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Operations of the Federal Reserve Bank of St. Louis in 1961—An Annual Report T h e f e d e r a l r e s e r v e b a n k o f s t . l o u is is a part of the Federal Reserve System, the primary function of which is to regulate bank credit and the nations money supply with a view to contributing to economic growth, full employment, and reasonably stable prices. A summary of monetary developments in 1961 was presented in the January 1962 issue of this Review. In addition to the monetary management activities of the Federal Reserve System, each Federal Reserve Bank performs a variety of operations which contrib ute to efficient operation of the economic system. The principal operating functions of a Federal Reserve Bank are handling member bank reserve accounts, distributing currency and coin, clearing checks, col lecting other negotiable instruments, transferring funds, making advances to member banks, fiscal agency op erations for the United States Government (such as issuing and redeeming Treasury securities), safekeep ing of securities, research operations, and examination and supervision of banks. Most of the employees of the Bank are engaged in these activities. This article describes the principal operations of the Federal Re serve Bank of St. Louis and its branches during 1961. trict, of which 320 were national banks and 158 were state member banks. A year earlier there were 319 national banks and 161 state member banks, a total of 480 member banks in the district. M em ber B ank R eserve A ccounts The Federal Reserve Bank of St. Louis and its branches hold the reserve deposit accounts of all mem ber banks in the Eighth District. Member banks were required in 1961 to keep as reserves the following percentages of their deposit liabilities: 1 Net Demand deposits* Central reserve city banks........................................ 16%% Reserve city banks....................................................... 16%% Other member banks................................................... 12% Time deposits All banks ....................................................................... 5% * Total demand deposits minus cash items in process of collection and demand balances due from domestic banks. These reserves were required to be on deposit with the Federal Reserve Bank, except for amounts that the member bank chose to hold in actual cash. This vault cash was about one-eighth of the total. 1 See footnote bottom of second column, page 10. THE EIGHTH FEDERAL RESERVE DISTRICT The area which is served by the Federal Reserve Bank of St. Louis, the Eighth Federal Reserve Dis trict, includes most of Missouri, all of Arkansas, and parts of Illinois, Indiana, Kentucky, Tennessee, and Mississippi. The Bank has three branches, located in Little Rock, Louisville, and Memphis. Bound aries of the Eighth Federal Reserve District and its three branch zones, along with the location of the dis trict in relation to the eleven other Federal Reserve Districts, are shown in the accompanying map. As of February 1, 1962 there were 478 member banks in the Eighth Dis C o u n ty Location a n d B ran ch Territories — County Bou n da rie s ■■ Branch and M ain O ffice Boundaries — — O O State B oundaries District Bou n da ry Head Office Branch Offices Page 9 Member banks may draw on and replenish their reserve deposit accounts much as individuals use their checking accounts in settling day-to-day transactions. Numerous entries are made in the reserve accounts of member banks. Entries are made for currency or coin withdrawn or deposited, for settlements of clear ings and checks, for Treasury deposits transferred from member banks to the Reserve Bank, for transfers of funds, for redemptions of Government bonds and coupons, and for sums borrowed and repaid. The Reserve Bank or branch records all transactions and strikes a daily balance for the reserve account of each member bank. These transactions are described in subsequent paragraphs. During 1961 the Federal Reserve Bank of St. Louis installed a 1401 IBM computer at the St. Louis ofRce. The records relating directly both to actual member bank reserve balances and to required balances at that office have been placed on the machine, reducing sub stantially the volume of the manual labor. In addition, many of the other bookkeeping functions of the Bank have been transferred to the computer. Collecting and Clearing Checks The use of demand deposits in commercial banks by individuals and businesses in making payments is facilitated by the Federal Reserve Banks in clearing checks and in providing a mechanism through which commercial banks settle for the checks collected. By way of example, consider the