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1959
ANNUAL

REPORT

Federal Reserve Bank of Kansas City

BG
261.3

129&
1~9

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~------------------------------------------------ -!

FEDERAL RESERVE BANK OF KANSAS CITY

January 30, 1960
To the Member Banks of the
Tenth Federal Reserve District:
It is a pleasure to send you the Annual Report of the Federal
Reserve Bank of Kansas City for 1959.

The past year witnessed new records in physical output and
income both in the national and the District economy, in spite of
the retarding effect of the steel strike and other prolonged work
stoppages. The most conspicuous improvement over 1958 occurred
in the demand for durable goods, leading to greater gains in the
Nation than in the District where nondurable goods are prominent in the industrial structure. District activity exceeded that of
the previous peak in 1957, however, even though the basic support arising from favorable farm income weakened after midyear
when meat animal prices declined and crop production failed to
reach earlier expectations. District commercial banks encountered
heavy demands for credit from all major classes of borrowers,
and loans again established new records. Lack of growth in total
deposits heightened the problems of banks in meeting these
demands.
The operations of this bank, which reflect a response to
economic and other developments in the year, are outlined in
a second section of the report.

•,

$;{4
H. G. Leedy
President

. - - - - -Contents - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - .

ECONOMIC REVIEW

National Economic Expansion

Impact of the Steel Strike

Price D evelopments in the Upswing

D evelopments in the Financial Markets

Rise in Interest Rates

Demands for Credit

Monetary and Credit Policies

Broadening of the Securities Markets

District Business Conditions
District Generally at High Level in 1959

District Patterns in 1959

Agriculture in the District

1959 in Retrospect

Financial Impact .

Banking in the District Economy

21
26

BANK OPERATIONS

)

Services as Fiscal Agent

Member and Nonmember Banks

Bank Examination .

Research

Changes in Directors and Officers

Federal Advisory Council

Industrial Advisory Committee

DIRECTORS AND OFFICERS,

1960

____ Economic Review ______ ___________________ .

NATIONAL ECONOMIC EXPANSION
HE PROCESS of economic recovery and expansion which began in the spring of
1958 continued in the year just closed, carrying the Nation's economy to record
rates of income, employment, and output. Despite a slowdown in the rate of
growth after midyear, attributable in large measure to the prolonged work stoppage in the steel industry and its attendant effects on other lines of activity, the
basic forces of expansion remained in evidence. Final demands for goods and
services continued to increase throughout the year. Notable was the fact that
while prices moved upward with advancing activity levels, price markups were
significantly less than in previous cyclical upswings of the postwar period. As a
result, most of the increase in national output and income, measured in dollar
terms, represented real gains rather than inflated price tags.

While final figures for the fourth quarter are not available for this report, it
appears that total demands for goods and services-as measured by gross national
product-attained a level in 1959 more than 8 per cent above that of 1958. After
downward adjustment for price changes, the gain was still about 6~ per cent
and presumably would have been larger but for the deterring influence of the
steel strike in the second half. Manpower requirements- in terms of numbers of
persons-did not increase proportionately with the growth of real output, since
output per man-hour was substantially higher in 1959 and the workweek was
longer. The failure of employment to expand in line with output was particularly
evident in the year ending with the first quarter of 1959. Still, civilian employment in the first 11 months of the year averaged 1.6 million persons higher than
in the same period of 1958-a gain of 2.5 per cent-and the average level of
unemployment was lower by about 900,000 persons.
As is typical, rising consumption outlays were a dominant factor in the growth
of aggregate demands for goods and services, accounting for approximately half
of the greater than $35 billion increase in GNP from the 1958 level. The more
ebullient consumer markets reflected not only the increase in consumer purchasing power as incomes rose, but also the willingness of individuals to reduce their
savings in relation to after-tax incomes and to employ credit facilities extensively.
The jump in sales to consumers was particularly evident among retailers of automobiles and major household appliances.

All categories of private investment outlays contributed to the year-to-year
gain in private capital formation, but chief among these was business investment
in inventories. Business inventories were drawn down somewhat in the second
half as a consequence of the steel strike but the decumulation was not sufficient
to offset the large buildup earlier in the year, when rapidly rising sales and the
anticipation of an interruption of steel supplies boosted inventory stockpiling to
an annual rate of $10 billion in the second quarter. Thus, the switch to inventory
accumulation in 1959, contrasting with reductions in 1958, accounted for roughly
half of the annual growth in gross private domestic investment. Business fixed
investment outlays rose throughout the year, but did not regain the high levels
of 1956 or 1957. Residential construction was substantially higher in 1959 than
in the previous 12 months, as new housing starts were sustained at an annual
rate well over 1.3 million units during the first 9 months. Applications for federally guaranteed financing turned down abruptly after midyear, however, and
the level of starts also declined markedly in the fourth quarter.
Although both Federal and state and local government purchases of goods
and services were higher in 1959, Federal acquisitions did not advance beyond
the level attained late in 1958.
Such a broadly based expansion in economic activity as was realized in 1959
typically means rising production, sales, and profits over a wide range of industries. Some areas of the economy, however, did not share fully in the general
prosperity. In agriculture, the trend of income was downward through the year,
and net realized farm income is estimated to have been 15 per cent below yearearlier levels. Rising production costs were partly responsible for the reduced
income level, but declining prices of meat animals and some crops, as well as
reduced payments under the Soil Bank program, were also important factors.
Commercial exports in the first 10 months did no better than to about equal
shipments of the same period in 1958, although the export markets improved
during the year with rapid industrial expansion in Western Europe and elsewhere. With imports from abroad rising appreciably, the excess of exports over
imports was reduced substantially in 1959, and for the first time since 1953 the
net balance on international goods and services transactions failed to be a positive factor in the national income and product accounts. As noted above, homebuilding activity was cut back sharply in the winter months, casting a shadow
on the prospects for the 1960 spring construction season.

Impact of the Steel Strike
The year 1959 may be ~oted in economic history for having witnessed the
longest steel strike on record. The mills were operating at year end under the
injunction provisions of the Taft-Hartley Act, and in the first week of this year
the issues which had led to the work stoppage in mid-July finally were resolved.

)

Cessation of production in such a basic industry was bound to have penrasive
effects on economic activity. Because the possibility of a work stoppage had
been widely anticipated, inventories in steel-using industries were at unusually
high levels at midyear. Consequently, the initial cutbacks in activity resulting
from the strike were confined mainly to railroad transportation, coal mining, and
other direct suppliers of the steel firms . It was not until about mid-September
that steel-using industries had to begin reducing production schedules significantly, and shortages of the metal became increasingly acute in the following
weeks. By mid-November, secondary layoffs attributed to the strike were estimated at one-half million workers. When production was resumed under the
Taft-Hartley Act early in November, the steel companies were able quickly to
restore ingot production to high volume, but the volume of finished products
was slower in retrieving lost ground. The prolonged shutdown of major steel
firms had created shortages which would take months of full production to
remedy.

Price Developments in the Upswing
Public concern with inflation in 1959 was not allowed to flag. Consumer
prices moved upward steadily through the year to a level in November about rn
per cent higher than a year earlier, and wholesale prices would also have risen
had it not been for a substantial decline in the prices of farm products and processed foods . Moreover, past experience has indicated amply that periods of
swiftly advancing production may create an inflationary potential which, although temporarily held in check, ultimately may break out into a rash of price
increases.
Developments during the year carried the suggestion, however, that inflationary pressures in the current economic upswing were emerging at a more gradual
pace than in the 1954-57 expansion period. The most direct evidence is found
in the behavior of wholesale prices of industrial commodities, a set of prices
which are comparatively sensitive to current changes in the state of the commodity markets. In the 1954-57 period, this group of prices began to increase
sharply after mid-1955, some 11 months after the upturn in production had commenced, with price markups on major industrial commodities being announced
almost daily. Over the first 19 months of expansion (August 1954 to March 1956) ,
prices of these commodities at the wholesale level rose 5.8 per cent. During the
same interval of the present economic advance-April 1958 to November 1959the increase was 2.4 per cent, as indicated in the accompanying chart.
Groups of commodities responsible for a substantial portion of the rise in
wholesale prices from August 1954 to March 1956 were metals and metal products, rubber, machinery, paper and allied products, fuels, lumber and wood
products, and nonmetallic minerals. With one exception, the advance in prices
in these sectors has been substantially less in the current upswing, during
which the largest price increases have been recorded for hides, skins, and leather

Wholesale Prices During Two Expansion Periods
Index (August 1954; April 1958=100)
108
All Commodities

Index (August 1954; April 1958=100)
108

104

100

1958-59

1954-56
96

96
Selected Components of Industrial Commodities Index

108

104

100

Fuels and Power

11 2

II 2
108

Pulp, Poper and
Allied Products

108

104

100

100
11 2

112
108

Machinery and
Motive Products

108

104

100

100
120

120
116

Rubber and
Products

116

112

108

104

100

Hides, Skins ond
Leather
Products

96
3

Months After Cyclical Turn i ng Point
SOURCE : Bureau of Labor Statistics.

