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Fo R EWO R I)

A D U A L P U R P O S E is served by this Annual Report of the
Federal Reserve Bank of M inneapolis. T h e first purpose is to
present to the stockholders the statement ol condition of the
bank at the close of the year and its earnings and expenses
for the year.
T h e second purpose is educational— to olTer to the general
public, as well as to the stockholders, a description of one of
the service functions of the bank and also a statement on the
functioning ol the Federal Reserve System in the nation's
T h e message of President J. N . Peyton entitled, M o n etary
P o licy Can C o n trib u te to the N a t io n ’s Stren g th , states his
belief that the national welfare is best served by a central bank­
ing system that provides regional representation in policydetermining bodies.
T h e feature article, fifth in a series and entitled, S e rv ic e
Station fo r Y o u r F o ld in g M o n e y , describes the important
services performed by the bank's Currency department.
It is hoped that this Annual Report will serve to promote a
better understanding of the Federal Reserve System — its
services and functions.



R O G E R B. S H E P A R D


R O G E R B. S H E P A R D , S t. P au l b u s i n e s s m a n , h as
b een c h a ir m a n s in c e J a n . 1, 1916. R e p r e s e n tin g th e
p u b lic in ter est a s a c la ss C d ire cto r, a p p o in t e d by
th e Board o f G o vern ors, h e w as r e a p p o in te d for a
th r e e -y e a r te r m to serve th r o u g h D e c e m b e r 31, 1953.
P A U L E. M IL L E R , d e p u t y c h a ir m a n , is d ir e c to r o f
th e U n iv e r s ity o f M in n e s o ta a g r ic u ltu r a l e x te n s io n
d iv isio n , S t. P a id . H e w as r e c e n tly r e a p p o in te d a
c la ss G d ire cto r.
C H A R L E S W. B U R G E S , a c la ss A d ir e c to r , is vice
p r esid en t a n d c a s h ie r o f th e S e c u r ity N a tio n a l B a n k ,
E d geley , N .D . H e w as recen tly reehke ted by m e m b e r
b a n k s h a v in g c o m b in e d c a p ita l a n d s u r p lu s of* less
th a n $150,000.
HOlM ER P. C L A R K , h o n o ra ry c h a ir m a n o f W est
P u b lis h in g C o., S t. P a id , is a c la ss B d ir e c to r r ep re­
s e n t in g c o m m e r c e , in d u s tr y , a n d a g r ic u ltu r e . He
w as e le c te d by m e m b e r b a n k s h a v in g com binc'd
c a p ita l a n d s u r p lu s o f m o r e th a n $100,000.
W IL L IA M A. D E N E C K E is a liv e sto c k r a n c h e r o f
B o z e m a n , M o n ta n a . A c la ss B d ir e c to r , he w as
e le c te d by m e m b e r b a n k s h a v in g c o m b in e d c a p ita l
a n d s u r p lu s o f less th a n $150,000.

E D G A R F. Z E L L E
F. A. F LODI IN is presid en t o f th e Lake S h o re
E n g in e e r in g C o., iro n M o u n t a in , M ic h . H e w as r e ­
c e n tly a p p o in t e d a c la ss (1 d ire cto r to (ill an iin e x pired te r m e n d in g D ec. 31, 1952.
RAY C. L \ I \ ( i E , a c la ss B dire<*tor, is p r esident o f
C h ip p e w a ('a im in g C o., C h ip p e w a F alls, W is. H e w as
r e c e n tly r e e le c te d hy m e m b e r h a n k s h a v in g c a p ita l
a n d s u r p lu s o f $150,000 or m o r e h u t less th a n $400,000.
IIA R O IJ) N. T H O M S O N , vice p r esid en t o f th e
F a rm er s a n d M e r c h a n ts R an k, P r e s h o , S .D ., is a
c la ss A d irecto r. H e w as e le cte d hy m e m b e r h a n k s
h a v in g c o m h in c d c a p ita l a n d su r p lu s o f $150,000 or
m o re hut less th a n $400,000.
E D G A R F. Z E L L E is c h a ir m a n o f th e First N a ­
tio n a l R an k o f M in n e a p o lis a n d c h a ir m a n a n d
trea su rer o f Jefferson T r a n s p o r ta tio n Go. H e w as
e le c te d a (‘lass A d ire cto r hy h a n k s w ith c o m h in c d
ca p ita l a n d s u r p lu s o f $400,000 or m o re , to fill an
u n e x p ire d te rm e n d in g D ec. .‘51, 1952.


R A Y G. L A N G E

In T h i s A n n u a l R e p o r t


President Peyton's M e s s a g e ........................................................... ^


Check Collection , Coin Progress Highlighted >e a r ........................... 10


“ Service Station for Your Folding M o n e y ........................................... 16


Warnings and Expenses , Sta ternen t of Condi tion




Monetary Policy
Can Contribute to
the Nation’s Strength


L i I F E in the United States today is on the whole
comfortable. W e cannot afford to be sanguine,
however, for as more and more of our citizens
are com ing to realize, a great task lies ahead of us
which may exert stresses and strains on our
W e are embarked on a program which seeks to
provide a volume of civilian goods sufficient to
maintain a high standard of living for our people
and at the same time produce mountains of m ili­
tary materiel. W hile doing this, we certainly wish
to preserve our democratic political institutions.
O ur country can lose power and prestige— and
endanger the life of democratic institutions
throughout the world— as much by a failure to
build defenses against a deterioration of our eco­
nomic structure as by a failure to build adequate
defenses against m ilitary aggression.

met. T o meet it we must formulate and follow in
detail the best protective measures we can devise.
Defenses against inflation require that men with
specialized skills— and wisdom — shall be entrusted
with the formulation and development of the
program for the maintenance of a strong and stable
economy. It is obvious that efficiency in production
is required. Necessary also is soundness of our
financial institutions.
M oney is the core of the financial structure, and
the Federal Reserve System has been entrusted by
Congress with responsibilities regarding its man­
agement which need public recognition and under­
standing. But these matters are com plex; they are
difficult to understand. Yet, all complex problems
basically have a simple substance.

W e must therefore be alert to detect and must
courageously correct weaknesses in our economic
structure as well as those that appear in our m ili­
tary armor.

T h e substance of inflation is that the rate of
money creation and money use has outrun the
supply of goods and services for which money may
be expended. Conversely, deflation consists of a
declining rate of money expenditures on goods
and services.

A n apparent threatening weakness in our eco­
nomic structure, and that of other nations which
seek to preserve political and economic democracy,
is inflation. T h is threat must be recognized and

T h e Federal Reserve System is concerned with
forestalling inflationary and deflationary move­
ments insofar as that desirable objective can be
achieved by monetary measures. T h e instruments


which may be used are explicitly defined by legis­
lative acts and clearly delegated by Congress under
the Constitution to the Federal Reserve with the
purpose of promoting growth and stability in the
Th in kin g on these matters, I have been led to
devote my annual letter to them. T hey are uppermost in my mind, more salient at the beginning
of this new year than the general business situation
in the Ninth district. Accordingly, I shall give you
briefly my impressions of the organizational struc­
ture of the Federal Reserve System, its place in
the banking system, and the record of its policies
in 1951.

