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foreword It IS OUR privilege to submit another A nnual Report of the Federal Reserve Bank of M inneapolis to its stockholders. Each report seems more challenging than its predecessors. Perhaps this is true because our economy is becoming bigger and more complex as the years go by, imposing on the Federal Reserve banks a greater volume of w ork and obligating the System all the more to do all it can to maintain economic stability. T h e statement of condition of the bank at the close of the year and its earnings and expenses for the year reveal the scope of its operations. These statements, however, need the supplementation given them in the Operations R eport— which emphasizes the discounting function that last year assumed a greater importance than at any time during the past two decades. Continuing the series of feature articles initiated six years ago, the report this year contains a story on the H elena Branch and its territory. This serves to emphasize “ regionality” in the structure of the Federal Reserve System and gives a picture of an important part of the N inth district. Thus the report is drafted with the objective to promote a better understanding of the services of the Federal Reserve Bank of Minneapolis. Zke Board of Directors , ■ ° f tk e \ * L Melem Branch THE FIV E M O N T A N A N S w h o comprised the Branch board during 1952 are pictured on this page, along w ith the n e w members (at left) w h o began tw o-year terms Ja n u a ry 1, 1953. A b o v e , clockw ise, the directors are E. D. M a c H A F F IE , Helena; A . W . HEIDEL, vice president, Po w d e r R iver County bank, Broadus; G. R. M IL B U R N , livestock rancher, Grass R ange, chairm an; T H E O D O R E JA C O B S , president, First N atio n al bank, M isso u la; and JO H N E. CO RETTE, president, M ontana P o w e r co m p an y, Butte, chairm an for 1953. W ith retirement of directors M acH a ffie and Ja c o b s, n e w faces on the board are J. W IL L A R D JO H N S O N , financial vice president, W estern Life Insurance com p an y, H elena; and G E O R G E N. LUND, vice president, First N atio nal bank, Reserve. feature Subject _______________________________________ Situated in the 'Treasure State’ of Montana T h e H e l e n a Br a n c h , Serves a Vast Rich Territory CHANGE AND GROWTH MARK HISTORY OF F. R. B. OFFICE AND ITS DOMAIN T H E S E T T I N G which Montana provides for the Helena Branch, far western office of the Federal Reserve Bank of Minneapolis, is as expansive as it is unique. Spacious and grandly scenic, rich in natural resources, and backgrounded in the tradi tion of the old west, the “ Treasure State” is a place where one can still see how the nation grew, al though change and grow th continue to m ake the frontiers recede. T h e story of the Branch—its his tory and operations — necessarily seems prosaic alongside the romantic account its bailiwick provides. G ive imagination play and you can almost hear the w ar cries of the Sioux, rattle along in the stage that ran between V irginia City and Helena, watch the m iners’ pokes of gold dust and nuggets spill out onto the assayers’ scales, join a posse pursuing bank bandits, or see the steamers bring ing civilization up the Missouri river from St. Louis to the head of navigation at Fort Benton. M ontana has become, since these things grew remote, a ranking producer of wheat and prime beef, of copper, zinc, silver, lead, manganese, oil, and lumber, though prim itive regions remain. In sections apart from valleys and plains marked with buildings, fences, and power lines, the visitor finds FLATHEAD VALLEY A N D THE M IS S IO N RANGE ^ towering mountain peaks and virgin forests, buttes and canyons, Indian caves and the Badlands— “ H ell Cooled O ff,” where as one wise-cracking air traveler put it, “ in most places a jack rabbit would have to carry his lunch to get across it.” Visitors Enjoy State's D iversity M ontana is a fascinating variety of things as history and the contemporary scene mingle. T o the history-minded it is Robbers’ Roost, early-day ren dezvous of road agents; the gold dredge just ceased operations— last of a long line of gold- Klk Basin in 1915— and expanding refineries; the cattle auctions in a dozen localities; and mighty monarchs of the forest 011 their way to lumber mills. Montana also is the rich grain farm er who died leaving an estate of reputedly $3 m illion; the Black Angus cattle on a $0,000-acre ranch in F er gus county; the dozen hydroelectric plants of Montana Power com pany— with one steam plant m aking a baker's dozen; and the $75 million tourist industry which has a wealth ol leatures to oiler in Glacier park and other attractions. H A R V E S T IN G W HEAT, STATE'S "G O L D E N " CROP seekers in the Helena area; the abandoned sodroof cabins of frustrated homesteaders; and the old west of the roaring Sixties as revived by the museum at V irginia C ity—gold m ining camp at A lder gulch that produced f>ioo million in gold. It can be the site of Custer’s Last Stand in the battle of the Little B ig H o rn ; Charles Russell paintings in a Great Falls studio; the ghost town that was once a silver cam p; the Chinese whose forebears were brought in to build the railroads; and the state capital of Helena, which once boasted more millionaires per capita than any other spot. T o the student of geology, again, Montana offers the Lew is and C lark cavern, with its weirdly formed and beautifully colored rock form ations; the warm well water that heats a hotel at Boulder; Grasshopper glacier, where alternate layers of bil lions of the insects from another age lie frozen in ice in the mountains of southern M ontana; G iant spring, largest fresh water spring in the world, flowing -$8 S million gallons of water every < 24 hours; and Cavity range near Lew istow n— telling with its crystal and ice caves, H e ll’s Forty Acres, catacombs, Travertine mountain, and ex tinct geyser cones the strange story of the ages. Industrially and commercially it is also the ore refineries at Anaconda and Great F alls; the 70 dude ranches that offer resort comfort or rough ing it in the wilderness; the famous wild-hay region of the Big H ole basin; the million bags of sugar processed annually by a big Billings plant; the shipments of Christm as trees that mean a cool million to “ tree farm ers;” and the bountiful water power, hardly a fifth harnessed. A Vacation W onderland T o the vacationer, again, M ontana is the 12 na tional and seven state forests (with two million acres of primitive area), embracing more than a fifth of the state; the awe-inspiring views of rugged peaks forming the Continental D ivide; the jew el like lakes with their tree-lined shores; the peace and solitude of cool woodland retreats; and sports with a backdrop of unsurpassed beauty— whether IN T O THE CORRAL . . . THEN MARKET B O U N D T o the businessman or economist, M ontana is the copper camp of the “ richest: hill on earth” at Butte (city called “ a mile high and a mile deep” ) which has yielded $2 billion in m inerals; $100 million Fort Peck dam, largest earth-hll struc ture in the w orld; wheat farms averaging more than 1,600 acres; gushing oil w ells—dating from m 2* / V — ~I * ^ trail riding into the hack country, a ski run at 1 0,000 feet, angling for gam ey trout in a sparkling stream, or stalking deer, elk, moose, and hear. Tourists find Montana is the inevitable silver dollar received in change; Blackfeet Indians in ceremonial dress; the sculptured rock ot Montana canyon; the w orld’s largest smoke stack, 5S5 feet high, of Anaconda smelter; the six units of the state university — at M issoula, Butte, Bozeman, Billings, H avre, and D illon ; die breathtaking beauty of Flathead lake with its 188 square miles: and, of course, H elen a’s main street, which was Last Chance gulch, a gold rush locality that yielded many millions in gold. A s varied as M ontana’s topography and assets is its citizenry. One finds copper miner, cowboy, lum berjack, cattleman, dry-land farmer, sheepherder, dude rancher, oilman, Indian, sportsman, and many other distinct types. Behind them is the tradition of fur trader, Indian wars, trail herds, cattle baron, gold camps, copper king, road agent, rustler, and vigilante. It's Two States, V irtu a lly T h ird largest state in the union with its 147,148 square miles, M ontana remains a place of wide open spaces between towns where even Paul Bunyan could do setting up exercises without upset ting things. W ithin the territory live 591,024 people (1950 census), or an average of four persons per square mile. Only two states, neighboring W y- O IL R E F IN IN G IS PART OF BILLINGS SCENE d LATEST V IE W O F "THE RICHEST HILL O N EARTH" om ing and Nevada, have less population density. H owever, since the end of W orld W ar II, when the state’s population was at a low level due to loss of residents to the armed forces and war industry in other states, M ontana’s population has climbed ^2.5 per cent— advancing from 446,000. As it was expressed by E . A . D ye, editor of the H elena Independent Record, "‘M ontana is virtually two states,” for the Rockies, a chain from 100 to 200 miles wide, in effect divide it into two geographical and economic areas. W estern Montana, com prising roughly one-third of the state, is mountainous, heavily forested, with vast mineral resources and fertile valleys. Its in dustries are based upon its lumber, m ineral, and agricultural resources. T h e tourist trade also fig ures importantly. Butte, second-largest city (33,251— 1950 census) and m ining locality, is in this area, as is Missoula, fourth largest (22,485), an educational center. In the region’s valleys there is extensive diversified farm ing, much of it irrigated. L arg e lumber mills are located at