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FEDERAL RESERVE B A N K
OF ST. LOUIS
February 21, 1951
T o the Member Banks of the Eighth
Federal Reserve District:
It is a pleasure to transmit herewith the
annual report of the Federal Reserve Bank of
St. Louis for the year 19 50.
Very truly yours,
{/
President.
TABLE OF CONTENTS
T h e E c o n o m y in 19 5 0
5
Production
7
Employment
9
Income
.
10
Expenditures
10
Construction
12
B a n k i n g D e v e l o p m e n t s in 19 5 0
Loan
14
Expansion
14
Grow^th in M o n e y S u p p l y
15
M o n e y and Liquid Assets
17
M e m b e r Bank Reserves
18
Federal Reserve A c t i o n
19
A c t i v i t i e s of t h e F e d e r a l R e s e r v e B a n k of St. Louis
21
People and P l a n t
21
Information
23
and Analysis
Credit Operations
24
Regulation V
24
Regulation W
24
Regulation X
24
Examination
Operating Functions—Member
25
Banks
25
Accounting
26
Coin and C u r r e n c y
27
Safekeeping
28
Wire Transfers
28
N o n c a s h Collections
29
Services f o r U n i t e d S t a t e s G o v e r n m e n t
Fiscal A g e n c y
29
29
Audit
30
D i r e c t o r s a n d Officers
31
Statement
Condition
34
Expenses
35
Earnings
of
and
Page 3
THE ECONOMY IN 1950
The economic record of 1950 indicates rising activity throughout the
year. In most lines new highs were reached for a so-called peace-time
economy; in some new all-time peaks. In terms of value more goods
and services were turned out in the United States than ever before.
In physical terms, output was larger during some years of World W a r
I I . But the quantity of goods available to the civilian economy in 1950
was at a record level.
As in 1949, the midyear point in 1950 was an economic milepost.
The two points marked two very different developments, however.
Mid-1950 brought Korea, and with it a stronger beat to the boom
already sounding loudly. A year earlier the midyear date marked a
reversal in the mild downtrend and a beginning of the economic
expansion that prevailed throughout 1950.
In the first half of 1950, the large and growing demands of individuals and businesses pushed production, employment and income higher
than in the last half of 1949. Korea added to this demand an increased
defense program and, for a time at least, an intensified drive for civilian
goods. Thus the second half of 1950 saw sharp advances from the
already high levels of the first half-year. Employment and income
rose to new highs, industrial output to a level surpassed only at the
height of World W a r I I effort. Most of the strength in the second
half of 1950 still was accounted for by civilian demand.
The immediate effect on the economy of the Far Eastern developments in mid-1950 was largely psychological. When the shooting
started it touched off a wave of emotional buying. Consumers and businessmen recalled vividly the shortages and price increases during World
W a r II and hastened to protect themselves. In order to obtain the goods
they wanted, consumers and businessmen used their already high
incomes, mortgaged future income and dipped into accumulated savings.
The money supply grew at a time when the productive facilities of the
nation already were being operated at near-capacity levels. T h e result
was to intensify inflationary pressures and to push prices to new peaks.
The direct impact of the war, in terms of increased production and
employment, was not great in 1950. Additional billions of dollars were
Page 5
appropriated for the purchase of military goods, but there is a considerable time lag between the appropriation of funds and the production of goods. A sizable number of defense contract commitments
were made during the last half of 1950 but a large proportion of the
new contract commitments were for "long lead" items and they were
translated into a relatively small proportion of the total volume of
goods produced during that period. T o the end of the year, the
nation's productive machinery was engaged primarily in turning out
goods for civilian consumption. At record peacetime levels, the flow
of goods did not keep pace with the expansion in the money supply.
Through the application of selective credit controls over private credit
used to finance the purchase of consumers' durable goods and new residential construction and through the use of general credit controls
affecting the supply of credit, efforts were made to cope with the
growth in the money supply. But as the year ended, the question of
curbing inflationary pressures remained a major domestic problem.
WHOLESALE
PRICE
INDEX
1926 = lOO
1
Per Cent
190
|Per Cent
190
/
180
180
FARM ^ : \ ^ ^
\
PRODUCTS - ^ ^
y ^
^
y^
170
170
I60
160
"-^*.,.^^
ALL
'-..N
.-^
y
^
^^•^•^N^COMMODITIESx • • . . ? . - y
^-^^^ y^'^
^ ^
tso
^ .
140
^ -
.
I
,
^
i
l
^
OTHER
.
1
,
.
1
.
,
1
.
y
^
COMMODITIES-*
1949
/
y
,
1
.
.
1
1950
Page 6
150
—.--*
,
,
I
.
. ,«j\
140
Production
The value of goods and services produced in the United States
climbed to a new peak of about $279 billion in 1950. This was $23
billion or 9 per cent larger than the 1949 figure. T h e gain reflected
higher prices, but also increased physical output.
Most of the increase, on a value basis, occured in the last six
months of 1950, and consequently an average for the year gives an inadequate picture of trends during the full twelve months. In the third
quarter alone the national product was flowing at an annual rate $14
billion higher than in the second quarter. This was followed by an
additional $13 billion increase (annual rate) in the last three months
of the year.
Physical volume of industrial production in the nation last year
averaged nearly 200 per cent of 1935-39, according to the Federal
Reserve index, as compared with 176 per cent in 1949. The trend was
GROSS
NATIONAL
PRODUCT
QUARTERLY
Annual Rates
BiUions
of
DoHars
300
GROSS
NATIONAL PRODUCT
200
PERSONAL
CONSUMPTION
EXPENDITURES
too >
-.-^•T:...-
\
PRIVATE.
DOMESTIC a
^
GOVT PURCHASES
OF GOODS a
SERVICES
\
**_- —
vr.T.T.T.'lT-..*-
^FOREIGN INVESTMENT
^''
JJU
O.
1946
1942
1939
4 t h Quarter 1950 Estimated By Council of Economic Advisors
SOURCE- Dcpt. of Commerce Estimates, Adjusted For Seasonal Variation
12^
rr,.rT,T,T,:
Page 7
1950
u p throughout the first nine months of 1950. In the last three months
of the year, despite pressure for further increases, output tended to
level off at about 215 per cent of 1935-39 as the automobile industry
moved into its model changeover period and as adverse weather hampered output in some centers of heavy industry.
T h e expansion in production of durable goods was especially strong.
