Full text of Annual Report of the Federal Reserve Bank of Dallas : Annual Report to the Board of Directors (1948)

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Fed era I Reserve Bank
of Dall as
Annu al Repo rt
to the
Boar d of Direc tors
Submitt ed by
R. R. Gilbert, President
February 5, 1949

•
CONFIDENTIAL

CONTENTS
Page

Economic Developments in 1948 in the Eleventh Federal Reserve District ______ . -------____ -------------. _____ ----------------------------------· 3
Trea.sury Financing -----------------------------------------------------------------· 7
Government Securities Market-------------------------------------------------· 9
Member Bank Reserves and Related Factors.---------------------·----- 13
Weekly Reporting Member Banks-United States____________________ 15
Weekly Reporting Member Banks-Eleventh Federal Reserve
District ... ----.. ___ --.... -------. ____ ---.... ----__ ----.. --------------------------------- 17
Internal Operations -----------------------------------------------------------------Research Activities -------------------------------------------------------------·
Bank and Public Relations Activities-----------------------------------Legal Activities -------------------------------------------------------------------Auditing Activities -------------------------------------------------------------·
Personnel Activities -------------------------------------------------------------Retirement System --------------------------------------------------------------·
Pay Roll Deductions for Bond Purchases-----------------------------·
Bank Examinations -------------------------------------------------------------Report on Banking Developments.--------------------------------------Regulation of Instalment Credit.. .... ------------------------------------Membership in the Federal Reserve System... ----------------------·
Changes in Capital Stock......................... ----------------------------Nonmember Banks ---------------------------------------------------------------Par Banks ---------------------------------------------------------------------------New Bank Organizations........·--------------------------------------------·
Bank Failures ----------------------------------------------------·············---·Federal Reserve CrediL------------·······--·-······---------·--····--·------·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 ----------------------------------·---·------------·------------·-·Federal Reserve Bank BudgeL----------·-·-------------·-----·-·---------1

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ECONOMIC DEVELOPMENTS IN 1948
IN THE ELEVENTH FEDERAL RESERVE DISTRICT
Continuation of a strong demand for the goods and services
of the basic industries of the country resulted in virtually full
production and the maintenance of a very high level of employment in the Nation throughout the year. Most of the major indexes
of economic activity reached or exceeded former peacetime records at one time or another. The Nation's total industrial production ranged between 191 percent and 195 percent of the 1935-39
average except during two months when labor difficulties and mass
vacations in industry brought about temporary declines. Civilian
employment reached its peak in July, when 61,615,000 workers
were employed. During the last half of the year a moderate seasonal decline occurred, but in December approximately 1,000,000
more workers were employed than during the same month a year
earlier. Following a decline during the first quarter of the year,
wholesale prices and the cost of living rose steadily to reach alltime highs in August. At that time an improved supply-demand
relationship and noticeably stronger price resistance checked the
advance and, as a result, the trend turned downward slightly during the last quarter of the year.
Despite these record developments which occurred on the national economic scene, there were recurrent evidences during the
year that the inflationary pressures had spent their force in numerous areas of economic activity. In fact, it appeared that the country
had made much progress in "growing up" to the excessive, warcreated volume of purchasing power. The sharp break in the prices
of agricultural commodities during the first quarter of the year,
an increased resistance on the part of buyers in the real-estate and
in various durable goods markets, and a slowing down of the rate
of business expansion during the last quarter of the year, all reflected the effect of full production, the impact of rising prices on
consumer incomes, and the return of competition and a buyers'
market in many lines of goods.
Another indication of the increased pressures developing in
business is the rising number of business failures. Although fail3

ures are still relatively few in comparison with those of prewar
years, a steady upward trend in the number of failures and a decrease in the average liability of defaulting firms seem to suggest
that smaller concerns-and especially those which have been established since the end of the war-are finding it difficult to maintain profitable operations under conditions of higher operating
costs, keener competition, uncertain price trends, and more difficult credit problems.
In the Eleventh Federal Reserve District the dollar volume of
department store sales reached a new peak during 1948, while
the percentage increase over 1947 equaled or exceeded that of any
other district. Sales during the first nine months of the year were
about 12 percent above those of the corresponding period of 1947,
and even though consumer buying during the fourth quarter of
the year was at a less rapid pace, the gain in sales for the full
year amounted to 9 percent. The same factors which stimulated
a large volume of sales for the Nation as a whole were effective
in bringing about the same result in this District. Record consumer
incomes, a higher level of employment at increased wage rates,
continued full production in most lines of activity, favorable
agricultural incomes despite the lower level of agricultural production, and a strong demand for the petroleum products of the
area, all combined to assure a very high level of trade.
In this District as in the country as a whole, however, evidences
of readjustments were apparent. An improved supply of goods
provided consumers with the opportunity of broader selection,
while increased prices exerted pressure upon purchasing power;
as a consequence, increased competition and developing buyers'
markets were noticeably characteristic of trade activity during the
last quarter of the year. The underlying strength of consumer purchasing power at slightly lower price levels, however, was clearly
evident from the results obtained by merchants who resorted to
clearance sales, store-wide promotions, and price reductions to
support their dollar volume of sales. Such practices not only
stimulated sales but also tended to prevent the development of a
dangerous inventory situation, as consumers were induced to purchase slower moving merchandise in response to the price reductions offered.
The use of consumer credit in the form of charge accounts and
instalment accounts increased significantly during the year. After
4

the re-establishment of Regulation W on September 20 the rate
of increase in instalment credit became perceptibly slower, although the outstanding volume of charge accounts continued to
increase substantially to the end of the year. Credit sales at department stores in the District represented 63 percent of total sales
during December 1948 as compared with 61 percent during the
same month a year earlier. Moreover, collections became slower
as the year progressed.
Perhaps the two most important developments affecting agri·
culture in the Eleventh Federal Reserve District during 1948 were
the continuation of the drought over wide areas and the decline in
prices received by farmers for most commodities.
Because of the unfavorable weather, total agricultural production during 1948 in the five states of this District was substantially less than that of 1947. Larger crops of cotton, grain sorghums, and a few other minor commodities were harvested, but
the increase in production of these crops was not sufficient to offset
the sharp declines reported for winter wheat, oats, and other
products. Total crop acreage harvested in 1948 in the District
was about 49,000,000, in contrast with 50,300,000 in 1947. Moreover, yields of most major crops were lower during 1948 than a
year earlier.
Cotton production in the five states increased slightly due to
larger crops in Arizona, Louisiana, New Mexico, and Oklahoma,
for in Texas the crop of 3,200,000 bales was about 250,000 bales
less than the 1947 crop. The production of small grains in the
District declined about one-third below the crop of the preceding
year, as wheat and oat crops were down 33 percent and 48 percent, respectively, to more than offset a small increase in the barley
crop.
Range and livestock conditions in the District were strongly
affected by adverse weather. At the end of the year the condition
of ranges in Texas was generally poor and considerably below
average, while ranges in New Mexico and Arizona were reported
to be in fair condition but below average for the year-end season.
The farm value of Texas crops totaled $1,147,386,000 in 1948,
or approximately $300,000,000 less than the total reported for
1947. However, although the 1948 total is about 21 percent below
the record set in 1947, it is some 23 percent greater than the 1946
total.
5

All major divisions of industry in this District reached· new
peacetime peaks in employment and output during 1948 and in
some cases even exceeded wartime records. At the year-end, manufacturing employment in Texas totaled about 405,400 persons and
all nonfarm employment reached 2,350,000 persons. At the same
time, unemployment in Texas declined toward the end of the year
to a new postwar low of about 2 percent of the nonfarm labor
force. Other indicators of industrial activity included an increase
of about 12 percent in industrial power consumption in Texas
and an increase of about 4 percent in miscellaneous carloadings
in the southwestern freight district.
The petroleum industry enjoyed a record year, with crude oil
production in the District averaging 2,689,000 barrels daily, or
about 10 percent more than the previous record reached in 1947.
Throughout most of the year the continued pressure of demand
for petroleum products led to the payment of premiums above
the higher prices for crude oil which were posted late in 1947.
During the latter part of 1948, however, the easing of the supply
situation and some softening in prices of petroleum products
raised the question as to whether the postwar peak in petroleum
prices might not have been reached. An easier supply situation in
the petroleum industry in 1949 than in the previous year is expected as a result of larger crude oil stocks and some softening
of demand. Drilling activity was maintained throughout the District on a large scale, with completions in 1948 approximating
14,000 wells, a record second only to the completions in 1937.
Construction activity in the District, as in the Nation, set a new
postwar record in 1948, although the rise in construction costs permitted the dollar volume of construction to increase considerably
even though the physical volume changed only moderately. The
value of construction contracts awarded in the District during
1948 totaled $782,000,000, or 15 percent above 1947 and second
only to the 1942 wartime peak. Residential awards amounted to
$263,000,000, or 8 percent above the previous record reached in
1947. Commercial and institutional building also increased, but
public utility and manufacturing construction declined considerably from the levels of the preceding year.
A factor contributing to the upward movement of construction
contract awards, and an important potential factor in any future
cost reductions, is the gradual easing that has occurred in the con6

struction materials situation. The production of practically every
construction material increased during 1948, and the seasonal
decline in construction during the winter months in most parts of
the country permitted some increase of stocks. Lumber production appears to have been up slightly from 1947, while more
pronounced gains were made in the case of brick and cement.