Metals and
Products

Months After Cyclical Turning Point

products-reflecting in part the reduced level of cattle marketings-and lumber
and wood products. For these two types of commodities, prices reached a peak
around mid-1959, and since have declined.
Perhaps the most fundamental explanation of the more temperate rise of prices
during the present period of expansion is that the growth of domestic production, while about as rapid up to mid-1959 as in the same interval of the 1954-57
advance, did not tax productive capacity to the degree evident in the second half
of 1955 and during 1956. Margins of unused industrial capacity apparently have
been more ample in many lines of activity, reflecting the extraordinary volume of
capital formation in recent years. Quite important is the fact that capacity expansion since 1954 has been unusually rapid for a number of basic industrial materials-aluminum, synthetic rubber, cement, paper, and steel, for examplewhere tightness of supplies in relation to d emands in the last boom period contributed to the surge of wholesale prices. Unfilled orders for durable goods in
October 1959, although up from their low in 1958, were more than 13 per cent
below tl1eir level at the same stage of the 1954-57 expansion.
International transactions in goods and services also were contributing less to
domestic inflationary problems in 1958 and 1959 than they were several years
ago. With some nations in Western Europe and elsewhere experiencing mild
recessionary tendencies during 1958, d emands for U. S. exports declined until
early in 1959, in contrast to substantial growth during 1954 and 1955. The competitive character of international markets, moreover, has changed appreciably
in recent years with the postwar expansion of industrial capacity and the gains
in productivity achieved by the more heavily industrialized nations. American
markets have been increasingly penetrated by attractively priced articles from
abroad, and domestic production for export markets has been subjected to more
vigorous competition in prices and quality from foreign-produced commodities.

DEVELOPMENTS IN THE FINANCIAL MARKETS
in the financial markets during 1959 might be d escribed generally as following a pattern established in previous periods of economic expansion during the 1950's. Monetary and credit policies in each of these periods
have b een directed toward restraining the growth of commercial bank credit
and the money supply, with a view toward moderation of inflationary pressures
and toward provision for economic growth at a sustainable pace. As demands
for credit have emerged strongly during these expansion phases of the business
cycle, the constraint upon supplies of funds has required a considerable rise in
interest rates to attract additional investors into the securities markets, and has
generated a reduced availability of credit to potential borrowers.

D EVELOPMENTS

Rise in Interest Rates
The rise in borrowing costs during 1959 carried interest rates to postwar highs
and, on some types of debt instruments, to levels not seen since the 1920's. Thus,
in October the Treasury issued a 5-year note carrying a 5 per cent rate of interest, the highest coupon rate on a U. S. Government security since 1921. In September, the rate of interest paid by leading corporations for short-term bank
loans advanced to 5 per cent, the highest rate since the early 1930's. Increases
in rates were much larger for debt instruments of shorter maturity. Market
yields on 3-month Treasury bills rose about U percentage points during the year;
yields on 3- to 5-year Treasury issues about rn percentage points; and yields on
long-term Government bonds about one-half percentage point on the average.
At the end of the year, 3-month Treasury bills provided a yield to the investor
above that for long-term Government bonds, in marked contrast with the situation prevailing during most of the past 30 years, when short-term rates typically
were lower than rates on longer-term instruments.

Demands for Credit
A steeper climb of short-term than long-term rates of interest is characteristic
of economic expansion periods, but the trend in 1959 was reinforced by existing
legislation limiting to 4~ per cent the rate paid by the Treasury on bond issues.
As a result, the Treasury was able to market only a small volume of long-term
securities at the beginning of the year. The remainder of the marketable securities issued to raise new cash or to refund maturing issues had a maturity of
less than 5 years. The supply of Treasury issues in this maturity range rose
greatly, since the Treasury's cash requirements were about equal to those of
1958, when net cash borrowing from the public amounted to about $8 billion.
State and local government demands on the credit markets also continued high
in 1959, with the volume of bond issues for new capital running close to the $7.7
billion record level of the previous 12 months.

While security offerings of Federal and state and local governments were an
important factor in the pressures on interest rate levels, it was in the private
sector of the economy that credit demands displayed a striking increase from
1958. Expansion of mortgage indebtedness during the first three quarters suggested an annual increment of $19-$20 billion, some $4-$5 billion larger than
the HJ'58 rise. And, as indicated earlier, individuals employed credit facilities
extensively to expand their purchases of consumer goods and services. Instalment loans rose $5.2 billion in the 12 months ended October 1959, and noninstalment credit advanced $1 ·billion over the same interval. This was in marked
contrast to the credit demands expressed by the consumer sector in 1958, when
reduced levels of outlays for durable goods were accompanied by a slight fall
in instalment loans.

In the business sector, heightened credit demands were expressed entirely in
the short-term markets. The volume of corporate long-term security issues was
almost 15 per cent less than in 1958 and was comprised more heavily of equity
instruments. The commercial banking system, on the other hand, was faced by
large-although not unprecedented-business requests for additional credit after
a year of stability in business credits during 1958. Business loans (including
loans to personal and sales finance companies) at all commercial banks rose an
estimated $5 billion in the 12 months ended in November, compared with increases of $6.3 billion in 1955 and $5.5 billion in 1956, other years of rapid
advance in business short-term borrowing. It should be noted, however, that the
business sector was also an important supplier of funds to the money market
during 1959, as nonfinancial corporations increased their ownership of Treasury
securities by $4.3 billion in the first 9 months. The expansion in liquid asset
holdings reflected in large measure the tendency for corporate tax payments to
lag behind the growth in Federal tax liabilities, which increased substantially
during 1959, and a level of short-term rates which encouraged temporary investment of idle balances.

Monetary and Credit Policies
These unusually large demands for credit from individuals, businesses, and
governments were permitted to press against a supply of loanable funds whose
growth was circumscribed by restraining Federal Reserve policies. Member
bank reserve balances increased little during 1959, even though open-market
operations resulted in a rise in the System's portfolio of Government securities,
since there were other factors tending to reduce bank reserves-chiefly a decline
in the monetary gold stock. Expansion in commercial bank earning assets and
in the money supply was thus dependent upon reductions in cash assets of banks
and upon a redistribution of reserves in favor of banks with lower required reserve ratios. These sources permitted an increase in the year ended in November
of approximately $3.2 billion in total credit extended by banks to others, a fairly
low annual rate of increase in comparison with previous years of monetary and
credit restraint, such as 1955 and 1956. Over the same 12 months, the money
supply expanded by an estimated $1.5 billion, an annual growth rate of approximately 1 per cent.
Business and other demands for credit expressed in the commercial banking
system were much larger than could be accommodated by the expansion in total
commercial bank credit. To finance a $12.6 billion advance in loans to others
during the year ended in November, commercial banks liquidated $9.3 billion
in securities. In the process, bank liquidity, as measured by ratios of loans to
deposits, was drawn down to the lowest level of the postwar period. As pressures on bank reserves mounted, member bank borrowing at the Reserve banks
also increased from an average of less than $500 million in the final quarter of

1958 to a level of about $900 million to $1 billion in the last half of 1959. To
discourage undue expansion of borrowings at the Reserve bank, and to keep
the cost of member bank borrowing abreast of short-term market rates of interest, the Federal Reserve Bank of Kansas City, along with the 11 other Reserve
banks, raised the discount rate three times during 1959. These increases, in steps
of one-half percentage point, brought the rate to a level of 4 per cent at the
close of the year.

Broadening of the Securities Markets
The liquidation of investments by commercial banks, combined with the high
volume of new debt obligations reaching the market, supplied a volume of securities to the market substantially in excess of the amount which could be financed out of current savings at rates of interest prevailing at the end of 1958.
Savings of individuals in the form of increased gross ownership of financial assets
were considerably larger in the first three quarters of 1959 than in the same
period a year earlier, but individual indebtedness rose about an equal amount.
Thus, the net volume of fina,ncial savings of individuals was not enlarged, and
an upward adjustment of interest rates was necessary to encourage investors to
expand their ownership of fixed-income securities at the expense of other types
of financial assets.
The response of individuals to the change in rate levels was a primary factor
in the growth of individuals' ownership of securities. In the first three quarters
of 1959, individuals acquired an estimated $8.4 billion in securities, contrasted
with a net reduction of $0.5 billion in the same months of 1958. Other investors
also increased their security ownership markedly as interest rates rose. Important
among these were the nonfinancial corporations, as mentioned earlier, and foreign central banks and other official international institutions. The latter group
enlarged their investment in Treasury bills and certificates by $3 billion in the
first 9 months of 1959.