From the low point reached late in 1949 to the closing months of 1950,
physical production in these industries increased 52 per cent. In the
nondurables field, production increases were less striking but by the
end of the year output was at an all-time peak.
Expansion in the Eighth District in 1950 apparently was a little
less, percentagewise, than that for the nation as a whole. In large
measure this reflected the fact that the decline between 1948 and 1949
was smaller here, and consequently recovery to capacity operations
w^ould necessarily be less pronounced than in the nation as a whole.
Manufacturing activity moved up rather strongly during the first six
months. In the last half year, further increases occurred and by the
end of 1950 activity was at a level about 20 per cent above that at the
close of 1949—just slightly below the national gain. Here, too, the
largest increases were in the heavy goods industries with production of
nondurables climbing at a somewhat slower rate.
I n contrast to nonagricultural output, agricultural production in
1950 was smaller than in 1949. T h e decline, of course, was in line
w^ith national farm policy, and acreage and marketing restrictions were
in force. Even so, national crop production in 1950 was the third
largest on record, exceeded only by the crops of 1948 and 1949.
In this district production of most major crops also was less than
in 1949. T h e major exceptions were a 17 per cent increase in oats
production and a 20 per cent increase in soybean production. District
tobacco production was 15 per cent less, and cotton output was down
28 per cent compared with a year earlier. Production of corn, rice
and wheat was 1, 18, and 33 per cent less, respectively, in the district
t h a n a year earlier. These declines can be attributed mainly to acreage
restrictions, but unfavorable weather also was a factor here.
Page 8
Employment
The tremendous demand for goods during 1950 was reflected not
only in a high level of production but also in a rise in employment to an
all-time high of 62.4 million in August. At the previous peak, in mid1948, employment totaled 61.6 million—and for the year 1949 it averaged 58.7 million. Much of the expansion reflected a sharp rise in
manufacturing employment, which averaged 5 per cent above that
in 1949.
Because of the large demand for labor, the increase in the civilian
labor force—from 62.1 million in 1949 to 63.1 million in 1950—was
largely absorbed. Also, fewer persons were unemployed in 1950 than
in 1949, averaging 3.1 million as against 3.4 million in 1949. Unemployment in October reached a low of less than 2 million as compared
with 4.5 million at the beginning of the year—part of this reduction
was seasonal.
In the district's major industrial areas, employment averaged about
3 per cent larger than in 1949. As in the nation, most of the increase
reflected the expansion in manufacturing industries. Other industries
also added to their work forces and, as a result, total non-agricultural
employment late in the year was larger than ever before. Manufacturing employment climbed to the highest level since World W a r I I .
The largest increases over 1949 in nonfarm employment in the five
major district areas occurred in Evansville and Louisville. Here,
employment was up 6 per cent and 4 per cent, respectively. In Little
Rock, St. Louis and Memphis, the increases ranged from 1 per cent to
3 per cent.
As more workers were employed, unemployment in the district declined. There were sizable reductions in most parts of the district and
by the end of 1950 the number of workers seeking jobs was smaller than
at any time since 1948.
In the district and the nation, the year was marked, too, by a rise in
wage rates and a gradual lengthening of the workweek. In St. Louis,
average weekly earnings of manufacturing workers late in the year was
about 8 per cent larger than a year earlier. T h e growth in weekly pay
checks was smaller, percentagewise, than in the nation as a whole, however, and the amount of the average worker's weekly earnings was
smaller here than nationally.
Page 9
Income
Income increased sharply during 1950. O n an annual basis, personal income was running at about $205 billion in the last half of 1949.
T h a t rate rose by $10 billion in the first half of 1950 and by more than
that amount in the second half. T h e gain was concentrated in nonagricultural income, particularly in wages and salaries. After Korea,
however, farm income began to pick up and was growing appreciably
by year end. Most of the farm income gain was attributed to higher
prices.
Since farm income represents a relatively larger proportion of total
income here than in the nation, the fact that farm income showed an
appreciably smaller increase than nonfarm income tended to hold the
district income gain below the national average. Nevertheless the
Eighth District did register a substantial increase in income over 1949,
and at year end district income was running some 10 per cent ahead of
that at the close of 1949.
Expenditures
In the first half of the year consumers' outlays in the nation were at
an annual rate of about $184 billion. This was about 3 per cent above
the level of the first half of 1949. Demand was concentrated in the
consumer durable goods field—for automobiles, homefurnishings, and
appliances.
With the outbreak of hostilities in Korea, consumer buying increased
sharply—in the nation and in this district. Almost all goods were in
demand—particularly those which consumers feared would become
scarce under wartime conditions. Again, as earlier in the year, there
was heavy buying of automobiles, appliances and other major durables.
As a result, the annual rate of consumers' outlays in the third quarter
increased $13 billion over the level of the preceding three months.
Late in August the initial rush for goods subsided and consumers'
spending dropped back from the peaks reached early in that month and
late in July. But even at this lower level, expenditures were larger than
they were during the first half of 1950. Consumer credit continued to
expand and in mid-September the Board of Governors reimposed Regulation W in an attempt to curb the growth of instalment credit. T h e
initial terms of the Regulation tended to reduce spending for appliances
Page 10
and homefurnishings, but they had little effect on the demand for automobiles, especially new cars. A subsequent tightening of the Regulation
had more impact.
Business spending also contributed to inflationary pressures. The
sustained demand for consumers' goods gave business firms a strong
incentive to increase expenditures. The need to add to inventories was
especially great since stocks had been reduced materially during 1949.
During the first half of 1950, retailers, wholesalers and manufacturers
stepped up their buying and contributed significantly thereby to the
expansion in total production.
After the Korean crisis developed, business reacted in much the same
way as did consumers, by greatly increasing commitments. As a result,
the value of new orders received by manufacturers in July was up $ 1.4
billion from the previous month, and in August was up an additional
$5 billion—climbing to a total of $27 billion in that month. During the
first six months of the year the value of new orders averaged $ 18 billion
a month. Although production continued to rise, shipments did not
keep up with the new business received each month, and by the end of
DEPARTMENT
STORE
ADJUSTED
Per Cent
450
DAILY
AVERAGE,
INDEX
SALES
1 9 3 5 - 3 9 = 100
400 >
Page 11
Per Cent
450
1950 manufacturers' backlogs had risen to $37 billion as compared with
$20 billion a year earlier and $23 billion at the end of June.