Bonner, Colum bia Falls, Kalispell, and Libby. T o the east of the Continental D ivide lies the greater portion of the state— part of the Great Plains region. Described as a huge plateau, its elevation drops gradually eastward toward the Dakotas. H ere are the great wheat farm s and ex tensive cattle and sheep operations. H ere, too, are to be found large lignite and sub-bituminous coal beds, oil and natural gas fields. y*. T h is region has the leading wholesale and retail trade centers of Great Falls (largest city, with 39,124 population) and Billings, third largest (31,834). T h e state’s heaviest concentration of oil refining is at Billings. In the area, too, are Miles City, “ capital of the cow cou ntry;” Bozem an, G a l latin valley gatew ay to Y ellow stone; H avre and Livingston, division points of Great N orthern and N orthern Pacific railways respectively. Rail Link Com pleted in '83 Since the late A . M . Holter, leading M ontana citizen in pioneer days, sawed the first piece of timber in the territory (population 18,000 in 1868) M ontana has come a long way. said to be physically impossible through the mountains— and in skeptics and critics said, there come for. Once it had been to build railroads the second place, was nothing to H ow ever, by September 3, 1883, the last spike was driven at G old Creek, and the Treasure State — which was admitted to the union in 1889— went 011 to take the important place regionally and na tionally that it enjoys today. A ccording to a pioneer citizen, the state has progressed more rapidly in farm ing and stock rais ing than in m ining— and so its basic income con tinues to change. Even so, its important place in the N in th district’s productiveness is due in a • H e re you see the Accounting d e p a rtm e n t, which also contains W ire Transfers a n d G o v e rn m en t D e posits. The view is from the north end to w a rd the cages a n d the v a u lt d oo r. (D o o r shown is of the book v a u lt.) S ta n d in g is Lee Pow ell, d e p a rtm e n t h e a d , a t the desk o f John H e a th . S e a te d a t f a r le ft is Joe M ille r, o n ly m em ber o f the o rig in a l Branch staff. • The a ttra c tiv e lo b b y a p p e a rs v irtu a lly the same as w hen the b uildin g w as o p e n e d in 1 9 2 8 , excep t fo r the new fluorescent ligh t fixtures. N o te p illb o x a t u p p er le ft from which v a n ta g e point the g u a rd on d u ty can survey the entire gro un d flo o r a re a . large measure, the record books show, to its valu able m ineral deposits and its forests. T h e emergence of farm ing has been evident in wheat grow in g. In 1915, wheat acreage was the largest the states in the N inth district had experi enced, but Montana was to see its production rise phenomenally from about 10 million bushels to 51 million by 1940 and 98 million bushels in 19 51. H arder, heavier, and of finer m illing quality than any other Am erican wheat, this dry-land grain commands a premium market. M ontana’s livestock industry was still on a small scale in the Sixties, but it was given a powerful impetus when great herds of cattle were driven 6 up the Texas trail during the Seventies and E igh t ies onto the plains, where they fattened on the thick, red buffalo grass. Sheep, a source of stability but become less important, came to the grazing lands in 1867 when a small flock of ^00 head were driven in from Oregon. Sheep products have meant more than $1 billion in income since. M on tana’s annual livestock revenue is now more than $200 million. W orth noting is the change in marketing that has gradually taken place. W ith development oi a dozen cattle auction points in the state, producers have become more independent ol distant mar kets, where formerly they had to accept prices being quoted at those points, with no alternative. • The 27-to n va u lt d o o r is seeing its second period of service in its second location, fo r with erection of the present building it was moved from the first site. The vault has an em ergency d oo r (not shown). fornia and Idaho the state’s real mineral wealth was discovered to lie in grosser metals. 1 he bold outcrops characteristic of the most distinctive veins of the Butte district attracted the miners’ attention after the period of placer mining. "The quest centered chiefly in the search for silver, and Butte became the greatest producer of that metal. Gold Find Opened the Territory M ining in M ontana has been a fabulous indus try since the discovery of gold on G old creek near Garrison in 1852 by Francois Finlay, a breed trapper. T he rich strikes which came principally at A lder gulch in the southern section and in Last Chance gulch opened the territory to wide settle ment— and also opened it to an influx of des peradoes that for a time spelled lawlessness and terror. Montana gravel beds and quartz lodes were to give up many fortunes in gold, but in the years after prospectors emigrated from diggings in Cali- N orm an B. Holter, son of the man who in 1867 founded M ontana’s oldest store — Holter H ard ware in H elena— at 85 recalls his father telling of a visit with M arcus D aly, founder of Anaconda Copper M ining company. A sked how things were going, D aly replied that he was discouraged. M in ing was turning to copper. It was the Anaconda Silver M ining company at that time, and it was understandable that the development should be considered calamitous. Copper nearly lost its place to zinc in 1951, when the value of the former was $27,784,000 and the latter $27,623,000. H ow ever, prelim inary Bureau of Mines estimates for 1952 show copper produc tion valued at $30,773,520—compared to $27,005,220 for zinc. The state holds fourth place nationally. 7 Zinc Gives State Another 'First' Zinc, however, should be spelled in capital let ters for 1952, because this mineral gave Montana its second first in national minerals production alongside the vital steel-making ingredient, man ganese— of which the state produced qt per cent of domestic ores. T h e Treasure State reached the top with Hi,834 short tons, with Idaho second at 70,911 short tons (prelim inary Bureau estimates). M ontana also ranks high in silver, lead, and gold output. Silver, now produced almost entirely as a by-product of zinc and copper m ining, in 1952 placed third. The state was fifth in lead. Other than coal and petroleum, other minerals of importance are phosphate rock, vermiculite, and chromite. In the fall of 1951 a new electric furnace plant of Victor Chemical W orks at Silver Bow began production of elemental phosphorous. This product, shipped in liquid form to processing plants in Illinois and California, is used in food stuffs, detergents, and pharmaceuticals. Phosphor ous also has military uses. Verm iculite has been produced for many years northeast of Libby, where it is found in high-grade deposits. Verm iculite, when expanded by heating, is used as an insulating material, in manufacture of wallboard, etc. O f all minerals, none is so widespread in M on tana nor found in such tremendous quantities as coal. A U. S. geological survey estimate placed reserves at over 200 billion short tons. A new process announced for use of lignite and other low-grade non-coking coals in the generation of electric power and production of coal tar products is a development holding great promise for the state. O il Is in the Ascendancy " The H e le n a branch was established for the purpose of pro vid ing better a n d quicker serv ice to banks in M o n t a n a . During the years our objective has b een continuously to improve that service. W e sincerely hope th a t M o n t a n a bankers will a lw a ys f ee l fre e to contribute sug gestions t o w a r d realizing that objective more fully —as w e also hope tha t they will alw a ys know themselves to be w elcom e a t our office." Even before oil discoveries in the W illiston basin underscored petroleum’s importance to Montana, it had been advancing to the point where it chal lenged copper and zinc for rank as leading m in eral. T he state has been producing oil for nearly four decades, with the Cut Bank field in north western Montana the chief source. Central M on tana already had several fields, and the northern rims of two other important basins— the B ig H orn and the Powder R iver—extend into the state. W hen the tenth field in the Montana portion of the W illiston basin was discovered in December, the state’s importance as an oil producing area was further emphasized. T ow n s spotlighted by the new activity include Glendive, Richey, Sidney, Terry, W ibaux, W o lf Point, and Poplar, location of the largest field. M ontana’s crude oil production in 1952, with December estimated from the pipe line run, 8 * Located a t the south end of the lo b b y is the Personnel d e p a rtm e n t a n d the desk of H a ro ld A . B erglund, assistant cashier. C o n fe rrin g with him is Steve Surm an, 3 0 -y e a r e m p lo y e e . Also in this a re a , besides the Personnel d e p a rtm e n t, can be fou nd the sw itch bo ard , sten og rap hic unit, an d central files. amounted to 9,539,678 barrels, according to the state conservation board. T h e 39 producible wells in the Montana portion of the basin yielded 689,998 barrels of crude in 1952. As for lum bering, the nearly 21 million acres of forests represent one of the state’s greatest assets. V irtually all of its timber volume is in softwoods, with white pine the most valuable. Total standing timber at the latest count available (1949) approx imated 55 billion board feet, and only ponderosa pine, largest single source of lumber, is not being replaced as fast as cut. T h e state leads, incidentally, in m arketing of Christm as trees, supplying one-seventh. N ew est industry in the way of wood products—which range from pulpwood logs and mine timbers to shingles and wallboard— has