Full text of Annual Report of the Federal Reserve Bank of Minneapolis : Annual Report, 1947

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F E D E R A L

R E S E R V E

BANK

M I N N E A P O L I S

JLhe

st a t e m e n t s

of condition and of earnings

and expenses of the Federal Reserve Bank of M innea
polis for 1947—w ith certain comparative data for 1946
—are here presented.
In a letter to the stockholders, President John N.
Peyton has reviewed the year’s operations of the bank
in the light of contemporaneous developments in the
commercial hanking, agriculture, and business of the
district.
T he “human interest” side of the daily activities of
a bank, or any other business enterprise, is not often
clearly reflected in the balance sheet and operating
statement. To display one facet of the bank’s functions
which is not revealed by such figures, there is added to
this year’s report an illustrated

description

of the

operations of the coin department.

Chairman , Board of Directors

IN C O M IN G

C O IN

SHIPMENT is hauled into
the special silver vault, in
which coins of various d e
nominations can be seen
stacked in tiers. O ther pic
tures of coin departm ent
operations will

be found

accompanying

the

coin

article (P.10) in this report.

Page Two

PR E SID E N T PE Y TO N ’S R EPO RT
to the Stockholders
W hen you, the N inth district banker, turned the
key in your lock T hursday m orning, January 2 ,
1947 , you were opening the door to a banner
banking and business year. D uring the year then
ahead, your customers were destined to w rite
more checks than ever before in your banking
history. T he checks were bigger; the customers
more numerous.

up from $ 4,838 m illion at the end of 1946 to $ 5,250
m illion at the end of 1947 , an increase of 8.5 per
cent. The largest relative gains in deposits were
made by banks in North D akota and South
Dakota.

In the year that lay ahead of you that m orning,
you and your associates had the task of satisfying
the requirem ents of your customers for more
currency than ever before in order to transact a
record volume of business. And in spite of the
large and grow ing volume of bank deposits, you
were destined to find in the months that followed
that your customers w ere com ing in far more
frequently to borrow larger sums of money for
business expansion than had been true in recent
years.

T his substantial expansion in deposits in turn
was reflected on the balance sheet of the Federal
Reserve Bank. To the extent that deposits rose
because this area was p ullin g in funds from the
rest of the country, member bank reserve balances
increased. T his increase was largely centered at
the close of the year, w ith the result that member
bank balances at this bank at the end of 1947
were $52 m illion above the preceding year.

In m y annual report to you last year appeared
this beginning paragraph:
“The bank of a community is the silent third
party to almost all business and financial trans
actions. It holds the people s money. It transfers
these funds to all parts ol: the country. It receives
money for deposit from all sections of the coun
try. It furnishes currency to customers who need
it and accepts for deposit cash which is in excess
supply. It lends money. It sells bonds; it redeems
bonds. In short, the bank is the community’s
financial department store.”
Never before in this area has this silent third party
relationship resulted in such vigorous banking ac
tivity as was true in 1947 for the financial depart
ment stores of our communities.
Now that the records for 1947 are largely in, it
is not difficult to see what explains the banker’s
busy year. It was simply the high and rising
volume of business activity and incomes in the
district. T his large volume of business activity
pushed total deposits of all banks in this district

In all cases, however, states in our district en
joyed deposit increases considerably in excess of
the national average of 2 per cent.

Personal Incom e P aym ents
Reflect G reater A ctivity
A more comprehensive measure of economic
activity in our region is provided by information
on total personal income payments to individuals
in the area. These income payments for the entire
district are estimated to have been $6,400 m illion,
substantially in excess of the $ 5,600 m illion in 1946 .
T he largest increases were concentrated in the
wheat-grow ing areas, which enjoyed another record
year of high production combined w ith high prices.
Prelim inary figures suggest that income payments
in North Dakota rose from $624 m illion in 1946
to $750 m illion in 1947 , a rise of 21 per cent.
T his rise in personal incomes was inevitably
destined to push retail trade and spending higher.
T hat this occurred is abundantly clear. Retail
trade, as measured by our index of department
store sales, was approxim ately 11 per cent above
last year. It is not improbable that total retail
trade expanded somewhat more than this would
indicate, since many items enjoying a particularly

Page Three

PERCENTAGE INCREASE IN 1947
9TH DISTRICT INCOME OVER 1946

Not all of this business was transacted by cur
rency; probably, in fact, a rather sm all proportion,
since the great bulk of business transactions in
modern times is made by bank checks. T he large

PERCENT

CASH FARM IN CO M E

PERCENTAGE EXPANSION IN NINTH
DISTRICT BANKING AND
BUSINESS, 1946-1947
0

*10

+20

+30

+40

PERCENT

CASH FARM INCOME

IN C O M E PAYMENTS

DANK DEPOSITS

INCOM E

PAYMENTS

30
M E M B ER D AN K LOANS

I
DANK D ED ITS

D IS TR IC T DEPT. STORE SALES

Source: Cash farm income payments, U. S. D. A., “The
Farm Income Situation
Income payments, Survey of Current
Business.
Note: Percentage changes fo r both income payments and
cash farm income are based on partially estimated data for 1947.
* Includes 26 counties in Northwestern Wisconsin and 15
counties in the Upper Peninsula of Michigan. The income es
timates for these sections were made by the Research depart
ment, Federal Reserve Bank of Minneapolis.

