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ANNUAL REPORT 1957 FEDERAL RESERVE B A N K OF M I N N E A P O L I S FOREWORD I n this report we are presenting a review of economic develop ments during 1957 in the Ninth district. In retrospect, accomplish ments for the year as a whole look good in spite of a recessionary trend in business activity which developed late in the year. Borrowing by member banks at the Federal Reserve Bank of Minneapolis was relatively important during 1957. A series of charts dealing with borrowings and related banking trends over a period of years is also included in this report as a matter of current and historical interest. Finally, to fulfill a traditional function of the annual report, we present a resume highlighting operations carried on at the Federal Reserve Bank during the year. Chairman of the Board President Economic Conditions In 1957, as in the previous two years, the level of economic activity in the United States reached a new high. The dollar value of output as measured by the gross national prod uct rose somewhat more than did physical measures owing to con tinued rising prices. The index of consumer prices and the index of wholesale prices averaged 3.3 per cent and 2.9 percent higher, respec tively, than in 1956. According to preliminary esti mates the gross national product amounted to $434 billion in 1957; GROSS N A T IO N A L P R ODUCT AND M A JO R CO M PO NENTS Billions of Dollars Total Consumption . Gross Investment Government PRICE INDEXES, 1957 (1 9 4 7 - 4 9 = 100) In d e x this compares with $415 billion in 1956. The increase resulted from larger purchases of newly produced goods and services by individual consumers, government and for eigners. Spending for expansion of business inventories and for resi dential construction declined. Non-agricultural employment in the nation averaged 700,000 higher in 1957 than in 1956; this gain was less than half that registered from 1955 to 1956. By the end of 1957 workers in non-agricultural establishments numbered 600,000 fewer than a year earlier while in January 1957 they had numbered about one million more than a year earlier. This pat3 tern, expansion early in the year with a decline at the year end, was repeated by other important eco nomic statistics. The Federal Reserve Board’s in dex of industrial production dis closed that factories and mines were producing a record output in De cember of 1956; 12 months later in dustrial output had shrunk by 8 percent reflecting cutbacks in the production of durable and non durable goods and minerals. The re duction of manufacturing output was accomplished by reducing em ployment and by instituting shorter work weeks. During 1957 the num ber of hours worked per week by an ‘average’ worker in manufacturing dropped from 41.0 to 39.3. Produc tion workers in manufacturing num bered about 7 percent fewer at the end of 1957 than a year earlier. So pervasive was the cutback in pro duction that employment fell in each of the 21 industries dis tinguished by the manufacturing employment statistics. The value of new construction in 1957 broke all previous records but, as in the case of the GN P, rising IN D U S T R IA L P R O D U C T IO N INDEX, 1957 (1 9 4 7 - 4 9 = 1 0 0 ) 4 prices affected this yardstick. It is likely that the physical volume of construction work was little changed from the previous year. Both public and private spending for construc tion was up. A notable exception to this trend occurred in the residential construction industry. The number of dwelling units started in 1957 was down approximately 10 percent from the previous year. Equipped with record personal in comes, up almost 5 percent from the year before, Americans spent more in retail stores than ever before in history during 1957. Retail sales were better than 5 percent higher than in 1956. Like other economic statistics, however, the gain from a year earlier was narrowed as the months slipped by. The number of new automobiles sold in 1957 was only slightly greater than sales in 1956. The net income of farmers was little changed in 1957 from 1956; despite higher prices for animals and despite crop production equal to the record of 1956, higher costs and lower prices for crops prevented in comes from rising in total. Owing to the continued departure of man power from agriculture, however, farmers enjoyed an increase in their per capita incomes. Too, the value of farm real estate continued up. Continued expansion in the de mand for credit during 1957 pro duced the highest level of interest rates in many years. The average of member bank reserves during the year was virtually unchanged from the average in 1956. This reflected a monetary policy which was influ- SELECTED M AR KET YIELDS— A N N U A L AVERAGES Percent enced in part by the presence of ris ing prices during most of the year. Thus, discount rates were moved up from 3 percent to 3 54 percent at Federal Reserve Banks shortly after mid-year; in November the discount rate was returned to 3 percent as monetary policies shifted to accom modate changing economic condi tions. The principal change observed on the national scene, a reversal of the fairly lengthy upward trend of economic activity, was also in evi dence at the district level. THE DISTRICT ECONOMY Various measures indicated that I 957 was a good year in the Ninth Federal Reserve district. On the average, more district residents were at work during the year than ever before in history, and they were earning higher wages than ever be fore. The resultant satisfactory level of incomes permitted district mer chants to report higher sales than in 1956. At a sample of department stores, sales in 1957 were better than 2 percent above 1956. Automobile sales, according to the number of new vehicles registered, exceeded the 1956 figure by better than 4 per cent. And the volume of retail sales, as measured by a Bureau of the Census sample which excludes sales of large retail chains, was up in 1957 from the year before by 5.4 percent in the district while the in crease in the nation as a whole was 3.2 percent. Member bank deposits also appear in preliminary figures to have in creased by more in the district than in the nation as a whole; on the last Wednesday of 1957 total deposits of member banks in the district and in the nation were higher than a year earlier by 4.3 percent and 1.6 percent, respectively. And debits to demand deposit accounts at a sample of banks in the district during 1957 amounted to 6 percent more than in 1956. By states, the gains ranged from 5 percent in Montana to 11 percent in North Dakota. But some areas of the district economy slowed up in 1957. Activity in the building industry, for exam ple, appears to have receded some what. Construction c o n t r a c t s awarded and the value of building permits granted were down respec tively by 6.5 percent and 2.4 percent in the district during 1957. Some of the least prosperous areas of the district were those where lumbering and copper mining are important. Employment in Montana and Michigan, for example, declined by more than it did in other district states both absolutely and relatively. Lumbering was the first major in 5 dustry in the district to cut back on production. The demand for lum ber declined following 1955; that year marked the end of a residential building boom. When home builders cut their starts in the fall of 1955 retail lum ber dealers soon had an over-supply of lumber. In 1956 they reduced their stocks. The number of board feet of lumber held in retail yards in the Ninth district in January 1956 was 16 percent higher than one year earlier. As stocks were liqui dated during the year the board-foot volume carried by retailers fell be low the preceding year’s stock until in December 1956 inventories were 6 percent below the volume held in December 1955. When retail lumber dealers began to liquidate their inventories in 1956 sawmill operators and wholesalers rapidly accumulated stocks and this led to a reduction in lumber prices. The lower prices forced some high cost logging and sawmill firms to close down in 1957 and others were forced to reduce their operations in order to liquidate heavy stocks. The closing down of logging and lum bering operations reduced both em ployment and income in timber re gions of the district. Copper output was curtailed Copper mining and smelting is another basic industry in which pro duction was sharply reduced in 1957. In western Montana the larger metropolitan centers affected were Anaconda, Butte and Great Falls. 