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ANNUAL ST A T E M E N T 1955 FEDERAL RESERVE B A N K OF M I N N E A P O L I S FOREWORD N T H E following pages is the annual report of this Federal Reserve Bank for the year 1955. The past year has been one of unexcelled activity in the United States, and this tremendous rate of business expansion has been reflected in the Ninth Federal Reserve District, although the pace of the increase in this district was somewhat below the advance in other parts of the United States. Agriculture did not share in the boom which was almost nationwide. O This Federal Reserve Bank performed its usual functions throughout the year. Some activities expanded and others were curtailed, as related in succeeding pages. Throughout the year the staff of the bank performed with high morale, in spite of the inconvenience of building operations at the head office. For this high spirit, which operated to keep efficiency high and the turnover of employees low, we wish to thank the entire staff. Chairman of the Board P E O P L E ON Population in our district has had both ups and downs . ♦ * here's the latest information frontiers were settled by people “ on the move,” spreading westward to break new soil and bring virgin resources into production. Today those fron tiers are gone, but people still are “on the move.” The patterns of economic need, trade and income are constant ly being redrawn. As consumers and as producers, people determine the pattern of economic activity. When, where and why people move affects the pattern. This year we’ve chosen to talk about population—about peo ple “ on the move,” with special em phasis on “ what’s happening here” and “ what may happen.” O ur early People are on the move. Did you know, for example, that nearly half of the counties in the Ninth dis trict had fewer people in 1954 than they had in 1950 ? Perhaps you knew that our population here has grown more slowly than the national aver age. This was especially true during the late ’30s and ’40s. At that time some of our Ninth district states counted fewer and fewer inhabitants each year because people kept “ on the move”—mostly out. The years since 1950 haven’t com pletely reversed the trend of slower population growth in our district, but they have proved better. From 1950 to 1955 the Ninth district (all 264 million acres of it) counted a growth of about 275,000 persons. But—dur ing the same period four times as many new persons were tallied in the Los Angeles area alone. For each new person in our district since 1950, more than eight were added to Cali fornia’s population. But, as we said, we’re doing better. During the ’40s our annual rate of population growth for the entire dis trict was less than 0.4 percent per year, about one-fourth the national average. Since 1950 we’ve been add ing people at a rate that takes us up 3 to one-half the national average or about 0.8 percent per year. There are about 6 million of us living in the Ninth district—as close as can be estimated with people being born or dying, moving in or moving out each day. Chart i is a recent sta tistical “ snapshot” showing where o j[> Cities over 2500 •• Metropolitan areas P m a J w c V m Towns under 2500 *• A , people live in our district. Of course, like any family “ snapshot” the pic ture soon becomes out-of-date. As you can see, a substantial share 2 ,5 0 0 % r M ?Z> of our district’s population is jammed into just a very few large cities. One person out of four lives in our three largest metropolitan areas — Minneapolis-St. Paul (1,190,000), DuluthSuperior (260,000) and Sioux Falls (74,000). About half of us live in cities of 2,500 or more and a fourth in towns and rural communities of less than 2,500 inhabitants. Three-fourths of us, then, live in these “pinpoints” that t o w n s and cities appear to be on the map. The remaining fourth of us are spread throughout the vast spaces in be tween. Incidentally, those of us who live in a city or town in this district, will probably make a living by processing farm products, selling, financing or distributing merchandise b e c a u s e those are the main businesses of the district. Or, we may perform some service for our community, help manufacture some product or con struct the plant for it. In the Lake Superior area, in western Montana, or in the Black Hills some of us will be engaged in mining or a related activity. But if we live “ way out,” be tween the towns and the cities, chances are we’re engaged in farm ing or ranching. That’s our family snapshot of Ninth district population as of 1955. But just as people change, so does population. The over-all increase for our district between 1950 and 1955, as we mentioned, was about 275,000 persons. This represents a 5 percent increase, which stands well below the LIVE IN THE NINTH DISTRICT national average of 9 percent as Chart 2 shows. CHART 2— PERCENTAGE POPULATION CHANGE 1950-1955 Percent The 'W hy' of Our Slower Growth What causes our growth to be slower than the national average? Let’s analyze it. First of all, natural changes in population are the result of two basic things—people are born and people die. If these were the only things that affected population in an area, we would be slightly ahead of the national average because (1) in recent years the birth rate in our states has exceeded the national aver age by 1V2 to 2 /4 births per 1,000 people per year (the national average was 25), while (2) our death rate does not exceed the national rate—in fact, in 1940, 1951 and 1952 (the three years we checked) it was from 14 to i l/ 2 less per 1,000 persons. But births and deaths are scarcely half the story. A second and much more import ant side is the fact that we don’t stay “ put.” Some of us move within the district, some to the outside. We have seen here, as in the rest of the nation, a steady movement of people off the farms. Chart 3 shows the decline in our farm numbers from 1920 to 1955. In the last five years alone about 3 million Americans migrated from farms. Today farm residents make up only 13.5 percent of the total pop ulation. In 1950 that figure was 16.6 percent. In our district a larger pro portion of people lives on farms than in any other Federal Reserve district. But as the chart shows, in our district picture as in the national one, the trend is away from farms. 6 The Census bureau recently report ed that the number of farms in the nation declined between 1950 and 1954 by nearly 600,000, a drop of 11 percent. This is the sharpest decline in our history. It reduced the number of farms to 4.8 million—the smallest number since 1890. For the Ninth district as a whole the decline during these same years measured about 6 percent. The ex perience of individual states looks like this: Num ber of Farm s I 95° !9 5 4 Minnesota . . . . 1 7 9 , 1 0 1 16 5 ,2 2 5 33,0 5 9 M ontana ......... 35*085 N orth D akota. . 6 5 ,4 0 1 6 1,9 3 0 South D akota. . 66,452 62,520 W isconsin (entire state) . 16 8 ,5 6 1 15 3 ,5 5 8 Percentage C hange — 7.7 — 5-8 — 5.3 — 5.9 — 8.9 During the last 30 years the num ber of large farms (greater than 1,000 acres) has doubled nationally. In re cent years the number of small farms in the nation (that is farms less than 10 acres) has also increased marked ly. These small farms are the result of two trends in living patterns: to ward part-time farming by city-folk who like country life; and toward part-time or full time work by farm ers who want city jobs. More than two-thirds of the decline in farm numbers actually has come in the size-range of 10 to 100 acres. Improved Technology— Fewer Farms What caused the decline ? The great impact of technological change on farming, especially in the past 15 years, has been the primary cause. Since 1940 farm output has increased 35 percent while farm population has declined 27 percent. More machines, improved seeds and fertilizers, and more efficient farmers—all make it possible for fewer people to produce more on fewer but (mostly) bigger farms. To play on the words of a famous speech . . . never before have so few produced so much for so many. CHART 3— PROPORTION OF PEOPLE ON FARMS, 9TH DISTRICT A ND U.S., 1920 TO 1955 Percent ♦Estimated for 1955. Includes Minnesota, Mon tana, North Dakota and South Dakota. People leaving our farms go to cities or to small towns—some in our district, some outside. Back in the 1940s when parts of our district were losing population, cities in our dis trict were growing—not as fast as cities in other parts of the country— but still growing. The following fig ures show this: Percentage Change (1940 to 1950) Four Ninth- United District States States People living on farms. . .— 19 .3% — 2 3.7% People living in small towns .....................+ 1 6 . 3 + 1 5 .4 People living in cities. . . . + 1 9 . 7 -\-29.6 In round numbers the percentage in creases shown here mean that our cities and towns added about 540,000 people during the decade of the ’40s. Some of these came from the farm; some moved in from outside the dis trict. But it’s obvious that many people left the district entirely when you consider the great number of people who left our farms (332,000) and our natural increase (620,000). Census bureau estimates of the net move ment of people out of each of our states are shown in Table 1. Figures on the average annual natural in crease, the net loss to the Armed Forces and the resulting change in civilian population are also listed. Comparing the present decade of the ’50s with the ’40s, the accelerated rate of growth in this district is clearly evident. We can attribute this to two things: a larger natural increase (ex cess of births over deaths) and a bet ter balance between people moving out and those moving in. But the 7 tronic computers, boats and outboard motors . . . the more we have to offer service as lawyers, teachers, ministers or resort operators. This continued movement from farm to city, from farming to in dustry is one vehicle for bettering our standard of living. Living standards have been rising for the whole na tion. The accompanying figures on per capita income show how we’re faring in this district. conclusion is clear that our district continues to be a net “ exporter” of people. The Meaning of Movement Away It is too easy to conclude that some how we suffered because more peo ple decided to leave us than to join us. Actually, for several reasons the opposite would appear nearer the truth. In the first place, agriculture—our chief industry—requires fewer work ers year after year because of tech nological improvements. Employing more workers than needed is uneco nomic. In the long run this would tend to reduce the income of every body in the industry. Second, workers leaving the farms make a contribution to the economy in some other activity. During the war, for instance, they helped make much-wanted war goods. Today, the fewer workers we need to produce food and fiber, the more we have to help make autos, television sets, elec 1940 1950 United States $ 595 1,491 1954 !