case of a manu facturer in Pine Bluff, Arkansas, who sells goods to a firm in Madison, Wisconsin, and receives in payment a check drawn on a bank in Madison. The manufac turer deposits the check in his Pine Bluff bank, re ceiving a credit in his deposit balance. The Pine Bluff bank sends the check (with others) to the Little Rock Branch of the Federal Re serve Bank of St. Louis, which sends it to the Federal Reserve SOURCES Bank of Chicago, which in turn sends it to the Madison bank. The Madison bank charges the account of the firm that wrote it, and has the amount charged to its reserve account at the Chicago Federal Re serve Bank. The Chicago Bank credits the Little Rock Branch. In the meantime, the Little Rock Branch credits the reserve account of the Pine Bluff bank in accord ance with a time schedule worked out for the System. The Reserve Banks settle these accounts by wire at the end of each day through the Interdistrict Settle ment Fund located at the Board of Governors in Washington. Since promptness is important in clearing checks, the Federal Reserve Banks permit member banks having a substantial volume of checks payable in other Federal Reserve districts to send such checks directly to the other Reserve offices for collection. St. Louis member banks, for example, frequently send checks to the Federal Reserve Bank of New York for collection, at the same time informing the Federal Reserve Bank of St. Louis. Reserve accounts of these member banks are credited just as if the items had been sent to the St. Louis Federal Reserve Bank. Through these arrangements checks are collected throughout the nation quickly, with a minimum ex pense. Federal Reserve facilities for clearing checks are available to all member banks. However, many checks are cleared through local clearinghouses and correspondent banks, without using Federal Reserve facilities. The number of checks handled by the Federal Reserve System has increased constantly since 1920 with the exception of the depression years, 1930 through 1933 (see Chart 1). Check clearings at the Federal Reserve Bank in St. Louis and its Louisville, Memphis, and Little Rock branches have generally in creased at about the same rate as totals for the System. The number of checks cleared by the Federal Reserve Bank of St. Louis and its branches in 1961 totaled 216 1 Reserve requirements apply to a member bank’s "net demand” and "time” deposit liabilities. A member bank must be careful to see that the average amount of its reserves over a reserve period (one week for central reserve city and reserve city banks and two weeks for other member banks) equals or exceeds the average amount of reserves required during the period. THE FLOW OF CHECKS d e s t i n a t i o n s Page 10 Chart 1 Table I Number of Checks Handled, 1920-60 B illions The F ederal Reserve System B illio n s COMBINED VOLUME OF OPERATIONS AT THE ST. LOUIS BANK A N D THE LOUISVILLE, MEMPHIS, A ND LITTLE ROCK BRANCHES IN 1961 A N D 1960 (in thousands) Checks (Total)................................. City C h e c k s................................. Country Checks ........................... Government C h e c k s ...................... Postal Money O r d e r s ..................... Currency ....................................... Coin1 ............................................ Transfer of Funds ........................... Noncash Collections......................... U. S. Gov't Interest Coupons ............. Discounts and Advances2 ................. N u m b e r o f Pieces H a n d le d million, up 6 per cent from the 1960 volume. The dollar value of these checks amounted to $76 billion, or 4 per cent more than in 1960 (see Table I). Distributing Currency and Coin The money handling operations at the Federal Re serve Banks consist chiefly of the receipt of money from member banks and the delivery of money to member banks. The public obtains virtually all its currency and coin from commercial banks or by receiving it from others who, directly or indirectly, obtained it from banks. Commercial banks, in turn, either directly or indirectly obtain currency and coin from the Federal Reserve Banks to meet this demand. When the public’s demand for currency and coin increases, banks provide themselves with the amounts and kinds that the people in their community want. Most member banks depend upon the Federal Reserve Banks for replenishment of their supply, ordering what they require and having it charged to their reserve accounts. Free Reserves HE VOLUME OF FREE RESERVES has fre- | quently been used as an indicator of monetary action. Free reserves are member bank excess reserves less ! borrowings from Reserve Banks. High levels of free | reserves are said to indicate