TREASURY FINANCING
During 1948, total marketable issues of Government securities
declined from $165,758,364,000 to $157,482,090,000 as a result
of the Treasury's retirement and refunding operations. This decrease of $8,276,274,000, however, was offset in part by increases
in nonmarketable issues, with the consequence that the total interest-bearing debt of the Government decreased from $254,205,178,000 on December 31, 1947, to $250,579,231,000 on December 31, 1948.
The Treasury continued the policy of retirement of Government securities by cash as its cash position permitted; moreover,
policies of the Treasury and Federal Reserve System emphasized
the retirement by cash of maturing and callable securities held
by the Federal Reserve banks. Securities other than Treasury bills
maturing or callable during 1948 amounted to approximately
$35,500,000,000, of which $5,300,000,000 was retired by cash
and $30,200,000,000 was refunded. Cash retirement of maturing securities included $3,600,000,000 of certificates of indebtedness, $300,000,000 of Treasury notes, and $1,400,000,000 of
Treasury bonds. In addition, during the year the Treasury retired
by cash approximately $2,900,000,000 of Treasury hills. With
the exception of one issue of 11j2 percent Treasury notes which
was refunded into an issue of 13/s percent 181j2-month notes and a
small issue of 21j2 percent bonds which was retired wholly by
cash payment, issues of securities maturing or callable during the
year were refunded with certificates of indebtedness. As a consequence, the amount of certificates of indebtedness outstanding increased during the year by $5,305,099,000 while other Treasury
issues showed declines.
In an attempt to gain the full advantage of deflationary influences that might ensue from debt retirement, the Treasury reduced
its weekly bill offerings whenever its budgetary position permitted
7

and economic conditions seemed to warrant such action. A series
of weekly reductions of $100,000,000 each in offerings of Treasury bills was begun on January 15 and continued through April 8,
except that the reduction on March 18 was $200,000,000. Between
April 8 and June 24, when the Treasury's budget position was
somewhat less favorable and when the business outlook appeared
momentarily less inflationary, the amount of new offerings equaled
maturities. However, when it became evident that inflationary
forces still were very strong, weekly reductions in offerings of
Treasury bills amounting to $100,000,000 each were resumed
on July l and continued through September 9. Following a lapse
of several weeks, the practice again was resumed on November
18 and continued through December 9. As a result of this policy,
the amount of Treasury bills outstanding on December 31, 1948,
totaled $12,223,835,000 as compared with $15,136,337,000 a
year earlier.
In line with the policy of the Federal Open Market Committee
and the Treasury of bringing about a moderate degree of firmness
in short-term interest rates as an inflationary deterrent, the Treasury raised the interest rate on 12-month certificates of indebtedness from l percent to 11/s percent with the issue dated January
l, 1948. Subsequent issues of certificates were offered at the llf8
percent rate until October l, when the rate was increased to 11,4
percent for the 12-month maturity.
The average interest rate on the total marketable public debt
outstanding on December 31, 1948, was 1.979 percent as compared with an average rate on December 31, 1947, of 1.916 percent. The most substantial increases between these two dates in
average interest rates on outstanding Government securities occurred in the average rates for Treasury bills and certificates of
indebtedness. The average rate on Treasury bills outstanding rose
from 0.915 percent on December 31, 1947, to 1.157 percent on
the comparable date a year later, while the average rate on certificates of indebtedness outstanding rose from 0.892 percent to
1.158 percent during the same period. Smaller increases were
reflected in the average rates on Treasury notes and Treasury
bonds outstanding.
Throughout the year the Treasury emphasized the importance
of continuing to hold and to buy United States savings bonds. In
January and February a promotional campaign was carried out
8

by the Savings Bond Division of the Treasury to stress the importance of pay roll savings; from Aprill5 to July 15 the Security
Loan Drive was aggressively sponsored; then from November 11
to December 7 another promotional campaign to reach the farm
market and to re-emphasize pay roll savings was scheduled. In
addition, during the Security Loan Drive a special offering was
made to certain restricted classes of investors permitting them to
increase their purchases within .stated limits provided the purchases were made between July 1 and July 15.
Sales of savings bonds for the country as a whole reached
$7,295,000,000 during 1948, an increase of $600,000,000 or 9
percent above sales in 1947, while redemptions of $5,144,000,000
were only $35,000,000 larger than during the preceding year. In
this District, sales of $206,000,000 were $21,000,000 smaller
than in 1947, while redemptions of $236,000,000 were only $10,000,000 less. As a consequence, the District's excess of redemptions over sales rose from $19,000,000 in 1947 to $30,000,000
in 1948.
On December 31, 194.8, the Treasury's cash balance in its general fund was $4,208,411,000, as compared with a balance of
$3,097,078,000 a year earlier.

GOVERNMENT SECURITIES MARKET
The policy of the Federal Reserve System as shown in its efforts
to maintain stable and orderly conditions in the Government securities market and the rate policy of the Treasury as reflected
in refunding operations were primarily responsible for the trend
of yields on Government securities during 1948. Various factors,
such as increases in member bank reserve requirements, Treasury
:fiscal operations, the competitive demand for capital by private
borrowers, and market uncertainty regarding the continuation of
the System's support program, influenced the volume of transactions in Government securities at different times during the year,
but the ability of the System to maintain stable and orderly conditions in the market even in the presence of considerable pressure
was proved.
The average yield on 3-month Treasury bills rose gradually but
steadily until mid-February and then leveled off and fluctuated
within the comparatively narrow range of 0.996 percent and
9

0.998 percent until the second week in August. During this period
of several months a closely similar trend, though at a slightly
higher level, characterized the course of yields on certificates of
indebtedness. Then in the second week in August, partly in re·
sponse to the increasing fears of a resurgence of inflationary
forces, yields on bills and certificates resumed an upward course,
with the average yield on Treasury bills rising from 0.997 percent during the week ended August 7 to 1.155 percent during the
week ended January 1, 1949, while 9- to 12-month certificates of
indebtedness showed an increase in average yield from 1.10 per·
cent to 1.22 percent during the same period.
YIELDS ON TREASURY AND CORPORATE SECURITIES
WEEKLY AVERAGES OF DAILY FIGURES

TREASURY BILLS
( NEW ISSUES)

o~--------~--------~----------~--------~0
1945

1946

1947

1948

On the other hand, the average yield on long-term taxable Government bonds was comparatively stable throughout the year. On
January 2, 1948, an average yield of 2.45 percent was reported,
10

in contrast with an average yield on December 31 of 2.44 percent.
Moreover, during more than 10 months of the year the yield on
long-term taxable bonds averaged either 2.45 percent or 2.44
percent. The principal deviation from this pattern of stability
occurred between May 13 and June 23, when the average yield
declined from 2.44 percent on May 12 to 2.39 percent on June 3
and then regained its loss to reach 2.44 percent again on June 23.
During the remainder of the year a notable stability prevailed.
Strength in high-grade corporate bonds during the first half
of the year was reflected in a decline in the average yield from
2.93 percent during the week ended January 3 to 2.72 percent for
the week ended June 19. From that date until mid-August, yields
rose gradually and then remained relatively constant until December, when renewed strength brought about declining yields.
As a result of these developments, the average yield on high-grade
corporates declined from 2.90 percent on January 2 to 2.76 percent on December 31, and the spread between yields of these issues
and long-term taxable Governments narrowed from 0.45 percent
on January 2 to 0.33 percent on December 31. .
At times during the year, especially during the first quarter
and then again from July through October, there was considerable uncertainty in some quarters of the financial markets regarding the continuance of the support program of the System or
the level at which the System might continue to provide support.
During such periods the market was frequently under very heavy
pressure arid purchases of Government bonds by the Federal Open
Market Committee were very large. Moreover, increases in reserve
requirements of member banks, and particularly the increases
which became effective for all member banks during the latter
part of September, also stimulated substantial offerings of bonds.
Finally, a generally strong demand for funds by private corporations added to the pressure on the market.
It will be recalled that on December 24, 1947, the Federal
Open Market Committee lowered the support price for the longest
term Government bonds. The effect of that sudden move carried
over into the new year, and between December 31, 1947, and
February 18, 1948, net System purchases of Government bonds
amounted to $2,733,000,000. During that same period, however,
11