6 In Upper Michigan, the principal cities affected were Calumet, Han cock and Houghton. In both regions many smaller communities also were affected by the reduction in output or the closing of mines entirely. In the post World War II years the rapid expansion in home build ing and in automobile and other consumer durable goods production developed what appeared to be an insatiable demand for copper. In response to this growing demand producers around the world ex panded their output sharply. As home building and automobile and appliance production receded from peak levels the demand for copper slumped materially in 1956. The ac cumulation of heavy inventories by producers led to a series of price re ductions. The custom smelter quo tation of about 55 cents per pound in March 1956 fell to 25 cents by September 1957. The lower price for copper and for other metals mined with copper ore led the Anaconda Copper Com pany at Butte, Montana, to sharply reduce mining, smelting and fabri cating operations. In Upper Michi gan, Calumet and Hecla, Inc. cut production about 10 percent. The company completely closed down four low-grade mines and concen trated operations on seven highgrade deposits. At White Pine, out put in the low-grade ore operations of the highly mechanized plant built by the Copper Range Com pany was not reduced in 1957. The economic effect of the cut back in copper production was soon felt by the communities serving the workers in this industry. For exam ple, in Butte, Montana, July employ ment was reduced to a ‘mid-winter level’ and unemployment claims rose to five times the year ago vol ume. Some workers left the commu nity thereby raising the dwelling unit vacancies. Partly as a result, very few housing starts occurred in the latter half of the year. In the Upper Michigan peninsula unem ployment in the copper industry was limited by the transfer of workers from the high cost mines to the more efficient operations. Iron ore shipments were up Great Lakes shipping season many iron ore companies still held sub stantial stockpiles of ore. At under ground mines in Upper Michigan operations last fall were cut from a 5 day to a 4 day week. Late in 1957 some workers were laid off entirely. In northern Minnesota the repair of equipment and the removal of ‘over burden’ from ore bodies in prepara tion for the 1958 season have not been sufficient to maintain employ ment. In the principal northern Minne sota iron mining communities em ployment last fall declined more than in recent years. It is generally not until the opening of the Great Lakes shipping season that steel company officials announce the esti mated demand for ore from the Lake Superior region. Thus, the prospects for employment in the coming sea son and the immediate outlook for mining localities remain obscure. Shipments of ore from the Lake Superior region in 1957 totaled 86,614,734 long tons; this was an increase of 6,981,707 tons from the preceding year but was about 10 million tons under the all-time rec ord year of 1953. In 1956 the mining and shipping of iron ore were in District activity paralleled nation terrupted by labor disputes in the As in the nation as a whole, the steel industry and, later, in the Pitts burgh Steamship division of the U. aggregate level of activity in the dis S. Steel Corporation. These disputes trict stopped expanding in 1957. drastically reduced shipments of ore DISTRICT N O N A G R IC U L T U R A L for two months resulting in a lower E M P LO YM EN T total for 1956 as compared with 1957. Although shipments were heavy Millions in the first half of the 1957 season a decline in steel output in the latter half of the year curtailed ore ship ments from the Lake Superior re gion, demonstrating once again the close dependence of district mining activity on the level of national eco nomic activity. At the close of the 7 In many lines seasonal gains were less than normal while seasonal declines were greater than usual. A ‘cyclical’ decline was imposed on the normal seasonal pattern of business. The turn-around in business is per haps best reflected by the level of nonagricultural employment. In January of 1957 district employment was 30,000 above a year earlier. By December employment had fallen below the year earlier level in all district states except the Dakotas. That layoffs were not confined to the lumber, copper and construction industries is disclosed by the table be low. Part of the decrease in district employment has been in manufac turing where the reduction was more than enough to explain the de cline in total nonagricultural em ployment. In all district states em ployment in this category during the fourth quarter of 1957 slipped below 1956 figures. The decrease occurred in the manufacture of both durable and nondurable products. In this district as in the whole na tion, new orders received by manu facturers rose to a peak in the latter half of 1956 and declined in most months of 1957. In response to the decline in orders manufacturers first eliminated overtime work. In the first quarter of 1957, the average weekly hours of production workers considerably exceeded 40 hours in most district states. By the fourth quarter the average weekly hours had fallen somewhat below 40 in some states. As inventories were still accumulating in spite of a shorter work-week, manufacturers began to lay off workers with the result that employment fell behind the year earlier figure as the year ended. Fortunately, the need for workers expanded in government, finance and other service industries in 1957. The table below indicates that these sectors of the district economy ab sorbed almost 9,000 more workers. DISTRICT N O N -A G R IC U L T U R A L EM P LO Y M E N T 1956 1957 D ecem ber Decem ber 1,399,700 1,388,700 280,300 268,700 Durable goods 147,500 138,400 N on-durable goods 132,800 130,300 M ining 47,200 44,000 C onstruction 77,700 77,700 T ransportation and p u b lic u tilitie s 137,000 135,100 Trade 379,200 376,300 N o n -agricultura l to ta l M a nufa cturing 60,600 63,000 Service industries 181,500 184,800 G overnm ent 236,200 239,100 Finance, insurance and real estate NINTH DISTRICT AGRICULTURE IN 1957 Cash receipts for district farmers were approximately 3 percent higher in 1957 than in 1956. According to preliminary estimates the cash re ceipts from farm marketings amounted to slightly more than $3 marketings and thus net farm in come in 1957 was probably about the same as in 1956. Adding in creased government payments in 1957, net income in the district may even be slightly higher than in 1956. CASH RECEIPTS FROM FARM MARKETINGS States and parts of states in district ------------- Cash receipts1956 Percent chang over 1956 1957 (M illio n s ) M ichig an (15 counties) $ 26.7 $ 27.0 + l.l * 418.0 + 5.5 554.7 — 1.0 489.2 549.7 + 12.4 216.8 221.7 + 2.3 2,968.4 3,044.6 + 2.6 1,279.5 1,273.5 M ontana 396.3 N o rth Dakota 560.0 South Dakota W isconsin (26 counties) M innesota N inth d is tric t to ta l ♦Less th a n .5 p e rc e n t c h a n g e . billion. South Dakota enjoyed the largest increase in cash receipts, over 12 percent, while receipts in North Dakota and Minnesota — the only district states to show a decline— fell less than i percent. During the same