monetary ease; low j levels (net borrowed reserves) are thought to indi cate restraint. In its November 1961 R e v ie w , the Federal Re serve Bank of Kansas City examined the free reserve concept and concluded that this guide is not depend able. The article suggests that a better indication of 1 monetary conditions is the rate of change of bank credit. A copy of this R e v i e w can be obtained by j writing the Research Department, Federal Reserve j Bank of Kansas City, Federal Reserve Station, Kan- I | sas City 6, Missouri. I 1961 196 0 215,590 35,807 145,624 23,056 11,103 190,515 490,087 159 593 857 283 203,864 34,095 136,600 21,585 11,584 201,375 426,623 152 560 872 945 Safekeeping of Securities: Securities Received and Released Coupons Detached ................. 164 363 165 361 Fiscal Agency Operations: U. S. Savings Bonds Issued, Exchanged and Redeemed . . Other Government Issues3 . . . . . 7,269 444 7,534 457 $75,969,147 48,005,185 23,031,771 4722,719 209,472 1,143,163 48,265 69,379,098 373,627 129,886 813,490 $73,183,258 46,827,462 21,709,083 4,429,609 217,104 1,185,970 43,341 61,433,926 391,087 123,070 3,248,835 Safekeeping of Securities: Coupons Detached........................ 48,263 44,993 Fiscal Agency Operations: U. S. Savings Bonds Issued, Exchanged and Redeemed ......... Other Government Issues3 ............. 639,184 12,033,395 685,895 10,933,294 (in thousands of dollars) Checks Handled (Total) ................... City Checks .............................. Country Checks ......................... Government Checks .................... Postal Money O r d e r s................... Currency ...................................... Coin1 ........................................... Transfer of Funds ......................... Noncash Collections........................ U. S. Gov’t Interest Coupons ........... Discounts and Advances ................. D o lla r V o lu m e 1 Does not include unverified coins proved in connection with wrapping. 2 Actual number, not rounded to nearest thousand. 3 Includes securities of agencies. Some member banks, however, get their supplies through larger, centrally located member banks. Non member banks obtain part of their coin and currency from member banks; however, they may obtain their supply directly from the Federal Reserve Bank when such shipments are requested by a member bank. When the public desires less cash, money is returned to the banking system, building up bank reserves. Member banks may return excess amounts to the Reserve Bank. No attempt is made by the Federal Reserve or other public authorities to control the amount of coin and currency in circulation, the ob jective being to satisfy the desires of the public, in cluding commercial banks. Page 11 Chart 2 Pieces of Currency an d Coin Handled, 1952-61 M illions F e deral Reserve Bank of St. Louis M illio n s member banks with a source of credit for short-term accommodation. The principles under which Federal Reserve Banks lend to member banks are set forth in Regulation A of the Board of Governors of the Federal Reserve Sys tem as follows: Access to the Federal Reserve discount facilities is granted as a privilege of membership in the Federal Reserve System in the light of the following general guiding principles. New coin is obtained by the Federal Reserve Banks directly from a United States mint. New silver cer tificates and United States notes are obtained directly from the Treasury Department. New Federal Reserve notes are obtained from the Comptroller of the Cur rency, by the Federal Reserve Agent through the Board of Governors. Unfit currency and mutilated coin received at Federal Reserve Banks in the course of day-to-day operations are removed from circulation. There are large movements of currency and coin into and out of the Federal Reserve Bank each bus iness day as some member banks find themselves with a surplus while others are replenishing supplies. Thus, money handling operations at the Reserve Banks are continuous, although the aggregate amount of coin and currency held by the public and commercial banks may be relatively stable except for the seasonal upswings near most of the major holidays, especially near Christmas. Major activities in the Money Department of the Reserve Bank include paying out and receiving coin and currency, sorting, counting, and shipping cur rency and coin, and wrapping coin. The volume of currency handled by the Federal Reserve Bank of St. Louis and its branches in 1961 totaled 191 million pieces, down 5 per cent from the 1960 level. This decline was possibly due in part to a change in the regulations, effective primarily in late 1960, which permitted member banks to count vault cash as part of their reserves. Coin