cash retirement of System holdings of Treasury bills and certificates of indebtedness and sales of such short-term issues in the
market by the System were sufficient to more than offset the increase in holdings of Government bonds, with the consequence that
the System's total holdings of Government securities declined by
approximately $1,616,000,000.
From mid-February until the end of June, pressure on the Govmnment securities market was reduced considerably, and net
purchases of Government bonds by the Federal Open Market
Committee were comparatively small during most weeks of the
period, while holdings of bills and certificates of indebtedness
fluctuated more or less in accordance with reserve positions of
banks and general money market factors.
Late in June, fears regarding the future level of support prices
again developed. From the second week in July through November
10, very substantial offerings of restricted long-term issues appeared in the market, while some selling of taxable bank-eligibles
also was evident. In order to maintain market stability under the
support program of the System, the Federal Open Market Committee purchased during this period of extreme pressure approximately $4,341,000,000 of restricted bonds, principally from insurance companies, although other nonbanking investors at times
were a factor in the market. Net purchases of taxable bank-eligible
securities during these same weeks amounted to approximately
$752,000,000. During the remainder of the year offerings of
taxable bonds dwindled to comparatively minor amounts while
the System reduced its holdings of partially tax-exempt bonds to
meet the demand of savings banks and others seeking the advantage of the tax-exemption feature, in view of the possibility
of increased taxes. Net changes in the System's holdings of Government securities between December 31, 1947, and December 31,
1948, are summarized in tabular form on page 15.
Between January 1 and December 31, 1948, changes in the
prices of Government securities were comparatively moderate. The
longest term restricted 21f2 percent Government bonds of December 67-72 were quoted on December 31, 1947, at a bid price of
100-8/32, while one year later the bid price for this issue was
100-15/32. The unrestricted or bank-eligible 2lj2s of September
67-72 rose from 101 on December 31, 1947, to 101-29/32 on
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December 31, 1948, while the 2s of 52-54 rose from 101-4/32
to 101-12/32. As previously indicated, however, yields on Treasury bills and certificates of indebtedness rose significantly during
the year. On December 31, 1947, the longest maturity of Treasury
bills was quoted at a bid price of 0.96 percent discount, as compared with a 1.16 percent discount for the comparable maturity
on December 31, 1948. Similarly, the most distant dated certificate was quoted at 1.24 percent, as compared with a quotation
for the comparable maturity a year earlier of 1.08 percent.

MEMBER BANK RESERVES AND RELATED FACTORS
During 1948, changes in factors influencing member bank reserves resulted in a net increase of $2,339,000,000 in the reserve
balances of member banks. Principal factors which added to member bank reserves during the year were an increase in Reserve
bank credit amounting to $932,000,000 and an increase in the
monetary gold stock of $1,482,000,000, together with a reduction in the volume of money in circulation of $543,000,000.
Minor changes in the amounts of Treasury and national bank
currency outstanding and in Treasury cash balances also added
slightly to reserves. On the other hand, increases in Treasury deposits with Reserve hanks, nonmember bank deposits, and other
Federal Reserve accounts partially offset expansive factors.
Despite the .substantial increase that occurred during the year
in member hank reserve balances, estimated excess reserves of
the member hanks of the System declined from $1,499,000,000
on December 31, 1947, to $1,050,000,000 on December 29, 1948,
as a result of a very substantial increase in required reserves.
The increase of $2,788,000,000 in required reserves of member
banks was a consequence of the three increases in reserve requirements which were made effective for central reserve city
banks during February and June and for all member banks during
September.
Although there were intermittent short periods when the reserve
positions of member hanks were under considerable pressure, the
three periods of strongest and perhaps most continuous pressure
occurred during the first quarter of the year and during September and the last half of December. At other times the reserve
positions of member banks varied from comparatively easy to
moderately fum.
13

SUPPLY AND USE OF MEMBER BANK RESERVE FUNDS
(In millions of dollars)
December ll9, December :u ,
1U8
1941

Reserve bank credit_
$24,113
Monetary gold stoc
24,236
Treasury and national bank currency_ 4,585
Money in circulatio
28,325
Treastiry cash
1,329
Treasury deposits with Reserve banks_ _ 1,283
Nonmember deposits
1,106
Other Federal Reserve accounts
653
Total - - - - - - - -- Member bank reserve balances held__$20,238
Estimated required reserves
19,188
Estimated excess reserves
1,050

$23,181
22,754
4,562
28,868
1,336
870
961
563
$17,899
16,400
1,499

Changes
that
added to
.-eserves

Changes
that
.-educed
t"eaervea

S+ 932
+1,482
23
- 543

+

7
S+413
+145
90
$ 2,987
648
$+2,339
+2,788

+
s

-

449

During the first three months of the year the substantial excess
of Treasury receipts over expenditures, together with the retirement of Government securities held by the Federal Reserve System, drew heavily upon member banks' reserves. In addition,
during that quarter the first increase in reserve requirements of
central reserve city banks was ordered by the Board of Governors.
Late in May and again in June, Treasury transactions exerted
considerable pressure upon reserves, tending to offset in part the
expansive influence of gold imports and other factors. The second
increase in reserve requirements of central reserve city banks
also contributed to the tightness of reserve positions in June.
During the last half of the year reserve positions of member
banks were free of any considerable pressure, except during Sep·
tember when reserve requirements were increased and during the
last half of December when Treasury operations were the main
cause of tightness. A steady influx of gold and substantial purchases of Government securitie.S by the System, principally from
nonbanking investors, were the major factors tending to ease
reserve positions during the period.
Holdings of Government securities by the Federal Reserve System rose by only $774,000,000 during 1948, despite the fact that
purchase and sale transactions were exceptionally large at times
during the year. Perhaps more important than the increase in
total holdings of Government securities by the System during the
year were the changes which occurred in the composition of the
System's Government securities portfolio. During the year the
14

System reduced its holdings of Treasury bills, certificates of indebtedness, and Treasury notes but added very substantially to
its investment in Treasury bonds. As a consequence of these
changes, Treasury bonds represented 47.1 percent of the System's
holdings of Government securities at the end of 1948 in contrast
with 12.7 percent on the comparable date a year earlier. Figures
summarizing these changes are shown in the following table:
HOLDINGS OF GOVERNMENT SECURITIES BY THE
FEDERAL RESERVE SYSTEM
(Amounts in millions of dollars)
TIIP6 of

'"'""rit11

Perc~mt

Dec. 31,
19-'8

of total

Treasury bills
_$ 5,487
Certificates of indebtedness___ 6,078
791
Treasury notes _ _ _ _ _
Treasury bonds
... 10,977
Total
$23,333

23.5
26.0
3.4
47.1
100.0

Dec. 31,
1941

$11,433
6,7%
1,477
2,853
$22,559

Perc~mt

Net

of total

change

50.7
30.1
6.5
12.7
100.0

$-5,946
718
- 686
+8,124
S+ 774

WEEKLY REPORTING MEMBER BANKS
UNITED STATES
Among the factors which were influential in shaping the trend
of principal asset and liability accounts of weekly reporting member banks in the United States during 1948 were the fiscal operations of the Treasury; somewhat restrictive credit policies, especially regarding bank reserves; a continuing demand for bank
credit by business and industry; and a steady net inward movement of gold.
Although the Treasury followed a policy during the year of
retiring Treasury bills whenever its cash position seemed to make
such action practicable, the most substantial debt retirement occurred during the first quarter when the Treasury's cash receipts
were more than $6,400,000,000 in excess of payments. Consequently, between January and March considerable pressure wa.s
placed on bank reserves, and demand deposits adjusted of the
weekly reporting member banks declined by more than $3,300,000,000. Holdings of United States Government securities also
declined sharply during this period as reported totals moved downward from $37,227,000,000 on December 31, 1947, to $34,433,000,000 on March 31, 1948. Another factor contributing to the
pressure on reserves and to the decline in holdings of Government
15

securities during the first quarter of the year was an increase of
2 percentage points in reserve requirements against demand deposits at central reserve city banks which became effective February 27.
Moderately restrictive credit policies in the form of higher
rates on short-term Government securities and increases in member bank reserve requirements influenced the trend of asset and
liability items of the weekly reporting member banks at various
times during the year. In general, banks tended to meet increased
reserve requirements by reducing their holdings of Government
securities. This tendency was reflected in a decline in holdings of
Government securities during June of more than $500,000,000,
following the increase of 2 percentage points in reserve requirements against demand deposits of central reserve city banks effective June 11, and a decline of almost $2,200,000,000 in holdings
of Government securities between August 25 and September 29,
largely in response to increased reserve requirements of 2 percent·
age points against demand deposits and 11j2 percentage points
against time deposits effective on September 16 and September
24, respectively, for country banks and other classes of banks.
The demand for bank credit by business and industry continued
comparatively strong during the year but was less pressing than
a year earlier. Moreover, banks appeared to follow a somewhat
more selective credit policy, with the consequence that the loan
increase at weekly reporting member banks in the United States
during 1948 amounted to $2,337,000,000, or an increase of 10.0
percent, in contrast with the increase experienced during 1947
which amounted to $3,912,000,000, or 20.1 percent. During the
first five months of 1948 total loans of weekly reporting member
banks more or less followed a normal seasonal pattern, declining
gradually. Mter remaining relatively stable during the summer
months of the year, the loan trend turned upward as the outstanding volume of loans increased to $25,812,000,000 on December 29, 1948.
Following the decline in deposits which occurred during the
first quarter of the year, demand deposits of these banks rose
during April and then remained relatively stable through September. During the last quarter of the year demand deposits
adjusted increased gradually but did not reach the level which
16

was reported at the end of December 1947. For the year as a
whole, demand deposits adjusted declined at the weekly reporting
member banks by $891,000,000, or 1.8 percent.
Investments of the weekly reporting member banks declined
from $41,487,000,000 on December 31, 1947, to $37,192,000,000
on December 29, 1948, with all of the decline being due to a
reduction in holdings of United States Government securities.
During 1948 weekly reporting member banks reduced their portfolios of United States Government securities by 11.4 percent,
which, together with a minor reduction in holdings of other securities, resulted in a shrinkage of 10.4 percent in total investments.