Federal Reserve is Both a
Private and Public Institution
Congress wisely provided that the Federal R e­
serve System should be a semiprivate and semigovernm ental institution. T h is was accomplished
by building a structure of twelve regional Federal
Reserve banks, each owned by the member com­
mercial banks of its district, over which the Board
of Governors of the Federal Reserve System, an
instrumentality of the federal government, exer­
cises general supervision.
Clearly, it was the intent of Congress that the
central bank for the United States should be a

w s& om sns

—M L ffr M l
ib fS P k ll




• The privately held money supply increased $8.7
billion in the year ended December 31, 1951. De­
mand deposits were up $5.9 billion, time deposits
$1.7 billion, and currency outside banks $1.1 billion.


decentralized organization for certain purposes and
centralized for other purposes. It is a decentralized
structure—broken down into the twelve regional
banks— in order to assure that regional consider­
ations would be taken into account in the form ula­
tion of national policy and to provide for the
adaptation of national policy to local conditions.
It is chiefly through the Federal Open M arket
committee, on which five presidents of the Federal
Reserve banks and the seven members of the
Board of Governors serve, that national credit
policy, under authorization of Congress, is form u­
lated and implemented. T h e presidents of the F ed ­
eral Reserve banks have the benefit of the views
of their boards of directors as a basis for their own
views presented in the meetings of the Open M ar­
ket committee and in discussions with the Board
of Governors. T h e Board of Governors also has
the benefit of the opinions of the Federal A dvisory
Council, on which serve twelve persons, one from
each district, who are appointed by the boards of
directors of the Reserve banks.
Thus is provided a body for centralized decision­
m aking in which is reflected the thinking of people
from all regions of the country— a body which is
able to weld this thinking into a national mone­
tary policy.
T h is regional arrangement agrees with the po­
litical, economic, and social institutions built up in
this country and stands approved by our people
in sharp contrast with their disapproval of a com­
pletely bureaucratic determination of national

Federal Reserve Fits
Commercial Banking Structure
T h e structural arrangement and procedures of
the Federal Reserve System were designed to fit
the monetary system which had been developing
prior to the passage of the Federal Reserve Act in
1913. T h e chief form of money had become bank
deposits, whereas previously currency was the
main form of money. Slow ly it became recognized
that commercial banks were the creators of the
bulk of the money supply.
Prior to the establishment of the Federal Reserve
System, no control was exercised over the quantity
of the main form of money (bank deposits), ex-

mm on u s


6 o «M «K T



• Following the Treasury-Federal Reserve accord
in March, yields on government securities rose
sharply. After a 3rd-quarter drop, yields on all m a­
turities rose to new postwar highs late in the year
when commercial banks increased their loan rates.

cept for a regional gold reserve; that is, no delib­
erate inhibiting measures were taken to discourage
undue expansion or contraction of bank credit. In
periods of prosperity, bank credit was freely al­
lowed to promote further expansion and, in periods
of recession, to accelerate and accentuate con­
W hile Congress was preoccupied in the last half
of the nineteenth century and the early years of
the present century with problems relating to
coinage, a new monetary system, with a new
dom inant form of money, was fast developing.
T a k in g a careful look at this phenomenon when
prodded by the Panic of 1907, Congress decided
to establish a central banking system that would
effect a compromise between a legislatively deter­
mined and a privately determined money supply.
T h e result of the deliberations was the Federal
Reserve System, under which the commercial bank­
ing system was permitted to continue to create
money and yet be subject to the restraining meas­
ures which the new central banking system, using
the instruments of control specifically prescribed
by legislative acts, m ight take.
U nder this compromise, the Congress neither
directly through legislative prescription nor indi­

rectly through the agency of the Federal Reserve
System interferes with the individual commercial
ban k’s function as the allocator of funds. Each
bank receives and disposes of applications for
credit with little or no interference.
T h e Federal Reserve System, however, can exert
influence upon the over-all volum e of bank credit
and its general availability through the use of its
instruments of control. M oreover, it can on its own
initiative serve as a creator of money when offer­
ing to convert bank assets into cash or credit, and
it can decrease the money supply by retiring money
from private circulation paid to it in exchange for
its assets.
I have a firm conviction that the nation should
not without serious consideration disturb this
unique part-private and part-governmental nature
of our central banking system. T h e existing system
has proved workable and reasonably satisfactory.
Since the most realistic alternative to a central bank­
ing system such as we have in this country is one
in wrhich private control is weaker or altogether
lacking and governm ent control is stronger, the
public should deplore and resist any move in the
direction of such an alternative.

World War II Provided
Background for Inflation
From the end of December 1941 to the end of
1945, the privately held money supply (deposits
and currency) increased from $76.3 billion to
$150.8 billion. T h e increase of $74.5 billion in the
money supply is approxim ately the same as the
rise of $75.8 billion in bank holdings of government
T w o factors made possible these larger holdings
— namely, the large volume of excess reserves held
by the banks at the beginning of the period and
Federal Reserve purchases of governm ent secur­
ities in the period under survey. O f the $22 billion
of governm ent securities purchased by the Reserve
banks, over $ 17 billion was offset by an increase
in money in circulation.
A fter the w ar a period of great bank credit ex­
pansion developed. In the six-year period from
the end of 1945, bank loans increased about $36
billion, which compares with a rise of approxim ate­
billion in deposits and currency.


This great expansion in bank credit, which was
continuous in half-year periods, except for the first
half of 1949, provoked great discussion over meas­
ures which might be taken by the Federal Reserve
to discourage further credit expansion. T h e central
issue became the support of government securities
at set values by Federal Reserve open-market pur­

Treasury9 Federal Reserve
Reached Accord in March 1951
T h e chief considerations involved in the debate
over the maintenance of governm ent security
prices by the Federal Reserve were, on the one
side, that the purchases incident thereto in a period
of full em ploym ent created a highly inflationary
credit base and, on the other, that a need existed
to maintain confidence in the governm ent credit
and that low borrowing rates are desirable.
T h e fast-moving events and announcements re­
garding open-market policies of the Federal R e­
serve System are well known. T h e first step toward
a change in policy was the announcement in
A ugust 1950 by Federal Reserve authorities that
they were prepared to use all available powers
to restrain further inflationary credit expansion
consistent with the policy of m aintaining orderly
conditions in the m arket for government securities.
F ollow in g this announcement, discount rates at
the Reserve banks were raised, but substantial F e d ­
eral Reserve purchases of governm ent securities
were made to support Treasury refunding oper­
ations and also the long-term bond market. N o n ­
bank investors, chiefly institutional investors, con­
tinued to sell bonds in large volume as a means
of obtaining funds to acquire higher-yielding
In this process, commercial bank deposits and
reserve balances rose to higher levels, intensifying
the already intense inflationary pressures caused
by the outbreak of m ilitary hostilities in June.

bank deposits, effective in January 1951, and higher
m argin requirements on trading in stocks were
In Jan uary and February 1951, events and an­
nouncements confirmed the intention of the F e d ­
eral Open M arket committee to change its policy
in support of governm ent securities under which
a great volum e of investor holdings of the federal
debt had been monetized.
On M arch 4, a historic announcement was made
by the T reasury and the Federal Reserve that they
had reached an accord with respect to debt m an­
agement and monetary policies which would assure
successful financing of the governm ent’s require­
ments and at the same time m inim ize further
monetization of the public debt.
Thereupon, market prices on governm ent bonds
declined to levels considerably below par, and
yields on short-term issues also rose to levels higher
than had prevailed for many years.

