomes
general, the sorting and routing of checks will be greatly simpli·
fied, thereby increasing the efficiency and speed of collecting outof-town checks. In a recent survey, it was found that all but nine
of the par-remitting banks in this district have some checks in
circulation bearing the routing symbol in the approved location.
It is anticipated that the remaining banks will imprint the symbol
on their checks when new supplies are ordered.
The checks reviewed during a recent survey by this bank show
that 56 percent of them have the routing symbol in the approved
location as compared with 32 percent a year earlier. The percent·
age in this district, while slightly less than that for the New York
35

Federal Reserve District, was well above the 46 percent average
for the country. To expedite the successful completion of the program, continuous efforts are being made to obtain the coopera·
tion of banks and printers in having the routing symbol printed
in proper form on all new checks and drafts ordered by par·
remitting banks.
It is significant that many banks have found that checks bear·
ing the routing symbol are now circulating in sufficient volume
to warrant the use of the simplified method in sorting checks. It is
anticipated that this practice will spread rapidly as the program
progresses and as banks generally recognize the benefits to be
gained from shifting to this method.
FISCAL AGENCY OPERATIONS

The volume of fiscal agency operations declined only moder·
ately in 1947 in contrast with a sharp decrease in 1946 when the
major readjustments from war to peacetime demands occurred.
During 1947, substantial progress was made in achieving greater
efficiency and economy of operation through a reorganization of
work, a consolidation of some functions, and the transfer from
the branch offices to the Head Office of certain activities relating
to the sale and redemption of saving bonds.
This hank participated in the promotional campaign during
June and July to stimulate interest in the savings bond program
of the Treasury DepartmenL While all phases of the program were
included in the promotion, special emphasis was placed upon the
pay roll deduction and the Bond-A-Month purchase plans. The
Bond-A-Month Plan, whereby commercial banks will buy auto·
matically for customers each month bonds of designated denomi·
nations, was inaugurated during the promotion with satisfactory
results, especially at the larger city hanks. Largely as a result of
the promotion, 23 Texas concerns which had discontinued the pay
roll deduction plan when the war ended reinstated it during the
year.
The number of banks qualified to issue Series E savings bonds
increased during 1947, hut this gain was more than counterbalanced by the decrease in the number of other institutions so qualified. On December 31, 1947, there were 1,217 qualified issuing
agents., a net decrease of 44 during the year. The number of quali·
fied paying agents on December 31, 1947, totaled 990, an increase
36

of 46 during the year. At the end of the year, there were 688
hanks qualified as war-loan depositaries and 571 hanks qualified
as withheld-tax depositaries.
The principal activities relating to Government securities per·
formed during 1947 included:
Handling weekly offerings of Treasury hills to refund
maturing issues, with decreases from 1946 of 12 percent in
the number of tenders and 23 percent in the amount of allot·
ments.
Allotting $482,000,000 of certificates of indebtedness and
$204,000,000 of Treasury notes on exchange subscriptions.
Redeeming marketable Government securities aggregating
$1,174,000,000, a decline of 20 percent from the preceding
year.
Selling a new issue of 2lh percent Treasury bonds, invest·
ment Series A-1965, on a limited subscription basis in the
aggregate amount of $15,435,000.
Selling savings bonds aggregating $209,000,000 and
Treasury savings notes amounting to $40,000,000, reflecting
decreases of 7 percent and 10 percent, respectively, from the
volume in 1946.
Redeeming savings bonds totaling $246,000,000 and Treasury savings notes amounting to $82,000,000, with decreases
o~ 24 percent and of 50 percent, respectively, from the preVIous year.
Holding for safekeeping the savings bonds of individual
owners. On December 31, 1947, such holdings totaled 152,·
000 savings bonds with a maturity value of $14,549,000 as
compared with holdings of 176,500 savings nonds having a
maturity value of $15,764,000 at the close of 1946. The net
reduction was occasioned by the withdrawal of 47,000 bonds
and the deposit of 23,300 bonds.
Verifying 434,000 registration stubs covering the issuance
of Armed Forces Leave Bonds by Army finance officers in this
district and the redemption of 409,000 of such bonds in the
aggregate amount of $87,513,000, with the major part of the
redemption activity concentrated in the month of September.
37