DISTRICT BUSINESS CONDmONS

THE TENTH Federal Reserve District economy entered 1959 at a comparatively
high level of activity, reflecting the relatively mild impact of the 1957-58 recession and a significant growth in output which extended through the last three
quarters of 1958 and well into 1959. Nonfarm employment data suggest that
some slackening in the growth rate occurred in the second quarter of 1959, however, and during the final 6 months the District, like the Nation, experienced a
period of lower level activity than had prevailed earlier. As the year ended, both
economies were once again oriented upward.

District Generally at High Level in 1959
At midyear-before strike activity exerted a depressing influence-most District
states showed significant gains in nonfarm employment over the recession lows
of early 1958. While it appears that in most instances these gains were less than
the national average, it is important to recall that the recession had a relatively
small impact on District employment in 1958. This is illustrated by the fact that
in mid-1959 total nonfarm employment in the District was somewhat further
above its prerecession level than in the Nation.
In the period extending from early 1958-the recession low-to middle 1959,
almost all sectors of the District economy contributed strongly to growth. While
their influence was not uniform throughout the period, outstanding over-all gains
were evident in construction, manufacturing, mining, trade, government, and
services. Most of these sectors grew at a swifter than national pace in the District states. Unusually vigorous growth was registered in the portion of western
Missouri included in the District and in Colorado, Nebraska, and New Mexico.
Smaller over-all gains in Kansas and Oklahoma were accomplished despite continued losses in the aircraft in~ustry since expansion in other factory activities,
as well as in most nonmanufacturing lines, more than offset the decline. However, in both Wichita and Tulsa-centers of the District aircraft industry-employment remained at a low level and was substantially beneath earlier highs
associated with periods of larger military aircraft procurement.

Additional evidence of the generally high level of economic activity in District
states is found in the record of manufacturing employment. While employment
in that sector at midyear had generally risen less than nationally from its recession low, nevertheless it was equal to or above its prerecession level in all
states except Kansas and Oklahoma. On the other hand, in the Nation as a
whole it had not reached its preceding high. Greater than average relative
growth in the District occurred in western Missouri, Colorado, New Mexico, and
Nebraska.
Despite a rather sharp fall in employment in the second half of 1959, District
rates of insured unemployment for the most part remained distinctly below the
national rate near year end. The labor market classifications made by the Bureau of Employment Security show a similarly favorable record for the District's
major labor markets. Of the seven major areas in the District, at year end three
were classed as having job opportunities slightly in excess of job seekers and
four were classed as having job seekers slightly in excess of job opportunities.
The classification of major District labor markets compared very favorably with
national experience throughout 1959.
While these comparisons must be interpreted with care because of the large
differences which exist between labor markets-somewhat lower rates of insured

unemployment are perhaps to be expected in District markets-they do serve to
recall the point .that the District entered 1959 at a comparatively high level of
activity and remained at relatively high levels throughout the year.
The trade sector of the District economy also attested to this fact. Retail sales
remained consistently strong. The department store sales index, for example,
held above the high level of a year earlier, and Christmas sales were the highest
on record. Similarly, automobile registrations were well above the previous
year's pace. At least partly reflecting the strong retail trade picture, trade employment rose to a high level during the year.

District Patterns in 1959
While nonfarm employment in both the District and the Nation grew vigorously after the upturn early in 1958, the rate of expansion in the District apparently slowed down in the second quarter of 1959. Meanwhile, in the United
States as a whole, employment surged strongly upward, partly under the impetus
of the impending steel strike. Since the District is much less specialized in durable goods production than the Nation, a lesser stimulation stemming from anticipated steel shortages was to be expected. However, the rate of growth of overall District manufacturing employment, as well as total employment, appears to
have lessened toward midyear, not only relative to the Nation but also relative
to the rate sustained for the previous half year. Some large nonmanufacturing
sectors in the District economy-particularly government and construction-failed
to maintain rates of growth achieved earlier in the recovery. Construction employment, in fact, turned downward in the second quarter. While mining advanced strongly throughout the first half, its influence was insufficiently large to
maintain the previous growth rate of total employment.
The tapering-off pattern toward midyear was typical of Kansas, Nebraska,
western Missouri, New Mexico, and Wyoming. Overall, Oklahoma employment
changed relatively little throughout 1959 while in Colorado a rather strong upward movement persisted until midyear. In the latter state, the pattern of development was significantly affected by events in the steel industry.
In the second half of 1959, employment in the District experienced about as
great a fall from its prestrike level as in the Nation. While the steel strike as
such would not be expected to have as large a direct or indirect impact upon
employment in this region as nationally, the strike in that industry was accompanied by a number of others in metal fabricating, oil refining, copper, and
meat processing. The depressing direct influence of strikes was reinforced by
declines in the construction, mining, and transportation, communications, and
public utilities sectors and by a sharper than national fall in farm income.

Patterns of District Nonfarm Employment
SEASONALLY ADJUSTED

Thousands of Per1ons
2660

Thousands of Persons
375
I
I
I

2640

370

2620

1---1--+-+--hli~--+--"'!oll..---1

2600
2580
2560

355
350

2540

t--V~-+--t---t---;--+---r-----i

345

2520

'V'-~~~~~~~~~~~~-v

370

565 .-----.---,--.....--r-----r---,---r---,
560
5 55

Oklahoma

....
,i..,.....-

....\_ ~

540

340

545
540

- + - -t------r---r--- r - - - i

490 1----;--;--485

-t--

t------r--+--+-----i

Colorado

210
205

4801----1--t---t--i--:.r---t--+--1:-+-s---1

100
95

475

90
85

/ "

,..,,,.

~
""""

..,...

I-

220
215

535

New Mui co

230
225

t - - - + ---t--

....

545 l---"'l--t---+--1----+--t---t------t

l+----1--t---+--I#---+--;----+-·~

-.I'

\
345

5 50

I-

350

235

355

240

550

555

365 '--- Western Missouri
360

1-+-+--+-+--1--~--t::--__,..r"i

Nebraska

365
360

b----i--+-~~-t---;--+---r-----i

'-" too"
-

"--

'V'--

-.I'

Wyoming

-.......v-

80
75

1958

1959

....

1958

1959

SOURCE: State Bureaus of Employment Security and Federal Reserve Bank of Kansas City.

Manufacturing Employment Reflects Strike Activity

After mid-1959, widespread strike effects, and possibly other influences, generally caused rather sharp downturns in manufacturing activity which persisted
until late in the year. The effect of the steel strike was directly and immediately
felt in the District steel production centers located in Colorado and western
Missouri. In western Missouri the direct influence of the strike was reinforced
by particularly severe delayed effects upon automobile and other fabricated
metals production. This had a gradually deteriorating effect upon a previously
strong factory employment situation. In Colorado, which was importantly affected by the strike at the Pueblo mill, the Denver Metropolitan Area showed
vigorous growth in factory employment over the previous year. In other states,
the Omaha, Oklahoma City, and Albuquerque areas also showed growth. In the
remainder of the District metropolitan areas, comparison with the previous year
indicated either little change or small declines.
Strikes in a variety of other industries, while individually involving relatively
small numbers of employees, nevertheless were significant as a group. Such
strikes were comparatively important in western Missouri, Kansas, Oklahoma,
and New Mexico. Unfortunately, data available at year end did not yet clearly .
indicate the results of the resumption of steel production and the settlement of
other strikes. Nevertheless, there is little doubt that the factory sector had once
again become a significant element of expansion in the District economy.
Construction Reverses Direction

Among the nonmanufacturing industries, some of the most important impacts
upon the pattern of District development during the year came from the construction sector. In a number of District states, seasonally adjusted construction
employment turned downward during the first quarter or early in the second
and this apparently contributed to slowing of over-all employment growth in the
second quarter. The case of New Mexico, where the construction sector had
been a major source of growth for several years until the sharp downturn early
in 1959, is particularly striking. Construction employment had grown around
30 per cent between the high level of early 1958 and early 1959. While not displaying quite so spectacular an uptrend in the District as a whole, the construction sector nevertheless had been a strong source of employment growth between
early 1958 and early 1959, contributing a substantial portion of total nonfarm
employment growth during that period. This expansion was a consequence of a
• strong situation in residential construction and a temporary fillip supplied by
the acceleration of the Federal-aid highway program. Subsequent to its downturn, construction employment continued to decline in the second half and, next
to manufacturing, was the most important source of employment loss during that
period.