come with building of a match plant near Superior. From this relatively brief review of M ontana’s attractions and wealth-producing factors, it can be seen that it is a state of contrasts as well as change and grow th. Traverse its challenging ter rain by anything from plane to horseback and they become apparent even before its citizens draw a word picture of their state for you. Hotter Cam paigns for Branch Let's turn now— with the setting established— to the “ life history” of the H elena Branch before listening to what Montanans have to say about their state’s economy and its future. As has been indicated, no state in the district was to experience such a change in the pattern of its economy as M ontana. From 1910 to 1920 the “ land of the shining m ountains" had shifted from ranching to large-scale wheat farm ing. Then, with the railroad network completed, good crops, and the war as factors, a boom was the natural result. T h e impact 011 Montana was especially important. Establishment of the Branch in 1921 grew out of this situation. N orm an B. Holter, who had been a member of the first head office directorate, had learned that 18 new branches had been author ized by the Federal Reserve Board, including one in Salt Lake City but none in Montana. In M inneapolis at the time, H olter immediately began a campaign to establish a branch at Helena, broaching the matter to his fellow directors. “ The main argument was that if we were going to have any branches,” he recalled recently, “ H elena was farther away from a Federal Reserve bank than any other important financial center in the coun try.” At first it appeared his efforts would be rew ard ed with an “ agency” only, but a formal presenta tion of M ontana’s needs was later made to the M inneapolis board by Sam Stephenson, the late president of the Pirst National Bank of Great Falls, and T . A . M arlow , the late Helena capitalist. Charles j. K elly, the late chairman of the Metals Bank and Trust company of Butte, also visited the M inneapolis office and discussed the proposal. Associated banks of Helena had petitioned for the branch, and among the representations made were: that many government offices were centered in the capital city; that nine other districts had branch banks and only one or two districts were larger than or as large in area as the N in th ; and that Helena was virtually equidistant from prin cipal cities in which the larger banks were located — namely Butte, Great Falls, Missoula, Billings, and Bozeman. Several surveys determined that mail connec tions to Helena from other points would make for satisfactory service— and Helena (population 17,581) won a distinction in becoming the smallest city in the United States to be the site of a Federal Reserve bank or branch. A building at the corner of Park and Edw ards formerly occupied by an independent telephone company was obtained for $15,000, and a contract was let for remodeling and installation of a modern vault. Rem odeling, mostly of the second floor, came to $162,474.14, of which $66,580 went for vault and doors. As a sidelight, it is recalled that the building had been erected over old tunnels and sluice boxes used in the days when Helena was best known for its Last Chance gulch placer diggings. It be came necessary, consequently, to make some heavy concrete fills to insure against anyone gaining access to the vault from beneath, as well as to support its weight. It W as O nly M oney! O pening of the Branch on February 1, 1921, was accompanied by an incredible occurrence. T h is concerned the casual manner in which a dozen or more large mail sacks filled with two to three million dollars in new currency arrived at the bank from the Bureau of Printing and E n gravin g. 10 A post office driver, believing the sacks contained ordinary printed material, dumped them on the sidewalk outside the bank, then went in and noti fied one of the officers that a batch of supplies was outside. It developed that the currency shipment had • The views on these p ages a re o f the Check C o l lection a n d M a il d ep artm en ts. W a lt e r N achtsheim , d e p a rtm e n t h ea d , is seen a t his desk in the fo r e g ro un d in picture a t right, taken looking to w a rd the southeast corner. The IBM p ro o f machines a b o v e and b elo w a re a rra n g e d in rows a lo n g the w indow s a t the south a n d east sides. N o te second m achine in the picture b elo w with its back open as the o p e ra to r makes a correction. The rolls of tap es a re fo r the 2 4 "pockets" fo r checks in the m achine's "d ru m ." lain overnight at Logan on a truck, on a railroad platform — completely unguarded! T h e Branch opened with a staff of 36 employees and officers. One of this original group, Joe M iller of Governm ent Deposits, is still 011 the job. In cidentally, close to 150 years service is represented by him and four other long-time staffers. T h e four are Steve Surm an, B anking department, who is in his thirty-first year; M ary N eal of Personnel, in her thirtieth; Lee Powell of Accounting, in his twenty-eighth; and John Heath of the Banking department, in his twenty-fifth. Principal speaker at a luncheon on the occasion of the opening was Roy A . Y oung, then governor of the Minneapolis Reserve bank and later chair man of the Board of Governors, W ashington, be fore becoming head of the Boston Fed— and who is now chairman of the Merchants National Bank of Boston. H e promised cooperation of the parent bank and predicted “ a successful career for the Branch in every particular.” John Clay, president of the stock commission, C hicago; H olier and T . A. M arlow ; ernor, Joseph M. Dixon. Other speakers were Clay-Robinson L iv e H elena's N orm an B. and M ontana’s go v T he first expansion in w orking space came with establishment, during the first year, of the W ar Finance corporation, an agency of which was opened in Helena and the Branch made custodian. Additional personnel and crowded conditions prompted acquisition of an annex in January 1922 to accommodate 25 employees. H ow ever, as the volume of work was reduced with closing of more than half the banks in Montana, and as the W F C office was moved to Minneapolis, the annex was closed in 1925. The low point of member bank reserve balances at the Branch of $5,520,000 had occurred on D e cember 3 1, 1932, as a result of reduced deposits of the fewer member banks attributable to a lower volume of loans and depressive withdraw als of currency. O rganized early in 1932 was the Reconstruction Finance Corporation. A n agency was established under Branch management, but the R F C outgrew its space in about a year, m oving to other quarters. Later it was transferred to Minneapolis. T h e agen cy was returned with opening of the new build- ing in 193S, and the Branch was also custodian for the R F C ’s many affiliated corporations as they came into being. At the time the Branch opened, member bank reserve balances were $4,775,024.60, whereas loans to member banks were $7,664,7 ’7.S6, transferred from head office. The peak was reached on August 31, 1921, when loans totaled $13,601,252.44, approxi mately three times the amount or member bank reserve balances at that time. D uring the period from 1921 to 1933, the num ber of banks dropped steadily, but the majority of failures occurred prior to 1927. W ith closing of II for more than two years the Branch continued operations with the walls of its building cracked and propped up, inside and out. Helena, a study determined, continued to be the logical location for the Branch because of its train service, and with the quakes subsided to a large extent a building was erected in 193S on a new site just north of the post office at Park and Edw ards. T h e one-story structure, with approximately 14,000 square feet, cost $75,000 to build. T h is did not include m oving of the 2S-ton vault door from the old building at a cost of $2,500. Speakers at the opening on June 17, 19 ^ , in cluded Chester C. Davis, former Montanan and then a member of the Board of Governors, W ash ington; J. N . Peyton, then president of the M in neapolis Reserve bank; and ). E. O ’Connell, Helena bakery magnate, who was to serve 16 years 011 the head office directorate. N O R M A N B. HOLTER, one of M o n ta n a 's le a d in g citizens, is cred ited with starting the ca m p a ig n th a t g a v e his state a branch office in the F ederal Reserve System. A t 85 he is still active in the m a n a g e m en t of Holter H a rd w a re com pan y, H e le n a . Looking back on the years he says, "It's a w o n d e r ful thing to see a state g ro w from n o th in g /7 so many hanks the Branch had a great deal of rediscounted paper to liquidate. In the beginning this function was handled by the Branch, but it was soon assumed by the head office. Build? Earthquake Decides By iQ35 it became apparent that larger quarters were needed, but before a committee appointed to study the situation and determine whether to build could report, a series of severe earthquakes rocked Helena, badly dam aging the building. D uring the forenoon of October 31, 1935, one tremor collapsed a brick wall in the manager's oihce and caused other damage. T h e building suftered as severely as any in Helena. T h e need tor a new building was automatically decided, but 1 2 Second Story Added in 1946 Am erican entry into the war in 1941 brought a further increase in business, chiefly because ol fiscal agency work, and the decision was made to erect a second story. Costing $46,000, this was completed in February 1946. At a celebration on February 2^ observing the silver anniversary of the Branch, the principal speaker was D r. W alter C. Coffey, president em eri tus of the University of Minnesota and former M inneapolis F'ed board chairman. Also in attend ance