Monetary Policies of 1951
Had Anti-inflationary Results
One effect of the virtual cessation of Federal
Reserve purchases of governm ent bonds was that
institutional lenders were no longer able to mone­
tize their holdings by sale to the Federal Reserve
without causing a decline in the market prices of
governm ent securities.
T h at being the case, they were induced to adjust
new loans into closer balance with funds received
from new savings and repayments of old loans.
Since institutional investors could no longer con­
vert bonds into new money without penalty of
lower prices, commercial banks were no longer
the recipients of additional reserve balances, as
had been the case when the Federal Reserve bought
freely the bond holdings of those investors, or
those of the banks at set prices.

Under the Defense Production A ct of 1950, con­
sumer installment credit regulations were imposed
under Regulation W , and a new regulation cover­
ing credit in the real estate field, Regulation X ,
was instituted.

Th u s by the same stroke, the refusal to purchase
governm ent bonds from institutional holders so
freely was a refusal to create bank reserves so
freely— reserves on which additional commercial
bank loans might be based, and new money made
available for lending by institutional lenders.

Late in December, the Board of Governors an­
nounced higher reserve requirements 011 member

There was another aspect of the drop in govern­
ment bond prices (higher market yields) and the


is most likely to increase. If instead of allowing
their prices to decline, they are kept at a fixed level,
such as par, by Federal Reserve purchases, no
automatic restraint on further sales exists, as is the
case under free market conditions. In fact, such
fixed prices induce sales to the Federal Reserve
which, as we have seen, add to the public’s money
supply and to bank reserve balances. Thus, high
fixed government security prices heighten infla­
tionary pressures— especially at times when infla­
tion is most strong.

• Bank loans increased
with the increase for the
half of 1950. Loans for
tries figured importantly

at a steady rate in 1951,
year less than for the last
defense-supporting indus­
in causes of the increase.

higher yields on short-term securities in 1951.
Banks, which no longer gained ample reserve
balances as was the case when the Federal Reserve
purchased large amounts of governm ent securities,
found it advisable to borrow from the Reserve
banks in order to adjust their reserve positions.
Th is development can have a restraining effect on
bank loan expansion because banks are reluctant
to expand loans when they have outstanding bills

Reversal of Open Market
Policy Was Necessary Step

It is significant that inflationary pressures in
the economy declined beginning in the second
quarter of 1951 coincident with the unpegging of
governm ent security prices. Doubtless this action
contributed to the abatement of previously strong
inflationary forces at that time.
It h as been demonstrated, I think, that monetary
policy can be effective in the arsenal of weapons
for defense against inflation. T o be sure, other
measures to fight inflation are important. Taxation,
price and w age controls, and selective credit con­
trols can be helpful if they are wisely conceived
and administered, but the burden placed on them
is unnecessarily great if the monetary factor in a
period of intense inflationary pressures is allowed
to contribute to further inflation.
M onetary policy can contribute mightily to the
maintenance of strength and stability in our econ­
om y— and can do so without com promising the
freedoms we cherish.

These somewhat technical observations, and
others that might have been made, can be reduced
to one; namely, that the reversal of open m arket
policy as it affected government securities was a
necessary step toward a free market—one in which
prices more nearly reflect supply and demand
forces. In a free market for government securities,
dissatisfaction over prevailing rates relative to re­
turns on alternative investments leads to selling
of governm ent securities, whereupon their market
yields rise and they again become more attractive
It is in the prosperity phase of the business cycle
when the demand for credit is great that the
volume of governm ent securities offered for sale




Advances in Check Collection and Coin
Facilities Highlighted Bank’s Year
N E picture, it has been said, is worth onethousand words. One statistic can be equally
m eaningful.


Business figures, for example, can tell a story of
prosperity or depression, inflation or recession.
Banking statistics also are eloquent story tellers,
because they reflect the business conditions of the
communities which the banks serve.

• R ecord 81.6 m illio n ch eck s were pro­
cessed , for an 18 per cen t increase.
• Sp ecial u n it h a n d led 5 m illio n o f
n e w b a n k a b le postal m o n ey orders.
• N ew coin vault p rom o ted efficiency
in o p era tio n o f th e coin d e p a r tm e n t.
• O u tg o in g cu rren cy s h ip m e n ts in ­
creased 10 per c e n t, coin 19 per c e n t.
• R e d is c o u n tin g o p er a tio n s, for years
a b o u t d o r m a n t, revived sig n ifica n tly .

Since the Federal Reserve Bank of Minneapolis
is a clearinghouse for many of the banking trans­
actions in the N inth Federal Reserve district,
figures indicating the F ed ’s work volume often
reflect the general level of district business activity.

are larger and more frequent. If business is poor,
the F ed ’s work load should decline.

If business is good, the number and dollar volume
of checks, bills, and coins handled by the Reserve
bank should be high, because money payments

What do the figures show for 1951 ? T he over-all
picture, as shown by the volume figures for Reserve
bank operations, is one of business at a record level.
In number and dollar value, checks flowing
through the F ed ’s collection department during
the year lar outdistanced those of any previous
12-month period. W hen the totals were added at
year-end, it was found that the Federal Reserve
Bank of Minneapolis and its Helena (M ontana)
branch had handled in 1951 a record-smashing 81.6
million checks and other cash items with a face
value of S25.9 billion. T h is exceeded the 1950 total
of 69.3 million items by 18 per cent and compares
with a 1949 figure of 65.2 million.
T he increased work load in the F ed ’s check col­
lection department led to several changes at the
Minneapolis head office during the year, including
expansion and complete rearrangement of the de-

• Pictured at the left is one of 10 specially designed
machines used for listing the new bankable post
office money orders. Note how operator reads the
faces of the checks as they drop into lighted slot.