Total construction contracts awarded generally failed to match the levels of
a year earlier after June 1959. Reduced roadbuilding activity was an important
depressing influence in the nonresidential construction sector during the year.
Because of an emergency antirecession appropriation early in 1958, Federal-aid
highway construction awards were greatly stimulated. However, they fell off
sharply beginning in the first half of 1959 and continuing through the year.
Because of the disproportionately large highway mileage in the District, such a
cutback is particularly significant for the region. Information made available
by State Highway Commissions indicates that highway construction contract
awards generally fell substantially in District states between 1958 and 1959.
Perhaps the downward adjustment in the roadbuilding program had been largely accomplished by year end. More Federal-aid funds for highway construction
will be available in the first half of 1960 than in the last half of 1959.
While gains in construction contract awards over the previous year were attributable to the residential sector early in 1959, the level of activity in that
sector generally fell below the similar month of 1958 after about midyear. After
adjusting for seasonal variation; a decline in the number of dwelling units authorized by local building permits also was evident after midyear. Generally
speaking, homebuilding advanced about as strongly in the District as in the
Nation following the upturn in the spring of 1958. However, the pace of housing
construction appears to have weakened and then turned downward somewhat
sooner than in the Nation. The decline in residential construction was distributed
widely among the District states.

Other Sectors Contribute To Setback
Among the other nonfarm sectors, both mining and transportation, communications, and public utilities showed considerable employment losses in the second half. Some of the reduction in mining was, of course, directly or indirectly
attributable to strikes. The shutdown of mines supplying coal to steel plants
and strikes in the New Mexico copper mines are cases in point. However, most
of the decline was in the petroleum and natural gas industry which accounts for
over 75 per cent of mining employment in the District. Crude oil production
in the District fell drastically after the Suez crisis and has not yet recovered the
high level of that period. Nevertheless, the second half of 1958 began to show a
rise which was continued through the first half of 1959. However, crude production, as well as drilllng and exploration activity, apparently leveled off in the·
second half of the year. This was the result of longer-run demand and supply
relationships in the entire industry, as well as the dampening effect of the steel
strike on demand. However, the experience of the District was relatively favorable when compared with other major oil-producing areas.

Changes in Late 1959 Difficult to Assess at Year End

At the close of 1959, data were not yet available which would allow an accurate assessment of the situation emerging after the settlement of major strikes
influencing the District. While the magnitude of change could not yet be observed, it does seem clear that the balance of forces was once more orienting
the nonfarm economy upward. A major element in the re-emergence of growth
was, of course, the manufacturing sector. With the restoration of full production
in most strike-bound industries, related manufacturing and nonmanufacturing
activities which were cut back sharply in the last half of 1959 were no longer
kept from once again contributing to a general growth trend.

AGRICULTURE IN THE DISTRICT
1959 in Retrospect

THE

YEAR 1959 was one of change for District agriculture. Cash receipts from
farm marketings, after remaining near or above year-earlier levels during the
first half of 1959, dropped relatively sharply at midyear. They remained substantially below comparable 1958 levels during the last half of 1959 because of reduced wheat production and a lower level of prices, particularly for meat animals. Farm costs continued to increase, and net incomes of District farmers for
the year as a whole averaged significantly lower than the relatively favorable
levels of 1958. The income drop was particularly noticeable since it occurred so
abruptly at about midyear. Furthermore, the declines were unevenly distributed
by regions and by commodities.

Crop inventories carried into 1959 were substantially larger than normal in
District states because of the record wheat and grain sorghum crops harvested
in 1958. Marketings from these large inventories caused cash receipts from the
sale of crops to average 18 per cent larger in the first half of the year, compared
with the first half of 1958. This fact, combined with the favorable prospects for
crop production early in the year, caused District farmers to be optimistic.
Prospects for the 1959 wheat crop remained excellent until shortly before harvest
time. It then became apparent that mosaic disease would cause a significant
reduction in production throughout much of the central parts of Kansas, Nebraska, and Oklahoma.
Although wheat production in District states was above average in 1959, it
was 174 million bushels less than the huge output achieved in 1958. Grain sorghum production, although 6 per cent below the record output of 1958, was
about three times the 10-year average for District states. Hay production was
slightly above the 10-year average but 20 per cent below the favorable output
achieved in 1958. On the other hand, the production of cotton increased 36 per
cent, com 25 per cent, and sugar beets 9 per cent over the 1958 levels.

Record feed supplies and continued high prices for meat animals early in 1959
encouraged farmers in the District to continue expanding livestock numbers.
Available data indicate that the expansion in numbers occurred at a rapid rate
during the first part of the year. Expanding numbers, however, increased meat
supplies. These larger supplies of meat, along with other factors, caused meat
animal prices to decline sharply and the rate of buildup in numbers to slacken
by late 1959.
Although hog prices trended downward rather persistently throughout the
year, the decline was moderate during the first half of the year and accelerated
during the last half. The average price received by farmers for hogs in December was 32 per cent lower than the January level. This sharp decline in prices
discouraged further expansion in hog numbers late in the year.
Cattle prices increased from January to May of 1959 because of seasonal influences and withholding of cattle from slaughter. The rate of slaughter, however, increased during the year and, in the last few months, was significantly
above year-earlier levels. From May to December, a combination of factors
caused prices received by farmers for cattle to decline 20 per cent-a substantially larger drop than would be expected from normal seasonal factors. The
lower level of cattle prices, reduced hay production, a reduction in pasture conditions from favorable year-earlier levels, and increased numbers of cattle in
relation to roughage supplies caused the rate of buildup in cattle numbers to
ease by late 1959.
Sheep and lamb prices followed approximately the same pattern as did cattle
prices. Even though the volume of marketings of all meat animals increased
during the year, the increase was not large enough to offset the influence of
the reduced level of prices on cash receipts.

Financial Impact
Favorable conditions during the early part of the year, when production plans
were being formulated, encouraged farmers to expand their investment in such
items as machinery and equipment. The large number of meat animals on farms,
which were valued at relatively high levels during the first half of the year,
brought the investment in meat animals in District states to the second highest
level on record-more than a third above a year earlier. With investment in both
the crop and livestock production sectors being expanded, the demand for farm
credit increased. These conditions were partly responsible for the fact that nonreal-estate farm loans of member banks in the District in 1959 averaged about
a fourth higher than comparable 1958 levels through most of the year. By the
end of the year, however, less favorable feeding ratios, the generally lower level
of prices, and the sharp contraction in farm income eased the pressure for farm
credit, but longer-run influences tended to sustain these demands.

Technological innovation, which has proceeded at a rapid pace in agriculture,
has had a profound influence on capital requirements and output in the industry. Generally, these innovations have encouraged individual farmers to substitute capital for labor in their efforts to expand output and produce more efficiently. Furthermore, many of these developments can only be introduced
profitably if the acreage handled per farmer is increased. Thus, numbers of
farmers have been declining. Despite this decline, total investment in the industry has been increasing because of the use of more capital and increasing
land prices; therefore, the amount of investment per farm has increased at a substantially more rapid rate than for the industry as a whole.
The dollar value of assets employed by the agricultural industry in the United
States increased from $102 billion in 1946 to $203 billion in 1959. This was an
average increase of about 5.4 per cent annually. On a per-farm basis, the national average dollar value of assets used in production increased from about
$12,000 in 1946 to around $31,000 in 1959-an average annual increase of 7.6 per
cent. Although comparable data are not obtainable for farms in the District,
available evidence indicates the rate of change was of about the same magnitude. The average investment per farm on commercial family wheat farms in
the southern Great Plains increased from about $40,000 in 1946 to around
$86,000 in 1959. This was an increase of 115 per cent for the postwar period.
Investments on other types of commercial family farms that are important in the
District increased by much larger amounts than did those for wheat farms during
the same period of time. Thus, the 7.6 per cent average annual increase per farm
for the Nation seems to provide a reasonable estimate for the District.
Measured in terms of production expenses, capital requirements increased
from $14.5 billion for the Nation in 1946 to $25.8 billion in 1959-an average
annual increase of 4.5 per cent. On a per-farm basis, the increase was larger
because of the declining number of farms.
The influence that these changing capital requirements had on credit use is
well summarized by the fact that, for the Nation, total farm debt (exclusive of
Commodity Credit Corporation loans) increased from $7.7 billion in 1946 to
$20.8 billion in 1959, or at an average annual rate of 7.9 per cent. On a per-farm
basis, the rate of increase again would have been larger.
The eomposition of the capital requirements of farmers also has been changing
during the postwar period. A larger proportion of the total requirements now
is needed for providing such resources as fertilizer, insecticides, sprays, biological
supplies, services, fuel, machine hire, and machinery. Changes such as these
have important implications to commercial banks and others who finance the
agricultural industry. The amounts of financing as well as the methods used
are affected.