was O liver S. Powell, P'RB first vice president who became president in July 1952. Facing east, the present building from its emi nence near Mt. Helena affords a fine view of the valley and the distant mountain ranges in which the capital city has its setting. T h e building is said to be not only one of the finest in the System but also one of the best from the standpoint of utiliza tion of space. Officers of the Branch today are Clarence W . Groth, vice president, and H arold A . Berglund, assistant cashier. “ D utch,” as he is known, on August i(S, 194S, had been made assistant vice president assigned to the Branch, and he was ad vanced to vice president on M ay 5, 1950. H e has been with the bank since M ay 14, 1923, when he entered on a part-time basis. “ Bergie” was desig nated assistant cashier assigned to the Branch on June 23, 1950. H e has been with the bank since A ugust 6, 1917. T h e board of directors at year-end 1952 was comprised of G . R . M ilburn, livestock rancher, Grass Range, chairm an; John E. Corette, presi dent, M ontana Power company, Butte; A . W . H eidel, vice president, Powder R iver County bank, Broadus; Theodore Jacobs, president, First National bank, M issoula; and E. D . M acHaffie, H elena. W ith directors Jacobs and M acHaffie complet ing their terms, they were succeeded January 1, 1953, by G eorge N . Lund, vice president, First National bank, Reserve; and J. W illard Johnson, vice president, W estern L ife Insurance company of Helena. O riginal directors of the Helena Branch were T . A . M arlow , president, National Bank of M on tana, Helena, chairm an; Charles J. K elly, chair man, Metals Bank & T ru st company, Butte; H . W . Row ley, president, N orthern Hotel company, B illin gs; R . O. K aufm an, vice president, Union Bank and T ru st company, H elena; and Lee M. Ford, president, Great Falls National bank, Great Falls. O riginal officers of the Branch were O. A . C arl son, m anager; R. E. T ow le, cashier; and L . W . Lon g, assistant Federal Reserve agent and auditor. • When an e a rth q u a k e rocked H e le n a in O c to b e r 1 9 3 6 , the first h o m e of t he Branch w as severely dam aged. O p e ra tio n s continued here, h o w ever, fo r m ore than tw o years, d uring which tim e the w alls w e re p ro p p ed up inside and out. The b uild in g now serves as a bus station. Carlson resigned February 1, 1922, and was suc ceeded by T ow le. T ow le, now state superintendent of Montana banks, joined the F e d ’s staff in 1914. H e was ap pointed manager of the Branch in 1922, m anag ing director in 1929, and vice president assigned to the Branch in 1948, the title he held at the time of his retirement on December 3 1, 1950. Volum e Figures Tell of G row th Operations figures for 1921 ( 1 1 months) when compared with those for 1952 bespeak the growth that has taken place during the Branch’s 32 years. Total resources, which had been $11,931,580.02 when the books were closed on December 31, 1921, were $78,801,061.15 at year-end 1952. Total items handled by the Transit department in 1921 came to 2,472,310, aggregating $291,233,000, while in 1952 total checks handled hit 12,507,353 (including 815,951 postal money orders) having an aggregate value of $3,000,936,000. W here 1921 saw 3,19 1 transfers of funds totaling $56,792,385.96, in 1952 there were 10,032 transfers aggregating $765,342,217.62. (Coin shipped and paid out during 1952, not including uncurrent coin, totaled 17,835,226 pieces with a value of $4,781,802. Currency shipped and paid out, not including cancelled notes or notes returned to other Federal Reserve banks totaled 4,299,817 pieces with a value of $48,393,234.) W ith the greatly increased volume figures one would also expect an increase in employees, but thanks to mechanization and the transfer of some operations to the head office, the total staff today is 55 compared to the 66 in 1921. Loans to member banks have been an unpre dictable item. D u rin g the 1 1 months of its first year the Branch had advanced funds to 149 of the 193 members either under bills payable or redis counts, the aggregate amount having been more than $57 m illion. T h is represented 16,822 indi vidual notes totaling $32,723,000 and 1,278 col lateral loans aggregating $25,162,000. Figures for ensuing years fluctuated greatly. T h e total dropped to $28 million in 1922, then to $7.5 m illion by 1924. Follo w in g the bank holiday in 1932, funds advanced rose to $18 m illion but then dropped rapidly. It was not until 1949 that advances reached earlier proportions— $26,395,000, all for the purpose of replenishing depleted re serves when requirements were increased. T h e year 1952 saw a substantial increase in ad vances as 91 collateral loans aggregating $65,275,000 were made to member banks. They Like Silver Dollars T h e circumstance which finds M ontana — where gold dust was once the medium of ex change— a “ silver dollar state” today accounts for heavy shipments of standards common at the Branch. In 1952 the total was 3,602,990, with only 73,191 received— m aking a net average weekly shipment of approxim ately $69,000. So silver-dollar conscious are M ontanans that if you hand them a paper dollar you may get change for a five. It happened three times to one visitor! T h e tradition, jealousy retained, is based on the state’s production of metals and the fact that M ontana was developed largely by m ining. Branch coin figures reflected an interesting rec reational change in 1950 when slot machines were declared illegal. Coins received jum ped from the customary three or four m illion annually to 9,135,724— “ slot machine money pure and simple.” T h e dollar amount was even more significant. W here for five years less than $300,000 had been received from banks, in 1950 the dollar total was $1,016,- 1 4 • A lounge a n d recreation room fo r m em bers of the staff has been p ro vid ed in the basem ent. Knotty pine w alls g ive the p la c e an inviting a p p e a ra n c e . 000. Obviously much of this had been in slots, and in tills for m aking change. D urin g the depression period, Branch staffers recall, money was flown out on more than one occasion to distressed member banks. Recalled, too, is how when the late President Roosevelt called in all the gold, the Branch had more than a million in coin, and from four to five m illion in gold-backed currency. T h e hoard made “ quite a sight” spread out on a table while being counted. Economy Has Been a t a Peak A t the time a branch was petitioned for, M on tana’s 13 1 national banks had total resources of $109,166,000 and deposits of $81,775,000 (D ecem ber 31, 19 18 ). There were 266 state banks, and deposits of all banks were $186,896,000. Deposits of the 38 national and 45 state m em bers in M ontana at the end of 1952 aggregated $558 million. T h is figure represents approximately 86 per cent of deposits of all 109 banks (on the basis of year-end 1951 figures). A s its bank deposits indicate, the Treasure State has been enjoying a thriving economy. Witness these 1951 income figures: farm crops accounted for nearly $235 million, livestock $215 million, m ining more than $100 million, lumber about $50 million, oil and gas more than $30 million, and the tourist industry $75 million. A n estimated $100 million was added to value of products by m anu facturing. Income payments to individuals, over $ i billion in 19 51, sounded another prosperity note. Per capita income payments averaged $1,752, eleventh highest in the U . S. (Income from farm m arketings in 1952— pre lim inary figures — show that drouth and lower prices have cut returns. W here in 1951 cash farm income was $448 m illion, the all-time high, in 1952 it was $385 m illion— 10 months actual. L iv e stock represented $200 m illion of this. T h e effect of these figures is to reduce the accepted 5 to 1 ratio between farm ing and m ining income.) Farm ing Is Basic Economy W hile handbooks may background you on what makes M ontana’s economy tick, look at the state through the eyes of representative bankers, busi nessmen, editors, and others in its key cities, and the neat statistics are translated into a prosperous present emerged from a pioneering past and prom ising a bright future. Those with a finger on the economic pulse are agreed on what comprises M ontana’s basic econ omy. “ W hile m ining, oil, and alum inum plants are spectacular and dram atic things,” said A lex W arden, publisher of the G reat Falls T ribune, “ we have to remember that basically agriculture and livestock raising are M ontana’s economy. T h e ratio is almost 5 to 1 to m ineral. T h at makes it the basic economy.” Rem arking that “ this state gets along all right as long as it is profitable to m arket farm crops,” the publisher of the state’s largest daily added that no factor is watched as closely as the weather. “ They say good weather is no good,” he smiled. “ It has to be wet and disagreeable to m ake a good production year in M ontana.” Recognizing M ontana’s prim ary role as a pro ducer of foodstuffs and raw materials, he looks at its future in this light: “ W e are a production state. Perhaps of all the states, we don’t live off each other. W e create new w ealth.” Grass Is W ealth Factor • The ta b u la tin g division is located in a sound p ro o fe d space on the second flo o r. H ere clearings a n d Treasury card a n d p a p e r checks a re processed. Another who recognizes that farm ing is the basic economy is Errol G alt, president of the First Continued on P a g e 2 6 Operations Keport_____________________________ Revival of Discounting Featured Bank’s Services in 1952 V CHECK COLLECTION CONTINUED TO SET RECORDS V YEAR-END STATEMENT SHOWS F. R. B. NOTE CIRCULATION AT PEAK y/ O. S. POWELL BECAME BANK’S CHIEF EXECUTIVE T H E D IS C O U N T window at the Federal