# Dubbed the "penthouse" because it was built
atop the bank's five-level vault, the new coin vault
is lined with 60 tons of 1-inch steel and has a capac­
ity of 100 tons, or $2 ,0 0 0 ,0 0 0 worth of small coin.
A labor-saving feature is an electric fork lift which
hoists skids of coins as high as 11 feet into the steel
bins. At left, an operator is engaged in w rapping
coins—which totaled over 58 ,0 0 0 ,0 0 0 in 1951—and
at right is one of three sorting machines which ran
through more than 110 million pieces during the year.

partm ent’s w orking space— with a reorganization
of the work flow for greater efficiency, increased
use of machines for check handling, and enlarge­
ment of the departmental staff.
For the first time, a late night shift from io:^o
p.m. to 6:30 a.m. was inaugurated.

F o r the first time, also, check sorting and proving
was made almost entirely a mechanized operation
—going from 100 per cent m anual to about 90
per cent processing by IB M proof machines. W ith
these increased in number from 20 to 80, the M in­
neapolis Fed came to have the largest installation
of its kind in the Upper M idwest.
Not all of the 1951 increase in check volume was
due to expanding business activity, however. More
than five million of the new, bankable postal
money orders were processed by the Fed in the
last six months of the year. T h e new money orders,
which were placed in use July 1, are of the punchcard type, and it was necessary to install a battery
of proof machines with specially designed cardpunching attachments to handle them.


Part of the increased volume was the result, too,
of changed check-handling procedure by com m er­
cial banks. Nevertheless, a good share of the F e d ’s
increased work must be attributed to higher prices
and a continuing high level of business activity.
T h is conclusion would seem to be supported by
bank debits figures which for 134 cities in the
district were up an average of 10 per cent from 1950.

Currency and Coin Totals
Exceeded 1950 Volume
T h e Reserve bank’s currency department also
experienced a grow th in w ork volume in 19 5 1 . A s
the public called on commercial banks for more
cash with which to do business, shipments of cur­
rency to member banks from the head office and
branch rose to $446 million, 10 per cent above the
1950 figure.
Coin, which was so much in demand in late 1951
that it looked for a time as if the Fed might have
trouble in fully supplying member bank needs,
showed an even greater rise in dollar volume of
outgoing shipments. T h e 1951 figure of $15.4 m il­

lion topped the previous year’s figure by 19 per
cent. Fortunately, in M arch a new coin vault and
added mechanical facilities for handling coin were
placed in operation at the head office.
T h e dollar amount of coin wrapped during the
year was also higher than in 1950. T h e increase
in dollar value was 26 per cent.
T h e rise in volume of w ork so far as incom ing
cash was concerned was not as great. Incom ing
currency counted and sorted totaled 71.2 million
pieces, r per cent above 1950’s total. T h eir dollar
value of I475 million was up a little less than 3
per cent.
In the course of the year, the sorters also removed
2(S million pieces of unfit currency worth $ 112
million from the stream of paper money, while
$158 million in new bills were placed in circulation
by the head office and branch.
Incom ing coin sorted and counted also increased,
but again the rise was not as much as that of out­
going coin.
Note circulation of the Federal Reserve Bank

• In the interests of greater efficiency, extensive
changes were recently completed in the Check Col­
lection departm ent. W orking arrangements were re­
vamped to establish a better flow of the work and
operations were almost entirely mechanized. The
view above shows part of the administration section,
which extends back in the first bay, and some of
the proof machines (increased from 20 to 80 in
the extensive mechanization) in the second bay.

• Shown on the opposite page is the M ail d ep art­
ment, where cash letters from direct-sending member
banks in and out of the Ninth district are broken
down into immediate and deferred groups of city
and country items. These go to the incoming
proof division. Board on w all is placard of simplified
alphabetical unit sort by states. Note slots for con­
solidated mail at rear. (M ore views on pages 14-15.)

of M inneapolis increased $21.3 million during 1951.
T h e total of notes in circulation on December 31
stood at $632 million, down $4 million from the
year’s high on December 24 and short of the 1948
all-time record by only $6.4 million.

Advances to Member Banks
During 1951 Up Sharply
Transfers of funds also showed a sharp rise.
Total dollar volum e of transfers for 1951 reached
a record-breaking $14.3 billion, one-fifth again as
much as 1950’s record figure. Noncash collections

were also up. G rain drafts, which m ake up more
than two-thirds of such collections, rose 10 per
cent in number and 21 per cent in dollar amount.
One of 19 51’s largest and most interesting gains
percentagewise was in the number and dollar'
volume of advances to member banks secured by
United States government obligations. Fo u r hun­
dred and twenty such loans were m ade in 1951
compared with 332 in 1950, and the aggregate
dollar amount of $1.7 billion was up 90 per cent.
O f course the amount outstanding at any one
time was not nearly so great. T h e high point was
$56,010,000 on June 28.
Even more noteworthy, perhaps, was the fact
that for the first time in years three advances were
made to member banks on collateral other than
governments, even though the total amount in­
volved was only $300,000. Evidently some banks
had reached a point where they no longer had
government securities available to use as loan col­
Volum e of securities owned by com mercial banks
and held in custody by the F ed was also up 4
per cent. T h e year-end total was $1.4 billion.
T he only 1951 volume figures which showed
significant decreases were those involving w ork of
the fiscal agency department. Savings bond sales
in the district (not including post office sales)
dropped an impressive 48 per cent in dollar volume
and 8 per cent in number. Redem ptions of savings


bonds were also down 12 per cent in number and
14 per cent in dollar volume from 1950’s figures.
Total sales in the district amounted to $134.6
million compared with redemptions of $214.7
lion. These figures are not strictly comparable,
however, since the sales figure does not include
post office sales.
A lso down were purchases and sales of govern­
ment securities cleared through the Fed for the
account of N in th district banks. These showed a
year-to-year decline in dollar amount of 24 per

Staff Goes Over 700;
Flodin ?
Zelle New on Board

died September 26, and W . D . Cochran, who
passed away December 5. F . A . Flodin, president
of the L ak e Shore Engineering Co., Iron M oun­
tain, M ichigan, was appointed to fill M r. Cochran’s
unexpired term, and E dgar F . Zelle, chairman of
the board of the First N ational Bank of M inne­
apolis, was elected to fill the vacancy left by the
death of M r. Quay.
A t the regular Novem ber election of directors,
C. W . Burges, vice president and cashier of the
Security National Bank, Edgeley, N orth D akota,
and R ay C. Lange, president of the Chippew a C an ­
ning Co., Chippew a Falls, W isconsin, were re­
elected to three-year terms beginning January 1,

T h e increase of work at the Fed made necessary
an expansion in the bank’s staff, as could be ex­
pected. F or the second consecutive year the num ­
ber of employees on December 31 at head office
and branch was larger than on that date the
previous year. T here were 714 on the staff at the
end of 1951 compared with 673 in 1950 and 1949^
postwar low of 633.

Roger B. Shepard, St. Paul, Minnesota, was re­
designated chairman of the board and Federal
Reserve agent for 1952, and Paul E . M iller, di­
rector of the University of M innesota's agricul­
tural extension division, St. Paul, was reappointed

Effective January 1, 1951, all Federal Reserve
employees were blanketed under the provisions of
the federal Social Security program.