Business expenditures for new plant and equipment in the nation
during 1950 were about the same—$18.1 billion—as in 1949. While
the annual totals were similar the experience in the two years was very
different—in 1949 the level of business capital expenditures was declining w^hile in 1950 it was gaining throughout the year. Manufacturing
and mining industries and electric and gas utilities spent more in 1950
than in 1949—and the increases offset declines in outlays by railroads
and other transportation industries and in commercial and miscellaneous
industries.
In this district there were substantial additions to the existing industrial facilities. Manufacturing construction, as measured by the value
of contracts awarded, was 23 per cent larger than in 1949. There was
a n increase of 69 per cent in commercial construction. Expenditures
in the heavy engineering field, however, were 10 per cent smaller than
in 1949.
Construction
T h e 1950 boom received much of its impetus from the large increase
in expenditures for new construction. T h e value of new construction
nationally was $27.7 billion—an alltime high and an increase of 23
per cent over 1949. Increased prices accounted for some of the gain
but physical volume is estimated at least 10 per cent larger than
in the previous peak year, 1927, and 15 per cent larger than in 1942,
the wartime record year. In this district the floor area of nonresidential
construction, based on F. W. Dodge Corporation reports covering a
major portion of the district, was 53 per cent larger than in 1949. In
the residential field, the number of new one- and two-family units put
under contract was 30 per cent larger than in the previous year and
there was a considerably larger percentage increase in multi-family units.
M u c h of the increase was in the residential field. Private expenditures for housing were half again as large as in 1949. Totaling $12.5
billion as against $8.3 billion in the preceding year, private housing
accounted for 45 per cent of all construction outlays as compared with
37 per cent in 1949. In terms of physical volume, housing construction
also was larger than in any previous year. A total of 1.4 million nonfarm
dwelling units were started during the year.
T h e sharp expansion in construction also Hfted the value of contracts
Page 12
awarded in the Eighth District to a new high—$868 million. This was
17 per cent more than in 1942, the previous peak year, and 29 per cent
larger than in 1949. As in the nation as a whole, residential building
accounted for much of the rise in total construction expenditures.
Housing contracts, valued at $228 million in 1949, rose to $350 million
in 1950 and for the first time since the building boom in the late 1920's
represented more than 40 per cent of the value of all work put under
contract in the district.
The high level of residential construction was a major factor in the
rise in private credit during the year. In October, the Board of Governors issued Regulation X which established controls over real estate
construction credit not insured or guaranteed by the Federal Government. Companion regulations were issued by the Housing and Home
Finance Administration in connection with credit extended for both old
and new homes insured or guaranteed by F.H.A. or V.A.
EXPENDITURES
FOR NEW CONSTRUCTION
IN THE UNITED
STATES,
1946-1950
Dill ons (M
30
Uo i m r s
Diiiions
o\r u o i i
30
A
\ 20
20
y^gg^
;^^^^
10
'////////
H to
,^J^Al/J^jl^jtjt,
>oow>vv
o
1946
PRIVATE
1948
1947
RESIDENTIAL
ALL
COMMERCIAL
SOURCE
U.S. Dept of Commerce
OTHER
PUBLIC
MANUFACTURING
yy/A
1949
and
Labor
Page 13
1950
PRIVATE
BANKING DEVELOPMENTS IN 1 9 5 0 ^ J
T h e most significant banking developments in 1950 were the expansion of bank loans, particularly in the second half of the year, the resultant growth in the money supply plus its increased rate of use, and the
steps taken by the Federal Reserve System to counteract inflationary
pressures.
Loan Expansion
Eighth District member banks increased their loans approximately
25 per cent to a record total of $1.9 billion at the close of 1950. Relative to a year earlier loans were up $340 million. A large share of the
loan growth occurred in the second half of the year, as it normally does
in this district in connection with crop movements. This year, however,
the rise from the June low to the December high—^$375 million—was
much larger than usual.
TOTAL
EIGHTH
I Billions
of
DISTRICT
WEEKLY
LOANS
REPORTING
Dollars
MEMBER
BANKS
Billions
Page 14
of
Dollars
T h e need to finance the 1950 cotton crop and substantial purchases
of stored cotton from the C C C pool, both at high prices, contributed
particularly to the 1950 loan increase in district banks. Business demand
for inventory and other working capital requirements added to the upswing. A survey of a few banks at mid-November indicated that the
gain in business loans from June to November, 1950, although centered
around the activity of cotton merchants and related processors, was
spread throughout most types of businesses.
While the greatest surge in demand for bank credit apparently came
from business, the expansion in real estate and consumer loans also was
an important factor. At Eighth District weekly reporting member
banks, for example, business loans increased $158 million from December, 1949 to December, 1950, accounting for three-fifths of the total
gain in those banks. Expansion in real estate and consumer credit
amounted to $48 million and $49 million, respectively. Within the
year both real estate and consumer loans increased most in the third
quarter, reflecting the scare buying and the rush to obtain real estate
financing immediately following the outbreak of Korean hostilities.
The loan increase in 1950 was widespread throughout the member
banks in the district but was centered heavily in large urban banks.
They reported a 27 per cent increase in volume (about the same as
growth nationally in large city banks), while the smaller banks reported
a 13 per cent increase.
Nationally the loan expansion at all banks amounted to $ 11 billion in
the year 1950 with the bulk of the growth coming after June 30. In
addition the banks added $2 billion net to their holdings of investments
other than Government securities.
Growth in Money Supply
Some of the funds to expand loans were obtained by the banks from
the sale of United States Government securities. From December 1949
through December, 1950 commercial bank holdings of U.S. Government
securities declined $5 billion. Nonbank investor purchases, mostly by
corporations and individual investors, offset a large part of these sales
but not all. The Federal Reserve System also purchased a substantial
volume of Government securities during the year, thereby creating bank
reserves.
Page 15
T o the extent that loan and "other" investment expansion was not
offset by the sale of Governments, bank deposits were created by a net
increase in earning assets of the banking system. O n balance, then,
bank credit expansion was a major source of funds supporting the
enlarged civilian demand for goods.