D IS T R IC T DEPT STORE STOCKS

C IT Y DEPT. STORE SALES

C ITY DEPT. STORE STOCKS

heavy dem and
channels.

are

m arketed

through

other

T his volume of business required further in
creases to an already record supply of money in
circulation. The banks, as the distributors of the
money supply, felt the full force of this impact.
Some measure of this increase is found in our head
office and branch currency and coin departments,
which recorded paym ents into circulation in the
N inth district during the year of $383 m illion, the
return flow m eanw hile aggregating $370 m illion.
T he note circulation of this bank, w hich con
stitutes the bulk of the money in circulation in
the district, stood at $627 m illion at the end of the
year—a rise of $34 m illion in 1947 .

COUNTRY DEPT. STORE SALES

COUNTRY

DEPT. STORE STOCKS

COST OF LIVIN G , M IN N E A P O LIS

Note: Bank deposits and loans represent the percentage
change in the amounts outstanding as of December 31, 1946,
and December 31, 1947. Cost of living represents the percentage
change in an annual average of the monthly data. A ll other
items are based on annual dollar volumes. Data on Cash Farm
Income, Income Payments, and Cost of Living are partially
estimated. Department Store stocks, however, are measured
from year-end 1946 to year-end 1947.
Source: Cash Farm Income, U. S. D. A. ; Income payments,
Survey of Current Business ; Cost of Living, Department of
Labor.

LOANS OF ALL NINTH DISTRICT MEMBER BANKS, 1920-1947
(In M illion Dollars)

: Monthly data fo r 1947.

volume of business activity had its reflection also
in the fact that bank debits (the total dollar volume
of checks w ritten against deposits) increased by
22 per cent over 1946 .
It is for this reason that our M inneapolis and
H elena check collection departments last year
handled 54.2 m illion items w ith an aggregate
dollar total of $ 18.5 billion. T his is a rise of 5.6
and 10.7 per cent, respectively, over the previous
year.

End of Year Finds Loans
a t High Level
One of the m ajor 1947 banking developments
has been the substantial private dem and for bank
credit. Bank loans in the district rem ained at a
fairly constant level during the early part of the
year but by m idyear were rising at a very rapid
rate.
In fact, loans at member banks in this area
increased by 13 per cent during the last six months
of 1947 , and 27 per cent for the entire year. The
basic explanation for this heavy private demand
for bank loans is clear. Both business and indi

viduals laid out for themselves a rate of spending
in excess of their incomes. D uring a period when
there was much to be gained by increased produc
tion, a substantial am ount of this bank credit
undoubtedly performed a very much-needed func
tion of expanding productive capacity.
T he least reassuring feature of this heavy loan
expansion in 1947 (it occurred both in our district
and nationally) is that its m ajor effect was to in
crease the dollar volume of business activity by
raising prices rather than production. N ationally,
both industrial and agricultural production in a
“physical” or “unit” volume sense made modest
or no gains during the year.
It is for this reason that an expansion of bank
loans, after production has achieved capacity
volume, is usually considered inflationary. Incomes
or receipts alw ays exactly equal the value of cur
rent production. A n expansion of credit makes it
possible for consumers and business to push ex
penditures beyond receipts. W hen production is
already at capacity levels, the increased amount
of spending power represented by bank credit ex
pansion can and does increase the dollar volume
of business only by a corresponding increase in

prices. Even nonspeculative, “sound”, “production”
loans m erely enable the borrower to bid productive
resources aw ay from some other equally anxious
buyer. Total production is left almost unchanged.

PERCENTAGE INCREASE IN WHOLESALE
PRICES, INDUSTRIAL PRODUCTION,
AND BANK LOANS DURING 1936 -1947

In a year w ith unused productive resources
available, such as 1936 , the response to expanding
demand, partly represented by an expansion in
bank loans, was a 22 per cent increase in the phy
sical or unit volume of industrial production;
wholesale prices rose by a very moderate 4 per cent.
In 1947 almost no unused productive resources
were available. Consequently the major response
to expanding demand, a part of which was the
24 per cent rise in commercial bank loans, was a
rapid rise in prices and a negligible expansion of
actual production.

IND U S TR IA L
PRODUCTION

1947
BANKS
LOANS

WHOLESALE
P R IC E S

IN D U S TR IA L
PRODUCTION

T he chart illustrates the different response to
expanding money demands—a production in
crease in 1936 ; a price rise in 1947 .
The major problem therefore is that loans which
in each individual instance are perfectly sound
(in the sense that the borrower can readily repay
the loan) result in more dollars chasing after the
same volume of goods. The rising price level which
results makes possible further profits and only
adds to the very real incentive for borrowers to
expand loans further and reap even larger profits.
One of the m ajor problems which developed in
1947, therefore, was how to temper this inflation
ary expansion in bank credit in such a w ay that
the reasonable needs of the banks and the bor
rowers for funds would be met and, at the same
time, orderly conditions w ould be preserved in
the bond m arket. To meet w hat seemed to be
the necessary requirements of member banks for
temporary funds during the year, this bank lent
an aggregate of $969 m illion during 1947 ; the
largest volume outstanding at any one time was
$33.9 m illion on February 24 .