• This view of Check Collection shows the battery
of Recordak machines at the rear of the third bay
where items are microfilmed after the letters have
been proved and sorted into units. In the foreground
are adding machines used at various times during
the day for certain manual listing operations. ^

T h e bank was saddened during the year by the
death of two of its directors, A rthur H . Quay, who


• Located in the fourth and fifth bays is the out­
going proof division. Along the sides are racks used
for assembling the proved checks by banks. After
the items are recapped by banks as to amount, the
work flow takes the cash letters to the consolidated
mail section for enclosure to the respective banks.

to a three-year term as director and named deputy
chairman for 1952.
T he H elena branch received a new director with
the appointment of A. W . Heidel, vice president
of the Powder River County Bank, Broadus, M on­
tana, to a two-year term beginning January 1, 1952.
G . R. M ilburn, manager of the N -Bar Ranch, Grass
Range, Montana, was reappointed for a similar
two-year term and was made 1952 chairman of the
branch board.

tural organizations. N e w in 1951 was a two-day
Montana Forum sponsored by the Helena branch
and attended by more than 100 bankers in that
Also a part of the Fed's program of education
was promotion oi its movie, T h e Federal R eserve
Ban/( and You, produced in 1950. By year's end,
1951, well over a quarter-m illion persons, not in­
cluding television audiences, had seen this film.
More than 7,000 copies of the b an k’s picture book­
let also were distributed during the year, mostly
to schools. A new 11-fram e currency exhibit, com ­
pleted in M ay, was in constant display use by
Ninth district member banks during the rest of
the year.

Educational Features
Continued During Year

In addition to the reorganization and expansion
of the check collection department and the addi­
tion of new coin vault facilities, an improvement
made at head office saw installation of an entirely
new fluorescent lighting system in the bank lobby.

T h e Federal Reserve Bank of M inneapolis dur­
ing 1951 continued its program of conferences,
short course classes, forums, clinics, and other
meetings designed to further its educational ob­
jectives. It also participated in the educational
programs of other banking, business, and agricul­

For the year ahead, the Federal Reserve Bank
of Minneapolis pledges its efforts to promote the
welfare of banking, business, agriculture, and the
general public in the N inth district in perform ing
its service functions and in carrying out the mone­
tary policy of the Federal Reserve System.






Your F O L D I N G M O N E Y
Besides Keeping Currency in Circulation Fit, the Reserve
Banks Can Convert Acceptable Bank Assets into Currency

I f Y O U found yourself on a radio or television
qu iz program , how would you fare if the emcee
asked you, “ H o w much money is in circulation
in this country to d ay?” W ould you “ strike it rich” ?

currency is made up of Federal Reserve notes?”

Suppose the quiz-master wanted to kn o w :
“ W hat denominations of bills are favored by coun­
terfeiters?” W ould you “ break the bank” ?

More than likely those who work in the curren­
cy departments of Federal Reserve banks would
come up with a greater number of right answers
in this sort of quiz. H ow ever, if all of us could
take a look at how the currency department oper­
ates, even “ the big payoff” might come our way.

If the emcee asked, “ W hat is the average life of
a one-dollar b ill? ” , would you “ double your
m oney” ?

Federal Reserve Notes
Give Currency Elasticity

M aybe you’d find some of these questions easy,
but would you be a loser or a winner on this 64dollar stum per: “ W hat percentage of the nation’s

Issuance of currency is a function that Federal
Reserve banks were charged with perform ing by
the original act of Congress which created the


Federal Reserve System. T h e preamble wordage
. . to furnish an elastic currency, to afford means
of rediscounting commercial paper . . .” gets to
the heart of the matter.
By far the most important kind of currency is
the Federal Reserve note. M ore than $24 billion
of the record $29.4 billion of currency and coin in
circulation in late December 1951 was this kind
of money. Tw enty-four billion dollars is a lot of
cash. If it were all in dollar bills, for instance, it
would m ake almost 29,000 stacks as high as the
W ashington monument.
Since Federal Reserve notes, however, are printed
in denominations of from $5 to $10,000 and many

of the bills are in the large denominations, the
actual notes in circulation would m ake a consider­
ably smaller pile.
Federal Reserve notes are important not only
because they make up such a large part of our
total cash supply, but also because they are the
only type of United States currency which is elastic;
that is, currency which can autom atically expand
or contract in supply according to the needs of
the nation’s economy. A s stated before, such an
elastic currency was one of the chief objectives of
the Federal Reserve Act of 1913.
Th e importance of this elastic quality in Federal
Reserve note issue can be appreciated when one
realizes that the needs of business and individuals
for currency vary widely from season to season and
from year to year.
From the seasonal standpoint, currency is par­
ticularly needed at harvest time and during the
pre-Christmas buying period. It is least needed,
ordinarily, in January and February. In 1951 there
was a typical holiday expansion in the nation’s
currency and coin circulation in the four weeks
ending December 26. In this period, currency and
coin in use rose $660 million to set an all-time
record. In the two weeks follow ing Christm as there
was a sharp drop in currency and coin circulation
amounting to $600 million by January 9, 1952.

• Currency sorters at the Minneapolis Fed counted
and sorted more than 70 million bills during 1951.
On the facing page are pictured half of the d ep art­
ment's 16 units, where sorters detected 126 counter­
feits while also removing 28 million pieces of unfit
currency from the stream of paper money in 1951.
• Internal audits are
A t right, two auditors
for a rapid check of
post-holiday influx. In
bills is being trundled

regularly made of currency.
are shown using tickometers
bills which were pari- of the
the circle a bin of counted
into the bank's lower vault.


Seasonal Demands Met ,
Money Panics Averted
Before the Federal Reserve System was estab­
lished, whenever depositors asked for more cash
than usual from the commercial banks the smaller
banks would draw on their accounts with big city
banks, know n as correspondents. Because the city
banks had no way of enlarging their own supply
of currency as needed, the cash situation often
became very tight at those times of the year when
many small banks were asking for extra cash at
the same time.
T h e result was a sharp rise in interest rates,
particularly during the crop-moving season, at
which time the demand for money exceeded the
available supply.
A t times— when there existed a widespread fear
that property values might fall —- there would
develop an abnormal, more than a seasonal, de­
mand for cash. A t the beginning of a movement
ot this type, a few people would sell property to
gain cash. Thereupon, others seeing the decline in
prices and fearing further weakening of prices
would offer property for sale. Lenders would in­
sist on repayment of loans. In short, everyone
would want cash at the same time.
T here was 110 method, however, by which more
cash could be injected into the economy to supply
the demand. Panic would ensue as individuals
and business firms competed for the limited supply
of coins and currency in existence. A t such times
there was alw ays the danger that some banks might
be forced to suspend currency payments. Should
a number of banks fail, panic conditions would
be intensified.
T h e rigidity in the currency supply which
brought about or intensified such situations was
due to the fact that all of the various types of cur­
rency existing prior to 1914 were limited as to total
issue— either by the value of specific government
securities, of which there was a relatively small
amount, or by the value of the country’s gold
and silver.
T h e Federal Reserve note was designed to satisfy
seasonal demands for currency and to prevent re­
currences of money panics which, strangely enough,
had occurred at fairly regular intervals.