R e serve Bank of Minneapolis was a busy place in 1952 as m ember banks were furnished more re serves through loans than in any other year in the past two decades. Officials of this bank with long memories w ill tell you, however, that less paper was handled last year than in the years of the early Thirties. T h is is true because borrowing in the earlier years was based largely on customers paper, whereas today Federal Reserve advances are based on notes of banks secured by government obligations. It is acknowledged, nevertheless, that important developments took place in discounting last year. T h e amount of reserves made available to m em ber banks by borrowing from this bank amounted to nearly half again as much last year as in 1951 — and was higher even than in any year since 1929. Specifically, average daily dollar volume was up 45 per cent from 1951. These larger borrowings, which were also ex perienced by other Federal Reserve banks, are backgrounded by significant trends. In the decade of the Tw enties, banks engaged actively in redis counting customers’ paper to provide reserves needed to support credit expansion. In the next decade, after 1933, rediscounting customers’ notes and other methods of borrowing at the Reserve banks nearly vanished because bank loans had dropped to a lower level and excess reserves were 1 6 more than amply provided by net gold imports. D urin g the years of W orld W ar II, when addi tional reserve balances were needed to support a deposit expansion caused by bank purchases of governm ent securities, such reserves were supplied by Federal Reserve open-market purchases. A fter the war, a great revival of demand for bank loans occurred, which caused shifts in the composition of bank assets. Governm ent security holdings de clined and loans climbed rapidly. T h e Federal Reserve System, through its support-purchases policy, had made possible for about five years large-scale selling of governm ent securities by banks without the market sinking to less than par. In the spring of 19 51, a significant change in Federal Reserve policy was made whereby prices of government securities were allowed to fluctuate more freely in response to m arket forces. Prices fell below par in an orderly decline— whereupon member banks began a trek to the discount w in dows of the Reserve banks in order to obtain the reserves needed to support higher deposit liabilities created by a continuing loan expansion. M ore Banks Accommodated in '5 2 It may seem strange to some that banks regard liabilities wrhich result from borrowing as dis tasteful while they welcome and seek to m axim ize liabilities which arise from deposits. Nevertheless this is true and it is partly for this reason that • N e a rly 100 m illion items w ere h an d le d by the Check Collection d e p a rtm e n t in 1 9 5 2 as the volum e o f operation s continued an increase which has been in progress since 1 9 4 2 . The w ork lo a d has increased in th a t tim e from 3 5 ,9 3 6 ,0 0 0 to 9 8 ,3 2 5 ,0 0 0 items. The u pp er curve shows d o lla r v a lu e of items p ro cessed as distinguished from the lo w e r curve, which reflects w ork lo a d . The steeper slope of the higher curve fo r much of the p eriod reflects to a la rg e exten t the in fla tio n a ry influence of rising prices. banks ordinarily resort to borrowing only for short periods, usually in order to erase reserve deficiencies resulting from temporary influences such as adverse clearings. It is traditional that banks shun borrowings more on statement dates than at other times. Th is ex plains why loans to member banks— the item “ bills discounted" on this bank's year-end state ment—amounts to only $500,000, or less than 4 per cent of the average amount outstanding for the year 1952. In 1952, 51 different member banks negotiated 584 loans aggregating more than $2 billion, where as in 1951, 44 banks negotiated 420 loans aggre gating almost $ 1% billion. Although these figures serve to illustrate the magnitude of the increased activity in the dis count department, they are not as m eaningful as are the figures which relate to the average daily volume of loans outstanding. L arg er borrowings by member banks in 1952 boosted the average daily volume figure from $io.S million in 1951 1 7 to $15.7 m illion last year, an increase of 45 per cent. T h e volum e of borrowings last year by m em ber banks located in other districts amounted to more than twice the 1951 amount. T h e rate of interest charged by the Federal Reserve banks on loans to member banks was raised to 2 per cent in January of 1953. A rate of 1.75 per cent had been in effect since mid-1950. Check Collection D epartm ent Records H igher Volume T h e discount department was only one of sev eral departments of the bank which experienced more activity in 1952. Breaking records has become a habit with our check collection department, which employs more people than any other de partment of the bank. T he number of items han dled by check collection has increased in every year since 1942. D urin g 1952, 16.7 million more items than in 1951 were processed by this depart ment— or 20 per cent more. T h e 100 million m ark was approached as 98.3 million items were func tioned. T h e 16.7 million additional items handled was composed of additional postal money orders, go v ernment checks, and other checks amounting to 5.8 m illion, 2.6 million, and 8.3 million respectively. M ore than twice as many postal money orders were processed in 1952 as in 1951. This is because Federal Reserve banks did not begin to pay money orders until after the first six months of 1951 had passed. W ith government expenditures rising it is not unusual to find the number and dollar value of governm ent checks deposited with us in 1952 up substantially from 19 51. T h e dollar amount of checks passing through this bank last year, other than those drawn by the U. S. government, did not increase as much, per centagewise, as the number of such checks did. T h is indicates that the average check was made out for a smaller amount last year than in 1951. T h e grow ing use of personal checks, which are usually made out for smaller amounts than busi ness checks, might explain this development. Also, declining prices, particularly in agriculture, might have played a part. T h e constantly grow ing level of activity in our check collection department does not surprise those who have observed the grow ing level of deposits in N inth district member banks. A s the chart on the opposite page shows, these deposits grew faster last year than they did in either of the pre ceding two years. People W an ted and Got M ore M oney Last Y ear W hile customers of district member banks eiv larged their deposit balances in 1952, they also re quested and received more currency and coin. T h e satisfaction of this demand left its mark on our annual statement, which shows a larger amount of Federal Reserve notes outstanding than ever before in history. These notes make up the bulk of our circulating currency. A s the public’s supply of folding money and coin grow s, so does the activity in our currency and coin department. Last year the people in this department of the bank received, counted, pack aged, shipped out, and retired more money than they had in the previous year. 1950 19 51 1952 • Loans to district m em ber banks by the Fed eral Reserve Bank of M in n eap o lis in 1 9 5 2 a v e ra g e d 4 5 p er cent h ig h e r than they had in the previous y e a r. 1 8 Pieces of currency counted totaled 72,488,428, with a value of $486,442,000, while coin counted totaled 109,274,295 pieces aggregating $9,946,000. W rapping increased 9.2 per cent as 63,951,230 coins were packaged. others noted earlier, reflected the decline in grain production and prices last year. T h e dollar value of non-cash collections other than grain drafts was up in 1952 by 6.4 per cent. These collections included such items as bond coupons, matured securities, notes, trade accept ances, et cetera. J F M A M J J A S O N D • Deposits increased fas te r last y e a r a t N inth dis trict m em ber banks than th e y did in eith e r o f the p recedin g tw o years. M uch o f the increase occurred a t city banks, which a re c on centrated in M inn eso ta. Th e records ol the department suggest that resi dents of other Federal Reserve districts did more traveling in our district last year than they had previously. Notes issued by other Federal Reserve banks are returned to the bank of issue when re ceived here. T h e dollar value of such returns in creased by iS per cent last year. Notes of this bank returned by other Federal Reserve banks to us amounted in 1952 to only 2.7 per cent more than in 1951. Transporting currency in a wallet is one way to accomplish the transfer of funds. But a safer, more efficient way is to employ the wire transfer facil ities of the Federal Reserve banks. T h e wire trans fer department of this bank effected 2.1 per cent more transfers last year than in 1951— 53,351, am ounting to $13,925,743,000. Some of the bond coupons collected by our non cash collections department are coupons which had formerly been attached to U. S. government securities held in our safekeeping department for the account of commercial bank owners located 111 the Ninth district. People in the safekeeping department detached and presented for collection more than 273,000 coupons in 1952. A t the end of 1952, securities worth $1,484 billion were held in safekeeping for their owners, an amount 8 per cent higher than the previous y e a r end total. Savings Bond Record Im proved in 1952 Government securities are the chief stock in trade of our fiscal agency department. Most district bankers need 110 introduction to the operations of this department, which range from the adm inis tration