period, the pro portion of cash income in the dis trict derived from crops decreased from 40 percent to 38 percent. Live stock and livestock product income accounted for 62 percent of total cash farm income in 1957. While cash receipts from farm marketings were up approximately 3 percent over 1956 in the district, the prices paid by farmers for pro duction expenses increased by ap proximately 4 percent. Production expense, however, amounts to ap proximately two-thirds of cash farm Over the last few years there has been a downward pressure on farm income; during the same period the price of farm land has been steadily increasing. During the last two years land values in the district rose 18 percent; 12 percent of the rise has oc curred since mid-1956 (see chart). DISTRICT FARM LAND VALUE INDEX (1947-49 = 100) Index Mar . Jul y 1955 Nov. Mar . July 1956 Nov. Mar. July Nov. 1957 9 The favorable crop prospects in mid1957 coupled with the continuing pressure to increase farm size were important factors in the farm land price rise. In some areas the conser vation reserve program has increased the demand for land of below aver age quality and increased average market prices. Changes in prices and output Crop prices averaged slightly low er in 1957, with the exception of corn which was much lower in price. Livestock prices in 1957 were sub- Crop the following page. Flaxseed production in the district in 1957 was only about half as large as production in the previous year. Flaxseed production suffered se vere damage from the virus disease, Aster Yellows, and also from bad harvest weather in North Dakota and Minnesota. Minnesota and the Dakotas accounted for 92 percent of the flaxseed crop in 1957. The largest producer, North Dakota, with 15 million bushels accounted for nearly 60 percent of U. S. output. A large increase occurred in win- CROP PRODUCTION IN THE NINTH DISTRICT* 1956 1957 Percent 1957 is of 1956 Corn 470,521,000 bu 495,418,000 bu. A ll wheat 239,562,000 bu. 257,776,000 bu. 107.6 W in te r w h e a t* * * * Spring wheat (o ther than durum ) 29,937,000 bu. 171,122,000 bu. 57,430,000 bu. 191.8 160,666,000 bu. 93.9 38,503,000 bu. 39,680,000 bu. 103.1 268,991,000 bu. 346,571,000 bu. 128.8 57,417,000 bu. 61,277,000 bu. 106.7 129,680,000 bu. 153,455,000 bu. 1 10.0 Durum Oats Soybeans** Barley 105.3 Rye A ll hay 7,581,000 bu. 7,670,000 bu. 101.2 19,256,000 tons 21,631,000 tons 1 12.3 Flaxseed 46,440,000 bu. 24,015,000 bu. Sugar beets Potatoes, Irish Sorghum g r a in * * * 1,988,000 short tons 26,319,000 cwt. 19,678,000 cwt. 1,768,000 bu. 6,844,000 bu. * ln c lu d e s only th e fo u r fu ll d is tr ic t states. * *ln c lu d e s only M in n ., So. D a k. and N o . D a k. stantially above a year ago. Thus, livestock-feed grain price ratios were favorable to livestock producers. Crop production in the district dur ing 1957 was above 1956 levels in most lines. Yields in 1957 were also generally higher. Acreage changes and yield changes for the major crops in the district states are shown in percentage terms in the chart on 10 2,283,000 short tons 51.7 114.8 74.8 387.1 * **S o rg h u m g ra in re p o r te d only fo r So. D a k. * * * * ln c lu d e s M in n ., So. D a k. and M o n t. ter wheat production; Montana, the largest producer, registered a 52 per cent increase in winter wheat acre age and experienced excellent yields. South Dakota, the only sorghum grain producing state in the district, increased grain sorghum acres by 126 percent and realized an average yield of 29.0 bushels an acre, exactly double the 10-year average yield. ACRES A N D YIELDS BY C R O P A N D S T A T E PERCENT C H A N G E FROM 1956 D E C L IN E CORN Minnesota M North dakofa 1 SouthDakota 1 Montano , IN C R E A S E | i i i 1 1 M i ! HH I f , Ninth District ; i i $ i Acres Yield , 3 4 \ 1 W T 1 ' A ll WHEAT Minnesota . i i 1 n 1 n 1 1 North Dakota South Dakota ■ Montana i f f 1 I ! ! 1 | f | 1 | | ■ Ninth District' OATS Minnesota ■ * i I i mm * North Dakota South Dakota Montana ; ) 1 , 5 | 1 Ninth District I j I Minnesota 1 i f ! ) 1 m ■ ' 5 $ I * J * * M ' 1 » - i 5 ' s \ ■ l^orth Dakota | 1 1 1 ■ f South Dakota '' ! i , i 14" : 1 1 1 Montano 1 * ' Ninth District : 1 : , 1 f I M | j i i i i i : j ' • ; . ! 1 | 1 § i i ! Minnesota i j • / s i r i ! 5 i 5 North Dakota South Dakota Montana * ; \ ! i ! ; !: ' \ I i t J , \ j < 1 ; 4 \ ! ' i m i - ; * 1 ? Minnesota North Dakota ' — f , p f T f l Soyth Dakota i 1 i 1 1 1 1 1 ■ I z Montana ' p iip p s || ■ ■ ■ ■ - Minnesota M l * ? X ‘ 1 North Dakota ; i 1 i 1 ; ; * Soyth Dakota - : i ■ : Montana "T I 1 j 1 I 1 | “■* * Ninth District mmmm i i ♦ ) * 5 : ) 40 20 ■ r , > » ' . 0 20 40 60 so too 11 MEMBER BANKS PROSPERED IN 1957 District member banks enjoyed a properous year in 1957. The year witnessed an increase in profits, divi dends, loans and deposits at these institutions. Indeed, all of these items were larger than ever before in his tory. A comparison of district mem ber bank profits in 1957 with those of the previous year reveals a smart $5.9 million or 23 percent increase. Profits were affected most by an increase of almost $ 11 million in the amount of interest collected on loans; this increase was produced partly by an upward revision of in terest rates charged at many banks and partly by higher average hold ings of loans in 1957 than in 1956. Income from securities was likewise increased by an increased rate of return and by larger average hold ings during 1957. Earnings from securities amounted to $4 million more than in 1956, an increase of approximately 10 percent. The largest increase of expense was recorded for interest on time deposits. The maximum rate which insured banks can pay on time de posits was raised by the regulatory agencies with the result that many banks announced higher interest rates to savers beginning January 1, 1957. The increase in the amount of interest on time deposits paid by district member banks was $7.2 mil lion, making the total interest paid 41 per cent larger in 1957 than in 1956. The increase was partly the result of higher rates paid and part ly the result of continued growth in the amount of time deposits; at the end of 1957 such balances were 14 percent larger than a year earlier. The higher interest paid on time deposits so enlarged the ‘expense pie’ that the compensation of officers and employees accounted for only 44 percent of total expense in 1957; this was down from 48 percent of LO A N S , INVESTMENTS A N D DEPOSITS O F DISTRICT MEMBER BANKS 12 total expense in 1956 even though salaries and wages were 8 percent higher in 1957 than in 1956. Total current expense rose $16.4 million in 1957 while current reve nues increased by $17.4 million with the result that net current earnings were up a million dollars. Net profits were up by much more than this amount — despite higher income taxes—owing primarily to a sub stantial reduction in charges made for losses on loans and securities in 1957. Stockholders enjoyed a 6 per cent increase in dividend payments. The Statements of Condition which member banks file at the end of the year show that loans increased by $77 million during 1957 at dis trict member banks. The propor tionate gains ranged from a low of 2.9 percent in Minnesota to a high of 9.4 percent in Michigan. Con sumer type loans increased $41 mil lion. Residential mortgage loans were up by $20 million while loans to business rose $24 million. These credits brought loans and earnings from loans at district member banks to the highest level in history. In contrast to the experience of 1955 and 1956, the 1957 loan expan sion was accomplished without the liquidation of securities. Thus, hold ings of U. S. Treasury obligations and of other securities were $16 mil lion and $23 million higher, respec tively, at the end of 1957 than at the beginning. The loan expansion was financed largely with deposit growth. District member bank deposits grew