>77o Four District States $ 484 1,376 Four States as Percent of U.S. 81 92 1,555 88 Some of the income increase must be written off as the result of price increases—that part is illusory. But even when this is fully considered there still is an increase in the vol ume of goods and services available per person. The significant point for us in this district is not only the absolute or over-all increase, but also the fact that we’re closer to the na TABLE I— AVERAGE A N N U A L C H A N G E S IN POPULATION I | Natural Increase N et C ivilian 1 O ut-m iqration N e t Loss to A rm e d Forces Net Civilian Increase 19,100 3,000 — 2,300 700 20,500 Annual change during the period 1940 to 1950: M in n e so ta................ M o n ta n a .................. North D akota........... South D akota............ 36,100 7,200 9,800 8,900 14,300 3,500 1 1,500 7,600 2,700 700 600 600 Total................. 62,000 36,900 4,600 Annual change during the period 1950 to 1954: M in n e so ta................ M o n ta n a .................. North D akota........... South D akota............ 53,500 1 1,250 12,750 13,250 7,000 2,500 7,250 7,000 10,000 2,250 2,000 2,500 Total................. 90,750 23,750 16,750 36,500 6,500 3,500 3,750 50,250 tional level of per capita income than we were in 1940. To be sure, in large part our per capita income d e p e n d s on farm prices. For example, the slower rise in per capita income in the district since 1950 is largely the result of lower farm prices. Nevertheless, our relative position would have risen more slowly in the ’40s and dropped more rapidly in the ’50s if everyone had insisted on staying in their lo calities or in the jobs they had in 1940. In short our relative position is helped as workers move to the lo calities and occupations where their productivity is the highest. Economic con d ition s constantly change. All of us must make adjust ments to those changes. Working where we are needed most results in more abundance for everyone. The volume of business (hence the need for services such as banking) de pends as much if not more on the income of people as on their num ber. As people become better pro ducers their incomes rise. As their incomes rise they can spend more. And, as their incomes rise they can save more, and invest more. Prospects for the Future In the near future we can expect the national population to increase by about 2 l/ 2 to 3 million persons annually. For the year ending No vember 1, 1955 the growth was 2.8 million persons ( a rate of 1.7 per cent). Over a longer period we can expect successive “waves” of popula tion growth. For example, an un usually large number of babies were born in the early ’40s and again soon after World War II. About 10 years from now these babies of the ’40s will be doing their share for our vital statistics by marrying, and having families. At that time the annual in crease in population will be even larger than it is now (assuming birth rates remain similar). Mainly because of continued high birth rates it has been necessary to revise upward time after time the population projections (estimates of what population will be in the fu ture). An early postwar projection suggested a population of 165 million for the U.S. in 1990. This figure was already reached in mid-1955. In October 1955 the census bureau released four revised projections, any one of which is considered reason ably possible. The four estimates of the future size of the national popu lation range from 186 to 193 million for 1965 and from 207 to 229 million for 1975. Prospects for the nation, then, are that our population will continue to grow rapidly. Outlook for the Ninth District How will our district share in this population growth? We’ve already implied that this will largely depend on our future migration. In the re cent past more people moved out of the district than into it. But these migration patterns are constantly changing as we Americans are be coming more mobile all the time. Each year during the past eight years, for example, about one out of 9 TABLE 2— POPULATION, 1950 AND 1955, WITH PROJECTIONS FOR I960 AND 1965 Percentage Change Thousands of People M in n e so ta.............. M o n ta n a ................ North D akota.......... South D akota.......... 1950 C ensus 1955 Estimate 2,982 591 620 653 3,174 633 642 677 I960 Proiection 3,322 662 633 686 1965 Projection 19501955 19551960 19601965 3,479 693 642 705 6.4 7.1 3.5 3.7 4.7 4.6 — 1.4 1.3 4.7 4.7 2.8 1.4 Four Stales........... 4,846 5,126 5,303 5,519 5.8 3.5 4.1 United States.......... 150,697 165,248 176,103 188,593 9.7 6.6 7.1 every five of us has moved to a different house. And about 3 out of every 20 persons moving have moved to different states. Consequently, pop ulation projections for particular states or geographic areas based on some earlier migration experience won’t necessarily fit present or future migration experience. State projec tions are, therefore, subject to rather wide margins of error. In spite of these uncertainties, early in 1955 the Census bureau made seven illustrative projections for each state to provide a working idea of the size of population in i960 and in 1965. Table 2 shows only the highest of the seven projections for each of the four states entirely in the district. For each of the four states these projections may be compared with the actual population as tallied by the census in 1950 and estimated by the Census bureau in 1955. Notice that the 1955 population for North Dakota (estimated as of last July 1) exceeds the projection for i960 and equals the one for 1965. In contrast the mid-1955 estimates for the other three states are smaller than the i960 projection—only slight ly smaller, though, in South Dakota. In each state the population growth 10 rates assumed in making projections for the next two 5-year periods are lower than the actual growth of population during the 5-year period ending last year. Or in other words if growth rates in the future adhere to our “ new” experience of the past five years the projections will prove too low. But the rate of population growth we’ve had in the past five years could be slowed down during the next ten years. Either lower birth rates or migration out of the district in large enough numbers could do this. If so, the growth of population in the district will be slow again— the way it was in the 1940s when it stayed around one-fourth of the national rate. On the other hand, if we keep going the way we have for the past five years, our rate of popu lation growth here will stay near one-half of the national rate. At the higher rate, the combined popula tion of the four states should be nearer 5.7 million in 1965 than the 5.5 million estimated in the table. Summary We might tie together the things we have talked about in these few summary statements: (1) It seems probable that the rate of population growth in the Ninth district will continue to be below the national average because of continued out-migration. This is based on the importance of agricul ture in our district and on the as sumption that there will be further and substantial productivity gains in this industry. A slowdown in such developments—or a great increase in the demand for agricultural pro ducts—could change the picture. (2) Some of our counties—those that are predominately rural — may expect further declines in the num ber of inhabitants in the future as the farm population continues to shrink. (3) Between now and i960 we may expect to add at least 200,000 and perhaps as many as 300,000 per sons to our population, and all of this growth will take place in our cities and towns. Over-all, we are more uncertain about the population prospects for the district than for the nation. If industrial expansion within the dis trict lags behind the national average, as it did during the ’30s and early ’40s, then we can expect substantial migrations out of the district and a relatively slow rate of population growth. On the other hand, if min ing, manufacturing and other nonagricultural industries in the district develop at a rate equal to or faster than the rest of the nation, the im pact upon population within the dis trict will be more favorable. M illio n People In general, people will go where they have the best opportunities for finding a livelihood. Whether that will be in the Ninth district or else where will depend on the many factors which determine the loca tion of industry and comparative rates of economic development in different parts of the nation. Over the span of years the greatest gains in living standards, both here and elsewhere, will be made if free mar ket forces are permitted to resolve these factors. And one expression of a free market will continue to be .......... people on the move. A MORE DETAILED description of population patterns and trends in the Ninth district may be ob tained upon request from the Research Department, Federal R e s e r v e Bank, Minneapolis 2, Minnesota. The district economy in 1955 H E P O P U L A T I O N article brought out the fact that agricul ture is much more important to the affairs of the Ninth district than it is to the affairs of the nation generally. This importance can be expressed in a number of ways: for example, the chart on page 7 shows that the pro portion of the population which lives on farms is almost twice as high in the district as it is for the nation as a whole. Another measure of the impor tance of farming to the district is the percentage of total personal income which is farm income. Table 3 indi cates that even in 1954—a year of declining farm prices—the fraction of total personal income going to farmers in South Dakota was more than one-fourth. In Montana and North Dakota the fraction was about a fifth; in Minnesota, which is much more industrialized than other dis trict states, more than a tenth of per sonal income went to farmers. For the nation as a whole, little more than a twentieth of personal income was claimed by farmers. T a b le 3— R a tio o f F a rm In co m e t o T o t a l P e r s o n a l In c o m e in 1954* Minnesota ................................................11.4 Montana .................................................. 