Developments Suggest Caution
T he need for caution in further increases of
bank credit and deposits was suggested in three
events of 1947 . First, in A pril there was levied on
each Federal Reserve bank an interest charge on
Federal Reserve notes outstanding not covered by
gold certificates. (A t present Federal Reserve banks

Page Six

Source: Wholesale prices, Bureau of Labor Statistics, In
dustrial production and bank loans, Federal Reserve Bulletin.

are required to m aintain a gold certificate reserve oi:
25 per cent against their own notes in circulation,
although the actual reserve ratio is now about 45

per cent.) M ajor effect of this action was to assure
recoupment by the Treasury of any added earn
ings which m ight accrue to the Federal Reserve
banks from higher short-term interest rates.
In July, the posted 3/8 per cent rate on United
States T reasury bills was discontinued, and those
issues sought their level in relation to other gov
ernment securities. A further change in the short
term rates occurred in October, w ith certificates of
indebtedness beginning the shifting from /8 per
cent to the 1 l/s per cent yield reached by the yearend.
T hird, during the last week in December, the
Federal Open M arket committee lowered the sup
port price m oderately on the longer-term United
States government bonds.
These things all had the effect of stiffening in

terest rates slightly
availability of bank
seemed appropriate
pressures to which
jected during most
latter part.

and reducing
credit. Both
in view of
the economy
of the year,

moderately the
of these results
the inflationary
was being sub
particularly the

90 Per Cent of Earnings
Paid to Treasury
You w ill note from the accom panying statement
of our earnings and expenses for the past year that
the new interest charge on Federal Reserve notes,
which I referred to above, resulted in the payment
to the T reasury of $2 , 124 ,282—approxim ately 90
per cent of our net earnings after dividends.
After m akin g the foregoing interest payment to
the Treasury, we paid $253,000 to our stockhold
ing member banks representing the regular six
per cent dividend, and transferred the remainder
of our earnings, $236 ,000, to surplus.
In establishing such rates of interest as w ill bring
about the transmission to the T reasury of ap
proximately 90 per cent of the net earnings after
dividends of each of the Federal Reserve banks,
the Board of Governors has utilized its authority
under Section 16 of the Federal Reserve Act to
accomplish much the same result as the old “fran
chise tax” provisions of the law.
You may recall that up to 1933 , each Federal
Reserve bank was required to pay a “franchise
tax” am ounting to 90 per cent of its net earnings
after accumulation of a surplus equal to its sub
scribed capital. T hat tax was elim inated in 1933
in order to perm it the Reserve banks to restore
their surplus accounts after Congress had re
quired each bank to contribute one-half of its
surplus as a subscription to the capital stock of
the Federal Deposit Insurance corporation. In the
latter part of 1947 , the FD IC capital so subscribed
by the Reserve banks was turned over to the
Treasury and the stock held by the banks was
retired.

Operations Reflect
Business A ctivity
It is interesting to notice how the volume of
work going through the various departments of
our bank serves to point out w hat’s happening in

business and agriculture in the district. For ex
ample, our check collection departm ent last year
reported record activity, both in dollar volume and
in number of items handled. For the most part,
the expansion was in country checks, suggesting
more spending w ith the increased availability of
goods desired by farmers and other country bank
customers.
This spending did not, however, result in a
deposit shift from this to other Federal Reserve
districts, for it was more than offset by an increase
in farm income. Here again our operations were
but the record of your customers’ activities. As the
result of i 947’s record grain prices, we collected
during the year 907,000 grain drafts am ounting to
$ 1,082 m illion, as compared w ith 808,000 for $688
m illion in 1946 . The average grain draft handled
thus increased from $852 to $ 1 , 192 .

Savings Bond Sales Up;
Redem ptions Down
One of the more noteworthy developments of
the year was that sales of United States savings
bonds in this district increased, w hile redemptions
declined. A lthough there were actually fewer
bonds delivered on original issue by our bank and
by issuing agents (exclusive of post offices) in the
N inth district than there were in 1946, they were
of larger denominations.
Comparison of our district figures for 1947 with
those for 1946 shows that savings bond sales went
up in dollar amount from $276 m illion to $317
million, w hile declining in number of pieces from
1 . 837.000 to 1 ,426,000. M eanwhile, redemptions fell
from $225 m illion to $201 m illion, the number of
pieces so redeemed being 5 ,000,000 in 1946 and
3 .200.000 in 1947 . The ratio of sales to redemptions
was actually even more favorable than these figures
indicate, for sales by post offices are not recorded
here. Redemptions of post office-sold bonds are,
however, reflected in our figures.
The slackening in savings bond redemptions,
however, did not bring about a shrinkage in the
year’s work of our Bond Redemption division,
since $44 m illion of A rm ed Forces Leave bonds
were redeemed through us in 1947 . These bonds,
you w ill remember, were issued late in 1946 to
veterans, other than officers, who at the time of

Page Seven

discharge had not received all of the leave to which
their period of service entitled them.
It is estimated that some $80 m illion of these
bonds were issued in the N inth district. N early all
of the leave bonds redeemed have been handled
since September 2 , for they were theretofore re
deemable only in the event of the veteran’s death.

