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THE ESTABLISHMENT AND OPERATION OF BRANCHES, AGENCIES AND CURRENCY FUNDS OF FEDERAL RESERVE BANKS Prepared i n D i v i s i o n o f Examinations, Board o f Governors of the Federal Reserve System 1938 TABLE OF CONTENTS PART I Organization History Pag© Introduction..... ... ....... 1 Dates o f establishment o f F e d e r a l Reserve branches, agencies, end currency funds which were i n operat i o n as o f December 51, 1 9 5 7 . . . . . 5 L e g i s l a t i v e Background 5 . % The Work o f the Federal Reserve O r g a n i z a t i o n Committee and the P r i n c i p a l Factors which I n f l u e n c e d i t s S e l e c t i o n o f Reserve C i t i e s . . . 8 A t t i t u d e o f the Federal Reserve O r g a n i z a t i o n Committee Toward the Establishment o f Branch O f f i c e s o f F e d e r a l Reserve Banks * 9 Some o f the E a r l y Problems o f the Federal Reserve Board the Establishment o f the New Orleans B r a n c h . . . 11 General A t t i t u d e o f t h e Board Toward the Establishment o f Branches i n 1916 - the Memphis Agency 15 Branches i n the P a c i f i c Northwest - Standard Branch By-Laws Adopted 17 Other Branches E s t a b l i s h e d During 1917 20 Memorandum Plan Branches - Chief Reasons f o r Development. Branch O f f i c e s E s t a b l i s h e d During 1918.. .. * 20 23 Branch O f f i c e s E s t a b l i s h e d During 1919 Branch O f f i c e s E s t a b l i s h e d During 1920 and 1921 Oklahoma C i t y Controversy 27 Board's Power t o D i s c o n t i n u e Branches - The McFadden A c t 30 Branches a t San A n t o n i o , Texas, and C h a r l o t t e , North C a r o l i n a 31 Havana Agency. 34 Currency Funds - Scran t o n , P e n n s y l v a n i a . . . 45 25 PART I I Results o f Previous Branch and Agency Surveys made Toy t h e Board Page Branch I n v e s t i g a t i o n o f 1924 . Branch Survey o f 1930 . 50 55 Review o f Branches by Board 1 s F i e l d Examiner - 1935 55 Branch Survey o f 1936. . . . . . . . . 56 PART I I I Current S t a t i s t i c a l Data and Comments i n Connection w i t h the Operation o f Each o f the Branches, Agencies and Currency Funds Federal Reserve Bank o f New York: B u f f a l o Branch . 59 Federal Reserve Bank o f P h i l a d e l p h i a : Scranton Currency Fund 70 Federal Reserve Bank o f Cleveland: C i n c i n n a t i Branch P i t t s b u r g h Branch 74 84 Federal Reserve Bank o f Richmond: B a l t i m o r e Branch C h a r l o t t e Branch Federal Reserve Bank o f A t l a n t a : Birmingham Branch Havana Agency ......... J a c k s o n v i l l e Branch. N a s h v i l l e Branch. New Orleans Branch Savannah Agency . 94 103 . . 112 121 130 140 149 159 Federal Reserve Bank o f Chicago: D e t r o i t Branch 164 Federal Reserve Bank o f S t . L o u i s : L i t t l e Rock Branch L o u i s v i l l e Branch Memphis Branch 175 184 193 Paffe Federal Reserve Bank o f Minneapolis: Helena Branch 202 Federal Reserve Bank o f Kansas C i t y : Denver Branch. Oklahoma C i t y Branch Omaha Branch 217 228 237 Federal Reserve Bank o f D a l l a s : E l Paso Branch. Houston Branch San Antonio Branch.. 247 258 269 Federal Reserve Bank o f San Francisco: Los Angeles Branch.. . P o r t l a n d Branch S a l t Lake C i t y Branch S e a t t l e Branch Spokane Branch 280 290 500 509 320 PART I ORGANIZATION HISTORY INTRODUCTION Section 3 o f the Federal Reserve Act as o r i g i n a l l y enacted p r o v i d e d that "Each Federal reserve bank s h a l l e s t a b l i s h branch banks w i t h i n t h e Federal reserve d i s t r i c t i n which i t i s located " but gave the Board no a u t h o r i t y t o disapprove or t o i n i t i a t e a c t i o n i n conn e c t i o n w i t h t h e establishment o f a branch. Notwithstanding the f a c t t h a t i t had no s p e c i f i c a u t h o r i t y i n t h e m a t t e r , the Board i n the e a r l y days o f the System was subjected t o s t r o n g pressure t o e s t a b l i s h branches i n s e v e r a l c i t i e s throughout t h e l a n d but t h e Federal Reserve banks appeared t o be d i s i n c l i n e d t o open new o f f i c e s . As a r e s u l t t h e r e was some a g i t a t i o n f o r l e g i s l a t i o n making i t compulsory f o r t h e Board t o e s t a b l i s h branches and t o f o r e s t a l l such a c t i o n t h e Board sponsored an amendment, which became e f f e c t i v e on June 21, 1917, changing S e c t i o n 5 o f the Act t o read: "The Federal Reserve Board may p e r m i t o r r e q u i r e any Federal Reserve bank t o e s t a b l i s h branch banks w i t h i n the F e d e r a l Reserve d i s t r i c t i n which i t i s located " P r i o r t o the passage o f t h e amendment o n l y one branch o f f i c e (New Orleans) had been e s t a b l i s h e d but w i t h the change i n t h e law t h e number o f nev/ branches increased r a p i d l y , f i v e b e i n g e s t a b l i s h e d i n t h e l a t t e r p a r t o f 1917; ten d u r i n g 1918; f o u r i n 1919; two i n 1920, and one i n 1921; a t o t a l o f 23 branches being i n o p e r a t i o n a t t h e end o f 1921. Considerable doubt e x i s t e d d u r i n g t h i s p e r i o d as t o t h e a u t h o r i t y o f t h e Board, once a branch had been e s t a b l i s h e d , t o r e q u i r e i t s discontinuance even though subsequent developments c l e a r l y i n d i c a t e d t h a t i t s o p e r a t i o n was unnecessary. This p o i n t was, however, C l a r i f i e d by t h e passage o f the McFadden Act on February 25, 1927, which added a paragraph t o S e c t i o n 5 o f the F e d e r a l Reserve Act s p e c i f i c a l l y a u t h o r i z i n g the Board t o r e q u i r e the discontinuance o f any branch e s t a b l i s h e d under t h a t s e c t i o n . Two a d d i t i o n a l branches (San Antonio and C h a r l o t t e ) which had been approved s u b j e c t t o the passage o f t h e McFadden A c t , commenced o p e r a t i o n s d u r i n g 1927, i n c r e a s i n g t h e number o f branches t o 25. No branches have been e s t a b l i s h e d since 1927. Up t o December 51, 1937, no branch had ever been d i s c o n t i n u e d ; however, one agency, the Havana Agency o f the Federal Reserve Bank o f Boston, and s e v e r a l currency funds have been d i s c o n t i n u e d . The m a t t e r o f the expense o f o p e r a t i o n o f brandies was, o f course, o f primary importance i n t h e e a r l y days o f t h e System and as an inducement t o o b t a i n branches, c l e a r i n g house banks i n a t l e a s t one c i t y o f f e r e d to raake up any d e f i c i t i n expenses o f the branch f o r t h e f i r s t y e a r , w h i l e banks i n o t h e r c i t i e s agreed t o r e d i s c o u n t paper i n s u f f i c i e n t amounts t o p e r m i t earni n g s t o cover any d e f i c i t , o r t o employ t h e branch t o conduct c l e a r i n g house examinations, paying as compensation an amount equal t o t h e previous cost o f conducting such examinations. However,, w i t h the increased earnings o f t h e Federal Reserve banks d u r i n g and immediately f o l l o w i n g the Great War, the expense o f o p e r a t i o n g r a d u a l l y became o f l e s s importance i n connection w i t h the establishment o f branches, the primary c o n s i d e r a t i o n l a t e r being the r e n d e r i n g o f s e r v i c e t o member banks and through them t o commerce, i n d u s t r y and a g r i c u l t u r e . The f o l l o w i n g pages present i n some d e t a i l a general h i s t o r y o f t h e branch q u e s t i o n and a review o f t h e p r i n c i p a l c o n s i d e r a t i o n s i n v o l v e d i n the s e l e c t i o n o f t h e v a r i o u s Federal Reserve branch, agency, and currency fund c i t i e s ( P a r t 1) t h e r e s u l t s o f previous branch surveys made by the Board ( P a r t 2 ) , and p e r t i n e n t c u r r e n t s t a t i s t i c a l , data and comments i n connection w i t h the operat i o n o f each o f such u n i t s ( P a r t 3 ) . 2 -5- Dates o f establishment o f Federal Reserve branches, agencies* and currency funds which were i n o p e r a t i o n as o f December 51, 1957» Federal Reserve Bank Branch Date E s t a b l i s h e d New York Buffalo May 15, 1919 Cleveland Cincinnati* Pittsburgh* January 10, 1918 A p r i l 22, 1918 Richmond I! Baltimore Charlotte March 1 , 1918 December 1 , 1927 Atlanta !! Birmingham* Jacksonville* Nashville* New Orleans August 1 , 1918 August 5, 1918 October 21, 1919 September 10, 1915 Chicago Detroit March 18, 1918 St. Louis L i t t l e Rock Louisville Memphis January 6, 1919 December 5, 1917 September 5, 1918 Minneapolis Helena February 1 , 1921 Kansas C i t y Denver Oklahoma C i t y * Omaha January 14, 1918 August 2, 1920 September 4 , 1917 E l Paso Houston San Antonio June 17, 1918 August 4 , 1919 J u l y 5, 1927 Los Angeles Portland S a l t Lake C i t y Seattle Spokane January 2, 1920 October 1 , 1917 A p r i l 1 , 1918 September 19, 1917 J u l y 26, 1917 t! It II it tt tt Dallas tt it San Francisco ti it tt n Agency Atlanta it Havana Savannah September 1 , 1925 February 4, 1919 Currency Fund Philadelphia Scranton October 26, 1925 * Operated on "Memorandum Plan" 3 FEDERAL « w » s g g "SSXi K S T S S S S W - — RESERVE DISTRICTS LEGISLATIVE BACKGROUND The Federal Reserve O r g a n i z a t i o n Committee 1 was d i r e c t e d under Section 2 o f the Federal Reserve Act !t t o designate n o t l e s s than e i g h t nor more than twelve c i t i e s t o be known as Federal reserve c i t i e s " ; t o " d i v i d e the c o n t i n e n t a l U n i t e d S t a t e s , e x c l u d i n g Alaska,, i n t o d i s t r i c t s , each d i s t r i c t to c o n t a i n o n l y one o f such Federal reserve c i t i e s " ; and t o a p p o r t i o n t h e d i s t r i c t s " w i t h due regard t o the convenience and customary course o f b u s i n e s s , " I t was recognized t h a t i n so l i m i t i n g the number o f r e g i o n a l banks and d i s t r i c t s (as wass deemed necessary i n order t o i n s u r e a s t r o n g and manageable d e ~ c e n t r a l i z e d banking system) c e r t a i n c i t i e s would be d i s a p p o i n t e d and many t r a d e areas throughout t h e c o n t i n e n t a l U n i t e d States would s u f f e r some d i s advantages. I n order t o minimise such disappointments .and disadvantages, S e c t i o n 5, which read as f o l l o v / s , was i n c o r p o r a t e d i n t h e A c t : "Each Federal, reserve bank s h a l l e s t a b l i s h branch banks w i t h i n t h e Federal reserve d i s t r i c t i n which i t i s l o c a t e d and may do so i n the d i s t r i c t o f any Federal reserve bank which may have been suspended. Such branches s h a l l be operated by a board o f d i r e c t o r s under r u l e s and r e g u l a t i o n s approved by the F e d e r a l Reserve Board. D i r e c t o r s o f branch banks s h a l l possess the same q u a l i f i c a t i o n s as d i r e c t o r s o f the Federal r e serve banks. Four o f s a i d d i r e c t o r s s h a l l be s e l e c t e d by the reserve bank and t h r e e by t h e Federal Reserve Board, and t h e y s h a l l hold o f f i c e during the pleasure, r e s p e c t i v e l y , of the parent bank and t h e F e d e r a l Reserve Board. The reserve bank s h a l l designate one o f t h e d i r e c t o r s as manager." As w i l l be noted t h i s s e c t i o n s t a t e d t h a t "Each Federal reserve bank s h a l l e s t a b l i s h branch banks", and t h a t the Federal Reserve Board*s a u t h o r i t y i n the matter was l i m i t e d t o approval o f r u l e s and r e g u l a t i o n s under which such branches would operate and t o the s e l e c t i o n o f t h r e e o f t h e seven branch directors. N o t w i t h s t a n d i n g these s p e c i f i c p r o v i s i o n s i n t h e law the Board, Composed o f W. G. McAdoo, Secretary o f the Treasury D, F. Houston, Secretary o f A g r i c u l t u r e John S k e l t o n W i l l i a m s , Comptroller o f the Currency in the e a r l y years o f the System, was subjected t o s t r o n g pressure t o e s t a b l i s h branches. C e r t a i n i n d i v i d u a l s also contended the p r o v i s i o n r e l a t i n g t o the establishment o f branches was mandatory and t h a t t h e F e d e r a l Reserve banks i n d e l a y i n g a c t i o n on a p p l i c a t i o n s f o r branches were n o t f u l f i l l i n g t h e i r d u t y under t h e A c t . As a r e s u l t t h e r e was some a g i t a t i o n f o r l e g i s l a t i o n making i t compulsory f o r the Federal Reserve Board t o e s t a b l i s h branches. I n order t o f o r e s t a l l such l e g i s l a t i o n and t o c l a r i f y the p r o v i s i o n r e l a t i n g t o the appointment o f d i r e c t o r s o f branches, the Board announced d u r i n g the e a r l y p a r t o f 1917 t h a t i t was seeking an amendment t o S e c t i o n 5. On June 21, 1917, S e c t i o n 5 was amended g i v i n g t h e Board a u t h o r i t y t o " p e r m i t o r r e q u i r e " any Federal Reserve bank t o e s t a b l i s h branches. The amended s e c t i o n t h e n read: "Sec. 5. The Federal Reserve Board may p e r m i t or r e q u i r e any Federal Reserve bank t o e s t a b l i s h branch banks w i t h i n the Federal Reserve d i s t r i c t i n which i t i s l o c a t e d o r w i t h i n the d i s t r i c t o f any Federal Reserve bank which may have been suspended. Such branches, s u b j e c t t o such r u l e s and r e g u l a t i o n s as t h e Federal Reserve Board may p r e s c r i b e , s h a l l be operated •under the s u p e r v i s i o n o f a board o f d i r e c t o r s t o c o n s i s t o f n o t more than seven nor l e s s than t h r e e d i r e c t o r s , o f whom a m a j o r i t y o f one s h a l l be appointed by the Federal Reserve bank o f the d i s t r i c t , and the remaining d i r e c t o r s by the Federal Reserve Board. D i r e c t o r s o f branch banks s h a l l h o l d o f f i c e d u r i n g the pleasure o f the F e d e r a l Reserve Board." P r i o r t o the passage o f t h i s amendment o n l y one branch o f f i c e (New Orleans) had been e s t a b l i s h e d . A f t e r i t s passage the number o f branches r a p i d l y increased; f i v e being e s t a b l i s h e d i n the l a t t e r p a r t o f 1917; ten d u r i n g 1918; f o u r i n 1919; two i n 1920 and one i n 1921; a t o t a l o f t w e n t y - t h r e e being i n o p e r a t i o n a t t h e end o f 1921. As t h e s e r v i c e s rendered t o member banks were broadened, the o p e r a t i n g expenses o f branches increased f a r beyond o r i g i n a l e s t i m a t e s . I t became ap- parent t h a t t h e establishment o f a d d i t i o n a l branches, many o f which were 6 sought s o l e l y because o f c i v i c p r i d e , would increase an a l r e a d y heavy burden o f expense w i t h o u t m a t e r i a l l y improving t h e e f f i c i e n c y o f t h e Reserve System as a whole. The branch question was a l s o complicated by the f a c t t h a t considerable doubt e x i s t e d as t o whether t h e Federal Reserve Board, once a branch was e s t a b l i s h e d , had any a u t h o r i t y t o r e q u i r e i t s discontinuance even though subsequent developments c l e a r l y i n d i c a t e d t h a t i t s o p e r a t i o n was unnecessary. The McFadden A c t , which became e f f e c t i v e on February 25, 1927, added a paragraph t o Section 3, s p e c i f i c a l l y a u t h o r i z i n g t h e Board a t any time t o r e q u i r e t h e discontinuance o f any branch a l r e a d y e s t a b l i s h e d , o r t o be e s t a b l i s h e d , under t h a t s e c t i o n . The amended s e c t i o n ( g i v i n g e f f e c t t o the change i n the Board 1 s o f f i c i a l t i t l e under t h e Banking A c t o f 1935) then read and s t i l l reads as f o l l o w s : "Sec. 5. The Board o f Governors o f the Federal Reserve System may p e r m i t o r r e q u i r e any Federal reserve bank t o est a b l i s h branch banks w i t h i n the Federal reserve d i s t r i c t i n which i t i s l o c a t e d o r w i t h i n the d i s t r i c t o f any Federal reserve bank which may have been suspended. Such branches, s u b j e c t t o such r u l e s and r e g u l a t i o n s as the Board o f Governors o f t h e Federal Reserve System may p r e s c r i b e , s h a l l be operated under t h e s u p e r v i s i o n o f a board o f d i r e c t o r s t o c o n s i s t o f n o t more than seven nor l e s s than t h r e e d i r e c t o r s , o f whom a m a j o r i t y o f one s h a l l be appointed by the Federal reserve bank o f the d i s t r i c t , and the remaining d i r e c t o r s by the Board o f Governors o f t h e Federal Reserve System. D i r e c t o r s o f branch banks s h a l l h o l d o f f i c e d u r i n g t h e pleasure o f the Board o f Governors o f t h e Federal Reserve System. "The Board o f Governors o f the Federal Reserve System may a t any time r e q u i r e any Federal Reserve Bank t o d i s c o n t i n u e any branch o f such Federal Reserve Bank e s t a b l i s h e d under t h i s s e c t i o n . The Federal Reserve Bank s h a l l thereupon proceed t o wind up the business o f such branch bank, s u b j e c t t o such r u l e s and r e g u l a t i o n s as t h e Board o f Governors o f t h e Federal Reserve System may prescribe." 7 Two a d d i t i o n a l branches ( C h a r l o t t e and Sail A n t o n i o ) , which had been approved s u b j e c t t o the passage o f the McFadden A c t , commenced operations d u r i n g 1927, b r i n g i n g the t o t a l t o t w e n t y - f i v e . No a d d i t i o n a l branches have been e s t a b l i s h e d since 3.927. Up t o Decem- ber 51, 1957, no branch had ever been d i s c o n t i n u e d ; however, one agency, t h e Havana Agency o f the F e d e r a l Reserve Bank o f Boston, and s e v e r a l currency fund have been d i s c o n t i n u e d . THE WORK OF THE FEDERAL RESERVE ORGANIZATION COMMITTEE AND THE PRINCIPAL FACTORS WHICH INFLUENCED ITS SELECTION OF RESERVE CITIES. Pursuant t o Section 2, the O r g a n i z a t i o n Committee e a r l y i n 1914 h e l d p u b l i c hearings i n 18 o f t h e l e a d i n g c i t i e s o f the c o u n t r y , gave audience t o c l e a r i n g house a s s o c i a t i o n s , chambers o f commerce and t o the r e p r e s e n t a t i v e s o f more than 200 c i t i e s , end conducted an independent . i n v e s t i g a t i o n by b a l l o t among 7,471 n a t i o n a l banks, which had f o r m a l l y assented t o t h e Federal Reserve A c t , as t o t h e i r preference f o r Federal Reserve c i t i e s . Thirty-seven cities asked t o be named Federal Reserve c i t i e s ; consequently, 25 o f them had t o be disappointed. I n announcing i t s d e c i s i o n , on A p r i l 2, 1914, t h e O r g a n i s a t i o n Committee s t a t e d t h a t the f o l l o w i n g f a c t o r s , among o t h e r s , had governed i t s selection: " F i r s t . The a b i l i t y o f the member banks w i t h i n the d i s t r i c t t o p r o v i d e the minimum c a p i t a l o f $4,000,000 r e q u i r e d f o r the Federal reserve bank, on the basis o f 6 per cent o f t h e c a p i t a l stock and surplus o f member banks w i t h i n the d i s t r i c t . "Second. The m e r c a n t i l e , i n d u s t r i a l , and f i n a n c i a l connect i o n s e x i s t i n g i n each d i s t r i c t and the r e l a t i o n s between the v a r i o u s p o r t i o n s o f t h e d i s t r i c t and the c i t y s e l e c t e d f o r the l o c a t i o n o f the Federal reserve bank. " T h i r d . The probable a b i l i t y o f the Federal reserve bank i n each d i s t r i c t , a f t e r o r g a n i z a t i o n and a f t e r t h e p r o v i s i o n s o f the Federal reserve a c t s h a l l have ^one i n t o e f f e c t , t o meet the l e g i t i m a t e demands o f business, whether normal or abnormal, i n accordance w i t h the s p i r i t and p r o v i s i o n s o f the F e d e r a l reserve act. " F o u r t h . The f a i r and e q u i t a b l e d i v i s i o n o f t h e a v a i l a b l e c a p i t a l f o r the F e d e r a l reserve banks among t h e d i s t r i c t s created. " F i f t h . The general geographical s i t u a t i o n o f the d i s t r i c t , t r a n s p o r t a t i o n l i n e s , and the f a c i l i t i e s f o r speedy communication between the Federal reserve bank and a l l p o r t i o n s 0 f the d i s t r i c t . " S i x t h . The p o p u l a t i o n , area, and p r e v a l e n t business a c t i v i t i e s o f t h e d i s t r i c t , A e t h e r a g r i c u l t u r a l , manufacturing, mining, or commercial, i t s r e c o r d o f growth and development i n t h e p a s t and i t s prospects f o r the f u t u r e . " I n answer t o c r i t i c i s m s d i r e c t e d a t i t f o l l o w i n g i t s s e l e c t i o n o f Federal Reserve bank c i t i e s t h e O r g a n i z a t i o n Committee i s s u e d a f u r t h e r state- ment on A p r i l 10, 1914, which read i n p a r t as f o l l o w s : " F o l l o w i n g i t s p o l i c y declared a t the v e r y o u t s e t , the committee refused t o be i n f l u e n c e d by t h e p u r e l y l o c a l and s e l f i s h claims o f c i t i e s o r i n d i v i d u a l s , and discharged t h e d u t y imposed upon i t by Congress a f t e r exhaustive i n v e s t i g a t i o n and study o f t h e e n t i r e c o u n t r y , w i t h unbiased minds and according t o i t s best judgment. With so many c o n f l i c t i n g c l a i m s , somebody had t o judge. Congress c o n s t i t u t e d the committee a c o u r t and gave the Federal Reserve Board the power o f r e v i e w . Disappointed competitors should seek a remedy through the o r d e r l y processes the law p r e s c r i b e d . "Considerable comment has been occasioned by t h e f a i l u r e o f t h e committee t o croate d i s t r i c t s suggested by New Orleans, w i t h New Orleans as t h e l o c a t i o n f o r a reserve bank; by B a l t i m o r e , w i t h B a l t i m o r e as t h e l o c a t i o n f o r a reserve bank; by Omaha, w i t h Omaha as the l o c a t i o n f o r a reserve bank; and by Denver, w i t h Denver as t h e l o c a t i o n f o r a reserve bank. "The committee r e a l i z e d t h a t the d i v i s i o n o f the e o u n t i y i n t o d i s t r i c t s was f a r more i m p o r t a n t and complex than the d e s i g n a t i o n o f the reserve c i t i e s , and t h a t the l a t t e r d u t y was s u b s i d i a r y and r e l a t i v e l y simple, w a i v i n g c o n s i d e r a t i o n s o f l o c a l p r i d e o r p r e s t i g e . I n a r r a n g i n g t h e d i s t r i c t s the c o n s i d e r a t i o n o f t h e charact e r and growth o f i n d u s t r y , t r a d e , and banking, no l e s s than the t r a d i t i o n s , h a b i t s , and common understandings o f t h e people was much more i n t i m a t e l y i n v o l v e d . " ATTITUDE OF THE FEDERAL RESERVE ORGANIZATION COMMITTEE TOWARD THE ESTABLISHMENT OF BRANCH OFFICES OF FEDERAL RESERVE BANKS. I n a d d i t i o n t o a p p l i c a t i o n s f i l e d w i t h t h e O r g a n i z a t i o n Committee f o r d e s i g n a t i o n as Federal Reserve c i t i e s , a number o f c i t i e s had a p p l i e d f o r 9 d e s i g n a t i o n as branch c i t i e s , as provided f o r by S e c t i o n 5 o f the A c t . In connection v/ith such a p p l i c a t i o n s the O r g a n i z a t i o n Committee s t a t e d ; " I t i s no p a r t o f the d u t y o f the o r g a n i s a t i o n committee t o l o c a t e branches o f the Federal Reserve banks. The law s p e c i f i c a l l y provides t h a t 1 each Federal Reserve bank s h a l l e s t a b l i s h branch banks w i t h i n the Federal r e s e r v e d i s t r i c t i n which i t i s l o c a t e d 1 , A l l the m a t e r i a l c o l l e c t e d by the committee w i l l be placed a t the d i s p o s a l of the Federal r e s e r v e banks end the Federal reserve board when they are organized end ready to consider the establishment o f branch banks." While i t was n o t the d u t y o f the Organization Committee to designate branch c i t i e s , experts appointed by t h a t Committee had considered the r e l a t i o n s h i p o f branch c i t i e s to reserve bank c i t i e s i n s o f a r as o p e r a t i n g and accounting p o l i c i e s were concerned. The suggestions o f these experts nnd proposed branch by-laws were i n c o r p o r a t e d i n a c i r c u l a r to a l l F e d e r a l Reserve banks (No. 8 , dated October 17, 1914). I t was s t a t e d t h a t such sug- g e s t i o n s had n o t been f i n a l l y approved by the Board and were o f f e r e d simply as a basis f o r f u r t h e r d i s c u s s i o n and i n order to promote u n i f o r m i t y i n the o r g a n i z a t i o n o f F e d e r a l Reserve banks. This c i r c u l a r envisaged two classes o f branches: F i r s t , the establishment o f l o c a l o f f i c e s , w i t h o u t banking machinery, the d i r e c t o r s o f which would c o n s t i t u t e a subcommittee whose f u n c t i o n would be to pass on paper submitted f o r r e d i s c o u n t , c e r t i f y i n g as t o i t s d e s i r a b i l i t y or d i s a p p r o v i n g i t as the case might be, and t r a n s m i t t i n g i t t o the head o f f i c e f o r a c t u a l r e d i s c o u n t , i . e . , a l i m i t e d agency. Second, the establishment o f a completely organized branch bank w i t h a c l e a r l y d e f i n e d t e r r i t o r y and a p r o p o r t i o n a t e c a p i t a l i z a t i o n based upon the t o t a l c a p i t a l and surplus o f the member banks i n such t e r r i t o r y , performing almost a l l , i f n o t a l l o f the f u n c t i o n s >f the parent r e serve bonk and m a i n t a i n i n g records s i m i l a r to those recommended f o r the parent bank i n connection w i t h a l l such f u n c t i o n s , i . e . , a f u l l - f l e d g e d branch. I t was p o i n t e d out t h a t branches o f the f i r s t class would be the most advantageous from the s t a n d p o i n t o f expense, since they would n o t i n v o l v e adjustments i n t h e proposed c l e a r i n g system o r t h e development o f a system o f accounting f o r t h e branch which would f i t i n t o t h e accounting system o f the Reserve bank. The q u e s t i o n was r a i s e d , however, as t o whether such simple o r g a n i z a t i o n s would s a t i s f y t h e demands o f the communities i n which t h e y were l o c a t e d and whether t h e y would p r o v i d e a s u f f i c i e n t a d d i t i o n t o t h e mechanism o f t h e Federal Reserve System t o warrant t h e i r e s t a b l i s h m e n t . In connection w i t h branches o f t h e second c l a s s , i t was s t a t e d t h a t they should be e s t a b l i s h e d o n l y i n c l e a r c u t , independent t r a d i n g areas, whose t e r r i t o r y was an economic u n i t and whose member banks n a t u r a l l y stood i n close r e l a t i o n s h i p t o one another. I I was s t a t e d , as a general p r i n c i p l e , t h a t i n no event should a d i s t r i c t be completely d i v i d e d i n t o branch areas, w i t h the p a r e n t bank e x e r c i s i n g no d i s t i n c t banking f u n c t i o n s except those o f o v e r s i g h t ; the t h e o r y being t h a t i n every d i s t r i c t t h e r e should be a s t r o n g independent Reserve bank o r g a n i z a t i o n p e r f o r m i n g a c t u a l banking f u n c t i o n s and d i r e c t l y r e d i s c o u n t i n g t h e paper o f a considerable number o f t h e member banks i n c l u d e d i n such d i s t r i c t . SOME OF THE EARLY PROBLEMS OF THE FEDERAL RESERVE BOARD - THE ESTABLISHMENT OF THE NEW ORLEANS BRANCH. The newly organized Federal Reserve Board r e c e i v e d a p p l i c a t i o n s from v a r i o u s member banks asking f o r changes i n t h e s e l e c t i o n s made by the O r g a n i z a t i o n Committee. Baltimore member banks requested t h a t B a l t i m o r e i n s t e a d o f Richmond be designated t h e Federal Reserve c i t y o f the F i f t h D i s t r i c t ; P i t t s b u r g h member banks requested t h a t P i t t s b u r g h i n s t e a d o f Cleveland be designated the Federal Reserve c i t y o f the F o u r t h D i s t r i c t ; member It banks i n the E l e v e n t h D i s t r i c t p e t i t i o n e d f o r the e s t a b l i s h m e n t of a branch a t Nov/ Orleans and t h a t they be p e r m i t t e d to a t t a c h themselves t o such branch; and member banks i n s e v e r e ! other s e c t i o n s asked t o be t r a n s f e r r e d from one d i s t r i c t t o a n o t h e r . These appeals were f i l e d under thr?t p o r t i o n o f S e c t i o n 2 o f the A c t which p r o v i d e d : "The d e t e r m i n a t i o n o f s a i d O r g a n i z a t i o n Committee s h a l l n o t be s u b j e c t t o r e v i e w , except by the F e d e r a l Reserve B o a r d . . . The d i s t r i c t s thus c r e a t e d may be r e a d j u s t e d and new d i s t r i c t s may from time to time be c r e a t e d by the F e d e r a l Reserve Board, n o t to exceed twelve i n number." Hearings on the q u e s t i o n o f changing the l o c a t i o n s o f Reserve banks and r e v i s i n g d i s t r i c t l i n e s were arranged f o r e a r l y i n 1915 and, f o l l o w i n g a f o r m a l r e q u e s t by the d i r e c t o r s o f the F e d e r a l Reserve Bank o f A t l a n t a , steps were taken t o f o r m u l a t e r e g u l a t i o n s governing the o p e r a t i o n s o f a branch a t New Orleans* On May 4 , 1915, the Board announced the f i r s t changes i n d i s t r i c t l i n e s and on June 24, 1915, i s s u e d the f o l l o w i n g press statement r e l a t i v e t o i t s a p p r o v a l o f the New Orleans Branch o f the F e d e r a l Reserve Bank of A t l a n t a : "While the Board has c a r e f u l l y considered the p r i n c i p l e s which should be observed i n opening a branch o f the F e d e r a l Reserve Bank o f A t l a n t a , i t i s n o t ready a t t h i s time t o p r o mulgate any g e n e r a l r u l e s a p p l i c a b l e t o r.ther p o i n t s , as i t regards the p r o p o s i t i o n as somewhat e x p e r i m e n t a l . " I t i s f e l t t h a t the experience gained i n t h i s case w i l l have r.n i m p o r t a n t b e a r i n g upon the f u t u r e development o f the branch-bank i d e a . I n c i d e n t a l l y i t may be mentioned thc'it the banks comprised i n the New Orleans C l e a r i n g House A s s o c i a t i o n have undertaken t o moke good f o r the f i r s t year o f o p e r a t i o n any d i f f e r e n c e bet?/een the expense o f conducting t h e new branch bank now proposed and the revenues to be d e r i v e d from i t . "No d e f i n i t e assignment o f t e r r i t o r y has been made to the New Orleans branch, b u t i t i s understood t h a t i t i s i n t e n d e d t o assign to i t the member banks o f L o u i s i a n a and M i s s i s s i p p i i n d i s t r i c t 6, and those of Mobile and Baldwin Counties, A l a . The bonks i n the t e r r i t o r i e s so segregated w i l l d e a l w i t h the New Orleans branch o n l y . "The Board has d i r e c t e d t h a t the New Orleans branch s h a l l conduct only o p e r a t i o n s i n the d i s c o u n t and purchase o f comm e r c i a l paper and acceptances and those r e l a t i n g to c l e a r i n g , c o l l e c t i o n , and exchange t r a n s a c t i o n s and t r a n s f e r s of funds. The issue o f notes and the f u n c t i o n o f r e d i s c o u n t i n g w i t h o t h e r Federal r e s e r v e banks, the purchase of U n i t e d States bonds and n o t e s , and dealings i n warrants o f ' m u n i c i p a l i t i e s 1 are to be c a r r i e d on s o l e l y by the Federal Reserve Bank o f A t l a n t a . A l l o p e r a t i o n s are t o be r e p o r t e d promptly to the F e d e r a l Reserve Bank of A t l a n t a , and the Federal Reserve Board i s t o be advised o f the same w i t h o u t d e l a y . The t r a n s a c t i o n s o f the New Orleans branch w i l l be considered as the t r a n s a c t i o n s of the F e d e r a l Reserve Bank o f A t l a n t a and so r e p o r t e d i n the statements o f the l a t t e r . " The New Orleans Branch o f the A t l a n t a Reserve Bank, which comuenced business on September 10, 1915, was d i s t i n c t l y a f u l l - f l e d g e d branch, s i n c e i t was ^ i v e n a c l e a r l y d e f i n e d t e r r i t o r y and was a u t h o r i z e d to d i s c o u n t and purchase commercial paper and acceptances, to c l e a r and c o l l e c t i t e m s , to m a i n t a i n reserve accounts, and to handle exchange t r a n s a c t i o n s and t r a n s f e r s o f funds. The c a p i t a l stock of the Federal Reserve Bank o f A t l a n t a h e l d by member banks i n the New Orleans t e r r i t o r y was a l s o regarded as c a p i t a l of the branch f o r bookkeeping purposes and complete records o f earnings and expenses were maintained. I n approving the establishment o f the New Orleans Branch the Board d i d n o t , however, abandon c o n s i d e r a t i o n o f the simpler form o f o r g a n i z a t i o n h e r e t o f o r e mentioned, as i s evidenced by the f o l l o w i n g excerpt taken from the 1915 Annual Report: " I n v e s t i g a t i o n and experience have seemed to show t h a t , a t l e a s t f o r some years to come, the o r g a n i z a t i o n of branches w i t h completely equipped o f f i c e s , v a u l t s , and the l i k e , and w i t h r; f u l l s t a f f of s a l a r i e d o f f i c i a l s , x v i l l be too heavy en expense f o r most of the Reserve banks, y e t , t h a t v a l u a b l e s e r v i c e would be performed by l o c a l o f f i c e s o f the s e v e r a l banks i n n o t a few p l a c e s . The Board has, t h e r e f o r e , had under c o n s i d e r a t i o n t h e question whether e s t a b l i s h i n g l o c a l agencies might n o t meet the requirements o f t h e case b e t t e r than the more f u l l y organized branch o f f i c e . Competent l e g a l o p i n i o n i s t o t h e e f f e c t t h a t t h e c r e a t i o n o f such l o c a l o f f i c e s i s p e r m i s s i b l e under t h e terms o f the l a w , and the Board b e l i e v e s t h a t i t may prove p r a c t i c a b l e t o meet banking n e c e s s i t i e s i n many s e c t i o n s o f t h e country by t h i s means." The question o f changing t h e l o c a t i o n o f Federal Reserve c i t i e s o f D i s t r i c t s Four (Cleveland) and F i v e (Richmond) presented a more serious problem and, as a d d i t i o n a l appeals f o r adjustments i n d i s t r i c t l i n e s were c o n t i n u a l l y being r e c e i v e d , the a d v i s a b i l i t y o f r e d u c i n g the number o f Federal Reserve d i s t r i c t s and r e v i s i n g d i s t r i c t l i n e s , i n such a manner as t o s e t t l e a l l pending appeals, r e c e i v e d c o n s i d e r a t i o n . Since t h e r e was some doubt as t o the Board 1 s power i n t h e m a t t e r , the q u e s t i o n was submitted t o the A t t o r n e y General o f the U n i t e d S t a t e s , who, on November 22, 1915, rendered an o p i n i o n t h a t t h e Board had no power t o a b o l i s h a Federal Reserve district. The A t t o r n e y General a l s o r u l e d on A p r i l 4, 1916, t h a t the Board was w i t h o u t a u t h o r i t y t o change t h e l o c a t i o n o f any Federal Reserve bank w i t h in a district. These d e c i s i o n s l e f t o n l y two p o s s i b l e remedies f o r complaints o f member banks concerning t h e geographical and economic aspects o f the System; namely, t o make acceptable adjustments i n d i s t r i c t l i n e s or t o e s t a b l i s h a d d i t i o n a l branches or l o c a l agencies o f Federal Reserve banks, which would make Reserve bank f a c i l i t i e s more r e a d i l y a c c e s s i b l e t o the complaining member banks. Although the Federal Reserve Act d i d n o t s p e c i f i c a l l y a u t h o r i z e the establishment o f agencies, counsel f o r the Board on October 5 , 1915, expressed the o p i n i o n t h a t t h e r e was no l e g a l o b j e c t i o n t o the establishment by Federal Reserve banks o f l o c a l agencies f o r the purpose o f e x e r c i s i n g c e r t a i n s p e c i a l or p a r t i c u l a r powers, which the p a r e n t bank was a u t h o r i z e d t o e x e r c i s e under the A c t . GKiERAL ATTITUDE OF THE BOARD TOWARD THE ESTABLISHMENT OF BRANCHES I N 1916 THE MEMPHIS AGENCY. There were no brruches o f Federal Reserve banks e s t a b l i s h e d d u r i n g the year 1916. However, the Federal Reserve Bank o f S t . L o u i s opened cn agency i n Memphis, Tennessee, on September 25, 1916, which had as i t s sole f u n c t i o n the custody o f c o t t o n warehouse r e c e i p t s pledged as c o l l a t e r a l to r e d i s c o u n t s of l o c a l member banks. This arrangement appeared d e s i r a b l e , since i t was i m