18.4 North Dakota .........................................21.3 South Dakota ......................................... 28.5 United States ......................................... 5.3 ^Source: Survey of Current Business, Sept. 1955. 12 Having demonstrated the impor tance of farming, it is apparent that a review of 1955 economic develop ments in the district might well be gin with a discussion of district farm ing, our most important single in dustry. Good Weather Helped Output The forces of nature, supplement ed by a good deal of assistance from the hand of man, combined in 1955 to produce a bountiful harvest in most of the Ninth Federal Reserve district. Not only crops, but live stock, too, were produced on a scale seldom equaled in the past. The pro duction of all major crops save corn and potatoes was increased during 1955. The absence of adequate mois ture in parts of Minnesota and South Dakota served to reduce the yield of ground planted to corn. This in stance of adverse weather, however, was the exception not the rule. As might be expected, particularly since farm production outside the district was also larger than a year earlier, the increased flow of market ings by farmers was accompanied by falling prices for all major crops and for cattle and hogs. Proportionately, prices fell a bit more than output rose; for this reason, the cash re ceipts of district farmers from mar ketings are estimated to have been slightly lower in 1955 than in 1954. T able 4— C a sh M Incom e fro m F arm a r k e t in g s * (Dollar amounts in thousands) 1954 Michigan ( 15 co’s ) . . .$ 26,430 Minnesota . . . 1,265,658 Montana . . . . 396 ,16 1 North Dakota. 4 7 1,233 South Dakota. 570,231 Wisconsin (26 co’s ) . . . 209,416 District ......... 2,939,129 1954 $ 1955 in % of 1954 25,662 1,263,304 369,868 512,749 509,017 97 100 93 109 89 202,679 2,883,279 97 98 ♦Source: U .S .D .A .— “ Farm Income Situation” In this, district agriculture gener ally followed national trends. But the district decline in farm cash re ceipts was slightly more moderate than the 3-percent decline estimated for the nation. District receipts from marketings of farm products were down roughly 2 percent during 1955, compared with 1954. Farm receipts by individual states, however, show wider differences both above and below a year ago. For 1955, South Dakota farm income was down an estimated 11 percent; Montana farm ers received about 7 percent less dur ing the year. Minnesota farmers re ceived practically the same income as they had received in 1954 and in North Dakota farmers enjoyed a 9percent increase in cash receipts com pared with 1954. Large crop and livestock market ings helped to offset the effect of lower prices and kept district farm income from dropping more than 2 percent b e l o w the previous year. Wheat production was up 39 percent from 1954’s harvest. Total crop pro duction for the district was second only to the record harvest of 1948. Crop conditions were unusually good in all states except South Da kota, where late summer dryness hurt crop yields. Responding to relaxed acreage re strictions on production of durum wheat, Montana wheat growers in creased their durum output to rough ly 5 million bushels. (How much of this would qualify as milling durum is not accurately known.) Less rust damage and improved moisture con ditions throughout the main durumproducing area of the Dakotas and Minnesota resulted in a three-state output of 14 million bushels com pared with only 5.6 million in 1954. Hog prices were sharply below 1954 levels during the entire year. Cattle prices also experienced sig nificant declines. Big gains in the volume of livestock marketings helped to offset part of the effect of lower prices, but not all of it. Dur ing September-December of 1955, for example, monthly receipts of barCHART 4— NINTH DISTRICT CROP PRODUCTION 1955 as a percent of 1954 ' DECREASE IN C R E A S E Wheot (all) +39% ' Barley +18% Soybeans +6%1 ,7l Oatj + 3% >±j + J : ] i | 0% Flax - 3% Com 13 rows and gilts at the CHART 5— BARROW S A N D GILTS— MARKETINGS. PRICES A ND GRO SS South St. Paul public RETURNS AT SOUTH ST. PAUL (1954 AND 1955) market averaged 25 percent larger than in 1954. Prices, on the other hand, r a n g e d from 18 percent to 40 up 2 5 °/. 0 percent b e l o w 1954 — • 2-4 ' levels for these months. 1 .9 1 As a result, gross re turns to hog produc ers from the sale of barrows and gilts to taled 14 percent less for farm land by present farm op than during the same 1954 period. erators who see an advantage in For the entire year, marketings of spreading their machinery and oper barrows and gilts totaled 25 percent ating overhead on a larger-sized unit. larger than in 1954, prices averaged The volume of farm land transfers 30 percent less than 1954 prices, and has been relatively small, however. total returns to producers were 14 In wheat areas particularly, observ percent smaller. (Figures on barrows and gilts do not include all hogs ers report aggressive bidding for marketed; nor do South St. Paul fig available land in order to offset the ures relate exclusively to marketings effect of wheat acreage restrictions. from the Ninth district. However, This has also put added economic the above figures illustrate trends in pressure on small and medium-sized hog marketings, prices and returns farming operations, and has been an during 1955.) Totals for the eight important factor in the shifting of major midwest markets show a sim acres planted to major crops—as in ilar picture. Marketings of both dicated in chart 6 on page 15. slaughter and replacement cattle Average prices paid by farmers for were also larger during the fall goods used in production have main months of 1955, and prices of both tained a very stable level, even as kinds were lower than a year ago. prices of farm commodities and farm Despite lower farm prices and the incomes have declined. Prices paid drop in farm income, land values in for most manufactured items pur all four district states rose during the chased by farmers have tended to in year ending July 1, 1955—-in three of crease recently to some extent. But the four states to a record high level. these markups have been about off This trend in land values undoubt set by lower prices for feed, live edly reflects a number of complex stock, and other supplies bought and factors, among them active bidding sold by farmers among themselves. 14 CHART 6— ACRES PLANTED TO M AJOR CROPS 1955 as a percent of 1953 O a ts 4 0 .5 % Com 4-1 % Flax 4-16 % Barley +62 % / Soybeans +81 % Oiher Aspects of the District Economy While the condition of the dis trict’s farm economy appeared some what less prosperous in 1955 than in 1954, the same observation cannot be made concerning the non-agricultural enterprise of the district. The most comprehensive measure of ac tivity in that sector of the economy is the level of non-agricultural em ployment. An inspection of chart 7 reveals that every major component of em ployment in the district registered an increase during 1955. In response to the growth in demand for prod ucts by business and consumers, in dustrial firms expanded their output sharply. For the second half of the year manufacturing and mining operations were at or near capacity. This expansion led to a rise in em ployment, to an increase in hourly wage rates and, in the latter part of the summer, to overtime pay which hit an all-time high. The 1955 expansion in manufac turing established new industrial em ployment records in the two Ninth district states of Montana and North Dakota, where manufacturing firms employed more workers than in 1953, the previous peak year for in dustrial activity. In the other district states manufacturing employment did not equal the ’53 record. Over three-fourths of the indus trial employment is in the eastern half of the district. The expansion in industrial output there did not pro ceed as rapidly as in more heavily industrialized regions of the United States. For example, the number of manhours worked in Minnesota’s industrial plants from the first of the year through July was below the number for the c o r r e s p o n d i n g months of ’54. The employment fig ures in January and February 1955 were down as much as 7 percent from those of ’54. Following Febru ary, industrial employment rose steadily but did not reach the preCHART 7— INCREASE OF NONAGRICULTURAL EMPLOYMENT— NINTH DISTRICT (Last half 1955 compared to last half 1954) T housand Em p lo yees 10 6IS**- 111 4III ill 2 111 1IIIIS1I1II fill M fg . M in i n g C on st. Trade S e rv ic e O th e r 15 vious year’s total until July. Employ ment continued to expand sharply during the summer, reaching a sea