WEEKLY REPORTING MEMBER BANKS
ELEVENTH FEDERAL RESERVE DISTRICT
Changes in the principal asset and liability accounts of the
weekly reporting member banks in this District between December
31, 1947, and December 29, 1948, included increases in total
deposits and loans and discounts and decreases in investments and
in balances with correspondents. The rate of increase of deposits
and loans during 1948, however, was notably less than that which
occurred during 1947, while the decrease in investments was somewhat larger.
Total deposits of the reporting banks in this District increased
$95,000,000 during 1948 as compared with an increase of $217,000,000 during the preceding year. The increase in total deposits
between December 31, 1947, and the latest reporting date in 1948
was the result of increases in demand deposits adjusted of $146,000,000 and increases of $32,000,000 and $12,000,000 in time
deposits and United States Government deposits, respectively, offset in part by a decline of $95,000,000 in interbank deposits.
Adjusted demand deposits of this group of banks followed an
irregular downward trend during the first three months of the
year, reaching a low point of $1,810,000,000 on March 31. Dur- ·
ing the remainder of the year an upward trend prevailed, broken
only by occasional weekly declines. As a consequence, adjusted
demand deposits reached a peak of approximately $2,015,000,000
on December 15, 1948, and then declined moderately during the
17

remainder of the year. The trend of deposits in this District was
influenced during the first three months of the year by the large·
scale debt retirement program of the Treasury which extended
through March and by business hesitancy aroused by the sharp
break in the prices of agricultural products early in the year.
During the remainder of the year the strength of business and
economic activity supported a gradually increasing volume of
deposits.
Total loans of the weekly reporting banks in this District in·
creased about $114,000,000 during the year, reflecting increases
of $71,000,000 in commercial, industrial, and agricultural loans,
$11,000,000 in real-estate loans, and $37,000,000 in loans classified as "all other" and including consumer borrowings. This last
category of loans showed a strong demand throughout most of
the year, while real-estate loans showed a gradual upward trend
through October and then declined slightly during the remaining
nine weeks of the year. Commercial, industrial, and agricultural
loans declined steadily during the :first half of the year to reach
a low figure for 1948 of about $683,000,000 on June 9. Thereafter, a steady upward movement occurred, bringing the total of
this major category of loans to approximately $783,000,000 on
December 29. The increase in total loans of the weekly reporting
member banks in this District was substantially less during 1948
than a year earlier, the percentage increase for 1948 being 11.1
percent as contrasted with an increase of 18.5 percent during the
preceding year.
Several factors accounted for the slower upward loan trend
during 1948. In the first place, the monetary and credit authori·
ties followed more restrictive credit policies, especially during
the last half of the year, than had been the case during 1947.
Then too, the Voluntary Credit Control Program of the American
Bankers Association, which was generally supported by leading
member banks in this District, helped to minimize loans of a speculative and inflationary character. Finally, the noticeably slower
rate of increase in the expansion of business activity, together
with increased cautiousness and selectivity on the part of commercial bankers, also was a restraining influence.
Total investments of the reporting banks in the District declined
approximately $24,000,000 during the year as a result of a
decline in holdings of United States Government securities amount18

ing to $36,000,000, offset in part by an increase in holdings of
other securities. Weeldy reporting banks in the District increased
their holdings of Treasury bills and certificates of indebtedness
during the year by about $45,000,000 and $77,000,000, respectively, while their investments in Government bonds were reduced
from about $846,000,000 at the end of December 1947 to some
$719,000,000 at the end of 1948. In addition, holdings of Treasury notes declined by approximately $31,000,000.
Factors contributing to changes in holdings of Government securities by the weekly reporting member banks included the change
in the support price level which was announced late in December
1947 and which was followed by rather substantial sales of bonds,
the more attractive rates on bills and certificates, the desire at
times for greater liquidity, and increased pressure on reserves
when loan demand was very strong.
Principal asset and liability accounts of the weekly reporting
member banks in this District, together with the percentage change
in each item, for the District and the United States, are shown in
tabular form below:
(Amounts in millions of dollars)

E!e'IJenth Federal Reserve Distri<:t
Net
Dec. S9, Dec. 81,
1U8
1947
change

Deposits-total
$3,063
Demand deposits-adjusted _ ___ 1,998
Time deposits
417
United States Government deposits_
36
Interbank deposits
612
Loans
1,139
Investments
1,203
United States Government securities_ 1,082
Other securities
121
Balances with correspondents
300

$2,968
1,852
385
24
707
1,025
1,227
1,118
109
323

S+

95
+146
32
12
-95
+114
-24
-36
12
-23

+
+
+

Percentage change
Ele'IJenth
United
Dietrict
Statee

+ 3.2
+ 7.9
+ 8.3

+50.0
-13.4
+11.1
-2.0
-3.2
+11.0
-7.1

-

1.4
1.8
2.9
+55.7
-9.1
+10.0
-10.4
-11.4
- 1.3
-16.6

+

INTERNAL OPERATIONS
RESEARCH ACTMTIES

The work of the Research Department during 1948 included
the basic statistical and reporting services; the publication of the
Monthly Business Review, the Agricultural News Letter, and special bulletins; active participation in bank and public relations
activities through such media as bankers' forums, radio presentation, articles written for outside publications, and public ad19

dresses; the handling of a growing number of requests from
banks, businesses, and others for miscellaneous statistical and
econoinic information; and numerous services to the directors,
officers, and other departments of the bank. Businesses and banks
in the District continued to show much interest in such basic
statistical services as the releases covering department store sales
and inventories, the monthly report of bank debits in the principal
cities of the District, the weekly report of condition of selected
member banks in leading cities of the District, and the midyear
and year-end studies of member bank operating ratios. One of the
most important services, however, of the Statistical and Reporting
Section of the Research Department is the ability to supply
promptly on request specific items of statistical or economic information to a steadily growing number of banks and businesses
which have shown an increasing tendency to use the Research
Department of this bank as a source of such information.
Regular circulation of the Monthly Business Review at the end
of December 1948 was 3,423 as compared with a circulation of
2,946 at the end of 1947, or a net increase of 477. During the
same period the regular circulation of the Agricultural News
Letter showed a net increase of 349, bringing the monthly circulation of that publication to 2,475 at the end of 1948. Evidence of
the strong interest in these publications is reflected in the frequent
requests for additional copies, which on a number of occasions
have required reprints running into several hundred copies. No
basic changes in either of these publications are contemplated during 1949, although it is probable that new features will be added
from time to time to improve their quality and to strengthen their
favorable acceptance. The script for the bank's weekly radio
broadcast was prepared and presented throughout the year by the
Research Department.
Other major bank and public relations actiVIties undertaken
during the year included the preparation of economic data for
a publication, "Economic and Banking Problems of the East Texas
Area," and a graphic pamphlet, "Economic and Banking Trends
in Texas." Five hundred copies of each of these publications were
distributed on a selective basis to banking and business leaders. In
addition, the department contributed considerable time and effort
to the Texas Savings Bond Division of the United States Treasury
to assist it in its promotional and sales activities.
20

The efficiency of operations and the volume of work accomplished by the department during 1948 probably were affected
somewhat by the loss of three experienced staff members during
the first six months of the year. Although satisfactory replacements for these economists were obtained, a considerable period
of orientation and development was inevitable. The problem of
obtaining competent personnel at the professional level continues
difficult, especially in the field of finance and central banking.
Efforts will continue to be made to strengthen the department's
personnel by supervised training, organizational improvement, and
essential staff additions.
BANK AND PUBLIC RELATIONS ACTMTIES