p r a c t i c a l to send such c o l l a t e r a l , which was s u b j e c t to f r e q u e n t t i o n , to S t . L o u i s . substitu- This agency operated u n t i l January 20, 1917, end proved o f g r e a t value to member banks and c o t t o n f a c t o r s i n Memphis. The agency a l s o operated d u r i n g the F a l l o f 1917 and the Spring o f 1918. I n i t s Annual Report f o r 1916 the Board made the f o l l o w i n g g e n e r a l comment concerning branches and l o c a l agencies: " I n view o f the experience gained from the o p e r a t i o n o f the one branch bank i n the e n t i r e system, i t would seem wise, i n c o n s i d e r i n g the establishment o f o t h e r branches, to take i n t o account whether there i s an a c t u a l need f o r them - immediate or p r o s p e c t i v e - growing out o f the added convenience to the member banks which would n a t u r a l l y f a l l w i t h i n the t e r r i t o r y a l l o t t e d t o the branch, or whether the a p p l i c a t i o n f o r a branch i s p r i m a r i l y a m a n i f e s t a t i o n o f l o c a l c i v i c p r i d e . I n j u s t i c e t o a l l the member banks i n a d i s t r i c t where branches are sought to be e s t a b l i s h e d , i t would be w e l l to a s c e r t a i n as n e a r l y as can be done i n advance, whether the branch would be r e a l l y s e l f - s u s t a i n i n g , i . e . , whether the n e t p r o f i t s growing out o f i t s o p e r a t i o n would exceed the n o t revenue t h a t would accrue i n any event to the parent bank. "The Board would welcome l e g i s l a t i o n s i m p l i f y i n g the o r g a n i z a t i o n and o p e r a t i o n o f branch banks and reducing the cost o f m a i n t a i n i n g them. This would enable the Federal Reserve Banks b e t t e r to determine the q u e s t i o n o f branches. "The Board has been informed t h a t some o f the F e d e r a l Reserve Banks are ready t o e s t a b l i s h agencies or o f f i c e s i n such c i t i e s i n t h e i r d i s t r i c t s as may r e q u i r e s p e c i a l s e r v i c e s , such as the c o l l e c t i o n o f checks or the making o f l o a n s on warehouse r e c e i p t s . An agency o f t h i s k i n d was e s t a b l i s h e d by the Federal Reserve Bank o f S t . L o u i s i n September a t Memphis, Tenn. This has proved convenient to the banks o f t h a t c i t y i n the h a n d l i n g o f the c o t t o n c r o p . " I t i s a l s o i n t e r e s t i n g t o note t h a t the Governors o f Federal Reserve banks, a t t h e i r conference i n December 1916, passed the f o l l o w i n g r e s o l u t i o n on the s u b j e c t o f branches and l o c a l agencies: "That i t i s the sense o f the conference t h a t when cond i t i o n s i n a Federal Reserve D i s t r i c t appear to n e c e s s i t a t e the establishment o f a d d i t i o n a l f a c i l i t i e s i n c i t i e s other than t h a t i n which the Federal Reserve Bank i s l o c a t e d , such f a c i l i t i e s should be provided through the means o f Agencies, r a t h e r than through Branches, as contemplated by the Federal Reserve A c t . " The r e s o l u t i o n was brought to the a t t e n t i o n o f the Board by a Committee o f Governors i n a l e t t e r dated January 50, 1917, and the f o l l o w i n g reasons f o r i t s adoption were c i t e d : " ( a ) The establishment o f branches would i n v o l v e l a r g e expense which, i n the event s e v e r a l were necessary, would be almost i f n o t q u i t e p r o h i b i t i v e . (b) The establishment o f agencies would be much l e s s expensive, the d i f f e r e n c e being s u f f i c i e n t t o be o f v i t a l importance. (c) The establishment o f agencies would p e r m i t o f more u n i f o r m i t y o f o p e r a t i o n , a l l being under the d i r e c t i o n o f the Federal Reserve Bank. (d) The establishment o f branches w i t h t h e i r semi-independent o p e r a t i o n would undoubtedly tend to arouse c o n f l i c t i n p o l i c y and r i v a l r y between s e c t i o n s . (e) The establishment o f agencies would p e r m i t o f the d i s continuance o f any agency or o f f i c e which experience proved to be unnecessary o r u n p r o f i t a b l e , w h i l e there i s no p r o v i s i o n i n the Federal Reserve Act f o r the d i s continuance o f a branch once e s t a b l i s h e d , r e g a r d l e s s o f how u n p r o f i t a b l e or unnecessary t h r t branch may prove to be. ( f ) The establishment o f agencies would p e r m i t o f the expansion o f any one or a l l o f them i n t o f u l l y organi z e d branches whenever experience demonstrated the expediency o f such a c o u r s e . " As i n d i c a t e d Ijy the above r e s o l u t i o n and t h e preceding q u o t a t i o n from the 1916 Annual Report both the Federal Reserve Board and the Governors o f the s e v e r a l Reserve banks f e l t t h a t extreme c a u t i o n should be exercised i n e s t a b l i s h i n g branches, c h i e f l y because o f the expense i n v o l v e d . I t was a l s o f e l t t h a t Section 3, which provided f o r t h e establishment o f branches, l a c k e d clarity. As p r e v i o u s l y p o i n t e d out t h e Federal Reserve Board, because o f a g i t a t i o n f o r l e g i s l a t i o n making i t compulsory on i t s p a r t t o e s t a b l i s h branches, sponsored an amendment t o S e c t i o n 3, which was enacted i n t o law on June 21, 1917, under which the Board was a u t h o r i z e d t o " p e r m i t or r e q u i r e " any Federal Reserve bank t o e s t a b l i s h a branch and under which the p r o v i s i o n s r e l a t i n g t o t h e appointment o f d i r e c t o r s was c l a r i f i e d . This amendment cen- t e r e d r e s p o n s i b i l i t y f o r f u r t h e r development o f the Federal Reserve branch system i n the Board and l e f t f o r i t s d e t e r m i n a t i o n the q u e s t i o n as t o whether "branches", on the order o f t h e one a t New Orleans, or " a g e n c i e s " , such as t h e one a t Memphis, should be e s t a b l i s h e d i n t h e v a r i o u s c i t i e s which up t o t h a t time had a p p l i e d f o r branches. BRANCHES IN THE PACIFIC NORTHWEST - STANDARD BRANCH BY-LAWS ADOPTED. I t had been e v i d e n t f o r some t i m e , owing t o t h e g r e a t s i z e o f the T w e l f t h D i s t r i c t and the d i s t a n c e between c i t i e s , t h a t the c r e a t i o n o f branches or agencies i n the P a c i f i c Northwest would probably be necessary i n order t o a f f o r d member banks i n t h a t s e c t i o n q u i c k e r access t o the d i s c o u n t and c o l l e c t i o n f a c i l i t i e s o f the System. I n f a c t , the O r g a n i z a t i o n Committee recognized t h i s need and had i n d i c a t e d i n i t s r e p o r t t h a t i t might e v e n t u a l l y 17 become necessary to request l e g i s l a t i o n p e r m i t t i n g the establishment ^f a t h i r t e e n t h Federal Reserve bank to serve t h a t t e r r i t o r y . This need was emphasized d u r i n g the l a t t e r p a r t of January 1917, when three s m r l l S t a t e bonks i n S e a t t l e closed t h e i r doors. There was temporary f e o r t h a t the s i t u a t i o n might become more s e r i o u s , but the Federal Reserve Bank o f San Francisco sent a r e p r e s e n t a t i v e to S e a t t l e , and l e t i t be known t h a t a l l o f i t s resources v/ere a t the d i s p o s a l o f any l o c a l member banks which might d e s i r e to convert e l i g i b l e assets i n t o means of immediate payment. F o l l o w i n g t h i s i n c i d e n t the q u e s t i o n of Reserve bank f a c i l i t i e s in the P a c i f i c Northwest was c a r e f u l l y considered by the Federal Reserve Bank o f San Francisco. Late i n March 1917, Mr. A. C. M i l l e r , member of the Federal Reserve Board, v i s i t e d t h a t bank and attended hearings a t which bankers o f P o r t l a n d , S e a t t l e , and Spokane presented arguments as to t h e i r need f o r branches. F o l l o w i n g t h i s meeting the Board announced t h a t the Federal Reserve Bank o f San Francisco had determined, w i t h i t s a p p r o v a l , to e s t a b l i s h branches i n a l l three o f the above-mentioned c i t i e s and t h a t d e t a i l s of t h e i r o r g a n i z a t i o n and management would be r e v e a l e d l a t e r . It was a l s o s t a t e d : "Meantime the Board has been g i v i n g c a r e f u l c o n s i d e r a t i o n to the question o f branches i n o t h e r d i s t r i c t s where member banks have i n d i c a t e d a s t r o n g d e s i r e f o r the extension o f f a c i l i t i e s i n t h i s way. For every such case the problem t o be met i s whether a f u l l - f l e d g e d branch organized under the p r o v i s i o n s of the A c t , i n v o l v i n g the expense which n e c e s s a r i l y goes w i t h such an o r g a n i s a t i o n , i s c a l l e d f o r or whether a more simply organized agency w i l l meet the requirements o f the s i t u a t i o n . The answer t o t h i s q u e s t i o n depends i n each i n s t a n c e upon the c h a r a c t e r and volume o f business developing a t the p o i n t to be served and the support t o be expected from the bankers o f the community to be served by the branch." 18 On J u l y 13, 1917, t h e Board announced arrangements f o r the o r g a n i z a t i o n o f a branch o f the Federal Reserve Bank o f San Francisco a t Spokane, Washington. As an evidence o f cooperation Spokane C l e a r i n g House banks agreed t o employ the branch t o conduct c l e a r i n g house examinations, payi n g as compensation an amount equal t o t h e previous cost o f conducting such examinations, and a l l l o c a l nonmember banks and t r u s t companies agreed t o m a i n t a i n reserve d e p o s i t s w i t h t h e branch i n the same percentage as i f they were members and t o be s u b j e c t t o t h e same p e n a l t i e s f o r d e f i c i e n c i e s . It was also understood t h a t l o c a l nonmember banks and t r u s t companies would take steps t o become members as soon as p o s s i b l e . I t was f e l t t h a t these concessions on t h e p a r t o f l o c a l bankers would reduce the n e t expense o f o p e r a t i n g the branch and t h a t t h e System would be strengthened by the accession o f new members. The Spokane Branch commenced business on J u l y 26, 1917. I n connection w i t h i t s establishment standard branch by-laws, s u b j e c t t o minor changes because o f l o c a l c o n d i t i o n s , were drawn up and adopted by the Board. these by-laws: (a) A branch was assigned a s p e c i f i c t e r r i t o r y ; Under (b) t h e Re- serve bank c a p i t a l c o n t r i b u t e d by banks i n such t e r r i t o r y was considered as c a p i t a l o f the branch f o r bookkeeping purposes; (c) t h e reserves maintained by banks i n such t e r r i t o r y were h e l d a t the branch} (d) t h e branch conducted a l l c l e a r i n g and c o l l e c t i o n o p e r a t i o n s f o r banks i n i t s t e r r i t o r y , maintain- i n g bookkeeping records i n c i d e n t a l t h e r e t o j (e) the branch was empowered t o r e d i s c o u n t f o r member banks i n i t s t e r r i t o r y up t o a s p e c i f i e d amount subj e c t t o approval o f the Head O f f i c e ; ( f ) the branch could n o t engage f o r its own account i n open market t r a n s a c t i o n s except s u b j e c t t o the orders and f o r the account o f the Head O f f i c e } and (g) the branch was supervised by a board o f f i v e d i r e c t o r s , under d i r e c t c o n t r o l of the Heed O f f i c e , three o f whom were appointed by the Reserve bank and two by the Federal Reserve Board. OTHER BRANCHES ESTABLISHED DURING 1917 I n r a p i d succession branches were e s t a b l i s h e d i n Omaha on September 4, 1917, i n S e a t t l e on September 19, 1917, i n P o r t l a n d on October 1 , 1917, and i n L o u i s v i l l e on December 3, 1917. / d l of these branches were e s t a b l i s h e d on the sane general p l a n as the Spokane Branch. I n each i n s t a n c e member and nonmember banks i n these bronch c i t i e s evidenced a w i l l i n g n e s s to cooperate w i t h the Federal Reserve bank o f t h e i r d i s t r i c t . Omaha member banks passed a r e s o l u t i o n agreeing, i f necessary, to r e d i s c o u n t w i t h the branch an amount s u f f i c i e n t a t l e a s t to cover any d e f i c i t i n expenses; S e a t t l e and P o r t l a n d bankers made approximately the same concessions as Spokane bankers had made; and L o u i s v i l l e bankers, who had p r e v i o u s l y resented being a t t a c h e d to the S t . Louis Reserve Bonk end who, as a r e s u l t , were s a i d to be h o s t i l e to the •System as a whole, i n d i c a t e d a more f r i e n d l y a t t i t u d e toward the System. In the l a t t e r i n s t a n c e i t was deemed unwise to use the establishment of a branch as a l e v e r t o b r i n g nonmenber banks i n t o the System, as was done i n the P a c i f i c Northwest, although s e v e r a l banks i n d i c a t e d a v / i l l i n g n e s s to do so. MEMORANDUM PLAN BRANCHES - CHIEF REASONS FOR DEVELOPMENT During 1917 a p p l i c a t i o n s f o r branches a t C i n c i n n a t i and P i t t s b u r g h were considered by the Federal Reserve Bank o f Cleveland and the Board. A survey o f the p r o s p e c t i v e t e r r i t o r i e s t o be assigned these branches i n d i c a t e d t h a t reserve d e p o s i t s of member banks i n such t e r r i t o r i e s would i n the aggregate exceed by approximately $24,000,000 the reserve deposits c a r r i e d w i t h the Head O f f i c e a t Cleveland and t h a t , i n s o f a r as Federal Reserve bonk stock was concerned, the two proposed branch zones would i n c l u d e member banks h o l d i n g $1,800,000 more stock than the banks attached to the Head O f f i c e ; the p r o posed P i t t s b u r g h zone i t s e l f h a v i n g s u b s t a n t i a l l y l a r g e r member bank reserve deposits and Reserve bank stock h o l d i n g s than the Head O f f i c e . This s i t u a - t i o n presented a problem which was n o t encountered i n the branches p r e v i o u s l y e s t a b l i s h e d ; .that i s , the p o s s i b i l i t y of s e r i o u s l y c u r t a i l i n g Head O f f i c e p r e s t i g e and thus i m p a i r i n g the s t r e n g t h and u n i t y so e s s e n t i a l to the conduct o f l a r g e r System o p e r a t i o n s . I n a d d i t i o n the survey i n d i c a t e d t h a t branches as contemplated i n P i t t s b u r g h and C i n c i n n a t i would cost between $50,000 and §60,000 a n n u a l l y ; whereas branches p r e v i o u s l y e s t a b l i s h e d were then o p e r a t i n g or expected to operate a t a cost of approximately $25,000 per annum. The f o l l o w i n g comments appearing i n a l e t t e r addressed to the Federal Reserve Bank o f Cleveland (X-404) on September 21, 1917 (copies o f which were sent to a l l Federal Reserve banks) r e f l e c t the a t t i t u d e of the Reserve Board i n the m a t t e r : "The more we study the subject the more c l e a r l y do we see t h a t there axe two t h i n g s i n which banks i n i m p o r t a n t c i t i e s away from the Federal Reserve c i t i e s are i n t e r e s t e d : First, A l i b e r a l supply o f Federal Reserve notes which can be r e l e a s e d q u i c k l y i n i n emergency; and Second, I n some cases, a t l e a s t , a c o l l e c t i o n agency to operate as a l o c a l and c o u n t r y c l e a r i n g house, " I f the o f f i c e r s of your bank can work out t h i s problem i n a s a t i s f a c t o r y way i n C i n c i n n a t i , you w i l l have performed an i m p o r t a n t s e r v i c e , n o t o n l y a t t h a t p o i n t , but w i l l be e f f e c t i n g a s o l u t i o n o f the problem f o r a number o f other p o i n t s . Ol There are perhaps ten o r f i f t e e n c i t i e s i n the U n i t e d States which are j u s t i f i e d i n having such branches o f l i m i t e d power, but v/hich are n o t j u s t i f i e d i n i n c u r r i n g the expense o f f u l l f l e d g e d branches. I t i s n o t a s u f f i c i e n t argument t o sayt h a t the l o c a l banks agree to f u r n i s h enough paper f o r r e d i s count to support a branch. What we are concerned w i t h i s to render the necessary s e r v i c e a t a minimum o f c o s t . " I n cooperation w i t h the Federal Reserve Bank o f Cleveland the Board l a t e r announced the adoption o f an a l t e r n a t i v e set o f branch by-laws f o r use a t C i n c i n n a t i and P i t t s b u r g h . Branches e s t a b l i s h e d under these by-laws are known as "memorandum plan branches", c h i e f l y because much o f the bookkeeping i n c i d e n t a l to t h e i r o p e r a t i o n i s performed a t the Head O f f i c e upon r e c e i p t o f d a i l y t e l e g r a p h i c advices from the branch. i m p o r t a n t p r o v i s i o n s o f these by-laws were: Some o f the more (a) such branches were to be e s t a b l i s h e d on the theory t h a t they were o f f i c e s o f the p a r e n t bank, opened f o r the convenience o f such member banks as n i g h t d e s i r e t o use them; (b) such branches would be a l l o t t e d a c o l l e c t i o n zone, but member banks t h e r e i n could e l e c t t o continue t o do business d i r e c t w i t h the Head O f f i c e ; (c) such branches would forward a d a i l y t r a n s c r i p t o f a l l business transacted w i t h banks e l e c t i n g t o c l e a r through them t o the Head O f f i c e ; the Head O f f i c e maint a i n i n g a l l i n c i d e n t a l bookkeeping r e c o r d s ; (d) such branches m i g h t , where the circmistances warranted, give immediate c r e d i t f o r r e d i s c o u n t s tendered by member banks i n t h e i r c o l l e c t i o n zone e l e c t i n g to submit them, s u b j e c t to f i n a l approval by the Head O f f i c e ; (e) such branches would d e a l d i r e c t l y w i t h a l l member banks i n t h e i r c o l l e c t i o n zones i n s o f a r as exchange t r a n s f e r s , currency shipments and cash d e p o s i t s and v/ithdrawals were concerned; and ( f ) such branches would n o t f o r bookkeeping purposes be assigned any t h e o r e t i c a l capital. The C i n c i n n a t i and P i t t s b u r g h Branches were a u t h o r i z e d to operate under "memorandum p l a n by-laws" d u r i n g the l a t t e r p a r t o f 1317• I n i t s Annual Report f o r the year 1917 the Board made the f o l l o w i n g statement concerning branches: "The p o l i c y o f the Board i n the establishment o f these new branches had been to recognize the u n i t y and paramount responsibility the Federal Reserve Bank, w h i l e extending f u l l f a c i l i t i e s t o the banks i n the t e r r i t o r y served by the branch. 3y a v o i d i n g d u p l i c a t i o n s i n bookkeeping, and by cons o l i d a t e d c o n t r o l o f accounts a t the Federal Reserve Dank, i t i s expected t h a t branches can be operated a t a comparatively small expense." BRANCH. OFFICES ESTABLISHED DURING 1918 The C i n c i n n a t i and P i t t s b u r g h Branches opened f o r business e a r l y i n 1918. During the year "memorandum p l a n " branches were a l s o e s t a b l i s h e d i n Denver, Birmingham, J a c k s o n v i l l e , and D e t r o i t and " f u l l - f l e d g e d " branches were placed i n o p e r a t i o n a t B a l t i m o r e , S a l t Lake C i t y , E l Paso, and Memphis; the l a t t e r p r e v i o u s l y having been served by a temporary agency. The a p p l i c a t i o n s o f Denver, J a c k s o n v i l l e , S a l t Lake C i t y , and E l Paso were approved c h i e f l y because the t e r r i t o r i e s which i t was proposed they should serve were r a t h e r remote from any Head O f f i c e or e x i s t i n g branch, whereas the c i t i e s o f B a l t i m o r e , D e t r o i t , Birmingham, and Memphis were given branches l a r g e l y because of t h e i r importance as f i n a n c i a l and commercial centers. I n connection w i t h a number of the a p p l i c a t i o n s f i n a l approval was w i t h h e l d pending the accession to membership i n the System o f a d d i t i o n a l nonmember banks i n the c i t i e s or t e r r i t o r i e s to be served. I t i s i n t e r e s t i n g to note t h a t the D e t r o i t Branch was e s t a b l i s h e d c h i e f l y because of i n t e r v e n t i o n by the Federal Reserve Board; the management o f the Federal Reserve Bank o f Chicago on several occasions expressing o p p o s i t i o n t o the branch, b o t h because o f the d i v i s i o n i n t e r r i t o r y which i t would e n t a i l and because the s e r v i c e rendered by the Head O f f i c e was considered adequate. Although the Board d i d n o t " r e q u i r e " the Chicago Reserve Bank to e s t a b l i s h the branch, the f i l e s i n d i c a t e t h a t D e t r o i t bankers were r a t h e r d e f i n i t e l y assured i t would be e s t a b l i s h e d sometime i n advance o f the date i t was approved by the Chicago Reserve Bank. A f t e r a s h o r t p e r i o d o f o p e r a t i o n the Denver and D e t r o i t Branches were changed from "memorandum plan" to " f u l l - f l e d g o d " branches. The f o l l o w i n g statement i n r e g a r d to branches i s taken f r ; m the Annual Report of the Board f o r the year 1918: "While s e c t i o n 3 o f the Federal Reserve A c t as amended June 21, 1917, a u t h o r i z e s the Federal Reserve Board to ' p e r m i t or r e q u i r e 1 any Federal Reserve Bank to e s t a b l i s h branch banks v d t h i n i t s d i s t r i c t , i t i s the p o l i c y o f the Board to have n e g o t i a t i o n s f o r branch banks o r i g i n a t e between the community a p p l y i n g and the Federal Reserve Bank, and t o review o n l y such cases as may be r e f e r r e d t o i t a f t e r c o n s i d e r a t i o n by the d i r e c t o r s of the Federal Reserve Banks. " A l l o f the branches have proved a g r e a t convenience t o the communities served, and have tended to arouse a g r e a t e r l o c a l i n t e r e s t i n the Federal Reserve System. Many o f them have j u s t i f i e d t h e i r existence from the s t a n d p o i n t o f e a r n i n g s , while o t h e r s r e c e n t l y e s t a b l i s h e d have n o t y e t had an opport u n i t y o f demonstrating t h e i r a b i l i t y to s u s t a i n themselves. I n some cases the establishment o f branches has been f o l l o w e d by accession t o membership o f a number o f S t a t e banks i n the l o c a l i t i e s served, and the usefulness o f the branches has been g r e a t l y increased as a r e s u l t . "The by-laws governing the branches are approved by the Federal Reserve Board, and are u n i f o r m as f a r as r e c o g n i t i o n o f the c o n t r o l and r e s p o n s i b i l i t y o f the Federal Reserve Banks i s concerned, but d i f f e r i n some d i s t r i c t s as t o matters o f a d m i n i s t r a t i v e d e t a i l . I n some cases the branch i s empowered t o make r e d i s c o u n t s f o r the member banks assigned t o i t , w h i l e i n o t h e r s the a c t u a l r e d i s c o u n t i n g o p e r a t i o n i s performed a t the head o f f i c e , the member banks being &iven c r e d i t a t the branch as o f the date on which the paper i s tendered t o t h e branch. I n one case the earnings growing out o f r e d i s c o u n t s are shown on the books o f the branch, w h i l e i n the o t h e r they appear o n l y on the books o f the Federal Reserve Bank; conseq u e n t l y a comparative statement o f the earnings of the v a r i o u s branches can n o t be given. " C l e a r i n g operations and the c o l l e c t i o n of country checks are engaged i n by the branch banks, and the head o f f i c e s are r e l i e v e d o f a corresponding amount o f d e t a i l work. " I t i s apparent, however, t h a t too g r a t a number o f branches i n any one d i s t r i c t i n v o l v i n g a d i v i s i o n o f the funds c f the Federal Reserve Dank w i l l tend t o i m p a i r the e f f e c t i v e c o n t r o l o f the bank over i t s resources, and t h i s f a c t , together w i t h the expense i n v o l v e d i n the o p e r a t i o n o f branch banks, w i l l make i t impossible t o g r a t i f y the c i v i c p r i d e o f many c i t i e s d e s i r i n g branches. "There are, u n a v o i d a b l y , some advantages enjoyed by member banks l o c a t e d i n Federal Reserve or branch bank c i t i e s which arc n o t shared by banks i n other towns and c i t i e s , b u t the Board i s endeavoring, as f a r as p o s s i b l e , to give equal f a c i l i t i e s to a l l member banks, and has, t h e r e f o r e , a u t h o r i z e d the Federal Reserve Banks to pay a l l charges on shipments o f currency to or from member banks. A member bank, t h e r e f o r e , l o c a t e d a t a d i s t a n c e from i t s Federal Reserve Bank, i s thus p u t i n as f a v o r a b l e a p o s i t i o n v / i t h respect t o currency t r a n s f e r s as a member bonk l o c a t e d i n the Federal Reserve c i t y , v / i t h the exception o f the time i n v o l v e d i n t r a n s i t . " The branches e s t a b l i s h e d d u r i n g 1317 and 1918 were d e c i d e d l y n o t the simple, inexpensive agencies mentioned by the Board i n i t s 1916 Annual Report and recommended by the Governors a t t h e i r F a l l Conference i n 1916. Undoubtedly, the increased use o f Reserve bank f a c i l i t i e s by the government and p r i v a t e i n t e r e s t s a f t e r : u r e n t r y i n t o the World War, as w e l l as a d e s i r e on the p o r t o f the Board to expand the par c o l l e c t i o n system, was r e s p o n s i b l e i n l a r g e measure f o r t h i s changed a t t i t u d e toward branches. It i s t r u e also t h a t the earnings o f the System had improved d u r i n g t h i s p e r i o d and t h a t the establishment o f branches was o n l y one o f s e v e r a l steps taken to improve the f a c i l i t i e s o f tho System f o r member banks and t o make membership i n the System uore a t t r a c t i v e to nonmembers. BRANCH OFFICES ESTABLISHED DURING 1919 Federal Reserve f a c i l i t i e s were expanded d u r i n g the year 1919 through the establishment o f f o u r a d d i t i o n a l branches; namely, a t L i t t l e Rock, Houston, B u f f a l o , and N a s h v i l l e . The c i t i e s o f L i t t l e Rock and Houston were g i v e n " f u l l - f l e d g e d " branches; the former being approved o n l y a f t e r L i t t l e Rock bankers had v i g o r u u s l y p r o t e s t e d t h a t a l i m i t e d power branch would n o t meet the needs o f t h e i r community, which competed i n a degree w i t h the c i t y o f Memphis. B u f f a l o and N a s h v i l l e were given "memorandum plan" branches, the l a t t e r being e s t a b l i s h e d "upon the understanding t h a t the Board may decide to revoke t h i s d e s i g n a t i o n and consider a r e d i s t r i b u t i o n and r e d u c t i o n o f branches i n the A t l a n t a D i s t r i c t i f the establishment o f t h i s p a r t i c u l a r branch does n o t j u s t i f y i t s e l f i n the outcome". The reserve accounts o f member banks i n the B u f f a l o zone were subsequently t r a n s f e r r e d to the branch. I n the c i t i e s o f L i t t l e Rock, B u f f a l o , ana N a s h v i l l e the establishment o f the branch was used as an inducement to b r i n g e l i g i b l e l o c a l or nearby nonmember banks i n t o the System. Although Houston 1 s a p p l i c a t i o n was approved on c o n d i t i o n a p p l i c a t i o n s f o r membership were r e c e i v e d and approved from a t l e a s t t h i r t y e l i g i b l e nonmember banks, having combined resources of n o t l e s s than $12,000,000, t h i s requirement was withdrawn when the Federal Reserve Agent a t D a l l a s advised the Board t h a t i t might l e a d to misunderstandings and prove very embarrassing t o h i s o f f i c e i n m a i n t a i n i n g a h i g h standard o f membership. During the e a r l y p a r t o f 1919, the Federal Reserve Bank of A t l a n t a , w i t h the approval o f the Board, a l s o e s t a b l i s h e d an agency a t Savannah, Georgia. The f u n c t i o n s of the agency were l i m i t e d t o supplying the currency and c o i n requirements of member banks i n Savannah; a c t i n g as c u s t o d i a n of s e c u r i t i e s pledged.by l o c a l member banks to secure r e d i s c o u n t s a t the A t l a n t a Reserve Bank, h o l d i n g i n safekeeping s e c u r i t i e s belonging to l o c a l member banks; and a r r a n g i n g f o r the s e t t l e m e n t o f l o c a l c l e a r i n g house balances on the books o f the A t l a n t a Reserve Bank, by t e l e g r a p h i c advice t o A t l a n t a . The A t l a n t a Reserve Bank also surveyed the currency s i t u a t i o n on the I s l a n d o f Cuba d u r i n g the year 1919 and submitted a p l a n f o r redeeming U n i t e d States currency then i n c i r c u l a t i o n on the I s l a n d w i t h i t s own n o t e s . The v a r i o u s f a c t o r s which prompted t h i s survey and other steps l e a d i n g up to the establishment o f agencies o f the Boston and A t l a n t a Reserve Banks i n Havana, Cuba, w i l l bo discussed i n subsequent pages o f t h i s memorandum. I n i t s Annual Report f o r the year 1919, the Board c o l l e d a t t e n t i o n t o the statements i n i t s 1918 r e p o r t r e l a t i v e to the f a c i l i t i e s a f f o r d e d by branches and t o the i m p r a c t i c a b i l i t y o f e s t a b l i s h i n g branches merely t o g r a t i f y c i v i c pride. I t was also p o i n t e d o u t , a p p a r e n t l y to discourage f u r t h e r a p p l i c a t i o n s f o r branches, t h a t the p o l i c y which had been adapted o f having the Federal Reserve banks pay a l l t r a n s p o r t a t i o n charges on shipments o f currency made to and from member banks had been continued w i t h satisfactory r e s u l t s , and t h a t , except as to time i n t r a n s i t , member banks i n o u t l y i n g sect i o n s enjoyed the same f a c i l i t i e s i n the n a t t e r of currency t r a n s f e r s as member barks i n Federal Reserve c i t i e s . BRANCH OFFICES ESTABLISHED DURING 1920 AND 1921 - OKLAHOMA CITY CONTROVERSY On December 31, 1921, there were t w e n t y - t h r e e branches o f F e d e r a l Reserve banks i n o p e r a t i o n , those a t Los Angeles, C a l i f o r n i a , and Oklahoma C i t y , Oklahoma, which were a u t h o r i z e d d u r i n g 1919, having been opened f : : r business on January 2 and August 2, 1920, r e s p e c t i v e l y , and the branch a t Helena, Montana, a l s o a u t h o r i z e d i n 1919, having been placed i n o p e r a t i o n on February 1 , 1921. The branches a t Los Angeles and Helena were opened on a " f u l l - f l e d g e d " b a s i s , both s e r v i n g t e r r i t o r i e s which were remote from t h e i r r e s p e c t i v e head o f f i c e s . I n each i n s t a n c e , the establishment o f the branches was preceded by entrance t o the System o f a number of nonmember banks. Oklahoma C i t y 1 s a p p l i c a t i o n r e c e i v e d s p e c i a l c o n s i d e r a t i o n because the Board also had b e f o r e i t a p p l i c a t i o n s from Muskogee and Tulsa, Oklahoma, both o f which were l o c a t e d w i t h i n the Tenth' Federal Reserve D i s t r i c t . Branches had p r e v i o u s l y been opened i n Denver, Colorado, and Omaha, Nebraska, and the q u e s t i o n as to j u s t where the demand f o r branches would stop n a t u r a l l y arose. The Federal Reserve Board took the p o s i t i o n t h a t t h r e e branches would be the maximum number t h a t could be expected i n the Tenth D i s t r i c t , and, i n s o f a r as Oklahoma C i t y was concerned, i t was i n d i c a t e d t h a t i t had n o t occurred t : the Board t h a t a branch i n t h a t c i t y would be necessary because the d i s t a n c e to Kansas C i t y was s h o r t . However, i n March 1918 a q u e s t i o n n a i r e was sent by the Board to a l l member banks i n Oklahoma t o a s c e r t a i n whether they p r e f e r r e d a branch a t Tulsa or Oklahoma C i t y . This q u e s t i o n n a i r e showed t h a t , although Oklahoma C i t y was p r e f e r r e d by a m a j o r i t y o f banks d e s i r i n g a branch, more than o n e - h a l f o f the member banks i n the State ( l o c a t e d i n the Tenth D i s t r i c t ) wanted the branch a t Tulsa or p r e f e r r e d to continue to do business w i t h the Head O f f i c e . T h e r e a f t e r a h e a r i n g was h e l d , w i t h a member ^ f the Board a t t e n d i n g , a t which r e p r e s e n t a t i v e s o f both c i t i e s were given an o p p o r t u n i t y t o argue the m e r i t s o f t h e i r a p p l i c a t i o n s . At t h i s hearing the Oklahoma bankers were advised t h a t e l i g i b l e State banks i n Oklahoma hru n o t supported the System and t h a t a recommendation would be made t h a t the Board d e c l i n e both a p p l i c a t i o n s and n o t reopen the d i s c u s s i o n u n t i l twnety or t w e n t y - f i v e subs t a n t i a l S t a t e banks became members. Board acted a c c o r d i n g l y . This recommendation was made and the Pressure f o r a branch c j n t i n u e d to be e x e r t e d ; Members o f Congress and Secretary o f the Treasury McAdoo i n t e r e s t i n g themselves i n the m a t t e r . The question was f u r t h e r complicated when a p p l i c a t i o n s f o r branches were received from W i c h i t a , Kansas, and L i n c o l n , Nebraska, both o f which c i t i e s were also i n the Tenth D i s t r i c t . On J u l y 24, 1919, the d i r e c t o r s of the Kansas C i t y Reserve Bank granted a hearing to r e p r e s e n t a t i v e s o f Oklahoma C i t y , Tulsa, L i n c o l n , and W i c h i t a and t h e r e a f t e r voted n o t to e s t a b l i s h an a d d i t i o n a l branch a t t h a t t i n e . This d e c i s i o n was immediately appealed by Oklahoma bankers, supported by Senator Robert L . Owen, and the Board agreed to review a l l evidence submitted by and to hear committees from the f o u r contending c i t i e s . On or about the same time the Oklahoma C i t y C l e a r i n g House A s s o c i a t i o n c i r c u l a r i z e d banks i n Oklahoma r e q u e s t i n g cooperation i n p r o t e s t i n g l a r g e earnings of the Kansas C i t y Reserve Bank, the contemplated e r e c t i o n of a new Reserve bank b u i l d i n g and the f a i l u r e o f the Reserve bank to e s t a b l i s h a branch i n Oklahoma; and asking f o r endorsement of a plan to r e q u e s t the t r a n s f e r o f the State o f Oklahoma to the Eleventh Federal Reserve D i s t r i c t i f Oklahoma was n o t granted a branch. I t would appear t h a t t h i s a c t i o n was no more than an e f f o r t to embarrass the Kansas C i t y Reserve Bank end b r i n g pressure t o bear on the Board. The hearings on the appeal then before the Board were h e l d as scheduled and based on the arguments made and b r i e f s submitted, the Board advised the Kansas C i t y Reserve Bank t h a t i t appeared a l i m i t e d power branch i n e i t h e r Tulsa or Oklahoma C i t y would be a convenience to member banks and the p u b l i c i n the southern p o r t i o n of the Tenth D i s t r i c t . The Board requested data r e l a t i v e to m a i l f a c i l i t i e s and check c l e a r i n g , which was supplemented by a p o l l o f a l l member banks i n Oklahoma as to t h e i r preference f o r a branch, and on December 19, 1919, the Board announced t h a t i t had a u t h o r i z e d and d i r e c t e d the Federal Reserve Bank o f Kansas C i t y to e s t a b l i s h a l i m i t e d power branch a t Oklahoma C i t y , but t h a t i t reserved the r i g h t to d i s c o n t i n u e such branch i f i t s o p e r a t i o n s were found t o be u n s a t i s f a c t o r y . This p r o - v i s i o n was s i m i l a r to t h a t s t a t e d i n connection w i t h the approval o f the N a s h v i l l e Branch o f the F e d e r a l Reserve Bank of A t l a n t a . The Oklahoma C i t y Branch has always operated on the "memorandum p l a n " , although an e f f o r t has been made on s e v e r a l occasions to have i t s f u n c t i o n s broadened. BOARD1S POWER TO DISCONTINUE BRANCHES - THE McFADDEN ACT As p r e v i o u s l y s t a t e d i n t h i s memorandum there was considerable doubt as t o the Board's a u t h o r i t y to d i s c o n t i n u e branches under Section 3, as amended June 21, 1917. Because o f t h i s f a c t , the Board's Committee on Branches was i n s t r u c t e d on September 26, 1925, t o d i r e c t the General Counsel o f the Board to render an o p i n i o n as to the power o f the Federal Reserve Board i n the matter o f d i s c o n t i n u i n g branch Federal Reserve banks, and as to the power and a u t h o r i t y o f the board o f d i r e c t o r s o f a p a r t i c u l a r Federal Reserve bank to d i s c o n t i n u e branches which i t had e s t a b l i s h e d . The committee was also requested to consider the a d v i s a b i l i t y of s u b m i t t i n g these questions t o the A t t o r n e y General o f the U n i t e d s t a t e s f o r h i s o p i n i o n . Counsel f o r the Board was o f the o p i n i o n t h a t n e i t h e r the Federal Reserve Board nor a Federal Reserve bank had expressed or i m p l i e d power to d i s c o n t i n u e a branch which had once been v a l i d l y e s t a b l i s h e d . doubt i n the m a t t e r . I t was admitted, however, t h a t t h e r e was some Although t h i s o p i n i o n was given t o the Board d u r i n g the l a t t e r p a r t of 1923, i t was n o t f o r m a l l y r e f e r r e d to the A t t o r n e y General u n t i l January 25, 1926. The A t t o r n e y General informed the Board, through the S e c r e t a r y o f the Treasury> t h a t h i s a t t e n t i o n had been c a l l e d to the f a c t t h a t the McFadden A c t , which was then under c o n s i d e r a t i o n , contained a p r o v i s i o n expressly a u t h o r i z i n g the a b o l i t i o n o f branches, and t h a t h i s o p i n i o n would be w i t h h e l d u n t i l a c t i o n on such l e g i s l a t i o n had been taken by Congress, unless there was some reason making an immediate response necessary. The Board i n d i c a t e d t h a t there was no reason why the question should n o t be d e f e r r e d u n t i l a f t e r Congress had f i n a l l y l e g i s l a t e d thereon. The McFadden A c t , which added a paragraph to Section S, specifically a u t h o r i z i n g the Board to r e q u i r e the discontinuance o f branches, was approved on February 25, 1927. BRANCHES AT SAM ANTONIO, TEXAS, AND CHARLOTTE, NORTH CAROLINA On February 23, 1927, the Board advised the Federal Reserve Bank o f D a l l a s t h a t i t had approved the a p p l i c a t i o n o f D a l l a s d i r e c t o r s f o r a branch a t San A n t o n i o , Texas, e f f e c t i v e upon the s i g n i n g o f the McFadden A c t . On February 25, 1927, s i m i l a r advice was sent t o the Richmond Bank r e l a t i v e a branch a t C h a r l o t t e , N o r t h C a r o l i n a . to Both o f these a p p l i c a t i o n s had been before the Board almost c o n t i n u o u s l y since 1919, and, inasmuch as t h e i r establishment rounded out the Federal Reserve branch system as i t exists today, the steps l e a d i n g up to t h e i r establishment w i l l be reviewed a t some length. San A n t o n i o ' s a p p l i c a t i o n was f i l e d on March 6 , 1919, but was withdrawn i n f a v o r of an a p p l i c a t i o n by Houston, when i t became apparent t h a t the Board would n o t approve b o t h a p p l i c a t i o n s . The withdrawal was only temporary, how- ever, and s h o r t l y a f t e r the Houston Branch commenced o p e r a t i o n s San Antonio ot again p e t i t i o n e d f o r a branch. I t s a p p l i c a t i o n was approved by the D a l l a s d i r e c t o r s w i t h b u t one d i s s e n t i n g v o t e ; t h a t of the Federal Reserve Agent. The Agent s t a t e d t h a t he had voted "no" f o r the f o l l o w i n g reasons: (1) the Board had already s a i d i t would n o t e s t a b l i s h two a d d i t i o n a l branches i n the Dallas D i s t r i c t ; (2) soiae of the t e r r i t o r y sought by the San Antonio Branch had a l r e a d y been assigned to Houston and some was being adequately served by the Head O f f i c e , and (5) unless a f i r m stand was taken a p p l i c a t i o n s could also be expected from A m a r i l l o , Shreveport and other c i t i e s . He i n d i c a t e d t h a t the managing o f f i c e r s o f the D a l l a s Reserve Bank were i n h e a r t y agreement w i t h h i s views and t h a t t h e r e was no p r e s s i n g need f o r a branch. 