From the preceding discussion, it appears that part of the large increase in
member bank loans to farmers in 1959 can be attributed to conditions of a current nature that prevailed early in the year when farmers made a large proportion of their financing arrangements. As these conditions changed, part of the
strong demand for farm loans subsided. However, a significant proportion of
the increased demand for farm loans in 1959 was accounted for by long-run
factors, and this demand persisted throughout the year.

BANKING IN THE DISTRICT ECONOMY

BROAD movements of District industrial and agricultural income influence the
operations of banks in a number of ways. Rising income may induce an inflow
of deposits or it may generate capital requirements which cause depositors to
minimize their holdings of cash balances. Economies in the use of cash may
largely satisfy the demand for capital but substantial additional sums may be
required through bank loans. Each economic period may be unique in the way
in which these events develop.
The strong demand for loans which became evident at District member banks
after mid-1957 continued through 1958 and the first half of 1959 before slowing
somewhat in the later months of the year. From mid-1957 to June 1959, total
loans increased $738 million and in the succeeding 5 months, an additional increase of $93 million was recorded. Early gains in this expansion were easily
accommodated, for they appeared during a period of growth in bank reserves
produced by a policy of monetary ease in the late months of 1957 and in part of
1958. District banks shared fully in this growth as a consequence of a revival
of farm income and the relatively favorable performance of District industry.
Additions to total loans in 1959, however, were made possible only by sales of
investments, the conservation of cash balances, and extensive resort to borrowing
from the Reserve Bank and the Federal funds market, for deposits registered
little change in the period.
All major types of credit users contributed to the exceptional growth of loans
over the past 30 months, but the principal new element in the demand for credit
was the revival of farm requirements after they had lagged in the period from
mid-1952 to 1957. The long-term growth of farm capital requirements, which
was outlined in the discussion of agriculture, and growth of farm income and rebuilding of cattle herds which followed the end of the drought, all played a role
in this sharp swing in credit demands. Nonguaranteed loans to farmers held by
District member banks increased $210 million, or 52 per cent, in the 2 years
ending June 30, 1959.
After midyear, loan demands assumed a decidedly less buoyant tempo. Farm
credit requirements slackened and this development occurred at a time when the

steel strike and other work stoppages of importance in District economic activity
dampened the demand for business credit among District banks. This respite
provided an opportunity for banks to curtail their Reserve Bank discounts, which
had grown rapidly during earlier months.
Nevertheless, in the 11 months through November 1959, District reserve city
banks added $141 million to their total loans and liquidated $214 million of
investments. Average daily deposits fell by $69 million in the period, the largest
reduction occurring in interbank balances. The principal demand for accommodation at these banks emanated from business firms, whose borrowings increased
by an estimated $100 million. Loans to farmers increased about $18 million,
mainly representing participations with country correspondents in larger loans.
Consumer loans increased $14 million and smaller gains occurred in real-estate
mortgages and loans for the purchase of securities.
Business demands were broadly based as most commercial and industrial
groups added to their bank debts. Retailers were particularly active borrowers,
increasing their borrowings from the larger banks by a greater amount than in
any similar period during the past 8 years. Metal products fabricators borrowed
heavily in the first half year and their seasonal retirements in the second half
were not commensurate, despite the effects of the strike on steel inventories.
Other groups whose demands contributed to the growth of business loans were
public utilities, construction firms, and sales finance companies. Requirements
of seasonal borrowers, such as commodity dealers and food manufacturers, were
about in line with other years.
The growth of loans at District country member banks was even more striking
than that at reserve city banks, for it included redemption of a substantial volume of loans guaranteed by the Commodity Credit Corporation. Detail is available only for the period to October 6, but in that span a growth of $109 million
occurred in spite of retirement of $67 million of guaranteed loans. Consumer
loans increased $56 million, business loans about $50 million, and nonguaranteed
loans to farmers $45 million, while real-estate mortgages advanced $21 million.
With the exception of real-estate loans, each of these increases exceeded those
in the preceding 4 years. A further growth of $27 million in total loans occurred
between October 6 and November 25.
The drain on reserves which these demands imposed was countered in part
by a rise of $19 million in average daily deposits during the first 11 months. Demand deposits were reduced $67 million but time and savings accounts increased
$86 million. Investment holdings were curtailed $45 million, while balances with
banks declined $57 million. Country member banks also found it necessary to
borrow in a volume not witilessed since World War II.
Loan expansion as swift as that of recent years raises questions as to whether
the forces involved are of a cyclical character which can be expected to subside

Loons by Cla11es, District Member Banks
MIDYEAR CALL REPORT DATES FOR LOANS;
AVERAGE DAILY DEPOSITS
Mi llions of Dollar1

10,000
Somi - lo~ 1cal1
e ,0 0 0 1 - - - - - --+- - - - - - - ; - - - - - - - - - ; - - - - - - - - ==---__,
*
6,000 l;::;;;:;;;;;;;;;;;;;;;;;;;;;;;;;;--j--= - - - - -

t - - ---+------ -1

Average Daily Deposits

Total

Business

1,000

eoo

1--- - -- - - +-

-----+---

L------i---------~~:::=-

___J__ _ _ ___j

400

Instalment Loans

I 00 1----1-B0

- --+- - --

--t-

~------1------t--------+---------f

*Est i mat ed
60 ~-~~-~-~-~-~-~-~-~-~-~~

1947

' 50

' 53

'56

'59

NOTE : On a semi-logarithmic scale, equal slopes indicate equal
rotes of change.

when economic activity approaches a new peak or whether elements of a longerterm character are involved. As an aid to a broader perspective, a chart is displayed showing the growth of deposits and of loans by major classes from 1947
to mid-1959.
One of the striking features of the postwar period has been the stable rate of
growth of total loans. Part of this stability is attributable to banks' ability to obtain loans guaranteed by the Commodity Credit Corporation whenever other
credit demands relaxed. But even among individual types of loans-such as business loans, real-estate mortgages, and instalment loans to individuals- growth has

Loan-Deposit Ratios
TENTH DISTRICT MEMBER BANKS
1954-1959

Ratio

.-~~~-,-~~~~-.~~~~-r-~~~~..--~~~-.--~~~--,

,_---,

1~~~~--,,.-~~~~-r-..,.__~~---=U!"'-~~~~-1-~~~~-1-~~~~-1

been persistent, with little evidence of slackened demands in periods of business
contraction. The willingness of banks to allow this growth to occur at a more
rapid rate than the growth of deposits implies that banks held a larger proportion of liquid assets than they desired and that lower liquidity ratios were acceptable. Late in 1959, loan-to-deposit ratios were close to 50 per cent among
reserve city banks, compared with a ratio of about 35 per cent in 1954. The
loan-to-deposit ratio of country member banks was about 42 per cent in contrast
with a ratio of around 31 per cent in 1954. The ratio of the two groups combined was 46 per cent-the highest level since the late 1920's when loans were
about 53 per cent of deposits. Somewhat higher ratios now prevail at leading
cities in other parts of the country but the structure of their deposits indicates
that their liquidity requirements also might be lower.
The growth of loans over the postwar period as a whole did not involve a
curtailment of investments, for these earning assets have fluctuated within a
stable but fairly wide range throughout the period. Rather, the loan expansion
was financed by deposit gains and by increasing economies in the use of cash
resources. The latter, in turn, was aided by reductions of legal reserve requirements which were inaugurated during periods of monetary ease. Thus, the

stable growth of loans has been founded, in part, upon sources of funds which
cannot be expected to yield the same support in the future.
If loan volume is to continue to increase at the same rate as prevailed over
the past decade, it will be necessary for deposits to increase more rapidly or
for the banking community to be willing to operate with still higher loan-todeposit ratios. Moreover, if demands for credit continue to be expressed as
strongly as in the past, a slackened rate of increase in loans would involve more
rigorous rationing standards than have been imposed in recent years. Fragmentary evidence suggests that a number of banks in the District reached levels
of liquidity in 1959 which caused this problem to command more attention than
it had been accorded before, although aggregate statistics continued to reflect
declining liquidity.