The major objectives of the bank and public relations program
formally approved by the Board of Directors early in 1947 were
largely achieved during the year. Activities in most phases of the
program were broadened, and their effectiveness is evident in the
increased demand for speakers and for special articles, more numerous inquiries for economic information, the responsiveness of
outside contacts in furnishing information on business conditions,
and a broadening interest in other activities such as bankers'
forums and the weekly radio program. The following summary
outlines briefly the principal activities during 1948:
Bank officers and representatives made 181 visits to nonmember banks and 682 visits to member banks. These visits
included about 90 percent of all member banks in the District.
Representatives of the bank addressed 60 meetings of banking, civic, trade, and educational organizations, at which the
total attendance approximated 6,650 people. The bank also
had one or more representatives at 135 other meetings of
such organizations, at which the total attendance aggregated
50,000 persons. A total of 1,418 individuals, consisting of
633 students, 482 bankers, and 303 businessmen and others,
visited this bank and its branches. In each instance, the total
for 1948 was greatly in excess of that for 1947.
The bank .sponsored five bankers' forums, which were held
at Huntsville, Longview, Lufkin, Mount Pleasant, and Tyler,
Texas. The area covered by these forums, comprising 43
21

counties in East Texas, included 85 member banks and 150
nonmember banks. These forums were well-received by the
bankers in attendance, and there has been a continuing demand for copies of the forum booklet, as well as for booklets prepared for earlier forums. A special forum-type discussion of economic and banking trends in Texas was presented at the Texas Bankers Conference in Austin sponsored
jointly by the University of Texas and the Texas Bankers
Association. Booklets were also prepared and used as a basis
for the forum discussions, and subsequent requests for copies
have depleted the supply.
The bank's weekly radio program, "Your Southwest Business Review," over Station WFAA-570, Dallas, Texas, was
continued throughout 1948. Frequent favorable comments
from bankers and businessmen in widely scattered areas of
the District are indications of the interest in and the value
of the program.
On June 10, 1948, the bank sponsored a dinner meeting in
Houston, Texas, attended by a representative group of leading
bankers in that city and by the directors of the bank and its
Houston Branch. Governor Clayton of the Board of Governors visited Houston and San Antonio on October 20 and
21, respectively, to attend the meetings of the boards of directors of those branches. A luncheon meeting was held in each
city which was attended by the senior officers of local banks
and the directors and officers of the respective branches. On
the occasion of the joint meeting of the boards of directors of
the bank and its three branches held on November 12, 1948,
the bank also sponsored a dinner meeting attended by 135
guests, consisting of leading bankers and businessmen of
Dallas and the directors of this bank and its branches. Allan
Sproul, President of the Federal Reserve Bank of New York,
was the principal speaker at this dinner meeting.
The various activities of the bank received much favorable
publicity during the year, including comments and editorials in
newspapers and financial periodicals relating to speeches delivered,
articles published, and material contained in the bank's regular
publications. In addition, frequent news stories were published
relating to the bank's activities, public appearances of staff mem22

hers, admissions of new member banks, meetings participated in
by the bank's representatives, changes in the bank's official staff,
and appointment or election of members of the boards of directors
of the Head Office and branches.
LEGAL ACTIVITIES

Since the bank was not involved in any litigation during 1948,
the legal activities were of a general nature and those usual to the
office of counsel. These included the rendering of both written and
oral opinions on various legal problems arising under the general
laws as well as under national and state banking laws. Legal
analysis and comment with reference to a proposed revision of the
Negotiable Instruments Law were made, and several of the bank's
operating bulletins were reviewed. Applications for membership
in the Federal Reserve System and similar matters, such as
amendments to charters of member banks, have come to the attention of Counsel, and opinions have been rendered with reference
to the legal aspects. In addition, Counsel has rendered general
service, such as preparing and approving contracts and leases
which concern the bank and its branches, discussing with the officers
of the bank the interpretation and application of the regulations,
investigating accidents, analyzing insurance contracts, and other
similar matters.
AUDITING ACTIVITIES

The examining staff of the Board of Governors made a regular
examination of this bank and its branches during April and May
1948. 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 three
meetings for the purpose of reviewing audit reports and discussing audit procedures with the General Auditor. Throughout the
year, the General Auditor consulted frequently with the officers
of the bank regarding changes in accounting procedures and new
accounting methods.
PERSONNEL ACTIVITIES

During 1948, close attention was given to the maintenance of
the Job Classification and Salary Administration Plan which be33

came effective on October 1, 1947. In carrying out that responsibility, special efforts were made to keep job descriptions, specifications, evaluation, and grading on a current basis, and surveys
of community salary rates and personnel policies were made during the spring and fall of 1948 in the Cities of Dallas, El Paso,
Houston, and San Antonio. The number of employees with salaries
in excess of their respective grade maximums had been reduced
to 49 at the end of 1948 from 85 on the date the Job Classification
and Salary Administration Plan was established. This reduction
resulted partly from resignations but mostly from changes in
assignments and in the importance of the jobs held by such
employees.
On December 31, 1948, the personnel of this bank and its
branches, including officers and employees, totaled 954 as compared with 920 on December 31, 1947. This increase of 34 reflected chiefly an increase in certain activities of the RFC-CCC
Department and the re-establishment of the Consumer Credit
Department.
TOTAL NUMBER OF EMPLOYEES, BY MONTH, 1945-1948
FEDERAL RESERVE BANK OF DALLAS

~~g~ER~----------------~--------------------~----------------~--------------------~NU~6~

TOTAL EMPLOYEES

1200

....._............-

, ___

...._~~--·"-· ,4::(-.!~
/.------------1-----------------~ 1200

-r

~---·-·~

0

0

JFMAMJJASONDJFNAMJJASONDJFMANJJASONDJFMAMJJASOND
1945
1946
1947
1948

The annual salary rate of officers and employees at the Head
Office and branches on December 31, 1948, amounted to $2,402,24

000 as compared with $2,335,000 on December 31, 1947. The
net increase of $67,000 was due in part to the increase in personnel and in part to salary adjustments based on meritorious performance of duties and promotions to more responsible jobs. At
the end of 1948, the average annual salary of employees was
$2,340.
The combined rate of personnel turnover at the Head Office
and branches for 1948 was 38 percent, or approximately the same
as in 1947. While there were increases in the rates of turnover
at the Head Office and Houston Branch, they were more than offset
by the declines at the El Paso and San Antonio Branches. The
increase at the Houston Branch raised the turnover rate in 1948
to 54 percent, a rate substantially above that of other offices, while
the turnover rate at the El Paso Branch declined sharply, dropping
to 32 percent from 74 percent in 1947.

On December 31, 1948, approximately 86 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 the coverage. During the year
the bank and its personnel paid premiums amounting to $30,700
to the Blue Cross organization, and that organization paid approximately $16,700 for hospital, medical, and surgical services
rendered to officers and employees of the bank or their dependents.
In October 1948, the Board of Governors of the Federal Reserve
System approved a policy for the uniform treatment of employees
of the Federal Reserve banks entering service in the Armed Forces
of the United States under the Selective Service Act of 1948, and
that policy has been adopted by this bank. The policy, which provides for reinstatement of an employee, under certain conditions,
at the expiration of his military service, reimbursement for part
of the premiums paid on National Service Life insurance, the payment of one-half month's unearned salary at the time of entering
military service, and the payment of an additional one-half month's
unearned salary if and when the employee returns to service with
the bank, accords employees substantially the same benefits as
those made available to employees who entered military service
during World War II.
In carrying out the policy of recognizing officers and employees
who have had 25 years or more of continuous service, dinner
25

meetings were held on November 16, 1948, in the Head Office
and branch cities, and service emblems were presented to 14 members of the staff who had completed 25 years of continuous service
since the first annual dinners were held in 1947. On November
16, 1948, 101 officers and employees had attained the distinction
of having 25 years or more of continuous service.
Employees continued to avail themselves of the counseling service instituted at the Head Office in 1947, which affords them an
opportunity to discuss their personal problems privately and confidentially with designated counselors on the staff of the Personnel
Department.
The commercial wired music .service, which has been used in
the recreation room, dining room, and Transit Department for
some time, was extended during 1948 to three other operating
departments.
RETIREMENT SYSTEM

There were no material changes during the year in the rules
and regulations of the Retirement System of the Federal Reserve
banks. On July 1, 1948, this bank's rate of current contribution
was reduced from 10.10 percent to 10.08 percent of the bank's
total pay roll. During 1948, four retirements were effected and
three death claims were paid, bringing the total number of retirements effected at this bank to 68 and death claims paid to 31 since
the Retirement System was inaugurated on March 1, 1934. At the
end of 1948, 40 former officers and employees were receiving retirement allowances and seven had arranged for their retirement
payments to be deferred.
PAY ROLL DEDUCTIONS FOR BOND PURCHASES

The officers and employees at the Head Office and branches purchased $110,000 of Government securities during 1948 through
the pay roll deduction plan. At the end of the year about 37 percent of the personnel was enrolled in the plan, and authorized
deductions were at the rate of 4.25 percent of the bank's total pay
roll. Since the pay roll deduction plan was inaugurated in April
1941, purchases of savings bonds by officers and employees of the
bank have aggregated $1,463,000.
28

BANK EXAMINATIONS

The Examination Department broadened its activities considerably during 1948 to cope with changing conditions and to render
additional and more effective service in the supervision of member banks. The continued upward trend in the volume of loans
under conditions of increasing competition among business concerns, the uncertainty as to the future trend of business in many
lines, and the increasing number of business failures created credit
problems which have not confronted bankers in recent years. This
situation required this bank's examiners not only to appraise more
carefully the loan portfolios of banks but also to stress to bankers
the need for adequate credit files, for appropriate loan diversification and selectivity in credit extensions, and for aggressive collection policies. The increasing number of defalcations and the
growing tendency of some customers of banks to indulge in questionable practices posed further problems for the examining staff,
necessitating more careful scrutiny of audit procedures and of the
nature and amount of fidelity bond coverage.
During the year the examining staff participated in 169 examinations, as compared with 173 in 1947. The following table
summarizes the operations of the department during the two years:
Irulepe-ndent
examin.ations

State member banks_ _ _ _ _ _ __ _ _
State bank applications for membership
Separate trust department
Holding company affiliates
Applications to organize national banks
Total

Joint 60laminationa
with state or other
federal agencies

1948

1947

1948

1947

4
3
1
0
0

4
12
1
0
0

140
8
10
3

130
6
11
2
7

8

17

161

156

0

Effective September 1, 1948, the Board of Governors promulgated a revision of Regulation H, simplifying and reducing the
number of standard conditions of membership, and concurrently
cancelled certain special conditions accepted by state banks at the
time of their admission to membership in the Federal Reserve
System.