by $174 million in 1957. Time deposits owned by individuals, part nerships and corporations rose $163 million, thereby accounting for the bulk of the gain in total deposits. The 14 percent growth scored by time deposit balances in 1957 was one of the sharpest gains on record and reflected in part the improved competitive position of time de posits which resulted from the pay ment of higher rates to the owners of such balances. DISTRICT MEMBER B A N K LO A N S — SELECTED TYPES of D o l l a r s 1947 Excludes 1948 real 1949 estate and 1950 C.C.C. 1 951 l oans 1952 1953 1954 1955 1956 1957 to f a r me r s 13 C O M P A R A T IV E STATEMENT O F E A R N IN G S A N D N IN T H DISTRICT MEMBER BANKS DIVIDENDS O F DECEMBER 31 (in thousands o f dollars) G overnm ent Securities 1956 1957 Earnings from: % Char $ 34,790 $ 32,282 7.8 9,859 8,466 16.5 108,475 97,834 10.9 1,732 1,705 1.5 1 1,679 10,433 1 1.9 22.1 O th e r Securities Interest on Loans O th e r C harges on Loans Service C harges on Deposit A ccounts O th e r Service Charges and Fees 7,092 5,808 Trust D epartm ent 4,697 4,265 10.1 O th e r C u rre n t Earnings 5,102 5,176 — 1.4 $183,426 $165,969 10.5 $ 21,727 $ 20,062 8.3 31,226 28,898 8.1 TOTAL Current Earnings Expenses for: Salaries— O ffice rs Salaries and W ages— Employees 1,152 25,031 6.2 17,781 1,223 D irectors' and O th e r Fees Interest on Time Deposits 40.8 17.4 Interest on Borrowings 1,852 1,578 Taxes (excluding incom e taxes) 3,832 3,604 6.3 D epreciation 3,094 2,798 10.6 31,989 27,720 15.4 $119,974 $103,593 15.8 $ 63,452 $ 62,376 1.7 $ $ O th e r C u rre n t Expenses TOTAL Current Expenses Net Current Earnings Recoveries, Transfers from Valuation Reserves, and Profits on: 1,906 — 32.2 Loans 1,470 1,476 — .4 A ll O th e r 1,634 1,178 38.7 Securities 1,293 $ 4,397 $ 4,560 — 3.6 $ 5,608 $ 12,124 — 53.7 Loans 5,035 9,060 — 44.4 A ll O th e r 1,885 1,576 19.6 $ 12,528 $ 22,760 — 45.0 Profits before Taxes Taxes on Net Income $ 55,321 23,385 $ 44,176 18,125 25.2 29.0 Net Profits Dividends on: $ 31,936 $ 26,051 22.6 TOTAL Recoveries Losses, Charge-offs and Transfers to Valuation Reserves on: Securities TOTAL Losses 19 — 78.9 14,829 13,999 5.9 TOTAL Dividends $ 14,833 $ 14,018 5.8 Net Profits after Dividends $ 17,103 $ 12,033 42.1 Preferred Stock Comm on Stock 14 $ 4 $ C O N D IT IO N O F N IN T H DISTRICT MEMBER BANKS O N DECEMBER 31 (in thousands o f dollars) 1956 Assets Cash, Balances w ith O th e r Banks U. S. G ove rnm ent O b lig a tio n s , D ire c t and G uaran teed O b lig a tio n s o f States and P olitical Subdivisions O th e r Bonds, Notes, and Debentures C o rp o ra te Stocks Loans and Discounts, Including O v e rd ra fts Bank Premises O w ned Real Estate O w ned O th e r than Bank Premises 1957 $1,055,242 $1,099,951 1,336,356 1,352,102 274,937 297,710 94,048 125,666 7,227 7,497 1,875,042 1,952,180 34,516 40,938 2,651 2,598 5,673 7,426 855 614 13,529 15,543 4,700,076 4,902,225 2,287,960 2,270,844 1,173,032 1,336,869 Investments and O th e r Assets In d ire c tly R epresenting Bank Premises or O th e r Real Estate C ustom ers' Lia b ilitie s O th e r Assets TOTAL Assets Liabilities Demand Deposits o f Individuals, Partnerships, and C o rp o ra tio n s Time Deposits o f Individuals, Partnerships, and C o rp o ra tio n s Deposits o f U. S. G overnm ent, Inclu ding Postal Savings 101,767 90,065 Deposits o f States and P olitical Subdivisions 304,247 324,959 Deposits o f Banks 415,761 437,945 42,438 38,935 4,325,205 4,499,617 O th e r Deposits, C e rtifie d and O ffic e rs ' Checks, etc. TOTAL Deposits Bills Payable, Rediscounts, and O th e r L ia b ilitie s M o rtga ges and O th e r Liens A cceptances Executed by Bank O th e r Lia b ilitie s TOTAL Liabilities 3,630 40 209 253 855 614 48,841 60,973 4,378,740 4,561,497 Capital Accounts C a p ita l 99,291 104,252 Surplus 141,033 144,881 65,479 75,976 15,533 15,619 U n divid ed Profits Reserves TOTAL Capital Accounts TOTAL Liabilities and Capital Accounts 321,336 340,728 4,700,076 4,902,225 !5 Loans to Member Banks A major purpose of the Federal Reserve System is to influence the na tion’s supply of money and credit in a way that will promote economic progress. This influence is ordinarily accomplished by adding to or sub tracting from the supply of reserves at member banks. Changes in the level of borrowing by member banks represent one way of adding to or subtracting from member bank re serves. Before the Federal Reserve System was established in 1914 there were frequent periods of economic dis tress resulting directly or indirectly from an inflexibility in the nation’s supply of currency and bank re serves. Federal Reserve Banks were established, in part, for the purpose of correcting this weakness in the banking system. The law provides that “ Any Federal Reserve Bank may make advances . . . to its member banks on their promissory notes . . . ” and “ Any Federal Reserve Bank may discount notes, drafts, and bills of exchange . . Thus, a member bank can obtain additional reserves by borrowing from its Reserve bank. According to several yardsticks, member bank borrowing from the Federal Reserve Bank of Minne apolis has been growing in impor tance. For example, the chart below indicates that the proportion of dis trict member banks borrowing from the Federal Reserve has increased in every year but one since 1950. In 1957, better than 25 percent of the 473 member banks in the district borrowed from the Federal Re serve at least once during the year. Not since 1933 has the proportion of PERCENT O F DISTRICT MEMBER BANKS B O R R O W IN G D U R IN G THE YEAR 60 40 20 0 1915 16 1925 1935 1945 1955 AVERAGE OF MEMBER BANK BO RROW ING FROM THE MINNEAPOLIS FEDERAL RESERVE BANK M liiicns of Dollars _________ ___ Millions of Delia r --------------------------------------------------------------r t r 1920 1925 1930 1935 borrowing banks been so high. In none of its years of operation prior to 1934 did the Minneapolis Federal Reserve Bank make loans to fewer than 25 percent of its mem ber banks. Since 1914 this figure has varied from a high of 75 percent in 1921 to a low of 2 percent in 1943. Country banks, which virtually dis appeared from the discount window in World War II, have reappeared during the postwar period in slowly rising numbers. Since the peak year of 1921 the number of member banks which borrow has declined even more rapidly than the proportion of mem ber banks borrowing owing to a de cline in the total number of banks. The number of member banks in the Ninth district has fallen from 1,024 1921 to ^ ess t^ ian ^ at currently. Most of the decline oc curred in the 14 years after 1921. Another measure of the impor tance of borrowing by member banks is the dollar amount of funds 1940 1945 1950 1955 borrowed. Like the proportion of banks borrowing, the dollar amount of loans outstanding at the Federal Reserve Bank of Minneapolis has increased during the postwar years. Indeed, the average daily amount of advances to member banks, at $39 million, was higher in 1957 than in any of the years since 1921 with the single exception of the year 1955 when advances averaged $42.5 mil lion. The average dollar amount of member bank borrowing from the Federal Reserve Bank of Minne apolis has ranged between a high of $76 million in 1920 and a low of $47,000 in the year 1936. The high water mark for borrowing by all member banks in the nation was also registered in 1920. That borrowing activity is cur rently well above the levels of the late thirties and World War II but well below the level of the early twenties is indicated by still another yardstick, namely, the proportion of T7 CHART A— RATIO OF MEMBER BANK BORROW ING TO MEMBER BANK RESERVES Percent 1920 1925 1930 their reserves which member banks borrow. During the past io years, Ninth district member banks borrowed an average of approximately 4 percent of their reserve balances at the Fed eral Reserve. In