TABLE I
CHANGES IN T H E CONSOLIDATED C O N D I T I O N
S T A T E M E N T O F BANKS A N D T H E
M O N E T A R Y SYSTEM
(In billions of dollars)
December, 1949
to
June, 1950
June, 1950
to
December, 1950
Assets
Bank Credit:
Loans
Investments
Non-U.S. Government
U.S. Government
Gold
+
Liabilities
Private Money Supply
U.S. Government Deposits
Foreign Deposits
Bank Capital Accounts
2.4
+
8.5
+1.0
— L7
— 0.2
+1.0
— 2.2
— 1.4
+
+
5.9
+ 0.2
+ 0.7
+ 0.4
+0.2
+
—
—
-
7.2
1.1
0.2
0 -
+
+
5.9
1.5
1.5
T h e net rise in bank credit in the first six-month period, which
occurred despite a small loss of gold from the banking system, increased
the money supply by $1.3 billion. During the second half of 1950, bank
credit expansion, offset in part by a much larger loss of gold than in the
first half, added $6 bilHon to the money supply.
Page 16
More Rapid Use of Money and Liquid Assets
In addition to growth in the supply of money, there was an increase
in its rate of use. At banks in reporting centers outside New York, the
annual rate of turnover of demand deposits increased from 18 to 20 in
the first six-month period. By the end of 1950, the annual rate had risen
to about 22.
Series E Bonds were cashed at an increasing rate in 1950. Beginning
in May, 1950, redemptions exceeded sales by an amount averaging
roughly $100 million per month over the last eight months of the year.
Time deposits were drawn down in the last half of the year. Eighth
District member banks reported $18 million loss in time deposits from
June through December. In contrast these deposits had increased $25
million in the first half year.
Growth of the spending stream outran the ability of the country to
produce more goods and services on short notice. Inflationary pressure
on prices resulted.
p
MONEY
SUPPLY*
Billtons of Dollars
I80
BJIIrons of Dollars
ISO
Lost Wednesday of month
175 >
/< 175
< I70
170
165
>
\—-''^'^
\ y ^
< 165
160
I60
1948
1949
^Except U. S. ond Foreign Government
•M
Page 17
1950
Member Bank Reserves
Expansion of bank deposits resulting in the main from the $8 billion
net rise in bank credit (an increase in loans and ''other" investments
offset in part by a decline in Government security holdings) required
about $900 million in additional reserves to be held with the Federal
Reserve Banks. Also the banks needed $800 million more reserves to
offset net losses from the money market factors (movements of gold, currency, Treasury balances, float and miscellaneous items). These factors
at times added to and at times subtracted from member bank reserve
balances, but for the year as a whole there was a net drain from them.
T h e gold outflow accounted for a loss of $1.8 billion and a rise in currency circulation for a loss of $150 million. T h e other factors were net
suppliers of funds for the year, as shown in the table.
TABLE II
FACTORS AFFECTING MEMBER BANK RESERVES
(In millions of dollars)
( + ) indicates addition
(—) indicates reduction
Aggregate
4 Quarters
1st*
2nd*
3rd*
4th*
(Entire
Quarter Quarter Quarter Quarter Year 1950)
Money Market
Currency
+ 796
Treasury Operations —
16
Gold and Foreign
— 295
Float
— 186
Miscellaneous
+ 235
Total
Deposit Changes
System Open Market
Operations
Borrowings
Total Change
Excess Reserves at
End of Period**
— 57
+155
—279
+16
— 35
—
—
—
+3
+
34
273
526
21
36
—856
+387
—690
+480
— 9
— 151
+ 253
—1,790
+ 631
+ 227
534
194
—200
—194
— 476
— 381
—688
—541
—
—
—1,273
+ 222
+701
—295
+1,137
+
50
+983
+180
+1,548
+ 157
— 323
+
+
330
— 66
^
856
790
+
+
514
12
526
*Based on closing Wednesday figures of each quarter.
**Excess Reserves were estimated at $837 million at the close of 1949.
Page 18
830
922
47
790
T h e lion's share of the additional reserve funds was supplied by System
Open Market operations. Banks gained $1.5 billion in reserve funds
from System net purchases of Government securities over the year as a
whole. Net sales in the first quarter were only partly balanced by net
purchases in the second quarter. After the Korean conflict began, net
System purchases added over $2 billion. Particularly important in adding to banks' reserves were purchases made in connection with the September 15-October 1 and the December 15, 1950-January 1, 1951
refunding operations.
During the year, commercial banks sold several times the net amount
added to System account. From December, 1949 through June, 1950
commercial bank holdings of U. S. Government securities dropped $1.1
billion; from June through December bank holdings declined $3.5
billion. Nonbank investor purchases, mostly by corporations and individual investors, offset most of the sales but not all. The balance was
purchased by the System to maintain order in the Government securities market.
Irregularly, the banks obtained reserve funds and used them by
borrowing from the Federal Reserve Banks and subsequently repaying
those loans. Over the year as a whole there was little change in member
bank borrowings at Federal Reserve Banks.
Federal Reserve Action
While the System was required to supply net reserves to the banking
system during 1950, despite the growing strength of inflationary forces,
over-all Federal Reserve credit policy evolved from one of neutrality at
the beginning of the year to one of positive restraint at the end of the
year. Virtually all the tools of control available to the Federal Reserve
System were brought into play during the year:
(1) Open market operations were conducted, insofar as they could
be in the light of the Treasury's refunding programs, to increase
the cost of additional member bank reserves. Short-term interest
rates rose. The average rate on accepted bids on Treasury bills
rose from 1.081 per cent on bills dated January 5, 1950 to 1.172
per cent on bills dated June 29, 1950. By the end of the year,
the bill rate had risen to 1.382 per cent. Prices of taxable Treasury bonds fell (yields increased) over the year. Effective August
18 to 25, the rediscount rate at all Federal Reserve Banks was
Page 19
raised from ^2 per cent to 1% per cent. Thus, whether the
banks obtained additional reserves by borrowing from their
Federal Reserve Banks or by disposing of Government securities
in the open market, the cost of these reserves was increased.
(2) Acting under the new powers granted by the Defense Production
Act of 1950, consumer instalment credit was again brought under
regulation September 18 and minimum down payment, maxim u m maturity terms were stiffened on October 16. Effective
October 12 the Board of Governors placed credit for new construction of 1- and 2-family residences (not extended, insured,
or guaranteed by the Federal Government) under Regulation X .