totaled 490 million pieces, about 15 per cent above that of 1960 (Table I). Lending Operations Member banks may obtain credit on occasion by borrowing from the Reserve Bank. The discount rate charged on such loans throughout 1961 was 3 per cent per annum. A major objective of the provision for lending by the Federal Reserve Banks is to provide Page 12 Federal Reserve credit is generally extended on a short-term basis to a member bank in order to en able it to adjust its asset position when necessary be cause of developments such as a sudden withdrawal of deposits or seasonal requirements for credit beyond those which can reasonably be met by use of the bank’s own resources. Federal Reserve credit is also available for longer periods when necessary in order to assist member banks in meeting unusual situations, such as may result from national, regional, or local difficulties or from exceptional circumstances involv ing only particular member banks. Under ordinary conditions, the continuous use of Federal Reserve credit by a member bank over a considerable period of time is not regarded as appropriate. In considering a request for credit accommoda tion, each Federal Reserve Bank gives due regard to the purpose of the credit and to its probable effects upon the maintenance of sound credit conditions, both as to the individual institution and the economy generally. It keeps informed of and takes into ac count the general character and amount of the loans and investments of the member bank. It considers whether the bank is borrowing principally for the pur pose of obtaining a tax advantage or profiting from rate differentials and whether the bank is extending an undue amount of credit for the speculative carry ing of or trading in securities, real estate, or com modities, or otherwise. Lending operations of the Reserve Banks were at a relatively low level during 1961. The cost of obtaining funds in other ways, such as security sales and inter bank borrowing, was usually less expensive than bor rowing from Reserve Banks. The average daily dollar volume of loans outstanding to members banks at the Federal Reserve Bank of St. Louis and its branches in 1961 was $3,537,000, compared with $17,445,000 in 1960. Advances by the Federal Reserve Bank of St. Louis and its branches, which numbered 283 in 1961, were down 70 per cent from the 1960 level. Such advances aggregated $813 million during 1961, down 75 per cent from the 1960 amount. Fiscal Agency Operations One of the major objectives of the Federal Reserve Act is to provide a financial agent for the United States Government. In this capacity, the Federal Re serve Banks act as the United States Government’s principal banking agency. They hold the Government’s demand deposit accounts, accept Government receipts, settle checks drawn on the Treasurer of the United States, and issue, redeem, and transfer title to Govern ment securities. The securities operations have been a major activity since the early 1940’s, when the debt grew substantially to finance World War II. STATEMENT OF CONDITION FEDERAL RESERVE BA N K O F ST. LOUIS Am h December 31, (in thousands of dollars) 1961 Gold Certificate Reserves .......................... $ 679,572 Federal Reserve Notes of Other Banks . . 21,784 Other Cash .................................................. 17,621 Discounts and Advances............................ 2,210 U. S. Government Securities...................... 1,165,881 806,100 Uncollected Items ....................................... 16,232 Other Assets .................................................. Total Assets............................................. $2,209,400 December 31, 1960 $ 721,711 21,671 23,197 7,764 1,090,624 329,743 14,981 $2,209,691 Liabilities anql Capital Accounts In connection with Government debt operations, the Reserve Banks engage in such activities as super vising the printing and mailing of circulars, handling applications and tenders for Treasury bills, receiving payments, issuing and redeeming other Government securities, and redeeming interest coupons. Fiscal agency operations, by their very nature, are carried out in close cooperation with the United States Treasury Department. Regulations concerning the op erations are issued by the Treasury Department so that uniform operating procedures are maintained throughout the Federal Reserve System. Reserve Banks are reimbursed by the Treasury for most ex penses incurred in this work. The total volume of fiscal agency operations at the Federal Reserve Bank of St. Louis and its branches did not change significantly in 1961 from the 1960 levels. The dollar volume of savings bonds issued, exchanged, and redeemed declined 7 per cent. The dollar volume of