• Here you see registered mail receipts of incoming
currency shipments from member banks being
opened and verified by package count in a cage
by a currency teller. Messengers from the local
banks bring in deposits of their surplus currency.

Gold Certificates and U. S.
Securities Back Notes
O riginally it was provided that Federal Reserve
notes should be backed by a 40 per cent gold re­
serve and by a 100 per cent collateral of so-called
“ eligible paper,” which consisted of certain short­
term customers’ notes and acceptances discounted
by commercial banks with the particular Federal
Reserve bank which issued the Federal Reserve
notes. (Discounting, as bankers know, is a pro­
cedure by which banks’ paper arising from loans
may be converted into cash or reserves at the F ed ­
eral Reserve banks.) In 19 17 the 100 per cent re­
quirement on eligible paper was reduced to 60
per cent.
By providing a currency based 011 this particular
type of commercial bank asset, the framers of the
Federal Reserve act believed that the supply of
cash would automatically increase during the
periods when it was most needed and automatically
decrease when the need was past. T h is belief
proved to be substantially correct during the early
years of the Federal Reserve System, but in the
period follow ing the crash of 1929 the country
had a rude awakening.
W hile ordinarily the demand for currency is
greatest at times of heavy borrowing from com m er­

cial banks, the situation in the early 1930’s was just
the reverse. In the face of a long and severe price
decline, the public began hoarding currency as
the safest and most profitable possession they could
hold. T h e demand for currency increased by leaps
and bounds at the very time that the supply of
commercial paper was declining.
In such circumstances, the Federal Reserve note
lost its cyclical elasticity—the property of expan­
sibility and contractibility in connection with the
long-term waves in business activity. Th ey were
tied to requirements concerning collateral, the
supply of which contracted at times when the
demand for currency was extremely heavy.
T h e Glass-Steagall Act of 1932, which tem­
porarily allowed government securities as well as
eligible paper to be used as backing for Federal
Reserve notes, was designed to remedy this situa­
tion. In 1945 this authority was made permanent,
and the required gold reserve (now consisting ol
gold certificates) was reduced from 40 per cent to
25 per cent. In recent years government securities
have almost entirely replaced eligible paper as
backing for Federal Reserve notes.

Fed’s Total IXote Circulation
Increased $21 Million in ’51
On December 31, 1951, the Federal Reserve Bank
of Minneapolis had $647 million of its notes out­
standing. T h e year’s high of notes in actual cir­
culation— in the hands of the public and in banks
—totaled $636,138,000 on December 24, close to
the record $638,351,000 in circulation December
12, 1948.
Collateral held against the $647 million notes
outstanding December 31 consisted of $150 million
in gold certificates and $505 million in government
securities. These securities were part of those pur­
chased by the Federal Reserve System in the open
Incidentally, note circulation rather than the re­
serve accounts of member banks, as some persons
believe, is the largest single liability of the Reserve
banks. Total note circulation of the M inneapolis
Reserve bank increased about $21 million during
1951, which was in line with the general increase
in the use of currency and coin.
It is difficult to imagine how the United States

could have managed during W orld W ar II w ith­
out the use of the expandable Federal Reserve
note. Currency and coin in circulation showed an
almost four-fold increase from 1939 to 1946, and
most of this expansion was in Federal Reserve
Today, when a member bank needs more cur­
rency it simply draws on its reserve account at
the Federal Reserve bank, k n ow in g that if this
account falls below the legal m inim um required
it can be replenished by the member ban k’s bor­
rowing from the Reserve bank against a pledge of
any sound assets.
When the need for cash slacks off and currency
returns to a member bank, it will ordinarily send
such currency to its Reserve bank for credit to the
member’s reserve account or for repayment of
borrowing. T he actual bills may then be retired
from circulation and replaced with new paper
money when there is again a call for additional
N o Reserve bank can (without penalty) pay out
the notes issued by any other Reserve bank. Such
notes, if fit for further use, must be returned di­
rectly to the bank of issue. Unfit notes are also
sorted as to the issuing bank but are returned
direct to the Treasury department for redemption.
Since there are 12 Federal Reserve banks issuing
notes, this requirement means many additional
sorts for Federal Reserve currency handlers.
In 1951 the M inneapolis bank and its H elena
branch shipped to other Reserve banks approxi­
mately $50 million dollars worth of fit notes which
had gravitated to the N in th Federal Reserve dis­
trict from other parts of the nation.
It may be said that the Federal Reserve note has
endowed all forms of the nation’s currency with
elasticity, since all kinds of paper money are freely
exchangeable and the public is hardly conscious
of the fact that there are different kinds in use.

Some Civil War Greenbacks
Still in Circulation
Silver certificates, second in importance in the
major types of currency, rank far behind Federal
Reserve notes in circulation with a total of a little
more than $2.3 billion in late 19 51. T h e backing
for these bills is the metal from which they get


their name. F o r each dollar issued in silver cer­
tificates there is deposited with the U. S. Treasury
371.25 grains of pure silver.
United States notes, with a maxim um author­
ized issue of approxim ately $347 million, are backed
by a gold reserve of $156 million. T h is is nominally
a redemption fund, although, of course, it covers
only 45 per cent of the total value of the outstand­
ing notes— and none of our currency has been re­
deemable in gold domestically since 1934.
From a historical standpoint, it is interesting to
note that these notes are a remnant of the C ivil
W ar “ greenbacks.” T h eir total circulation remains
virtually static, since the notes which wear out are
constantly being replaced.
W e have come a long way in our currency sys­
tem since 1863, when there were more than 7,000
kinds of bank notes in use—of which 1,700 were
issues of the spurious wildcat banks. In such
monetary chaos, business must of necessity have
been carried on in a most leisurely manner. T h is
situation was further complicated by the existence
of m ore than 3,000 kinds of counterfeit notes.

Secret Service Keeps
Close Tab on Counterfeits
T h e counterfeiting problem is not one of his­
torical interest only, however. T h e detection of
spurious money is still one of the important jobs
of Federal Reserve currency sorters. Counterfeits
are usually recognized from their appearance, al­
though the feel of the paper is occasionally the
giveaw ay.

terfeit money, purporting to have a value of $1,4 71.
T h e banks which sent them in for deposit suffered
the loss— unless they were able to determine from
whom the bogus bills were received.
Alm ost all of these counterfeits were tens and
twenties, the denominations favored by counter­
feiters. Since very large denomination bills are
seldom counterfeited, a person can feel reasonably
confident of the authenticity of any $10,000 bill he
finds in his pocket.