T h e remaining instrument of selective credit control, that over
stock market margins, was not tightened during 1950.^
(3) Throughout the year the System continued to urge the banks to
restrain credit growth. O n August 4, 1950, the Board of Governors and other regulatory agencies urged all lending institutions
to exercise special care in their operations and to screen out loans
to business or consumers that might be used for speculative purposes or interfere with defense requirements. O n August 18, the
Board and the Federal Open Market Committee announced that
they would be ''prepared to use all the means at their command
to restrain further expansion of bank credit consistent with the
policy of maintaining orderly conditions in the Government
securities market." T h e statement continued that ''The Board
is also prepared to request the Congress for additional authority
should that prove necessary." O n November 17, the Chairman
of the Board of Governors sent a letter to all member banks again
stressing the need for restraint in lending.
(4) O n December 28, the Board of Governors announced increases
in member bank reserve requirements (to existing legal maximums for reserve city and country members and to within 2 percentage points of the legal maximum on demand deposits for
central reserve city banks). The action absorbed $2 billion in
member banks' free funds when effective, J a n u a r y 11-February
1, 1951. It should be noted that a fairly widespread expectation
of an increase in requirements imposed some restraint on bank
lending several months before the effective dates.
* In January, new construction credit control was extended to cover multi-unit residential
construction. Also in January, margin requirements were increased from 50 per cent to
75 per cent.
Page 20
L
ACTIVITIES OF THE FEDERAL RESERVE J j
I
BANK OF ST. LOUIS
^ ^ |
During 1950, the Federal Reserve Bank of St. Louis had a general
increase in work volume. In part this was due to increased activity in
the regular operating functions, in part it was due to additional duties
assigned to the Federal Reserve System under the national defense program.
Most of the St, Louis Bank's activities arise from the Federal Reserve
System's statutory responsibilities as the nation's central bank and fiscal
agent and from operations incident to exercising those responsibilities.
Thus this Bank, as part of the Federal Reserve System, shares in formulating or advising on general System credit policy and is charged with
implementing those policies in the Eighth Federal Reserve District. It
supervises Eighth District member banks, particularly state member
banks. It carries out a variety of typical central bank operating functions, such as check collection, money shipments and receipts, holding
of member bank reserves, fiscal activities for the United States Government, and many others. In most of these fields, activity and work
volume was greater in 1950 than in 1949.
People and Plant
Much of the work of a Federal Reserve Bank may seem to the nonfinancial community complex and difficult to understand. Actually the
functions and operations are not as intricate as they may seem at first
glance. And the primary requirements for carrying them out are the
same as those essential to any successful endeavor—trained people and
adequate physical plant and equipment.
In doing its work, a Federal Reserve Bank needs the services of a wide
variety of people—men and women who have a number of aptitudes
and a range of training. Some work requirements have to do with credit
policy formulation and administration, others with volume operations
in sorting checks or counting money, still others with building maintenance or employee health.
T h e 1,117 officers and employees at the St. Louis and three branch
offices at the close of 1950 thus engaged in a number of widely diflFering
activities—but almost all of them called for some special training and
Page 21
aptitude. T h e Bank is constantly trying to further that training and
develop new talents. Much of this work is done at the departmental
level where department managers and supervisors as a regular part of
their jobs are engaged in training people they supervise. Merit reviews
of all employees are conducted regularly.
O n a bankwide basis an executive development program is carried on.
This program is designed to offer opportunities for training and advancement^ and to develop an alert and trained group of potential officers,
department managers, supervisors and specialized personnel. As part of
this program, the Bank expects to recruit and train a few selected college
graduates each year.
Under the training program in 1950 six employees completed
advanced training assignments and three finished basic training assignments. One college graduate brought into the Bank last summer completed his orientation assignment.
Also it is believed that as part of the general training program officers
and top-level employees profit from regular discussions of current economic and credit policy problems. In 1950 a seminar course of twelve
lecture and discussion periods was conducted. In addition to lectures
delivered by our own officers and staff, speakers from the Board of
Governors and the Federal Reserve Banks of New York, Cleveland and
Philadelphia led discussion periods. T h e Bank also encourages attendance at the various schools of banking: Central States School of Banking, Southern States School of Banking, and the Graduate School of
Banking. In 1950, nine men from the head office and branches were
enrolled in these schools, with two completing their work at them.
Adequate plant and equipment also are essential to smooth operations.
A good many of the Bank's employees have duties in connection with
the maintenance and necessary alterations in the buildings at St. Louis,
Louisville, Little Rock and Memphis. Last year, as examples of work
in this field, some locker and washroom facilities were added at St.
Louis and the main banking room mezzanine was extended and
fluorescent lighting installed at Little Rock.
Rehabilitation work in the Nugent^ building was completed in 1950
and it was leased to a division of the Army Engineers (occupancy began
February 1, 1951). In that building it was necessary to replace or recondition all metal equipment and plumbing, install air conditioning, acous*By action of the Board of Directors on F e b r u a r y 8, 1951, this building was r e n a m e d the
Chester C. Davis Building in honor of M r . Davis who served as President of the Federal
Reserve Bank of St. Louis from M a r c h 1, 1941 to J a n u a r y 3 1 , 1951.
Page 22
tical ceilings, fluorescent lighting and asphalt tile flooring. O n the
exterior, the garden was enclosed and walks installed through it.
The garage adjacent to the bank building was also completed in 1950.
It accommodates automobiles of officers, employees, visiting member
bankers and guests. Five hundred fifty parking permits were sent to
directors of the Reserve Bank and to member banks. About 55
guests use the garage each month.
T h e people and plant of the Federal Reserve Bank thus are the two
main factors in the Bank's operations. The remainder of this report
discusses the specific functions carried on by the Bank in 1950.
Information and Analysis
T h e service of providing information on and analysis of economic
conditions for banks, businesses and the public grows out of several
functions of the Federal Reserve Bank of St. Louis. The directors and
officers need to be kept informed on economic developments in the
nation and the district in order to fulfill their responsibilities as a part of
the Federal Reserve System. The Board of Governors in Washington
for similar reasons wishes factual and interpretive reports on district
developments. The collection of regular statistical material, partly as a
by-product of other activities, partly as a definite program, is a typical
central banking function.
During 1950, the Bank collected, tabulated and analyzed a vast quantity of statistical data pertaining to agriculture, banking, employment,
industry and trade. Special studies were also conducted in various fields.
In addition to using the information internally, the Bank made a large
part of it available to bankers, businessmen, students and the public generally through the Monthly Review, periodic reports and special publications.