of Uncle Sam ’s deposit balances at the commercial banks to the issue, redemption, and exchange of Treasury securities. The dollar value of issues, redemptions, and ex changes of U. S. governm ent direct obligations accomplished by fiscal agency in 1952 amounted to $3,804 billion, or 13.9 per cent more than in 19 51. Low er grain production as well as lower prices for grain was reflected by the lessened tempo of activity in the non-cash collections department. These figures include the face value of savings bonds issued and redeemed during the year. It is interesting to note that the dollar value of savings bonds issued was up by 7.2 per cent between 1951 and 1952, while the dollar value of redemptions declined by 16.2 per cent. O nly 5.2 per cent fewer bonds were presented for redemption. These figures suggest that a lesser proportion of redem p tions is composed of high denomination bonds. G rain drafts account for almost 75 per cent of the non-cash items collected by this bank. C om pared to 1951 the number of such drafts collected was down 4 per cent, while their dollar value was down 9 per cent. T h is development, as well as T he grow ing popularity of the payroll savings plan for bond purchases together with more favor able terms for savings bonds announced last year probably accounts for the improved record of sav ings bond sales and redemptions last year. G ra in -D ra ft A ctivity Reflected Declines in Agriculture 1 9 Service Is Bank's Product A n explanation of the quickened pace at the M inneapolis Federal Reserve bank last year cannot be phrased in terms of any single reason. Instead, an adequate explanation would need to incorporate reference to developments much too numerous for individual treatment here. But it is fairly clear that as the wealth and popu lation of the N inth district grow, the demand for b anking services will also grow . Some evidence that grow th occurred last year can be found in the ledger books. For example, the record of debits to deposit balances at a sample group of district banks indi cates that customers of these banks made more payments last year than ever before. At the same time the record of deposit growth shows that more deposits were made, permitting balances larger than ever before in the face of larger payments. District bankers made more credit available to their customers. Although loan expansion at m em ber banks in the district proceeded at a consider ably less rapid clip in 1952 than in 1951, there was no evidence that deserving borrowers were not being accommodated. (See chart on opposite page.) On the contrary, statistics relating to member bank assets disclose that most of the funds made available to the banks by deposit growth were used to purchase securities rather than to make loans. C H A N G E S IN C O N SO L ID A T ED S T A T E M E N T FOR D ISTRIC T MEMBER BANKS (Millions of Dollars) 1952 Loans Investments Cash and Due Total Assets + 74 +184 +' 26 Deposits Other Liab. Capital + 269 + 4 -284 Total Liab. + 284 + 11 In expanding service to their customers, member banks required more assistance from their Federal Reserve bank. Assistance, for example, was pro vided in the form of check collection facilities to accommodate the larger number of items w ith draw n and deposited by district bank customers. It was also provided in the form of currency serv 20 ices which insured that retail trade would not be inconvenienced by inadequate currency and coin. It was further provided in the form of investment services such as the purchase of securities by us for the account of district banks and the safekeep ing of such securities. T h e extension of credit to member banks and the wire transfer of funds at their request are other examples of how, by rendering services to the commercial banks, the Fed makes it possible for them to render more effective service to their customers. O. S. Pow ell Becomes President From a personnel viewpoint the big change in 1952 was, of course, the return of O liver S. Powell from W ashington to assume the presidency of the bank upon the retirement on July 1 of John N . Peyton. M r. Peyton had been president of the bank for 16 years and had been with the bank since 1933, having served as chairman of the board from 1933 to 1936. M r. Pow ell, who joined the bank in 1920, had been first vice president from 1936 to 1950, when he accepted an appointment to the Board of G o v ernors of the Federal Reserve System in W ashing ton, D . C. H e resigned from the Board upon his election to the b an k’s top executive position. M embership of the bank’s directorate remained unchanged during the year. In Novem ber, Hom er P. C lark, honorary chairman of the West Publish ing Co., St. Paul, Minnesota, and E dgar F. Zelle, chairman of the First National Bank of M inne apolis, w?ere reelected to the board for three-year terms beginning January 1, 1953. Shortly before year's end Roger B. Shepard of St. Paul was re designated chairman of the board and Federal Reserve agent for 1953; Paul E. M iller, director of the University of M innesota’s agricultural exten sion division, St. Paul, was renamed as deputy chairman for 1953; and F* A- Flodin, president of the Lak e Shore Engineering Co., Iron M ountain, M ichigan, was reappointed to the board for a three-year term beginning January 1, 1953. Joseph F. Ringland, president of the N orth western National Bank of M inneapolis, was re appointed a member of the Federal Advisory Council for 1953. aiiH uassaiJ^ 1950 1951 1952 • A ltho ug h loans continued to increase in 1 952, they increased less ra p id ly than in 1 9 5 1. District m em ber banks last y e a r e n la rg e d their investment holdings, on b a la n c e , fo r the first time since 1 949. There were two new appointments and a re appointment to the Helena Branch board. T he new directors are George N . Lund, vice president of the First N ational Bank of Reserve, Montana, and J. W illard Johnson, financial vice president, Western L ife Insurance Co., Helena, Montana, both of whom will serve two-year terms beginning January i, 1 953. John E . Corette, president and general manager of the Montana Power Co. of Butte, Montana, was reappointed for a two-year term beginning January 1 and was named chair man of the Branch board for 1953. Three Changes in O fficial Staff In addition to M r. Peyton’s retirement there were three other changes in the official staff during the year. M ay 1 saw the retirement of W illiam E. Peterson, assistant cashier. In Novem ber, O. W . Ohnstad, auditor, was elected assistant vice presi dent and K yle K . Fossum, assistant cashier, was made auditor. Several other changes, reflected in the official staff roster as it appears elsewhere in this report, actually did not take place until after the end of the year. These included the appointment of John J. Gillette and M elvin B. H olm gren as assistant cashiers; the advancement of assistant cashiers A rthur W . Johnson and Christian Ries to assistant vice presidents; and the addition of “ vice presi dent” to the title of J. M arvin Peterson, director of research. T h e number of persons on the ban k’s staff dropped slightly from a total of 714 at the head office and branch on Decem ber 3 1, 19 51, to a total of 695 at year-end 1952. Som e of the decrease un doubtedly can be accounted for by the reduction in staff which resulted from the dropping of con sumer credit and real estate credit controls during the year. T h e number of employees is still some what above the postwar low as of December 3 1, which was set in 1949 when there were only 633 persons on the combined staffs. In the field of personnel administration the year witnessed the blanketing in of all employees under the Federal Reserve System ’s new group life in surance program and the turning over of direction of the bank’s cafeteria to an outside management. T w o state banks were accepted for membership in the Federal Reserve System during the year and one state member w ithdrew , m aking a total of 476 member banks in the district as of D ecem ber 31, 1952. T h e two new member banks are: P eo ples S tate B a n k , T hree L ak es, W i s c o n s in R a p id C it y T r u s t C o m p a n y , R a p id C it y , S o u t h D a k o t a Assembly Is Introduced Most notable change in the b an k’s educational program was discontinuance of the annual Federal Reserve Conference and the Federal Reserve Forum and their replacement with a new meeting called the Member B ank Directors and Officers Assembly. Th is meeting was held N ovem ber 24 and 25. Unlike the Conference, which was de signed for top bank executives only, and the Forum , which was set up for potential executives, the Assembly program was designed with bank directors in mind— and it developed that about one-third of the nearly 600 persons who attended were directors of member banks. T h e M ontana Forum , inaugurated in 1951, was repeated in 1952 at the H elena branch. A t the head office our W orkshop for college instructors of money and banking was repeated, another C on ference of Bank Exam iners was held, and nine more sessions of our Short Course in Central Concluded on P a ge 2 8 2 1 --------- Sawings and Expenses---------7952 1951 Earnings from: Discounted Bills ....................................................................... $ 286,795 U nited States Governm ent Securities ......................... 14,003,295 Industrial Advances ................................................................ 5,515 All Other .................................................................................... 5,233 T otal C urrent E arnings $14,300,838 Expenses: N et Operating Expenses .................................................. I 2,981,666 Assessment for Expenses of Board of Governors 105,000 Federal Reserve Currency: O riginal Cost 181,589 Cost of Redemption ......................................................... 