----Bank Operations--------------------------

MonERATE TO substantial increases were experienced in nearly all activities of
the bank in 1959, a continuation of a trend evident in recent years, and new
volume peaks were reached in several operations. Both gross and net earnings
reached new highs. Gross earnings were $39,719,766, up $7,745,374 from the
previous year. Income from Government securities held in the System Open
Market Account-amounting to $36,792,290-provided the bulk of the bank's
earnings. After operating expenses and other additions to and deductions from
earnings, net earnings for the year were $37,453,211, up $12,484,795. This increase includes an addition to current net earnings of $5,178,979, resulting almost
entirely from the discontinuance and transfer of certain reserves for contingencies. Statutory dividend payments to member banks rose $66,696, totaling
$928,427 for the year.
Payments to the U. S. Treasury as interest on Federal Reserve notes totaled
$37,739,576. These payments consisted of all net earnings after dividends, and,
in addition, $1,214,792, which was the excess in surplus account at year end
over 100 per cent of subscribed capital. These payments to the Treasury reflect
a conclusion by the Board of Governors, in which the board of this bank concurred, that the maintenance of surplus at the level of subscribed capital would
be appropriate in the light of present circumstances. For that reason it was
decided to change the recent practice of adding approximately 10 per cent of
net earnings to surplus account, and to pay to the Treasury the amounts by
which surplus exceeded subscribed capital, which is twice paid-in capital.
Reserve deposits of Tenth Federal Reserve District member banks were $841
million on December 31, 1959, an increase of $23 million from the end of 1958.
For the year as a whole, reserve deposits averaged $859 million daily-a reduction of $8 million. The decline in average reserve deposits was entirely a reflection of the decrease in average daily excess reserves which, at $43 million, totaled
$13 million less than in 1958. Required reserves rose $5 million above 1958
levels to average $816 million in 1959.
The growth in average daily required reserves would have been larger but for
a substantial rise in cash items in process of collection, a normal accompaniment
of higher levels of business ·activity and increased check payments. The increase
was largest at reserve city banks, where gross demand balances also declined
slightly and average daily net demand deposits were reduced by $34 million.
At country banks, average daily net demand deposits grew $171 million, reflect-

ing both an increase in gross demand balances and a decline in their demand
balances at domestic banks. Time deposits rose $32 million at reserve city banks
and $100 million at country members on an average daily basis.
The regulation issued by the Board of Governors late in November relative to
counting part of vault cash as required reserves affected the reserve positions of
75 District members, according to statistics as of mid-November. Among
country members, 68 had vault cash in excess of 4 per cent of their net demand
deposits. For these banks, an aggregate $18.4 million in vault cash was eligible
for meeting reserve requireinents. Seven reserve city banks had vault cash in
excess of 2 per cent of their net demand deposits, totaling $8 million.
Federal Reserve notes of this bank outstanding as of December 31, 1959, after
adjustment for notes on hand and forwarded for redemption, totaled $1,117,823,870, an increase of $16.7 million from a year earlier. The peak level of notes
in circulation during the year was reached on December 15, when a volume of
$1,124,920,215 was outstanding. The seasonal peak level was $18 million higher
than in 1958 and established a new alltime high. The volume of notes outstanding in 1959 was consistently above year-earlier levels throughout the 12-month
period.
Borrowing at the Reserve Bank by District members increased sharply during
1959, attaining an average daily level of $86 million for the year as a wholesubstantially higher than in any recent year. The buildup of discounting activity
was relatively steady throughout the first half, when loans were rising rapidly
and deposits were falling somewhat more than seasonally. By the week of July
8, discounts had risen to an average daily level of $155 million. An easing of
reserve pressures developed in late July, August, and September, as deposits
began to rise seasonally and loan demands abated, permitting repayment of indebtedness. Tpe decline in borrowings during this period was also associated
with security sales from member bank portfolios. Borrowings rose again in the
late fall and winter months to an average level of about $90 million in December
as seasonal reserve pressures intensified. Three times during 1959 the discount
rate of this bank was increased in steps of one-half percentage point. On March
13, the rate was advanced from 2~ per cent to 3 per cent; a further increase to
3~ per cent took place on June 5; and the final increase to 4 per cent was on
September 11.
Check collection activities continued in 1959 at an even greater pace than had
been experienced previously, and new record peaks in volume of checks processed were established during the year. More than 198 million clearing house
and country checks, including return items, valued at $65 billion were processed
during the year, reflecting increases of 7.5 per cent in number and 6.3 per cent
in amount.
Noncash collection items handled increased moderately from the previous

I
I
I
I

Statement of Condition

ASSETS

Dec. 31, 1959

Cash reserves:
Gold certificates ............................................ $
Other cash ....................................................
Discounts and advances..........................................
U. S. Government securities:
Bills ..............................................................
Certificates ................................................. .
Notes ..........................................................
Bonds ......................................................... .
Total U. S. Government securities.......... $
Total loans and securities...................... $
Due from foreign banks ........................................
Federal Reserve notes of other banks ................... .
Uncollected items ..................................................
Bank premises ......................................................
Other assets ......................................................... .

753,039,580
15,271,691
42,648,000

Dec. 31, 1958
$

112,321,000
452,904,000
474,599,000
107 ,063,000
1, 146,887,000
1, 189,535,000
561
24,273,000
309,923,023
4,636,504
12, 157,213

Total Assets .................................... $2,308,836,572

791,871 ,662
14,661 ,659
19,206, 100
96,056,000
796,026,000
122,396,000
106,015,000

$
$

1, 120,493,000
1, 139,699, 100
566
11 ,317,500
254,994,838
4,799,175 .
7,130,018

$2,224,474,518

UABWTIES
Federal Reserve notes ............................................ $
Deposits:
Member bank-reserve accounts ..................
U. S. Treasurer--general account ................
Foreign ........................................................
Other deposits ..............................................

1, 117,823,870

Total Deposits ...................................... $

913,665,185

Deferred availability items ....................................
Other liabilities ................................................... .

840,994,415
44,444,966
13,572,000
14,653,804

1,101 ,081,490
817,730,084
38,270,898
9, 165,000
3,278,497

868,444,479

228,113, 170
1,140,612

200,589,795
848,054

Total Liabilities ................................ $2,260,742,837

$2, 170,963,818

CAPITAL ACCOUNTS
Capital paid In...................................................... $
Surplus ...................................:: ...........................
Reserve for contingencies ......................................

15,860,050
31,720, 100
513,585

Total Liabilities and
Capital Accounts ...................... $2,308,836,572

14,847,850
32,934,892
5,727,958

$2,224,474,518

I
I
I
I

Earnings and Expenses

Year 1958

Year 1959

Current Earnings
Discounts and advances ........................................$
Industrial advances (commitments) ..................... .
United States Government securities .................•....
All other ............................................................. .

2,893 ,655 .04
1,32 1.05
36, 792,290.38
32,499.7 7

607 ,851.2 1
2,620.99
31 ,338,904.50
25,014.81

39, 719,766 .24

31,974,391.51

Net operating expenses ........................................ $
Assessment for expenses of Board of Governors..... .
Federal Reserve currencyOriginal cost, including shipping charges........
Cost of redemption,
including shipping charges................... .

6,916,499.27
251, 100.00

6,593,067 .69
228, 100.00

7,445,534.08

Current Expenses

249,415 .22

139,549.07

28,519.59

31,218.83

Current Net Earnings ......................$32,274,232.16

6,991 ,935.59

$24,982,455.92

Additions to
Current Net Earnings
Net profit on sales of United States
Government securities ..................................$
Transferred from reserves for contingencies (net) ..
Other ................................................................... .

8, 190.9 1
5.206,430.86
2,945 .98

5,2 17,567 .75

7,474.21

Transferred to reserves for contingencies................ $
Other ....................................................................

$
38,588.72

21 ,478.57
35.18

38,588.72

21,513.75

6,663 .93
810.28

Deductions from
Current Net Earnings

Net Earn ings ....................................$37,453,211.19

$24,968,416.38

Distribution of Net Earnings
Dividends paid ...................................................... $
928,427 .42
Paid United States Treasury (Interest on
outstanding Federal Reserve notes) ...,. ..........
37' 739,575.91
Transferred to surplus .......................................... - 1,214,792. 14

$37,453,211.19

861 ,731.26
21,696,020.08
2,410,665.04

$24,968,416.38

I
I
I
I

Volume of Operations

PIECF.S HANDLED (in thousands)
Discounts and advances ........................................................
Currency received ·······················-·······································
Currency paid out .............................•..................................
Coin received .....................................•................................
Coin paid out ......................................................................
Checks :
United States Govemment ........................................... .
All other (Including return Items) ............................. .
Collection Items ...................................................................•
Safekeeping of securities:
Pieces received and delivered ..................................... .
Coupons detached and collected •................•................
Purchase and sole of securities for account of others........... .
Transfers of funds ............................................................... .
Operations performed as Fiscal Agent of the
United States Government:
Securities received and delivered-United States savings bonds •...•.......•..........•.•....••
Other Government seeurltles .......................•........
United States currency redeemed •......................•..........
Government security coupons redeemed ........................
Federal tax depositary receipts ................................... .
Postal money orders ..........................................•.....•..•
Postmasters' deposits ....................................................
Incoming and outgoing moil:
Registered mail ........................................................... .
Ordinary moil ........ :.................................................... .