its first 10 years of operation—in the decade after 1914 —the Minneapolis Federal Reserve Bank loaned member banks an amount which averaged approxi mately 65 percent of their reserve balances. In contrast, during none of the years between 1933 and 1944 did member banks borrow as much as 1 percent of their reserve balances. See charts A and B. The former chart indicates that prior to 1935 annual average borrowings by district mem ber banks ranged as high as 160 per cent of their reserves; the latter chart shows that in none of the years since 1935 have borrowings of district member banks averaged as much as 10 percent of reserves. The propor tion of member bank reserves fur nished by Reserve Bank loans has 18 declined substantially from the levels common during the early years of the System. Of particular interest is the close correspondence between the ratio of borrowings to reserves for Ninth dis trict member banks and for all mem ber banks in the nation in most of the more than 40 years covered by charts A and B. With respect to the seasonal pat tern of borrowing, district member banks have differed somewhat from all member banks in the nation. This is revealed by the chart on the next page which measures the average amount of borrowing for each of the 12 months as a percent of the annual average amount of borrowing. The chart is based on the borrowing ex perience since World War II. Thus it is seen that district mem ber banks tended to borrow most (160 percent of the annual average) in May while all member banks in the nation have borrowed most (127 percent of the annual average) in CHART B RATIO OF MEMBER BANK — BORROWING TO MEMBER BANK RESERVES Percent SEASONAL INDEX OF MEMBER BANK BORROWING AT THE FEDERAL RESERVE tndex November, during the postwar pe riod. The month of peak borrowings in the nation has been a month of relatively low borrowings by district member banks. The seasonal low points of bor rowing in the district and the na tion are less widely separated than the seasonal highs. Borrowings of all member banks have averaged lowest in September while in the district borrowings have been low est in August as a rule. Since banks borrow to correct re serve deficiencies and since reserve deficiencies are often produced by deposit withdrawals, it is not sur prising to find district member banks borrowing more in the first half of the year than in the second half. This is because district member bank deposits ordinarily flow out in the early months of the year while they rise in the second half of the year. The chart on page 12 reveals this pattern for each of the past 10 years. The behavior of deposits is, of course, not the only factor to in fluence member bank borrowing. Thus, during some of the past 10 years district member banks have borrowed more in the last half than in the first half, contrary to the pat tern depicted by the chart. A heavy demand for credit from its custom ers frequently prompts a bank to borrow. Indeed, the official statement of guiding principles, observed by Fed eral Reserve Banks in making loans, states that “Federal Reserve credit is generally extended on a short term basis to a member bank in order to enable it to adjust its asset position when necessary because of develop ments such as a sudden withdrawal of deposits or seasonal requirements for credit beyond those which can reasonably be met by use of the bank’s own resources.” * Using the proportion of member banks which borrow as well as the dollar amount of member bank bor rowing and the fraction of their re serves which member banks borrow as yardsticks, we have seen that borrowing has recently been a more important source of reserves than was true a few years ago but that it is less important than was true early in the history of the Federal Reserve System. That member banks now borrow less than was common during the early years of the Federal Reserve System is a reflection, in part, of the operation of other forces that affect bank reserves, and of the develop ment of alternatives to borrowing ^Foreword to Regulation A 19 MEMBER BANK BO RRO W ING M i l l i o n s of Do l l a r s 50BORROWINGS FROM FEDERAL RESERVE 40— BORROWINGS of FEDERAL FUNDS 10- 19 56 1957 The black bars represent averages of amounts reported each Wednesday as “ borrowings from others than the Federal Reserve” by dis trict banks which participate in the market for federal funds. The lighter bars represent the average of daily borrowings by all district member banks at the Federal Reserve. from the Federal Reserve. Also, dis count policy in recent years has em phasized prompt repayment. An important alternative to bor rowing for a bank in need of cash is the liquidation of government se curities. Years ago banks held few government securities and thus were more likely to borrow from the Fed eral Reserve when deficient in re serves. But a tremendous amount of Treasury securities was lodged with the banks in the thirties and in World War II. In the first decade after the Federal Reserve System was estab 20 lished government securities held by district member banks averaged 12 percent of their deposits. In the past decade government securities have averaged 39 percent of deposits. Bor rowing the excess reserves of other banks is also an alternative to borrow ing from the Federal Reserve. Such borrowing is accomplished in the market for ‘federal funds.’ But the fact that borrowing is now a quantitatively less important source of reserves than was true early in the history of the Federal Reserve System does not detract from the im portance of the borrowing privilege to a bank in need of reserves. The rate of interest charged on loans to member banks is known as the discount rate. This rate is altered from time to time with changing economic conditions. A change in RATIO OF GOVERNMENT SECURITIES TO DEPOSITS AT DISTRICT MEMBER BANKS DISCOUNT RATE AT THE FEDERAL RESERVE BANK OF MINNEAPOLIS the rate, by itself, has no affect on the supply of bank reserves. However, the willingness of banks to borrow from the Federal Reserve is influenc ed by the discount rate. In 1957 ^ie discount rate at all Federal Reserve banks was raised to 3 ! 2 percent shortly after mid-year; / other market rates had been rising and the presence of inflation made it important that growth in bank reserves and the money supply be limited. In November, Federal Re serve Banks reduced the discount rate to 3 percent in recognition of de flationary forces which had appeared. Although the 3 Vi percent discount rate charged during part of 1957 was higher than any rate prevailing since 1934, it was lower than the rates common prior to that time. In the early years of the Federal Reserve System, when the discount rate was considered the principal instrument of monetary policy, interest rates in general were relatively high. Over the years, the techniques of monetary policy have changed a good deal. Open market operations —the purchase and sale of govern ment securities by Federal Reserve Banks—have become an important tool for influencing the supply of bank reserves. Flexible reserve re quirements are also a powerful and useful device for regulating the sup ply of bank credit and money. The development of these complementary techniques has contributed much to the effectiveness of monetary policy. 