sonal peak in September. The decline last fall was less than in the preced ing year, and December employment was almost 4 percent above the 1954 total for December. The low level of employment in manufacturing plants in Minnesota in the first half of 1955 was traced largely to a smaller number of work ers employed in durable-goods in dustries. Employment in the manu facture of both electrical and non electrical machinery (other than ag ricultural) and lumber and wood products was down significantly. In northwestern Wisconsin and Upper Michigan industrial employ ment followed a similar pattern. It was down during the first half of ’55, principally among firms manufactur ing machinery and rubber products. Payrolls Hit All-time High In addition to widespread gains in industrial employment, a longer work week coupled with increases in hourly rates and more overtime pay, boosted weekly earnings mate rially in ’55. Average weekly earn ings in every Ninth district state rose by more than 5 percent over the ’54 averages, and in Montana and South Dakota by as much as 7 and 8 per cent respectively. South Dakota aver age weekly earnings began to rise sharply in the fall of ’54. They were only slightly above $60.00 in the first half of ’54, but they had risen to $77.82 by November ’55. In Mon 16 tana, where w e e k l y earnings are larger because of the higher hourly rates paid in metal mining, average weekly earnings in October ’55 were up to $90.31; they were $82.25 in October of ’54. In Minnesota, weekly earnings last N o v e m b e r almost touched $82.00 ($81.99) as compared with a high of $76.38 in ’54. Miners Were Busy Mining areas, as well as industrial centers, felt the effect of the econom ic boom. More minerals were con sumed in the accelerated pace of in dustrial production, especially in dur able goods production. The principal mineral mined in the Ninth district is iron ore, about 80 percent of which is mined in Min nesota. Although an increasing quantity of foreign ores have been imported by U. S. steel mills, the Lake Superior iron-ore region still remains the chief source of supply. At the close of the Great Lakes naviga tion season on December 8, 1955, 87.5 million long-tons had been shipped, an increase of 44 percent over the 60.7 million long tons shipped in ’54. This was only 8.5 million long-tons less than was shipped in ’53, when an all-time high record was set. The 1954 imports of iron ore totaled 15.8 million long tons, and in the first 10 months of ’55 imports totaled 16.9 million. An increasing proportion of lower grade ores is mined in the Lake Superior region. These ores are beneficiated, that is washed or sintered to reduce the foreign matter, before shipping to blast furnaces. For in stance, one-third of the ores shipped were so treated in ’50; the percent age had risen to 38 percent in ’54. As 1955 drew to a close, a new era began in the iron-ore industry. The Reserve Mining Company, which has a new plant located on the north shore of Lake Superior, at Silver Bay, Minnesota, began to concentrate taconite and pelletize the iron-ore concentrate. This marked the be ginning of the manufacture of tac onite pellets on a large commercial scale. Sharp Rise in Mineral Production Price increases stimulated nonferrous mineral production. The price of copper rose from 29.7^ per pound in December ’54 to 44.0^ in Septem ber ’55. In the remaining months of the year it declined less than 1.5$. The price rise of other minerals was not as high, but it was enough to en courage producers to expand output. The output of copper in Montana and Upper Michigan in ’55 totaled about 310 million pounds, an in crease of 63 percent from the ’54 pro duction. Silver recovered from min erals in this district aggregated 4.8 million fine ounces last year, an in crease of 9 percent from ’54. Zinc and lead produced in Montana are a small proportion of the national to tal, but the output was up 13 per cent. More gold was recovered last year from other minerals, but less was extracted from direct ores. In the first 10 months of ’55 gold pro duced in this district aggregated 459,- 606 fine ounces, down 2.5 percent from 1954. A Boom Construction Year A large s h a r e of the economic boom in 1955 in the Ninth district was concentrated in the construction industry. A l t h o u g h construction workers have accounted for only about 7 percent of the district’s non farm employment, one-third of the total rise in employment last year occurred in this industry. At the sea sonal peak o v e r 5,500 additional workers were employed. High employment on construction projects continued into the fourth quarter. The number of workers em ployed as of mid-October was even further above the year-ago total than was true in the third quarter. In No vember, the activity on construction projects dropped sharply due to the early arrival of winter, and in the last two months of ’55, fewer workers were employed in the construction industry than in the same period of the year 1954. Home builders had another big year in ’55. According to statistics compiled on the number of dwelling units authorized in this district, more units were built in both ’54 and ’55 than in the boom year of 1950. Ap proximately 24,300 units were author ized in ’55 as compared with 22,000 in ’50. Even so, the market for houses apparently has not been exhausted. In a survey made by this bank last December, two-thirds of the build ers, suppliers of building materials and real-estate brokers replying to a *7 questionnaire reported a continuing strong housing market. A substan tial number of builders stated that they were planning to build about as many houses in 1956 as they had completed in ’55. Along with the high level of home building there was also a large vol ume of pratically all other types of construction in the Ninth district in ’55. There were many substantial in dustrial projects. For example, in the petroleum industry, a 450-mile crudeoil pipeline was constructed at a cost of about $18 million from Poplar Field in eastern Montana to link with midwest refining centers. This is the first pipeline outlet for crude oil from the Montana portion of the Williston basin. Another crude-oil pipeline costing $12.5 million was completed to Great Northern Oil Company’s new refin ery at Pine Bend, in Minnesota. Both the pipeline and refinery were placed in operation during ’55, and con struction of a new $15 million am monia plant was begun adjacent to the refinery. The list of major projects under taken last year extends into many other phases of industry to include capital formation in utilities, ferrous and nonferrous mineral processing, electronics and manufacturing plants. 18 The improvement of non-agricultural enterprise in the district, as re flected by employment gains, was somewhat less spectacular than in the nation generally. This is suggested not only by employment figures but by most other district indicators as well. Consider new automobile regis trations, department store sales, fur niture store sales, and bank debits. All of these magnitudes increased in the district during 1955, but by a lesser proportion than the national increase. T a b le 5— S e le c te d C h an ge fro m In d ic a to r s — 1954 to District . . .. + 16 % Department store sales . . ■ • + 3 Furniture store sales . . . . 7 Bank debits ..................... . . + 2 0.4 Bank deposits ........... . New car registrations 1955 Nation + 37% + + + + 7 9 7 3 Because the decline of economic activity in the district from 1953 to 1954 was less severe than for the na tion generally, it is not surprising that the recovery movement was also of lesser proportions here than in the nation. Thus, if department store sales in 1955 for the district and the nation are compared with 1953 rath er than 1954, the district gain com pares more favorably with the na tional gain. District member banks H E ECONOMIC conditions de scribed constituted the environ ment in which district member banks operated during 1955. Except for a failure of deposits to rise, the experi ence of district member banks paral leled that of all member banks in the nation; that is, loans increased rapidly (up 15 percent), a large amount of investments was liquidated, time deposits grew much more slowly than in 1954, and the banks bor rowed a great deal more than in T 1954- Member banks in only two of the twelve Federal Reserve districts re ported lower deposits at the end of 1955 (Dec. 28) than at the end of 1954 (Dec. 29); these were member banks in the Minneapolis and Kan sas City districts. It is significant that in both districts agriculture is a dom inant industry. The withdrawal of correspondent balances at city banks accounted for all of the deposit loss in the Ninth district. In part, these withdrawals resulted from the efforts of country banks to satisfy the strong demand for loans which confronted them in 1955. City banks too were called up on to finance an uncommonly large amount of borrowings. The rate of loan increase was approximately the same at city and country banks. But when the banks are grouped by states, substantial variations in the rate of increase are observed from a low of + 5 .1 percent at Ninth district member banks in Wisconsin to a high of + 2 9 percent at member banks in Montana. T a ble L 6— P e r c e n t I n c r e a s e oans in M 1955 em ber at B D of is t r ic t anks Michigan ..................................... Minnesota .................................. + 1 4*7 Montana .....................................-\-2g.0 North Dakota ............................+ I 5-4 South Dakota ............................