An expanded program of analysis and review of examination
reports was inaugurated by the Examination Department on January 1, 1948, as a means of having readily available information
which would indicate the condition of, and h·end of affairs at,
member banks. Summaries of these analyses are circulated to the
27

officers of the bank who are members of the Discount Committee,
for their information and guidance.
The bank's officers and staff maintained very pleasant and satisfactory relations with all of the federal and state bank supervisory authorities in this District.
REPORT ON BANKING DEVELOPMENTS

In 1947, the Board of Governors inaugurated a program of
obtaining from Federal Reserve banks quarterly reports reflecting
noteworthy developments in banking not ordinarily obtainable
from statistical information. The report represents a composite
summary of views and observations of the Federal Reserve banks'
officers, examiners, and other personnel in direct contact with commercial bankers in their districts. These reports were continued
during 1948, and they have been very beneficial to the Board of
Governors and to the officers of this bank in helping them keep
informed on developments in the field of banking and finance
throughout the District and the Nation.
REGULATION OF INSTALMENT CREDIT

Under authority of the Joint Resolution of Congress, approved
August 16, 1948, providing for the control of consumer instalment
credit, the Board of Governors reissued Regulation W in substantially the same form in which it expired on November 1, 1947.
The Regulation, which became effective September 20, 1948, controls instalment sales of twelve kinds of consumer durable goods
and most instalment loans for consumer purposes. Instalment
credits up to $5,000 are within the scope of the Regulation. The
Board's authority to control consumer instalment credit will expire
June 30, 1949, unless extended by Congress .
. Immediately following the effective date, a promotional and ·
educational campaign relative to the Regulation was begun by this
bank. Every effort was made to obtain registration statements from
individuals, businesses, and banks subject to the Regulation. Circulars were mailed to all previous registrants, as well as to trade
associations, chambers of commerce, banks, and new firms of
which the bank had a record. Shortly before the November 19
deadline, further efforts to obtain registration were made, including a press release which was mailed to all newspapers in the
District. Banks which had not filed statements were traced in No28

vember, and other concerns were traced again in December. On
December 31, registration statements had been filed by 12,516
individuals and business concerns.
In accordance with instructions of the Board of Governors, this
bank put into effect, on October 1, 1948, an eruorcement program
designed to accomplish as much in the nine-month period ending
June 30, 1949, as was accomplished in a year under the earlier
Regulation. During the fourth quarter of 1948 this bank's investi·
gators visited 1,428 business enterprises, and their reports indicate
that compliance with the provisions of the Regulation on the whole
has been highly satisfactory. Most firms are cooperating fully because of their willingness to do so and also because they feel that
the terms of the Regulation are consistent with good business practices. Intense competition has tended to strengthen compliance,
since doubtful practices or newspaper advertising not consistent
with the Regulation are reported to this bank promptly by competitors. The noncompliance cases have been dealt with promptly and
a high degree of cooperation has been obtained from these registrants. Cooperative relations were established with state and fed·
eral supervisory authorities, with a view to obtaining adequate
enforcement of Regulation W among lenders under their respective supervision.
Partly as an educational function and partly as an aid to the
enforcement program, the investigators have called on banks,
chambers of commerce, credit associations, and other trade organizations in each city or town visited, for the purpose of discussing
Regulation W and acquainting the organizations with important
features of the educational and enforcement programs. Representatives of the bank also have attended a number of meetings of
merchants, bankers, and others to explain the Regulation and to
answer mqu1r1es.
As was the case in connection with previous consumer credit
controls, the branches are administering the Regulation in their
respective territories. Each branch has a full-time investigator, as
compared with three at the Head Office.
MEMBERSIITP IN THE FEDERAL RESERVE SYSTEM

In the Eleventh Federal Reserve District the following state
and national banks, seven of which were newly organized institu29

tions, were admitted to membership in the Federal Reserve System
during 1948:
Name of bank

Location

Deposits
December 31, 1948

First National Bank of Borger_________Borger, Texas _________________ $1,592,000
Union State Bank............................... Carrizo Springs, Texas.. 643,000
First National Bank in Lockney.......Lockney, Texas................ 1,806,000
American State Bank__ _____________________ Lubbock, Texas-------------- 3,744,000
Peoples State Bank__ ________________________ .Artesia, New Mexico...... 454,000
Empire State Bank of Dallas.............Dallas, Texas --·-·----------- 9,643,000
Almeda State Bank_________________________.Houston, Texas ------------- 2,550,000
The First State Bank_______________________ Abilene, Texas ····----------- 1,572,000

Due to the voluntary liquidation of two national banks, mem·
bership in the Federal Reserve System in this District showed a
net increase during the year of only six banks, and on December
31, 1948, totaled 620 banks, comprising 474 national banks and
146 state banks. This number, however, included one national
bank and one state bank which entered voluntary liquidation during December but which had not surrendered their stock in the
Federal Reserve Bank at the end of the year.
The admission of six state banks to membership during 1948
was the largest for any Federal Reserve district, but constituted
only 18 percent of the total for the System as compared with 48
percent in 1947. On December 31, 1948, the state bank membership in the District was at the highest level since 1925 and ranked
fifth among Federal Reserve districts.
The course of events during 1949 may influence strongly the
number of membership applications received from state banks.
If the downward trend in the number of newly chartered institutions continues, it is probable that fewer applications may be received from such banks. The number of nonmember banks eligible
for membership has continued to increase, and inquiries received
from several of them indicate their interest in membership. The
desirability of having direct access to the facilities of this Federal
Reserve Bank, particularly the discount facilities, might be a
determining factor in their decisions to make application, especially if there should be a deterioration in economic conditions. On
the other hand, the increase in the reserve requirements of mem30

her banks during 1948 and the possibility of additional increases
have caused dissatisfaction on the part of some member banks and
may act as a strong deterrent to further membership applications
from nonmember banks.
CHANGES IN CAPITAL STOCK

The paid-in capital stock of this bank reached an all-time peak
of $7,852,350 on December 31, 1948, and the increase of $548,600 during the year exceeded that in 1947 by about $110,000.
Banks in this District admitted to membership in the System during 1948 purchased capital stock of this bank in the amount of
$63,000, while 291 existing member banks increased their holdings by $490,550 as a consequence of increases in their capital
and surplus accounts. During the year, cancellation of capital
stock of this bank in the amount of $4,700 was occasioned by the
voluntary liquidation of two former member banks, while three
member banks surrendered stock in the amount of $250 because
of reductions in their respective capital and surplus accounts.
The rapid growth of bank deposits during the war and postwar
periods has created a need for larger capital structures of many
banking institutions. The need for strengthening capital structures
has been recognized by banks generally. Through the observance
of conservative dividend policies permitting the addition of a
large portion of profits to capital accounts and through the sale of
additional stock to the public, considerable progress has been made
in strengthening capital structures. The desirability of further
strengthening capital accounts is emphasized by the substantial increase in loans and other risk assets during the past two years, the
deterioration in the quality of some of these assets under more competitive business conditions, and the increase in losses being sustained by banking institutions. During 1948 the number of member banks which increased their capital and surplus accounts was
slightly smaller than in 1947, but the amount of the increase was
substantially larger.
NONMEMBER BANKS

The following nine newly organized nonmember state banks in
the District, including one succession, began operation during
1948:
31

Location

Bank

Gibsland Bank.-----------···-···-···-···-···-···-·········-Gibsland, Louisiana
Citizens State Bank.........•·-····--·-··-···········Tucumcari, New Mexico
First State Bank........·-·--········-·····-····-···-····-····-------·--·---Crane, Texas
Grove State Bank....................·-···-··················-··········-····.Dallas, Texas
First State Bank....·-·-··---·---···-······-···-·····--····-·······-El Paso, Texas
Bellaire State Bank ··-----···-····-····-··--···--·················----Houston, Texas
North Side State Bank......·-·····-·-··············-······-··-········Houston, Texas
The First State Bank of Stratford·-·······-·-····-······----.Stratford, Texas
The Terrell State Bank·-·····-·---··--··-····-····-·······--·····--·-··----Terrell, Texas

The effect of these additions upon the total number of nonmember banks was offset in part by the voluntary liquidation of
two banks, the conversion of one bank into a branch of a bank
located in another district, the discontinuance of commercial banking functions by one bank, and the admission of one bank to membership in the Federal Reserve System. On December 31, 1948,
there were 396 nonmember banks in the District, or four more
than at the end of 1947.
PAR BANKS

On December 31, 1948, 905 active commercial banks in the
District, or nine more than a year earlier, were remitting at par
for checks drawn on themselves. During the year one former nonpar bank and all except one of the newly organized banks agreed
to remit at par. At the end of 1948 the number of nonpar banks
remained at 109, comprising 58 banks in Texas, 49 banks in Louisiana, and 2 banks in Oklahoma.
NEW BANK ORGANIZATIONS