21 Federal Reserve Bank of Minneapolis Nineteen hundred fifty-seven was a year of more than ordinary changes and a year of high activity at the Federal Reserve Bank of Minne apolis. The major changes took place in top bank management and in banking quarters. The high level of activity in the bank, as indicated by the record work volume handled by many operating departments, was, in part, a reflection of the generally prosperous and active business econ omy throughout the Ninth Federal Reserve district. The bank’s building program, be gun in 1955, was completed late in April with the addition of eight new floors and extensive remodeling of the old banking quarters. This gave the bank a 12-story home in which to house all its numerous operations with room to spare. The new addi tion was badly needed. For a number of years an ever-increasing volume of work had heavily taxed the bank’s physical plant. A study of the 1957 operation figures which appear in the table on page 23 reveals the con tinuance during the year of an up ward trend in work volume. V O L U M E O F SELECTED O P E R A T IO N S AT THE M IN N E A P O L IS FEDERAL RESERVE BAN K Millions of P i e c e s V o lu m e of O p e r a t io n s in P r in c ip a l D epa rtm en ts ($. amounts in thousands) ■ --------- A m o u n t----------------- Number ----------1956 1957 1956 1957 Advances to member banks and non member banks secured by U. S. Gov ernment obligations ............................. .. 3,657,349 $ 4,875,759 1,270 Advances to member banks secured by other collateral ........................................... 4 I ,3 I 8 4,080 20 Currency counted during year.................... 481,649 470,742 70,752,050 76,564,154 Coin counted during year............................. 14,805 15,652 148,580,613 14 8 ,6 8 1,0 11 113,878,800 124,035,500 31,687,287 36,745,909 18,470,804 12,334,229 i >356 18 Coin wrapped during year........................... 9,171 10,382 Currency shipped and paid out.................... 405,500 406,930 Coin shipped and paid out........................... 20,234 20,858 U. S. Government checks handled............. 3,018,380 2,993,426 Postal money orders handled...................... 16 9 ,114 1 6 1 ,1 3 3 9,948,722 9,275,375 Other checks h an d led .................................... 30,339,649 32,194,920 95,160,539 102,323,560 Unfit notes retired from circulation........... Grain drafts handled .................................... 532,261 495,415 601,977 561,26 1 Other noncash collections ........................... 119 ,2 52 1 15 ,18 7 421,084 408,701 Securities held in custody for banks on December 31 ............................................. 1,476,737 1,48 5,213 357,M 5 368,691 Coupons cut from securities held for banks ............................................................. Coupons paid from U. S. Government direct obligations ...................................... 45,222 44,725 291,401 274,025 Coupons paid from issues of other U. S. Government agen cies............................... 1,6 31 1,623 14,876 14,662 3,909,159 4,955,640 4,466,872 4,502,840 Issues, redemptions, and exchanges of other U. S. Government agencies........... 21,848 36 ,10 3 2,572 4,255 Purchases and sales of Government se curities and Government securities cleared through the Federal Reserve Bank for the account of banks in the Ninth district ........................................... 1,573,660 1,810,003 7,095 8,597 U. S. Savings Bonds sales (also included in U. S. Government direct obligations) . 228,446 155,259 1,945,709 1,8 3 7 ,9 11 U. S. Savings Bonds redemptions (also included in U. S. Government direct obligations) .................................................. 323,770 390,197 24,674,130 2 ,412,4 31 2,502,197 65,895 71,940 687 680 Issues, redemptions, and exchanges of U. S. Government direct obligations. . . . Transfer of fu n d s ........................................... 24,022,362 Net Federal Reserve notes outstanding. . . Number of employees at end of year......... 498,236 494,826 23 CHECKS A N D CURRENCY OTHER OPERATIONS For example, in Chec\ Collections, which is the largest operating depart ment of both the bank and its Helena Branch, work volume set a new rec ord in 1957 for the 15th consecutive year with a total of 123.9 million items handled. A decrease of more than 6 million in the number of U. S. Government checks processed was more than offset by an increase in the volume of checks drawn by the pri vate sector of the economy. Although the net gain in number of items was small as compared with increases shown in other recent years, the dol lar volume of all checks handled was up a substantial 5.5 percent from 1956. The amount of cash handled was also up. More than 76.5 million pieces of currency were counted by sorters at the bank head office and Helena Branch in 1957 as compared with 70.7 million in 1956. Dollar volume showed a slight reduction, however. Coin counted exceeded the preced ing year’s high in both number of pieces and in value. More than 148.6 million coins went through the bank and branch counting machines dur ing the year, up slightly in number from 1956, and up 6 percent in dol lar volume. The amount of coin wrapped also hit a record peak at 124 million pieces, higher by almost 9 percent than the 1956 figure. Dollar value of currency paid out showed a slight increase; a 16 percent rise in the volume of unfit currency sorted out and retired from circulation in dicated that currency was being kept busy after it got into circulation. In another large department, Fiscal Agency, work volume was on the in crease in several areas. The number of pieces of U. S. Government obli gations issued, redeemed and ex changed by the bank during 1957 was well in excess of the preceding year’s figures, and dollar volume was up by more than one-fourth. Ninth dis trict banks also made increasing use of the Federal Reserve Bank’s facil ities for purchasing and selling secu rities; both the number and dollar volume of such transactions showed substantial expansion. In the Accounting department transfers of funds handled by the bank and branch reached an all-time record of $24.6 billion. The number of transactions was up approximately 9 percent over 1956. Borrowing in the market for ‘federal funds’ (men tioned in the feature article), is ac complished with wire transfers. The Safekeeping department held in excess of $1,485 billion in securities belonging to Ninth district banks at year end, up slightly from the De cember 31, 1956 figure. The number of coupons cut from such securities during the year showed an increase of approximately 3 percent. The Dis count function also set records in a number of fields during the year. The work of this department is covered in detail elsewhere in this report. A few areas of operation showed reductions in work volume. In Non cash Collections there was a drop in the volume of both grain drafts and other collections handled. Total dol 24 lar value of such collections was off approximately 6 percent; this was the second decline in as many years, reflecting in large part new arrange ments for processing some grain drafts. Also down, as shown by Fiscal Agency records, were sales of savings bonds in the district. Savings bond redemptions increased. There were two important changes in the savings bond program during the year. On February i the Treasury raised the investment yield on Series E bonds from 3 to 3.25 percent. On October 1 the familiar type paper-style Series E bond was discontinued and re placed with a prepunched card-style bond. Finally, despite the generally in creased work load and the necessity of adding to the Building and Pro tection personnel because of the in creased size of the bank building, there was a reduction of seven per sons in the combined staffs at Helena and Minneapolis from year-end 1956 to year-end 1957. FINANCIAL STATEMENTS A quick look at the comparative Statement of Earnings and Expenses which accompanies this article shows that the Federal Reserve Bank had higher earnings in 1957 than in 1956. Indeed, earnings set an all-time rec ord. Income both from government securities and from advances to mem ber banks was up substantially from 1956. This was largely due to the in crease in earning rates, which for all earning assets amounted to 3.14 per cent in 1957 as against 2.43 percent in 1956. The rate of interest earned on advances to member banks at 3.5 per cent during part of the year was higher than at any time since 1934. Too, the