For a number of years the Bank has followed the practice of having
officers and field men visit both member and nonmember banks to establish closer working relationships on problems of mutual interest. These
visits also are useful to obtain opinions and economic information at the
"grass roots" level. During the year, 497 visits were made by officers
of the Bank and 997 visits by field representatives.
T o make its economic findings readily available to bankers and others,
23 public discussion meetings were sponsored by the Bank jointly with
the various bankers associations and universities in the seven states partly
Page 23
or wholly contained within the Eighth District. Over 2,000 bankers,
bank directors and others attended these meetings. Speakers also were
furnished for numerous civic and professional organizations.
In addition, the Bank made films on banking subjects available to
member banks for showing to schools, civic clubs, bankers meetings and
similar groups. Two of the films were shown over the local television
station—KSD-TV.
T h e Bank encouraged visits to the head office and branches to view
operations. Over 3,600 people took advantage of this opportunity, most
of them students from high schools and universities.
Credit Operations
Member banks borrowed more than twice as much money from the
Federal Reserve Bank in 1950 as in 1949. During the year, aggregate
advances, including renewals, totaled $1.4 billion as compared with $692
million in 1949. The number of notes handled increased from 525 to
647.
Regulation V—Effective September 27, the Board of Governors
reactivated Regulation V covering the guarantee of loans for defense
production. By the close of 1950 ten applications had been received for
a total of $ 1.6 million.
Regulation W—Regulation W, which had lapsed on June 30, 1949,
was reactivated under the Defense Production Act of 1950 by the Board
of Governors on September 18. T h e present Regulation imposes controls over instalment sales and instalment loans up to $5,000 on automobiles; up to $2,500 on other listed articles, and up to $2,500 on instalment
loans for any other purpose.
By the end of the year, 10,807 Eighth District businesses had registered
under Regulation W. Field representatives had examined 574 registrants. No serious violations had been found.
Regulation X—Also under the Defense Production Act, effective
October 12 the Board of Governors imposed Regulation X, under which
conventional real estate construction credit is regulated. Since this was a
brand new field for the Federal Reserve System, considerable work was
necessary to build up mailing lists of real estate brokers, savings and loan
associations, insurance companies, and others in the real estate financing
field. Inquiries as to interpretation of the various provisions of the
Regulation were numerous. By the end of the year the new activity was
proceeding smoothly and an investigating staff had been set up.
Page 24
Examination
During the year, each of the 171 state member banks in the district
was examined at least once. Following established practice, examinations were made jointly with examiners for the seven State Banking
Departments, except in a few instances where practicable schedules
could not be arranged. In addition, a number of investigations, both
joint and independent, were made. A table showing the number of
examinations and investigations undertaken during the year follows.
E X A M I N A T I O N S OF S T A T E MEMBER BANKS
Commercial Departments
Trust Departments
Holding Company Affiliates
Affiliates other than Holding Companies
Joint
149
40
0
14
Independent
22
8
1
2
INVESTIGATIONS
Holding Company Affiliates
Affiliates other than Holding Companies
Affiliated Companies
Applications for Fiduciary Powers
Applications for New National Bank Charters
2
37
2
0
1
1
8
0
1
0
Operating Functions-Member Banks
In 1950, 43 per cent of all employees of the Bank were engaged in
duties that fell in this category.
Check Collection—In 1950, for the seventeenth consecutive year, the
volume of checks collected increased over the preceding year. Almost
134 million items were handled in 1950 compared with 129 million in
1949. In terms of dollars, checks collected in 1950 aggregated almost
$47 billion, about $4 billion more than in 1949.
During 1950, several all-time records were established in the handling
of checks drawn on country banks. The St. Louis office handled
Page 25
4,714,000 country bank checks during the month of October, which represents the largest volume of such items ever handled in a single month.
O n August 2, a record day's volume of 289,000 country checks were
handled at St. Louis.
Further progress was made in 1950 with the check routing symbol
program. A survey conducted near the close of the past year indicated
that nearly 73 per cent of all checks on par banks in this district now
bear the symbol. A similar survey made a year earlier indicated 67
per cent use.
NUMBER
OF C H E C K S
HANDLED
AT ST LOUIS AND
BRANCHES
DAILY
AVERAGE
4 00
300
200
lOO
Thousands
1950
1949
Accounting—The 496 member banks in the district maintain reserve
balances with the Bank, and 35 nonmember banks maintain clearing
accounts. Daily transactions affecting these accounts, and changes in
the capital stock of this Bank necessitate a large volume of bookkeeping
entries. Banks are furnished with daily transcripts reflecting details of
charges and credits that arise from check collection and clearings, noncash collection transactions, transfers of funds, money shipments and
receipts, and other deposits and withdrawals of funds.
In addition to these operations performed for banks, accounting operations are concerned with internal affairs of the Bank itself. Transactions
Page 26
through the Federal Reserve Interdistrict Settlement Fund, this Bank's
share of transactions of the System Open Market Account, and internal
operating expense items were major sources of activity.
Coin and Currency—The number of pieces of currency sorted and
counted in 1950 was larger than in 1949 and the dollar volume was also
larger. During the year, 199 million pieces of currency were handled,
an increase of 437,000 over 1949. Dollar volume amounted to $1.1
billion, an increase of $10.7 million over the previous year.
More coins were counted during the year also. The total of 293
million represented a 7 million-piece increase over 1949. This increase
was mainly in the smaller denominations and amounted to only $14,000
raising the dollar amount in 1950 to a little over $25 million.
A substantial increase occurred in shipments of money during 1950.
There were 7,000 more shipments of coin than in 1949. This increase
was due mainly to (1) an increased countrywide demand, and (2) increased use of the Bank's coin wrapping service. Wrapped coin payments amounted to just under $7 million in 1950 as against $3.5 million
in 1949.
COIN
NUMBER OF PIECES
AT
ST L O U I S
AND
DAILY
AVERAGE
HANDLED
BRANCHES
Thousands
1500
1949
1000
500
1950
Page 27
Safekeeping—The Bank furnished safekeeping facilities for 486 of the
496 member banks in 1950, and to 550 nonmember banks. T h e latter
have such facilities available only for collateral for Treasury T a x and
Loan Account, or to secure United States Government deposits of public
funds.
Traffic in and out of the Safekeeping Department increased over 1949.
Number of securities received was 78,000, an increase of almost 7,000.
T h e number released also increased and fewer securities remained in
safekeeping than at the end of 1949.