Millions of Pieces Sorted
and Counted During Year
Servicing the nation’s currency is a big job and,
as is already evident, the Reserve banks deal in
big figures so far as currency is concerned. Every
safeguard must be thrown around these large
amounts of cash, not only while they are in the
Federal Reserve bank but also during shipment
to and from member banks.
Incom ing money shipments to the Federal R e­
serve Bank of M inneapolis arrive by registered
mail and are picked up at the M inneapolis post
office by the bank’s representatives in armored
trucks. A t the bank a receiving teller verifies the
amount of each incom ing shipment by package
count. T h e packages of currency are then turned
over to the currency sorters, who not only classify
it as to kind, fitness, and genuineness, but also

Detection of spurious currency has become an in­
creasingly difficult job in the last few years— this
because of the greater number of counterfeits in
circulation and because of the improved quality of
w orkm anship they reveal.
W hen “ funny m oney” is discovered by a Federal
Reserve bank currency sorter, it is immediately
turned over to the United States Secret Service,
which has the responsibility of suppressing at­
tempts by private enterprisers to interfere with
Uncle S am ’s “ m onopoly” in the field of currency
In 1951, currency sorters at the Federal Reserve
B ank of M inneapolis picked up 126 pieces of coun­


• Unfit bills are cancelled by punching four holes
in them in a pattern which identifies them as having
been cancelled by the Minneapolis Reserve bank.

machine-eount the bills in each package to verity
its correctness. T h e electrically operated counting
machines are so sensitive to the thickness of paper
that if two bills are accidentally fed into one ol
them at the same time, the machine will jam.
Most persons don't care about the pedigree ol a
five-dollar bill so long as Mr. Lincoln's portrait is
genuine and it is in their possession. Currency
sorters, however, must be able to recognize instant­
ly each of the different types of United States cur­
rency in general use.
The most obvious distinguishing Icaturc ol the
various types is the color ol the serial number and
seal. On Federal Reserve notes this color is green,
on silver certificates it is blue, and United States
notes are red.
In addition to these major kinds ol currency,
there are still in circulation a limited amount ol
special bills issued tor emergency use during World
W ar II, a tew national bank notes issued prior to
1(^5, and a hodge-podge ol miscellaneous issues
which intrigue currency collectors.
T he war emergency currency consists ol notes
bearing the label “ National Currency, Series ol
i()2() \ with brown seals and serial numbers; silver
certificates having gold-colored seals instead ol the
usual blue (the so-called North African invasion
currency); and notes of the San Francisco Federal
Reserve bank on which the word “ H aw aii” has
been overprinted on face and back and having
brown seals and serial numbers.
As indicated previously, each of these types ol
currency has different backing, although all, of
course, are obligations of the United States gov­

Federal Reserve Supplies
Member Banks with Currency
One of the jobs of each Federal Reserve bank
is to see that every piece of currency it receives is
examined so that those which are soiled, limp,
torn, and plain “ beat" can be retired from public
use and replaced with new.
Last year the Federal Reserve Bank of M inne­
apolis and its Helena (M ontana) branch removed
from the money stream some 2< million pieces ol
old paper money having an approximate value ol
$ 112 million. N or was this an all-time high.

• Before being sent to the Treasury for burning,
the bills are "guillotined" into halves by this blade,
and the halves are then sent in two separate
shipments to Washington for complete destruction.

How do the Federal Reserve banks happen lo
have acquired the job ol keeping our dollar bills
crisp and clean.' W ell, F'ederal Reserve banks are
“ bankers' banks." Any commercial bank which is
a member ol the Federal Reserve System must
keep lunds on deposit with the Reserve bank ol
its district. These deposits are known as reserves,
or reserve accounts.
When a member bank has more currency on
hand than it needs or than is safe to carry in its
own vaults, the currency is shipped to the Federal
Reserve bank for deposit to the member bank's
reserve account.
In the Reserve bank, currency sorters carefully
inspect each incoming bill. Last year, sorters in the
Federal Reserve Hank of M inneapolis and its
Helena branch examined and passed judgm ent on
7 1 million pieces of currency, worth $475 million.
A great many of these bills, of course, even
though no longer new are still in good enough
condition for another “ tour of duty.” M any ol
them, however, are deemed unfit for further use
and marked for destruction. Some of them, in
fact, have been so badly damaged by fire, water,
decay, or other destructive forces that they cannot
be identified. In such cases, the remnants or ashes










Earnings from:
Discounted Hills ................................................................
United States Government Securities
Industrial Advances ..........................................................
All Other ............................................................................

T otal



Net Operating Expenses....................................................
Assessments for Expenses of Board of Governors
Federal Reserve Currency:
Original Cost ..................................................................
Cost of Redemption ......................................................




8 ,441,067



8 ,536,884

2 ,850,014


2 ,359,069




2 ,602,427

Current Earnings ........................................................................................$ 9,326,854
Additions to Current N et Earnings:
Profit on Sales of U. S. Government Securities
All Other ............................................................................................


5 ,934,457

T otal
Deductions from Current Net Earnings:
Loss on Sales of U. S. Governm ent Securities
Reserve for Registered Mail Losses........................................
All Other ............................................................................................



T otal ........................................................................................$






1, 101,178


7 ,035,635

T otal C urrent E xpenses ............................................$ 3,138,045

Net Deductions to Current Net Earnings



N et Earnings .................................................................................................. $ 9,259,657
Dividends Paid .........................................................................................
Paid to U. S. Treasury (Interest on Federal
Reserve N otes) ..........................................................................
Paid to U. S. Treasury (Section 1 3 b )............................................
Transferred to Reserves tor C ontin gen cies................................
Transferred to Surplus (Section 1 3 b ) ..........................................
Transferred to Surplus (Section 7 ) .................................................

1, 113,176
1, 113,292


6 ,067,408


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 Y ea r....................................................
B alance at C lose of Y ear




$ 13, 168,052

S u r p l u s A c c o u n t ( S e c t i o n 13b)
Balance at Close of Previous Y ear................................................. .....$ 1,072,621
Transferred to Surplus (Section 13b)
B alance at C lose of Y ear

$ 1,072,621







Dec. 11, 1951

Dec. 31, 1950

$ 325,261,086

$ 366,114,49S
2 1,466,655

$ 350,279,252

$ 387,581,153

(><>1(1 ( 'ertilicates
Redemption Fund lor F. R. Notes
T ot a l G old C e r t i f i c a t e

R eserve

Other Cash ..............................................................................


Hills Discounted .............................................................


Industrial Advances

LJ. S. Government Securities:
Ronds .................................................................................
Notes .................................................................................
Certificates ot Indebtedness.......................................
Hills .....................................................................................
T otal


$ 641,194,000

$ 749,486,731

$ 641,379,301


S ecirities

$ 749,353,000



S. G o v e r n m e n t



Due trom Foreign Hanks
F. R. Notes ol Other F. R. Hanks
Uncollected Items
Bank Premises
Other Assets
T ota l A ssets



Federal Reserve Notes in Actual Circulation

$ 632,028,690

$ 610,642,820



$ 490,145,107

$ 441,570,922

$ 1,191,782,872


I )eposits:
Member Hank— Reserve Accounts
U. S. Treasurer—General Account
Foreign ..............................................................................
Other Deposits
T ota l D eposits

Deterred Availability Items
Other Liabilities
T otal L ia b il it ie s

Capital Paid In
Surplus (Section 7)
Surplus (Section 13b)
Other Capital Accounts


L iabilities, C



T otal Hills and S ecu riti es














Chairman of the Board and Federal Reserve Agent

B, S h e p a r d
Paul, Minnesota

R oger
S t.