Fiscal Agency Activities
Were Consolidated
The T reasury D epartm ent’s economy program
occasioned the consolidation w ith head office func
tions of certain of the Fiscal Agency activities
which had tem porarily been assigned to the H elena
branch during the w ar period. The transfer, which
was effected M ay 28 , related principally to sales
and redemptions of United States savings bonds
and the handling of W ar Loan Deposit accounts
for banks in branch territory.

S ta ff F u rth er Reduced
The size of the bank’s staff, which had reached
record proportions during the w ar years, continued
to reduce. A t the year’s end, 651 men and women
were employed at the head office and branch, as
compared w ith 707 at the close of 1946 . T he de
crease in personnel during 1947 came about largely
through the consolidation in the head office build
ing of w ar bond activities w hich had been con
ducted at the bank’s w ar bond annex in M in
neapolis, as w ell as certain of those which had
been conducted at Helena.
T he discontinuance of consumer credit control
(R egulation W ) and certain governm ental agency
custodian functions served to release employees to
other departments whose personnel requirements
had expanded.
The five-day work week, which was inaugurated
at the close of 1946 , has proved satisfactory after
a full year’s test. By means of rotation of employees
in those departments which must be “Open for
Business as U sual” on Saturdays, it has been pos
sible to divide the employees’ 40-hour work week
into five rather than six days. T hanks to the splen
did cooperation of the banks in the district in an
ticipating their requirements, it has been possible
for m any of the operating departments to function
with skeleton crews on Saturdays.

Page Eight

Also of interest in the field of personnel adm in
istration at our bank during the year was the com
pletion of arrangem ents for surgical fee insurance
to supplement the hospital expense coverage pre
viously available to employees. A t the same time,
the bank commenced absorbing two-thirds of the
cost of the entire hospital-surgical plan; thereby
enabling employees to obtain both hospital and
surgical coverage for themselves and their depend
ents at a cost somewhat below that which they
previously paid for hospitalization protection alone.

McLeod Elected Director
W ith the retirement at the expiration of his term
of M r. J. E. O’Connell of H elena as a Class B
director, M r. W alter H. McLeod of Missoula, M on
tana, was elected to that office. W ith this one ex
ception, the composition of the district board of
directors and the board of directors of the H elena
branch remains unchanged; M r. Roger B. Shepard
having been reappointed and M r. J. R. M cK night
having been re-elected to the district board, and
Mr. B. M. H arris and Mr. M alcolm E. H oltz
having been reappointed as branch directors. Mr.
Shepard continues as chairm an of the district board,
and M r. W . D. Cochran as deputy chairm an.
M r. R. B. Richardson was named chairm an of
the branch board.
The retirement in M ay of Mr. Ernest W . Sw an
son, vice president in charge of bank examinations,
m arked the only change in the bank’s official staff.

Six Banks Jo in System
N inth district member banks increased in num
ber during the year from 471 to 475 as the result
of the admission to membership of six banks and
the dissolution of two member banks whose func
tions were carried 011 by other member banks in
the same community.
Received into membership during the year were
the follow ing:
G

rand

ib e r t y

u l b e r t so n

a r a is

S tate B a n k ,

ounty

g r an d m a r a i s , m i n n

B a n k , Ch e st e r , M o n t a n a .

S tate

B ank

u lb e r t so n ,

CUL

BERTSON, MONTANA.
F

ir st

S ta t e B a n k

F ro id ,

fr o id ,

Montana.

iv in g s t o n

B ank

S tate B a n k ,

S h e r id a n ,

l iv in g st o n ,

s h e r id a n ,

Montana.

Montana

66Conference M aketh a Ready M an99
As Sir Francis Bacon aptly put it in his essay
O f S t u d i e s , “Conference m aketh a ready m an”.
The need for readiness is no less essential now
than it was in Bacon’s time. T he year 1947 afforded
us greater opportunities to become better acquaint
ed w ith the bankers of the district through per
sonal contact and to obtain the benefit of their
views of our common problems.
On A pril 26 , country and city bankers and
members of our staff assembled 1,100 strong at our
spring conference. On September 18 and 19 , more
than 400 member bank executives—chief execu
tive officers being barred—attended our second
annual Federal Reserve Forum . One-hundred
bank exam iners, including representatives of both
state and federal supervisory agencies serving ter

ritories in this district, assembled at the fourth
annual conference held fo r that group.
C ou ntry bankers, both m em ber and nonm em
ber, w ere frequent visitors at our bank. In calls at
m ore than 1,000 banks, our officers and other staff
mem bers w ere able to profit by across-the-desk
discussion w ith the m en to w h om the farm ers
and businessmen of the district look fo r financial
advice and guidance.
Students and others also have been frequent
visitors at our bank and there has been a persistent
dem and fo r copies of our picture book Y our
M oney and the F ederal R eserve S ystem and for
showings of B ack o f B anks and B usiness, a m o
tion picture w hich w e produced several years ago.
It was pleasing to note this increased public interest
in the operations of the Federal Reserve bank in