1919, the Board advised the D a l l a s d i r e c t o r s t h a t i t On October 20, "does n o t b e l i e v e t h a t the p u b l i c i n t e r e s t r e q u i r e s a branch bank a t San An tonic a t t h i s time and has, therefore, withheld i t s approval"• From 1920 t o 1925 sporadic e f f o r t s were made t o o b t a i n a branch or even an agency or currency depot, b u t i n each i n s t a n c e the Board i n d i c a t e d i t s u n w i l l i n g n e s s t o g r a n t such f a c i l i t i e s . The matter came t o a head i n the e a r l y p a r t o f 1927, when the D a l l a s d i r e c t o r s again approved an a p p l i c a t i o n f o r a branch a t San Antonio and Congressional l e a d e r s such as Senator Glass and Representatives Garner and Wurzbach added t h e i r support t o San Antonio 1 s p e t i t i o n . As s t a t e d h e r e t o f o r e t h e B o r r d f s approval was f i n a l l y obtained, c o n d i t i o n e d on the passage o f the McFadden A c t , and the San Antonio Branch opened f o r business on J u l y 5, 1927. During 1919 the Board r e c e i v e d a p p l i c a t i o n s f o r branches from c l e a r i n g house a s s o c i a t i o n s i n Charleston, South C a r o l i n a and Wilmington, North Carolina, These a s s o c i a t i o n s were advised t h a t i t had been the Board's p o l i c y t o have a l l a p p l i c a t i o n s f o r branches o r i g i n a t e a t the F e d e r a l Reserve banks 82 and t h a t , a c c o r d i n g l y , t h e i r a p p l i c a t i o n s should f i r s t be presented t o the Federal Reserve Bank o f Richmond. I n f o l l o w i n g up the m a t t e r , the Board advised the Richmond Dank t h a t i n f o r m a t i o n had been r e c e i v e d t o the e f f e c t t h a t banks i n North and South C a r o l i n a were desirous o f having a branch and t h a t the Board wished to know whether the Richmond Reserve Bank had r e c e i v e d any a p p l i c a t i o n s , and i f so, what conclusions had been reached r e g a r d i n g them. On December 11, 1320, the Richmond Reserve Bank r e p l i e d t h a t a p e t i t i o n f o r a branch, a t a p o i n t y e t to be determined, had been submitted by committees r e p r e s e n t i n g bankers o f N o r t h and South C a r o l i n a and t h a t a separate p e t i t i o n * had also been made f o r a branch i n South C a r o l i n a . The Board asked the Richmond Reserve Bank to s e t t l e the matter one way or another i n order to f o r e s t a l l requests f o r hearings a t Washington. T h e r e a f t e r , hearings were h e l d i n Richmond and a thorough i n v e s t i g a t i o n as t o the most d e s i r a b l e l o c a t i o n f o r a branch i n the Carolinas was conducted by the Richmond Reserve Bank. These hearings and i n v e s t i g a t i o n s extended over a p e r i o d of three years and on November 7 , 1924, the d i r e c t o r s o f the Richmond Bank requested permission t o e s t a b l i s h a branch a t C h a r l o t t e , N o r t h C a r o l i n a . Subsequently, the d i r e c t o r s o f the Richmond Bank appeared before the Board i n an e f f o r t t o show cause why t h e i r request should be granted. On June 3, 1325, the Board's Committee on Branches recommended d i s a p p r o v a l of the proposed C h a r l o t t e Branch. The Board concurred i n t h i s recommendation and so advised the Richmond d i r e c t o r s , who expressed r e g r e t a t the B o a r d ' s a c t i o n and l a t e r requested a r e h e a r i n g i n the matter. A f t e r some disagreement as to the character o f the h e a r i n g , invita- t i o n s were sent by the Board to r e p r e s e n t a t i v e s of C h a r l o t t e , Wilmington, Spartansburg, G r e e n v i l l e , Columbia and Greensboro a d v i s i n g them t h a t a h e a r i n g would be h e l d i n Washington on January 15, 1926, f o r t h e purpose o f d i s cussing the n e c e s s i t y f o r a branch i n t h e C a r o l i n a s and t h e proper l o c a t i o n f o r such branch, i f e s t a b l i s h e d . This hearing emphasized the d i s a g r e e - ment e x i s t i n g among the v a r i o u s c i t i e s and as a r e s u l t t h e p e t i t i o n o f the Richmond d i r e c t o r s t o e s t a b l i s h a branch a t C h a r l o t t e was t a b l e d pending the r e c e i p t from t h e A t t o r n e y General o f an o p i n i o n as t o t h e Board 1 s a u t h o r i t y t o d i s c o n t i n u e branches. t h i s o p i n i o n became unnecessary. With the passage o f the McFadden Act Vhe C h a r l o t t e a p p l i c a t i o n was reconsidered and approved and a branch o f t h e Richmond Reserve Bank was opened i n t h a t c i t y Qn December 1 , 1927. The San Antonio and C h a r l o t t e Branches were organized and have always operated on a " f u l l - f l e d g e d " b a s i s . HAVANA AGENCY During the p e r i o d o f m i l i t a r y occupation o f Cuba a t the t u r n o f the century a l l customs, taxes and p u b l i c and p r i v a t e debts were, by o r d e r o f the P r e s i d e n t o f t h e U n i t e d S t a t e s , made payable i n U n i t e d States currency o r i n f o r e i g n g o l d c o i n a t s p e c i f i e d r a t e s o f exchange. Under t h i s o r d e r U n i t e d States currency became t h e c h i e f medium o f exchange on the I s l a n d . This c o n d i t i o n was n o t changed by the Treaty o f 1905* since the new Cuban Government, w h i l e having power t o set up a c e n t r a l bank and i s s u e i t s own currency, also by a c t made U n i t e d States currenqy l e g a l tender f o r a l l p u r poses p u b l i c and p r i v a t e . The P i a t t Amendment t o t h e Treaty o f 1905, reserved t o t h e U n i t e d States the r i g h t t o i n t e r v e n e i n Cuban a f f a i r s t o preserve a s t a b l e government. I t a l s o l i m i t e d the Cuban Government 1 s a u t h o r i t y t o c o n t r a c t p u b l i c -34- debts. These p r o v i s i o n s o f f e r e d a measure o f s e c u r i t y t o American c a p i t a l i n v e s t e d on the I s l a n d and encouraged an i n f l o w o f new c a p i t a l . Trade between the two c o u n t r i e s was f o s t e r e d , American Thanking i n t e r e s t s sought and obtained r e p r e s e n t a t i o n i n the banking l i f e o f the I s l a n d , and banking t r a n s a c t i o n s between the U n i t e d States and Cuba grew i n number. This l e d to a s u b s t a n t i a l increase i n the amount of U n i t e d States currency c i r c u l a t i n g i n Cuba. A f t e r the Federal Reserve System was e s t a b l i s h e d F e d e r a l Reserve notes and Federal Reserve bank notes q u i t e n a t u r a l l y found t h e i r ?/ay t o the I s l a n d , forming a s u b s t a n t i a l p a r t o f i t s c i r c u l a t i o n . However, since s h i p p i n g and insurance charges on currency were h i g h , t r a n s f e r s o f notes were c h i e f l y confined t o those o f l a r g e r denominations. I n the absence o f any d e f i n i t e program o f redemption, notes o f smaller denominations a l r e a d y on the I s l a n d , or which found t h e i r way t o the I s l a n d , continued t o remain i n c i r c u l a t i o n even though f a r below the u s u a l standard o f f i t n e s s . Because of p r o x i m i t y to Cuba, notes o f the Federal Reserve Bank o f A t l a n t a c o n s t i t u t e d the b u l k of Federal Reserve notes on the I s l a n d . The A t l a n t a Bank, which had the smallest volume o f domestic c i r c u l a t i o n o f any Reserve bank, regarded i t s Cuban c i r c u l a t i o n w i t h f a v o r , since the gold r e ceived i n exchange f o r such notes augmented i t s gold reserves and thus broadened i t s investment and c r e d i t base. With a view t o f u r t h e r expanding i t s Cuban c i r c u l a t i o n , the A t l a n t a Reserve Bank i n 1919 surveyed the currency s i t u a t i o n on the I s l a n d and subsequently submitted to the Board a program f o r r e p l a c i n g $50,000,000 o f u n f i t U n i t e d S t a t e s n o t e s , then estimated to be c i r c u l a t i n g on the I s l a n d , w i t h i t s own n o t e s . I t was contemplated t h a t the eotchango could be accomplished a t a p r o f i t * since t h e o r e t i c a l l y i t would b r i n g $50,000,000 o f gold i n t o the A t l a n t a Bank, $30,000,000 o f which, as excess gold r e serves, would be a v a i l a b l e f o r investment or as reserve f o r an a d d i t i o n a l |75,000,000 i n c i r c u l a t i o n . I t was p o i n t e d o u t t h a t t h i s program would clean up the currency on the I s l a n d , although the estimated replacement was based on notes o f $5 or over and d i d n o t contemplate the renewal of notes o f smaller denominations, which were i n extremely poor c o n d i t i o n . The Board took issue w i t h t h i s plan m a i n t a i n i n g t h a t by f a r the l a r g e r p a r t of the paper money c i r c u l a t i n g i n Cuba c o n s i s t e d of N a t i o n a l Bank notes and Federal Reserve notes and t h a t the redemption o f such n o t e s , other than those o f t h e A t l a n t a Bank, by the A t l a n t a Bank would merely expand i t s gold reserves and c o n t r a c t gold reserves of other F e d e r a l Reserve banks w i t h o u t adding a p p r e c i a b l y to the System's gold h o l d i n g s . The A t l a n t a Reserve Bank was advised t h a t the Board d i d n o t f e e l t h a t the System would be strengthened by such an exchange o f n o t e s . I t was i n d i c a t e d t h a t Cuban branches o f American banks might f i n d i t good business t o l o o k a f t e r the redemption o f u n f i t notes on the I s l a n d * I n i n v e s t i g a t i n g A t l a n t a ' s program i t was a l s o p o i n t e d out t h a t Cuba was e n j o y i n g currency c i r c u l a t i o n a t no expense; t h a t Cuba might w e l l bear the expense o f keeping such c i r c u l a t i o n f i t ; that A t l a n t a ' s program, i n s o f a r as the investment p r o f i t s were concerned, could w e l l l e a d to i n f l a t i o n and to h a r m f u l c o m p e t i t i o n f o r d e s i r a b l e paper; and t h a t A t l a n t a ' s computations were based on gold reserves o f 40% which, although l e g a l , were abnormally low. No a c t i o n was taken i n the matter by the A t l a n t a Reserve Bank a t t h a t time. During the l a t t e r ^ p a f c t o f 1920, the Cuban Government requested the assistance of the S t a t e Department o f the U n i t e d States i n having e s t a b l i s h e d 36 i n Cuba a Federal Reserve agency f o r the redemption o f a l l o l d and d e t e r i o r a t e d currency c i r c u l a t i n g on the I s l a n d , because i t was regarded as dangerous t o p u b l i c h e a l t h . This request was brought t o the a t t e n t i o n o f the Federal Reserve Board by the Treasury Department and the Board s t a t e d t h a t i t was n o t considered d e s i r a b l e t o e s t a b l i s h an agency i n Cuba, b u t t h a t i t would be pleased t o work out some arrangement w i t h the Cuban Government whereby t h e Cuban t r e a s u r y or Cuban banks would undertake t o c o l l e c t and s h i p u n f i t notes t o the J a c k s o n v i l l e Branch o f t h e Federal Reserve Bank o f A t l a n t a f o r redemption. On June 18, 1921, the Federal Reserve Bank of A t l a n t a , upon r e s o l u t i o n of i t s d i r e c t o r s , decided t o i n v e s t i g a t e the f e a s i b i l i t y and d e s i r a b i l i t y of e s t a b l i s h i n g an agency a t Havana, Cuba. Follovting t h i s i n v e s t i g a t i o n the d i - r e c t o r s of the A t l a n t a Reserve Bank passed t h e f o l l o w i n g r e s o l u t i o n s "TPftiereas, should i n the d i s c r e t i o n and wisdom o f the Federal Reserve Board, they consider the establishment o f a branch or agency o f t h e Federal Reserve System i n Cuba, be i t "Resolved, t h a t i n view o f the p r o x i m i t y o f the A t l a n t a bank t o Cuba, and t h e i n t i m a t e business r e l a t i o n s of people i n our d i s t r i c t , we ask t h a t a t the time your Board considers t h i s m a t t e r , t h a t t h e Federal Reserve Bank o f A t l a n t a be allowed the p r i v i l e g e o f a conference w i t h your Board as t o such branch or agency being e s t a b l i s h e d under the j u r i s d i c t i o n o f the A t l a n t a Federal Reserve Bank." A t a l a t e r d a t e , w i t h t h e consent o f t h e Board, the A t l a n t a Bank arranged t o handle a t i t s J a c k s o n v i l l e Branch exchanges o f u n f i t notes forwarded from Cuba, provided the Cuban a u t h o r i t i e s assumed, the expense and r i s k s i n c i d e n t a l t o such t r a n s a c t i o n s . The Cuban Government was advised o f t h i s arrangement, b u t delayed use o f the f a c i l i t i e s o f f e r e d a p p a r e n t l y because o f t h e expense i n v o l v e d . I n an e f f o r t t o meet t h i s o b j e c t i o n the A t l a n t a bank i n 1922 sought a u t h o r i t y t o designate the Havana Branch o f the N a t i o n a l C i t y Bank o f New York as i t s agent i n Cuba, w i t h a view t o having such branch m a i n t a i n a stock o f notes on the I s l a n d ; i t being u n d e r stood t h a t the N a t i o n a l C i t y Bank would absorb a l l s h i p p i n g and insurance charges. The Federal Reserve Board took the p o s i t i o n t h a t such d e s i g n a t i o n should n o t be made except a t the request o f the Cuban Government. request was made by the Cuban Government. No such Subsequently, the A t l a n t a Bank handled one exchange, i n v o l v i n g $8,042,000 o f u n f i t one's and two's f o r Cuban Government through i t s J a c k s o n v i l l e Branch. the I t was estimated, how- ever, t h a t approximately $84,000,000 i n notes o f the A t l a n t a Bank, m o s t l y o f l a r g e r denominations, had been shipped t o Cuba a t the request o f American banks, such banks r e c e i v i n g currency from the I s l a n d which, i n s o f a r as A t l a n t a was concerned, was r e t u r n e d through o r d i n a r y channels. The Cuban s i t u a t i o n again came b e f o r e the Board on A p r i l 5, 1925, when the d i r e c t o r s o f the Federal Reserve Bank of Boston passed a r e s o l u t i o n di- r e c t i n g the Governor o f such bank, w i t h the approval o f the Federal Reserve Board, t o take immediate steps to e s t a b l i s h an agency o f the Boston Bank i n Havana f o r the purpose o f conducting operations p e r m i t t e d under S e c t i o n 1 4 ( e ) ^ o f the Federal Reserve A c t . Hearings r e g a r d i n g t h i s r e s o l u t i o n , attended by r e p r e s e n t a t i v e s of the Boston, A t l a n t a , New York and P h i l a d e l p h i a Reserve Banks and p r i v a t e bankers, were h e l d i n Washington on A p r i l 50 and May 7, 1925. The establishment o f the agency was s t r o n g l y opposed by the New York and A t l a n t a Reserve Banks; the former because i t b e l i e v e d the establishment of such 2 Authorizes the establishment o f agencies o f Federal Reserve banks i n foreign countries " wheresoever i t may be deemed best f o r the p u r pose o f purchasing, s e l l i n g , and c o l l e c t i n g b i l l s of e x c h a n g e . . . . . . " a d i r e c t agency would c o n s t i t u t e a dangerous precedent and the l a t t e r because i t b e l i e v e d the A t l a n t a d i s t r i c t by v i r t u e of a p r i o r resolution and geographic l o c a t i o n was e n t i t l e d t o f i r s t c o n s i d e r a t i o n . The Federal Advisory Council a l s o reviewed the matter and made the f o l l o w i n g recommendations "While the Council i s i n f u l l sympathy w i t h the ends t h a t the Board i s t r y i n g t o a t t a i n , i t b e l i e v e s t h a t the p l a n as now contemplated v/ould not prove successful i n a c t u a l o p e r a t i o n and t h a t what the Board d e s i r e s t o achieve can and should be accomp l i s h e d by o t h e r and simpler means which would n o t i n v o l v e t h e ominous step o f p e r m i t t i n g Federal Reserve Banks t o e s t a b l i s h o r g a n i z a t i o n s o f t h e i r own i n f o r e i g n c o u n t r i e s a step which i n the o p i n i o n of t h e Council was n o t contemplated by t h e Act a step f o r which the t r a d i t i o n s o f the i m p o r t a n t European c e n t r a l banks would g i v e no p r e c e d e n t . " P r e s i d e n t Harding and members o f h i s Cabinet b e l i e v e d t h a t a Federal Reserve agency i n Cuba would a i d i n the expansion of American commercej the President expressing hope t h a t i t v/ould be p o s s i b l e to s a t i s f a c t o r i l y a d j u s t the cont e n t i o n between Boston and A t l a n t a . The American Ambassador t o Cuba a l s o urged e a r l y a c t i o n t o e s t a b l i s h such an agency i n order t o f o r e s t a l l the establishment o f a Cuban bank of i s d u e , which was considered h i g h l y und e s i r a b l e , and, t o check, i f p o s s i b l e , the a b s o r p t i o n o f the I s l a n d ' s p r i v a t e banks by Canadian i n t e r e s t s . He a l s o f e l t t h a t such an agency would b r i n g about r e d u c t i o n i n the abnormally h i g h d i s c o u n t r a t e s maintained on the Island, The Federal Reserve Board, having decided t o e s t a b l i s h an agency i n Cuba, arranged a f u r t h e r h e a r i n g i n the matter a t which r e p r e s e n t a t i v e s o f the Boston and A t l a n t a Reserve Banks were requested t o be p r e s e n t . This h e a r i n g was h e l d d u r i n g May 1923 and on June 28, 1923, the Board announced t h a t i t had decided t o approve a p l a n under which the Federal Reserve Banks o f Dos ton and A t l a n t a were t o open agencies i n Havana. This p l a n was i n - corporated i n a r e s o l u t i o n adopted by the Board on June 27, 1925, and amended on J u l y 50, 1925. While i t gave the Federal Reserve Bank o f Boston p r i o r i t y i n the purchase and sale o f a l l cable t r a n s f e r s and b i l l s arising out o f our trade w i t h Cuba, except such b i l l s as o r i g i n a t e d i n or were drawn upon banks or other drawees i n the S i x t h Federal Reserve D i s t r i c t , i t re- served t o the A t l a n t a Bank the r i g h t to supply the currency i n v o l v e d i n such t r a n s a c t i o n s or otherwise e n t e r i n g i n t o c i r c u l a t i o n on the I s l a n d , Each agency was a u t h o r i z e d to perform t r a n s a c t i o n s o f the type to be handled by the other o n l y w i t h the permission or upon the r e f u s a l o f the o t h e r t o do so. On September 1 , 1923, agencies o f the Federal Reserve Banks o f Boston and A t l a n t a were opened i n Havana, The Boston Agency operated w i t h a s m a l l personnel and a t comparatively small expense, since i t s a c t i v i t y was conf i n e d to the purchase and sale o f cable t r a n s f e r s , which were c o l l e c t e d or p a i d , as the case might be, by the A t l a n t a Agency. Agency showed, a f a i r p r o f i t . Consequently, the Boston On the o t h e r hand the A t l a n t a Agency, which had no source of income, was r e q u i r e d to m a i n t a i n a r e l a t i v e l y large, personnel to handle currency payments and r e c e i p t s on the I s l a n d , and i n a d d i t i o n had to absorb p r i n t i n g , s h i p p i n g and insurance charges i n c i d e n t a l t o the r e p l a c e ment o f such currency. There was considerable f r i c t i o n between the two agencies r e g a r d i n g the scope o f t h e i r a c t i v i t i e s and the d e s i r a b i l i t y o f c o n s o l i d a t i n g the agencies soon became apparent. I n A p r i l 1926 the Boston Agency a t the request o f banks i n Cuba, which were experiencing or threatened w i t h r u n s , sold cable t r a n s f e r s aggregating $32,900,000 payable i n Havana. The A t l a n t a Agency had on hand l e s s than $7,500,000 o f currency and was unable promptly t o complete these t r a n s f e r s j some of which v/ere delayed two or t h r e e days pending the a r r i v a l of a d d i t i o n a l currency by s p e c i a l t r a i n , plane and boat from Atlanta. S h o r t l y a f t e r t h i s i n c i d e n t the Federal Reserve Bank o f Boston addressed a l e t t e r t o t h e Board o u t l i n i n g the u n s a t i s f a c t o r y f e a t u r e s o f the e x i s t i n g s i t u a t i o n i n Cuba and s t a t i n g t h a t , unless t h e Board was d i s posed t o c o n s o l i d a t e the two agencies under i t s d i r e c t i o n and c o n t r o l , its agency i n Havana should be d i s c o n t i n u e d . The Board reviewed t h e q u e s t i o n and on December 22, 1926, passed a r e s o l u t i o n a u t h o r i z i n g t h e Federal Reserve Bank of Boston t o d i s c o n t i n u e i t s Havana Agency, e f f e c t i v e January 1 , 1927, and a u t h o r i z i n g the Federal Reserve Bank o f A t l a n t a t o assume the f u n c t i o n s p r e v i o u s l y performed by the Boston Agency. On January 27, 192.7, the Board also passed a r e s o l u t i o n r e - d e f i n i n g the f u n c t i o n s t o be performed by the A t l a n t a Agency. Subsequently, the Federal Advisory C o u n c i l considered the question o f the establishment and maintenance of t h e Havana Agency and reached the f o l l o w i n g c o n c l u s i o n , which was brought t o the a t t e n t i o n of a l l Federal Reserve banks on May 26, 1927 (X-4860)s "The Federal Advisory Council recognizes t h a t i t i s n o t advisable t o d i s c o n t i n u e the Crib an Agency a t t h i s t i m e . The C o u n c i l , however, wishes t o r e i t e r a t e the view t o which i t has given expression on s e v e r a l occasions i n the p a s t , t o wits t h a t i t does n o t b e l i e v e i t t o be good p o l i c y f o r the Federal reserve banks t o e s t a b l i s h agencies o f the character o f t h e Cuban Agency o u t s i d e o f t h e C o n t i n e n t a l U n i t e d S t a t e s . The C o u n c i l , t h e r e f o r e , suggests t o the Federal Reserve Board t h a t i t study the whole problem t o the end t h a t , i f p o s s i b l e , some p l a n be devised which may be an e f f e c t i v e s u b s t i t u t e f o r the present arrangement. 11 While the operations o f t h e Cuban agency were reviewed from time t o time between the years 1927 t o 1935 no a c t i o n was taken t o d i s c o n t i n u e or c u r t a i l <£1 i t s functions. I n f a c t on January 2, 1929, the Board broadened the f u n c t i o n s o f the agency t o p e r m i t d i r e c t exchanges o f ner or f i t currency f o r United S t a t e s c o i n tendered by the Treasurer o f the Republic of Cuba, or any banking i n s t i t u t i o n doing business i n Havana. A p e r i o d o f p o l i t i c a l u n r e s t began i n Cuba i n 1955, when P r e s i d e n t Machado was deposed from the presidency. P o l i t i c a l f a c t i o n s sought c o n t r o l of the government, c o n s t i t u t i o n a l forms were abandoned and r i o t s and s t r i k e s ensued. I n view of t h e r i s k s a r i s i n g from these c o n d i t i o n s , as w e l l as the f a c t t h a t t r a n s p o r t a t i o n f a c i l i t i e s between the J a c k s o n v i l l e Branch and Cuba had improved, the A t l a n t a Reserve Bank on June 8 , 1954, passed a r e s o l u t i o n under which t h e Board was requested t o permit discontinuance o f the Havana Agency. On J u l y I S , 1954, the Board h e l d a meeting i n Washington, which was attended by r e p r e s e n t a t i v e s of American and Canadian banks having o f f i c e s Cuba, t o consider the m a t t e r . A l l the bank r e p r e s e n t a t i v e s present a t t n i s meeting were of t h e o p i n i o n t h a t the agency should be continued. Department of the U n i t e d S t a t e s in The State also urged t h a t the agency be continued u n t i l more s t a b l e c o n d i t i o n s p r e v a i l e d i n Cuba. I n view o f the e x i s t i n g sentiment, the A t l a n t a d i r e c t o r s reconsidered the q u e s t i o n and advised the Board t h a t the A t l a n t a Bank would cooperate i n a System o p e r a t i o n of t h e agency and t h a t , i n t h e i r o p i n i o n , such an arrangement would be a proper s o l u t i o n o f the problem. On October 51, 1954, the Board addressed a l e t t e r t o a l l Federal Reserve banks o u t l i n i n g A t l a n t a ' s p o s i t i o n i n regard t o the agency, s t a t i n g t h e suggested s o l u t i o n t o the problem, and r e q u e s t i n g advice as t o t h e i r a t t i t u d e toward p a r t i c i p a t i o n w i t h the other Federal Reserve banks i n the o p e r a t i o n s of the agency by the F e d e r a l Reserve Bank of A t l a n t a on a System b a s i s . A l l o f the 42 banks e v e n t u a l l y agreed t o p a r t i c i p a t e i n the operations of t h e agency under the f o l l o w i n g conditionss (a) the A t l a n t a Bank would defray a l l u s u a l o p e r a t i n g expenses, since the c i r c u l a t i o n o f i t s notes i n Cuba a t times worked t o i t s advantage; (b) a l l o f the Reserve banks would share i n the n e t p r o f i t s o f the agency, i f any t h e i r r e s p e c t i v e shares t o be determined by the amount of t h e i r c a p i t a l and s u r p l u s ; (c) any l o s s ( n o t covered by c o l l e c t i b l e insurance) due t o c i v i l commotion, war, r i o t , i n s u r r e c t i o n , r o b b e r y , e t c . , would be shared by a l l o f the Reserve banks t h e i r r e s p e c t i v e shares t o be determined by the amount o f t h e i r c a p i t a l and s u r p l u s ; (d) the A t l a n t a Bank would provide c e r t a i n s p e c i f i e d types and amounts o f insurance; (e) the A t l a n t a Bank would alone be r e s p o n s i b l e f o r the o r d i n a r y operations o f the agency, would f u r n i s h each Reserve bank w i t h statements covering operations o f t h e agency a t n o t l e s s than monthly i n t e r v a l s , and would n o t , w i t h o u t t h e consent o f the other Reserve banks and t h e Board, make any change i n the n a t u r e or extent ox agency o p e r a t i o n s . On May 25, 1955, the Board addressed a l e t t e r t o a l l Federal Reserve banks (X-9217) s t a t i n g t h a t f o r m a l agreements r e l a t i n g t o the o p e r a t i o n o f the Havana Agency as a System agency had been executed and exchanged between each Reserve bank and the A t l a n t a Reserve Bank and t h a t t h e Havana Agency would begin o p e r a t i n g under the new arrangement on June 1, 1955. During 1955, the Cuban Government began i s s u i n g i t s own currency. This money c i r c u l a t e d f r e e l y on the I s l a n d and i t s use, t o g e t h e r w i t h p r e v a i l i n g adverse economic c o n d i t i o n s , s e r i o u s l y a f f e c t e d the earnings o f the Havana Agency. Faced w i t h a s e r i e s o f increased o p e r a t i n g d e f i c i t s , the A t l a n t a d i r e c t o r s on February 14, 1936, again passed a r e s o l u t i o n t o request the Board's permission t o d i s c o n t i n u e the agency a t such time as such a c t i o n could be taken w i t h o u t unduly a f f e c t i n g t h e banking and business i n t e r e s t s o f Cuba, o r , as an a l t e r n a t i v e t h a t some plan be formulated under which the agency might be operated w i t h o u t i n c u r r i n g a s u b s t a n t i a l o p e r a t i n g l o s s . A new t r e a t y between t h e U n i t e d States and Cuba was r a t i f i e d by the United States Senate on May 51, 1936. This t r e a t y superseded t h a t of 1905 and under i t the United States abandoned, t h e r i g h t t o i n t e r v e n e i n the i n t e r n a l a f f a i r s of Cuba, as was p o s s i b l e under the P i a t t Amendment t o the e a r l i e r treaty. F o l l o w i n g t h i s a c t i o n the A t l a n t a d i r e c t o r s again reviewed the Cuban s i t u a t i o n arid on September 11, 1956, passed a r e s o l u t i o n s i L i i l a r t o the one passed e a r l i e r i n the y e a r , and on January 11, 1957, submitted a r e v i s e d form of agreement t o the Board under which each Reserve bank would bear a pro r a t a share o f any d e f i c i t a r i s i n g from o p e r a t i o n of the agency. No a c t i o n was taken regarding t h i s r e v i s e d agreement. The matter o f t h e discontinuance of the Havana Agency was, however, again, considered by the Board i n December 1957, a t which time a conversation was had w i t h the Under Secretary o f S t a t e t o determine the a t t i t u d e of the S t a t e Department toward the p o s s i b l e discontinuance o f the Havana Agency. The Under Secretary s a i d a t the time t h a t the Cuban Government had had a t e c h n i c a l commission studying w i t h the S t a t e Department and the Treasury Department c e r t a i n reform measures t o be undertaken by the Cuban Government w i t h regard t o i t s currency system, c e n t r a l banking p o s s i b i l i t i e s , e t c . , and u n t i l t h e two governments had reached a d e c i s i o n as t o v?hat i t was d e s i r a b l e t o do i n a r a t h e r f a r reaching program, hoped v e r y much t h a t the Federal Reserve System would take no a c t i o n t o t e r m i n a t e the agency a t Havana. The Under Secretary s a i d t h a t i f any f u r t h e r a c t i o n i n the matter could be d e f e r r e d f o r a t l e a s t another s i x months, i t would bo appreciated by the S t a t e Department, M and i n a l e t t e r dated January 7 , 1938, the Board advised P r e s i d e n t Newton o f A t l a n t a of the conversation w i t h the Under Secretary o f S t a t e and s t a t e d t h a t unless f u r t h e r advice was received from t h e S t a t e Department before J u l y 1 , 1S58, and i n the absence of f u r t h e r developments, the Board would take the matter up again w i t h the State Department a t t h a t time and advise Mr. .Newton of t h e r e s u l t s . A f t e r the e x p i r a t i o n o f t h e s i x months 1 p e r i o d f u r t h e r conversations regarding the matter were had and correspondence exchanged w i t h t h e State Department and although the S t a t e Department suggested t h a t the q u e s t i o n of d i s c o n t i n u i n g t h e Agency again be d e f e r r e d , t h e Board under date o f August 3, 1938, adopted a r e s o l u t i o n a u t h o r i z i n g and d i r e c t i n g t h e F e d e r a l Reserve Bank o f A t l a n t a t o d i s c o n t i n u e the maintenance and o p e r a t i o n o f the Agency a t Havana as soon as p r a c t i c a b l e and i n no event l a t e r than the close o f business December 51, 1958. I n f o r m a t i o n submitted by the Board's Examiners i n connection with, an examination of t h e Havana Agency as of January 28^ 1938, i n d i c a t e s t h a t t h e r e i s now an almost complete absence o f American money i n a c t i v e t i o n i n Cuba, circula- i t having been supplanted by the Cuban currency placed i n c i r - c u l a t i o n beginning i n 1955. This s i t u a t i o n has n a t u r a l l y r e s u l t e d i n a decided " d r y i n g up" of a c t i v i t i e s a t t h e Agency, CURRENCY FUNDS - SCRANTQN» PENNSYLVANIA P r i o r t o January, 1922, member banks i n Scranton, Pennsylvania, and the immediate v i c i n i t y , when ca3.1ed upon t o meet heavy p a y r o l l s or o t h e r emergencies, v/ere sometimes inconvenienced by the l a t e a r r i v a l of currency from the Federal Reserve Bank of P h i l a d e l p h i a , due t o poor r a i l f a c i l i t i e s . In order t o c o r r e c t t h i s s i t u a t i o n , the Federal Reserve bank entered i n t o an agreement w i t h the F i r s t N a t i o n a l Bank of Scranton whereby such bank was made 45 custodian o f a $1,000,000 currency fond which could be dravn a g a i n s t by member banks i n Scrsnton and i t s v i c i n i t y , whose currency shipments d i d n o t a r r i v e on schedule5 the fund being reimbursed when the delayed shipment a r r i v e d . Under the agreement the fund was c a r r i e d i n a safe d e p o s i t box ut the F i r s t N a t i o n a l Bank^ such bank p l e d g i n g marketable investments w i t h the Reserve bank as s e c u r i t y and assuming a l l l i a b i l i t y f o r l o s s e s , except on shipments t o and from the Reserve bank. This agreement remained i n e f f e c t u n t i l October 1923, a t which time the fund was increased t o $2,000,000 and a new agreement was executed which provided t h a t ; (1) The fund should be under the j o i n t custody of s i x persons appointed by the F i r s t N a t i o n a l Bank, any two o f whom would have the p r i v i l e g e of access. (2) Withdrawals could be made by the F i r s t N a t i o n a l Bank or by i t f o r o t