D eputy Chairman

Pai l E. M i l l e r
Director, University oi Minnesota Agricultural Extension Division
St. Paul, Minnesota
C . W . B ur ge s

F. A . F lodin

Vice President and Cashier
Security National Bank
Edgeley, North Dakota
H o m e r P. C l a r k
Honorary Chairman, West Publishing Co.
St. Paul, Minnesota

President, Lake Shore Engineering Company
Iron Mountain, Michigan
R a y C. L a n g e
President, Chippewa Canning Company
Chippewa Falls, Wisconsin

W illiam

H arold N . T homson

A. D enecke

Livestock Rancher
Bozeman, Montana

Vice President, Farmers and Merchants Bank
Presho, South Dakota

F. X e l l e
Chairman, First National Bank
Minneapolis, Mi nnesota

E dgar

First Vice President

J ohn N . P e y t o n ,
A lbert


M ills,

B A N k I N (; D E PA HI > 1 E NT

A. B e r g l u n d , Assistant
Assigned to Helena Branch

H ar ol d

H ar ol d C . C o r e ,


Vice President in Charge of

K y l e K . F ossum,

M aurice

C lement

Vice President

A rthur W . Johnson,

Assistant Cashier

Assigned to Helena Branch

Check Collection
A r t h u r R. L a r s o n , Assistant Vice President
Noncash Collections
Currency and Coin
Securities Safekeeping
M i l f o r d E. L y s e n , Operating Research Officer
W i l l i a m E. P e t e r s o n , Assistant Cashier
O i ls R. P r e s t o n , Vice President
Public Services

M a r c u s O. S a t h e r ,

O rthen


Assistant Cashier

Vice President

Assistant Vice President

N ice,

O hnstad,

A uditor

H arold O. M c C o n n e l l ,

Vice President

E a r l B. L a r s o n ,

Vice President

Government Securities

C hristian

R ies,

Assistant Cashier

( rovernment Securities

S igurd

U e l a n d , Vice President, Counsel,
and Secretary

Assistant Cashier

Discount and Credit
Credit Regulations

V an

Assistant Cashier

C larence W . C roth,

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

Public Services

General and Internal Operations

G eor ge M.


Discount and Credit
Credit Regulations

J. M a r v i n P e t e r s o n ,
F ranklin

Director of Research

L. P arsons,


Associate Director of


R. M i l b u r n
Livestock Rancher
Grass Range, Montana
E. C o r e t t e , J r .
Vice President, Montana Power Company
Butte, Montana

J ohn

T he od o re J acobs

President, First National Bank
Missoula, Montana

A. W . H eidel

Vice President, Powder River County Bank
Broadus, Montana

D . M acH a efie

Helena, Montana

C larence W . G roth,

Vice President

H arold A .

B erglund,

Assistant Cashier

J o s e p h F. R i n g l a n d
President and Chairman, Northwestern National Bank
Minneapolis, Minnesota


V. W ood
President, Minneapolis Electric Steel Castings Co.
Minneapolis, Minnesota
S heldon

J ohn M . B ush

The Cleveland-ClifiFs Iron Company
Negaunee, Michigan
A . H . D aggett

President, Gould-National Batteries, Inc.
St. Paul, Minnesota

L. M i l l e r
President, Miller Broom Company
La Crosse, Wisconsin

A lbert

M. R i n g e r
President, Foley Manufacturing Co.
Minneapolis, Minnesota

W alter

C o n tin u e d

fro m



of the bills are forwarded to the Treasury depart­
ment for determination, if possible, of their value.

Fed Cancels Unfit Bills;
Destroyed by Treasury
Currency determined to be unfit for circulation
by our sorters is counted and packaged as carefully
as the good currency. Instead, however, of being
re-circulated or placed in the vault for later use,
four rectangular holes are punched in each package
of bills by a specially designed machine. Shape and
position of these holes identifies the bills as having
been cancelled by the Federal Reserve B ank of
M inneapolis.
T h e next step is to slice the package of bills
lengthwise. T h e bottom halves are then packaged
and shipped to the currency redemption division
of the Treasury department.
Identical packages of the top halves are retained
at the Reserve bank until notification arrives from
W ashington that the bottom halves have been re­
ceived and verified, whereupon the top halves
also are shipped.
F in al step in destruction of unfit bills is burning
them in an oven whose temperature reaches 2,100
degrees. In an average year the Treasury burns
more than $8 billion in old currency, or about seven
tons daily. N inety per cent of this money is in $1
Visitors are sometimes dismayed to see the de­
struction of paper money, but it is as necessary
to the operation of the country’s currency system
as the printing and engraving of new bills. Even
the best quality paper w ill wear out. T h e average
dollar bill has a useful life of only six to nine
months. O f course larger denominations, more
sparingly used, last longer.


Nearly Half-Billion in Bills
Shipped to Member Banks
T o replace the currency consigned to the fu r­
naces, each Federal Reserve bank maintains a stock
of brand-new bills of all denominations. Last year
the M inneapolis Fed and its branch placed in cir­
culation nearly $158 million in crisp, new paper
Currency fit for further use goes into temporary
storage in the Federal Reserve bank’s six-level vault,
where it is protected by an intricate system of locks
and two huge steel doors w eighing nearly 40 tons
each. T h e entire bank is guarded day and night
by members of its 30-man protection force.
W hen currency orders are received from m em ­
ber banks, the Fed fills them by taking both new
and used bills from the vault. O utgoing shipments
to member banks during 1951 totaled approximate­
ly $440 million. These shipments receive the same
precautionary handling as do the incom ing.
T h e next time you handle a $10 or $20 bill,
take a good look at it. T h e chances are that it is
one of the many thousands of Federal Reserve
notes which make up roughly five-sixths of our
currency and coin supply and which give it its
T h e chances are, too, that your bill w ill be in
reasonably good condition. If not, it’s because it
hasn’t visited a Federal Reserve bank recently.
T h e odds are in your favor that the bill is genuine,
too. If it isn’t, you can be sure that it has never
seen the inside of a Federal Reserve bank.
From all this you can understand that the F ed ­
eral Reserve Bank of M inneapolis and its Helena
branch, together with the other Federal Reserve
banks and their branches, have a big responsibility.
T h e wheels of industry and commerce in the na­
tion would come to a stop without “ folding
m oney.” W henever and wherever it is needed,
the Federal Reserve’s job is to see that currency is
available— and if your credit is good, it always is.