1959

1958

4
201,263
200,732
472,815
473,683

2
201,773
201,009
403,552
402,552

25,088
198,761
754

24,108
184,886
738

574
578
4
174

438
534
3
159

9,157
418
50,594
586
536
18,279
227

8,755
422 ·
48,642.
556
508
19,165
242

237
4,557

227
4,586

$11,973,332
1, 152, 198
1, 139,244
40,125
39,990

$ 3,396,196
1,117,446
1,115,959
36,281
36,029

8,323,934
64,644,570
345,848

8,094,825
60,799,070
323,600

38,020,654
60,751
513,443
72,391,335

21,273,924
53,792
431,499
63,794,306

944,970
12,041,244
68,510
109,567
1,666,316
307,089
380,216

847,515
12,577,767
66,663
97,822
1,502,437
316,600
343,560

AMOUNTS HANDLED (in thousands)
Discounts and advances ..................................................... .
Currency received ............................................................... .
Currency paid out ............................................................... .
Coin received ......................................................................
Coin paid out ........................ :............................................ .
Checks:
United States Government ............................................
All other (including return items) ..............................
Collection items ................................................................. .
Safekeeping of securities:
Securities received and delivered ................................. .
Coupons detached and collected ................................. .
Purchase and sole of securities for account of others ........... .
Transfer.s of funds .......•........................................................
Operations performed as Fiscal Agent of the
United States Government:
Securities received and delivered-United States savings bonds ...............................•
Other Government seeurltles ...............................•
United States currency redeemed .........•.....•....••............
Government security coupons redeemed ........................
Federal tax 'depositary receipts ••...............••.................
Postal money orders ...............................................••..•
Postmasters' deposits ...........•......................................:.

year. The number of collection items totaled 754,000 compared with 738,000 in
1958. The aggregate value of such items was $346 million, up $22 million.
Incoming and outgoing transfers of funds numbered 174,000, up 15,000 from
1958, or an increase of 9 per cent. The amount of funds transferred increased
from $63.8 billion to $72.4 billion, an increase of 13 per cent.
Securities held in safekeeping for member banks totaled $2.7 billion at year
end, a decrease of $111 million from a year earlier, reflecting the lower level
of member bank holdings of Government securities. Activity in custody accounts,
on the other hand, was substantially greater, with security deposits and withdrawals totaling 574,000 pieces aggregating $38 billion. This was an increase of
31 per cent in number of securities handled and 79 per cent in dollar value. The
higher level of member bank borrowings, sales of Government securities by
banks to obtain loanable funds, and the larger volume of short-term Treasury
debt operations during the year accounted for the increased activity in safekeeping accounts.
Currency receipts and payments declined slightly from 1958, although there
was a moderate increase in dollar amount of currency transactions. Receipts and
payments of currency numbered 402 million pieces aggregating $2.3 billion, an
increase of $58 million in dollar amount over the preceding year. Coin transactions increased sharply in 1959, both in number of pieces and dollar value. Receipts and payments of coin numbered over 946 million pieces aggregating over
$80 million-an increase of 17 per cent in number and nearly 11 per cent in
amount.

Services as Fiscal Agent
Changing monetary conditions in 1959 were reflected in the rates of interest
on Government securities offerings and in financing procedures. Of 22 issues
of marketable securities offered during the year, 14 were for cash and 8 in exchange for maturing issues. Nine of the cash offerings were in the form of bills
with maturities of I year or less and only two of the other issues had maturities
over 5 years. A program of I-year bill offerings maturing in January, April, July,
and October was initiated resulting in a decrease in the number of fixed-rate
offerings. In addition to the weekly bill offerings, $873 million in new marketable securiti~s were issued for cash in this District, and $ffl7 million in securities
were issued on exchanges. The highest rate on an offering during the year was
5 per cent on a 4~-year note issued in November.
The average rate at which tenders to the weekly offerings of 91-day Treasury
bills were accepted ranged from 2.ffl per cent in January to 4.ffl per cent for a
December offering. The 13- and 26-week bill cycle started in December 1958 was
continued and the average rate on the 182-day bill generally paralleled the rate
on the shorter bill, ranging from 2.92 per cent for the first January issue to 4.96

per cent for the December 10 offering. The number of tenders from country
banks and nonbank investors in this District increased as the rates became more
attractive and 20,818 tenders were accepted as compared with 18,064 in 1958.
Allotments on accepted tenders totaled $2 billion, about $400 million less than
in 1958.
Sales of United States savings bonds, Series E and H, continued at a relatively
high level in the District during the first three months of 1959 and then fell off
sharply until a rate increase was approved in September, retroactive to June I.
Sales, at issue price, of $341 million compared with $352 million in 1958. Redemptions of an·series exceeded sales by $178 million, totaling $519 million as
compared with $409 million a year earlier. The rate increase did not apply to
Series F, G, J, or K savings bonds which accounted for most of the increase in
redemptions.
In November the Treasury offered to exchange Series F and G savings bonds
maturing in 1960 for a 4l per cent note maturing in 1964. This is the first advance refunding accomplished under the provisions of an Act of Congress which
became effective in September. Approximately half of the $1,600 million of eligible bonds oul$nding :were exchanged. SubscriptJons in· this District totaled
$55.5 million.
The bank continued to perform other services as Fiscal Agent for the Government during the year. Among these are verification and destruction of unfit
United States currency, guarantee of Regulation V loans for defense production
purposes, receipt and accounting for deposits of Federal taxes under the depositary receipt system, receipt of surplus deposits from postmasters, processing
postal money orders, and handling of drafts for the Commodity Credit Corporation.

Member and Nonmember Banlcs
There were 756 member banks in this District at the close of 1959, of which
619 were national banks and 137 were state chartered banks. This represented a
membership increase of six banks since 1958. Three national banks opened for
business during the year, and one national bank was absorbed by another national bank. Two new state chartered banks opened during the year as member
banks of the Federal Reserve System, three nonmember banks became members
of the .Federal Reserve System, and one state member bank went into voluntary
liquidation.
Nonmember banks bi the Tenth District totaled 1,019 at the close of the year,
of which all except six were on the par list During the year 14· nonmember
banks "commenced business, one bank went into voluntary liquidation, and three
were al?sorbed· by other nonmember banks. Two nonmember banks were closed
by state banking aU:thoritie8, one was immediately succeeded upon liquidation,

and three banks became members of the Federal Reserve System. These
changes resulted in an increase of five in number of nonmember banks as compared with the previous year end.

Bank Examination
Each of the 137 state member banks located in the Tenth District was examined during the year. Eighty-eight examinations were made independently
by examiners from this bank, including examination of three nonmember banks
upon application for membership in the Federal Reserve System. In addition,
49 examinations were made jointly with representatives from state banking departments.

Research
The research activities of the bank continued to serve the dual role of providing analyses and interpretations of economic events for internal use and of advancing public knowledge of economic developments and the functions of monetary and credit policy. These responsibilities were discharged through regular
and special reports on various .facets of the economy for the use of officers and
directors and through participation of staff members in research projects of
interest to the System as a whole.
Public information activities included both publications and speeches. The
principal medium of public information continued to be the bank's Monthly
Review. Other publications, statistical releases, and press releases also were
issued. Two special pamphlets representing more comprehensive projects were
published during the year. One was a 45-page report entitled "Financing Beef
Production Systems" and the other was "Water Resources-Development and
Use," containing 68 pages. A canvass of the mailing list of the Monthly Review
was completed in 1959 to assure that recipients continued to be interested in
receiving it.
Staff members appeared before such varied audiences as bankers and other
credit organizations, farmers and farm suppliers, government officials, regional
and national schools of banking, and college students and faculties, as well as
other business and professional groups. In the spring, a series of nine economic
forums in Oklahoma and a single forum in New Mexico were conducted in
cooperation with the respective state bankers associations. One forum also was
presented in Nebraska at the invitation of a local clearing house.