CUSTODIAN ACTMTIES

The termination of certain programs and the marked decline
in the scope of other programs operated by the Reconstruction
Finance Corporation and the Commodity Credit Corporation
greatly reduced the operations of the RFC-CCC Department of
the bank during 1947. Moreover, the Reconstruction Finance Corporation embarked upon a decentralization program involving the
transfer to its local loan agencies of certain accounting and loan·
servicing functions heretofore performed by Federal Reserve
banks as Custodians. Four of these functions were transferred during the last half of the year, and six other functions are scheduled
to be transferred early in 1948. This bank, as custodian for the
Corporation, will continue to make disbursements for local loan
agencies, to hold valuable papers and securities in safekeeping,
to service preferred stocks, debentures, and loans purchased, and
to handle transactions related to mining loans, defense supplies,
and rubber reserve and metal reserve programs.
On January 22, 1947, the Corporation terminated its blanket
participation agreement with commercial banks on loans made to
business enterprises and immediately inaugurated a small loan
participation plan under which the RFC would participate to a
maximum of 75 percent with commercial banks on business loans
not in excess of $100,000. Prior to the termination of the blanket
participation agreement, commercial banks in this district had
made 504 loans to business enterprises approximating $11,135,000. Prior to December 31, 1947, such commercial banks had
made 280 loans totaling $10,386,000 under the small loan par·
ticipation plan. The RFC-CCC Department continued to service the
loans under these programs during 1947. It also handled the pur·
chase and servicing of 3,161 mortgage loans approximating $18,·
270,000 under the "G.I." Housing Program prior to October 1,
when servicing duties were transferred to local loan agencies.
The work of the Commodity Credit Division of the department
was greatly reduced during 1947 and involved largely the receipt
and servicing of cotton producers' notes aggregating $4,423,000
secured by 31,000 bales of cotton, and the release to producers
of such notes having a face value of $3,355,000 secured by 28,000
bales of cotton. It disbursed approximately $124,000,000 in connection with programs involving the purchase of wool, peanuts,
and other commodities.
38

CUISINE SERVICE

During 1947 the expense of operating the bank's dining room
service amounted to $92,556 as compared with $86,448 in 1946,
although 17,300 fewer meals were served, and resulted in an
increase in the average cost per meal to 58 cents in 1947 from 49
cents in 1946. The increase in salaries paid to dining room employees and in food prices was responsible for the higher operating
cost. Since total receipts for meals served amounted to only $44,445 during 1947, this bank absorbed $48,111, or 52 percent of
the total expense as compared with 44 percent in 1946.
Preparations have been made to convert the dining room service
to a full cafeteria basis as soon as the necessary equipment is
delivered, and a new plan of pricing each food item separately
will be inaugurated.
FEDERAL RESERVE BANK BUDGET

During 1947, the Board of Governors requested the Federal
Reserve banks to reinstate the practice of preparing annual budget
estimates of expenditures which was discontinued in 1942 when
the banks experienced difficulties in estimating, with reasonable
accuracy, the probable costs of performing the various functions
under wartime conditions. This action was taken to assure the most
effective supervision of expenditures since responsibility for the
supervision and control of the operating costs of Federal Reserve
banks, including expenses incurred by them as fiscal agents of the
United States, is shared by the Board of Directors and officers of
the respective banks and the Board of Governors of the Federal
Reserve System.
In May 1947, this bank submitted to the Board of Governors a
budget broken down by each of its four offices for the last six
months of 1947, and in October, submitted a similar budget for
the year 1948. These budget estimates were approved by the Board
of Directors of the bank and subsequently by the Board of Governors. Through monthly reviews of expenditures in relation to
budget estimates, the officers responsible for the supervision of the
several functions are able to keep in close touch with the cost of
various operations in relation to the volume of work handled and
to increase the general efficiency of the organization. During the
six months ended December 31, 1947, total expenses of each of
39

the four offices of the hank were held within the respective budget
estimates for the period, although the expenditures for certain
functions exceeded budget estimates.
INTEREST CHARGE ON OUTSTANDING FEDERAL RESERVE NOTES

During 1947, the Board of Governors invoked the authority
granted under the provisions of the Federal Reserve Act to levy
an interest charge on outstanding Federal Reserve notes not col·
lateraled by gold certificates. This action was taken to permit the
System to pay into the Treasury approximately 90 percent of the
net earnings of Federal Reserve hanks, thereby accomplishing the
same results as the former franchise tax provisions of the Federal
Reserve Act in effect prior to 1933. This course was deemed desirable in view of the large profits of Federal Reserve hanks, which
have resulted from the essential operations of the System. During
the year total payments to the Treasury approximated $75,000,.:
000, of which $3,000,000 represented payments by this hank.
RETIREMENT OF FDIC CAPITAL STOCK

Pursuant to the provisions of an act approved August 5, 1947,
the Federal Deposit Insurance Corporation paid to the United
States Treasury the sum of $139,300,000 to retire its stock which
Federal Reserve hanks were required to purchase when the Cor·
poration was established in 1933. The FDIC stock held by this
bank, aggregating about $4,360,000, was surrendered on Septem·
her 17, 1947, to the Treasury for delivery to the Corporation for
cancellation.

40