other Government issues handled rose 10 per cent. Total number of items handled was down about 3 per cent. Safekeeping A Federal Reserve Bank holds securities in safe keeping, primarily for member banks. Some securities are placed with the Bank for the sole purpose of safe keeping; others are pledged to the Bank to secure loans to member banks; and still other securities are placed with the Federal Reserve Bank as security for deposits of state and local government funds and for the United States Government Treasury Tax and Loan Accounts. Much of the time of employees engaged in safe keeping operations at the Federal Reserve Bank is directed to handling securities and maintaining rec ords of securities and coupons. Records are maintained of all securities for reconcilement and balancing pur- Federal Reserve Notes (Net) .................... $1,269,413 Deposits: • Member Banks—Reserve Accounts . .. 628,096 U. S. Treasurer—General Account . . . . 17,587 Other ........ ............................................... 11,391 Deferred Availability Cash Item s............. 234,940 Other Liabilities and Accrued Dividends 2,368 Total Capital Accounts.............................. .......... 45,605 Total Liabilities and Capital Accounts $2,209,400 $1,232,140 650,878 26,542 54,001 203,701 1,133 41,296 $2,209,691 MEMORANDA: Contingent liabilities on acceptances purchased for foreign correspondents decreased from $7,663,000 on December 31, 1960 to $4,250,000 on December 31, 1961. The ratio of gold certificate reserves to deposits and F. R. note liabilities combined was 36.8% on December 31, 1960 and 35.3% on December 31, 1961. COMPARATIVE STATEMENT OF EARNINGS -------------------------- AND EXPENSES --------------FEDERAL RESERVE B A N K O F ST. LOUIS (in thousands of dollars) Earnings from: Discounted Bills ......................................... U. S. Government Securities............... Industrial Advances ............................... AU Other .................................................. Total Current Earnings.......................... 1961 1960 $ 111 37,728 -0 13 37,852 $ 686 43,769 - 0- ____ 19 44,474 Expenses: Operating Expenses ................................... 7,981 Assessment for Expenses of Board of Governors ........................................... ......... 211 Federal Reserve Currency: Original C o st........................................... ......... 277 Cost of Redemption .............................. .......... 44 Net Expenses....................................... 8,513 235 ____39 8,635 Current Net Earnings..................................... 35,839 29,339 Additions to Current Net Earnings: Profit on Sales of U. S. Govt. Sec. (net). . 140 Transferred from Reserves for Contingencies (n e t)................................. -0 AU Other...................................................... 1 Total Additions............................................ 141 Deductions from Current Net Earnings: All O ther...................................................... Total Deductions............................................ 3 8,143 218 99 470 ___ 1 570 3 567 Net Additions to Current Net Earnings . . . . 138 Net Earnings before payment to U. S. Treasury.............................................. $29,477 $36,406 Distribution of Net Earnings: Paid to U. S. Treasury (Interest— F. R. Notes).............................................. $25,742 Dividends Paid ........................................... ......... 862 Transferred to Surplus.............................. 2,873 Total .................................................... $29,477 $33,936 802 1.668 $36.406 Page 13 D i r e c t o r s of th e F e d e r a l R e s e r v e B a n k of S t. L o u is F e b ru a ry 1, 1 9 0 2 BOARD OF DIRECTORS L ittle R ock B ra n ch D irecto rs P i e r r e B . M c B rid e Appointed by the Board of'Governors Chairman of the Board and Federal Reserve Agent Term Expires Dec. 31 T. W in f r e d B e l l , President, Bush-Caldwell Company and Arkansas Electric Company, Little Rock, Arkansas J. H. L o n g w e l l Deputy Chairman of the Board F re d e ric k P. B l a n k s , Planter, Parkdale, Arkansas 1962 1963 E. T i l l e r , President, Tiller Tie and Lumber Com pany, Inc., Little Rock, Arkansas 1964 W a ld o Appointed by the Directors of the Federal Reserve Bank Clam A D irecto rs Elected by Member Banks Term Expires Dec. 31 R. C r a v e n s , President, Mercantile Trust Company, St. Louis, Missouri 1962 H. L e e C o o p e r, President, Ohio Valley National Bank of Henderson, Henderson, Kentucky 1963 K e n to n H. C. A dam s, Executive Vice President, The First National Bank of De Witt, De Witt, Arkansas J . W. B e lla m y , President, National Bank of Commerce of Pine Bluff, Pine