+ 5-3 Wisconsin .................................. + 5*1 District ....................................... + i 5-° The $226 million increase of total loans at district member banks in 1955 resulted almost entirely from additional business, mortgage and automobile loans; balances in these classifications increased respectively by $117 million, $74 million and $29 million. Although the types of loans mentioned i n c r e a s e d at member banks in every district state, the rela tive importance of each type of loan varies widely by states. While busi ness loans, for example, approximate 17 or 18 percent of total loans in the Dakotas and Michigan, they are 38 percent of the total at member banks in Minnesota. That the character of bank lending differs widely within the district is demonstrated by the tabulation on page 20. The compo sition of total loans at the end of 1955 at Ninth district member banks 19 ts> O C o m p o s it io n o f L oans at Real Estate Loans I (A ) Secured by farm land.............................. 2 (B) Secured by residential property insured by F H A ....................................... 3 (C) Secured by residential property insured or guaranteed— V A .................. . N in t h D is t r i c t M em ber B a n k s on D ecem ber 31, 1955 -------------------- Country Banks ------Reserve Michigan Minnesota Montana No. Dak. So. Dak. Wisconsin Total City Banks 2 .1% 2 .4% 13-2 7-9 9.9 4.6 2 5.8 7-i 8.4 9.1 7-8 3 5-7 5.6 13.6 10.6 3-4 4 8.5 4.9 2.6 5 1.2 % 10.7 9-3 9.2 10.0 8.0 13.0 4.9 1 3 .1 5-7 4 (D) Secured by residential property not insured or guaranteed.................... 26.5 5 (E) Secured by other property..................... 10 .1 1 5.6 % 2 .8% 1.8 % 1.6 % .1 % 5-1 3.5 3-i 4.0 3-5 10.7 14.6 7.2 .1 6.3 •3 6 Loans to farmers 6 (A) Guaranteed by Commodity Credit Corporation .............................................. 7 (B) Other loans ................................................ 2.8 11.9 18.2 15*3 23.8 9.8 14.6 1.0 7 8 Commercial and Industrial.............................. 16.9 17.8 19 .1 17.7 18.6 22.5 18.4 50.8 8 Loans to Individuals 9 (A ) Retail Auto Paper.................................... 7.9 8.8 1 1 .1 10.6 6.1 7.6 8.9 5-5 9 10 (B) Other Retail Instalment Paper.............. 2.6 3-3 4.9 5-3 3.8 2-5 3-8 3-9 10 11 (C) Repair and Modernization Instalment Loans ......................................................... 1.9 3-i 4.8 3-3 1.8 1.9 3-i 6.7 11 12 (D) Instalment Cash Loans........................... 2.7 2.4 2.6 2.2 1.6 2.2 2-3 i .5 12 13 (E) Single Payment Loans.............................. 4.4 3-6 2.5 2.8 3-4 5-9 3-5 4.1 13 14 All other loans including OD’s .................... 3-4 2.1 1.6 1.8 2.2 3.5 2.2 7.6 14 15 Gross Loans and Discounts.............................. . 100.0% 100.0% 100.0% 100.0% 100 .0 % 100.0% 100.0% 100.0% 15 in each state or part state is shown by the tabulation. The swelling of the loan totals in 1955 brought the ratio of loans to deposits for district member banks to 41.7 percent from 36.1 percent at the end of 1954. This ratio has in creased in every year since the end of World War II but in none of these years was the increase as large as it was in 1955. Since deposits fell a bit, most of the addition to loans was financed by the liquidation of investments; ad ditional borrowings by banks (see page 31) also supplied needed funds. Because the average yield of loans is substantially higher than the average yield of investment securities, the substitution of the former for the lat ter had a beneficial effect on the current operating earnings of the banks. Loan income for all district member banks was up from $ 75.9 million in 1954 to $83.8 million in 1955—an increase of more than 10 percent. Income from investments was also higher in 1955, despite the liquida tion, chiefly because the interest rates paid on short-term government se curities (the most important kind of securities held by banks) rose so much from 1954 to 1955. But the de pression of bond prices which result ed from the generally tight credit conditions produced a large reduc tion in the amount of profit from the sale of securities. The decline in these profits from 1954 to 1955 was more than sufficient to reduce profits before income taxes, despite the im pressive growth of current earnings from loans and investments. Also, salaries, interest on time deposits and CHART 8-DEPOSITS, INVESTMENTS A N D LOANS OF NINTH DISTRICT MEMBER BANKS 21 CHART 9— RATIO OF LOANS TO DEPOSITS AT NINTH DISTRICT MEMBER BANKS P e rc e n t 5 0 ------------------------------------------------------------------------------------------------------------------------------------------------— 4 0 -----------------------------------------------------------------------------------------------------------------------------------------------------— 3 0 ----------------— — ----------^ - ------------------- — -------------- 20_______ ------------------ ----------------------------10 — --------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- 0____ I I 1945 I I_____ I--- !--- 1--- 1----1950 1955 other expenses were somewhat higher in 1955 than in 1954. Included in “ other current ex penses” is interest paid on borrow ings which rose from $170 thousand in 1954 to f n o i thousand in 1955. The Federal Reserve Bank of Min neapolis collected 76 percent of the interest paid on borrowings by dis trict member banks in 1955. The average daily volume of borrowing at the Reserve Bank was higher than in many years (see chart 11 on page 3 1 )* “ Interest on time deposits” was also higher in 1955 than in 1954. This resulted not only from the continua tion of a persistent upward trend in time balances at the member banks but also from a gradual increase in the average rate of interest paid on time deposits. Despite the fact that some member banks paid more attractive interest rates on time deposits in 1955 than in 1954, the growth of these balances in 1955 was only slightly more than half the growth registered in 1954— $32 million in contrast to $61 million. 22 Aside from lower farm incomes in many localities, doubtless a principal factor in the lower rate of time de posit growth during 1955 was the diversion of funds into the purchase of new homes, autos and other dur able goods mentioned previously. When one considers that on oc casions in the past, declining farm prices were often accompanied by violent deposit reductions at district banks, the experience of 1955 is par ticularly encouraging. Although the liquidity of the banks was reduced with the rising loan ratios, the pos session of marketable securities in substantial amounts, at the average district member bank, is one feature of the current situation which was not always present at times of large deposit withdrawals in the past. T a b le E a r n in g s 7— and S e le c te d Ite m s o f E xp en se at D is tr ic t M em ber B anks 1955 Interest on securities............. $ 39-6 Interest on loans.................... 83.8 Other current earnings.........■ 24.9 1954 $ 37-5 75-9 23-4 Total current earnings. . . . • 148.3 136.8 Salaries .................................. • Interest on time deposits. . . Other current expense. . . . • 44-9 15 .1 Total current expense......... . Net current earnings. . . . • 93.0 33-o 55-3 1.4 Profits on securities............. Other charges and — 8.8 credits (net) .................. Profits before income taxes • 47-9 20.0 Income taxes .................. Profits after taxes................ • 27.9 41.8 14.2 30.0 86.0 50.8 8.4 — 10.2 49.0 20.4 28.6 Operations E SP IT E M A N Y inconveniences to bank personnel resulting from a building program in 1955, the quantity and quality of service pro vided to member banks, the govern ment and the public was undimin ished. The enlargement of bank quarters, from four stories to twelve stories is intended to accommodate the continuation of an upward trend in the amount of work performed at the bank. This trend has existed since before World War II and is expect ed to persist in the future. For example, the largest depart ment of the bank in terms of em ployees is the check collection de partment. Each check deposited here must be speeded to the drawer’s bank. This requires the employment of people to receive and dispatch mail, to sort and list checks, and to perform other functions required for the smooth operation of our check collection department. Despite intro duction of the latest machinery, which has raised output per person in the department, the flow of items has increased each year so rapidly that more people and more space have been needed to facilitate this important operation. The number of items handled by “ check collection” — these include government c h e c k s , other checks and, since 1951, postal money orders —rose from not quite 112 million in 1954 to more than 116 million in 1955. The number of items has in creased in every year since 1942. Of the 1955 total, 88 percent was han dled (on a 24 hour basis) by the head CHART 10— NUMBER OF ITEMS HANDLED BY C H E C K COLLECTION DEPARTMENT M i ll i o n Items 120 -........................................... . ' ' 90 60 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 23 office (Minneapolis) while the rest was processed at the Helena branch office. The number of items passing through the head office has more than doubled since 1948! Another large department of the bank is the fiscal agency department. One of the most important jobs per formed there is the issue, redemp tion and exchange of Treasury se curities, and the payment of interest coupons from these securities. This department also does the processing and validating of Depositary Re ceipts covering deposits in certain banks of withheld income and social security taxes, of railroad retirement payments by employers and excise T able 8— V o lu m e of O taxes by retailers. Financial services to the Commodity Credit Corpora tion and other government agencies are also rendered. Table 8 shows that the number o£ issues, redemptions and exchanges of Treasury securities accomplished by the department in 1955 was up just slightly from 1954, but the number of coupons paid was up by more than 27 thousand or 10 percent. De positary Receipts validated were up 61 thousand in 1955 from the 218 thousand level of 1954. The increase represents additional receipts vali dated for employers who deposited withheld taxes in banks. A change in government policy early in the p e r a t io n s i n P r in c ip a l D epartm en ts $ amounts in thousands Amount Advances to member and non-member 1954 1955 banks secured by U. S. Government obligations ...................................................