23,301 T otal C urrent E xpenses .................................... $ 3,291,556 C urrent Earnings ............................. .. $11,009,282 Additions to C urrent Net Earnings: Profit on Sales of U. S. Governm ent Securities All O ther .................................................................................... T otal ..............................................................................S 62,431 62,510 79 Deductions from C urrent N et Earnings: Loss on Sales of U, S. G overnm ent Securities Reserve for Registered Mail Losses.................................. $ 14,267 All O ther ....................................................................................... 43,909 T otal ............................................................................. $ 58d76 Net Addition to or Deduction from Current Net Earnings ............................................................ $ 190,320 12,258,370 7,784 8,425 S12,464,899 $ 2,850,014 103,700 163,454 20,877 $ 3,138,045 $ 9,326,854 0 $........ $ 71 71 51,867 14,131 1,270 $ ’" 6^2 68 ............................................................................ 4,334 $ 11,013,616 Dividends Paid .......................................................................... 327,906 314,934 Paid to U. S. Treasury (Interest on Federal Reserve Notes) .......................................................... 9,617,021 8,050,167 1,068,689 894,556 Net Earnings Transferred to Surplus (Section 7) ................................... $ $ $ 67,197 9,259,657 Surplus Account (Section 7) Balance at Close of Previous Y e a r ....................................... Transferred from Profits of Year ....................................... B alance 22 at C lose of Y ear ............................... $ 14,062,608 1,068,689 $ 15, 131,297 $ 13, 168,052 894,556 $ 14,062,608 -----------Statement of Condition----------D ec. 31, 1952 ASSETS Gold Certificates ................................................................... $ 327,605,820 Redem ption F und for F. R. Notes .............................. 25,549,400 T otal G old C ertificate R eserve . . . . $ 353,155,220 O ther Cash ............................................................................... $ 5,878,973 Bills Discounted ................................................................... 500,000 Foreign Loans on Gold ..................................................... 767,000 Industrial Advances .............................................................. 134,883 U. S. G overnm ent Securities: Bonds ................................................................................. 143,939,000 Notes ................................................................................. 438,430,000 Certificates of Indebtedness ..................................... 159,018,000 Bills ..................................................................................... 23,013,000 T otal U. S. G overnment S ecurities . $ 764,400,000 T otal L oans and S ecurities .................. $ 765,801,883 D ue from Foreign Banks ................................................... 590 F. R. Notes of O ther F. R. B a n k s ................................ 10,297,600 Uncollected Items ................................................................... 103,136,047 Bank Premises .......................................................................... 1,051,410 O ther Assets .......................................................................... 4,978,416 T otal A ssets ................................................... $1,244,300,139 L IA B IL IT IE S Federal Reserve Notes in Actual C irculation ........... Deposits: M em ber Bank— Reserve Accounts ....................... U. S. T reasurer— General Account ..................... Foreign ............................................................................ O ther Deposits .............................................................. T otal D eposits .............................................. Deferred Availability Items .............................................. O ther Liabilities ..................................................................... T otal L iabilities ............................................ $ 325,261,086 25,018,166 $ 350,279,252 $ 7,055,811 0 0 133,731 169,655,000 160,891,000 403,955,000 14,852,000 $ 749,353,000 $ 749,486,731 705 7,727,500 96,788,956 1,082,816 4,035,864 $1,216,457,635 $ 650,889,010 $ 632,028,690 437,866,559 26,411,954 13,611,000 4,190,428 $ ”482,079^41 84,762,388 454,631 $1^218^185^970 464,389,342 8,308,750 13,012,500 4,434,515 $ 490,145,107 69,117,707 491,368 $1,191,782,872 C A P IT A L A C C O U N T S Capital Paid In ........................................................................ $ 5,719,300 Surplus (Section 7) .............................................................. 15,131,297 Surplus (Section 13b) ............................................................ 1,072,621 O ther Capital Accounts ..................................................... 4,190,951 T otal L iabilities , C apital A ccounts . $1,244,300,139 D ec. U , 1951 $ 5,362,650 14,062,608 1,072,621 4,176,884 $ 1,216,457,635 23 federal Kesern Bank ofM inneapolis DIRECTORS Chairman of the Board and Federal Reserve Agent R o ger B . S h e p a r d S t. Paul, Minnesota Deputy Chairman P a u l E. M il l e r Director, University of Minnesota Agricultural Extension Division St. Paul, Minnesota C. W. B u r g es 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 W il l ia m A. D e n e c k e Livestock Rancher, Bozeman, Montana F . A. F l o d in President, Lake Shore Engineering Co. Iron Mountain, Michigan R AY C. L a n g e President, Chippewa Canning Co. Chippewa Falls, Wisconsin H a r o ld N. T h o m so n Vice President, Farmers and Merchants Bank Presho, South Dakota E dgar F. Z e l l e Chairman, First National Bank, Minneapolis, Minnesota OFFICERS A O l iv e r S . P o w e l l , President W . M il l s , First Vice President lbert Audit Department Banking Department H arold C . C o r e , Vice President in Charge K y l e K . F o s s u m , Auditor of Personnel J o h n J. G il l e t t e , Assistant Cashier M e l v in B . H o l m g r e n , Assistant Cashier A r t h u r W . J o h n s o n , Assistant Vice President A r t h u r R . L a r s o n , Assistant Vice President M il f o r d E . L y s e n , Operating Research Officer O r t h e n W . O h n s t a d , Assistant Vice President O t is R . P r e s t o n , Vice President C h r is t ia n R ie s , Assistant Vice President G eo r g e M . R o c k w e l l , Assistant Cashier M a r c u s O . S a t h e r , Assistant Cashier M a u r ic e H . S t r o t h m a n , J r ., Vice President C l e m e n t V a n N ic e , Assistant Vice President 24 Bank Examination Department H a r o ld G . M c C o n n e l l , Vice President Fiscal Agency Department E a r l B . L a r s o n , Vice President Legal Counsel S ig u r d U e l a n d , Vice President, Counsel, and Secretary Research Department j. M a r v in P e t e r s o n , Vice President and Director of Research F r a n k l in L . P a r s o n s , Associate Director of Research Helena Branch DIRECTORS Chairman J o h n E. C o r e t t e President, Montana Power C o . Butte, Montana A. W. H eidi*l Vice President, Powder River County Bank Broadus, Montana G J. W G . R. M il b u r n il l a r d Jo h n s o n korge N. L und Vice President, First National Bank Reserve, Montana Livestock Rancher Grass Range, Montana Financial Vice President, Western Life Insurance Co. Helena, Montana OFFICERS C l a r e n c e W. G r o t h , Vice President H a r o ld A. B e r g l u n d , Assistant Cashier Member of federal „Advisory Council J o s e p h F. R in g l a n d President, Northwestern National Bank Minneapolis, Minnesota Industrial Advisory Committee Chairman S h e l d o n V. W ood President, Minneapolis Electric Steel Castings Co. Minneapolis, Minnesota J o h n M. B u s h A l b e r t L. M il l e r President, Miller Broom Co. La Crosse, Wisconsin The Cleveland-Cliffs Iron Co. Negaunee, Michigan A . H. D ag g et t President, Gould-National Batteries, Inc. St. Paul, Minnesota W alter M . R in g e r Chairman, Foley Manufacturing Co. Minneapolis, Minnesota 25 A s for sheep— 1,676,000 in number January 1, 1952, where they once were 6 million— he doesn’t see how the industry can survive. “ Costs of sheep ranching are entirely out of line.” R ealizin g the day of the commercial operation is done, he grants that “ returns can be pretty good for the fam ily type of operation, but where ranchers depend on hired help they are in trouble.” W ith sheep-herders not being replenished, the labor problem is known to be critical. Also, the First N ational’s chief re minds, “ sheep ranching is a business that requires a lot of close attention—24 hours a day.” PIC TUR ESQ UE ST. M A R Y LAKE IN GLACIER PARK THE HELENA BRANCH Continued from Page 15 N ational B an k of Great Falls. “ W et and disagree able” weather to him means there will be good grass. “ W hen you are talking about natural re sources,” he declared, “ grass is the best one we have. It is the base for an industry that brings more new wealth into our state each year than any other single enterprise.” A dd in g that grass is “ the main support of our livestock industry,” he observed, “ W e ’ll always be a big cattle produc ing state.” G reat Falls, he reminds you, is in the center of one of the finest wheat grow ing areas in the state, w ith its largest industries the two flour mills of M ontana F lo u r M ills and General Mills compa nies. A n aconda’s electrolytic smelter and its wire m ill are also important payrollwise. As a cattle auction point, Great Falls is the third largest. Drouth Is the Bugaboo M ontanans are “ always more concerned about drouth than economic conditions,” according to F red H einecke, president of the First N ational B an k of H elena. “ W e have more cattle now— 2,200,000 head January i, 1952—than we can take care of in a hard winter or a dry summer,” he explained. T h e trend is for increasing numbers, too, since “ low prices prevailing are retarding norm al m arketings.” 