Bluff, Arkansas R. M. L a G r o n e , J r . , President, The Citizens National Bank of Hope, Hope, Arkansas Ross E. A n d e r s o n , President, The Commercial National Bank of Little Rock, Little Rock, Arkansas Executive Vice President, First National Bank of Steeleville, Steeleville, Illinois 1964 1962 1963 1963 1964 A r th u r W e rre , J r ., Louisville B ran ch D irecto rs Appointed by the Board of Governors President, Taylor Drug Stores, Inc., Louisville, Kentucky P h i l i p D av id so n , President, University of Louisville, Louis ville, Kentucky R ic h a r d T. S m ith , Farmer, Madisonville, Kentucky W illia m H . H a rris o n , d a n B D irecto rs Elected by Member Banks 0 . M c C u tc h a n , Executive Vice President, Mead Johnson & Company, Evansville, Indiana H a ro ld 1962 M. Q u e e n y , Chairman of the Finance Committee and member of Board of Directors, Monsanto Chemical Com pany, St. Louis, Missouri 1963 Edgar Chairman of the Board, Rebsamen & East, Inc., Little Rock, Arkansas 1964 R aym on d R eb sam en , 1962 1963 1964 Appointed by the Directors of the Federal Reserve Bank E. R o b e r ts o n , Chairman of the Board and President, Liberty National Bank and Trust Company of Louisville, Louisville, Kentucky R a y A . B a r r e t t , President, The State Bank of Salem, Salem, Indiana 1963 G. R u s s e l l , President, The Peoples First National Bank & Trust Company of Paducah, Paducah, Kentucky 1963 Executive Vice President, The First Na tional Bank of Mitchell, Mitchell, Indiana 1964 M e rle 1962 Jo h n J o h n R. S tro u d , C lass C D irecto rs Appointed by the Board of Governors M em phis B ra n ch D irecto rs President, Porcelain Metals Corpora tion, Louisville, Kentucky 1962 P i e r r e B . M c B rid e , D. W o o t e n , Executive Vice President, Mid-South Chemical Corporation, Memphis, Tennessee 1963 H. L o n g w e l l , Director, Special Studies and Programs, College of Agriculture, University of Missouri, Columbia, Missouri 1964 Jesse J. Appointed by the Board of Governors President, Riverside Industries, Marks, Mississippi E d w ard B. L e M a s t e r , P resid en t, E d w ard L eM aster Co., In c ., Memphis, Tennessee F r a n k L e e W e s s o n , President, Wesson Farms, Inc., Victoria, Arkansas W il lia m K in g S e l f , 1962 1963 1964 Appointed by the Directors of the Federal Reserve Bank R. C a v in e s s, President, National Bank of Commerce of Corinth, Corinth, Mississippi 1962 E. B r o w n , President, Union Planters National Bank of Memphis, Memphis, Tennessee 1963 Chairman of the Board, The National Bank of Commerce of Jackson, Jackson, Tennessee 1963 C h a rle s Jo h n M em ber, F e d e ra l A dvisory Connell Sim pson R u s s e l l , Chairman of the Board, Mercantile Trust Company, St. Louis, Missouri L e o n C. C a s t l i n g , S id n ey M a e s tr e , Page 14 President, First National Bank at Mari anna, Marianna, Arkansas 1964 O f f i c e r s o f th e F e d e r a l R e s e r v e B a n k of St. L o u is F e b ru a ry 1, 1 9 6 2 D e lo s C. J o h n s , D a r r y l R. F ra n c is , President First Vice President H o w a rd H . W e ig e l, Vice President and Secretary G e o rg e E . K r o n e r , J o s e p h C. W o t a w a , Vice President H o m er J o n e s , Vice President D a l e M . L e w is, G e o rg e W . H irs h m an, Vice President M a rv in L . B e n n e t t , General Auditor W illia m Assistant Vice President E a r l R. B ille n , Vice President Vice President J. A b b o tt, Adviser P a u l S a lz m a n , Assistant Vice President W illis L. Jo h n s, Assistant Vice President G e r a ld S te p h e n K o p tis , Assistant Vice President J. M . G eig er, Assistant Vice President O r v i l l e O. W y r ic k , C a rl Chief Examiner T. A r l t , Assistant Vice President N o rm a n N. B o w s h e r , Assistant Vice President W o o d ro w W . G ilm o re , Jo h n J . H o fe r, T. D u n n e, Counsel and Asst. Sec’y. W ilb u r H . I s b e ll, Assistant Chief Examiner R ic h a r d 0 . K a le y , Assistant Vice President G eo rg e W . D e n n is o n , Planning Officer E a r l H . C h a p in , Assistant Vice President W . E . W a lk e r, Assistant Vice President Assistant Chief Examiner Assistant Vice President LITTLE ROCK BRANCH F re d B u rto n , Vice President and Manager _______________, Cashier J o h n K . W a rd , Assistant Cashier H o w a rd J . J e n s e n , Assistant Cashier LOUISVILLE BRANCH D o n a ld L. H e n ry , Vice President and Manager J o h n W . M enges, C l a r e n c e J . W o e r tz , Cashier Assistant Cashier Louis A . N e ls o n , Assistant Cashier M EM PHIS BRANCH E . F r a n c i s D eV o s, Vice President and Manager B e n ja m in B . M o n a g h a n , J o h n F . B re e n , J r ., Assistant Cashier