$ i 945,901 $ 4,155,36 1 Currency counted during year..................... Coin counted during year........................... 13,609 13,824 Coin wrapped during year........................... 9*556 9*449 Currency shipped and paid o u t.................. 384,409 360,548 Coin shipped and paid o u t........................... 19*432 17,43° Unfit notes retired from circulation......... U. S. Government checks handled............. 2,865,914 2,661,540 Postal Money Orders handled.................... 166,340 *75*753 Other checks handled..................................... 26,625,232 28,602,562 Grain drafts handled....................................... 6 97,211 704*523 Other non-cash collections........................... 152,605 12 7,5 18 Securities held in custody for banks on last day of yea r............................................ 1,674,664 1,493,201 Coupons cut from securities held for banks Coupons paid from U. S. Government direct obligations ....................................... 31,6 9 1 4i *733 Issues, redemptions and exchanges of U. S. Government direct obligations................ 5 ,10 3,30 3 4*587*315 Purchases and sales of Government securi ties, and Government securities cleared through the Federal Reserve Bank for the account of banks in the Ninth Dist. 1,680,735 1*479*303 U. S. Savings Bonds sales (also included in U. S. Government direct obligations) 236,600 251*397 289,761 U. S. Savings Bonds redemptions.............. 233*046 20,273,960 Transfers of fu n d s............................................ 17,035*742 Number of employees at end of year. . . . 24 Number 1954 1955 480 70,753,488 140,871,465 107,398,500 1,16 2 6 7,410,167 137*523*569 117,668,500 30,624,376 16,321,998 10,485,965 85,100,579 792,967 400,857 33,868,319 17 ,2 0 1,14 7 9*835*497 89,050,754 787,924 415,492 2 9 0 ,116 327,299 264,813 292,376 4*327*137 4*332,598 4,891 5,736 1,693,829 2,457*058 57*694 676 1,720 ,815 2,437*895 61,928 694 year brought more employers under the depositary arrangement. Pay ments for railroad retirement and excise taxes are also included in the totals, however. clines were registered for the num ber of pieces of both currency and coin counted so that the overall pace of activity in this department of the bank was little different from 1954. One particularly interesting aspect of operations in Fiscal Agency dur ing 1955 was the issue and redemp tion of savings bonds—shown sep arately on Table 8. These figures re flect in part the savings habits of the people. From 1954 to 1955 a much larger increase was registered for the value of redemptions (up 24 percent) than for the value of sales (up 6.5 percent). Although these figures re flect the fact that many more F and G bonds (twelve-year maturities) came due in 1955 than in 1954, they also suggest a lesser rate of liquid saving in the district last year, as did the figures cited previously which show a lessened rate of time deposit growth at district banks. The heavy liquidation of invest ments by district member banks in *955 produced a reduction in the amount of securities held in custody for banks by our safekeeping depart ment. The banks liquidated securi ties valued at $190 million while holdings of our safekeeping depart ment fell by $182 million. Despite the lower amount of securities held at the end of the year, personnel of the department in 1955 detached and presented for payment—as a service to the banks—13 percent more cou pons than in 1954. The nation’s currency and coin gets into circulation when it is paid out by Federal Reserve banks; it is removed from circulation by deposit at Reserve banks. The function of providing the economy with the amount of currency it demands re quires the employment of people to receive, pay, sort, count, wrap and destroy currency at the Minneapolis Reserve bank. Table 8 indicates that a larger dollar amount of both currency and coin was shipped and paid out from the bank in 1955 than a year before. Also, a larger amount of unfit notes was retired from circulation. But de The larger number of employees working at the end of 1955 is per haps the best measure of the overall amount of work being done at the bank. The increase occurred in re sponse to a need for more service from the Federal R e s e r v e Bank. While table 8 shows some of the areas where more service has been provided, not all activities of the bank lend themselves to statistical treatment. The F e d e r a l Reserve gathers information concerning eco nomic conditions, it provides speak ers and educational materials, it ex amines banks and does other things not measurable in the terms of table 8. Regional Research During 1955, the Research Depart ment had as its major objectives (1) 25 special regional research into eco nomic developments of particular interest and importance to this dis trict, (2) better statistical data with particular emphasis on expanding the sample of reporting stores, (3) improvement in the quality of de partment publications so that they will be more interesting, attractive and informative, and (4) continu ance of bank and public relations activities. These major objectives will continue to guide the activities of the department during 1956. Major emphasis in the field of eco nomic analysis during 1955 has been on problems relating to the economy of the Ninth District. As one prod uct of such analyses, certain articles are produced in the M O N T H LY R EV IE W . These articles are normal ly regional in scope and include de velopments of broader national sig nificance only insofar as they relate to and influence the economy of this area. These special articles are sup plemented each month in the Review by an analysis of current business developments which is also regional in nature. From time to time, major special studies are undertaken which may not be completed for a year or more. Two of these which are nearing completion are a study on the pulp and paper industry, and a study re lating to agricultural representatives at country banks. In addition to these, a major regional research proj ect now under way is a study of the housing market in this district. This 26 study will attempt to develop the major characteristics of the residen tial real estate market in various lo calities throughout the district. In 1954, an inventory of material relating to economic resources in the district was started. This collection was expanded during 1955. When completed, it will be turned over to the library to be catalogued, filed and kept up to date. During the year, the department continued its program of carefully reading selected newspapers from throughout the district and clipping items of economic signifi cance. These clippings are the basis of the regular monthly feature, Eco nomic Briefs, which is printed in the Review. During 1955, increased emphasis was placed on improving our rela tions with respondents in the statis tical series, and expanding our re porting samples in the various series. Often, when members of the depart ment find themselves in a town where one of our reporting stores is located, they will visit the store. This personal contact is intended to im prove store-bank relations, to increase our knowledge of current trade de velopments in the area, and to stimu late greater interest in the statistical program of the bank. To supple ment this policy, members of the staff are making more intensive ef forts to obtain new respondents. During 1955, this effort was con centrated in the fields of household appliance stores and furniture stores. In their travels throughout the dis trict, members of the staff have been instructed to contact appliance stores and furniture stores whenever pos sible and ask for their cooperation in the statistical program. Results so far have been promising and it is hoped that our reporting sample will be substantially enlarged through this new program. Each month the library distributes within the bank a list of recent acces sions. This provides an easy reference to new material available for read ing. This list is supplemented by a library bulletin which is circulated to all banks in the d i s t r i c t each month. The bulletin contains brief reviews of selected books and other material received by the library. It is hoped that this will encourage bank ers to make greater use of the ma terials on hand. During the year, an attempt was made to create more interesting and informative charts and illustrations for the M O N T H L Y REVIEW . Thought was given to a revised for Financial Statements mat with the intention that a new The bank granted well over twice format will be adopted in the near as many loans in 1955 as in 1954; the future. Also, a publications special , average dollar amount of loans out ist, to assist in editing all publica standing was six times larger than in tions, was added to the staff. the year before—an increase from $7 Members of the department have million in 1954 to $42 million in continued to devote a substantial 1955. The number of member banks amount of time and effort to answer which borrowed in 1955 was 101; in ing special requests for information the previous year, 70 member banks and to fulfilling a variety of speaking availed themselves of the borrowing engagements. Inasmuch as educators privilege. On our statement of earn provide an excellent medium for ings and expense, an increase of earn bringing about understanding of the ings from discounted bills from $144 Federal Reserve System through thousand in 1954 to $840 thousand in their work with students, our bank 1955 was produced by the faster pace has consistently s o u g h t to assist of rediscounting as well as by an in teachers, particularly, in every way crease of the discount rate from i l/ 2 possible. percent to 2% percent (in four steps) The bank’s library has been an im during the year. In 1954 the discount portant help to those in search of rate had been reduced twice. information concerning economic and financial matters. To obtain the maximum value from our library, we have encouraged not only mem bers of the bank staff but also mem ber and non-member bankers in the district to make use of the library. The bank’s principal source of rev enue, earnings from United States government securities, fell in 1955 because average holdings were re duced (from $605 million to $580 million) and because the average earning rate fell (from 1.668 percent 27 EARNINGS AND EXPENSES Earnings from: Discounted Bills 1955 ....................................................................................