h e r l o c a l member banks s u b j e c t t o p r i o r approval o f the Reserve bank. (5) Deposits could be received f o r c r e d i t t o the reserve accounts of p a r t i c i p a t i n g member banks, the Reserve bank t o be given immediate t e l e g r a p h i c advice of such d e p o s i t s , (4) Confirmation of a l l withdrawals and deposits should be made t o the Federal Reserve bank d a i l y by l e t t e r . (5) The F i r s t N a t i o n a l Bank should pledge w i t h the Federal Reserve bank s e c u r i t i e s having an aggregate .aarket value of at least 000,000. (6) I n the event the fund exceeded 000,000 the Reserve bank could r e q u i r e the shipment t o i t of such excess or the pledge of a d d i t i o n a l s e c u r i t y . (7) Any losses o c c u r r i n g w h i l e shipments of currency were i n t r a n s i t t o t h e F i r s t N a t i o n a l Bank were t o be borne by the Reserve bank, whereas losses o c c u r r i n g a f t e r a r r i v a l were t o be borne by the F i r s t N a t i o n a l . (8) The agreement might be terminated by e i t h e r p a r t y upon f i v e days 1 w r i t t e n n o t i c e and, i n the event the F i r s t N a t i o n a l Bank f a i l e d to comply w i t h the terms o f the agreement, the Reserve bank could s e l l any or a l l of the s e c u r i t i e s pledged as c o l l a t e r a l t o the fund t o p r o v i d e f o r any l o s s i t might sustain. I n connection w i t h the establishment o f the fund the Federal Reserve Bank of P h i l a d e l p h i a s t a t e d t h a t a s u b s t a n t i a l saving i n postage and insurance charges would r e s u l t from i t s o p e r a t i o n , since a c t u a l shipments of currency t o the Scranton a r e a would be h e l d t o a minimum. I t was a l s o p o i n t e d out t h a t p a r t i c i p a t i n g banks would be able t o reduce the amount o f cash c a r r i e d i n t h e i r own v a u l t s , c a r r y a higher aggregate o f earning assets,and save i n t e r e s t which was t h e r e t o f o r e l o s t on currency i n t r a n s i t . I t was i n d i c a t e d t h a t Scranton banks would very l i k e l y apply f o r a branch, i f the fund was n o t established. On October 5, 1923, the Board voted t o i n t e r p o s e no o b j e c t i o n t o the establishment o f the proposed fund. Since e a r l y r e p o r t s f i l e d by the Federal Reserve Bank o f P h i l a d e l p h i a covering operations o f the fund i n d i c a t e d t h a t i t was r e n d e r i n g s a t i s f a c t o r y and economic s e r v i c e , the Board subsequently requested the P h i l a d e l p h i a Reserve Bank t o forward a d e t a i l e d account o f i t s o p e r a t i o n " i n order t h a t i t s use may be extended t o o t h e r c i t i e s and other D i s t r i c t s " . A currency fund s i m i l a r t o t h a t a t Scranton was a l s o operated a t Johnstown, Pennsylvania, from June 25, 1924, u n t i l March 13, 1955. Currency funds o f a more o r l e s s temporary n a t u r e , some of which were n o t operated under c o n t r a c t and which remained i n o p e r a t i o n f o r p e r i o d s ranging from s e v e r a l days t o about one y e a r , have been e s t a b l i s h e d d u r i n g p e r i o d s of f i n a n c i a l s t r e s s or f o r o t h e r reasons i n Boise and Twin F a l l s , Idaho; Bangor, Maine; H a r t f o r d and New Haven, Connecticut; C h a r l e s t o n , South 47 C a r o l i n a ; Sacramento, C a l i f o r n i a , and Miami and Tampa, F l o r i d a . eleven currency funds have been operated. In all Only one, t h a t a t Seranton, Pennsylvania, i s a c t i v e a t present. The use o f currency funds f e l l i n t o d i s f a v o r when i t became apparent t h a t , i n one i n s t a n c e a t l e a s t , the fund was being used by banks as a subs t i t u t e f o r t i l l cash. The Board's a t t i t u d e toward such abuse, as w e l l as i t s i m p l i c a t i o n s , was p o i n t e d out i n a l e t t e r dated December 28, 1928, addressed t o t h e Federal Reserve Bank o f Atlanta? "The Board t h i n k s t h a t upon r e f l e c t i o n , your d i r e c t o r s w i l l agree t h a t i f t h e Miami p l a n (which, a t the present t i m e , i s a s u b s t i t u t e f o r t i l l cash) i s n o t promptly stopped, the p r a c t i c e w i l l spread t o such an e x t e n t t h a t i t w i l l become n o t o n l y burdensome, but probably p r o h i b i t i v e . " m PART I I RESULTS OP PREVIOUS BRANCH AND AGENCY SURVEYS MADE BY THE BOARD BRANCH INVESTIGATION OF 1924 During the e a r l y post-war years the earnings of the Federal Reserve banks were abnormally high and e a s i l y sustained the tremendous increase i n the expenses of the System a r i s i n g from the operation of branches and the broadening of services rendered f r e e to member banks. However, as the business of the country declined t o more normal l e v e l s , the earnings of the Federal Reserve banks also decreased. This reduction i n earnings was, quite obviously, not o f f s e t by a corresponding reduction i n operating costs, because such costs were of a more or less f i x e d nature. I n an e f f o r t to adjust the System to t h i s changed condition the Board i n 1922 appointed a Committee on Economy and E f f i c i e n c y t o study means of reducing expenses. I n connection with t h i s study the Board, during the l a t t e r p a r t of 1923, instructed i t s Standing Committee on Branches of Federal Reserve banks t o make a thorough i n v e s t i g a t i o n of Federal Reserve bank branches with a view to reporting thereon and recommending to the Board the p r i n c i p l e s by which i t should be guided i n passing upon future applications f o r branches and determining which of the e x i s t i n g branches had j u s t i f i e d t h e i r establishment. Pursuant to the above i n s t r u c t i o n s , a l e t t e r ( S t . 3915, dated January 29, 1924), reading i n part as follows was addressed to the Chairman o f each Federal Reserve bank having branches: * * * * * * * * " I n order t h a t the Board may be i n possession of data essential to the completion of i t s study i n regard to the operation of Federal Reserve branch banks i t w i l l be appreciated i f you w i l l furnish i t a t your e a r l y convenience with a report containing the following information: 50 "A. Statement, based on functional expense reports, showing the annual cost of maintaining each of the 21 functions l i s t e d on page 32 of the q u a r t e r l y functional expense report form E, t o gether with figures i n a p a r a l l e l column showing the estimated net saving t h a t could be effected i f the branch were discontinued and the work taken over by the head o f f i c e . "B. Statement as to whether or not i n your opinion and t h a t of the o f f i c e r s of the bank any one or more of the functions now being performed by the branch could be discontinued and the work taken over by the head o f f i c e without slowing up the work of member banks to a greater extent than would be warranted by the saving, to be effected i n the expenses of the Federal Reserve banks, together with an estimate of the probable annual saving, "C. Statement expressing the opinion of your Board of d i r e c tors as to whether any of your branches or any of the functions now being performed by them should be discontinued. "In addition to the information s p e c i f i c a l l y requested we s h a l l also welcome a f u l l expression of your views regarding any phase of Federal Reserve branch banking which you think should be considered by the £oard, especially as to the d e s i r a b i l i t y of somewhat broadening the functions of Federal Reserve branch banks." The r e p l i e s to t h i s l e t t e r were received and tabulated by the Division of Bank Operations and the r e s u l t i n g figures were submitted to the Board's Committee on Branches, together with a covering memorandum, on July 24, 1924. I t i s i n t e r e s t i n g to note t h a t a t that time i t was estimated the elimination of the twenty-three branches then operating would save the System approximately $3,000,000 per annum, or a l i t t l e over one-half of the annual operating cost of the branches, without considering the question of branch o f f i c e buildings. However, the o f f i c e r s and directors of a l l Federal Reserve banks having branches were of the opinion t h a t none of t h e i r branches should be discontinued or t h e i r functions c u r t a i l e d . The r e s u l t s of t h i s investigation were presented to the Federal Reserve Board by Mr. James, Chairman of the Committee on Branches, on July 25, 1924, with the following statements 51 "The importance of reducing the expenses o f the System i s so obvious t h a t I submit t h i s r e p o r t have the close study o f each member o f the Board. "My own conclusions are t h a t , i n the l i g h t o f the r e t u r n s , the p o s s i b l e savings t o the System by a b o l i s h i n g the Branches, estimated a t an excess o f $5,000,000 per annum, l a r g e as the sum appears to be, does n o t warrant the c l o s i n g o f any o f the Branches. N e i t h e r do I b e l i e v e i t advisable t o change cny o f the f u n c t i o n s now performed by the Branches a t t h i s time. " I f e e l t h a t the work o f the Board's Committee on S a l a r i e s , Expenditures and E f f i c i e n c y w i l l n o t b r i n g t o the a t t e n t i o n o f the o f f i c e r s and d i r e c t o r s o f the twelve banks the u r g e n t n e c e s s i t y o f s t r i c t economy, but w i l l p o i n t the way to cons o l i d a t i o n o f e f f o r t and may be the means o f having the banks o f t h e i r own v o l i t i o n c u r t a i l i n g some o f the l e a s t necessary f u n c t i o n s a t Branches. " A t an e a r l y meeting o f the Board, I wish to move 1 t h a t t h i s r e p o r t be r e c e i v e d , noted and f i l e d , w i t h o u t a c t i o n as d i s c o n t i n u i n g any o f the Federal Reserve Branch Banks. 1 " I n c o n j u n c t i o n v&th the v:ork o f the Board's Committee on Branches, the Governor* s Conference o f 1924 also discussed the p r i n c i p l e s which should be c o n t r o l l i n g i n the establishment o f branches o f Federal Reserve banks. After a thorough review o f the s u b j e c t , the Conference adopted the f o l l o w i n g consensus: "That branch banks should be e s t a b l i s h e d only when the Federal r e s e r v e banks were n o t able to p r o v i d e d i s t a n t member banks w i t h s a t i s f a c t o r y s e r v i c e , and o n l y i f the aggregate resources o f the d i s t r i c t t o be served and the saving o f time to member bonks i n t h a t d i s t r i c t i n the matter o f c o l l e c t i o n s , discounts and supplying currency j u s t i f y . I n other words, e s s e n t i a l s e r v i c e , r a t h e r than expense, i s the prime c o n s i d e r a t i o n . The conference f e l t , however, t h a t i n no case should branches be e s t a b l i s h e d i f agencies (money depots and t r a n s i t depots) can s a t i s f a c t o r i l y answer the purpose." On June 5, 1924, the Committee on Branches recommended t h a t the Board adopt, as a matter of p o l i c y , the above consensus and n o t i f y the Federal Reserve banks o f such a c t i o n . Although the Committee's recommendation was discussed by the Board on June 18, 1924, and January 12, 1925, a d e f i n i t e p o l i c y regarding branches was not formally adopted. BRANCH SURVEY OF 1950 On February 27, 1930, the Federal Reserve Board adopted the following resolution: "Resolved, t h a t the Governor arrange f o r a survey and study of the subject of branch Federal reserve banks with a view of informing the Board under what circumstances the establishment or maintenance of branch Federal reserve banks i s j u s t i f i e d from an economic and public service standpoint; the purpose of such survey t o be t o enable the Board to formulate a d e f i n i t e p o l i c y with reference to Federal reserve branch banks i n the l i g h t of experience gained through the actual operation of e x i s t i n g branches, and also to enable i t to determine whether any of the e x i s t i n g branches of Federal reserve banks should be c u r t a i l e d i n t h e i r functions or discontinued i n the i n t e r e s t of economy and e f f i c i e n c y . " The survey contemplated i n t h i s resolution was undertaken by the Board 1 s Division of Bank Operations and a memorandum was submitted to the Board on A p r i l 4, 1931. This memorandum included a chronological summary of a l l data i n the Board 1 s general f i l e s i n connection with applications f o r branches, banking and business data regarding a l l branch c i t i e s , a resume of branch functions and the volume of branch operations, and a review of the 1924 branch survey. The memorandum contained no recommendations as to discontinuing or c u r t a i l i n g any of the branches. I t was pointed out t h a t , with few exceptions, branches had been established i n c i t i e s located a t some distance from t h e i r respective head o f f i c e s and t h a t , excluding c i t i e s which were i n close p r o x i mity to a Federal Reserve c i t y , there were few non-branch c i t i e s i n the United States comparable as to population, loans and investments of member banks, bank debits or manufacturing a c t i v i t y with the c i t i e s i n which branches 53 had been established. I t was stated t h a t "before any d e f i n i t e conclusions are reached as to the circumstances which would j u s t i f y the establishment of a Federal Reserve branch from an economic or public service staadpoiiit" the Board should have more d e f i n i t e information i n regard to banks which were not w i t h i n overnight mail time of a Reserve bank or one of i t s branches and banks which were w i t h i n overnight mail time of more than one Reserve bank or branch. I t was, therefore, recommended t h a t the Reserve banks be requested to furnish the Board with the name, l o c a t i o n , and loans and i n v e s t ments of each member bank which was not w i t h i n overnight mail time from a Federal Reserve bank or one of i t s branches and a set of maps showing by colored l i n e s the boundaries of the t e r r i t o r y i n each d i s t r i c t which was w i t h i n overnight mail time from the Federal Reserve bank and from each branch, i f any. Mr. Smead's memorandum was reviewed by the Board and on A p r i l 22, 1931 (X-6871), a l e t t e r , requesting the suggested a d d i t i o n a l information was sent to a l l Federal Reserve banks. The information was received, analyzed and subsequently presented to the Board on September 23, 1931 (Memo: to Governor Meyer). M r . Smead As shown i n t h a t memorandum there were a t t h a t time 695 member bank points, having t o t a l loans and investments of $403,000,000 which were not w i t h i n overnight mail time of a Federal Reserve bank or branch. This represented 9.9 per cent of the t o t a l number and about 1 . 2 per cent of the aggregate loans and investments of a l l member banks. About 95 per cent of these member bank points were towns of less than 5,000 population? the e n t i r e group being c l a s s i f i e d as follows: 54 Population Number of Towns 164 211 125 91 68 25 9 4 695 Less than 500 500 to 1,000 1,000 t o 1,500 1,500 t o 2,500 2,500 t o 5,000 5,000 to 10,000 10,000 to 25,000 25,000 to 40,000 I t was s t a t e d t h a t because o f poor toxin service many towns i n close p r o x i m i t y t o a Federal Reserve c i t y d i d n o t have o v e r n i g h t n a i l s e r v i c e * On the other hund, based on i n f o r m a t i o n which was f u r n i s h e d by the A t l a n t a and Kansas C i t y Reserve Banks, i t was shown t h a t i n such d i s t r i c t s a subs t a n t i a l number o f member banks were w i t h i n o v e r n i g h t m a i l time o f from two to f i v e Federal Reserve c i t i e s . I t does n o t appear t h a t any d e f i n i t e p o l i c y i n regard to branches wxs f o r m u l a t e d by the Board, or t h a t a c t i o n was taken t o d i s c o n t i n u e any s p e c i f i c branch, as a r e s u l t o f t h i s survey. REVIEW OF BRANCHES BY BOARD1S FIELD EXAMINER - 1955. On or about May 1, 1955, Mr. James (Board member) addressed a memorandum to the Secretary o f the Board expressing the view t h a t something should be done about the problem o f useless branches. As a r e s u l t , Mr. Drinnen, then i n charge o f the Board's examination f o r c o on the road, was asked t o i n c l u d e i n r e p o r t s ox examination of Federal Reserve banks comments as to the s e r v i c e s rendered by the v a r i o u s branches and the n e c e s s i t y f o r t h e i r continuance. A resume o f the comments appearing i n such r e p o r t s r e g a r d i n g a l l branches, except Helena, w i l l be found i n p a r t throe o f t h i s memorandum. The o p e r a t i o n s the Helena Branch were n o t reviewed by the Board's examiners, since the Board had a l r e a d y requested the Minneapolis Reserve Bank 55 to survey the o p e r a t i o n s o f t h a t branch and to r e p o r t on the n e c e s s i t y f o r i t s continuance. The memorandum submitted i n regard to the Helen* Branch wa$ c i r c u l a t e d among the members o f the Board and was discussed at a Board meeting on December 12, 1934, w i t h the f o l l o w i n g r e s u l t , as shown by the minutes: "Governor Eccles mentioned the q u e s t i o n o f the d i s c o n tinuance o f the Helena branch o f the Federal Reserve B^nk o f Minneapolis which has been h e l d on the docket w i t h o u t a c t i o n since October 25, 1933, and he stated t h a t he f e l t t h a t the present i s an inopportune time to A&ve c o n s i d e r a t i o n to steps looking toward the discontinuance o f a branch o f a Federal reserve bank. "Mr. Hamlin moved t h a t the matter be l a i d on the t a b l e . Carried." A d i s c u s s i o n o f subsequent developments r e g a r d i n g the Helena Branch i s a l s o i n c l u d e d i n p a r t three o f t h i s memorandum under "Helena Branch". In 1937 the Board approved, an expenditure by the F e d e r a l Reserve Bank o f Minneapolis f o r the c o n s t r u c t i o n o f a new b u i l d i n g f o r the Helena Branch, which a c t i o n may perhaps i n d i c a t e t h a t no f u r t h e r c o n s i d e r a t i o n w i l l , at l e a s t f o r the time being, be given t o the matter o f the discontinuance o f the branch. SURVEY OF BRANCHES MADE BY RESERVE BANKS IK 1956. The Board's l e t t e r o f March 25, 1936 (X-9532), addressed to the Chairman o f .all Federal Reserve banks, r e q u e s t i n g a thorough survey o f t h e i r o r g a n i z a t i o n s i n the i n t e r e s t of economy and e f f i c i e n c y , contained the f o l l o w i n g s t a t e ment i n r e g a r d to branches: "• I n making these s t u d i e s i t i s i m p o r t a n t t h a t c a r e f u l thought be given to the o p e r a t i o n s now handled by branches o f Federal Reserve banks w i t h p a r t i c u l a r r e f e r e n c e t o the necess i t y f o r the branches. I f the branches are considered necessary a review o f t h e i r operations should be made t o determine whether any o f the o p e r a t i o n s now b e i n g handled by them could be t r a n s f e r r e d t o the head o f f i c e a t a s u b s t a n t i a l saving i n o p e r a t i n g cost and w i t h o u t i m p a i r i n g the services which the System i s now r e n d e r i n g t o member banks and through them to commerce, i n d u s t r y and a g r i c u l t u r e . " The q u e s t i o n o f branches was also discussed a t the Conference of P r e s i d e n t s , held i n Washington on May 26, 1936, and i t was voted " t h a t each Reserve bank having branches or agencies make a separate r e p o r t t o the Board o f Governors expressing i t s views on t h i s s u b j e c t . " I n accordance w i t h the Board* s l e t t e r and t h i s r e s o l u t i o n , the Federal Reserve banks have submitted statements, some i n much g r e a t e r d e t a i l than o t h e r s , r e l a t i n g t o each of t h e i r branches. D e t a i l e d comments as t o the conclusions each hank reached w i l l bo found i n p a r t three : f t h i s memorandum and s u f f i c e i t to say a t t h i s p o i n t t h a t none o f the Federal Reserve banks having branches d e f i n i t e l y recommended a t t h a t timo t h a t any of i t s branches be d i s c o n t i n u e d , a l t h o u g h c e r t a i n o f the Reserve banks f e l t t h a t expenses could be somewbxt reduced by c o n v e r t i n g them t o "memorandum plan" branches w h i l e o t l i e r Reserve banks i n d i c a t e d t h a t they would be w i l l i n g to g i v e cons i d e r a t i o n to the discontinuance o f c e r t a i n o f t h e i r branches p r o v i d e d t h a t , as a System p o l i c y m a t t e r , other bronchus comparably s i t u a t e d and of equal importance, were a l s o d i s c o n t i n u e d . 57 PART I I I CURRENT STATISTICAL DATA AND COMMENTS IN CONNECTION WITH THE OPERATION OF EACH OF THE BRANCHES, AGENCIES AND CURRENCY FUNDS BUFFALO BRANCH - FEDERAL RESERVE BANK OF NEW YORK (a) C i t y o f B u f f a l o B u f f a l o , w i t h a p o p u l a t i o n o f 575,076, i s t h e t h i r t e e n t h l a r g e s t c i t y the United States and t h e second l a r g e s t c i t y i n New York S t a t e . in I t i s located i n t h e extreme western p a r t o f the S t a t e , on Lake E r i e , and i s s a i d t o serve a t r a d e area having a r a d i u s o f 45 m i l e s . Twelve r a i l r o a d s , i n c l u d i n g a l l o f the l a r g e r n o r t h e a s t e r n roads, have t e r m i n a l s i n the c i t y and i t i s a l s o served by a number o f n a v i g a t i o n l i n e s and s e v e r a l n a t i o n a l a i r l i n e s . The B i e n n i a l Census o f Manufactures shows t h a t E r i e County, i n which B u f f a l o i s l o c a t e d , had 1,217 manufacturing establishments which had an output valued a t $609,559,000 d u r i n g t h e year 1955. The p r i n c i p a l manufactures were automobiles, automobile p a r t s , f l o u r and g r a i n products, i r o n and s t e e l , machinery and c a s t ings , chemicals, t e x t i l e s and f u r n i t u r e . ing. There was also considerable meat pack- According t o the Census of American business t h e r e were i n t h e same area 10,666 r e t a i l and 953 wholesale establishments which enjoyed sales aggregating $244,905,000 and $565,049,000, r e s p e c t i v e l y , d u r i n g the year 1935. Banking f a c i l i t i e s i n B u f f a l o as o f December 51, 1956, were p r o v i d e d by f o u r S t a t e banks, two n a t i o n a l banks, t h r e e mutual savings banks and one i n d u s t r i a l bank. These i n s t i t u t i o n s had deposits aggregating $556,553,000, as o f December 31, 1936, and o f t h i s amount $322,958,000 was c a r r i e d w i t h f i v e l o c a l member banks. The bulk of the commercial banking business o f t h e c i t y i s done by t h r e e r e l a t i v e l y l a r g e State member banks, each of wnicli has a number o f branches. Debits t o i n d i v i d u a l accounts i n banks of the c i t y aggregated |2,985,354,000 d u r i n g the year 1956, o r approximately $10,000,000 f o r each banking day. (b) Branch T e r r i t o r y and F u n c t i o n s : The B u f f a l o Branch was e s t a b l i s h e d May 15, 1919, and serves the ten most w e s t e r l y c o u n t i e s i n the S t a t e o f New York. These counties comprise a p p r o x i - mately 15$ o f the l a n d area o f the Second Federal Reserve D i s t r i c t and have approximately 11% o f i t s t o t a l p o p u l a t i o n . Approximately 12% o f a l l banks i n the Second D i s t r i c t ore w i t h i n t h i s area. As o f December 31, 1956, t h e r e were 128 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and of t h i s number 70, i n c l u d i n g 47 n a t i o n a l and 25 S t a t e i n s t i t u t i o n s , were members o f the System. The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared to those o f the Second D i s t r i c t as a whole: No. Member Banks Second D i s t r i c t B u f f a l o Zone 789 70 Loans and Investment §11,850,881 482,540 Capital and Surplus t (000 omitted) &L,703,341 65,049 Total Deposits $14,801,487 552,197 There are o n l y f o u r branch zones i n the e n t i r e System having l a r g e r member bank* f o o t i n g s then the B u f f a l o zonej namely, Los Angeles, P i t t s b u r g h , D e t r o i t and Cincinnati. The B u f f a l o Branch renders s u b s t a n t i a l l y the same s e r v i c e to member banks i n i t s t e r r i t o r y as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and loans to member banks are concerned. The reserve accounts o f member banks i n the branch zone are maintained a t the Branch. However, c o n t r o l accounts f o r a l l Branch operations are c a r r i e d on the books o f the Head O f f i c e ; the Branch m a i n t a i n i n g o n l y a memorandum general l e d g er. The Branch m a i n t a i n s no non-banking departments such as Bank Examination, Bank R e l a t i o n s , L e g a l , Research or F i s c a l Agency departments, although c e r t a i n o f such f u n c t i o n s are performed a t the Branch f o r the Head O f f i c e , As o f March 20, 1957, member banks i n the branch aone had balances w i t h the Reserve bank as f o l l o w s : Number o f Banks City of Buffalo Remainder o f Zone Total 5 65 70 Reserve Balances Deferred Balances Capital Stock $55,977,100 24,240,200 $58,217,500 #5,081,500 2,225,100 $5,506,400 $1,097,700 856,100 $1,955,800 Bills Discounted B u f f a l o i s 456 t r a i n m i l e s (9 h r s . - 45 mins.) from New York C i t y . $ 21,000 $21,000 On any business day t r a i n s l e a v e B u f f a l o a t 7 P.M. or l a t e r which a r r i v e i n New York a t or before 8 A.M. on the succeeding day, i . e . , o v e r n i g h t m a i l time. There are twelve branch c i t i e s nearer t o t h e i r r e s p e c t i v e head o f f i c e s than i s B u f f a l o and a l l o f such c i t i e s are w i t h i n o v e r n i g h t m a i l time o f such head o f f i c e s . Outstanding examples are P i t t s b u r g h (158 m i l e s - 5 h r s . and 20 m i n s . ) , B a l t i m o r e (157 m i l e s 4 h r s . and 21 mins.) and Birmingham (168 m i l e s - 5 h r s . and 50 mins.). The New York Reserve Bank advises t h a t banks i n the branch zone, o t h e r than those l o c a t e d i n B u f f a l o and i t s immediate v i c i n i t y , d e a l w i t h the Branch by m a i l and t h a t under normal c o n d i t i o n s such banks would n o t be s e r i o u s l y i n convenienced by discontinuance o f the Branch, since they are a l s o w i t h i n o v e r n i g h t m a i l time from New Y o r k . I t i s apparent t h a t discontinuance o f the Branch would c u r t a i l the s e r v i c e rendered to banks l o c a t e d i n and near B u f f a l o . These banks now have an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch i n s o f a r as d e p o s i t s and withdrawals o f c u r r e n c y , w i r e t r a n s f e r s and borrowings are concerned and would have to adapt t h e i r present p r a c t i c e s t o a new s i t u a t i o n under which o v e r - n i g h t m a i l communication w i t h the Head O f f i c e would be necessary. .61 While there are ten c i t i e s i n the Second D i s t r i c t , other than Buffalo and New York, with a population of over 100,000, only one such c i t y , Rochester, i s w i t h i n the Buffalo Branch zone. Rochester had a population of 328,132 and i s 66 t r a i n miles (2 hrs. 33 rains.) from Buffalo and 370 t r a i n miles (7 h r s . ) from New York. Other r e l a t i v e l y large c i t i e s i n the Buffalo zone are Niagara F a l l s and Jamestown with populations of 75,000 and 45,000 respectively, (c) Branch Building: The Buffalo Branch has occupied i t s present quarters a t 270-276 Main S t r e e t , since May 1928. The following figures show the o r i g i n a l cost and the carrying value, as of March 20, 1937, of the branch premises: Book Value 3-20-37 Cost Land $255,000(*) Building, v a u l t & v a u l t equipment 720,707 143.826 £864.553 Furniture and other equipment $255,000 198.950 453,950 8455.950 ( * ) Estimated value, remainder of purchase p r i c e included i n cost of building. (d) Earnings - Branch's Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 to 1937, i n c l u s i v e , were as follows: Year Earnjings 1931 1932 1933 1934 1935 1936 1937 $192,600 487,900 240,300 41,300 2,600 1,700 2,900 These f i g u r e s are incomplete since, tinder the present accounting proc-adure, the Branch does not receive any c r e d i t f o r income received by the Head O f f i c e .62 on investments, a p o r t i o n of which i s made p o s s i b l e by the c a p i t a l stock i n vestment and reserve balances o f banks i n the branch zone. The amount o f income shown on the books o f the Branch depends almost e n t i r e l y on the e x t e n t o f borrowing by member banks i n the branch zone. Income from t h i s source amounted to $479,100 i n 1932, whereas i t was only $1,400 i n 1937. (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f New York, as o f March 20, 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the B u f f a l o Branch: March 20, 1937 Number Amount Officers Employees 4 122 126 £ 33,500 180,914 6214,414 January 4 . 1936 Number Amount 4 127 131 $ 32,900 189,874 $222,774 Decrease Number Amount 5 5 § 600 ( I n c . ) 8,960 £8,560 .63 ( f ) Branch Expense by Functions: The expenses of the Buffalo Branch by functions during the past six years, as shown i n Functional Expense Reports, were as follows: 1952 General Overhead Controllable $ 28,054 Non-con t r o l l a b l e 32,246 Provision of space 46,358 Provision of Personnel 8,172 General. Service 42,604 Postage 21,649 Insurance 2,972 Loans, rediscounts,etc. 15,451 7,913 Securities Currency & Coin 42,456 Check c o l l e c t i o n 44,874 Non-cash collections 14,525 Accounting 51,139 F i s c a l Agency 2,533 — Legal Auditing 3,466 Bank Relations 1,657 Bank Examinations 17 S t a t i s t i c a l & Analyt-'l 322 Total Expense $346,368 Less - Reimbursable Fiscal Agency Exp. Net Expense £346,568 1955 $ 27,427 40,802 47,708 7,716 43,644 22,520 3,040 16,718 8,036 41,951 46,073 14,227 30,437 2,478 1954 1955 1956 1957 $ 27,617 224 46,178 45,366 49,072 23,291 958 7,921 7,055 78,971 42,083 16,201 32,285 8,952 5,889 5,209 11 546 $560,252 $ 27,701 $ 27,511 37,643 211 44,895 46,242 24,597 55,560 48,815 55,505 23,184 25,271 1,879 1,543 13,711 13,682 9,238 7,484 81,997 42,843 42,238 42,056 15,230 14,581 30,850 35,705 5,179 11,885 — 505 5,125 6,471 2,574 2,055 5 16 571 582 $572,699 $401,595 560 $595,251 5,480 1,562 34 535 $559,511 £560,252 £572,699 587 £592,844 556 £558,755 - £401,595 - 5,222 1,497 — $ 27,860 212 54,988 11,871 49,846 21,621 788 7,775 5,879 77,180 42,758 14,790 29,458 8,898 - There were f i v e branches i n the System which operated a t a higher aggregate annual cost than the Buffalo Branch i n 1957; namely, Pittsburgh, Eos Angeles, Baltimore, Cincinnati and D e t r o i t . However, viewed as a whole the operations performed a t each of these branches were i n l a r g e r volume. (g) Volume of Operations a t Buffalo Branch: The following i s a comparison of the volume of operations i n various departments of the Buffalo Branch and the Head O f f i c e during the l a s t six months of 1936: .64 B u f f a l o Branch Discount Department: Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches with l a r g e r volume: Head O f f i c e 1,230 27 702 157 Denver, Omaha, San Antonio and E l Paso. Safekeeping: Member bank securities 12-31-36 02,673,000 $839,135,000 Branches with larger volume: Cincinnati, Pittsburgh, Baltimore, Jacksonville, Nashville, New Orleans, D e t r o i t , L i t t l e Rock, L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha, Houston and San Antonio. Currency & Coin: 1 . Number of b i l l s received and counted 18,132,000 305,069,000 Branches with larger volume: Pittsburgh, Baltimore, Detroit and Los Angeles Cost per one thousand units handled 65 cents 63 cents Branches with higher u n i t cost: Cincinnati, Helena, Denver, E l Paso, Portland, S a l t Lake City and Spokane. 2. Number of coins received and counted 18,594,000 506,649,000 Branches with l a r g e r volume: Cincinnati, Pittsburgh, Baltimore and Los Angeles. Cost per one thousand units handled 11 cents 11 cents Branches with higher u n i t cost: A l l branches have a higher u n i t cost except Baltimore, New Orleans, Memphis and Oklahoma City. Check Collection: 1. Number of c i t y checks (clearings) received 2,043,000 32,032,000 Branches with larger volume: Pittsburgh, Baltimore, D e t r o i t and Los Angeles Cost per one thousand u n i t s handled 01.86 $3.05 Branches with higher u n i t cost: L o u i s v i l l e , Helena, Denver, Oklahoma C i t y , E l Paso, Houston, Los Angeles, S e a t t l e , S a l t Lake C i t y , Spokane and Portland. 2. Number of country checks (outgoing) received 4,206,000 46,806,000 Branches with larger volume: Cincinnati, Pittsburgh, Baltimore-, D e t r o i t , L o u i s v i l l e , Oklahoma C i t y , Omaha and Los Angeles Cost per one thousand units handled 02.91 $2.82 Branches with higher u n i t cost: Los Angeles, Portland and Seattle. Non-cash Collections 1. Number of c i t y collections handled 17,142 37,843 Branches with larger volume: Baltimore, D e t r o i t , L i t t l e Rock, Memphis, Omaha and Los Angeles. Cost per u n i t handled 17.6 cents 32 cents Branches with higher u n i t cost: Cincinnati, Pittsburgh, D e t r o i t , Los Angeles, Portland and S e a t t l e . B u f f a l o Branch Head O f f i c e 2. Number o f country c o l l e c t i o n s handled 22,755 477,035 Branches w i t h l a r g e r volume: S a l t Lake C i t y and Spokane. Cost per u n i t handled 1 6 . 1 cents 7.8 cents Branches w i t h higher u n i t c o s t : N a s h v i l l e , Los Angeles and P o r t l a n d . 