Changes in Directors and Officers
Directors

Burton L. Lohmuller, President, The First National Bank of Centralia, Kansas,
was elected a Class A director of this bank by member banks of Group 3 for a 3-

year term beginning January 1, 1960, succeeding W. L. Bunten, who at the end
of 1959 completed 18 years of service as a director of this bank.
At its meeting of March 12, 1959, the Board of Directors appointed R. L.
Kelsay, Chairman of the Board and President, The First National Bank in Hobart, Oklahoma, as a director of the Oklahoma City Branch for the unexpired
portion of a term ending December 31, 1960, to succeed R. Otis McClintock, who
resigned as a director of the branch effective February 12, upon his appointment
as member of the Federal Advisory Council.
The following directors were appointed at the branches for 2-year terms beginning January 1, 1960, to replace directors who had served three full terms
and were therefore ineligible for reappointment:

By the Board of Governors of the Federal Reserve System:
Denver BranchRobert T. Person, President, Public Service Company of Colorado, Denver,
Colorado, to succeed Aksel Nielsen.
Oklahoma City BranchJames E. Allison, President, Warren Petroleum Corporation, Tulsa, Oklahoma, to succeed Davis D. Bovaird.

By the Head Office Board at its meeting December 10, 1959:
Omaha Branch-·
Ralph E. Barton, President, The Wyoming National Bank of Casper, Wyoming, to succeed George J. Forbes.
Officers
C. L. Bollinger, General Auditor of the bank, retired effective August 1, 1959.
He had been with the bank since March 1934, when he joined the examination
staff. In March 1943 he became Assistant Auditor and was appointed General
Auditor in January 1948.
At its meeting of June 4, 1959, the Board of Directors appointed W. F.
Fairley as General Auditor of the bank to succeed Mr. Bollinger. At the time
of his ·appointment, Mr. Fairley had been with the bank for 31 years, during
which time he worked in each of the bank's branches at Denver, Oklahoma City,
and Omaha. Except for a short time after he first joined the bank, his entire
service has been in the A~diting Departments of the various offices. He was
named Assistant General Auditor in April 1952.
D. W. Woolley, Vice President, retired at the close of 1959 after more than 26
years with the bank. His service began as an examiner in October 1933. Shortly

after that the Federal Deposit Insurance Corporation was formed and Mr.
Woolley was loaned to the Corporation to assist in the initiation of the deposit
insurance program. After his return, he was appointed Examiner and Department Supervisor, and in 1937 became an Assistant Cashier. In 1941 he was appointed a Vice President and subsequently had charge of various bank functions,
including those of Secretary and Cashier. At the time of his retirement he was
Vice President in charge of Bank Examinations and Bank Relations.
F. R. Fritz, Assistant Cashier of the Oklahoma City Branch, retired effective
July 1, 1959, having completed more than 42 years of service with this bank.
He was employed at the Head Office as a clerk in January 1917, became Assistant Supervisor of the Fiscal Agency Department in 1928, and served in that
capacity until his transfer to the Oklahoma City Branch and his appointment
as Assistant Cashier of the branch in January 1945.
On June 4, 1959, the Board of Directors appointed W. J. Milburn, Jr., as Assistant Cashier at the Oklahoma City Branch to succeed Mr. Fritz. Mr. Milburn
joined the staff at the Oklahoma City Branch in January 1939, and became head
of the Securities Custody Department in December 1944. The Personnel and
Discount functions also were placed under his direction in 1947.

Federal Advisory Council
At its meeting of February 12, 1959, the Board of Directors appointed R. Otis
McClintock, Chairman of the Board, The First National Bank and Trust Company of Tulsa, Oklahoma, as member of the Federal Advisory Council for the
Tenth District for the remainder of 1959, to succeed R. Crosby Kemper, who
had served 3 years as member from this District and was therefore ineligible
for further service. At its meeting of December 10, 1959, the Board of Directors
reappointed Mr. McClintock for the year 1960 and until his successor is appointed.

Industrial Advisory Committee
Effective August 21, 1959, the Small Business Investment Act of 1958 repealed
the authority of the Federal Reserve Banks to grant working capital loans to
industrial and commercial businesses as well as the authority by which the
Industrial Advisory Committees of the Federal Reserve Banks were established.
The Industrial Advisory Committee of this bank therefore ceased to exist as of
that date.

_____ Directors and Officers-1960 ------------

DIRECTORS

RAYMOND W. HALL, Member of Firm
Hillix, Hall, Hasburgh, Brown & Hoffhaus, Attorneys
Kansas City, Missouri

Chairman of the Board and Federal Reserve Agent
JoE W. SEACREST, President
State Journal Company
Lincoln, Nebraska

Deputy Chairman
K. S. ADAMS, Chairman of the Board
Phillips Petroleum Company
Bartlesville, Oklahoma

IIARoLD KouNTZE, Chairman of the Board
The Colorado National Bank of Denver
Denver, Colorado

E. M. DODDS, Refrigeration Consultant
Kansas City, Missouri

BURTON L. LoHMULLER, President
The First National Bank of Centralia
Centralia, Kansas

W. S. KENNEDY, President and
Chairman of the Board
The First National Bank of
Junction City
Junction City, Kansas

MAX A. MILLER, Livestock Rancher
Omaha, Nebraska

OLIVER S. WILLHAM, President
Oklahoma State University
Stillwater, Oklahoma

MEMBER OF FEDERAL ADVJSORY COUNCIL

R. Ons McCLINTOCIC, Chairman of the Board
The First National Bank and Trust Company of Tulsa
Tulsa, Oklahoma

omcERs
H. G. LEEDY, President
HENRY 0. KoPPANG, First Vice President

F. H. LARSON, Asst. Vice President
J. T. WHITE, Asst. Vice President
J. C. CRAIG, Asst. Cashier
GEORGE C. RANKIN, Asst. Cashier
JOHN W. SNIDER, Asst. Cashier
RoBERT E. THOMAS, Asst. Cashier
WILLARD EDWARDS, Director of Personnel
W. F. FAIRLEY, General Auditor
GEORGE D. ROYER, JR., Chief Examiner
D. R. CAWTHORNE, Financial Economist
RAY J. DoLL, Agricultural Economist
WILBURT. BILLINGTON,
Industrial Economist

GEORGE H. CLAY, Vice President,
General Counsel, ancl Secretary
CLARENCE W. Tow, Vice President
JoHN T. BoYSEN, Vice Pres. and Cashier
L. F. MILI.S, Vice President
J. S. HANDFORD, Vice President
E. U. SHERMAN, Vice President
C. A. CRAVENS, Vice President
P. A. DEBUS, Vice President•
R. L. MATHES, Vice President•
CECIL PucKETI, Vice President•
JosEPH R. EuANS, Asst. Vice President
0
(
) Assigned to Branch

-------------------------------------------------·
Denver Branch
DmECTORS

ROBERT T. PERSON, President
Public Service Company of Colorado
Denver, Colorado
Chairman

H. BLOEDORN, President
The Farmers State Bank of Fort Morgan
Fort Morgan, Colorado

CALE W. CARSON, President
First National Bank in Albuquerque
Albuquerque, New Mexico

STEWART CosGRIFF, Chairman of the Board
and Chief Executive Officer
Denver United States National Bank
Denver, Colorado
RAY REYNOI.J>S, Cattle Feeder and Farmer
Longmont, Colorado

omCERS
CECIL PucKETI, Vice President
H. L. STEMPEL, Cashier
J. R. ZAHOUREK, Asst. Cashier
HOMER F. KREBS, Asst. Cashier

Oklahoma City Branch
DIRECTORS
JAMES E. ALLISON, President
Warren Petroleum Corporation
Tulsa, Oklahoma
Chairman
C. L. PRIDDY, President
DoN H. DENNIS, Cattle Rancher
The National Bank of McAlester
Grady, Oklahoma
McAlester, Oklahoma
R. L. KELSAY, Chairman of the Board and
President
The First National Bank in Hobart
Hobart, Oklahoma

CHARLES P. STUART, Chairman of
the Board
The Fidelity National Bank and
Trust Company of Oklahoma City
Oklahoma City, Oklahoma

omCERS
R. L. MATHES, Vice President
F. W. ALEXANDER, Cashier
E. P. FARLEY, Asst. Cashier
W. J. MILBURN, JR., Asst. Cashier

·------------------------------------------------·
Omaha Branch

DIRECTORS
JAMES L. PAXTON, JR., President
Paxton-Mitchell Company
Omaha, Nebraska
Chairman
RALPH E. BARTON, President
JOHN F. DAVIS, President
The Wyoming National Bank of Casper
The First National Bank of Omaha
Omaha, Nebraska
Casper, Wyoming
C. WHEATON BATTEY, President
The Continental National Bank
of Lincoln
. Lincoln, Nebraska

HOMER A. Scorr, Vice President, and
District Manager, Sheridan District
Peter Kiewit Sons' Company
Sheridan, Wyoming

omCERS
. P.A. DEBus, Vice President
H . W . PRITZ, Cashier
W. P. DoRAN, Asst. Cashier
~ALTER L. PLEISS, Asst. Cashier