As a service to banks, coupons were clipped as they matured and the
banks' accounts credited. During the year the number of coupons
clipped was slightly smaller than in 1949.
Wire Transfers—As one of its services, the Bank transfers funds for
member and nonmember clearing banks by ware. Both the number of
transfers and the total dollar amount were larger in 1950 than in 1949.
Number of transactions rose from 88,000 to 95,000 and dollar volume
from $16 billion to $19 billion. In 1949, dollar volume exceeded the
billion-dollar mark in only one month, but in 1950 that mark was topped
in every month but two.
CURRENCY
NUMBER
OF P I E C E S
A T ST
LOUIS
AND
DAILY
AVERAGE
HANDLED
BRANCHES
Thousands
lOOO
1949
500
Noncash Collections—The Bank handled 368,000 noncash collection
items totaling $329 million in 1950. About 838,000 United States Government interest coupons (including those clipped from securities in our
safekeeping and those received from banks and others) were paid.
Services for United States Government
About 16 per cent of the employees performed duties that fell within
this category.
Fiscal Agency—A large portion of the work performed in connection
with the fiscal agency operation resulted from the sale, redemption and
reissue of Series E savings bonds. Most sales were made through the
1,600 issuing agents that the Bank was servicing at the end of the year.
Registration stubs representing bonds sold by issuing agents numbered
2.4 million, an increase of 209,000 from the previous year. The number
of savings bonds issued directly by the Bank was slightly less than in 1949.
T h e Bank also processed all redemptions of savings bonds, although
about 95 per cent were redeemed through 1,558 paying agents. A total
of 3.5 million bonds, or 250,000 more than in 1949, was redeemed
SALES
AND
REDEMPTION
OF U. S. SAVINGS BONDS
8th
F R.
DAILY
DISTRICT
AVERAGE
Thousands
of
Pieces
J5
10
[80N0
SALES
1950
1949
Page 29
through these paying agents. T h e number redeemed directly by the
Bank was practically unchanged from 1949.
T o service these issuing and paying agents, the Bank made over 13,000
shipments of bonds on consignment.
As fiscal agent for the United States Government the Bank also
handled sales, exchanges and transfers of marketable Government securities. T h e number of applications for new offerings and the number of
pieces allotted were substantially larger than in 1949. Applications
numbered over 13,000 or 76 per cent above 1949, while more than
75,000 pieces were allotted—more than double the 1949 total.
Transactions involving purchase and sale of securities for member
banks numbered 6,500, and totaled more than $1.4 billion. Telegraphic
transfers of securities numbered 7,500 for $2.6 billion. T h e Bank
handled over 201,000 exchange and redemption transactions for more
than $5.1 billion. Activity in the Treasury T a x and Loan Account
(formerly W a r Loan Deposit Account) greatly increased during the
year. Transactions numbered 108,000, an increase of 63 per cent over
1949. At the end of the year there were 1001 qualified depositaries of
which 156 had executed Letters of Agreement with their correspondent
banks for the custody of Treasury T a x and Loan collateral. Twenty-one
commercial banks held collateral security amounting to $14.6 million
for the account of their correspondent banks subject to the Bank's order.
Effective January 1, 1950 a new procedure for handling deposits of
Withheld Income and Employment Taxes went into effect. T h e Bank
received almost 48,000 depositary receipts direct from employees, over
152,000 receipts from qualified depositaries, and more than 155,000
receipts from Collectors of Internal Revenue.
Audit
T o insure that all functions and accounts affecting assets and liabilities of the Bank are properly handled, the Audit Department conducts
periodic checks throughout the Bank and its branches. x\ll operating
departments and all functions and accounts affecting assets and liabilities were audited during 1950 in accordance with an approved frequency
schedule. Annual balance sheet audits were conducted at each of the
branches. Reports of major audits were submitted directly to the
Chairman of the Board of Directors and to the Audit Committee of
Directors.
Page 30
.DIRECTORS AND OFFICERS
F e b r u a r y 15, 1951
D I R E C T O R S
Chairman
Chief Counsel
Missouri-Pacific Lines
St. Louis, Missouri
for
RUSSELL L . DEARMONT,
Trustee
Deputy
Chairman
Vice-President
and
Manager
Dixie W a x P a p e r C o m p a n y
M e m p h i s , Tennessee
W M . H . BRYGE^
M . M O S S A L E X A N D E R , President
W M . A. M C D O N N E L L ,
Missouri-Portland Cement Company
St. Louis, Missouri
President
Planters Bank & T r u s t C o m p a n y
Hopkinsville, K e n t u c k y
PHIL E . CHAPPELL,
J. E. E T H E R T O N , President
Carbondale National Bank
C a r b o n d a l e , Illinois
President
First N a t i o n a l B a n k in St. Louis
St. Louis, Missouri
Farmer
JOSEPH H . MOORE,
Charleston
Missouri
President
Plunkett-Jarrell Grocer Company
Little R o c k , A r k a n s a s
RALPH E . PLUNKETT,
L o u i s RuTHENBURG, Chairman
Servel, I n c o r p o r a t e d
Evansville, I n d i a n a
of Board
O F F I C E R S
DELOS C . JOHNS,
O. M.
ATTEBERY,
First
Vice-President
President
W M . E . PETERSON,
S.
J.
F.
J.
Vice-President
W M . H . STEAD,
Vice-President
H . H . W E I G E L , Secretary and Assistant
Vice-President
F . GiLMORE, Assistant Vice-President
D . M . L E W I S , Assistant
Vice-President
H . G A L E S , Assistant Vice-President
F . N . H A L L , Assistant
Vice-President
L. D E M I N G , Assistant Vice-President
G. O . H O L L O C H E R , Asst.
Vice-President
C. WoTAWA, Assistant Vice-President
E . R. B I L L E N , Assistant
Vice-President
J O H N J. C H R I S T , Assistant
Vice-President
G. W . HiRSHMAN, General
Auditor
H . B.