I947-

THE EBB A ND

F L O W OF C O I N

[)

Page Nine

THE EBB AND FLOW OF COIN
W ho invented the coin? W e
don’t know just who he was or
even whether he was Chinese,
Egyptian, or L ydian. But as we
count coins by the ton we are
grateful that oxen, salt, shells, and
skins have been replaced by some
thing more conveniently sorted,
counted, stacked, and wrapped.
Coins of m any curious shapes
and sizes had come and gone be
fore the w am pum of the A m eri
can Indian yielded to the shill
ings, louis d’or, and doubloons
which the colonists brought with
them from England, France, and
Spain. The present American
decimal system of currency was

A N O U T G O IN G SHIPMENT of coin
is loaded into an armored car

not devised until 17 S5 , and the
first United States coin was not
minted for seven years after that.
Today about 2 billion pennies,
500 m illion silver coins, and 200
m illion nickels are turned out an
nually at United States mints in
Philadelphia, Denver, and San
Francisco. At the close of 1947,
the nation’s circulating coins
amounted to approxim ately $ 1,250
m illion.

Volume of New Coin
Would Fill 11 Boxcars

performed by the Subtreasuries,
are now the channels through
which virtually all new coin is
conveyed from the mints to the
nation’s banks and thence to the
public.
The Federal Reserve Bank of
M inneapolis obtains nearly all of
its new coin from the Denver
mint. D uring 1947 , the head of
fice received from that m int 40
m illion pennies, 5.5 million dimes,
and 400,000 half-dollars—a quan
tity roughly equivalent to the
normal load capacity of 11 freight
cars.

The 12 Federal Reserve banks
and their 24 branches, as succes
sors to the functions previously

Of $2.8 million of new coin re
ceived during the year by our

service truck in the g ara g e located
within the bank. The armed guards

standing by will accompany
shipment to the post office.

the

H elena branch, approxim ately
$2.3 m illion was in standard sil
ver dollars. M ontanans, loyal to
their silver-producing state, give
but gru d gin g toleration to the
paper dollar bill.
Silver coins sent to our bank
by the mint are packed in sealed
bags and shipped by registered
m ail. Pennies and nickels are
sent by express. Much of the coin
received from the mints must be
re-sacked by us into sm aller quan
tities.
W hen our stocks of a particu
lar denomination of coin run low.
it is not always necessary for us
to obtain new coin from the mint
to replenish the supply. Federal
Reserve banks in other districts

O N E DAY'S RECEIPTS can give
the coin tellers a busy time of it.
They are seen beginning the count
ing operation. Three trucks hold
country member bank shipments,
the truck in the foreground city
receipts.

often have sufficient excess quan
tities to take care of our require
ments.

Most Coin Comes
From Banks
Coin received from the mints
and other Federal Reserve banks
during 1947 aggregated $4.6 m il
lion. Most of our incoming coin,
however, came ftom the district’s
commercial banks, which ship us
the amount received by them in

excess of their requirem ents. Such
shipments durin g 1947 aggre
gated $7.3 m illion—approxim ately
62 per cent more than they sent
us in 1946 .
Country member banks ship
coin to us by express collect.

Sharp Eyes Spot
C ounterfeits
W ith the aid of new high-speed
machines—which count up to
3,000 coins per m inute—incoming
coin is sorted and counted into
standard quantity sacks as soon
as possible after receipt.
The 89 m illion pieces of coin
which we counted in 1947 w eigh
ed a total of about 430 tons—

nearly a ton and a half per w ork
in g day. T he men of our coin
departm ent are really w eight lift
ers. Fortunately, however, the job
doesn’t require the supermen who
w ould have been needed for a
sim ilar operation in Sweden in
the 17 th century when the Swed
ish R iksbank issued coins in the
form of copper plates w eighing
as m uch as 14 pounds each.

lic, apparently blithely unaw are
that federal law is being violated,
continues to drill holes in, carve
initials on, and m ake rings and
bracelets of U nited States coins.
Coins also seem to be favorite
subjects for target practice, as
evidenced by the number of sil
ver dollars and half-dollars which
come to us punctured by bullet
holes.

Sharp eyes, as w ell as strong
backs, are necessities for our coin
handlers. It is the responsibility of
the Federal Reserve banks to re
move uncurrent, m utilated, for
eign, and counterfeit coin from
circulation. Coin is considered
uncurrent w hen reduced in
w eight by natural abrasion; while
m utilated coins are those which
have been bent, punched, or oth
erwise defaced.

Other coins are rendered un
current by rancid peanut oil (from
vending m achines) and by glue,
and some show the effects of a
losing battle w ith a food chop
per, feed grinder, or paper shred
der.