average amount of advances outstanding was somewhat higher in 1957 than in 1956. Government se curities were also yielding more than they had in many years. Current expense showed a sub stantial increase but net earnings were nevertheless $2.6 million above those of the previous year. Also up were additions to current earnings, interest paid to the U. S. Treasury on Federal Reserve notes, and dividends paid to member banks. This latter item reflects continued growth in the capital accounts of district member banks. Examination of the December 31, 1957 Statement of Condition shows that assets of the bank and branch combined were down very slightly from December 31, 1956. The prin cipal changes were an increase in gold certificate reserves and a reduc tion in holdings of Government se curities. The reduction of securities held was occasioned by System open market operations and by the annual reallocation of System securities among the Reserve banks. One figure on the statement which deserves special comment is the bank’s outstanding circulation of Fed eral Reserve notes. At the year-end note circulation stood at $495 million, $3 million less than at the end of 1956; this compares with a circula tion of $622 million on June 30, 1954. This latter date is used for purposes 25 FED ERAL RESERV E BANK O F M IN N E A P O L IS S T A T E M E N T O F C O N D IT IO N A SSET S Dec. 3 1 , 1957 Gold Certificates.................................................................................... $ 390,875,779 > Redemption Fund for F.R. N otes.................................................... 2 2 ,17 1,35 3 Total Gold Certificate Reserves...................................... $ Other Cash ........................................................................................... I Bills Discounted .................................................................................... Foreign Loans on G o ld ......................................................................... Industrial Advances ......................................... .................................... 413,047*132 8,359,527 Dec. 3 1, 1956 $ 3 5 1> 392,666 22,952,138 % 374,344,804 $ 9,319,030 3,530,000 625,000 42,350 120,000 23,774 U. S. Government Securities: ............................................................................................. Bonds 63.283.000 206.759.000 246.937.000 38.879.000 60,462,000 Notes ................................................................................................ Certificates of Indebtedness...................................................... Bills .................................................................................................. 430,167,000 21,226,000 Total U. S. Government Securities............................... $ 511,855,000 $ Total Loans and Securities............................................... $ 511,998,774 $ 560,055,350 555,858,000 Due from Foreign B a n k s .................................................................... F.R. Notes of Other F.R. B anks...................................................... 348 23,008,000 556 14,376,750 Uncollected I t e m s .................................................................................. Other Assets ........................................................................................... 136 ,191 ,'064 10,085,159 135,944,612 10,406,330 Total A sse ts........................................................................... $1,102,690,004 $1,104,447,432 LIA B IL IT IES Federal Reserve Notes in Actual Circulation..................................$ 494,826,280 $ 498,235,535 Deposits: Member Bank— Reserve A ccou n ts...........................................$ U. S. Treasurer— General A c c o u n t........................................ Foreign ........................................................................................... 433,49°,539 18,515,030 8,184,000 $ 39 8 ,117 ,19 0 22,651,606 7,400,000 3 ,835,68i Other Deposits ............................................................................. 1 ,335,9 4 1 Total Deposits .................................................................... $ 461,525,510 Deferred Availability I t e m s ................................................................$ Other Liabilities ..................................................................................... 113 ,2 6 3 ,14 2 628,521 Total Liabilities ..................................................................$1,070,243,453 $ 432,004,477 $ 142,597,491 594,681 $1,0 73,432,18 4 C A PITA L ACCOUNTS Capital Paid I n .......................................................................................$ Other Capital Accounts ....................................................................... 7,425,950 25,020,601 Total Liabilities and Capital Accounts........................... $1,102,690,004 26 $ 7,182,100 23,833,148 $1,104,447,432 FED ER A L R ESER V E BANK OF M INNEAPOLIS EARNINGS AND E X P E N SE S 1956 1957 Earnings from: $ 1,010,077 1 3,086,844 1,6 18 .............. 2,591 26,653 13,764 Total Current Earnings .................................... ......................... $ 17 ,2 16 ,5 2 9 $ 14 ,113 ,2 7 6 $ On C O Expenses: 182,500 132,600 ......................... 49> i 59 29,371 .... 10 ,10 7 9,933 ......................... $ 4,803,771 Assessment for Expenses of Board of Governors ..................... $ 4,346,585 Federal Reserve Currency: Cost of Redem ption................................................ $ 9,766,691 Current Net E arn in gs........................................................... Additions to Current Net Earnings: Profit on Sales of U. S. Govt. Sec. (net) ....................... $ 4> 302 $ 7 ,3 7 i 377 ..............$ 60,800 $ 7,748 $ 11,4 58 Deductions from Current Net Earnings: 0 0 0 Reserve for Contingencies........................................... ........... 260,627 438 ................. $ 2 71,7 35 $ 11,8 96 Net Deductions from Current Net Earnings.................. ......................... $ 210,935 $ 4,148 Total Deductions ............................................... Net Earnings before payments to U. S. T reasury......... ......................... $12 ,2 0 1,8 2 3 Paid to U. S. Treasury (Interest on F.R. Notes) ......................... 10,587,139 $ 9,762,543 8,406,449 422,045 Transferred to Surplus (Section 7 ) .................................... ......................... 1,176,345 934,049 Balance at Close of Previous Y ear.................................... ......................... $18,520,204 $17 ,5 8 6 ,15 5 Surplus Account (Section 7) Transferred from Profits of Y ear....................................... ................. T J 76,345 Balance at Close of Y ear................................................................ $19,696,549 934,049 $18,520,204 27 of comparison because it was in July of 1954 that the Federal Reserve Act was amended to allow Federal Re serve banks to pay out the fit notes of other Reserve banks. Since the Minneapolis bank has traditionally received more currency issued by other Reserve banks than those banks receive of Minneapolis Reserve notes, this bank in recent years has fre quently been in the position of pay ing out the notes of other Reserve banks rather than its own. This has resulted in an increase in the volume of the Minneapolis bank’s fit-for-use notes on hand and a decrease in its note circulation. BAN K M A N A G EM EN T The year 1957 saw changes in the directorate of both the head office of the Federal Reserve Bank of Minne apolis and in that of its Helena Branch, plus changes in the Ninth district’s representation on the Fed eral Advisory Council. The bank was saddened in No vember by the death of Mr. Joseph F. Ringland, President of the North western National Bank of Minne apolis, and Class A director of the Federal Reserve Bank since January 1, 1956. At year-end this vacancy was unfilled but Mr. John A. Moorhead, new President of the Northwestern National Bank, was elected in Jan uary, 1958, to serve the unexpired portion of Mr. Ringland’s term. At the annual election in Novem ber, Mr. Harold C. Refling, Cashier of the First National Bank in Bot 28 tineau, North Dakota, and Mr. Ray C. Lange, President, Chippewa Can ning Company, Inc., Chippewa Falls, Wisconsin, were both re-elected as directors for three-year terms com mencing January 1, 1958. Mr. Refling is a Class A director and Mr. Lange a Class B director. In December the Board of Gover nors of the Federal Reserve System redesignated Mr. Leslie N. Perrin, Director, General Mills, Inc., Minne apolis, as Chairman and Federal Re serve Agent for 1958. At the same time the Board reappointed Dr. O. B. Jesness, Agricultural Economist, St. Paul, as Class C Director for a threeyear term beginning January 1, 1958, and redesignated him Deputy Chair man for 1958. In September Mr. Julian B. Baird, Chairman, First National Bank of St. Paul, resigned as Ninth district representative on the Reserve Sys tem’s Federal Advisory Council as a result of his appointment as Under secretary of the Treasury. The board of directors elected Mr. Gordon Mur ray, President of the First National Bank of Minneapolis, to fill out Mr. Baird’s unexpired term. In December Mr. Murray was re-elected to the Advisory Council for 1958. There were also two changes in the Helena Branch board effective Janu ary 1, 1958. Mr. O. M. Jorgenson, Chairman of the Security Trust and Savings Bank, Billings, Montana, was elected by the board as a Branch director for a two-year term to suc ceed Mr. A. W. Heidel, President, Powder River County Bank, Broad- us, Montana. The Board of Gover nors appointed Mr. John M. Otten, farmer and rancher of Lewistown, Montana, to a two-year term as Vice Chairman to succeed Mr. George R. Milburn, Manager, N-Bar Ranch, Grass Range, Montana. Dr. Carl McFarland, President, Montana State University, Missoula, Montana, served as Chairman of the Branch board during 1957 and will also serve in that capacity in 1958. There were also several changes in the official staff of the bank during the year. The most notable was the retirement on March 31 of Mr. Oliver S. Powell as President of the bank, and the election as his successor of Mr. Frederick L. Deming who had previously been First Vice President of the Federal Reserve Bank of St. Louis. Mr. Powell had served as bank President since 1952 following two years as a member of the Board of Governors of the Federal Reserve System and 14 years as First Vice President of the Minneapolis Federal Reserve Bank from 1936 to 1950. Other changes were the retirement on February 1 of Mr. Earl B. Larson, Vice President and Cashier, and of Mr. George M. Rockwell, Assistant Cashier. In December Mr. Frederick J. Cramer was advanced from Per sonnel Officer to Assistant Vice Pres ident, effective January 1, 1958. MISCELLANEOUS ACTIVITIES Some of the bank’s activities, such as many of those carried on by the Research, Examinations, Personnel, Public Services and Planning de partments are difficult to measure statistically but are nonetheless high ly important to the performance of the bank’s functions and responsi bilities. The activity of these depart ments tends to rise or fall with an increase or decrease in the work of other departments of the bank where activity volume can be more easily measured. The Research department was particularly busy during 1957 with numerous studies and surveys which it was called upon to make; it was necessary to add several persons to the departmental staff. Most important of the bank’s pro gram of meetings and conferences was the two-day Open House and Conference for Ninth district bank ers held in May to observe the com pletion of our new building. Other meetings included the 9th annual Workshop for college teachers of money and banking and economics held in May, and the 14th annual Examiners’ Conference in Novem ber for representatives of all federal and state bank supervisory agencies in the district. During the year one new national bank opened for business, two na tional banks consolidated, two state member banks converted to national charters, and one state bank became a Federal Reserve member. The net result was a membership gain of one bank during the year; 474 members at the end of 1957 as compared with 473 on December 31, 1956. There were 1,295 banks in the Ninth dis trict at the end of 1957 compared with 1,296 a year earlier. 29 DIRECTORS OF THE FED ER A L R ESER V E BANK OF M INNEAPOLIS AND H ELEN A BRANCH DIRECTORS Class A A. Jo h n M President, Northwestern National Bank of Minneapolis, o o rh ead, 1958 Minneapolis, Minnesota H aro ld N. T h o m so n , Vice-President, Farmers & Merchants Bank, 1959 Presho, South Dakota H a ro ld C. R e f l in g Term expires December 31 , Cashier, First National Bank in Bottineau, 1960 Bottineau, North Dakota Class B T . G. H a r r i s o n , President, Super Valu Stores, Inc., Hopkins, Minnesota J. E . C o rette , President and General Manager, Montana Power Company, 1959 Butte, Montana R C. ay L ange , 1958 President, Chippewa Canning Company, Inc., 1960 Chippewa Falls, Wisconsin Class C President and General Manager, Lake Shore, Inc., Iron Mountain, Michigan 1958 N . P e r r i n ,1 Director, General Mills, Inc., Minneapolis, Minnesota F. A 1959 lb ee F l o d in , L e s lie O. B. J e s n e s s , 2 Agricultural Economist, St. Paul, Minnesota 1960 H ELEN A BRANCH Appointed by Federal Reserve Bank J. W Financial Vice President and Treasurer, Western Life Insurance Company, Helena, Montana il l a r d J o h n so n , 1958 G eo . N . L u n d , Chairman of the Board and President, The First National Bank of Reserve, Reserve, Montana O. M. J o r g e n s o n , Chairman, Security Trust and Savings Bank, Billings, Montana 1958 1959 Appointed by Board of Governors President, Montana State University, Missoula, Montana 1958 M. O t t e n , 3 Farmer and Rancher, Lewistown, Montana 1959 C a r l M c F a r l a n d ,1 Jo h n 1 Chairman 2Deputy Chairman 3Vice Chairman OFFICERS OF THE FE D E R A L R E S E R V E BANK OF MINNEAPOLIS AND H ELEN A BRANCH OFFICERS F r e d e r ic k A lbert W. L. D e m in g , M il l s , Banking Department E. C arl B F r e d e r ic k J o h n J. G J. C il l e t t e , A Assistant Vice-President , ram er First Vice-President Audit Department Assistant Cashier e r g q u ist , laren ce A rthur M C W. en W. h r is t ia n M arcus M a u r ic e C lem en t G Vice-President h n stad O. Sath er , N ic e , an , J r ., K. G General Auditor , c C , Vice-President Chief Exam iner o n n ell ro bel, Fiscal Agency— Government Securities e l v in W il l ia m B. H o lm gren C. Bro nn er , Vice-President Assistant Cashier , Legal Department S ig u r d U elan d , Vice-President, Counsel and Secretary Assistant Cashier H . Stro th m an Assistant Vice-President , Assistant Vice-President ie s , G. M aro ld o g er M Operating Research Officer ys e n t , O R V Vice-President & Cashier ko th , J o h n so n , E. L il f o r d Orth W. cN u lt y Bank Examination Department H Assistant Cashier J. M rthur R C President Research Department Vice-President Assistant Vice-President F r a n k l in O scar F. L Director of Research Business Economist L . P ar so n s, it t e r e r , H ELEN A BRANCH K K. F o s s u m , Vice-President assigned to Helena Branch H yle A . B e r g l u n d , Assistant Vice-President assigned to Helena Branch aro ld e a t h , Assistant Cashier assigned to Helena Branch John L . H MEMBER OF FED ER A L ADVISORY COUNCIL u r r a y , President, First National Bank of Minneapolis, Minneapolis, Minnesota G ordon M INDUSTRIAL ADVISORY COMMITTEE S h eldo n V . W John A. M. ood, B u sh , H. D aggett, A. B. H e ia n W alter M. , R Minneapolis, Minnesota, Chairman Ishpeming, Michigan St. Paul, Minnesota Chippewa Falls, Wisconsin in g e r , Sr., Minneapolis, Minnesota 31