Page 31
KLINE,
Counsel
MEMBER OF FEDERAL ADVISORY COUNCIL
W. L. HEMINGWAY^ Chairman of the Board
Mercantile-Commerce Bank & Trust Company
St, Louis, Missouri
MEMBERS OF INDUSTRIAL ADVISORY
President
Western Textile Products Company
St. Louis, Missouri
COMMITTEE
President
American Furnace Company
St. Louis, Missouri
JACOB V A N D Y K E ^
CLARENCE S. F R A N K E ,
G. A. H E U S E R , President
Henry Vogt Machine Company
Louisville, Kentucky
J A M E S L O U I S CRAWFORD,
President
Walsh Refractories Corporation
St. Louis, Missouri
First Vice-President and General
Alton Box Board Company
Alton, Illinois
MARVIN W . S W A I M ,
Manager
LITTLE ROCK BRANCH
D I R E C T O R S
Chairman
J. B E A U C H A M P , President
Terminal Warehouse Company
Little Rock, Arkansas
STONEWALL
HARVEY C . C O U G H , J R . ,
President
President
First National Bank
Hope, Arkansas
T H O S . W . S T O N E , Exec.
^^ice-President
T h e Arkansas National Bank
Hot Springs, Arkansas
President
S.\M B. STRAUSS, President
Pfeifers of Little Rock
Little Rock, Arkansas
Union National Bank
Little Rock, Arkansas
CECIL C . COX,
Farmer
Stuttgart
Arkansas
GAIT HER
C, J O H N S T O N ,
First National Bank
Newport, Arkansas
LLOYD SPENCER,
O F F I C E R S
C. M . STEWART, Vice-President and Manager
CLIFFORD W O O D , Assistant Manager
CLAY C H I L D E R S , Assistant
W. J. BRYAN, Assistant
Page 32
Manager
Manager
LOUISVILLE BRANCH
D I R E C T O R S
Chairman
President
Mengel Company
Louisville^ Kentucky
ALVIN A . V O I T ,
President
Lincoln Bank and Trust Company
Louisville, Kentucky
Farmer
S M I T H BROADBENT^ J R . ,
NOEL R U S H ,
Cadiz
Kentucky
A. C. VoRis, President
Citizens National Bank
Bedford, Indiana
H. L E E COOPER, President
Ohio Valley National Bank
Henderson, Kentucky
President
Porcelain Metals Corporation
Louisville, Kentucky
PIERRE B . M C B R I D E ,
Cashier and Director
The Union National Bank
New Albany, Indiana
IRA F . WILCOX,
OFFICERS
C. A. ScHACHT, Vice-President and Manager
FRED BURTON, Assistant Manager
L. K. A R T H U R , Assistant
L. S. M O O R E , Assistant Manager
Manager
MEMPHIS BRANCH
D I R E C T O R S
Chairman
L E S L I E M . STRATTON, J R . , President
Stratton-Warren Hardware Company
Memphis, Tennessee
H U G H M . BRINKLEY,
Farmer
Hughes
Arkansas
C. H. R E E V E S , President
Merchants and Farmers Bank
Columbus, Mississippi
H. W. H I C K S , President
First National Bank
Jackson, Tennessee
BEN L . R o s s , Chairman of Board
Phillips National Bank
Helena, Arkansas
M. P. M O O R E , Owner
Circle M Ranch
Senatobia, Mississippi
NoRFLEET T U R N E R , President
First National Bank
Memphis, Tennessee
O F F I C E R S
PAUL E . SGHROEDER, Vice-President
and Manager
S. K. BELCHER, Assistant Manager
C. E. M A R T I N , Assistant
H. C. ANDERSON, Assistant Manager
Page 33
Manager
COMPARATIVE STATEMENT OF
CONDITION
ASSETS
GOLD CERTIFICATES
REDEMPTION FUND
O T H E R CASH
.-.
Total Cash
D I S C O U N T S AND ADVANCES
U. S. G O V E R N M E N T S E C U R I T I E S
Total Loans and Securities
F. R. N O T E S O F O T H E R BANKS
UNCOLLECTED ITEMS
BANK P R E M I S E S ( N E T )
O T H E R ASSETS
Total Assets
Dec. 31, 1950
Dec. 31, 1949
$ 590,355,112
40,724,909
15,013,766
$ 686,839,736
42,929,214
18,957,850
646,093,787
748,726,800
500,000
1,137,613,000
2,502,000
1,020,561,000
1,138,113,000
1,023,063,000
9,788,730
212,191,132
3,509,443
6,469,198
8,780,550
171,468,707
1,926,133
6,805,515
2,016,165,290
1,960,770,705
1,097,440,250
1,090,460,145
651,163,354
24,658,746
64,253,191
611,854,729
31,880,808
57,262,821
740,075,291
700,998,358
144,200,366
227,309
136,305,898
475,311
1,981,943,216
1,928,239,712
LIABILITIES
FEDERAL RESERVE NOTES
DEPOSITS:
Member Bank—Reserve Account
U. S. Treasurer—General Account
Other Deposits
Total Deposits
DEFERRED AVAILABILITY ITEMS
OTHER LIABILITIES
Total Liabilities
CAPITAL ACCOUNTS
C A P I T A L PAID I N . . .
S U R P L U S (Section 7)
S U R P L U S (Section 13b)
O T H E R CAPITAL ACCOUNTS
Total Liabilities and Capital Accounts
7,398,000
20,295,334
521,317
6,007,423
6,894,200
19,117,860
521,317
5,997,616
$2,016,165,290
$1,960,770,705
COMPARATIVE STATEMENT OF
EARNINGS AND EXPENSES
EARNINGS
1950
1949
$15,197,121
$17,022,134
4,358,331
125,300
380,545
4,050,803
117,300
384,052
4,864,176
4,552,155
10,332,945
12,469,979
1,973,676
174
1,646,280
126
1,973,850
1,646,406
EXPENSES:
Operating Expenses
Assessment for Expenses of Board of Governors
Federal Reserve Currency
Total Current Expenses
Current Net Earnings
Additions to Current Net Earnings:
Profit on Sales of U. S. Government Securities..
Other Additions
Total Additions
Deductions from Current Net Earnings
Transferred to Reserves for Contingencies
Paid United States Treasury (Interest on Outstanding Federal Reserve Notes).....
83,918
17,999
154,618
2,116,055
10,595,592
10,294,486
Net Earnings After Reserves and Payments to
United States Treasury
Dividends Paid
1,609,286
431,812
1,551,226
407,193
Transferred to Surplus (Section 7)
1,177,474
1,144,033
S U R P L U S A C C O U N T ( S E C T I O N 7)
Surplus January 1
Transferred to Surplus—as above
Surplus December 31.....
19,117,860
1,177,474
17,973,827
1,144,033
$20,295,334
$19,117,860
@FedFRASER