26 You pocket another vote for stock raising, how ever, after talking with E d Phillips, secretary of Montana Livestock Grow ers association. “ A large part of the state is fitted for nothing else but meat production,” is his appraisal. “ I defy any m an,” he said, “ to show where M ontana ever amounted to anything when livestock w asn’t being produced.” A s for the future, he says, “ I don’t think live stock w ill ever be replaced as M ontana’s depend able industry.” Copper Production to Increase A t Butte, where the economic outlook is heavily weighted by m ining, things are given a roseate hue by the “ Greater Butte Project,” which means high copper output for many years to come. T o E . P. Frizelle, vice president of Metals Bank and Trust company, the revolutionary “ block caving” method “ is the greatest development that has taken place in Butte in years.” Th e industry has been having its ups and downs because of labor shortage, he explained. Also, since market and price figure importantly, low cost production the $27 million project gives means happier days ahead. Anaconda Copper M ining company— net worth $732 million, 1951 profits $100 million, $50 million after taxes— looks to the Greater Butte Project to make more than 130 million tons of ore available from low-grade deposits previously uneconomical to mine. T h is is expected to augment normal Butte production by approximately 90 m illion pounds of copper annually and prolong the district’s oper ations “ by decades.” For example, 15,000 tons of low-grade ore a day will flow from the K elley shaft at Butte for many years. In the process of block caving, the hills surrounding Butte will be gradually dropped by underm ining until they become holes perhaps 2,000 feet deep. Frizelle observed that a policy of the company, said to own a fourth of the world's copper, is to develop one ton of ore for every one extracted, and that reserves are greater than ever before. Anaconda is also going into alum inum with its backing of a new plant to be started in the spring near Colum bia Falls. Estimated to cost $40 million, it will use alumina derived from Dutch Guiana bauxite. Commercial shapes will be manufactured in the form of ingots, wire bars, etc. W hile the folks at Butte are mainly mineral conscious, they can be cattle-minded, too. Ranking second as an auction market, Butte recently saw 7,600 head change hands at one sale. Montana cattle, prime grass-fed, go to So. St. Paul, Sioux City, Omaha, and California points for finishing. Mfssou/cr Region Is Diversified At M issoula, “ the hub of five main and pros perous valleys” in western Montana, “ there is an unusual diversity of industry and agriculture— with no one enterprise large enough to control the economy,” according to Theodore Jacobs, pres ident of its First National bank. H e lists agriculture, livestock, and lumbering as “ the mainstays well backed up by a large tourist business and numerous small m anufacturing plants.” Prem ium apples and cherries, sugar beets, and potatoes come in for mention, while m anufac turing includes butter, cheese, and dairy products — as well as sash and doors, canned fruits and vegetables, and dental instruments. T he lumber produced is from pine, fir, larch, and spruce. Missoula occupies a leading position educational ly. Jacobs describes the state university as having “ a profound effect on the cultural life of the sec tion” besides furnishing “ trained young people, particularly to business and secondary education.” Billings Takes on Boom Aspects At Billings, processor of beet sugar, oil, meat, and dairy products, W illiston basin oil is stimulat CATHEDRAL ROCKS IN THE G A L L A T IN CANYON ing a new prosperity. Reports are that the city has become headquarters for more than a hun dred oil companies, producing, drilling, or ex ploring. Chief factors in B illin gs’ grow th, however, are “ geographic location and clim ate,” according to O. M. Jorgenson, president of Security T ru st and Savings bank. Claim ing 50,000 population for Billings, he credits it with a distribution and trade radius of several hundred miles. “ W e ’re the hub ol the Midland Em pire,” was his chamber-of-commerce description. The city is served by three railroads, ranks as an important trucking terminal, and is a station on Northwest, W estern, and Frontier airlines. Jorgenson also pointed to its industry— three re fineries, which get all their crude from W yom in g fields as yet; Great W estern Sugar com pany, one of the largest beet sugar plants in the w orld; and Carter Oil company, which m anufactures greases, fine oil, and insecticides. Billings also is the largest livestock market—both commission and auction. A s for the dry-land farm ing, you are told that “ it has contributed much to the economy through winter wheat and alfalfa, although there is an excellent irrigated area in the Yellow stone valley. W e have never known a crop failure.” N oting finally that deposits have been running close to $70 million in the four banks, Jorgenson predicted, “ W ith plenty of room to grow , plenty of water, and plenty of power, it w o n ’t be long Concluded N e x t P age 27 before Billings w ill be 75,000 or more—maybe 111 five years.” 'Looks Like Nothing but Good' If M ontana has come a long way since the days when its pioneer merchants traded rifles with the Indians for the equivalent height of buffalo hides laid flat, all indications are that beyond the horizon lies even richer realization of the state’s potential. “ Population and industry are starting to grow together,” submits A . T . H ibbard, president of U nion Bank & Trust company of Helena, who thinks, too, that “ a national policy for decentrali zation is going to be a factor in industrialization development here.” T h e state’s cheap power, you hear, is proving of value in encouraging new in dustry. “ T h e great thing that is going to change the ACKNOW LEDGEM ENTS: Anaconda Copper Mining Co.; Greater U niversity of Montana ; American Pictorial Guide Series ; U. S. Departm ent of A griculture; Montana Power Co. ; U. S. Bureau of Mines ; State Board of Conservation, Great Falls ; Helena public library ; Montana state highway commission. PICTURE CREDITS: P. 3—Flathead Valley, Northern Pacific railroad ; P. 4— W heat field— Great Northern railroad ; cattle on range, Northern P acific; cattle loading, Great Northern ; P. 5 — B illings refinery, N orthwest Airlines ; “Richest Hill on E arth,” Anaconda Copper M ining Co. ; P. 26— St. Mary Lake, Great Northern ; P. 27— Cathedral Rocks, Northwest Airlines ; Helena Branch photos, Les Jorud Commercial Photo shop, Helena. OPERATIONS REPORT Continued from Page 21 B an k in g were conducted. Several members of our staff spent a week or more in member banks as a part of our “ farm ing out” program. T h e bank continued its program of having representatives call on all banks in the district and attend various bank meetings, clinics, and schools. Prom otion of the bank movie, of the pic ture book, and of bank tours was also furthered. 'H eadache' Checks Being Reduced A new project begun in 1952, which it is believed m ay have far-reaching effects for the whole banking system, is a cam paign to reduce the number of so-called “ headache” checks—that is, checks which because of their poor design or arrangement cause sorting, listing, and other errors in handling. 28 economy,” the capital city banker declared, “ is the W illiston basin. It is so vast that it w ill affect the whole state.” Another authority who is bullish on M ontana is John E. Corette, capable president of Montana Power company, Butte. “ It is widely recognized,” he said, “ that there are very extensive natural re sources that w ill be developed in the future.” Referring to a constant search going on for m in erals, he said, “ Experience has proved in the past and it is anticipated in the future that this search will develop additional m ining and m illing opera tions to those now in existence.” H e also believes that “ constant improvement and development in the state’s agricultural and livestock industries and a constant development of irrigation assure a bright future in those fields.” N o one, of course, can accurately predict what the Branch’s domain will be like even ten years from now, but to borrow the words of Editor Dye, “ It looks like nothing but good for M ontana —nothing sensational, but a very good future.” H avin g shared more than three decades of the silver dollar state’s gold-flecked past, the H elena Branch looks forward to sharing that future— and hopes that it w ill be a truly golden one. Representatives of our bank made approximately 400 calls on firms to ask them to redesign their checks to meet m inim um standards of arrange ment and clarity; charts and slides to help in pre sentation of the problem were prepared; and speakers from the bank explained the program to a number of banking and business groups. W e have been gratified with the cooperation received from both business and banking so far. W ith the new year the Federal Reserve bank of Minneapolis renews its resolution to be of m ax im um service to banking, business, agriculture, and the general public of the N in th Federal R e serve district. It is to be sincerely hoped that the nation w ill in 1953 make substantial progress toward the goals of stability and peace, and that this bank may be able to make at least some small contribution toward the achievement of those goals.