$ United States Government Securities............................................... 840,861 *954 $ 144,803 9,669,412 10,679,996 ............................................................................. 3,997 5>I 34 All Other .................................................................................................. 12,007 5,482 Total Current Earnings............................................................... $10 ,526 ,277 $10 ,8 35,4 15 Industrial Advances Expenses: Operating Expenses .............................................................................$ 3,337,558 $ 3 ,2 18 ,110 105,000 105,500 Original Cost ...................................................................................... 65,895 147,988 Cost of Redemption.......................................................................... 10,309 I 7, i 43 Net Expenses ..................................................................................$ 3,518,762 $ 3,488,741 Assessment for Expenses of Board of Governors........................... Federal Reserve Currency: Current Net Earnings......................................................................................$ 7,007,515 $ 7,346,674 Profit on Sales of U. S. Government Securities (n et)............... — 38 14,804 A ll Other .................................................................................................. 86,520 3,450 Additions to Current Net Earnings: ..$ 86,482 $ 18,254 Reserve for Contingencies....................................................................$ ..$ 11,5 11,53366 $$ 13,429 Deductions from Current Net Earnings: All Other .................................................................................................. 2,022 421 Total Deductions ...........................................................................$ ..$ 13,558 13,558 $$ 13,850 Net Addition to Current Net Earnings.................................................... .$$ 72,924 72,924 $$ 4,404 Net Earnings before payments to U. S. Treasury..................................$ 7,080,439 $ 7,351,078 Paid to U. S. Treasury (Interest on F. R. N otes).................................. 6,013,073 6,287,237 Dividends Paid ............................................................................................... 399,^57 365,163 Transferred to Surplus (Section 7 ) ........................................................... 668,109 698,678 Surplus Account ( Section 7 ) Balance at Close of Previous Y e a r............................................................. $16,918,046 Transferred from Profits of Y e a r............................................................... $16,219,368 668,109 698,678 Balance at Close of Y e a r.............................................................$17 ,58 6 ,15 5 $16,918,046 28 STATEMENT OF CONDITION A SSETS Dec. 3 1 , 1955 Gold Certificates ..................................................................................$ Redemption Fund for F. R. Notes.................................................. 339,278,776 Dec. 3 1 , 1954 $ 421,327,504 24,644,098 23,728,983 363,007,759 $ 445,971,602 Other C a s h ....................... 7,907,872 $ 8,848,300 ........... i ,355,oo° 450,000 Foreign Loans on Gold. 25,000 3.333,333 Industrial Advances . . . 595630 96,071 Total Gold Certificate Reserves.......................................$ Bills Discounted U. S. Government Securities: Bonds ............................................................................................. 67,895,000 68.802.000 Notes ............................................................................................. 343,283,000 148.257.000 Certificates of Indebtedness....................................................... 143,476,000 340.909.000 36,414,000 53.215.000 Total U. S. Government Securities................................ $ 591,068,000 6 11.18 3.0 0 0 Total Loans and Securities................................................$ 592,507,630 615,062,404 Bills ................................................................................................ Due from Foreign Banks.................................................................. 557 559 F. R. Notes of Other F. R. Banks.................................................. 9*587,500 8,567,000 Other Assets ........................................................................................ 14 3 ,6 6 2 ,7 11 105,646,706 Total Assets .......................................................................$ 1,116 ,6 7 4 ,0 2 9 $1,18 4 ,0 9 6 ,571 LIA BILIT IES 531.709,075 5 8 3 ,5 11,3 6 5 Member Bank— Reserve Accounts......................................... 405,586,297 443,526,944 U. S. Treasurer— General Account......................................... 25,107,737 27.338,989 ......................................................................................... 9,650,000 12,050,000 Other D ep osits............................................................................. 5,693,589 2,315.744 Federal Reserve Notes in Actual Circulation................................ $ Deposits: Foreign Total Deposits .$ 446,037,623 $ 485,231,677 108,767,705 86,437.796 4 11,34 0 346,672 Total Liabilities .................................................................. $1,086,925,743 11,15 5 ,5 2 7 ,5 10 Deferred Availability Items................................................................ Other Liabilities .................................................................................. C A PITA L ACCOUNTS Capital Paid I n ................ 6,860,650 Other Capital Accounts. 22,887,636 Total Liabilities, Capital Accounts................................ $1,116 ,6 7 4 ,0 2 9 $ 6,360,250 22,208,811 $ 1,18 4 ,0 9 6 ,57 1 29 to 1.571 percent). Holdings of se curities were reduced because of Sys tem open market sales and redemp tions and because our proportionate share in the total system holdings was lowered. Total current earnings fell by only a fraction of the loss of revenue from government securities owing to the sizable increase of revenue from loans to member banks. The decline in current earnings which did occur, however, together with a slight in crease in the amount of current ex pense, brought net current earnings from $7,347 million in 1954 to $7,007 million in 1955. With more shares of Federal Re serve Bank stock in the hands of district member banks the amount of dividends paid in 1955 was larger than in the previous year. Owing to the lesser rate of earnings and the larger dividend payments in 1955, a smaller a m o u n t of earnings was available for payment to the Treas ury and for transfer to surplus than in 1954. The condition statement indicates an increase of almost 10 percent in the amount of capital stock out standing. Member b a n k s are re quired by law to hold such shares. While their maximum subscription is an amount equal to 6 percent of their capital and surplus, only half of this amount must be paid in, the other half is subject to call. The is sue of new shares in 1955 reflects the fact that the capital and surplus of district m e m b e r banks has been growing. In the year ended December 31, 1955, district member bank reserve balances declined by $38 million or 8.5 percent. In the last two weeks of the year the daily averages of re serve balances, required reserves and excess reserves were down respective ly by $19.8 million, $10.1 million and $9.7 million from a year earlier. The averages are more representative of member bank reserve positions be cause of rather large daily fluctua tions. Required reserves of district mem ber banks were reduced partly be cause their deposit liabilities fell, partly because the proportion of time deposits (against which reserve re quirements are lowest) increased, and partly because the proportion of district member bank deposits lodged at country banks (where reserve re quirements against demand deposits are lowest) increased. The bank’s largest liability item, Federal Reserve N o t e s in Actual Circulation, declined by $52 million in 1955. This decline does not accu rately measure changes in the dis trict’s need for currency since cur rency requests are satisfied by the shipment of notes issued by other Reserve banks—which have been de posited here—as well as by the ship ment of our own notes. Thus “ ex ports” and “imports” of currency between districts also affect our note liability. Since it is customary for many commercial banks to liquidate bills payable (borrowings) before the year-end statement date, the amount of Bills Discounted on this bank’s December 31 Condition Statement is not a representative figure. Rather, the average daily amount of borrow ings shown on chart 11 provides a better picture of this aspect of the bank’s condition in 1955. The bank’s gold certificate hold ings and its reserve ratio are shown by the Comparative Condition State ment to have declined in 1955. Our reserve ratio of 37.1 percent was the lowest of any Federal Reserve Bank at the end of the year and compared with a System average of 44.4 per cent. However, the bank’s ratio of “in vestments in government securities” to “ total assets” was 53 percent in contrast to a System average of less than 48 percent. It is evident that an exchange of securities for gold cer tificates with other Reserve banks would increase our reserve ratio. But C H ART 11— AVERAGE DAILY BO RR O W IN G S BY MEMBER BANKS FROM M IN N EA PO LIS FEDERAL RESERVE BANK M i l l i o n D o lla r s 5(S B S B ^ ^ 9 S S B S ^ H B S S 40!