3. Number o f coupon (except Government) and country s e c u r i t y c o l l e c t i o n s handled 5,106 551,736 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t , Omaha and Los Angeles. Cost per u n i t handled 13.5 cents 7.7 cents Branches w i t h higher u n i t c o s t : C h a r l o t t e , J a c k s o n v i l l e , D e t r o i t , L o u i s v i l l e , Memphis, Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume o f operations of the B u f f a l o Branch f o r the years 1931 to 1936, i n c l u s i v e , i s attached to t h i s memorandum. (h) Survey o f B u f f a l o Branch by Board 1 s Examiners - 1953. During the course o f an examination of the Federal Reserve Bank of New York, made as o f May 27, 1933, the Board 1 s F i e l d Examiners reviewed the operat i o n s o f the B u f f a l o Branch w i t h a view to expressing an opinion as to the n e c e s s i t y f o r i t s continuance. The r e p o r t of t h a t examination contains the f o l l o w i n g comment: "The B u f f a l o branch i s one o f the seven l a r g e s t branches i n the System ( s i x t h i n number of employees), and, i n the opinion o f your examiner, i t s continuance appears j u s t i f i e d i n view o f the importance o f the branch c i t y and t e r r i t o r y and the volume o f operations handled as compared w i t h s i m i l a r i n dices f o r other Federal reserve branch banks." ( i ) Survey o f B u f f a l o Branch made by Federal Reserve Bank of New York 1956. As requested i n the Board's l e t t e r o f March 25, 1936 (X-9532) the Federal Reserve Bank o f New York c a r e f u l l y reviewed the operations o f i t s B u f f a l o Branch. Based on o p e r a t i n g costs of $401,000 f o r the year 1955, i t was e s t i - mated t h a t a n e t saving of 0215,000 per annum would r e s u l t i f a l l branch 66 operations were transferred to the Head O f f i c e ; that t h i s saving would be increased to $233,000 per annuo i f the branch building were immediately d i s posed o f , since t h i s would eliminate carrying charges on the building, esti- mated to be about $18,000 per year; and that an a d d i t i o n a l $30,000 per annum might be saved i f a currency s t a t i o n (which would reduce the expense of currency shipments) were established i n Buffalo, making an estimated saving of $245,000 per annum i f the building were retained, or $263,000 per annum i f were disposed o f . it Relative to the l a t t e r estimate, i t was stated the establish- ment of a currency station would not be advocated u n t i l a broader survey, developing the extent to which other c i t i e s i n the d i s t r i c t might demand s i m i l a r service as a r e s u l t of such action, had been conducted. I t was admitted that operation of the Branch was of m a t e r i a l benefit under normal conditions to banks located i n and near the C i t y of Buffalo and that i n times of emergency banks i n outlying sections of the zone, such as i n Rochester, would f i n d i t s existence advantageous* The conclusion was reached, however, that discontinuance of the Branch would not seriously i n t e r f e r e with the service being rendered to member banks i n the d i s t r i c t , and, through them to commerce, industry and a g r i c u l t u r e . I t was pointed out that a strong protest could be expected from member banks i n the zone, p a r t i c u l a r l y i n Buffalo, i f i t became known that d i s continuance of the Branch was seriously contemplated. I n t h i s connection, attention was called to the f a c t that banks i n the Buffalo area have never been p a r t i c u l a r l y enthusiastic about the Federal Reserve System; t h a t p r i o r to the establishment of the Branch very few State i n s t i t u t i o n s i n such area were members; and t h a t any attempt to discontinue the Branch would revive whatever l a t e n t prejudices s t i l l existed i n the area and possibly lead to some .67 withdrawals from membership. I t was s t a t e d t h a t t h i s would be e s p e c i a l l y t r u e i f comparable branches i n o t h e r d i s t r i c t s were n o t d i s c o n t i n u e d . For t h i s reason i t was s t a t e d t h a t discontinuance o f t h e B u f f a l o Branch would be f a v o r e d only i f , as a matter o f System p o l i c y , o t h e r comparable branches i n the Sty-stem were d i s c o n t i n u e d a t the same time. The f o l l o w i n g observations were made concerning the a d o p t i o n o f a u n i f o r m System p o l i c y : * *We assume t h a t savings c o u l d be e f f e c t e d i n conn e c t i o n w i t h p r a c t i c a l l y a l l branches o f Federal r e s e r v e banks which would be comparable w i t h the f i g u r e s c i t e d above f o r the B u f f a l o Branch. We a l s o assume t h a t , as a p r a c t i c a l m a t t e r , the o n l y banks m a t e r i a l l y b e n e f i t i n g from the operat i o n o f such branches are the banks l o c a t e d w i t h i n the branch c i t i e s , and t h a t , i n most i n s t a n c e s , the banks i n t e r r i t o r y o u t s i d e o f the branch c i t i e s do n o t b e n e f i t m a t e r i a l l y , by reason o f the e x i s t e n c e o f the branches, unless they are more than o v e r n i g h t m a i l time from the head o f f i c e c i t i e s o f t h e i r d i s t r i c t s . Broadly speaking, i t would seem t o u s , t h e r e f o r e , t h a t i f a new p o l i c y i s t o be adopted w i t h r e s p e c t t o branches o f Federal reserve banks i t should be a u n i f o r m System p o l i c y , and probably ought t o be based upon the continuance, except i n s p e c i a l circumstances, o f o n l y those branches which are more than approximately t w e l v e . h o u r s m a i l time from the head o f f i c e . If such a p o l i c y can be adopted f o r the System as a whole, we would recommend t h a t the B u f f a l o Branch o f t h i s bank be d i s c o n t i n u e d as a p a r t of such program." .68 BUFFALO BRANCH VOLUME OF OPERATIONS Currency Received Bills and Co in Received and Checkst Handled Gov»t Non Cash Collection items All Gov't Fiscal Agency Transfer of Coupons m&r Oirect JEuate Other tomin. Checks 3,832,000 9,269,000 283,000 13,38**,000 1*8,810 107,353 539 - 2f,72** 29,3f1,000 **,0(6,000 7,517,000 262,000 11,795,000 59,660 II**,80** 517 - I7,9**9 37,176,,000 36,1*09,000 3 , 37**, 000 6,**3I,000 299,000 10,10**, 000 67,**3** 95,**82 H85 - 15,225 512 39,569,000 31,233,000 3,382,000 6,816,000 848,000 11,0**6,000 78,233 86,13*1 **,769 70 12,871 1935 112 39,518,000 36,561,000 3,7*»7,000 7,**32,000 357,000 f1,536,000 H 3,000 89,000 10,788 682 12,366 1936 67 37,703,000 36,009,000 **,**0**,000 8,067,000 **70,000 12,9** 1,000 85,000 89,000 1,273 **8** 1I,000 fiiie Hntmtei 193) **,I3** **3,585,000 35,939,000 1932 k,3S7 **0,2**9,000 1933 2,366 193*1 Pa. w f c t s L . S i i i l a l i i ^ ^ t f f . l t a u t t a d ( i n thousands G& of do 1i ars) 1931 1*76,888 23t,22** 3,569 1,6**6,797 687,313 1*8,90** 2,383,0!** 1,1*03 52,3t** 1,089 m 2,021,968 1932 821,129 209,53f 2,671 l,2**9,783 **90,200 33,** I1* 1,773,397 1,876 *»7,18** 1,719 - !,2**5,185 1933 **57,527 203,398 3,157 1,263,059 **67,557 3**, 139 1,76**, 755 2,379 35,9**6 630 - 1,183,810 193*1 6**, 712 185,516 3,325 I,****0,I28 580,025 50,509 2,070,662 2,7**8 37,173 2,1**** 133 830,597 1935 **,630 181,935 3,326 1,523,**I0 67**,0**5 **8,77t 2,2**6,226 3,55** ****,297 6,733 **H6 896,**07 1936 3,29** 16*1,125 3,1*11 1,709,371 792,053 6**, 637 2,566,061 2,90** 55,608 308 391 933,8**9 CURRENCY FUND. SCRAM TON, PA, - FEDERAL RESERVE BANK OF PHILADELPHIA (a) C i t y o f Scranton Scranton, w i t h a p o p u l a t i o n o f 143,433, i s t h e f i f t y - f i f t h l a r g e s t i n t h e U n i t e d States and the t h i r d l a r g e s t c i t y i n Pennsylvania. city I t i s located i n the n o r t h e a s t e r n p a r t o f t h e S t a t e on the Lackawanna R i v e r and i s s a i d t o serve a t r a d e area extending approximately t w e n t y - f i v e m i l e s i n a l l d i r e c t i o n s . T r a n s p o r t a t i o n f a c i l i t i e s are provided by f i v e r a i l r o a d s , i n c l u d i n g the E r i e , Delaware & Hudson and the Delaware-Lackawanna & Western, and a l s o by a number o f motor coach l i n e s and a i r lines. Scranton i s the center o f the g r e a t e s t a n t h r a c i t e coal r e g i o n i n the United S t a t e s ; mines honeycombing the c i t y and surrounding t e r r i t o r y . are a l s o l a r g e s i l k , c o t t o n and woolen m i l l s o p e r a t i n g i n the c i t y . There According t o the B i e n n i a l Census o f Manufactures f o r t h e year 1935 t h e r e were 287 manuf a c t u r i n g establishments l o c a t e d i n Lackawanna County, i n which Scranton i s s i t u a t e d , which had an output valued a t $43,171,193 and p a y r o l l s $11,687,557 d u r i n g t h e y e a r . totaling The Census o f American Business l i s t s 4,290 r e t a i l and 293 wholesale concerns i n the same area. These f i r m s enjoyed s a l e s , aggregating $78,.020,000 and $50,306,000, r e s p e c t i v e l y , d u r i n g 1935. Banking f a c i l i t i e s i n Scranton are provided by seven S t a t e nonmember banks, t h r e e n a t i o n a l banks and one t r u s t company. As o f December 31, 1936, these i n s t i t u t i o n s had d e p o s i t s aggregating $105,241,000 and o f t h i s amount $90,042,000 was c a r r i e d by t h e t h r e e l o c a l member banks. D e b i t s t o i n d i v i d u a l accounts i n banks o f the c i t y amounted t o $554,002,000 d u r i n g t h e year 1936; or an average of approximately $1,847,000 f o r each banking day. (b) Establishment and Operation o f the Fund: I n t h e e a r l y days o f t h e System banks l o c a t e d i n and near Scranton, which were c a l l e d upon t o meet heavy p a y r o l l s , were f r e q u e n t l y embarrassed by the l a t e a r r i v a l o f currency shipments from t h e Federal Reserve Bank o f P h i l a d e l p h i a due t o poor r a i l connections between the two c i t i e s . As a r e s u l t t h e r e was a r a t h e r i n s i s t e n t demand f o r t h e establishment o f a branch o f the Reserve bank a t Scran t o n . I n an e f f o r t t o remove the cause o f complaint and thus f o r e s t a l l demands f o r a branch, the Reserve bank, w i t h t h e Board's a p p r o v a l , on January 23, 1922, deposited $1,000,000 i n the custody o f the F i r s t N a t i o n a l Bank o f Scranton t o take care o f delayed shipments o f currency. A f t e r the establishment o f the fund any member bank i n Scranton or i t s immediate v i c i n i t y , whose currency shipment f a i l e d t o a r r i v e on t i m e , might withdraw from the fund an amount equal t o the a n t i c i p a t e d shipment and reimburse t h e fund when the shipment a r r i v e d . The o r i g i n a l fund proved successful and on October 9 , 1923, a new agreement was drawn up i n c r e a s i n g i t t o $2,000,000 and broadening i t s scope. The p r i v i l e g e s o f the f u n d , both o f d e p o s i t and w i t h d r a w a l , were extended t o a l l member banks i n Scranton and i t s v i c i n i t y , i n c l u d i n g banks i n such c i t i e s as Wilkes-Barre and P i t t s t o n , Pennsylvaniaj however, i t i s r e p o r t e d t h a t o n l y the t h r e e member banks i n Scranton now use t h e fund. The F i r s t N a t i o n a l Bank o f Scranton, as c u s t o d i a n , assumes a l l l i a b i l i t y f o r l o s s , except on shipments t o and from the Reserve bank, and has pledged r e a d i l y marketable s e c u r i t i e s w i t h a v a l u e i n excess o f $2,000,000 w i t h t h e Reserve bank as s e c u r i t y . The currency on hand i n Scranton i s considered a p a r t o f t h e cash balance o f t h e Reserve bank and i s k e p t under d u a l c o n t r o l o f o f f i c e r s o f the F i r s t N a t i o n a l Bank i n c e r t a i n s p e c i f i e d compartments i n i t s v a u l t , s u b j e c t t o examination a t any time by examiners f o r the Board, the Comptroller o f t h e Currency, o r t h e Reserve bank. Operations o f the .71 fund are l i m i t e d s t r i c t l y t o currency t r a n s a c t i o n s , which are r e p o r t e d t o the Reserve bank d a i l y by telephone and entered on i t s books receipts or w i t h - drawals b e i n g charged o r c r e d i t e d , as the case may be, t o the reserve accounts o f the member banks i n v o l v e d . The F i r s t N a t i o n a l Bank has a u t h o r i t y t o s i g n f o r the Reserve bank i n a l l t r a n s a c t i o n s a f f e c t i n g the f u n d , b u t withdrawals can be made o n l y w i t h the approval o f the Reserve bank, (c) A c t i v i t y o f the Fund: The f o l l o w i n g schedule 3hows the e x t e n t t o which the fund has been used i n recent y e a r s : Movement Of Currency Between Scranton Movement Of Currency Between Federal Reserve Bank and Scranton Year Deposits Withdrawals Shipped t o Fund 193S 1954 1935 1956 1937 #10,764,000 11,506,900 9,652,000 10,628,000 9,765,000 $28,446,000 53,957,400 28,728,000 26,807,000 26,050,000 $18,100,000 22,645,000 25,415,000 20,655,000 22,950,000 Received from Fund $1,261,000 145,500 4,454,000 6,550,000 6,451,000 (d) Estimated Saving R e s u l t i n g from Operation o f Fund: The f o l l o w i n g f i g u r e s submitted by the Federal Reserve Bank o f P h i l a d e l p h i a i n d i c a t e the estimated saving e f f e c t e d through o p e r a t i o n o f t h e Scranton Currency Fund d u r i n g the year 1937j t h e amount saved i s , o f course, governed by the e x t e n t t o which the fund i s used: Cost A c t u a l cost o f shipping $22,950,000 i n currency from F.R.B. t o Fund $3,901.50 A c t u a l cost o f s h i p p i n g $6,431,000 i n m u t i l a t e d currency from Fund t o F.R.B. 2,250.85 T o t a l cost of Fund Cost o f shipments i f member banks had withdrawn from and deposited w i t h F.R.B. i n s t e a d o f Fund ($35,795,000) Saving on s h i p p i n g Saving on h a n d l i n g T o t a l Saving $6,152.35 $7,842.85 6,152.35 $1,690.50 250.00 $1,940.50 The F i r s t N a t i o n a l Bank o f Scranton assumes the c o s t o f c l e r i c a l work necessary i n h a n d l i n g d e p o s i t s t o and withdrawals from t h e fund. (e) A t t i t u d e o f t h e Federal Reserve Bank o f P h i l a d e l p h i a toward Continuance o f Fund: During an examination o f t h e Federal Reserve Bank o f P h i l a d e l p h i a , made as o f September 19, 1956, t h e Board's Examiners discussed w i t h t h e management the need f o r continuance o f a Currency Fund a t Scranton. On October 10, 1936, A s s i s t a n t V i c e President Donaldson addressed a l e t t e r t o t h e Board* s Examiner o u t l i n i n g t h e b e n e f i t s and savings d e r i v e d from o p e r a t i o n o f t h e f u n d , both by member banks i n Scranton and by the Reserve bank. From the general tenor o f the l e t t e r i t waa apparent t h a t t h e Reserve bank favored continuance o f t h e f u n d , although a d e f i n i t e statement t o t h a t e f f e c t wau n o t made. .73 CINCINNATI BRANCH - FEDERAL RESERVE BAfiK OF CLEVELAND (a) C i t y o f C i n c i n n a t i C i n c i n n a t i , w i t h a p o p u l a t i o n o f 451,160, i s the seventeenth largest J c i t y i n the U n t i e d States and t h e second l a r g e s t c i t y i n Ohio. I t i s located i n the extreme southwestern p a r t o f the S t a t e , on t h e Ohio R i v e r , and serves a t r a d e area which extends SO m i l e s t o the n o r t h , 53 m i l e s south, 62 m i l e s east and 45 m i l e s west. m e t r o p o l i t a n area. There are approximately 1,016,000 i n h a b i t a n t s i n the Nine r a i l r o a d s , o p e r a t i n g nineteen t r u n k l i n e s , serve the c i t y , .including the B. & 0 . , Pennsylvania, Chesapeake & Ohio, E r i e , N o r f o l k & Western and New York C e n t r a l . I n a d d i t i o n t r a n s p o r t a t i o n f a c i l i t i e s are a f - forded by water routes on the Ohio River and by a i r l i n e s . According t o the B i e n n i a l Census o f Manufactures Hamilton County, i n which C i n c i n n a t i i s l o c a t e d , had 1,488 manufacturing establishments i n 1955, which had an o u t p u t valued a t $489,786,000. The c h i e f manufactures were foundry and machine shop products, soap, c l o t h i n g , f u r n i t u r e , e l e c t r i c refrigerators, bread and bakery p r o d u c t s , p l a n i n g m i l l products and copper, t i n and sheet i r o n work. There i s a l s o a s u b s t a n t i a l amount o f meat packing and p r i n t i n g and p u b l i s h i n g c a r r i e d on. According t o the Census o f American Business t h e r e were i n t h e same area 8,686 r e t a i l and 1,446 wholesale establishments which enjoyed sales aggregating $250,778,000 and $513,520,000, r e s p e c t i v e l y , during the year 1955. Banking f a c i l i t i e s i n C i n c i n n a t i as o f December 51, 1956 were provided by eleven S t a t e banks (7 members), f o u r n a t i o n a l banks and one M o r r i s Plan bank. These i n s t i t u t i o n s had d e p o s i t s aggregating $570,244,000, as o f t h a t date and o f t h i s amount $554,609,000 was c a r r i e d w i t h t e n l o c a l member banks m a i n t a i n i n g reserve c i t y balances; t h e r e being one o t h e r R e l a t i v e l y small member bank i n the .74 c i t y which i s a u t h o r i z e d t o c a r r y country bank reserves. Three o f the l a r g e r S t a t e member banks were o p e r a t i n g an aggregate o f f o r t y - s i x branch o f f i c e s w i t h i n the c i t y limits. Debits t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated $4,013,955,000 d u r i n g the year 1936, o r an average o f approximately $13,300,000 f o r each banki n g day. (b) Branch T e r r i t o r y and Functions* The C i n c i n n a t i Branch was e s t a b l i s h e d January 10, 1918, and serves t r a n t y f i v e counties i n southern Ohio and the p o r t i o n of the S t a t e o f Kentucky i n c l u d e d i n D i s t r i c t Four* This t e r r i t o r y represents 40$ o f t h e ' l a n d area o f t h e d i s - t r i c t and has approximately 26% o f i t s t o t a l p o p u l a t i o n . Approximately 29$ o f a l l banks i n the F o u r t h D i s t r i c t are w i t h i n t h i s area® As o f December 31, 1936, t h e r e were 372 banks, e x c l u s i v e o f mutual s a v i i ^ s banks, i n t h e branch zone and o f t h i s number 164, i n c l u d i n g 146 n a t i o n a l and 18 State i n s t i t u t i o n s , were members o f the Federal Reserve System* A l l but 2 o f t h e nonmember i n s t i t u t i o n s i n the branch zone were on the par l i s t * The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n t h e branch zone as compared t o those o f the F o u r t h C i s t r i c t as a whole: Fourth D i s t r i c t Branch Zone No. Member Banks Loans and Investments 627 164 $2,822,103 491,639 Capital and Surplus (000 o m i t t e d ) $427,865 72,543 Total Deposits $3,517,299 641,378 There are o n l y t h r e e branch zones i n the e n t i r e System having l a r g e r bank member f o o t i n g s than t h e C i n c i n n a t i zone^ namely, P i t t s b u r g h , Los Angeles and Detroit. The C i n c i n n a t i Branch i s operated on the "memorandum plan 11 • A l l g e n e r a l ledger accounts, as w e l l as accounts o f member banks, nonmember c l e a r i n g banks .75 and o t h e r Federal Reserve banks, are maintained a t the Head O f f i c e , which a l s o maintains a l l expense r e c o r d s . A t r a n s c r i p t o f a l l e n t r i e s a f f e c t i n g the a c counts o f banks i n the branch zone i s sent t o the Head O f f i c e d a i l y by w i r e * Member banks i n the branch zone may f o r w a r d t h e i r d i s c o u n t o f f e r i n g s e i t h e r t o the Branch or t o the Head Office® O f f e r i n g s r e c e i v e d by the Branch are examined t o see t h a t the paper i s t e c h n i c a l l y i n order and the amount o f each o f f e r i n g i s w i r e d t o the Head O f f i c e * Immediate c r e d i t i s g i v e n where the c o l l a t e r a l c o n s i s t s o f U* S. Government o b l i g a t i o n s * C r e d i t on a l l o t h e r o f f e r i n g s i s d e f e r r e d u n t i l f i n a l approval by t h e Head O f f i c e , b u t upon approval the c r e d i t i s made e f f e c t i v e as o f the date the o f f e r i n g was r e c e i v e d by the Branch. The Branch holds s e c u r i t i e s o f banks i n i t s zone i n safekeeping, b u t has no nonbanking departments such as Bank Examination, Bank R e l a t i o n s , L e g a l , Research o r F i s c a l Agency departments* As o f September 2 , 1937, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : No.of Reserve Banks Balances City of Cincinnati 10 $45,414,424 Remainder o f Zone 157 54.240.555 Total 167 $79.654.957 Deferred Balances $7,855,588 1.270.206 $9.125.794 Capital Stock $1,156,800 1.060.350 $2.217.150 Bills Discounted $509.657 $509.657 C i n c i n n a t i i s 262 t r a i n m i l e s (7 h r s . and 40 mins.) from Cleveland* On any business day t h e r e are s e v e r a l t r a i n s which leave C i n c i n n a t i a t 7 P.M* or l a t e r and a r r i v e i n Cleveland b e f o r e 8 A.M. on t h e succeeding day, i . e . , over- n i g h t m a i l time* There are f o u r branch c i t i e s c l o s e r t o t h e i r r e s p e c t i v e head o f f i c e s than i s C i n c i n n a t i ; namely, P i t t s b u r g h , B a l t i m o r e , Birmingham and Omaha. These c i t i e s a l s o enjoy speedier communication by r a i l w i t h t h e i r head o f f i c e s * I n a l l t h e r e arc f o u r t e e n branch c i t i e s which are as w e l l s i t u a t e d as C i n c i n n a t i from the s t a n d p o i n t o f o v e r n i g h t m a i l between the hours o f 7 P.M. and 8 A.M* I t i s apparent t h a t discontinuance o f the Branch would c u r t a i l the s e r v i c e rendered t o banks l o c a t e d i n and near C i n c i n n a t i . Such banks now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch i n s o f a r as d e p o s i t s and w i t h drawals o f c u r r e n c y , w i r e t r a n s f e r s and borrowings c o l l a t e r a l e d by government bonds are concerned and, i f the Branch were c l o s e d , would have t o d e a l w i t h the Head O f f i c e by m a i l . A study o f the C i n c i n n a t i Branch zone made i n December 1953, d i s c l o s e d t h a t t h e r e were 105 member bank p o i n t s i n the zone and t h a t o n l y 7 o f such p o i n t s were n o t w i t h i n o v e r n i g h t m a i l time o f the Branch, whereas 37 were n o t so s i t u a t e d w i t h r e s p e c t t o the Head O f f i c e . The same s i t u a t i o n u n - doubtedly s t i l l p r e v a i l s and consequently i t may be s a i d t h a t discontinuance o f the Branch would a l s o a f f e c t the type o f s e r v i c e rendered t o a s u b s t a n t i a l number o f banks i n o u t l y i n g s e c t i o n s of the branch zone. Other than Cleveland and C i n c i n n a t i t h e r e are s i x c i t i e s i n Ohio w i t h a p o p u l a t i o n i n excess o f 100,000; namely, Toledo, 290,718; Columbus, 290,564; Akron, 255,040; Dayton 200,982, Youngstown, 170,002 and Canton, 104,906. Only one o f those c i t i e s (Dayton) i s l o c a t e d i n the C i n c i n n z t i Branch zone. There a r e , however, f o u r o t h e r c i t i e s i n the branch zone w i t h a p o p u l a t i o n o f over 50,000; namely, Hamilton and S p r i n g f i e l d , Ohio, and Covington and L e x i n g t o n , Kentucky. One o r more member banks are l o c a t e d i n each o f these l a r g e r branch zone c i t i o s . (c) Branch B u i l d i n g : The C i n c i n n a t i Branch occupies q u a r t e r s i n t h e Chamber o f Commerce B u i l d i n g a t the corner o f 4 t h and Race S t r e e t s a t an annual r e n t a l o f $60,000 under a loase which does n o t e x p i r e u n t i l 1952® The l a n d upon which t h i s b u i l d i n g stands was purchased as a s i t e f o r a branch b u i l d i n g , b u t was subsequently leased f o r a p e r i o d o f 99 y e a r s , renewable f o r e v e r , v / i t h an o p t i o n t o purchase a t $600,000, t o the Chamber o f Commerce a t $30,000 per annum. The branch q u a r t e r s were remodeled and equipped by the Branch, a t i t s expense, and have been occupied since January 5, 1928. The f o l l o w i n g f i g u r e s r e f l e c t the o r i g i n a l c o s t and the c a r r y i n g v a l u e , as o f September 2 , 1957, o f the Branch's investment i n the premises: Cost Land A p p r e c i a t i o n based on lease Quarters F i x e d machinery & equipment Total $380,744 ^380,744 262,455 89.241 $752.420 Book v a l u e 9-2-57 $267,000 355«000 $600,000 150,074 2.975 $755.049 Hie Federal Reserve Bank o f Cleveland advises t h a t the r e n t which i s p a i d t o the Chamber o f Commerce by the Branch i s a v e r y i m p o r t a n t f a c t o r in the o p e r a t i o n s o f t h a t o r g a n i z a t i o n , which has had considerable d i f f i c u l t y meeting i t s requirements f o r i n t e r e s t and overhead. For t h i s reason i t in is f e l t t h a t some l o s s would bo i n c u r r e d i n c a n c e l l i n g the Branch 1 s l e a s e , i n the event the Branch were d i s c o n t i n u e d , and t h a t the s i t u a t i o n would be f u r t h e r complicated i f the Chamber o f Commerce was unable to f u l f i l l the terms o f i t s lease on the l a n d . I n a d d i t i o n , i t i s p o i n t e d o u t t h a t the v a u l t , f i x e d machinery and equipment used by the Branch could n o t bo s o l d r e a d i l y and consequently would have p r a c t i c a l l y no v a l u e . (d) Earnings - Branch Bookps No r e c o r d o f earnings i s maintained a t the C i n c i n n a t i Branch as i t is operated on the "memorandum p l a n " , (o) Branch Personnel: The r e p o r t o f examination o f t h e Federal Reserve Bank o f Cleveland, as o f September 2, 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the C i n c i n n a t i Branch: .78 Septenber 2 . 1957 Nunber Amount Officers Eaployees 4 142 146 §23,300 221.000 0244.300 August 29. 1956 Nunber Anount 4 135 139 0 23,700 212.200 0235.900 Increase Nuiuber Anount - 7_ 7 0 400(deca} 8.800 $8.400 O f f i c e r s and employees whose s a l a r i e s and wages are r e i r i b u r s a b l e are n o t i n c l u d e d i n the above f i g u r e s . N e i t h e r does the above t a b l e i n c l u d e f i v e en- ploy ees, w i t h annual s a l a r i e s t o t a l i n g 06,570, who l e f t the s e r v i c e o f t h e Branch p r i o r t o August 29, 1936, b u t who were then r e c e i v i n g d i s n i s s a l wages, ( f ) Branch Expense by F u n c t i o n s : The expenses o f t h e C i n c i n n a t i Branch by f u n c t i o n s d u r i n g the p a s t s i x y e a r s , as shown i n F u n c t i o n a l Expense Reports, were as f o l l o w s : 1932 1933 0 20,876 $ 21,720 Controllable 28,869 20,047 Non-controllable 73,990 104,487 -^Provision o f space 7,816 7,793 P r o v i s i o n o f personnel 71,449 68,032 General Service 17,591 20,819 Postage 4,867 5,359 Insurance 3,822 3,722 Loans, r e d i s c o u n t s , e t c . 4,480 4,182 Securities 51,008 52,402 Currency & c o i n 69,527 65,736 Chock c o l l e c t i o n 11,951 10,561 Non-cash c o l l e c t i o n s 27,628 28,710 Accounting 4,612 5,100 F i s c a l Agency Legal 6,113 6,944 Auditing Bank R e l a t i o n s 0 26 F.R. Note Issues 140 169 Statistical & Analytfl $420,769 0409,767 T o t a l Expense Less - Reinbursable — — F i s c a l Agency Expense 0420.769 0409.767 Net Expense 1934 1935 0 21,524 0 18,473 28,573 69 72,626 69,609 25,852 33,657 74,048 73,902 22,160 24,211 1,761 2,553 3,401 2,448 4,302 6,172 52,446 80,641 68,276 65,977 12,639 10,643 27,271 28,107 8,036 33,754 1936 0 17,400 37 64,690 40,700 67,750 24,832 2,225 1,652 5,879 79,444 61,354 10,331 25,401 27,719 1937 0 17 ,276 23 70 ,065 10 ,127 66 ,267 25 ,326 2 ,209 1 ,719 G,374 77 ,478 63 ,180 9 ,329 25 ,522 24 ,066 - - - - 7,593 6,963 5,975 — - - 5 ,759 4 ,453 13 108 174 164 0431,317 0456,739 106 160 164 0435,659 0400 ,333 5.426 2.565 0420.752 0451.313 7.355 6 ,149 0428.304 0403 t 134 Represents t h e n o t expense - incdne f r o n r e n t a l s having been deducted. .79 There were three branches i n the System which operated a t a h i g h e r annual cost than the C i n c i n n a t i Branch i n 1957; namely, P i t t s b u r g h , Los Angeles and Baltimore. However, viewed as a whole the o p e r a t i o n s performed a t these branches were i n l a r g e r volume. (g) Volume o f Operations a t C i n c i n n a t i Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s d e p a r t ments o f the C i n c i n n a t i Branch and the Head O f f i c e d u r i n g t h e l a s t s i x months o f 1956: C i n c i n n a t i Branch Safekeeping Member bank s e c u r i t i e s 12-51-56 $17,055,000 Branches w i t h l a r g e r volume: P i t t s b u r g h , D e t r o i t , B a l t i m o r e and Omaha. Head O f f i c e $154,546,000 Currency & Coin 1* Number o f b i l l s r e c e i v e d and counted 15,025,000 27,550,000 Branches w i t h l a i g e r volume: B a l t i m o r e , D e t r o i t , Los Argeles B u f f a l o and P i t t s b u r g h . Cost per one thousand u n i t s handled 71 cents 61 cents Branches w i t h h i g h e r u n i t c o s t : Helena, E I Paso, S a l t Lake C i t y and Spokane 2. Number o f coins r e c e i v e d and counted 22,685,000 22,588,000 Branches w i t h l a r g e r volume: Los Angeles, B a l t i m o r e and P i t t s b u r g h Cost per one thousand u n i t s handled: 20 cents 24 cents Branches w i t h h i g h e r u n i t c o s t : P i t t s b u r g h , Helena, Omaha, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Check C o l l e c t i o n 1 . Kuriber o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 1,865,000 5,545,000 Branches w i t h l a r g e r volume: B u f f a l o , P i t t s b u r g h , B a l t i m o r e , D e t r o i t and Los Angeles. Cost per one thousand u n i t s handled $1.80 $1.82 Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , L o u i s v i l l e , Helena, Denver, Oklahoma C i t y , E l Paso, Houston, Los Angelqp, P o r t l a n d , S a l t Lake C i t y , S e a t t l e , and Spokane .80 C i n c i n n a t i Branch Check C o l l e c t i o n ( c o n t f d ) 2# Number o f country checks (outgoing) r e c e i v e d 7,868,000 Branches w i t h l a r g e r volume: P i t t s b u r g h and B a l t i m o r e . Cost per one thousand u n i t s handled #2.57 Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , D e t r o i t , Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e , and Spokane* Head O f f i c e Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 14,061 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , D e t r o i t , L i t t l e Rock, Memphis, Denver, Omaha, Houston and Los Angeles. Cost per u n i t handled 30*5 cents Branches w i t h h i g h e r u n i t costs P i t t s b u r g h and P o r t l a n d . 12,547,000 $2.50 21,159 25.9 cents 2 . Number o f country c o l l e c t i o n s handled: None handled by branch. 3« Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 5,416 Branches w i t h l a r g e r volume: P i t t s b u r g h , B a l t i m o r e , D e t r o i t , Omaha, and Los Angeles. Cost per u n i t handled 3#6 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches, except P i t t s b u r g h . 46,887 15.2 cents A schedule showing the volume o f o p e r a t i o n s o f the C i n c i n n a t i Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f C i n c i n n a t i Branch by Board 1 s Examiners - 1933 During t h e course o f an examination o f the Federal Reserve Bank o f Cleveland, made as o f December 30, 1935, the Board 1 3 F i e l d Examiners reviewed the o p e r a t i o n s o f t h e C i n c i n n a t i Branch and expressed t h e o p i n i o n t h a t i t s continuance was warranted i n view o f the s i z e and importance o f the branch c i t y and the volume o f o p e r a t i o n s handled. A t t h $ t time t h e r e were 375 banks i n the branch zone and 212 o f them, i n c l u d i n g 9 i n t h e C i t y o f C i n c i n n a t i , were members o f the System. Then, as a t p r e s e n t , the" C i n c i n n a t i Branch was one o f the s i x most a c t i v e branches i n the Sjystem* .81 ( i ) Survey o f C i n c i n n a t i Branch made by Federal Reserve Bank o f Clevel a n d - 1956 A survey o f o p e r a t i o n s a t the C i n c i n n a t i Branch was made by the Federal Reserve Bank o f Cleveland, as requested i n the Board*s l e t t e r o f March 25, 1936 (X-9552)• Tho Board was advised i n a l e t t e r dated October 29, 1956 t h a t , as a r e s u l t o f t h i s survey, the continuance o f the C i n c i n n a t i Branch appeared t o be f u l l y j u s t i f i e d and t h a t no s e r i o u s c o n s i d e r a t i o n should be g i v e n t o i t s discontinuance f o r the present a t l e a s t * Hie f o l l o w i n g f a c t o r s were c i t e d i n supp o r t of t h i s conclusion: 1 . That discontinuance o f t h e Branch would r e s u l t i n some saving i n s a l a r y expense, b u t would e n t a i l much added expense a t the head o f f i c e ; the n e t saving being d i f f i c u l t to estimate. 2* That the losses which would be sustained on r e a l e s t a t e h o l d i n g s , leases and equipment i f the C i n c i n n a t i Branch were d i s c o n t i n u e d would more than absorb any saving which might be e f f e c t e d over a p e r i o d o f years* 5* That the n a t u r a l t r e n d o f business i n the C i n c i n n a t i area i s toward t h a t c i t y . 4* That check c o l l e c t i o n and c l e a r i n g o p e r a t i o n s are f a c i l i t a t e d by the Branch because bonks i n the t e r r i t o r y f i n d i t convenient t o s e t t l e i n C i n c i n n a t i exchange* 5* That a s u b s t a n t i a l numboj? o f c i t i e s i n t h e branch zone are two or more days remove4 from t h o Head O f f i c o by m a i l and t h a t check c o l l e c t i o n s and currency shipments would be g r e a t l y delayed i f they were handled from Cleveland. 6 . That member banks i $ Ohio and Kentucky would s e r i o u s l y obj e c t t o the l o s s of the s e r v i c e s which they now enjoy and t h a t , as a matter o f c i v i c p r i d e , bankers and business men i n C i n c i n n a t i would s t r o n g l y oppose any move t o d i s c o n t i n u e the Brarj^h* CINCINNATI BRANCH VOLUME Of OPERATIONS Nuafrer of Pieces Handled Currency Coin Received Received and Bi M s Pate 1931 teanisl - 1932 Non Cash Gov't Gov't and SMfitftd Collection Items Checks Handled £ i i i Country Checks Total Aft F i s c a l Agency Tr t r a w l Coupons Othec Pines! taw_ fast Transfer of fMt)4§ 30,501,000 51,389,000 3,70*4,000 13,385,000 966,000 18,055,000 785,137 38,8*47 21,3*48 26,773,000 *46,60*4,000 3,6*4*4,000 11,5*45,000 991,000 16,180,000 790,859 37,132 10,031 2 17,8*4*4 19,1*4 5 - 1933 - 28,520,000 MO,356,000 3,219,000 I0,*f75,000 1,176,000 1*4,870,000 85*4,952 38,76*4 37,206 320 15,6*4*4 193*1 - 27,80*1,000 Mi,863,000 3,067,000 12,005,000 2,076,000 17,1*48,000 893,811 3*4,13*4 70,209 2,9*46 13,179 1935 - 28,73*4,000 *49,5*40,000 3,518,000 13,83*4,000 1,687,000 19,039,000 757,000 33,000 107,655 32,7*42 10,683 1936 - 30,522,000 *46, 6*45 , 000 3,693,000 15,162,000 1,129,000 19,98*4,000 669,000 36,000 8 , 9 8 3 IO,*48*4 10,000 Aaounts Handled ( i n thousands of d o l l a r s ) 1931 - 122,537 5,393 1,936,763 890,732 I33,*493 2,960,988 12,909 *48, 760 27,*493 1932 - 99,*48*4 *4,*453 l,*459,l*49 66*4,795 105,556 2,229,500 13,339 *46,92*4 20,885 too 381,683 1933 - 125,909 7,736 1,352,11*4 68*4,198 116,792 2,153,10*4 l*4,*435 59,58*4 *46,658 1,222 330,156 193** - 102,852 5,705 1,5*4^4,362 8*41,305 1*42,621 2,528,288 1*4,776 69,289 56,101 3,952 35*4,758 1935 - I0t,*479 5,320 1,702,187 1,00*4,37*4 1*49,01*4 2,855,575 12,602 99,929 92,926 2*4,585 360,616 107,697 *4,925 1,905,337 1,182,172 169,333 3,256,8*42 I2,*437 96,836 3*4,611 9,919 *4*46,2*48 1936 QD 571,071 - PITTSBURGH BRANCH - FEDERAL RESERVE BANK OF CLEVELAND (a) C i t y o f P i t t s b u r g h P i t t s b u r g h , w i t h a p o p u l a t i o n o f 669,817, i s the t e n t h l a r g e s t c i t y i n the U n i t e d S t a t e s and the second l a r g e s t c i t y i n Pennsylvania. I t i s located i n the southwestern p a r t o f the State a t the p o i n t where the Monongahela and Allegheny j o i n the Ohio R i v e r and serves a r e t a i l trade area extending a p p r o x i mately 50 m i l e s i n a l l d i r e c t i o n s . i n t h i s area. There are approximately two m i l l i o n people Twenty-two r a i l r o a d s enter the c i t y , the major systems being the Pennsylvania, P i t t s b u r g h & Lake E r i e , B a l t i m o r e & Ohio, and B u f f a l o , Rochester & P i t t s b u r g h . The c i t y a l s o has an e x c e l l e n t m u n i c i p a l l y owned a i r - p o r t and i s served by a number o f n a t i o n a l a i r l i n e s . According t o the B i e n n i a l Census o f Manufactures f o r the year 1955, there were i n Allegheny County, i n which P i t t s b u r g h i s s i t u a t e d , 1 , 4 7 4 manufacturing establishments which had an o u t p u t valued a t $703,465,000 d u r i n g t h a t y e a r . The p r i n c i p a l manufactures were i r o n and s t e e l , machinery and c a s t i n g s , electrical machinery and apparatus, glass and glassware, chemicals, and c l a y p r o d u c t s . There was a l s o considerable canning, meat packing, baking and petroleum r e f i n ing. The Census o f American Business shows t h a t i n the same area t h e r e were 13,928, r e t a i l and 1,755 wholesale establishments which had sales aggregating $395,170,000 and $729,764,000, r e s p e c t i v e l y , i n 1955. Banking f a c i l i t i e s i n P i t t s b u r g h as o f December 51, 1956, were provided by t h i r t y - t w o S t a t e banks (8 members), e i g h t n a t i o n a l banks and one mutual savings bank. These i n s t i t u t i o n s had deposits aggregating $1,215,156,000 as o f t h a t date and o f t h i s amount $1,057,929,000 was c a r r i e d w i t h the s i x t e e n l o c a l meBiber banks, f o u r o f which are l o c a t e d i n o u t l y i n g s e c t i o n s o f the c i t y and authorized t o c a r r y country bank r e s e r v e s . .84 D e b i t s t o i n d i v i d u a l accounts i n banks o f t h e c i t y aggregated $8,676,891,000 d u r i n g t h e year 1956, or approximately $29,000,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions: The P i t t s b u r g h Branch was e s t a b l i s h e d A p r i l 22, 1918, and serves n i n e t e e n counties i n western P a m s y l v a n i a and s i x counties i n n o r t h e r n West V i r g i n i a . These c o u n t i e s comprise about 20$ o f the l a n d area o f the F o u r t h Federal Reserve D i s t r i c t and have approximately 50$ o f i t s t o t a l p o p u l a t i o n . Approxi- mately Z0% of a l l banks i n t h e F o u r t h D i s t r i c t are w i t h i n t h i s area. As o f December 51, 1956, t h e r e were 575 banks, e x c l u s i v e o f mutual savings banks i n t h e branch zone and o f t h i s number 244, i n c l u d i n g 219 n a t i o n a l and 25 State i n s t i t u t i o n s , were members o f t h e Federal Reserve System. nonmember banks i n t h e branch zone were on the par l i s t . A l l o f the The f o l l o w i n g f i g u r e s taken from r e p o r t s of c o n d i t i o n as of t h e same date show the s i z e of member bank f o o t i n g s i n the branch zone as compared t o those o f t h e F o u r t h D i s t r i c t as a whole: Fourth D i s t r i c t P i t t s b u r g h Zone No. Member Banks Loans and Investment Capital and Surplus (000 omitted) 627 244 $2,822,105 1,365,336 $427,865 225,056 Total Deposits $5,517,299 1,531,155 There i s no branch zone i n the System having l a r g e r member bank f o o t i n g s than the P i t t s b u r g h Zone. The P i t t s b u r g h Branch i s operated on the "memorandum p l a n " . A l l general l e d g e r accounts, as w e l l as accounts of member banks, non-member c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t the Head O f f i c e , which also maintains a l l expense records. A t r a n s c r i p t o f a l l e n t r i e s a f f e c t i n g the accounts o f bonks i n the branch zone i s sent t o the Head O f f i c e d a i l y by w i r e . Member banks i n the branch zone may f o r w a r d t h e i r d i s c o u n t o f f e r i n g s e i t h e r t o the Branch or to the Head O f f i c e . O f f e r i n g s r e c e i v e d by the Branch are examined t o see t h a t the paper i s t e c h n i c a l l y i n order and the amount o f each o f f e r i n g i s wired t o the Head O f f i c e . Immediate c r e d i t i s given where the c o l l a t e r a l c o n s i s t s o f U. S. Government o b l i g a t i o n s . C r e d i t on a l l o t h e r o f f e r i n g s i s d e f e r r e d u n t i l f i n a l approval by the Head O f f i c e , but upon app r o v a l the c r e d i t i s made e f f e c t i v e as o f the date the o f f e r i n g was r e c e i v e d by the Branch. The Branch holds s e c u r i t i e s o f banks i n i t s zone i n safekeeping. The Branch maintains no non-banking departments such as Bank Examination, Bank R e l a t i o n s , Legal, Research or F i s c a l Agency departments. As of September 2, 1937, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : City ef Pittsburgh Reminder o f Zone Total No. o f Banks Reserve Balances 16 224 $153,643,900 52.295.300 #205.939.200 Deferred Balances $13,325,800 2.778.700 &16.104.500 Capital Stock Bills Discounted $4,719,100 2.023,900 $6.743.000 $ 60.000 $60.000 P i t t s b u r g h i s 138 t r a i n m i l e s (5 h r s . - 15 mins.) from Cleveland. On any business day t h e r e are a number o f t r a i n s which leave P i t t s b u r g h a t 7 P. M. or l a t e r and a r r i v e i n Cleveland before 8 A. M. on the succeeding day, i . e . , n i g h t m a i l time. No branch c i t y i s feloser to i t s head o f f i c e than i s over- Pittsburg However, t h e r e are f o u r t e e n other branch c i t i e s which are as w e l l s i t u a t e d as P i t t s b u r g h from the s t a n d p o i n t of o v e r n i g h t m a i l communication between the hours o f 7 P. M. and 8 A. M. Branch c i t i e s comparable to P i t t s b u r g h i n s o f a r as speed o f r a i l s e r v i c e i s concerned are B a l t i m o r e (157 m i l e s - 4 h r s . and 21 mins.) and Birmingham (168 m i l e s - 5 h r s . and 50 m i n s . ) . .86 I t i s apparent t h a t discontinuance o f the Branch would c u r t a i l the s e r v i c e rendered to bnks l o c a t e d i n and near P i t t s b u r g h . Such banks under normal con- d i t i o n s now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p v / i t h the Branch i n s o f a r as deposits and withdrawals of currency, w i r e t r a n s f e r s and borrowings c o l l a t e r a l e d by government bonds are concerned. If the Branch were removed i t would be necessary f o r them t o d e a l w i t h the Head O f f i c e by m a i l . The s i t u a t i o n is d i f f e r e n t i n the case o f banks which a t present deal w i t h the Branch by m a i l , since the l a r g e m a j o r i t y o f such banks can be served j u s t as e x p e d i t i o u s l y from the Head O f f i c e under normal c o n d i t i o n s . This i s borne out by a study o f the P i t t s b u r g h Branch zone which was made by Federal Reserve Examiners i n December 1935. A t t h a t time t h e r e were 155 member bank p o i n t s i n the zone and o f this number 112 were w i t h i n o v e r - n i g h t m a i l time o f the Head O f f i c e as compared w i t h 115 w i t h i n o v e r - n i g h t m a i l t i n e o f the Branch. Other than P i t t s b u r g h there are o n l y three c i t i e s i n the branch zone having a p o p u l a t i o n i n excess o f 50,000; namely, E r i e , P a . , 115,967, Wheeling, West Va., 61,659 and McKeesport, P a . , 54,652. McKeesport i s contiguous t o P i t t s b u r g h and Wheeling and E r i e are 66 m i l e s (2 h r s . - 20 mins.) and 145 m i l e s (4 h r s . - 2 m i n s . ) , r e s p e c t i v e l y , distant, (c) Branch B u i l d i n g : The P i t t s b u r g h Branch has occupied i t s present q u a r t e r s a t Grant S t r e e t and Ogle Way since December, 1931. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost end book v a l u e , as o f September 2, 1937, o f the branch premises: Cost Land Ifuilding V a u l t & v a u l t equipment Fixed machinery & equipment F u r n i t u r e end equipment $ 781,564 867,455) 181,996) 552,411 $2,185,226 248,557 $2,451.585 Book Value 9-5-57 $ 781,564 930,512 152.958 $1,864,814 $1,864,814 .87 The banking premises, i n c l u d i n g f i x e d machinery and equipment, occupied by the Branch p r i o r t o 1951 are c a r r i e d as other r e a l e s t a t e on the books o f the Head O f f i c e . The t o t a l book v a l u e o f the o l d p r o p e r t y was $569,115 as o f September 2, 1937. This p r o p e r t y was badly damaged by the f l o o d s i n the e a r l y p a r t o f 1957, and, because of the expense i n v o l v e d , has n o t been placed i n usable condition. (d) Earnings - Branch Books: No r e c o r d of earnings i s maintained a t the P i t t s b u r g h Branch as i t is operated on the "memorandum p l a n " . (e) Branch Personnel: The r e p o r t of examination o f the F e d e r a l Reserve Bank o f Cleveland, as o f September 2 , 1957, shows the f o l l o w i n g i n regard to s a l a r i e s and personnel a t the P i t t s b u r g h Branch: September 2. 1957 Number Amount Officers Employees 4 210 214 August 29, 1936 Number Amount 0 27,300 312,400 $559,700 4 184 188 0 50,100 281>200 £511,500 Increase Number Amount 26 26 $ 2,800 (Deer.) 51,200 $28,400 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . N e i t h e r does the above t a b l e i n c l u d e 16 employees, w i t h annual s a l a r i e s t o t a l i n g $27,612, w ho l e f t the s e r v i c e o f the Branch p r i o r to August 29, 1956, but who were then r e c e i v i n g d i s m i s s a l wages. ( f ) Branch Expense by Functions: The expenses o f the P i t t s b u r g h Branch by Functions d u r i n g the past s i x y e a r s , as shown i n F u n c t i o n a l Expense Reports, were as f o l l o w s : .88 1952 General Overhead Controllable $ 27 ,677 Non-con t r o l l a b l e 28 ,517 •#Pro v i s i o n o f space 129 ,706 P r o v i s i o n o f Personnel 7 ,077 General 8 e r v i c e 71 ,819 Postage 27 ,702 7 ,649 Insurance 6 ,869 L o a n s , r e d i seounts, e t c . 6 ,264 Securities Currency & Coin 64 ,036 Check C o l l e c t i o n 99 ,235 Non-cash C o l l e c t i o n s 1 1 ,455 Accounting 38 ,960 F i s c a l Agency8 ,052 Legal Auditing 8 ,605 Bank R e l a t i o n s 26 F.R. Note Issues Statistical & Analyt'l 340 T o t a l Expense 0543 ,989 Less - Reimbursable — F i s c c l Agency Exp. Net Expense §543 ,989 1955 1954 0 27, 724 40, 007 114, 391 7, 102 71, 467 31, 926 7, 524 6 , 425 6 , 198 61, 606 102, 457 10, 855 38, 490 7, 912 0 25,754 48,999 117,535 32,231 74,160 31,547 3,828 6,148 6,398 61,152 101,116 10,775 39,101 9,102 9 , 225 10,243 - 1955 1957 1956 $ 23, 938 § 23,580 81 42 110, 180 102,141 45, 947 65,699 68,888 74, 970 31, 220 34,021 3,343 2 , 715 977 2,546 4, 610 14,122 11, 111, 919 122,737 96, 743 95,336 674 12,658 12, 40, 456 37,981 23, 318 23,148 510 106 10,608 316 11, 0 20, 640 63 154, 572 15, 516 64, 025 35, 765 3, 181 1 , 371 14, 188 135, 018 101, 197 12, 808 35, 357 21, 634 421 10, 599 5, 217 - — 68 310 $543, 607 33 344 0578,466 221 142 234 261 $603, 029 0617,359 247 $631, 819 £543, 687 1,873 £576,593 8,974 2, 964 8600,065 £608,385 7, 914 0623,905 * Represents the n e t expense - income from r e n t a l s having been deducted. There was no branch i n the System which operated a t a higher aggregate annual cost than the P i t t s b u r g h Branch i n 1957. The only comparable branch from a standpoint o f expense was Los Angeles w i t h annual o p e r a t i n g expenses aggregating $590,002. (g) Volume o f Operations a t P i t t s b u r g h Branch; The f o l l o w i n g i s a comparison o f the volume o f operations i n v a r i o u s departments o f the P i t t s b u r g h Branch and the Head O f f i c e d u r i n g the l a s t six months o f 1956: Safekeeping Member bank s e c u r i t i e s 12-51-56 Branches w i t h l a r g e r volume: P i t t s b u r g h Branch Head O f f i c e $115,906,000 None $154,546,000 .89 P i t t s b u r g h Branch Head O f f i c e Currency & Coin 1 . Number o f b i l l s r e c e i v e d and counted 26,082,000 27,350,000 Branches w i t h l a r g e r volume: Los Angeles, B a l t i m o r e and D e t r o i t . Cost per one thousand u n i t s handled 54 cents 61 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , Helena, Denver, Omaha, E l Paso, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f coins r e c e i v e d and counted: 26,297,000 22,588,000 Branches w i t h l a r g e r volume: B a l t i m o r e and Los Angeles. 24 cents Cost per one thousand u n i t s handled 21 cents Branches w i t h h i g h e r u n i t c o s t : Helena, Omaha, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Check C o l l e c t i o n 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 5,551,000 3,345,000 Branches w i t h l a r g e r volume: None Cost per one thousand u n i t s handled 01.63 $1.82 Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , L o u i s v i l l e , Helena, Denver, Oklahoma C i t y , E l Paso, Houston, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f country checks (outgoing) r e c e i v e d 13,193,000 12,547,000 Branches w i t h l a r g e r volume: None Cost per one thousand u n i t s handled 01.99 $2.50 Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , C h a r l o t t e , N a s h v i l l e , New Orleans, D e t r o i t , Helena, E l Paso, San A n t o n i o , Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 8,635 21,159 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , B a l t i m o r e , J a c k s o n v i l l e , D e t r o i t , L i t t l e Rock, Memphis, Denver, Oklahoma C i t y , Omaha, Houston, Los Angeles, S a l t Lake C i t y and S e a t t l e . Cost per u n i t handled 66.7 cents 25.9 cents Branches w i t h h i g h e r u n i t c o s t : None 2. Number o f c o u n t r y c o l l e c t i o n s handled: None 3. Number o f coupons (except Government) and c o u n t r y s e c u r i t y c o l l e c t i o n s handled 9,355 Branches w i t h l a r g e r volume: B a l t i m o r e and D e t r o i t . Cost per u n i t handled 3 . 1 cents Branches w i t h h i g h e r u n i t c o s t : A l l other branches. 46,887 15.2 cents .90 A schedule showing the volume o f o p e r a t i o n s o f the P i t t s b u r g h Branch f o r the years 1831 to 1936, i n c l u s i v e , i s attached to t h i s memorandum. (h) Survey of P i t t s b u r g h Branch by Board 1 s Examiners - 1955 During the course o f an examination o f the Federal Reserve Bank o f Cleveland, made as o f December 50, 1955, the Board's F i e l d Examiners reviewed the o p e r a t i o n s o f the P i t t s b u r g h Branch and expressed the o p i n i o n t h a t i t s continuance was warranted i n view o f the s i z e and importance o f the branch c i t y and the volume o f o p e r a t i o n s conducted a t the Branch. At t h a t time t h e r e were 396 banks i n the branch zone and 252 o f them, i n c l u d i n g 14 i n the C i t y o f P i t t s b u r g h , were members o f the System. Then, as a t p r e s e n t , the P i t t s b u r g h Branch was one o f the s i x mo:st a c t i v e branches i n the System; r a n k i n g f i r s t in the d o l l a r volume and number o f checks handled. ( i ) Survey of P i t t s b u r g h Branch made by Federal Reserve Bank o f Cleveland - 1956 As requested i n the Board's l e t t e r o f March 25, 1956 (X-9552) the Federal Reserve Bank o f Cleveland reviewed the operations o f i t s branches. The Board was advised i n a l e t t e r dated October 29, 1956 t h a t on the basis o f t h i s survey the continuance o f the P i t t s b u r g h Branch appeared t o be f u l l y j u s t i f i e d and t h a t no serious c o n s i d e r a t i o n should be given t o i t s discontinuance f o r the present a t l e a s t . The c h i e f reasons advanced i n support o f t h i s c o n c l u s i o n were J 1 . That tho Branch had b u t r e c e n t l y occupied a new b u i l d i n g which was c a r r i e d a t §1,958,000 and which could n o t be disposed o f , based on t h e i r experience w i t h the o l d branch banking qtxarters, except a t a substantial loss. 2. 'That i n t e n s e r i v a l r y e x i s t e d between the bankingi n t e r e s t s o f Cleveland and P i t t s b u r g h a t the time the System was organized and t h a t although bankers i n P i t t s b u r g h have since become r e c o n c i l e d t o the .91 l o c a t i o n o f the F e d e r a l Reserve Bank i n Cleveland, any i n d i c a t i o n t h a t the P i t t s b u r g h Branch might be d i s c o n t i n u e d would be met by the most a c t i v e and severe o p p o s i t i o n . S. That discontinuance o f the Branch would r e s u l t i n some saving i n s a l a r y expense, b u t would e n t a i l much added expense a t the Head O f f i c e ; the n e t saving being d i f f i c u l t to e s t i m a t e . 4. That the branch c i t y was selected because the n a t u r a l t r e n d o f business o f the surrounding t e r r i t o r y was toward P i t t s b u r g h . 5. That check c o l l e c t i o n and c l e a r i n g o p e r a t i o n s are f a c i l i t a t e d by the Branch because banks i n the t e r r i t o r y f i n d i t convenient t o s e t t l e i n P i t t s b u r g h exchange. 6. That a s u b s t a n t i a l number o f c i t i e s i n the branch zone are two days removed from the Head O f f i c e by m a i l and t h a t check c o l l e c t i o n s and currency shipments would be g r e a t l y delayed i f they were handled from Cleveland, and 7. That P i t t s b u r g h i s the outstanding i n d u s t r i a l center o f the North C e n t r a l S t a t e s , the l a r g e r i n d u s t r i a l concerns m a i n t a i n i n g o f f i c e s t h e r e , and t h a t , as a r e s u l t , the Branch i s c e l l e d upon t o supply currency through banking connections o f such concerns which i s d i s t r i b u t e d and used throughout Western Pennsylvania and Northwestern West V i r g i n i a j some o f such t e r r i t o r y b e i n g l o c a t e d i n the P h i l a d e l p h i a and Richmond D i s t r i c t s . .92 PITTSBURGH BRANCH VOLUME OF-OPERATIONS Hywkprfrfpieces far^M Bills msi Discounted Currency Coin Received Received and and fiwinitriL. tmt&t. Hon Cash Collection Items All Qov , t Checks Handled Gov»t City Cpuntrv Checks Total Coupons Fiscal Agency Transfer TCftMKiiMI., of Funds Other Direct Otfter 1931 - 1*7,1*02,000 **t,820,000 8,871*,000 21,036,000 732,000 30,6**2,000 **8»*,710 31,091 29,769 1932 • 39,192,000 39,125,000 8,106,000 18,803,000 786,000 27,695,000 **68,729 31,991 9,**56 18 19,6** 1 1933 - 38,829,000 32,632,000 8,277,000 17,178,000 87**,000 26,329,000 **86,l**l 3!,73l 25,6**2 102 17,18** 193** m l* 1,1*52, 000 33,766,000 !0,3M*,000 18,592,000 2,138,000 31,07**,000 521,677 28,565 ****,690 **8I ***,557 1935 - ****,687,000 35,8^*9,000 1**,050,000 23,356,000 1,008,000 38,**IN,000 56**, 000 3**, 000 73,8**9 16,007 9,606 >936 - 52,609,000 148,651,000 13,823,000 25,888,000 1,052,000 **0,763,000 **70,000 *»0,000 l**,977 5,930 11,000 25,112 - Atouint* jHniritaf ( i n thousands of dollars) 1931 21*7,367 3,915 8,66**, 505 1/602,529 10**,757 10,371,79* 15,563 36,756 127,076 2,13**, 203 m 1932 - 173,752 3,211 5,5«*M0& l,2****,l**l 89,383 6,878,332 l**,625 32,96** 17,108 155 1,018,927 1933 - 203,280 6,695 5,260,589 1, 198,2** 7 9**,989 6,553,825 15,001 **7,038 52,156 152 896, **97 1931* - 208,160 3,817 6,032,868 l,**57,93l 120,893 7,611,692 17,77** 68,035 86,905 509 657,306 1935 - 217, 02** 2,7^*7 7,06**,852 1,70**, 060 1 m , 138 8,883,050 I9,****7 88,729 102,350 I7,7**9 7**3, 136 1936 • 286,861 3 , ****** 8,930,791 2,190,031 »**3,**57 11,26**, 279 5,629 956, l**0 19,693 123,979 II7,09t BALTIMORE BRANCH - FEDERAL RESERVE BANK OF RICHMOND (a) C i t y o f B a l t i m o r e B a l t i m o r e , w i t h a p o p u l a t i o n o f 804,874, i s the e i g h t h l a r g e s t c i t y i n the U n i t e d States and the l a r g e s t c i t y i n Maryland. I t i s l o c a t e d i n the c e n t r a l p a r t o f the S t a t e , on the Petapsco R i v e r which enters Chesapeake Bay, and serves a trade area extending approximately 20 m i l e s i n a l l There are s l i g h t l y more than 1,000,000 i n h a b i t a n t s i n t h i s area. directions. Five r a i l - r o a d s , i n c l u d i n g the Baltimore & Ohio, Pennsylvania ana Western Maryland, servp the c i t y and numerous ocean steamship l i n e s a f f o r d d i r e c t connection w i t h most o f the i m p o r t a n t American and f o r e i g n p o r t s . I n addition regular a i r service i s a v a i l a b l e a t two a i r p o r t s . According t o the B i e n n i a l Census o f Manufactures B a l t i m o r e C i t y had 1,867 manufacturing establishments i n 1935 which had an output v a l u e d a t $558,805,000. fertilizer, The most i m p o r t a n t manufactures were i r o n and s t e e l , copper, straw h a t s , drugs, canned goods, a i r c r a f t , and d i s t i l l e r y and brewery products. There i s also considerable meat packing, r a i l r o a d r e p a i r work and ship b u i l d i n g and r e p a i r i n g c a r r i e d on. The Census o f American B u s i - ness f o r the year 1935 l i s t s 13,557 r e t a i l and 1,622 wholesale establishments i n B a l t i m o r e C i t y which enjoyed sales aggregating $301,137,000 and $424,478,000^ respectively, during that year. Banking f a c i l i t i e s i n B a l t i m o r e are provided by s i x n a t i o n a l banks, t h i r t e e n S t a t e banks (6 members), ten mutual savings banks and a M o r r i s Plan bank. These i n s t i t u t i o n s had d e p o s i t s aggregating $659,687,000, as o f December 31, 1936, and o f t h i s amount $355,895,000 was c a r r i e d w i t h the twelve l o c a l member banks, one, a n a t i o n a l bank, being a u t h o r i z e d to c a r r y country bank reserves. .94 Debits to i n d i v i d u a l accounts i n banks o f the c i t y aggregated 04,049,015,000 d u r i n g the year 1936, or an average o f approximately $13,500,000 f o r each banking day. ( * ) Branch T e r r i t o r y and F u n c t i o n s : The B a l t i m o r e Branch was e s t a b l i s h e d March 1 , 1918 and serves the e n t i r e State o f Maryland and t h i r t y counties i n Northern West V i r g i n i a . This t e r r i t o r y represents 15$ o f the l a n d area o f the F i f t h D i s t r i c t and has a p p r o x i mately 21% o f i t s t o t a l p o p u l a t i o n . Approximately 26% o f a l l banks i n the d i s - t r i c t are w i t h i n t h i s a r e a . As o f December 31, 1936 there were 268 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 116, i n c l u d i n g 98 n a t i o n a l banks and 18 S t a t e i n s t i t u t i o n s , were members o f the Federal Reserve System. the nonmember i n s t i t u t i o n s i n the branch zone were on the par l i s t . A l l of The f o l l o w - i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared t o those o f the F i f t h D i s t r i c t as a whole: No. Member Banks Fifth District Branch Zone 404 116 Loans and Investments $1,227,580 383,677 Capital and Surplus (000 omitted) $158,222 43,533 Total Deposits $1,702,403 511,126 There are o n l y f i v e branch zones i n the e n t i r e System having l a r g e r member bank f o o t i n g s than the B a l t i m o r e zonej namely, P i t t s b u r g h , Los Angeles, D e t r o i t , C i n c i n n a t i and B u f f a l o . The B a l t i m o r e Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s t e r r i t o r y as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , .95 non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and loans t o member banks are concerned. Branch. Reserve accounts o f member banks i n the zone are maintained a t the Member bank borrowings are passed upon a t the Branch, s u b j e c t to r e - view by the Head O f f i c e and notes and c o l l a t e r a l , i f any, are h e l d by the Branch. The Branch does n o t exercise f i s c a l agency f u n c t i o n s , but a c t s as a r e c e i v i n g and d i s t r i b u t i n g s t a t i o n f o r the Head O f f i c e . I t has no Bank Exam- i n a t i o n , L e g a l or F a i l e d Bank departments. As o f June 17, 1957, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : No.of Banks C i t y of Baltimore Remainder o f Zone Total 12 104 116 Reserve Balances $51,766,221 16.126.667 $67,892.888 Deferred Balances Capital Stock Bills Discounted $11,050,075 $ 727,300 945.952 586.700 $11.976.005 $1,314.000 $90,000 $90,000 B a l t i m o r e i s 15S t r a i n miles (4 h r s . and 21 mins.) from Richmond. On a#y business day there are s e v e r a l t r a i n s which leave B a l t i m o r e a t 7 ; P . M. or l a t e r and a r r i v e i n Richmond b e f o r e 8 A. M. on the succeeding day, i . e . , m a i l time. head o f f i c e . overnight P i t t s b u r g h i s the o n l y branch c i t y c l o s e r than B a l t i m o r e t o i t s However, t h e r e are f o u r t e e n other branch c i t i e s which are w i t h i n o v e r n i g h t m a i l time o f t h e i r r e s p e c t i v e head o f f i c e s . The branches most comparable t o Baltimore are P i t t s b u r g h (138 miles - 3 h r s . and 20 m i n s . ) and D e t r o i t (284 m i l e s - 6 h r s . and 35 m i n s . ) . I t i s apparent t h a t discontinuance o f the B a l t i m o r e Branch would c u r t a i l the s e r v i c e rendered t o banks l o c a t e d i n t h a t c i t y which now enjoy an o v e r - t h e counter r e l a t i o n s h i p i n s o f a r as d e p o s i t s and withdrawals o f currency, w i r e t r a n s f e r s , borrowings and safekeeping accommodations are concerned. The Federal reserve balances o f banks i n Baltimore are two and o n e - h a l f times as l a r g e as .101 those o f banks i n Richmond. Any i n d i c a t i o n t h a t discontinuance o f the Branch was even contemplated would reawaken the i n t e n s e b i t t e r n e s s which the o r i g i n a l s e l e c t i o n o f Richmond, r a t h e r than B a l t i m o r e , as a Reserve Bank c i t y aroused and would undoubtedly be harmful t o the System as a whole. I n addition it appears from a v a i l a b l e i n f o r m a t i o n t h a t a number o f the 79 o u t l y i n g banking p o i n t s i n the B a l t i m o r e zone, p a r t i c u l a r l y p o i n t s i n West V i r g i n i a , cannot be served as e x p e d i t i o u s l y from Richmond as they are now being served f r o m Baltimore. Other than B a l t i m o r e , there i s no c i t y i n the branch zone having a populat i o n o f over 50,000. follows: The p o p u l a t i o n s o f the more i m p o r t a n t c i t i e s are as Cumberland, Maryland, 37,747j Hagerstown, Maryland, 30,861 and Fairmont, West V i r g i n i a , 23,159. (c) Branch B u i l d i n g : Thc3 B a l t i m o r e Branch has occupied i t s present q u a r t e r s a t Lexington and C a l v o r t S t r e e t s since September 1928. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book v a l u e , as o f June 17, 1957, o f the branch premises: Cost Land Building V a u l t & v a u l t equipment F i x e d machinery & equipment F u r n i t u r e & equipment $ 250,487 992,474) 254,788) 550,459 $1,828,188 245,765 £g«071,955 Book Value 6-17-57 $ 187,145 1,012,675 22,589 $1,222,409 Si.222,409 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 to l i i o 7 , i n c l u s i v e , were as f o l l o w s : 9? Year Earnings 1951 1952 1955 1934 1935 1956 £ 52,600 25,300 19,200 20,500 21,600 1957 22,000 These f i g u r e s are incomplete s i n c e , under the p r e s e n t accounting p r o cedure, the Branch does n o t r e c e i v e any c r e d i t f o r income r e c e i v e d by the Head O f f i c e on investments, a l a r g e p o r t i o n o f which i s made p o s s i b l e by the c a p i t a l stock investment and r e s e r v e balances o f member banks i n the branch zone. In- come on borrowings by banks i n the branch zone i s a l s o c a r r i e d o n l y on the books o f the Head O f f i c e , which i s c o n t r a r y t o the u s u a l p r a c t i c e i n full- f l e d g e d branches. (e) Branch Personnel; The r e p o r t o f examination o f the Federal Reserve Bank o f Richmond, as o f June 17, 1937, shows the f o l l o w i n g i n regard to s a l a r i e s and personnel a t the B a l t i m o r e Branch: _June 17, 1957 Number Amount Officers Employees 4 164 168 $ 26,500 215,500 $240,000 June 27, 1956 Number Amount 4 160 164 $ 25,800 209,600 8255,400 Increase Number Amount 4 4 $ 700 5,900 $4,600 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . Compensation p a i d t o temporary employees and f o r overtime and supper money i s a l s o n o t i n c l u d e d ($8,200 f o r 1956). ( f ) Branch Expense by Functions: The uxpenses o f the B a l t i m o r e Branch by f u n c t i o n s f o r t h e years 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : .98 1952 General Overhead Controllable $ 11,323 Non-Controllable 16,112 * P r o v i i j i o n o f Space 55,612 P r o v i s i o n o f Personnel 6,580 General Service 54,881 Postage 24,060 Insurance 7,148 F a i l e d Banks L o o n s , r e d i s c o u n t s , e t c . 14,346 5,587 Securities Currency & Coin 50,084 Check C o l l e c t i o n 62,551 Non-cash C o l l e c t i o n 12,582 Accounting 29,430 F i s c a l Agency4,057 Legal Auditing 2,656 Bank R e l a t i o n s 1,642 — Bank Examinations 901 F.R. Note Issues Statistical & Analyt'l 402 T o t a l Expense $359,962 Less - Reimbursable — F i s c s l Agency Exp. Net Expense £359.962 - 1933 0 19,309 20,993 54,246 6,278 54,014 27,849 6,784 — 17,151 5,653 45,498 64,726 14,610 27,072 4,641 - 2,624 296 « 892 369 $373,805 — 0373.805 1934 0 18,419 22,207 53,146 26,659 59,167 27,984 5,236 — $ 17,982 249 48,881 37,815 59,874 28,747 4,265 — 9,251 6,481 48,164 58,654 14,557 28,102 13,836 - 1935 ' 3,429 240 — 4,741 6,351 73,209 57,418 16,985 28,892 41,931 - 5,094 86 — 1936 $ 14,346 83 52,091 53,921 56,474 28,336 4,050 1937 0 15,617 111 107,031 9,397 57,811 28,668 3,828 — — 4,995 8,124 74,475 59,169 15,832 28,043 44,245 5,315 7,828 75,737 65,462 17,514 28,506 45,562 - - 6,100 606 5,059 316 — — 717 455 $396,704 517 263 0455,500 307 171 $450,037 348 162 $475,683 7.393 §389.311 13,572 0419.728 29.118 $>420,919 31.260 5444.415 * Represents the n e t expense - income from r e n t a l s having been deducted. There are two branches i n the System which operated a t a h i g h e r annual c o s t than the B a l t i m o r e Branch i n 1937; namely, P i t t s b u r g h and Los Angeles, (g) Volume o f Operations a t B a l t i m o r e Branch: The f o l l o w i n g i s a comparison o f the volume o f operations i n v a r i o u s departments o f the B a l t i m o r e Branch and the Head O f f i c e d u r i n g the l a s t six months o f 1956: B a l t i m o r e Branch Discount Department: Notes r e d i s c o u n t e d C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: Head O f f i c e 17 42 3 Denver, Omaha, E l Paso, San Antonio and Buffalo. .99 Baltimore Branch Safekeeping: Member bank s e c u r i t i e s 12-51-36 $56,150,000 Branches w i t h l a r g e r volume: P i t t s b u r g h and D e t r o i t . Head O f f i c e $64,406,000 Currency & Coin: 1 . Number o f b i l l s r e c e i v e d and counted 27,396,000 26,575,000 Branches w i t h l a r g e r volume: Los Angeles. Cost per one thousand u n i t s handled 49 cents 40 cents Branches w i t h higher u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , D e t r o i t , Helena, Denver, Oklahoma C i t y , Omaha, E l Paso, San Antonio, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f coins received and counted 61,774,000 28,607,000 Blanches w i t h l a r g e r volume: None Cost per one thousand u n i t s handled 8 cents 7 cents Branches w i t h higher u n i t c o s t : A l l except New Orleans and Oklahoma C i t y . Check C o l l e c t i o n : 1 . Number o f c i t y checks ( c l e a r i n g s ) received 2,574,000 1,054,000 Branches w i t h l a r g e r volume: P i t t s b u r g h , D e t r o i t and Los Angeles. Cost per one thousand u n i t s handled $1.44 $2.29 Branches w i t h higher u n i t c o s t : A l l except C h a r l o t t e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e and New Orleans. 2. Number of country checks (outgoing) received 9,570,000 14,507,000 Branches w i t h l a r g e r volume: Pittsburgh. Cost per one thousand u n i t s handled $1.87 $2.45 Branches w i t h higher u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , C h a r l o t t e , N a s h v i l l e , New Orleans, D e t r o i t , Memphis, Helena, E l Paso, San Antonio, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Non-cash C o l l e c t i o n s ! • Number of c i t y c o l l e c t i o n s handled 10,149 10,579 Branches w i t h l a r g e r volume: D e t r o i t , L i t t l e Hock, Memphis, Omaha and Los Angeles* Cost per u n i t handled 17.2 cents 18.4 cents Branches w i t h higher u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , C h a r l o t t e , D e t r o i t , Los Angelas, P o r t l a n d and S e a t t l e . 2. Number o f country c o l l e c t i o n s handled 18,212 44,456 Branches w i t h l a r g e r volume: B u f f a l o , C h a r l o t t e , Omaha, S a l t Lake C i t y and Spokane. Cost per u n i t handled 12.5 cents 11.8 cents Branches w i t h higher u n i t c o s t : B u f f a l o , Birmingham, N a s h v i l l e , Helena, Los Angeles, P o r t l a n d and S e a t t l e . too Baltimore Branch Head O f f i c e 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 22,733 9,048 Branches w i t h l a r g e r volumes None Cost per u n i t handled 10. cents 20.5 cents Branches w i t h higher u n i t cost: A l l except C i n c i n n a t i , P i t t s b u r g h , Birmingham, New Orleans, Denver, Omaha and Seattle. A schedule showing the volume of operations of the Baltimore Branch f o r the years 1931 to 1936, i n c l u s i v e , i s attached t o t h i s memorandum, (h) Survey of B a l t i m o r e Branch by Board's Examiners - 1933 During the course o f examination o f .the Federal Reserve Bank o f Richmond, made as of J u l y 29, 1933, the Board's Examiners reviewed the operations of the Baltimore Branch and expressed the o p i n i o n t h a t i t s continued o p e r a t i o n was justified. A t t e n t i o n was c a l l e d t o the f a c t t h a t i t i s one of the f i v e l a r g e s t branches i n the System and t h a t i n a number of departments the volume o f work handled by the Branch exceeded t h a t handled a t the Head O f f i c e . ( i ) Survey of Baltimore Branch made by Federal Reserve Bank o f Richmond - 1936 As requested i n the Board's l e t t e r o f March 25, 1936 (X-9532) the Federal Reserve Bank of Richmond surveyed the operations o f i t s Baltimore Branch and advised as f o l l o w s : we are very p o s i t i v e t h a t the Baltimore Branch — one of the l a r g e s t and most important branches i n the Federal Reserve System — should be continued on the present basis I n reaching t h i s conclusion consideration was given to the character o f the t e r r i t o r y served by the Branch, the volume o f i t s operations as compared to those a t the Head O f f i c e , the s i z e and prominence of the C i t y o f Baltimore and the s u b s t a n t i a l investment i n quarters occupied by the Branch. The f a c t o r s which prompted the establishment o f the Branch o r i g i n a l l y , such as improved t r a n s i t , currency and discount f a c i l i t i e s and the b e l i e f t h a t the System should be made as f l e x i b l e as p o s s i b l e and n o t become too c l o s e l y i d e n t i f i e d w i t h a given s e c t i o n or c i t y , were a l s o c i t e d . 10.1 BALTIMORE BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Received Bills fills. and Di scounted Non Cash Coin Received and Checks StoMfltrr M a i All F i s c a l Agency Trutfltifitiftat... Other PLrsfci O^r Transfer of FunsN ,„ 1931 11,801 50,769,000 13*4,337,000 * l , 363, 000 1*4,561,000 8*41,000 19,765,000 296,09*4 128,523 6,977 172 30,195 1932 26,918 45,339,000 120,103,000 *4, 1*49,000 12,921,000 787,000 17,857,000 313,666 f46,5H 6,333 260 25,685 1933 15,8*16 >48,208,000 108,5*43,000 3,972,000 11,92*4,000 898,000 16,79*4,000 3*42,895 173,321 12,826 176 17,206 193*1 679 49,905,000 113,676,000 *4, 376,000 13,6*40,000 1,8*49,000 19,865,000 *417, 263 159,691 35,0*45 5,253 15,36*4 1935 95 51,316,000 116,752,000 **, 731,000 15,588,000 1,059,000 21,378,000 41 M o o 122,000 71,776 37,998 12,630 1936 29 55,3t2,000 125,18*1,000 5,128,000 17,7*47,000 1,252,000 2*4,127,000 352,000 11*4,000 10,81*4 19,226 12,000 AfqmU 0 " N* O Gov«t Gov't Citv Counted Collection Items Checks Handled tteiibri thousands of d o l l a r s ) f93l 6*11,632 2*48,848 10,455 2,008**405 1,076,800 125,79*4 3,210,999 5,676 96,90*4 53,712 8,600 I,*46*4,I05 1932 766,019 218,530 9,070 1,5*4*4,836 921,018 97,279 2,563,133 7,025 96,135 62,323 11,500 938,166 1933 207,106 24 0,492 11,317 1,509,197 89*4,067 111,319 2,51*4,583 8,069 103,682 79,1*42 1,291 822,780 193*4 11,531 211,736 8,098 1,771,81*4 1,10*4,18*4 1*4*4,515 3,020,513 10,712 1*40,11*4 230,180 8,3*46 878,119 1935 2,*402 217,5*17 8,172 l,832,*43l 1,289,*!!*! 1*4*4,869 3,266,71*4 11,138 161,8*40 29*4,02*4 *49,068 855,170 1936 998 233,6*18 8,8*4 8 2,020,1*31 1,579,786 180,3*48 3,780,565 11,525 163,463 221,923 26,666 875,885 .108 CHARLOTTE BRANCH - FEDERAL RESERVE BANK OF RICHMOND (a) C i t y o f C h a r l o t t e C h a r l o t t e , w i t h a p o p u l a t i o n o f 82,675, i s l o c a t e d i n the southwestern p a r t o f N o r t h C a r o l i n a i n what i s known as the Piedmont s e c t i o n . I t is the l a r g e s t c i t y i n the S t a t e and serves a t r a d e area w i t h a r a d i u s o f from 50 t o 70 m i l e s , which i s noted f o r t e x t i l e manufacturing. The surrounding territory i s devoted also t o d a i r y i n g and the r a i s i n g o f sweet p o t a t o e s , peanuts, s t r a w b e r r i e s , peaches and apples. cotton, The community i s served by the Southern, N o r f o l k & Southern, and Seaboard A i r L i n e r a i l r o a d s , and by the Piedmont and Northern E l e c t r i c Railway. I t i s a l s o on the r e g u l a r Washington-Atlanta a i r mail l i n e . According to the B i e n n i a l Census o f Manufactures t h e r e were 164 inanufac-~ t u r i n g establishments which had an output valued a t $42,900,000 o p e r a t i n g i n Mecklenburg County, i n which C h a r l o t t e i s s i t u a t e d , d u r i n g the year 1935. The c h i e f manufactures were c o t t o n y a r n , cottonseed o i l , wobdpulp, lumber, asbestos p r o d u c t s , h o s i e r y , c l o t h i n g and d y e s t u f f s . The Census o f American Business f o r 1935 l i s t s 1,228 r e t a i l and 268 wholesale establishments i n the same area which had sales aggregating £33,917,000 and $125,025,000, r e s p e c t i v e l y , d u r i n g t h a t year. Banking f a c i l i t i e s i n C h a r l o t t e are provided by three n a t i o n a l banks, one S t a t e member bank and f o u r r e l a t i v e l y small i n d u s t r i a l banks. These i n s t i t u - t i o n s had deposits aggregating $83,764,000, as o f December 31, 1936, and of t h i s amount $82,494,000 was c a r r i e d w i t h member banks. D e b i t s to i n d i v i d u a l accounts i n banks o f the c i t y aggregated $655,224,000 d u r i n g the year 1936, or an average o f approximately $2,184,000 f o r each banki n g day# (h) Branch T e r r i t o r y and F u n c t i o n s : The C h a r l o t t e Branch was e s t a b l i s h e d December 1 , 1927, and serves thirty- f o u r counties i n N o r t h C a r o l i n a and twenty-one c o u n t i e s i n South C a r o l i n a . This t e r r i t o r y r e p r e s e n t s 18% o f the l a n d area o f the F i f t h D i s t r i c t and has 19% of i t s t o t a l p o p u l a t i o n . Approximately 14% o f a l l banks i n the d i s t r i c t are w i t h i n t h i s area. As o f December 31, 1936, there were 145 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 36, i n c l u d i n g 31 n a t i o n a l and 6 S t a t e i n s t i t u t i o n s , were members o f the Federal Reserve System. 