Dimes w ear out sooner than
other coins, but all coins, espe
cially the silver ones, are subject
to m utilation. T he general pub

U ncurrent and m utilated coin
is sent to the m int for redemption,
but counterfeit coin is turned
over to the U nited States Secret
Service. Principal means of de
tecting counterfeit coins are by
appearance, sound when dropped
on a hard surface, feeling, soft
ness when cut w ith a knife, and

RELATIVE BULK of w rapped coin is shown here. Portraying $1 00 in each
denom ination, this picture indicates why w rapped coin costs vary from
$ 1 0 .6 0 per $ 1 ,0 0 0 in pennies to $.70 for halves. Upper four rows are
pennies, next row nickels, with dimes, quarters, halves at the bottom.

STEEL PENNIES are here being re
moved with an electro-magnet as
their copper counterparts continue
on through the counting machine
into the sack. A t top speed, 3,0 00
coins per minute, the counting m a
chines operate with machine gun
rapidity.

reaction to acid. Most frequently
such counterfeits are recognized
by reason of their dull appearance,
uneven reeding, or “soapy” feel
ing.
W hile quarters and half-dollars
are the most commonly counter
feited pieces, dimes, nickels, and
even pennies are not entirely im
mune to unlaw ful duplication.
Our clerks must also remove
from incom ing coin shipments
m any other items which have lit
tle resemblance to coins. In 1947 ,
as in any other year, we sorted
out a large num ber and variety
of washers, slugs, and buttons.
W e are no longer surprised to
find am ong incom ing coins such
objects as peanuts, steel files, met
al scraps, etc.

In recent months, we have been
removing from circulation the
steel pennies which were put into
use during the war. A n electro
m agnet has become standard
equipm ent for separating these
pennies from the copper pieces.
Also, we are still receiving a small
but steady trickle of gold coins,
which are turned over to the
Treasury department.
Our coin department m ight
seem a paradise for a coin col
lector, but at the speed w ith which
our clerks must handle incom ing
shipments they have little time to
check date and m int letter to dis
cover such high prem ium pieces
as the 1804 silver dollar or the
1894 S M int dime.

tists, we occasionally take part in
the distribution of special com
memorative coins, such as the
1946 Booker T. W ashington
memorial half-dollar.

coin is as follow s:

Coin Is Wrapped
On Request

A lthough all incom ing used
coin is counted and sorted, only
a portion of it is wrapped, since
orders for the most part call for
loose coin. A ll of it, however—
whether wrapped or loose—is
placed in coin sacks which are
sealed and tagged and kept under
vault protection aw aitin g future
use.

Som ething new has been add
ed to the duties of our coin de
partm ent—a wrapped coin ser
vice for member banks. Since
last M ay, 38 million coins, aggre
gating $ 1.7 million, were w rap
ped at the Minneapolis head of
fice and the Helena branch.

A lthough we do not handle
special requests from num ism a

W rapped coin is sent out when
specifically requested, and a
charge is made against the bank
ordering it to cover our out-ofpocket expense for materials and
additional labor. The schedule of
charges for w rapping $ 1,000 in

C O IN W RAPPING Has become an
important part of the department's
operations. Here you see four of

the machines, output of which varies with denominations — from
dimes, about 275 tubes an hour,

.70 for Q uarters, Halves
T.50

for Dimes

2.80 for N ickels
10.60 for Pennies

Nearly $10 M illion
In Coin Shipped
As member banks’ coin supplies
begin to run short of their antici
pated requirem ents, they usually
request us, by order form or let-

to nickels (the fastest), about 75 0.
New coins w rap more slowly than
coins which have been circulated.

ter or, 111 an emergency, by col
lect telegram , to ship coin to
them. To fill these needs, we take
from our vault sealed sacks of
coin, the tags on which show that
on previous counting and sorting
they were found to contain the
denom inations and amounts de
sired.
A fter verification and tagging
for shipment, these sacks are sent
by armored truck to the post office
for transm ission to the ordering
bank—by registered mail except
for the T w in Cities and Helena.
T h e costs of transportation on
shipments to country member
banks are borne by us.
T otal coin shipped and paid
out to banks in 1947 , both loose
and wrapped, amounted to ap
proxim ately $9.7 m illion, about
$ 1 m illion less than in 1946.

SEASONAL FLOW of coin finds outgoing shipments increasing with sum
mer vacation time and harvesting, and growing in volume before Christ
mas, with a heavy return flow taking place in first months of the new
year. Clint Sewall, head coin teller, stacks some of the early 1947 receipts
in the main vault, where the chief stock is maintained.

Demand Varies W ith
Regions and Seasons
The demand for coin, like that
for currency, varies both geo
graphically and seasonally. Re
gional differences are noticeable
not only between Federal R e
serve districts but also between
branch and head office territories.
The area served by the Helena
branch, for example, consistently
“loses'’ coin to other parts of the
country. This is clearly shown by
the figures for 1947 which reveal
ed that w hile our branch was
paying out to Montana member
banks $3.2 m illion of coin, only
$232 thousand were received from
those sources.
A N AUDIT of coin is made periodically by the bank's auditors, two of
whom are seen here in a corner of the main vault checking dollars. Coins
in a certain percentage of sacks are counted at each audit; other sacks
are then verified by weight.