®iISIi!!lS81!:S!8IIIII88liffliiBi8l8iffil>lil III 30S!!l8IISI!lllll!l8III81!8BMWSBSilll8BMM 111 20 l l i l l l i l i S H I i l l i l ill I llliS i ill 1950 1951 1952 IIIS llS lll 111 1953 1954 1955 the proportionate share of each Re serve bank in System investments is set once a year according to the average daily amount of assets at each bank—as a proportion of the System total — during the previous twelve months. An outflow of funds from the dis trict, indicated by the loss of deposits at our member banks during 1955, contributed to the reduction of total resources at the Minneapolis Federal Reserve Bank as shown by the con dition statement. Management and public relations N E N E W director was appoint ed and two new directors were elected to the bank’s Board in 1955. The new appointee was Dr. O. B. Jesness, Head of the Department of Agricultural Economics at the Uni versity of Minnesota, who in April was named by the Board of Govern ors as a Class C director. Dr. Jesness’ appointment filled a vacancy which O had existed on the Board since the resignation of Dr. Paul E. Miller in August, 1954. The new director’s term will expire December 31, 1957. He was also designated as Deputy Chairman of the Board for the re mainder of 1955. The two new directors elected by the member banks in November to take office January 1, 1956 were Mr. 31 Joseph F. Ringland, President, North western National Bank of Minne apolis as Class A director, and Mr. Thomas G. Harrison, President, Super Valu Stores, Inc., Hopkins, Minnesota as Class B director. Mr. Ringland replaces Mr. Edgar F. Zelle, who was not a candidate for re-election, and Mr. Harrison re places Mr. Homer P. Clark, who re tired after serving on the Board for 30 years. The First National Bank of Saint Paul, Minnesota, was named by our Board of Directors as a member of the Federal Advisory Council for 1956 replacing Mr. Ringland. Among the bank’s official staff, 1956 saw the retirement of one offi cer, the election of three new officers, and the advancement of four officers to more responsible positions. The retirement came in June when Mr. A. R. Larson, Assistant Vice Presi Mr. F. Albee Flodin, President and dent, left the bank after 35 years of General Manager, Lake Shore, Inc., service. New officers include Mr. Arthur Iron Mountain, Michigan, was re J. McNulty, who was made General appointed by the Board of Govern ors as Class C director for a three- Auditor in August, Mr. William C. year term ending December 31, 1958. Bronner, who was elected Assistant The Board of Governors also redes Cashier in September, and Mr. John ignated Mr. Leslie N . Perrin, Di L. Heath, who was elected Assist rector, General Mills, Inc. of Minne ant Cashier effective January 1, 1956. apolis as Chairman and Federal Re Mr. Heath is assigned to the Helena serve Agent, and Dr. Jesness as branch. Advancements were made on September 1 to Mr. Kyle K. FosDeputy Chairman for 1956. sum, General Auditor, who was pro Mr. A. W. Heidel, President, Pow moted to Vice President and trans der River County Bank, Broadus, ferred to the Helena branch as Man Montana, was reappointed to the aging Officer, Mr. E. B. Larson, Vice Helena Branch Board by our Board President, who was elected Vice of Directors for a two-year term President and Cashier, and Mr. M. ending December 31, 1957. Mr. B. Holmgren, Assistant Cashier who George R. Milburn, Manager, N Bar was advanced to Assistant Vice Pres Ranch, Grass Range, Montana, was ident. On January 1, 1956, Mr. Har reappointed by the Board of Govern old A. Berglund, Assistant Cashier, ors to the Branch Board for a similar was promoted to Assistant Vice Pres two-year term and was designated ident. Mr. Berglund is also assigned Chairman of the Branch Board for to our Helena branch. Mr. Clarence 1956. Mr. Carl McFarland, Presi W. Groth who has been Vice Presi dent, Montana State University, dent in charge of our Helena branch Missoula, Montana, was named Vice was transferred to the head office Chairman. with increased responsibilities on Mr. Julian B. Baird, Chairman, September 1. 32 The bank’s programs of bank and public relations and personnel devel opment continued through 1955 in much the same form as they have for the past several years. The program of meetings spon sored by the bank was topped by the Member Bank Directors and Officers Assembly in April. This was the third annual Assembly meeting and it was attended by 558 representatives of member banks. The seventh an nual Money and Banking Work shop for college teachers of money and banking and the twelfth annual Examiners Conference for all Ninth District bank examiners both set at tendance records for those meetings. Seven sessions of the Short Course in Central Banking, first begun in 1948, brought in more than 100 addi tional member bankers and boosted the total of those who have taken the course since its inception to 933. The program of bank calls was continued with each of the nearly 1300 banks in the district being vis ited at least once. Several of our se nior employees and officers also each spent a week in a member bank to learn more about commercial bank operations as a part of our training program. Speakers from the bank appeared before nearly 10,000 per sons during the year. The bank’s movie, The Federal Reserve Ban\ and You, was shown to an addition al 23,000 persons, and other movies, books on the Federal Reserve Sys tem, and our currency displays were all in good demand by schools, banks and others. Tours of the bank continued to bring many visitors, particularly students into the bank to witness our operations. One new national bank opened for business in the Ninth district during the year and one national bank was absorbed by another bank. The net result was, therefore, no change in the number of member banks during the year, although to tal banks in the district increased from 1,289 to 1 >296. 33 DIRECTORS OF THE FEDERAL RESERVE BANK OF MINNEAPOLIS AND HELENA BRANCH DIRECTORS Class A Term Expires December 31 N . T h o m s o n , Vice-President, Farmers & Merchants Bank, Presho, South Dakota 1956 C. R e f l i n g , Cashier, First National Bank in Bottineau, Bottineau, North Dakota 1957 F. R i n g l a n d , President, Northwestern National Bank of Minneapolis, Minneapolis, Minnesota 1958 H aro ld H aro ld J o seph Class B J. E. R President and General Manager, Montana Power Company, Butte, Montana 1956 C. L a n g e , President, Chippewa Canning Co., Inc., Chippewa Falls, Wisconsin 1957 C ay o rette , T . G. H a r r i s o n , President, Super Valu Stores, Inc., Minneapolis, Minnesota 1958 Class C N. P e r r i n ,1 Director, General Mills, Inc., Minneapolis, Minnesota L e s lie 1956 O. B. J e s n e s s ,2 Head, Department of Agricultural Economics, University of Minnesota Institute of Agriculture, St. Paul, Minnesota 1957 President and General Manager, Lake Shore, Inc., Iron Mountain, Michigan 1958 F. A lb ee F l o d in , H ELENA BRANCH Appointed by Federal Reserve Bank J. W G eo A. Financial Vice-President and Treasurer, Western Life Insurance Company, Helena, Montana 1956 N. L u n d , Chairman of the Board and President, The First National Bank of Reserve, Reserve, Montana 1956 President, Powder River County Bank, Broadus, Montana 1957 il l a r d . W . H J o h n so n , e id e l , Appointed by Board of Governors C arl President, Montana State University, Missoula, Montana M c F a r l a n d ,3 G eo rg e R. M i l b u r n ,1 1 Chairman 2 Deputy Chairman 3 Vice-Chairman 34 Manager, N Bar Ranch, Grass Range, Montana 1956 1957 OFFICERS OF THE FEDERAL RESERVE BANK OF MINNEAPOLIS AND HELENA BRANCH OFFICERS O liv e r S. P o w e ll, A lb e r t W . M ills , Banking Department F r e d e r ic k W. Vice-President and Cashier E a r l B. L arso n , W. H a r o ld Assistant Vice-President Jo h n s o n , Assistant Vice-President C la r e n c e M e lv in C h ris tia n R ie s , W . G ro th , B . H o lm g re n , W illia m O tis R . P r e s to n , C. B ro n n e r, Legal Department Assistant Vice-President M . R o c k w e ll, M arcu s O. S a th e r, Assistant Cashier N ic e , Vice-President, Counsel and Secretary Assistant Cashier M a u r ic e H . S t r o t h m a n , Jr ., C le m e n t V a n Vice-President Assistant Vice-President Assistant Cashier Vice-President S ig u r d U e la n d , G e o rg e Vice-President Chief Examiner G . M c C o n n e ll, R o g e r K . G r o b e l, Fiscal Agency— Government Securities Operating Research Officer O h n sta d , General Auditor Bank Examination Department Assistant Cashier M ilfo r d E . L ysen , O rth e n A r t h u r J. M c N u lt y , Personnel Officer J. C r a m e r , Jo h n J. G i l l e t t e , A rth u r Audit Department Assistant Cashier C a r l E . B e r g q u is t, President First Vice-President Research Department Vice-President F r a n k lin Assistant Vice-President Director of Research Business Economist L . P a rso n s, O scar F. L itte r e r , Helena Branch Vice-President assigned to Helena Branch K y le A. B e r g l u n d , Assistant Vice-President assigned to Helena Branch K . F o ssu m , H a r o ld L . H e a t h , Assistant Cashier assigned to Helena Branch Jo h n MEMBER OF FEDERAL AD VISO RY COUNCIL Chairman, The First National Bank of Saint Paul, St. Paul, Minnesota J u l ia n B . B a ird , INDUSTRIAL ADVISORY COMMITTEE S h eld o n V . W J ohn M. B u sh , ood, Minneapolis, Minnesota, Chairman Ishpeming, Michigan A. H. D aggett, A. B. H e ia n , Chippewa Falls, Wisconsin W alter M. R in g e r Saint Paul, Minnesota , S r ., Minneapolis, Minnesota