109 non-member banks i n the zone were on the par l i s t . Only 6 out o f There were t e n communi- t i e s i n the zone served by o u t - o f - t o w n branches o f member banks a t t a c h e d t o the Head O f f i c e . The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared to those o f tiie F i f t h D i s t r i c t as a whole: No. Member Banks Fifth District Branch Zone 404 36 Loans and Investments $1,227,380 98,815 Capital and Surplus (000 omitted) Total Deposits $158,222 11,293 $1,702,403 143,411 There are only f o u r branch zones i n the e n t i r e System having smaller member bank f o o t i n g s than the C h a r l o t t e zone; namely, Spokane, E l Paso, L i t t l e Rock and Helena. The C h a r l o t t e Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s t e r r i t o r y as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g and c o l l e c t i o n , non-cash c o l l e c t i o n s and safekeeping o f s e c u r i t i e s a r e concerned. It also acts as c u s t o d i a n f o r the R e c o n s t r u c t i o n Finance C o r p o r a t i o n . Reserve accounts .104 o f member banks i n the zone are maintained a t the Branch. have d i s c o u n t or f i s c a l agency departments. The Branch does n o t However, d i s c o u n t s of member banks i n the C i t y o f C h a r l o t t e may be presented a t the branch t o be forwarded t o the Head O f f i c e a f t e r being examined f o r t e c h n i c a l i t i e s . Immediate c r e d i t i s g i v e n f o r such o f f e r i n g s s u b j e c t t o f i n a l approval by the Head O f f i c e . As o f June 17, 1937, member banks i n t h e branch zone had balances w i t h the Reserve bank as f o l l o w s : No. o f Banks City of Charlotte (*)Remainder o f Zone Total 4 42. 46 Reserve Balances 011,619,907 9.565.595 £20.985.502 Deferred Balances Capital Stock 03,895,987 1.152.580 05.028.567 0125,700 215.450 £541.150 Bills Discounted £45.000 £45.000 (~*)lncludes 10 branches o f member banks i n Head O f f i c e zone. C h a r l o t t e i s 282 t r a i n m i l e s from Richmond. M a i l l e a v i n g Richmond a t 6:10 P.M. a r r i v e s i n C h a r l o t t e a t 5:50 A.M. the next day (9 h r s . and 40 mins.) and m a i l l e a v i n g C h a r l o t t e a t 7:15 P.M. a r r i v e s i n Richmond a t 8:10 A.M. the next day (12 h r s . and 55 m i n u t e s ) . o v e r n i g h t m a i l time o f Richmond. The branch c i t y may be said t o be w i t h i n Many o f the banking p o i n t s i n the branch zone, which deal w i t h the Branch by m a i l , are also w i t h i n o v e r n i g h t m a i l time o f Richmond. Discontinuance o f the Branch would o f course c u r t a i l the s e r v i c e rendered to banks l o c a t e d i n the c i t y o f C h a r l o t t e , which now enjoy an o v e r t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch. I t would a l s o slow up the c l e a r i n g and c o l l e c t i o n o f checks on and f o r shipments of currency and c o i n to a small number o f o u t l y i n g p o i n t s which are n o t w i t h i n o v e r n i g h t m a i l time o f Richmond. Other than C h a r l o t t e , the most populous c i t i e s i n the branch zone are as follows: Columbia, South C a r o l i n a , 51,581; A s h v i l l e , N o r t h C a r o l i n a , 50,193; G r e e n v i l l e , South C a r o l i n a , 29,154; and Spartanburg, South C a r o l i n a , 28,723. .105 A l l o f these c i t i e s have one or more member banks and are over 550 m i l e s from Richmond by r a i l . A l l o f these c i t i e s are w i t h i n o v e r n i g h t m a i l time o f Charlotte. (c) Branch B u i l d i n g : The C h a r l o t t e Branch occupies r e n t e d q u a r t e r s a t 110 South Tryon S t r e e t under a l e a s e e x p i r i n g June 1, 1941, a t an annual r e n t a l o f $12,207. Additional space, occupied by the R e c o n s t r u c t i o n Finance C o r p o r a t i o n , Custodian D i v i s i o n , i s r e n t e d on a month t o month b a s i s . The Branch i s reimbursed by the c o r p o r a - t i o n f o r t h i s a d d i t i o n a l space, c e r t a i n maintenance costs and a basement v a u l t which i t uses. The n e t r e n t a l and maintenance cost p a i d by the Branch f o r the year 1936 was $14,612.57. (d) Earnings - Branch Books: The Branch 1 s n e t earnings as r e f l e c t e d by i t s books f o r the years 1351 to 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1951 1952 1253 1934 1955 1956 1937 $2,500 7,700 1,300 100 200 100 100 These f i g u r e s are incomplete s i n c e , under the present accounting procedure, the Branch does n o t r e c e i v e any c r e d i t f o r income r e c e i v e d by the Head O f f i c e on investments, a l a r g e p o r t i o n o f which i s made p o s s i b l e by the c a p i t a l stock investment and r e s e r v e balances o f member banks i n the branch zone. Income on borrowings o f banks i n the branch zone i s a l s o c a r r i e d on the books o f the Head Office. 1CH (e) Branch Personnel; The r e p o r t o f examination of the Federal Reserve Bank o f Richmond, as o f June 17, 19S7, shows the f o l l o v d n g i n regard t o s a l a r i e s and personnel a t the C h a r l o t t e Branch; June 17, 1957 Number Amount Officers Employees June 27, 1956 Number Amount Increase Number Amount 3 55 $14,500 70,400 § 54 $13,900 70,100 1 $600 500 58 $84,900 57 &84,000 I |900 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . ( f ) Drench Expenses by F u n c t i o n s : The expenses o f the C h a r l o t t e Branch by f u n c t i o n s f o r the y e a r s 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 1952 General Overhead Controllable $ 10,026 Non-controllable 10,565 P r o v i s i o n o f Space 15,727 P r o v i s i o n o f Personnel 1,226 General Service 17,492 Postage 8,372 Insurance 2,240 F a i l e d Banks 641 Loan s , r e d i scouri t s , e t c 3,751 544 Securities Currency & Coin 13,328 Check C o l l e c t i o n 18,842 Non-Cash C o l l e c t i o n 6,148 Accounting 21,146 F i s c a l Agency32,704 Auditing 1,611 — Bank R e l a t i o n s F. Ft. Note Issues 511 S t a t i s t i c a l & Anc.lyt'l 86 T o t a l Expense 0164,960 Less - Reimbursable F i s c a l Agency Exp. 31,083 Net Expense $133,877 1955 1954 9, 973 12, 805 16, 886 8, 796 21, 389 11, 108 1 , 741 1955 $ 10, 120 16, 070 16, 569 1 , 302 18, 009 10, 525 2, 123 448 1 , 732 528 13, 177 19, 167 6, 979 19, 312 44, 130 1 , 590 0 $ 10,383 36 13,872 15,925 24,096 10,857 1,450 558 73 0182, 412 486 72 0202, 532 533 65 0241,036 049 $140, 363 51, 042 $151, 490 67.445 $173,591 1936 1957 $ 10, 604 21 13, 143 18, 726 22, 513 11, 732 1 , 592 0 10, 879 35 14, 042 1 , 810 23, 645 13, 094 1 , 527 903 166 30, 744 20, 714 6, 071 21, 421 71, 912 2 , 286 541 91 $233, 180 809 31 32, 500 21, 969 5, 765 20, 480 55, 628 2, 487 190 299 89 0205, 279 62, 143 $171, 037 49, 683 $155, 596 — 755 970 13, 734 22, 236 6 , 544 21, 193 52, 422 1 , 422 873 141 29,912 19,658 5,955 21,236 83,922 2,122 — .107 There were t e n branches i n the System which operated a t a lower annual cost than the C h a r l o t t e Branch i n 1937. (g) Volume o f Operations a t C h a r l o t t e Branch: The f o l l o w i n g i s a comparison o f the volume o f operations i n v a r i o u s departments o f the C h a r l o t t e Branch and the Head O f f i c e d u r i n g the l a s t six months o f 1936: C h a r l o t t e Branch Head O f f i c e Safekeeping Member bank s e c u r i t i e s 12-31-36 £304,000 $64,486,000 Branches w i t h l a r g e r volume: A l l branches, except S e a t t l e , Helena, Los Angeles and Spokane. Currency & Coin 1 . Number o f b i l l s r e c e i v e d and counted 7,915,000 26,375,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis and Los Angeles. Cost per one thousand u n i t s handled 44 cents 48 cents Branches w i t h higher u n i t c o s t : A l l branches except Birmingham, N a s h v i l l e , New Orleans, L i t t l e Rock, L o u i s v i l l e and Memphis. 2. Number o f coins r e c e i v e d and counted 3,164,000 28,687,000 Branches w i t h l a r g e r volume: A l l branches except L i t t l e Rock, Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 16 cents 7 cents Branches w i t h higher u n i t c o s t : A l l branches except B a l t i m o r e , J a c k s o n v i l l e , New Orleans, L o u i s v i l l e , Memphis, Oklahoma C i t y and Houston. Check C o l l e c t i o n 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 505,000 1,054,000 Branches w i t h l a r g e r volume: A l l branches except J a c k s o n v i l l e , L i t t l e Rock, Helena, Oklahoma C i t y , E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled $1. 32 $2.29 Branches w i t h h i g h e r u n i t c o s t : A l l branches except Birmingham, N a s h v i l l e and New Orleans. 2. Number of country checks (outgoing) r e c e i v e d 3,587,000 14,387,000 Brunches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t , L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha and Los Angeles. Cost per one thousand u n i t s handled $2.04 $2.45 .108 C h a r l o t t e Branch Check C o l l e c t i o n (Continued) Branches w i t h h i g h e r u n i t c o s t : Head O f f i c e B u f f a l o , C i n c i n n a t i , N a s h v i l l e , New Orleans, D e t r o i t , Helena, E l Paso, San A n t o n i o Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 3,568 10,579 Branches w i t h l a r g e r volume: A l l branches. Cost per u n i t handled 17.4 cents 18.4 cents Branches w i t h higher u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , D e t r o i t , Los Angeles, P o r t l a n d and S e a t t l e . 2. Nuaber of c o u n t r y c o l l e c t i o n s handled 18,961 44,456 Branches w i t h l a r g e r volume: B u f f a l o , Omaha, S a l t Lake C i t y and Spokane. Cost per u n i t handled 0 . 6 cents 11.8 cents Branches w i t h higher u n i t c o s t : A l l branches except L i t t l e Rock, Memphis, Omaha, E l Paso, S a l t Lake C i t y and Spokane. 3. Nuriber o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,696 9,048 Drenches w i t h l a r g e r volume: / i l l branches except Birmingheim, J a c k s o n v i l l e , Helena, Oklahoma C i t y , E l Paso, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 21.2 cents 20.5 cents Cost per u n i t handled Branches w i t h h i g h e r u n i t c o s t : J a c k s o n v i l l e , E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume o f o p e r a t i o n s o f the C h a r l o t t e Branch f o r the yoars 1951 to 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey of C h a r l o t t e Branch by Board's Examiners - 1955 During an examination o f the Federal Reserve Bank of Richmond, made as o f June 17, 1337, the Board's F i e l d Examiner reviewed the o p e r a t i o n s o f the C h a r l o t t e Branch and made the f o l l o w i n g comment: " I n view o f the r e l a t i v e unimportance o f the Branch c i t y and t e r r i t o r y and the comparatively small volume o f o p e r a t i o n s handled by the Branch, your examiner questions whether i t s continuance i s j u s t i f i e d i n the i n t e r e s t s o f economy and e f f i c i e n c y . " ( i ) Survey o f C h a r l o t t e Branch made by Federal Reserve Bank o f Richmond - 1956 A survey o f o p e r a t i o n s o f the C h a r l o t t e Branch was made by the Federal Reserve B a n k o f Richmond, as requested i n the Board's l e t t e r o f March 25, 1936 .109 9532), and the Board was advised as f o l l o w s : "The C h a r l o t t e Branch i s an e f f e c t i v e arm o f the Federal Reserve Bank o f Richmond i n s e r v i n g member banks, commerce, i n d u s t r y and a g r i c u l t u r e , and i t i s b e l i e v e d t h r t i t would be unwise to d i s c o n t i n u e i t s o p e r a t i o n s . " The f o l l o w i n g p o i n t s were considered i n r e a c h i n g t h i s c o n c l u s i o n : 1 . The f a c t t h a t the Branch was e s t a b l i s h e d o n l y a f t e r c a r e f u l a t t e n t i o n had been given t o the c o m p i l a t i o n o f p e r t i n e n t data r e l a t i v e to t r a n s i t schedules, currency needs and the normal t r e n d o f business i n the F i f t h D i s t r i c t - such i n v e s t i g a t i o n extending over a p e r i o d o f y e a r s . £. The f a c t t h a t C h a r l o t t e i s the l a r g e s t and most i m p o r t a n t c i t y i n the two C a r o l i n a s and i s i n the center o f the Piedmont s e c t i o n which i s noted f o r t e x t i l e manufacturing. 3. The f a c t t h a t the Branch has adapted i t s e l f t o the needs o f t h i s t e r r i t o r y and has become an i m p o r t a n t f a c t o r i n i t s f i n a n c i a l l i f e - having rendered p a r t i c u l a r l y u s e f u l s e r v i c e t o banks i n i t s zone d u r i n g the banking c r i s i s o f 1931-1934. 4. The volume o f operations conducted a t the Branch, and, 5. The f a c t t h a t i t i s much more s a t i s f a c t o r y , and p o s s i b l y no more expensive, t o have accounts o f member banks i n the branch zone c a r r i e d at C h a r l o t t e r a t h e r than a t Richmond. CHARLOTTE BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Non Cash XJoin Collection Checks Handled Bills Discounted Gov't Al 1 Total Coupons Other Gov't and and Counted Counted cy* Y Checks Transfer Traimptipn*. D i r e c t Other of 1931 12,765,000 6,527,000 765,000 4,851,000 365,000 -£,981,000 23,499 23,896 • 20,447 1932 12,275,000 6,959,000 748,000 4,082,000 421,000 5,251,000 34,827 27,579 - 17,639 1933 12,025,000 6,578,000 868,000 4,150,000 679,000 5,697,000 41,555 43,938 - 13,265 1934 12,767,000 7,238,000 845,000 4,795,000 1,503,000 7,143,000 49,655 42,722 - 12,222 1935 13,788,000 10,554,000 881,000 5,823,000 950,000 7,654,000 55,000 46,000 - \\,m 1936 15,255,000 7,626,000 973,000 6> 882,000 797,000 8,652,000 45,000 49,000 mm mm 12,000 Handled ( i n thousands of do 11ars) ^SBS 1931 50,931 961 476,847 612,907 39,531 1,129,285 252 25,433 • 1,020,265 1932 48,747 932 343,967 445,408 37,949 827,324 413 22,125 - 659,806 1933 53,049 3,780 441,904 541,100 52,284 1,035,288 507 31,980 - 615,109 1934 kefm 1,15** 624,283 750,040 91,612 1,465,935 513 m,707 • 35*4, 757 1935 4&, 673 1,280 669,589 832,229 72,314 1,574,132 479 38,590 - 1,01*6,376 1936 52,560 1,027 739,906 982,802 80,663 1,803,37t 440 46,173 • 1, 182,316 BIRMINGHAM BRANCH - FEDERAL RESERVE BANK Off ATLANTA. (a) C i t y o f Birmingham Birmingham, w i t h a p o p u l a t i o n o f 259,678, i s the t h i r t y - f o u r t h l a r g e s t i n the U n i t e d States and the l a r g e s t c i t y i n Alabama• city I t i s l o c a t e d i n the c e n t r a l p a r t o f the S t a t e and i s s a i d t o serve a t r a d e area extending about 100 miles i n a l l d i r e c t i o n s . There are approximately 740,000 people i n t h i s a r e a . Nine r a i l r o a d s , i n c l u d i n g the Southern, C e n t r a l o f Georgia, L o u i s v i l l e and Nashv i l l e , Seaboard A i r l i n e and F r i s c o , serve the c i t y . Transportation i s also a f f o r d e d by t h e D e t t e r A i r L i n e s . According t o t h e B i e n n i a l Census o f Manufactures J e f f e r s o n County, i n which Birmingham i s l o c a t e d , had 546 manufacturing establishments i n 1935, which had an o u t p u t v a l u e d a t $137,003,000. The p r i n c i p a l manufactures are s t e e l and i r o n p r o d u c t s , machinery, chemicals, cottonseed p r o d u c t s , t e x t i l e s , coke and coke b y - p r o d u c t s , cement and r a i l w a y equipment. Goal, i r o n o r e , l i m e s t o n e , marble, g r a p h i t e and commercial c l a y s are mined i n the surrounding t e r r i t o r y . There i s a l s o con- s i d e r a b l e lumbering, t r u c k f a r m i n g , d a i r y i n g , c o t t o n r a i s i n g and hog and p o u l t r y r a i s i r g c a r r i e d on. The Census o f American Business f o r 1935 l i s t s 418 wholesale and 3,729 r e t a i l establishments o p e r a t i n g i n J e f f e r s o n County, which enjoyed sales aggregating $125,688,000 and $88,584,000, r e s p e c t i v e l y , d u r i n g t h a t y e a r . Banking f a c i l i t i e s i n Birmingham are p r o v i d e d by t h r e e S t a t e banks ( l member), one n a t i o n a l bank and one p r i v a t e banking c o r p o r a t i o n . These i n s t i t u t i o n s had d e p o s i t s aggregating $88,007,000 as o f December 51, 1956, and o f t h i s amount $85,557,000 was c a r r i e d by the two l o c a l member banks. The n a t i o n a l bank operates s i x branch o f f i c e s i n the c i t y . Debits t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated $888,125,000 d u r i n g the year 1936, o r an average o f approximately 03,000,000 f o r each banking day. (b) Branch T e r x d t o r y and F u n c t i o n s : The Birmingham Branch was e s t a b l i s h e d on August 1 , 1918, and serves a l l o f the State o f Alabama except eleven counties l o c a t e d i n the southern p a r t o f the S t a t e and c e r t a i n designated c i t i e s , which are served by the Head O f f i c e . The branch zone c o n s t i t u t e s 17% o f the l a n d area o f the S i x t h D i s t r i c t and has 19% o f t o t a l population. its Approximately 16$ o f a l l banks i n the d i s t r i c t are w i t h i n t h i s area. As o f December 31, 1936, t h e r e were 177 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 70, i n c l u d i n g 54 n a t i o n a l and 16 State i n s t i t u t i o n s , were members o f the Sjjrstem. banks i n the zone were on t h e par l i s t . Only 6 o f the 107 nonmember The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared t o those o f t h e S i x t h D i s t r i c t as a whole: No. Member Banks Sixth D i s t r i c t Branch Zone 330 70 Loans and Investnents 01,026,849 129,397 Capital and Surplus (000 o m i t t e d ) 0143,409 24,488 Total Deposits $1,458,473 180,379 There are o n l y seven branch zones i n t h e System having smaller member bank f o o t i n g s than the Birmingham zonej namely, Spokane, E l Paso, L i t t l e Rock, Helena, C h a r l o t t e , San Antonio and N a s h v i l l e . The Birmingham Branch i s operated on the "memorandum plan. 1 1 A l l general ledger accounts, as w e l l as accounts o f member banks, nonnenber clearir^g banks and ether Federal Reserve banks, are maintained a t the Head O f f i c e , which also maintains a l l expense r e c o r d s . A t r a n s c r i p t o f a l l e n t r i e s a f f e c t i n g these . 1 1 3 v a r i o u s accounts i s sent t o the Head O f f i c e d a i l y by w i r e . Banks i n the t e r r i t o r y served by the Branch nay f o r w a r d t h e i r d i s c o u n t s e i t h e r t o the Branch o r the Head O f f i c e . Notes r e c e i v e d by the Branch are examined f o r technicalities and the amount i s w i r e d t o the Head O f f i c e which i n t u r n w i r e s i t s tentative approval o r d i s a p p r o v a l , c r e d i t being g i v e n as o f the date the a p p l i c a t i o n i s r e ceived a t the Branch* Notes are then forwarded t o the Head O f f i c e f o r final a p p r o v a l , b u t the supporting c o l l a t e r a l , i f any, remains i n custody o f the Branch. The Branch g i v e s t h e sane s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e i n s o f a r as r e c e i p t s and disburseaents o f currency and c o i n , check c o l l e c t i o n , noncash c o l l e c t i o n s , w i r e t r a n s f e r s and safekeeping o f s e c u r i t i e s ore concerned. The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , F a i l e d Banks, Research o r F i s c a l Agency departments. As o f J u l y 10, 19S7, ueriber banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : No.of Banks C i t y o f Birmingham Remainder o f Zone 2 65 67 Reserve Balances Deferred Balances Capital Stock 011,340,501 02,480,632 0.247.919 489,707 Sl9.588.500 $2.970.339 0405,200 $35 1 850 0741 f 050 Bills Discounted Birmingham i s 168 t r a i n m i l e s (5 h r s . and 50 n i n s . ) from A t l a n t a . There are o n l y two branch c i t i e s c l o s e r to t h e i r r e s p e c t i v e head o f f i c e s t h a n Birmingham namely, P i t t s b u r g h and B a l t i m o r e . However, t h e r e are f o u r t e e n branch c i t i e s which are as w e l l s i t u a t e d as Birmingham from the s t a n d p o i n t o f o v e r n i g h t m a i l . Other than Birmingham t h e r e are 50 member bank p o i n t s i n the branch zone and a l l b u t 7 o f such p o i n t s , having 7 member banks, can be reached o v e r n i g h t by o r d i n a r y m a i l from Birmingham, whereas 10, having 13 member banks, cannot be reached o v e r n i g h t by o r d i n a r y n a i l from A t l a n t a . I n s o f a r as r e g i s t e r e d n a i l i s concerned, t h e r e are 19 c i t i e s , w i t h 22 member banks, which are n o t w i t h i n o v e r n i g h t n a i l t i n e o f c i t h e r c i t y ; t h e r e being o n l y one p o i n t i n t h e zone which can be served more promptly f r o n Birmingham than from A t l a n t a . I n t h e circumstances, it appears t h a t discontinuance o f the Birmingham Branch would inconvenience a v e r y U n i t e d number o f o u t l y i n g member banks and t h a t o n l y where o r d i n a r y m a i l i s used* I t would, o f courso, a f f e c t the s e r v i c e rendered t o the two member banks I n the City o f Birmingham which now have an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch* Other than Birmingham, t h e r e are f i v e Alabama c i t i e s i n the branch zone having a p o p u l a t i o n i n exccss o f 20,000; namely, Montgomery, 66,079; Gadsden, 24,042; A n n i s t o n , 22,545; Bessemer, 20,721, and Tuscaloosa, 20,659. (c) Branch B u i l d i n g : The Birmingham Branch has occupied i t s present q u a r t e r s a t 1 8 t h S t r e e t and 5 t h Avenue since January 1927. The f o l l o w i n g f i g u r e s show the o r i g i n a l c o s t and c a r r y i n g value as o f J u l y 10, 1957, o f t h e branch premises: Cost Umd Building V a u l t and v a u l t equipment F i x e d machinery and equipment 0124,156 245,426) 65.910) 0455,472 47.448 Q4Q?f920 Book Value 7-10-57 0124,156 186.596 0310,732 495 $511,227 This account i s c a r r i e d on the books o f the Head O f f i c e . (d) Earnings - Branch Books: No r e c o r d o f earnings i s maintained a t the Birmingham Branch as i t i s operated on the "nenorondun plan. 1 1 .115 (e) Branch Personnel: The r e p o r t o f examination o f t h e Federal Reserve Bank o f A t l a n t a , nade as o f J u l y 10, 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the Birmingham Branch: J u l y 10. 1937 Number Amount Officers Employees 2 30 H 0 9,000 39.400 £48.400 May 30. 1936 Number Amount 3 27 J£ $11,700 33,400 §45.100 Decrease Number Amount 1# §2,700 3 I n c . 6.000 I n c 2 Inc.S3.500 I n c #Due t o discontinuance o f o f f i c e o f A s s i s t a n t Cashier. O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . ( f ) Branch Expense by F u n c t i o n s : The expenses o f t h e Birmingham Branch by f u n c t i o n s f o r the y e a r s 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 1935 1952 1955 1934 1936 1957 General Overhead Controllable $ 8,867 0 0,546 0 9,021 0 9 , 5 6 1 0 9,109 0 7,105 — 10,300 Noncontrollable 5,904 10,600 ^ P r o v i s i o n o f Space 5,695 11,606 9,013 9,952 9,571 7,446 P r o v i s i o n of Personnel 196 6,218 386 5,523 09 3,204 General Service 0,629 0,557 9,058 7,824 7,453 0,090 6,758 12,323 11,719 Postage 0,420 10,037 9,221 1,226 1,795 1,078 Insurance 1,044 992 1,179 Loans, r e d i s c o u n t s , e t c . 795 235 1 982 604 724 636 736 Securities 639 709 727 054 22,672 9,384 Currency & Coin 19,608 7,394 0,142 17,375 15,090 15,120 13,080 Check C o l l e c t i o n 14,159 14,231 13,994 2,906 3,271 2,915 3,449 Noncash c o l l e c t i o n 3,397 4,407 13,146 14,460 11,407 14,533 13,513 13,024 Accounting 90,297 03,207 72,299 30,061 22,104 12,057 F i s c a l Agency — 25 60 Legal 494 424 390 330 459 314 Auditing — — — — 224 F . R. Note Issues 095,255 $100,433 0131,777 0160,320 0170,003 0134,173 T o t a l Expense Less - Reimbursable F i s c a l ' Agency Expense 11.579 21.518 30.285 65.092 79.949 37.515 Net Expense &3S.674 & 06.915 8 95 r 492 &105.728 ft 98.954 $ 96,660 * Represents the n e t expense - income from r e n t a l s having been deducted. There were twenty branches i n the System which operated a t a h i g h e r annual c o s t than the Birmingham Branch i n 1957. (g) Volume o f Operations a t Birmingham Branchs The f o l l o w i n g i s a comparison o f t h e volume o f o p e r a t i o n s i n v a r i o u s d e p a r t ments o f the Birmingham Branch and the Head O f f i c e d u r i n g t h e l a s t s i x months o f 1956 s Birmingham Branch Head O f f i c e Safekeeping Member banks s e c u r i t i e s 12-31-56 §2,455,000 $40,256,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , N a s h v i l l e , Memphis, E l Paso, P o r t l a n d and S e a t t l e , Currency & Coin 1. Number o f b i l l s r e c e i v e d and counted 5,695,000 22,024,000 Branches w i t h l a r g e r volumes A l l branches except L i t t l e Rock, Helena, Denver, Oklahoma C i t y , Omaha, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 36 cents 41 cents Branches w i t h h i g h e r u n i t costs A l l branches except New Orleans and L i t t l e Rock, 2. Number o f coins r e c e i v e d and counted 4,550,000 7,225,000 Branches w i t h l a r g e r volumes A l l branches except C h a r l o t t e , J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, Helena, Denver, E l Paso, P o r t l a n d , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 17 cents 18 cents Branches w i t h h i g h e r u n i t c o s t ; A l l branches except B u f f a l o , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Oklahoma C i t y , Houston and Los Angeles. Check C o l l e c t i o n 1. Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 627,000 1,567,000 Branches w i t h l a r g e r volumes A l l branches except C h a r l o t t e , J a c k s o n v i l l e , L i t t l e Rock, Helena, Oklahoma C i t y , E l Paso, San A n t o n i o , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled $1.19 $1.23 Branches ^ i t h h i g h e r u n i t costs A l l branches. 2,111,000 3,704,000 2. Number o f country checks (outgoing) received Branches w i t h l a r g e r volume: A l l branches except N a s h v i l l e , New Orleans, L i t t l e Rock, Memphis, Helena, E l Paso, S e a t t l e and Spokane. Cost per one thousand u n i t s handled $1.63 $1.83 Branches w i t h h i g h e r u n i t costs A l l branches. Non-cash C o l l e c t i o n s 1. Number of c i t y c o l l e c t i o n s handled 4,206 15,278 Branches w i t h l a r g e r volumes A l l branches except C h a r l o t t e and Helena. Cost per u n i t handled 13.7 cents 8 . 4 cents Branches w i t h h i g h e r u n i t costs A l l branches except J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, L o u i s v i l l e , Memphis, Helena, Oklahoma C i t y , Omaha, E l Paso, Houston and S a l t Lake C i t y . .117 Birmingham Branch Head O f f i c e Non-cash C o l l e c t i o n s (Continued) 2. Hu^bcr of country c o l l e c t i o n s handled 4,093 21,273 Branches w i t h l a r g e r volumes A l l branches Cost per u n i t handled 15,4 cents 7 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , N a s h v i l l e , Los Angeles and P o r t l a n d . 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,027 2,630 Branches w i t h l a r g e r volume: A l l branches except Helena, E l Paso, S a l t Lake C i t y , S e a t t l e and Spokane. Cost per u n i t handled 9 . 1 cents 10.3 cents Branches w i t h h i g h e r u n i t costs A l l branches except C i n c i n n a t i , P i t t s b u r g h , New Orleans, Denver, Omaha and S e a t t l e . (h) Survey of Birmingham Branch by Board 1 s Examiners - 1933: During t h e course of an examination of t h e Federal Reserve Bank of A t l a n t a , made as o f November 13, 1933, the Board 1 s examiners reviewed the operations of the Birmingham Branch and, based on i n f o r m a t i o n developed, expressed doubt as t o the n e c e s s i t y f o r i t s continuance. I t was p o i n t e d out t h a t Birmingham i s o n l y 160 miles from A t l a n t a , being e a s i l y reached o v e r n i g h t by r a i l and w i t h i n one hour and t h i r t y minutes by a i r ? t h a t a l l b u t f o u r t e e n p o i n t s i n the branch zone could be reached o v e r n i g h t from A t l a n t a or New Orleans, only one of such p o i n t s having a p o p u l a t i o n of over 5,00uj and t h a t the Branch was one o f the s m a l l e s t i n the System, based on the number and d o l l a r volume o f items handled. ( i ) Survey of Birmingham Branch made by Federal Reserve Bank o f Atlanta—1936: I n accordance w i t h the request i n the Board's l e t t e r o f March 25, 1936 (X-9532), a survey of the o p e r a t i o n s of the Birmingham Branch was made by the Federal Reserve Bank o f A t l a n t a . As a r e s u l t o f t h i s survey, P r e s i d e n t Newton advised the Board t h a t the c l o s i n g of the Birmingham Branch would cause very little .118 inconvenience, except t o banks l o c a t e d i n t h e immediate v i c i n i t y , and t h a t it would r e s u l t i n an estimated annual saving o f $45,574> c h i e f l y through a r e d u c t i o n i n over-head. Mr. Newton's r e p o r t contained data r e l a t i v e t o o r d i n a r y and r e g i s t e r e d m a i l f a c i l i t i e s fro,a both A t l a n t a and Birmingham t o p o i n t s i n the branch zone, which has been p r e v i o u s l y given i n t h i s memorandum, as w e l l as d a t a r e g a r d i n g the volume o f o p e r a t i o n s a t the Branch. He p o i n t e d out t h a t banks l o c a t e d i n and near Birmingham would be inconvenienced i f the Branch were closed, but uiade no comment as t o t h e i r p o s s i b l e r e a c t i o n t o the c l o s i n g . N e i t h e r was any comment made as t o p o s s i b l e l o s s r e s u l t i n g from abandonment o f the banking premises owned and occupied by the Branch. .119 BIRMINGHAM BRANCH VOLUME OF OPERATIONS flwplw* 9f Pigs?? H a r r t M Currency Received Bills Oaie 20 and Counted 1931 10,30**,000 1932 8,336,000 1933 11,221,000 mk 9,27*4,000 1935 9,323,000 1936. 10,328,000 Non Cash Coin Received and Checks Handled sentry fronted 6,182,000 5,883,000 7,**36,000 6,283,000 6,870,000 7,770,000 Collection Items Gov't All Gov't Checks Tptal Coupons Ofoer Fiscal Agency Direct Other Transfer of Ftfndfi 1,317,000 2,879,000 332,000 **,528,000 17,335 12,333 6,975 99!,000 2,077,000 353,000 3,**2I,000 18,322 12,**67 5,901 926,000 2,**39,Q00 532,000 3,897,000 22,392 l**,370 5,338 1,08*1,000 3,177,000 818,000 5,079,000 36,939 19,060 6,396 1,151,000 3,6**6,000 863,000 5,660,000 52,000 17,000 5,2**** 1,2*10,000 3,958,000 713,000 5,911,000 Amounts Handled ( i n thousands of dollars) **2,000 18,000 5,000 1931 1*0,275 708 681,818 299,762 39,080 1,020,660 162 11,511 105,301 1932 31,798 670 **6I,129 209,227 28,613 698,969 219 6,898 66,106 1933 *4l,**05 1,615 517,215 21*2,283 35,190 79**,696 276 10,656 67,**39 193** 31, 66*1 786 7**9,90** 32**,956 58,597 I,I33,**57 ¥*5 l**,8**7 129,3**9 1935 29,599 960 8I7,U38 3**M32 58,888 1,221,158 *f20 15,239 135,953 1936 3U,3l*9 960 927,kBk **38,500 62,5**3 l,**28,527 390 16,237 137,216 http://fraser.stlouisfed.org/ O Federal Reserve Bank of St. Louis HAVANA AGENCY - FEDERAL RESERVE BAM OF ATLANTA (a) I s l a n d o f Cuba Cuba, the l a r g e s t I s l a n d o f the West I n d i e s , l i e s between the Gulf o f Mexico, the S t r a i g h t o f F l o r i d a and the A t l a n t i c Ocean on the n o r t h and the Caribbean Sea on the south. tant. Key West, F l o r i d a , i s about 100 m i l e s d i s - I t s area, i n c l u d i n g the adjacent I s l e o f Pines and surrounding keys, i s about 44,164 square m i l e s , or n e a r l y equal to t h a t o f the S t a t e o f Pennsylvania, I t i s 750 m i l e s i n l e n g t h and has an average b r e a d t h o f 50 m i l e s , w i t h a maximum o f 160 m i l e s . The coast l i n e , i n c l u d i n g the l a r g e r k e y s , i s about 2,500 m i l e s i n l e n g t h and provides many f i n e h a r b o r s , n o t a b l y t h a t o f Havana which i s one o f the l a r g e s t and f i n e s t i n the w o r l d . Accord- i n g t o the census o f 1930, the I s l a n d had a p o p u l a t i o n o f 3,763,375, consist- i n g o f 2,570,102 n a t i v e w h i t e s , 923,346 colored and 269,927 u n c l a s s i f i e d ; the l a t t e r f i g u r e i n c l u d i n g Americans, Europeans, Chinese and a l l f o r e i g n e r s permanently r e s i d e n t i n Cuba. The estimated p o p u l a t i o n as o f December 31, 1936, was 4,046,706. Sugar i s the predominant crop and approximately 1,000,000 acres are given over to growing cane. The y i e l d f o r 1936 was 2,557,000 l o n g tons and d u r i n g the year 2,562,289 l o n g tons valued a t $112,591,307 were exported. Tobacco r a i s i n g and the manufacture o f c i g a r s and c i g a r e t t e s i s the second l a r g e s t i n d u s t r y i n Cuba. The r a i s i n g o f l i v e s t o c k , c o f f e e , f r u i t and vegetables and the mining o f i r o n , copper and manganese are a l s o f a c t o r s i n the economic l i f e o f the I s l a n d . The Department o f Commerce estimated t h a t American investments i n Cuba i n 1930 aggregated $1,066,551,000 o f which $935,706,000 was d i r e c t and $130,845,000 p o r t f o l i o . An estimate made i n W a l l S t r e e t i n J u l y , 1933, p u t .121 American investments i n sugar p r o p e r t i e s on the I s l a n d a t 0570,000,000; in power i n t e r e s t a t more than 0125,000,000; i n o i l a t 09,000,000; i n r a i l r o a d s a t 0116,000,000; i n t e l e g r a p h and telephones a t 015,000,000 and i n o t h e r sources a t 0100,000,000. Cuba has been hard h i t through u n f a v o r a b l e economic c o n d i t i o n s which undoubtedly explains the d i f f e r e n c e s between the estimates f o r 1950 end 1955. The major p o r t i o n o f Cuban trade i s w i t h the United S t a t e s , as i s r e f l e c t e d by the f o l l o w i n g f i g u r e s : Exports U n i t e d States Year Total 1931 1952 1935 1934 1935 1936 #118,865,553 80,672,000 84,591,000 107,746,409 128,022,542 154,805,158 $ 90,059,512 58,550,270 58,497,548 78,928,916 101,534,180 121,898,787 Imports U n i t e d States Total $ 78,678,777 51,024,000 42,362,000 73,388,154 95,464,502 105,215,001 $ 46,965,702 28,754,509 25,092,862 45,525,574 55,686,078 66,494,245 A r e c i p r o c a l t a r i f f agreement between the U n i t e d States and Cuba was signed i n 1956 under which Cuba made concessions on 426 items o f American o r i g i n , g r a n t i n g duty r e d u c t i o n s and p r e f e r e n t i a l s o f from 20% t o 60%. In t u r n the U n i t e d States granted Cuba l a r g e t a r i f f r e d u c t i o n s on sugar, rum and tobacco, and also seasonal decreases on f r e s h f r u i t s and v e g e t a b l e s . The t r e a t y covered over 90% o f Cuba's exports t o the U n i t e d S t a t e s , (b) C i t y o f Havana Havana, w i t h a p o p u l a t i o n o f 584,893, i s the c a p i t a l and l a r g e s t o f Cuba. city I t i s s i t u a t e d on the northwestern s h o r t o f the I s l a n d about 100 m i l e s to the south and somewhat ?