Page Fourteen

At the head office, on the other
hand, incom ing shipments from
member banks exceeded their re
quirem ents in dollar amount, al-

though inadequacies in certain
denominations required resort to
the mint.
Standard silver dollars consti
tuted 72 % of the coin shipments
made by the Helena branch, but
less than 5 % of the coin paid out
at the head office.
D uring the summer vacation
and fall harvesting seasons, re
quests for coin rise, hitting their
peak just before Christmas is
business volume increases. In
January or February, outgoing
shipments are small and coin
tends to flow back into the Fed
eral Reserve bank.
D uring the first two months
of 1947 , the return of coin to our
bank was unusually heavy. So
rapid was the inflow that un

counted coin in the minor de
nominations piled up in our
vaults, creating a temporary prob
lem.
Nickels, particularly, piled up
in record quantities. It has been
suggested that the nickel’s sudden
loss of popularity is largely at
tributable to drives against “onearmed bandit” slot machines in
several states in the district, with
the upping of many candy bars
from 5c to 6c as a contributing
causc.
Pennies, on the other hand, had
a heavy increase in circulation
during the year. W e do not know
to what extent this was due to
taxes, such as the new cigarette
tax in Minnesota, or to fractional
increases in the prices of such

frequently-purchased items
candy bars and cigars.

W e do know, however, that
general business activity and par
ticular business ventures are often
reflected in the movement of coin
to and from the Federal Reserve
banks. Promotional advertising
contests, for exam ple, which in
volve the rem ittance of a sm all
coin and a box top result in an
outflow of coins of the denom ina
tion needed, followed by an in
flow of the same coins as they are
again deposited in commercial
banks by the contest sponsors.
W e wonder if any contest en
trant has ever thought, as he m ail
ed his dim e and box top, that the
impact of his action—m ultiplied
m any times—eventually is felt at
the Federal Reserve bank.

S T A T E ME NT S OF C O N D I T I O N , E A R N I N G S A N D E X P E N S E S

Page Fifteen

EARN INGS

AND

EXPENSES
1947

Earnings from:
Discounted Bills ..................................
United States Government Securities.
Industrial Advances
All Other
Total Current Earnings

1946

96,444
4,506,670
0
9,994
f 4,613,108

88,389
4,084,184
0
6,786
$ 4,179,359

$ 1,888,829

$ 1,593,145

65,186

55,330

Federal Reserve Currency:
Original Cost
Cost of Redemption .
Total Current Expenses .

90,473
18,610
$ 2,063,098

Current Earnings

$ 2,550,010

92,857
13,205
$ 1,754,537
$ 2,424,822

74,733
782
75,515

51,048
1,341
52^389

Expenses:
Net Operating Expenses
Assessment for Expenses of Board of Governors
of the Federal Reserve System.

Additions to Current Net Earnings:
Profit on Sales of U. S. Government Securities.
All Other
Total

Deductions from Current Net Earnings:
Reserve for Registered Mail Losses.
All Other . .
Total
...
Net Additions to Current Net Earnings.
Net Earnings

11,289
593
$
11,882
% 63,633
$ 2,613,643

$ 111,381
$ — 58,992
$ 2,365,830

Dividend Paid ..........................................................................................................
Paid to U. S. Treasury (Interest on outstanding Federal Reserve Notes) .
Paid to U. S. Treasury (Section 13b). . .
......................
Transferred to Surplus (Section 13b).
Transferred to Surplus (Section 7) .

253,251
2,124,282
500
0
235,610

10,171

101,210

238,372
0
0
0

2,127,458

S u r p l u s A c c o u n t ( S e c t i o n 7)
Balance at Close of Previous Year.
Transferred from Profits of Year.

$10,996,958
235,610

Balance at Close of Year

$11,232,568

Surplus
Balance at Close of Previous Year. .
Transferred to Surplus (Section 13b).
Balance at Close of Year. .

P ai\e S ixteen

$ 8,869,500
2,127,458
$10^96^958

A c c o u n t ( S e c t i o n 13b)
$ 1,072,621
0

$ 1,072,621

$ 1,072^621

STATEMENT

CONDITION

ASSETS

Dec. 31, 19 4 7

Dec. 31, 1946

$ 431,974,895
22,880,274
$ 454,855,169

$ 357,057,311
21,360,221
$ 378,417,532

Other Cash

6,792,806

5,734,048

Bills Discounted
Industrial Advances

1,265,000*

3,412,500*

Gold Certificates on Hand and Due from U. S. Treasury.
Redemption Fund—F. R. Notes.
Total Gold Certificate Reserves.

U. S. Government Securities:
Bonds
Notes
Certificates of Indebtedness
Bills
Total U. S. Government Securities.
Total Bills and Securities.

93,936,000
48,618,000
223,788,000
298,577,000
$ 664,919,000
$ 666,184,000

22,929,000
10,814,000
228,144,000
374,253,000
$ 636,140,000
$ 639,552,500

Due from Foreign Banks. . . . . .
F. R. Notes of Other F. R. Banks.
Uncollected Items
Bank Premises
Other Assets
Total Assets

2,379
8,158,050
67,641,451
1,208,439
3,656,181
$1,208,498,475

2,556
4,337,500
62,219,164
1,239,845
1,475,253
$1,092,978,398

Federal Reserve Notes in Actual Circulation.