A total of 77 newly organized banks throughout the United
States, excluding successions and conversions, opened for business
during 1948. This number compares with Ill banks in 1947 and
144 in 1946. As in 1947, about 62 percent of the new organizations were concentrated in the Atlanta, Chicago, and Dallas Federal Reserve Districts. This District had only 15 new organizations
in 1948 as compared with 30 in 1947. The Atlanta District had
20 new organizations in each year, while the Chicago District had
13 in 1948 as compared with 18 in 1947. The States of Texas and
Illinois, which do not permit branch banking, led all other states
in the number of new organizations. In many other states new
32

banking facilities were provided through the opening of branches
of existing banks.
BANK FAILURES

The year 1948 was the seventh consecutive year in which there
were no bank failures in this District. The latest information available indicates that no bank in the United States suspended opera·
tions in 1948, although one noninsured nonmember bank failed
toward the close of 1947. While the continued high levels of business and industrial activity and the generally favorable earnings
record of commercial banks have enabled most banks to absorb
without difficulty a larger volume of net losses, the risk element
inherent in the expanding loan portfolios of banks is becoming
more pronounced under increasingly competitive business conditions. Moreover, the number of banks whose affairs require closer
attention is increasing. These circumstances place added responsibility upon bank supervisory authorities for detecting and correcting unfavorable developments before they reach serious proportions.
FEDERAL RESERVE CREDIT

In view of the persistence of strong inflationary forces, accompanied by a further substantial growth in member bank loans to
customers, the Federal Reserve System, in cooperation with the
Treasury Department, continued to follow policies that would tend
to counteract these developments. During the year the Treasury
continued its program of using surplus funds to retire Government
obligations, especially those held by the Federal Reserve System,
and to increase interest rates on short-term Government securities,
while the Federal Reserve banks raised discount rates and the
Board of Governors utilized a portion of its authority to increase
the reserve requirements of member banks. As a consequence of
these policies, strong pressure was exerted upon the reserve positions of member banks in this District at certain periods, especially
during the first quarter of the year when Government debt retirement was very large and in September when the general increase
in reserve requirements became effective.
While member banks generally sold Government securities to
adjust their reserve positions, several of them borrowed from the
Federal Reserve bank to meet temporary deficiencies in required
reserves. During the year 28 member banks borrowed $180,376,000 from this bank, of which amount $180,225,000 represented
33

advances to 25 member banks on their own notes secured by
United States Government obligations and $151,000 represented
rediscounts of customers' notes for three member banks. As compared with 1947, there were increases of 13 in the number of
borrowing banks and of $28,000,000 in the total amount of
borrowings.
With a view to further improvement in its services, this bank
in the latter part of the year adopted a plan for the acceptance of
custody receipts of approved correspondent member banks in this
or other Federal Reserve districts covering United States Government securities as collateral for loans to member banks. One such
receipt was accepted by this bank and held so it would be available as collateral during the crop season, but as the member bank
did not find it necessary to borrow, the receipt was cancelled late
in the year.
During 1948, this bank's participation in Government securities
in the System Open Market Account averaged $972,000,000, as
compared with $913,000,000 in 1947. It is the practice of the
Federal Reserve banks to carry interest-bearing securities on their
books at par value. When such securities are purchased in the
open market at prices above par, the premiums are set up in a
separate account and amortized over the life of the securities. The
amounts of the outstanding premium balance in the System Open
Market Account and of this bank's participation therein are shown
below:
Premium balance in
Svatem Open Market
Account

Date

December 31, 1947_ _ _ _ _ _ _ _ $52,436,500.25
December 31, 1948

72,827,117.40

Thiabank'a
participation. in.
Premium Account

$2,803,622.36
3,300,452.13

The increase in the premium balance during 1948 reflects
the effect of the Federal Open Market Committee's heavy purchases of Treasury bonds in the open market at premium prices
to carry out the policy of maintaining an orderly Government
securities market. As a consequence of the Federal Open Market
Committee's decision on December 24, 1947, to lower the support
price for Treasury bonds, the increase in the premium balance
during 1948 was smaller than in 1947, even though the volume
of Treasury bond purchases was much larger.
34

FEDERAL RESERVE NOTE CffiCULATION

During the war period the circulation of this hank's Federal
Reserve notes showed an almost uninterrupted increase, but since
the war the month-to-month fluctuation has tended to revert to the
prewar seasonal pattern. From the accompanying chart, this trend
is apparent, for in each of the past three years the circulation has
declined sharply from the Christmas holiday until May of the succeeding year and then has shown an upward trend until the following Christmas. In 1948, circulation during the early months of
the year declined by $37,700,000 and reached the year's low point
at $587,000,000 toward the end of May. During the remainder
of the year circulation showed a steady upward trend, reflecting
the need for currency to finance the harvesting and movement of
agricultural products and to handle the larger pay rolls and the
increased volume of cash transactions resulting from the seasonal
FEDERAL RESERVE NOTE CIRCULATION
FEDERAL RESERVE BANK OF DALLAS

1946

1947

1948

expansion of trade and industry. Just prior to the Christmas holiday the hank's note circulation reached the year's high point of
$632,200,000, or only slightly under the all-time peak established
in 1947. The rapid return flow of currency from circulation in the
final week of the year reduced total circulation on December 31,
1948, to $623,700,000, only $1,000,000 less than the total a year
earlier.
35

The circulation of the several denominations of Federal Reserve
notes at the end of 1948 was not significantly different from that
a year earlier. The principal changes were a decline of about
$2,000,000 in the circulation of notes of the $5 denomination and
a corresponding increase in the circulation of notes of the $100
denomination.
DEPOSITS OF MEMBER BANKS

The aggregate deposits of member banks in this District, after
showing a substantial seasonal decline between January and April,
evidenced a steady upward trend during the remainder of 1948,
reaching a new all·time peak during December. In that month
deposits averaged $6,022,000,000, which was $188,000,000
higher than in December 1947 and $460,000,000 above the year's
low point reached in April. The increase apparently occurred at
banks in all deposit size·groups and in all sections of the District
and represented chiefly a growth in the deposits of individuals,
partnerships, and corporations. Interbank deposits, which had
shown an upward trend for several years, declined moderately
during 1948.
The decline in deposits that usually occurs during the early part
of each year is occasioned largely by substantial withdrawals for
the payment of income taxes and for the settlement of adverse balances of trade with other sections of the country, resulting in a
net outward movement of funds. In the remaining months of the
year the trend of deposits is usually upward, because receipts from
the sale of livestock and agricultural commodities and of industrial and other products of the District usually exceed by a substantial margin the volume of payments for goods purchased
outside the District. Of course, the movement of loans in response
to business, industrial, and agricultural requirements also is an
important contributing factor in determining the level of deposits.
In 1948 the increase in deposits from April to December was much
smaller than in the corresponding period of 1947, largely because
of the smaller receipts from agricultural products, a slower rate of
expansion in the petroleum industry and, in fact, in business and
trade generally, together with a somewhat smaller expansion of
loans than occurred during the corresponding period of 1947.
88

MEMBER BANK RESERVE BALANCES

The reserve balances of member hanks in the District declined
moderately during the first four months of 1948 and then rose
rapidly during subsequent months. The average of such balances
during December amounted to $971,000,000, or $136,000,000
higher than the average for December 1947. From the accompanying chart it will be observed that the moderate downward movement in required reserves during the earlier months of the year
was followed by a sharp upward trend in the remaining months
of the year. The dqwnward trend in the earlier part of the year
was occasioned by the decrease in deposits at member banks, while
the increase during the remainder of the year reflected not only
the rise in deposits at member banks but also the increase in their
reserve requirements, amounting to 2 percentage points on demand
deposits and 11f2 percentage points on time deposits, which became
effective in the last half of September. Excess reserves remained
fairly stable during the year, although there was a sharp temporary decline during the last half of September when the increase
in reserve requirements became effective. During December, excess
reserves averaged $88,000,000, or only $2,000,000 lower than
in that month of 1947.
MEMBER BANK RESERVE BALANCES, REQUIRED RESERVES AND EXCESS RESERVES
ELEVENTH FEDERAL RESERVE DISTRICT