Cashier P a u l I. B l a c k , J r . , Assistant Cashier Page 15 poses. In the case of Government securities, maturing coupons are clipped and maturing bonds withdrawn from safekeeping and redeemed. Other maturing cou pons and bonds are collected for the owners. In 1961 securities received and released at the Federal Reserve Bank of St. Louis and its branches numbered 163,700 compared to 164,781 in 1960. The dollar volume of coupons detached in 1961 totaled $48.3 million com pared to $45.0 million in 1960. Governors. (3 ) A monthly Review which is available to the public on request. (4 ) Public meetings of groups interested in economic policy. Whatever the research emphasis may be at any given time, the work in the department is always geared to the objective of providing a more thorough understanding of the economic system and the role of central banking in the system. Bank Examination Research The Research staff of the Federal Reserve Bank of St. Louis is engaged in assembling and analyzing eco nomic and financial information that serves as a guide to the Bank and to the System in the formulation and administration of monetary policy. By making much of this information available in their publications and public speeches, the department also helps to keep the public informed about the functioning of the economy with particular reference to monetary de velopments. Within the general framework of providing "eco nomic intelligence” necessary for central bank func tions, the department has a number of outlets through which it reports the results of its research. They are as follows: (1 ) Briefing sessions with the president, who, with other presidents and the Board of Gover nors, participates in the Federal Open Market Com mittee meetings. (2 ) Reports submitted to the direc tors of the Federal Reserve Bank and to the Board of Examiners of the Federal Reserve Bank of St. Louis have responsibility for examining all state banks in the Eighth District which are members of the Federal Reserve System. Each state member bank was ex amined during the year 1961. Major objectives of such examinations are to determine the quality of assets, the solvency of banks, and their compliance with federal and state laws and regulations; and to ap praise the adequacy of managements, operations, safe guards, and policies. Examinations are not intended to be a substitute for audits. TOTAL NUMBER EMPLOYED AT THE FEDERAL RESERVE BANK OF ST. LOUIS A N D THE BRANCHES O N JANUARY 1 FOR SELECTED YEARS 23 11-16-1914 (beginning of b a n k )......... 1924 ............................................... 586 1934 ............................................... 717 1944 ............................................... 1/551 1954 ............................................... 1,292 1959 ............................................... 1,139 1961 ............................................... 1,114 B u s in e s s E x p a n d s a n d B a n k C red it R ises—continued from page 3 While the stock of money was rising rapidly in late 1961 the rate of increase in the turnover of money was less than in the comparable periods of the two pre vious business upturns. The transactions velocity of money (i.e., the rate of turnover of demand deposits at banks outside of the seven largest financial centers) rose at an annual rate of about 3.2 per cent from the third quarter of 1961 to the fourth quarter. The in creases in velocity in the corresponding periods (sec ond to third quarters following the trough) of the 1958-59 and 1954-55 recoveries were greater, 8.4 and 12.0 per cent, respectively. Income velocity, the pro duction of goods and services divided by the average money supply, shows a somewhat similar pattern. Time deposits at commercial banks grew at an estimated annual rate of 11.6 per cent from the second half of August to the first half of January. During this period the money supply defined broadly to in Page 16 clude time deposits expanded at about 7.9 per cent per annum. During the comparable four-and-one-half months of the two previous business expansions, the supply of money plus time deposits rose at 4.2 per cent and 1.6 per cent annual rates. Interest Rates Interest rates on most marketable securities have risen in recent months. Yields on three-month Treas ury bills averaged over 2.70 per cent in January, high er than in any month in 1961. During September yields on these bills averaged 2.28 per cent. The rise in bill rates during the past year of economic recovery, however, was substantially less rapid than in the first year of the previous expansions. Rates on long-term Government bonds averaged 4.06 per cent in January, up only slightly from the September average of 4.02 per cent.
@FedFRASER