$ 626,968,780

$ 592,688,445

Deposits:
Member Bank—Reserve Account
U. S. Treasurer—General Account
Foreign Bank
Other Deposits
Total Deposits

450,542,397
43,974,904
8,225,000
2,645,456
$ 505,387,757

398,588,738
20,504,991
11,914,087
2,526,694
$ 433,534,510

Deferred Availability Items
Other Liabilities

57,023,537
867,039

48,688,857
285,198

Total Liabilities

$1,190,247,113

$1,075,197,010

LIABILITIES

CAPITAL

Capital Paid in
Surplus (Section 7)
Surplus (Section 13b)
Other Capital Accounts
Total Liabilities and Capital Accounts. .
* C o n sists

so le ly

of fo re ig n

lo a n s

ACCOUNTS

4,293,650
11,232,568
1,072,621
1,652,523
$1,208,498,475

4,070,550
10,996,958
1,072,621
1,641,259
$1,092,978,398

on g o ld .

Pi'i£e Seventeen

F E D E R A L R E S E R V E R A N K OF M I N N E A P O L I S
1948

DIRECTOR S
R o g e r B. S h e p a r d
St. Paul, Minnesota
Chairm an o f the Board and F ederal Reserve A g ent

W . D. C o c h r a n
W . 1). Cochran Freight Lines, Iron Mountain, Michigan
D eputy C hairm an
P. C l a r k
Chai rm an of the Board, West Publishing Company
St. Paul, Minnesota

F. D. M c C a r t n e y
Vice President. First National Bank
Oakes, Nort h Dakota

omer

larence

ill

J. R , M

C hai rm an of the Board, Northwestern National Bank
Minneapolis, Minnesota
R

C. L

n ig h t

President, Pierre National Bank
Pierre, South Dakota

ange

President, Chippewa Canning Company
Ch ippewa Falls, Wisconsin

11.

alter

eod

President, Missoula Mercantile Co.
Missoula, Montana
P a u l . E. M i l l e r
Director of Agricultural Extension
University of Minnesota
Minneapolis, Minnesota

OFFICERS
J ohn
O

liver

S. P o

, President
First Vice President

eyton

w ell

B A N K IN G DEPARTMENT
H

arold

rthur

ore

Personnel Officer

B A N K EX A M IN A T IO N DEPARTMENT
H

R. L a r s o n , Assistant Cashier
Check Collection

L a r s o n , Assistant Cashier
assigned to Helena Branch

ilfo rd

lbert

tis

ysen

Operating Research Officer

E arl

L arson,

RESEARCH DEPARTMENT
W .

racken

alter

urner

D irector of Research

AUDIT DEPARTMENT

I. Z i e m e r , Vice President and Secretary
Loans and Discounts

arry

Page High teen

Assistant Cashier
Collection Department
Currency and Coin
Securities Safekeeping

Assistant Vice President

E. P e t e r s o n , Assistant Cashier
Custodian for Governmental Agencies
W it hh el d Taxes

Vice President
assigned to Helena Branch
ow le

Vice President

illiam

R. P r e s t o n , Vice President
Banks and Banking

F.. T

o n n k l i ..,

Government Securities

W . M i l l s , Vice President and Cashier
General Bank Operations

FISCAL A G E N C Y DEPARTM ENTS

Paul

arold

W .

r tiie n

hnstad,

A u d ito r

LEGAL COUNSEL
S

igurd

aurice

eland

Vice President and Counsel
Assistant Counsel

S t r o t h m a n , J r .,

HELENA

BRANCH

DIRECTORS
R.

R, R i c h a r d s o n ,', C hairm an
President, ’W estern Lite Insurance Com pa
Helena, Montana

v l c o i .m

oltz

Agriculturist
Grea t Falls, Montana

R. M. H a r r i s
President. 'The Yellowstone Rank
Columbus, Montana

hkodork

Jacobs

President, First National Rank
Missoula, Montana
L . I ). MAt I I M l II

President, State Publishing Company
Helena, Montana

OFFICER*
R.

Town ,

I 'ice

President

MExMHER OF F E D E R A L A D V I S O R Y
1 li \ r v

arson

.Assistant Cashier

COUNCIL

K. A t w o o d

P r e s i d e n t , Fir st N a t i o n a l R a n k
M inneapolis, M innesota

IN D U STR IAL AD VISOR Y COMMITTEE
V . W o o d , C hairm an
President, Minneapolis Electric Steel Castings Co.

S i i 1 1 .d o x

John

M. R u s h , Negaunee. Michigan
The Clevelan d-C lifls Iron Compa ny

L. Mii. i.L .R , La Crosse, Wisconsin
President, Miller Rroom Company

lblrt

Page Nineteen

Full text of Annual Report of the Federal Reserve Bank of Minneapolis : Annual Report, 1947

FRASER