37

CASH DEPARTMENT OPERATIONS

The volume of operations in the Cash Department increased substantially during 1948. The principal changes in operations a~
compared with 1947 are shown below:
Incoming and outgoing shipments of currency and coin
numbered 105,872 and amounted to $1,286,000,000, representing increases over 1947 of 22,012 in number of shipments and $89,000,000 in amount.
The number of pieces of currency received and counted
totaled 119,360,000 with a value of $675,000,000, an increase over 1947 of 10,028,000 in number and $68,000,000
in value.
The number of coins received and counted was 194,625,000 with a value of $15,102,000, representing increases over
1947 of 9,904,000 in number and of $1,394,000 in amount.
The number of wire transfers of funds handled for member banks totaled 79,458 involving $18,000,000,000. These
figures represent increases over those in 1947 of 10 percent
in the number of transfers and of 30 percent in amount.
Securities held in custody for member banks and others
amounted to $833,000,000 on December 31, 1948, a decrease
of $38,000,000 during the year. This decrease reflects a further withdrawal by banks of collateral pledged to secure war
loan deposits and the redemption of securities previously
held in safekeeping.
The number of interest coupons clipped from securities
held in custody was 112,689, a decrease of 11,866 as compared with 1947.
The number of United States Government interest coupons
paid, including those clipped from securities held in custody
as well as those received from banks and others, totaled 350,000, a decrease of 140,000 as compared with 1947. This
decrease reflected largely the fact that no coupons have been
attached to Treasury certificates of indebtedness since September 1946.
During recent years this bank has experienced increasing difficulty in supplying adequate amounts of currency and coin to certain member banks in the South Plains area of Texas to meet their
38

day-to-day requirements during the cotton harvesting season. This
difficulty has resulted from a postal regulation which limits to
$40,000 the total amount of daily shipments of currency and coin
to all banks, regardless of the number, located on each star mail
route. During the past two years the situation has become more aggravated in this rapidly developing area, largely as the result of
increased farming activities and substantial oil developments and
the high prices received for agricultural commodities and petroleum products. Since the postal authorities could not he induced
to raise the daily limit on currency and coin shipments over these
star mail routes, this bank provided convoy service one day each
week during the harvesting season in the fourth quarter of 1948.
Inasmuch as currency and coin shipments in unlimited amounts
could be made on the days that convoy service was provided, member banks in the area were able to obtain ample currency and coin
to supplement the limited shipments on other days. The cost of
the convoy service for the three months amounted to $607.
As a measure of economy, this bank made arrangements with
an armored motor truck company to transport currency and coin
to and from member banks in Fort Worth, Texas. This service,
which became effective October 1, 1948, resulted in a saving of
$3,055 on such shipments during the fourth quarter of the year.
CHECK COLLECTIONS

The year 1948 was the sixteenth consecutive year in which the
volume of checks and collection drafts handled by this bank was
larger than in the previous year. During the year the Head Office
and branches handled 111,000,000 checks aggregating $37,485,000,000. These totals represent increases over 1947 of 4 percent
in the number of items handled and of 8 percent in the amount
involved. The record day in 1948 occurred on June 4 when 619,000 items were handled, but this number was considerably under
the all-time peak of 733,000 items handled on November 8, 1946.
The number of dishonored checks returned by drawee banks to
this bank in 1948 was 14 percent larger than in 1947, while the
amount involved increased 24 percent. This substantial increase
in the number of unpaid items handled reflects a trend that
appears to be general throughout the banking system.
Further efforts were made during 1948 to expedite the collection of checks and drafts through the use of air mail and air
express in cases where that service would reduce the collection
39

time or facilitate handling by the receiving hanks. The experiment
was satisfactory in most instances and enabled this hank to effect
collection in several cases from one to two days earlier than would
have been possible if the items had been dispatched by regular
mail. This hank has granted 218 hanks the privilege of sending
checks and drafts direct to other Federal Reserve hanks and
branches for collection, hut only 49 hanks were making use of
the privilege at the close of 1948. The purpose of this policy is
to encourage the direct routing of checks and collection drafts,
where the volume and amount are substantial, thereby speeding
up their presentation and collection.
CHECK ROUTING SYMBOL PROGRAM

The program, instituted in 1945, of having a routing symbol
placed on the checks of all par-remitting hanks continued to make
satisfactory progress during 1948. The symbol, constituting a
series of numbers, readily identifies the Federal Reserve hank
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 by both commercial hanks and Federal
Reserve hanks will he simplified greatly, thereby increasing the
efficiency and speed of collecting out-of-town checks. Virtually all
of the par-remitting hanks in this District now have some checks
in circulation hearing the routing symbol in the approved location.
A survey conducted as of December 1, 1948, shows that 69
percent of the checks reviewed had the routing .symbol in the
approved location, as compared with 56 percent a year earlier.
The percentage in this District, while slightly less than that for
the New York District, was equal to or greater than that for any
other Federal Reserve district and was well above the 58 percent
average for the country.
In July a large map of the United States showing the Federal
Reserve districts and branch territories was forwarded to all parremitting hanks. This map, on which is shown a list of check routing symbols assigned to the par hanks in each district, is designed
to assist check collection clerks of commercial hanks in identify.
ing the district or territory in which a drawee hank is located.
Throughout the year the program was encouraged through correspondence and personal contacts with hanks, printers, and others
concerned.
40

F1SCAL AGENCY OPERATIONS

The volume of fiscal agency operations during 1948 was at
about the same level as in 1947, but improvements in procedures
and increased efficiency made possible a reduction of about 10
percent in the number of employees. In carrying out the Treasury's
program of obtaining the maximum economy of operation without impairing the bank and public relations of Federal Reserve
banks, this bank during the year transferred most of the work incident to processing withheld tax receipts from the branch offices to
the Head Office.
On December 31, 1948, there were 1,214 agents qualified to
issue savings bonds and 1,001 agents qualified to redeem them.
Also, there were 701 banks qualified as war loan depositaries and
579 banks qualified as withheld tax depositaries.
The sale of Treasury savings notes increased appreciably after
September 1, when a new series offering a higher yield was made
available to investors. In consequence, total sales during the year
aggregated $46,000,000, or $6,000,000 more than during 1947,
while redemptions amounted to $64,000,000, or $18,000,000 less
than in 1947.
The other principal activities relating to Government securities
performed during 1948 included:
Handling weekly offerings of Treasury bills to refund
maturing issues, with increases from 1947 of 115 percent in
the number of tenders and 40 percent in the amount of allotments.
Alloting $693,000,000 of certificates of indebtedness and
Treasury notes on exchange subscriptions, representing about
the same volume as in 1947.
Redeeming marketable Government securities aggregating
$1,214,000,000, a slight increase over the preceding year.
Redeeming Armed Forces leave bonds in the amount of
$18,000,000, as compared with $87,000,000 in 1947.
Selling savings bonds aggregating $206,000,000 and redeeming $236,000,000 of such bonds, representing decreases
of 10 percent and 4 percent, respectively, from 1947.
41

Holding for safekeeping the savings bonds of individual
owners, which totaled 132,000 bonds on December 31, 1948,
with a maturity value of $13,750,000, as compared with
152,000 savings bonds with a maturity value of $14,549,000 at the end of December 1947.
CUSTODIAN ACTIVITIES

The Reconstruction Finance Corporation completed during 1948
its decentralization program involving the transfer to its local loan
agencies of certain accounting and loan-servicing functions previously performed by Federal Reserve banks as custodians. This
bank's custodian activities for the Corporation are now limited to
the receipt and disbursement of fund.s, the safekeeping of primary
and collateral documents, the servicing of bond, debenture, and
preferred stock purchases, and the handling of the defense supplies, rubber reserve, and metals reserve programs.
The Commodity Credit Division of the RFC-CCC Department,
which had been relatively inactive during 1947, increased its
operations considerably during 1948 when the decline in prices
of agricultural commodities resulted in increased interest in the
several Government commodity loan programs. Reflecting chiefly
operations in connection with the 1948 cotton loan program, the
department received and handled a large volume of producers'
cotton loan notes. At the end of 1948 this bank held 212,000 producers' notes involving $62,000,000, secured by 396,000 bales of
cotton. During the year there were released to producers 36,800
notes in the face amount of $9,700,000, secured by 81,600 bales
of cotton. The department disbursed to lending agencies in connection with the 1948 cotton loan program approximately $17,000,000 in cash and $44,000,000 in certificates of interest. It also
disbursed $29,000,000 to cooperative marketing associations covering loans on cotton made to producers and $110,000,000 to
lending agents in connection with Government loan programs involving other agricultural commodities, chiefly wool, wheat, peanuts, and potatoes.
CUISINE SERVICE

Early in 1948 the bank's dining room was converted into a full
cafeteria and a new plan of pricing each food item separately was
instituted. A snack bar service was added for the use of employees
at certain periods during the morning and afternoon. The opera42

tion of the dining room on a cafeteria basis has resulted in increased efficiency, thereby providing more satisfactory service and
making possible a reduction in the net expense of operation.
During 1948 the total expense of operating the dining room and
snack bar amounted to $87,934 as compared with $92,556 in
1947, a net decrease of $4,622. Since total receipts for meals
and other items amounted to $55,048, this bank absorbed $32,886
or 37 percent of the total cost of operation, as compared with 52
percent in 1947.
FEDERAL RESERV!E BANK BUDGET

In October 1947, this bank submitted to the Board of Governors, after approval by the Board of Directors, separate budgets
for the Head Office and the branches at El Paso, Houston, and
San Antonio for the calendar year 1948. Through periodical
reviews of expenditures in relation to budget estimates, the officers
responsible for supervision of the several functions have kept in
close touch with the cost of various operations in relation to the
volume of work handled. While the expenses of some functional
operations exceeded the amounts included in the budgets, the
over-all expenses of the Head Office and of the Houston and San
Antonio branches were within the total of their respective budgets
for the year 1948, while the expenses of the El Paso Branch
exceeded the budget by a very nominal amount.

43