#est o f Key West, F l o r i d a . I t has one o f the f i n e s t and s a f e s t harbors i n the w o r l d and numerous steamship l i n e s p l y between Havana and American p o r t s . There i s d a i l y passenger s e r v i c e by a i r - plane between Miami, F l o r i d a and Havana. The number o f t o u r i s t s e n t e r i n g .22 Cuba, c h i e f l y a t Havana, was 157,908 i n 1936. As o f December 31, 1937, banking f a c i l i t i e s i n Havana were p r o v i d e d by the f o l l o w i n g i n s t i t u t i o n s : American Banks N a t i o n a l C i t y Bank, New York Chase N a t i o n a l Bank, New York F i r s t N a t i o n a l Bank, Boston Number of O f f i c e s C i t y o f Havana Elsewhere i n Cuba 5 1 3 8 8 1 4 15 3 Canadian Banks Royal Bank o f Canada Canadian Bank o f Commerce Bank o f Nova S c o t i a 4 Domestic Banks Mendoza y Cia ( P r i v a t e ) N« Gelatz y c i a ( p r i v a t e ) Banco T e r r i t o r i a l de Cuba ( J t . Stock) Banco d e l Commercio 1 1 1 1 Published statements o f f o r e i g n banks o p e r a t i n g branches i n Cuba show c n l y combined f i g u r e s f o r the head o f f i c e and a l l branches. However, estimates place bank deposits i n Cuba i n the neighborhood o f $140,000,000. Havana, as above i n d i c a t e d , i s the banking center o f the I s l a n d . (c) Establishment o f Havana Agency: On September 1 , 1923, agencies o f the Federal Reserve Banks o f A t l a n t a and Boston were e s t a b l i s h e d i n Havana; the l a t t e r being d i s c o n t i n u e d and i t s f u n c t i o n s assumed by the A t l a n t a Agency on January 1 , 1927. From 1927 to the present time the Agency has been operated by the A t l a n t a Reserve bank. However, since June 1 , 1935, such o p e r a t i o n has been by agreement w i t h the o t h e r eleven Reserve banks " f o r the account of the F e d e r a l Reserve System as a whole and o f each o f the Federal Reserve banks". The agreement p r o - vides t h a t the A t l a n t a bank d e f r a y a l l expenses of o p e r a t i o n , b u t t h a t it share any p r o f i t s w i t h the other Reserve banks - the l a t t e r undertaking to bear a pro r a t a share o f c e r t a i n s p e c i f i e d unusual losses ( n o t covered by c o l l e c t i b l e insurance) such as those a r i s i n g from c i v i l commotion, war riots, etc, (d) Functions of the Agency: Functions o f the Agency i n c l u d e the r e c e i p t of currency f o r cable t r a n s f e r to the U n i t e d States; the payment o f currency on cable t r a n s f e r s from the United S t a t e s ; and the exchange of new or f i t f o r m u t i l i a t e d currency. These t r a n s a c t i o n s are a l l i n United States currency and are handled f o r any banking i n s t i t u t i o n i n Cuba or f o r the Cuban government a t a r a t e of $1.00 per $1,000. On shipments o f m u t i l a t e d currency the Agency i s , by s p e c i a l decreee, exempt from the u s u a l tax o f one f o u r t h of one per cent l e v i e d by the Cuban government on exports o f funds from the country. Assets o f the Agency c o n s i s t of cash and such cash items as are held pending weekly charge to the Head O f f i c e . currency i s c a r r i e d by the Agency. Approximately $5,000,000 i n A l l Agency accounts, i n c l u d i n g earnings and expenses, are c a r r i e d on the books o f the Head O f f i c e , although the Agency maintains c e r t a i n records r e q u i r e d by Cuban law. When the Agency was e s t a b l i s h e d United States currency, which was and s t i l l i s legal, tender on the I s l a n d , was the c h i e f medium o f exchange. In f a c t one of the main reasons f o r e s t a b l i s h i n g the Agency was t o clean up the currency then c i r c u l a t i n g on the I s l a n d . I n recent years, however, the Cuban government has placed i t s own currency i n c i r c u l a t i o n and such notes have l a r g e l y supplanted United States currency f o r a l l o r d i n a r y purposes. The United States currency on the I s l a n d , estimated t o aggregate approximatel y $50,000,000, i s a t present l a r g e l y used as bank reserves f o r deposits .124 payable i n U n i t e d S t a t e s currency and f o r i n t e r b a n k payments, or has found i t s way i n t o hoarding. As a r e s u l t there has been a gradual " d r y i n g up" of a c t i v i t y a t the Havana Agency. A schedule showing the volume o f operations a t the Havana Agency f o r the years 1928 to 1937 i n c l u s i v e i s attached to t h i s memorandum. (e) Agency Q u a r t e r s : The Havana Agency occupies 2,240 square f e e t o f space on the ground f l o o r of the M e t r o p o l i t a n O f f i c e B u i l d i n g , Progresso and Aguacate S t r e e t s , under a lease which expires on A p r i l 1 , 1942. The average annual r e n t a l over the p e r i o d of the lease i s $4>5Q0 por annum. There i s no p r o v i s i o n i n the l e a s e f o r i t s extension and i t i s s u b j e c t t o c a n c e l l a t i o n i n the event the Agency i s d i s c o n t i n u e d . The v a u l t , v a u l t equipment and f i x t u r e s i n the o f f i c e are owned by the Reserve bank. ( f ) Agency Personnel: As o f January 28, 1938, the personnel of the Agency consisted o f a manager, an a c t i n g a s s i s t a n t manager, one s t e n o g r a p h e r - c l e r k , seven guards, end one p o r t e r w i t h t o t a l annual s a l a r i e s of 020,980. I n addition, salaries aggregating 0300 a n n u a l l y are paid to three p a r t time employees and payment a t the r a t e o f 012 per annum i s made t o each o f f o u r o f f i c e r s o f the Havana Branch o f the N a t i o n a l C i t y Bank o f New York who are a u t h o r i z e d t o a c t as emergency custodians i n the absence of the Agency manager or a c t i n g a s s i s t a n t manager. (g) Earnings and Expenses: The earnings and expenses o f the Havana Agencies o f the Federal Reserve Banks o f Boston (1923 to 1926) and A t l a n t a (1923 t o 1937) were as f o l l o w s : Earnings Expenses F.R.B* o f Boston 1923 1924 1925 1926 $ 24,469.00 47,590.18 43,731.00 113,969.60 $ 8,796.40 13,648.23 13,366.43 16,210.52 Havana Agency F.R.B. o f A t l a n t a 1925 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 — — — 67,434.68 43,382.40 54,571.84 79,212.28 33,891.00 21,614.90 45,248.83 26,693.64 16,560.39 9,483.88 5,316.64 24,958.58 57,614.83 32,191.07 89,011.72 59,856.05 55,246.03 78,794.80 74,100.67 50,877.13 41,521.96 61,387.70 52,020.09 46,893.97 37,429.36 35,157.10 Earnings o f the Agency are d e r i v e d from t h r e e classes of currency transactions: (1) the payment o f currency to l o c a l banks i n exchange f o r c r e d i t a t a Federal Reserve bank, (2) the r e c e i p t o f currency from l o c a l banks i n exchange f o r which c r e d i t i s given f o r the account o f the l o c a l bank a t a Federal Reserve bank and (3) the denominational exchange o f new or f i t currency f o r u n f i t currency. A commission o f one d o l l a r per thousand i s charged on a l l t h r e e classes o f t r a n s a c t i o n s . Expenses i n c l u d e the cost o f p r i n t i n g and s h i p p i n g Federal Reserve n o t e s , (h) Status o f the Agency: As p r e v i o u s l y s t a t e d i n t h i s memorandum, the Havana Agency since June 1 , 1935 has by agreement been operated by the Federal Reserve Bank o f 12* A t l a n t a " f o r the account o f the Federal Reserve System as a ishole and o f each o f the Federal Reserve hanks"* T h i s arrangement grew out o f the f a c t t h a t the A t l a n t a Reserve bank had requested a u t h o r i t y t o d i s c o n t i n u e the Agency or as an a l t e r n a t i v e t o have some p l a n f o r m u l a t e d under which the Agency might be operated w i t h o u t i n c u r r i n g a s u b s t a n t i a l o p e r a t i n g l o s s , as was the case i n every year o f i t s o p e r a t i o n except 1927 and 1930• A t the time the agreement became e f f e c t i v e , i t was f e l t t h a t f u t u r e o p e r a t i n g l o s s e s might be s u b s t a n t i a l l y reduced, i f n o t v i r t u a l l y e l i m i n a t e d , an increase i n the charge made f o r e f f e c t i n g t r a n s f e r s o f funds. through As a consequence the A t l a n t a Reserve bank continued t o absorb the expense o f o p e r a t i n g the Agency. The Board f e l t , however, t h a t the charge should n o t be increased, a t l e a s t a t t h a t p a r t i c u l a r time. showed t h a t , even i f Subsequent developments the charge had been doubled, the o p e r a t i n g l o s s would n o t have been s u b s t a n t i a l l y reduced, due l a r g e l y t o a d e c l i n e i n the volume of t r a n s f e r s . Because o f t h i s f a c t , as w e l l as because o f changes i n the r e l a t i o n s h i p p r e v i o u s l y r e f e r r e d to h e r e i n between the governments o f the U n i t e d States and Cuba and the s u p p l a n t i n g o f United States currency by Cuban currency, the board o f d i r e c t o r s o f the A t l a n t a Reserve bank adopted r e s o l u t i o n s on February 14, 1956 and September 11, 1936, r e q u e s t i n g a u t h o r i t y t o d i s c o n t i n u e the Agency. The matter was before the Board on numerous occasions, but a c t i o n thereon was delayed a t the r e q u e s t o f the S t a t e Department which f e l t t h a t the operations o f the Agency were v i t a l t o t r a d e between the U n i t e d States and Cuba. However, on August 3, 1938, the Board o f Governors a f t e r again r e v i e w i n g the operations o f the Agency, and a c q u a i n t i n g the S t a t e Department w i t h a l l o f the f a c t s of the case and i t s intentions, .127 passed a r e s o l u t i o n a u t h o r i s i n g and d i r e c t i n g the F e d e r a l Reserve Bank o f A t l a n t a to d i s c o n t i n u e the Agency as soon as p r a c t i c a b l e and i n no event l a t e r than a t the c l o s e o f business December 51, 1958, The Federal Reserve Bank o f A t l a n t a and the other Federal Reserve banks were advised o f the B o a r d ' s a c t i o n and, as o f August 13, 1938, P r e s i d e n t Newton informed the Board t h a t h i s bank was p l a n n i n g to close the Agency n o t l a t e r than November 50, 1958, i f i t was f e a s i b l e t o do so. HAVANA AGENCY VOLUME OF OPERATIONS n thousands of do liars) Deposits of currency Currency received from head o f f i c e and H* 10 and gold coin by banks in Havana and by Cuban U n f i t and mutilated U n f i t and Currency payments American Currency Mut i I a t e d to Havana banks for branches and from government for transfer received in exchange currency cable transfers Currency Date Treasury Department to United States for new and f i t redeemed payable in Cuba exchange s 1928 10,900 26,kk9 2,592 22,862 13,738 3,195 1929 25,*422 28,215 3,*4*4l 31,112 21,595 U,I87 1930 38,820 1*7,63! 2,022 l49,2l4l 27,139 *4,282 1931 7,770 22,8*43 2,*483 20,836 8,010 3,238 1932 1,1*40 17,869 322 15,392 3,550 596 1933 28,806 2*4,27*4 1,226 27,526 26,0*47 193*4 l*4,*420 11,932 201 10,628 1*4,530 606 1935 2,8*40 11,532 UO 9,880 *4,500 699 1936 820 7,9Hi 36 7,*489 1,500 281 1937 - 14,923 39 U,H9 350 115 JACKSONVILLE BRANCH - FEDERAL, RESERVE, BANK OF ATLANTA (a) C i t y o f J a c k s o n v i l l e : J a c k s o n v i l l e , w i t h a p o p u l a t i o n o f 129,549, i s the the s i x t y - t h i r d l a r g e s t c i t y i n the U n i t e d States and the l a r g e s t c i t y i n F l o r i d a . I t i s located i n the extreme n o r t h e a s t e r n p a r t o f the State on the S t . Johns R i v e r , which p r o vides ready access to the A t l a n t i c Ocean, and i s s a i d t o serve a trade area extending 125 m i l e s n o r t h , 115 m i l e s south, 110 m i l e s west and 20 m i l e s to the east. This t r a d e area has an estimated p o p u l a t i o n o f 4 i 0 , 0 0 0 . Rail f a c i l i t i e s are a f f o r d e d by the A t l a n t i c Coast L i n e , Seaboard A i r L i n e , F l o r i d a East Coast, Southern and Georgia, Southern & F l o r i d a r a i l r o a d s . by the Eastern A i r Transport Company. The c i t y i s a l s o served A considerable volume o f f o r e i g n and coastwise s h i p p i n g a l s o emanates from J a c k s o n v i l l e . According t o the B i e n n i a l Census o f Manufactures f o r the year 1935, there were 256 manufacturing establishments l o c a t e d i n Duval County, i n which J a c k s o n v i l l e i s s i t u a t e d , which had an output valued a t $36,240,000 d u r i n g t h a t year. The c h i e f i n d u s t r i e s o f the community are the p r o d u c t i o n o f n a v a l s t o r e s , lumber, c i g a r s , canned goods and f e r t i l i z e r . I n a d d i t i o n there i s some ship b u i l d i n g and automobile assembling. The Census o f American Business f o r 1935 l i s t s 2,292 r e t a i l and 555 wholesale establishments o p e r a t i n g i n Duval County, which enjoyed sales aggregating $52,506,000 and $136,341,000, r e s p e c t i v e l y , d u r i n g t h a t y e a r . Banking f a c i l i t i e s i n J a c k s o n v i l l e are p r o v i d e d by two S t a t e banks (nonmembers), three n a t i o n a l banks and one M o r r i s Plan bank. 'These i n s t i t u t i o n s had deposits aggregating $105,056,000 as o f December 51, 1956, and o f t h i s amount $103,521,000 was c a r r i e d by the three l o c a l member banks. Debits t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated .80 $792,111,000 d u r i n g t h e year 1936, o r an average o f approximately $2,640,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions: The J a c k s o n v i l l e Branch was e s t a b l i s h e d on August 5 , 1918, and serves the e n t i r e S t a t e o f F l o r i d a . The branch zone c o n s t i t u t e s 2256 o f t h e l a n d area o f the S i x t h D i s t r i c t and has 13$ o f i t s t o t a l p o p u l a t i o n . Approxi- mately 14$ o f a l l banks i n the d i s t r i c t are w i t h i n t h i s area. As o f December 31, 1936, t h e r e were 155 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 57, i n c l u d i n g 53 n a t i o n a l and 4 S t a t e i n s t i t u t i o n s , were members o f t h e System. o f the 98 nonmember banks i n t h e zone were on t h e par l i s t . Only 19 The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f t h e member bank f o o t i n g s i n t h e branch zone as compared t o those o f the S i x t h D i s t r i c t as a whole: No. Member Banks Sixth District Branch Zone 330 57 Capital Loons and and Total Investments Surplus Deposits (000 o m i t t e d ) $1,026,849 $143,409 $1,458,473 177,123 23,075 272,270 There are only tv/elve branch zones i n the System having l a r g e r bank f o o t i n g s than the J a c k s o n v i l l e Zone; namely, P i t t s b u r g h , Los Angeles, Detroit, C i n c i n n a t i , B u f f a l o , B a l t i m o r e , New O r l e a n s , S e a t t l e , Oklahoma C i t y , Houston, Denver and Omaha. The J a c k s o n v i l l e Branch i s operated on the "memorandum p l a n " , b u t o f f e r s t o member banks i n i t s zone the same s e r v i c e as i s a v a i l a b l e a t the Head O f f i c e i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c o l l e c t i o n , noncash c o l l e c t i o n s and safekeeping .131 o f s e c u r i t i e s are concerned. However, a l l general l e d g e r accounts, as w e l l as accounts o f member banks, nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t the Head O f f i c e , which also maintains expense accounts. all A t r a n s c r i p t o f a l l e n t r i e s a f f e c t i n g the v a r i o u s a c - counts i s sent t o the Head O f f i c e d a i l y by w i r e . Banks i n the t e r r i t o r y served by t h e Branch may f o r w a r d t h e i r discounts e i t h e r t o the Branch o r the Head O f f i c e . Notes r e c e i v e d by the Branch are examined f o r technical- i t i e s and the amount i s w i r e d t o the Head O f f i c e which i n t u r n w i r e s i t s t e n t a t i v e approval o r d i s a p p r o v a l , c r e d i t being given as o f the date the a p p l i c a t i o n i s r e c e i v e d a t t h e Branch. Notes are then forwarded t o the Head O f f i c e f o r f i n a l a p p r o v a l , b u t the s u p p o r t i n g c o l l a t e r a l , i f remains i n custody o f the Branch. any, The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , F a i l e d Banks, Research o r F i s c a l Agency departments. As o f J u l y 10, 1957, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : No. o f Banks City of Jacksonville Remainder o f Zone Total 5 55 H Reserve Balances $14,669,235 20,121,551 154,790,786 Deferred Balances $2,293,021 940.570 $5,255,591 Capital Stock Bills Discounted $242,850 465,150 $706,000 - J a c k s o n v i l l e i s 349 t r a i n m i l e s (9 h r s . and 15 mins.) from A t l a n t a . On any business day t h e r e are s e v e r a l t r a i n s o p e r a t i n g between t h e two c i t i e s which p r o v i d e o v e r n i g h t m a i l s e r v i c e (7 P.M. t o 8 A.M.)* There are twelve branch c i t i e s c l o s e r t o t h e i r r e s p e c t i v e head o f f i c e s than Jacksonv i l l e - a l l o f which also enjoy o v e r n i g h t communication by m a i l w i t h t h e i r head o f f i c e s . Outstanding examples are P i t t s b u r g h , 138 m i l e s (3 h r s . and 20 m i n s . ) } B a l t i m o r e , 156 m i l e s (4 h r s . and 21 mins.) and Birmingham, 168 .182 m i l e s (5 h r s . and 50 m i n s . ) * Other than J a c k s o n v i l l e , t h e r e are 45 member bank p o i n t s i n the branch zone. A l l b u t 4 o f these c i t i e s , having 4 member banks, can be reached by- o r d i n a r y m a i l b e f o r e 10 A.M. on the day f o l l o w i n g m a i l i n g i n J a c k s o n v i l l e , whereas 25 p o i n t s , having 54 member banks, cannot be so reached from Atlanta. The r e g i s t e r e d m a i l schedules i n d i c a t e t h a t t h e r e are 16 p o i n t s , having 19 member b*mks, i n the branch zone which cannot be reached from J a c k s o n v i l l e by 10 A.M. on the day f o l l o w i n g m a i l i n g and t h a t t h e r e are 54 p o i n t s , w i t h 42 member banks, which cannot be reached from A t l a n t a . I t i s apparent from the above t h a t discontinuance o f the J a c k s o n v i l l e Branch would n o t o n l y c u r t a i l the c h a r a c t e r o f Reserve bank s e r v i c e rendered t o banks i n J a c k s o n v i l l e , which now have an o v e r - t h e - c o u n t e r relationship w i t h the Branch, but t h a t i t would also cause a s u b s t a n t i a l number o f o u t l y i n g member banks t o adapt themselves t o a slower t r a n s i t and currency shipment schedule than they are a t present a f f o r d e d . Other than J a c k s o n v i l l e , the more populous c i t i e s i n F l o r i d a > a r e Miami, 110,657j Tampa, 101,161; S t . Petersburg, 40,425; Pensacola, 51,579; Orlando, 27,530 and West Palm Beach, 26,610. A l l o f these c i t i e s have one o r more member banks and are w i t h i n o v e r n i g h t m a i l o f J a c k s o n v i l l e . Attention i s c a l l e d t o the f a c t t h a t t h e p o p u l a t i o n o f F l o r i d a increased 51.6$ i n the decade 1920 t o 1930, o r upwards o f 500,000 since the J a c k s o n v i l l e Branch was e s t a b l i s h e d i n 1918. (c) Branch B u i l d i n g : The J a c k s o n v i l l e Branch has occupied i t s present q u a r t e r s a t Church and Hogan S t r e e t s since June 1924. The f o l l o w i n g f i g u r e s show the o r i g i n a l .33 coat and c a r r y i n g value as o f J u l y 10, 1937, o f the branch premises: $ Book Value 7-10-37 Cost Land Building Vault and v a u l t equipment Fixed machinery & equipment $ 45,842 179,101 ) 38,229 ) 263,172 25,956 $289,128 $ 45,015 125,758 170,773 $170.773 This account i s c a r r i e d on the books o f the Head O f f i c e . (d) E a r n i n g s - - Branch Books: No r e c o r d o f earnings i s maintained a t the J a c k s o n v i l l e Branch, as i t i s operated on the "memorandum p l a n " . (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f A t l a n t a , made as o f J u l y 10, 1937, shows the f o l i o v d n g i n regard t o s a l a r i e s and personnel a t the J a c k s o n v i l l e Branch: J u l y 10. 1937 Number Amount Officers Employees 2 40 M $10,100 52,600 $62,700 May SO. 1936 Number Amount 3 34 |Z $12,500 42,800 $55,300 Increase Number Amount #1 tec. $ 2,400 Itec. 6 9,800 5 $ 7,400 # Due t o discontinuance o f o f f i c e o f a s s i s t a n t c a s h i e r . O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t included i n t h e above f i g u r e s . ( f ) Branch Expense by Functions: The expense o f the J a c k s o n v i l l e Branch by f u n c t i o n s f o r t h e y e a r s 1932 .134 t o 1937, i n c l u s i v e , were as f o l l o w s : 1932 General Overhead Controllable $ 8,843 18,987 Noncontreliable * P r o v i s i o n o f Space 6,674 708 P r o v i s i o n o f Personnel General Service 9,489 10,404 Postage Insurance 2,136 40 Loans, r e d i s c o u n t s , e t c . 1,411 Securities 14,104 Currency and Coin Check C o l l e c t i o n 12,561 5,624 Noncash C o l l e c t i o n Accounting 16,979 F i s c a l Agoncy 3,989 — Legal Auditing 947 — F.R. Note Issues — Works Progress T o t a l Expense 1112,896 Less-Reimbursable Fiscal 3.462 Agency Expense Net Expense &L09.434 1935 7,828 29,207 6,943 669 9,619 11,084 2,263 22 1,301 14,536 13,050 6,326 16,514 6,670 75 554 261 1935 ; 1934 $ 7,817 26,068 6,728 4,543 9,390 15,733 1,417 — 1,397 15,214 14,246 6,673 15,869 12,178 — $ 8,343 — 5,169 6,829 11,573 14,027 1,414 2 1,344 47,401 13,994 5,524 15,391 23,636 — 835 — $ 7,717 # 7,812 - - — 4,812 7,768 10,974 12,063 1,508 19,166 1,271 12,216 12,795 1,659 20 1,120 57,345 16,945 4,068 13,351 20,468 — 1,244 51,083 13,599 4,638 13,821 22,197 — — 618 1,209 — 1937 1936. 1,191 — — &L26,922 $138,108 $155,856 240 $152,282 $169,427 6,040 5120.882 11.289 1126.819 17.529 Si38.327 17.925 &L34.357 ^6,^59 $153,268 — —— * Represents the net expense - income from r e n t a l s having been deducted. There were s i x t e e n branches i n the System which operated a t a h i g h e r annual cost than the J a c k s o n v i l l e Branch i n 1937. (g) Volume o f Operation?at J a c k s o n v i l l e Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s departments o f the J a c k s o n v i l l e Branch and the Head O f f i c e d u r i n g the l a s t six months o f 1936. J a c k s o n v i l l e Branch Head O f f i c e Safekeeping: Member bank s e c u r i t i e s 12-31-36 $16,689,000 $77,439,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t and Omaha. J a c k s o n v i l l e Branch Head O f f i c e Currency & Coin: 1 . Number o f b i l l s r e c e i v e d and counted 9,875,000 22,024,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New.Orleans, D e t r o i t , Memphis and Los Angeles. Cost per one thousand u n i t s handled 48 cents 41 cents Branches w i t h h i g h e r u n i t costs B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t , Helena, Denver, Oklahoma C i t y , Omaha, E l Paso, San Antonio, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane/ 2. Number o f coins r e c e i v e d and counted 3,268,000 7,223,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , L i t t l e Rock, Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 13 cents 18 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except B u f f a l o , B a l t i m o r e , New Orleans, L o u i s v i l l e , Memphis and Oklahoma C i t y . Check C o l l e c t i o n : 1. Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 485,000 1,567,000 Branches w i t h l a r g e r volume: A l l branches except L i t t l e Rock, Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 01.38 01.23 Branches w i t h h i g h e r u n i t c o s t : A l l branches except C h a r l o t t e , Birmingham, N a s h v i l l e and New Orleans. 2. Number o f country checks (outgoing) r e c e i v e d 2,539,000 3,704,000 Branches w i t h l a r g e r volume: A l l branches except Birmingham, N a s h v i l l e , New Orleans, L i t t l e Rock, Memphis, Helena, E l Paso, S e a t t l e and Spokane• Cost per one thousand u n i t s handled 01.71 01.83 Branches w i t h h i g h e r u n i t c o s t : A l l branches except Birmingham and L i t t l e Rock. Non-cash C o l l e c t i o n s : 1. Number o f c i t y c o l l e c t i o n s handled 11,907 15,278 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , B a l t i m o r e , D e t r o i t , L i t t l e Rock, Memphis, Denver, Oklahoma C i t y , Omaha, Houston, Los Angeles and S a l t Lake City. Cost per u n i t handled 6 . 2 cents 8 . 4 cents Branches w i t h higher u n i t c o s t : A l l branches except L i t t l e Rock and Omaha. 2. Number o f country c o l l e c t i o n s handled 10,639 21,273 Branches w i t h l a r g e r volume: A l l branches except Birmingham, N a s h v i l l e , New Orleans, L i t t l e Rock, L o u i s v i l l e , Helena, E l Paso, San Antonio, S e a t t l e and Houston. Cost per u n i t handled 11.7 cents 7 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , B a l t i m o r e , Birmingham, N a s h v i l l e , Helena, Los Angeles, P o r t l a n d and S e a t t l e . .36 Non-cash C o l l e c t i o n s : (Cont'd) J a c k s o n v i l l e Branch Head O f f i c e 5. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,052 2,650 Branches w i t h l a r g e r volume: A l l branches except Birmingham, Helena, E l Paso, S a l t Lake C i t y , S e a t t l e and Spokane. Cost per u n i t handled 55.5 cents 10.8 cents Branches w i t h h i g h e r u n i t c o s t : E l Paso. A schedule showing the volume o f o p e r a t i o n s o f t h e J a c k s o n v i l l e Branch f o r the y e a r s 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f J a c k s o n v i l l e Branch by Board's Examiners - 1955 The Board's Examiners reviewed the o p e r a t i o n s o f the J a c k s o n v i l l e Branch, as o f November 18, 1933, and i n c o r p o r a t e d the f o l l o w i n g comment conc e r n i n g the n e c e s s i t y f o r i t s continuance i n the r e p o r t o f examination o f the A t l a n t a Reserve bank made as o f the same date: "There appears t o be a r e a l need f o r the branch a t Jacksonv i l l e i n view o f i t s d i s t a n c e from the Head O f f i c e and i t s l o c a t i o n a t t h e gateway t o F l o r i d a . " ( i ) Survey o f J a c k s o n v i l l e Branch made by Federal Reserve Bank o f A t l a n t a - 1956 As requested i n the Board's l e t t e r o f March 25, 1936 (X-9552), a survey o f the o p e r a t i o n s o f t h e J a c k s o n v i l l e Branch was made by the Federal Reserve Bank o f A t l a n t a . As a r e s u l t o f t h i s survey, P r e s i d e n t Newton advised the Board as f o l l o v / s : "A discontinuance o f the J a c k s o n v i l l e Branch would, i n my o p i n i o n , s u b s t a n t i a l l y delay the c o l l e c t i o n o f items and the f u r n i s h i n g o f currency. The volume o f business t r a n s a c t e d i n t h a t Branch, p a r t i c u l a r l y i n t h e t o u r i s t season, i s c o n s i d e r a b l e . From the s t a n d p o i n t o f t r a i n s e r v i c e , p o i n t s i n Southern F l o r i d a are as f a r d i s t a n t from A t l a n t a as New York. Furthermore, and speaking i n general terms, the only saving which would f o l l o w the d i s continuance o f any Branch would be the e l i m i n a t i o n o f o v e r head expense, and i n the case o f the J a c k s o n v i l l e Branch the aggregate o f saving from t h i s source would have t o be reduced by s u b s t a n t i a l l y increased postage charges and i n creased telephone and t e l e g r a p h t o l l s . " .137 Based on o p e r a t i n g expenses f o r the y e a r 1935, Mr. Newton s t a t e d an estimated saving o f $25,749 would r e s u l t from discontinuance o f the Branch. A statement showing the estimated saving by f u n c t i o n s was i n c l u d e d i n h i s r e p o r t , which a l s o contained data r e l a t i v e t o m a i l schedules, h e r e t o f o r e mentioned, and the volume o f operations a t the Branch. No comment was made as to t h e l o s s which might be sustained i f the q u a r t e r s occupied by the Branch were abandoned o r as t o t h e p o s s i b l e unfavorable r e a c t i o n s which might develop i f the Branch were d i s c o n t i n u e d . .138 JACKSONVILLE BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Bills Pftte Discounted Non Cash Currency Received and Coin Received ahd Counted Counted City Cpwrtor Checks Handled 6ov«t Checks Collection Items A! I Gov't Total Sftraoi iihsr Fiscal Agency Transactions Direct O^her Transfer of Funds 1931 - 10,036,000 9,076,000 061,000 *4, 258,000 *45*f, 000 5,573,000 51,037 *46,*4*48 - 8,*426 1932 - 15,09*4,000 9,721,000 001,000 3,623,000 512,000 *4,936,000 69,808 *49,595 - 8,329 1933 - 15,^27,000 8,6*40,000 788,000 3,607,000 538,000 *4,933,000 83,089 *49,665 - 10,213 193*1 - 18,096,000 7,57**,000 938,000 *4, 181,000 698,000 5,817,000 9*4,892 50,87*4 - 7,577 1935 - 18,808,000 9,033,000 97*4,000 *4,882, 000 693,000 6,5*49,000 85,000 5*4,000 - 5,852 1936 - 21,232,000 9,928,000 9*48,000 5,*409,000 66,000 50,000 1931 - 79,*493 1,287 1,118,356 *4l 1,2*45 51,553 1,581,15*4 953 20,321 - 197,507 1932 - 6*4,518 1,355 65*4,065 315,775 *43,099 1,012,939 1,258 16,508 - 1*49,66*4 1933 - 66,715 2,076 292,335 306,667 52,0f6 651,018 l,*437 19,8*42 - 152,612 193*4 - 67,273 1,378 396,370 *45*4,279 63,107 913,756 l,*435 22,103 • 181,981 J935 . 78,183 f,270 600,*498 557,690 65,*495 1,223,683 1,128 31,395 - 181,500 1936 - 87,7 18 l,*422 1,030,875 676,909 89,*42*4 1,797,208 878 29,22*4 • H* <0 725,000 7,082,000 Amounts Handled ( i n thousands of dollars) 6,000 - 192,561 NASHVILLE BRANCH - FEDERAL RESERVE BANK OF ATLANTA (a) C i t y o f N a s h v i l l e : N a s h v i l l e , w i t h a p o p u l a t i o n o f 153,866, i s the second l a r g e s t c i t y Tennessee and the f i f t y - f i r s t l a r g e s t c i t y i n the U n i t e d S t a t e s . in I t i s located i n the c e n t r a l p o r t i o n o f the S t a t e , on the Cumberland R i v e r , and i s s a i d t o serve a trade area extending 33 m i l e s n o r t h , 85 m i l e s south, 115 m i l e s east and 75 m i l e s west i n ?;hich approximately 677,000 people r e s i d e . Transportation f a c i l i t i e s i n t h i s area are provided by the L o u i s v i l l e & N a s h v i l l e , the N a s h v i l l e , Chattanooga & S t . L o u i s , the Tennessee C e n t r a l and the N a s h v i l l e F r a n k l i n R a i l r o a d s ; a l s o by v a r i o u s bus l i n e s and s e v e r a l n a t i o n a l a i r l i n e s . According t o the B i e n n i a l Census o f Manufactures, Davidson County, in which N a s h v i l l e i s l o c a t e d , had 295 manufacturing concerns i n 1935, which had an o u t p u t valued a t 0105,171,000 t h a t y e a r . The p r i n c i p a l products were rayon, cellophane, shoes, t e x t i l e s , f u r n i t u r e , stoves and bakery goods. The Census o f American Business f o r 1935 shows 4,039 r e t a i l and 452 wholesale f i r m s i n the same a r e a , which enjoyed sales aggregating 083,177,000 and 0123,688,000, r e s p e c t i v e l y , d u r i n g the y e a r . Banking f a c i l i t i e s i n N a s h v i l l e are provided by t h r e e n a t i o n a l banks, three S t a t e nonmember banks and one i n d u s t r i a l bank. These i n s t i t u t i o n s had d e p o s i t s aggregating 0112,503,000, as o f December 31, 1936, and o f t h i s amount 084,460,000 was c a r r i e d by the three l o c a l member banks, two o f which were o p e r a t i n g an aggregate o f eleven branches. D e b i t s to i n d i v i d u a l accounts i n banks o f the c i t y aggregated 0910,933,000 d u r i n g the year 1936, or an average o f approximately 03,000,000 f o r each bank T i n g day. MO (b) Branch T e r r i t o r y and F u n c t i o n s ; The N a s h v i l l e Branch was e s t a b l i s h e d October 21, 1919, and serves t h a t p o r t i o n of Tennessee i n c l u d e d i n the S i x t h D i s t r i c t , w i t h the e x c e p t i o n of the C i t y o f Chattanooga. This t e r r i t o r y represents 12$ o f the l a n d area o f the d i s t r i c t and has 15$ o f i t s t o t a l p o p u l a t i o n . Approximately o f a l l banks i n the S i x t h D i s t r i c t are w i t h i n t h i s a r e a . As o f December 31, 1956, t h e r e were 205 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 61, i n c l u d i n g 57 n a t i o n a l and 4 State i n s t i t u t i o n s , were members o f the System. banks i n the zone were on the par l i s t . Only 47 o f the 142 nonmember The f o l l o v / i n g f i g u r e s taken from r e - p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared t o the S i x t h D i s t r i c t as a whole: Sixth D i s t r i c t No. Member Banks Loans and Investments 330 $1,026,849 0145,409 $1,458,473 61 126,821 18,931 177,115 Branch Zone Capital and Total Surplus Deposits (000 o m i t t e d ) There are o n l y s i x branch zones i n the System having smaller member bank f o o t i n g s than the N a s h v i l l e zone, namely, Spokane, E l Paso, L i t t l e Rock, Helena, C h a r l o t t e find San A n t o n i o . The N a s h v i l l e Branch i s operated on the "memorandum p l a n " and o f f e r s the same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e check c l e a r i n g s and noncash c o l l e c t i o n s are concerned. transfers, However, a l l general ledger accounts as w e l l as accounts o f member banks, nonmember c l e a r i n g banks and other Federal Reserve banks are maintained a t the Head O f f i c e , which also maintains a l l expense r e c o r d s . A t r a n s c r i p t o f a l l e n t i i e s a f f e c t i n g these .141 accounts i s sent t o the Head O f f i c e d a i l y by w i r e . Member banks i n the branch zone may f o r w a r d t h e i r d i s c o u n t o f f e r i n g s e i t h e r to the Branch or t o the Head Office. O f f e r i n g s r e c e i v e d by the Branch are examined to see t h a t the paper i s t e c h n i c a l l y i n order and the amount o f each o f f e r i n g found t o be acceptable i s w i r e d t o the Head O f f i c e , which c r e d i t s the account o f the o f f e r i n g bank on the same day, s u b j e c t t o f i n a l approval upon r e c e i p t o f the notes and a p p l i c a t i o n a t the Head O f f i c e . i n i t 3 zone. The branch holds s e c u r i t i e s i n safekeeping f o r banks I t does n o t have Bank Examination, Bank R e l a t i o n s , L e g a l , Research or Fiscal. Agency departments. As o f J u l y 10, 1937, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : C i t y of Nashville Remainder o f Zone No. o f Banks Reserve Balances Deferred Balances Capital Stock 3 58 0 9,714,513 8.300.100 018.014.615 $1,508,200 174,702 ^1,682,902 0289,500 291,100 $580.600 Bills Discounted N a s h v i l l e i s £89 t r a i n m i l e s (7 h r s . and 15 m i n s . ) from A t l a n t a . There are s e v e r a l t r a i n s d a i l y from both c i t i e s which p r o v i d e o v e r n i g h t m a i l s e r v i c e between them. branch zone. Other than N a s h v i l l e , there are 51 member bank p o i n t s i n the A l l b u t 8 of these p o i n t s , having 8 member banks, can be reached by o r d i n a r y n a i l from N a s h v i l l e before 10 A. M. on the day f o l l o w i n g m a i l i n g , whereas 15 p o i n t s , having 15 member banks, cannot be so reached from A t l a n t a . There i s one member bank p o i n t i n the branch zone which can be reached from A t l a n t a by o r d i n a r y n a i l before 10 A. M. on the day f o l l o w i n g m a i l i n g which cannot be reached w i t h i n t h a t time from N a s h v i l l e . The r e g i s t e r e d m a i l schedules i n d i c a t e t h a t there are 18 member bank p o i n t s , w i t h 18 member banks, which cannot be reached before 10 A. M. on the day f o l l o w i n g m a i l i n g from N a s h v i l l e , as compared ? / i t h 26 member bank p o i n t s , having 28 member banks, which cannot be so reached from A t l a n t a . I t appears from t h e f o r e g o i n g t h a t d i s - continuance o f the N a s h v i l l e Branch, i n a d d i t i o n t o a f f e c t i n g the s e r v i c e rendered to banks i n t h a t c i t y , would a l s o slow up the s e r v i c e rendered to a small number o f o u t l y i n g banks; t h a t i s , banks i n N a s h v i l l e would no l o n g e r have immediate access t o Reserve bank f a c i l i t i e s and a small number o f outlying banks would have to adapt t h e i r business to a two day r a t h e r than a one day m a i l schedule. Other than N a s h v i l l e , the more populous c i t i e s i n the branch zone, both o f which have une or more member banks, are K n o x v i l l e , 105,802, and Johnson City, 25,080. ( c ) Branch B u i l d i n g : The N a s h v i l l e Branch has occupied i t s present q u a r t e r s a t 228 T h i r d Avenue, N o r t h , s i n c e December 1922. The f o l l o w i n g f i g u r e s show the o r i g i n a l c o s t and c a r r y i n g v a l u e , as of J u l y 10, 1937, o f the branch premises: Cost Land Building V a u l t and v a u l t equipment Fixed machinery & equipment 0 83,704 135,870) 40,042) 259,616 25,101 0284,717 Book Value 7-10-37 0 46,704 105,912 152,616 $152,616 (d) Earning s - Branch Books: No r e c o r d o f earnings i s maintained a t the N a s h v i l l e Branch, as i t is operated on the "memorandum plan 11 . (e) Branch Personnel: The r e p o r t of examination of the F e d e r a l Reserve Bank o f A t l a n t a , made as o f J u l y 10, 1957, shows, the f o l l o w i n g i n regard t o s a l a r i e s end personnel a t tho N a s h v i l l e Branch: J u l y 10, 1957 Number Amount Officers Employees 2 34 H May 50, 1956 Number Amount £10,550 42,054 052,404 2 51 H Increase Number Amount 011,400 57,600 549,000 5 | 01,050 Deer. 4,454 £5,404 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s • ( f ) Branch Expense by F u n c t i o n s : The expenses o f the N a s h v i l l e Branch by f u n c t i o n s f o r t h e years 1952 t o 1957, i n c l u s i v e , were as f o l l o w s : 1933 1932 General Overhead Controllable 0 9,112 Non-ccn t r o l l a b l o 3,563 P r o v i s i o n o f Space 8,492 P r o v i s i o n o f Personnel 214 General S e r v i c e 7,530 Postage 9,693 Insurance 2,143 F a i l e d Banks Loans,r e d i s counts,e t c . 1,090 228 Securities Currency & Coin 11,461 Check C o l l e c t i o n 16,163 Noncash C o l l e c t i o n 4,376 13,647 Accounting F i s c a l Agency 14,290 Legal 1,600 Auditing 520 — Bank R e l a t i o n s — Bank Examinations — F, R. Note Issues — Statistical & Analyt'l T o t a l Expense $104,122 Less - Reimbursable F i s c a l Agency Exp. 12,811 Net Expense £ 91.311 0 9,156 3,463 7,799 131 7,750 12,993 2,a3 1934 0 9,615 4,010 7,644 4,014 9,330 9,374 1,016 — — 665 533 9,055 16,295 3,853 11,946 32,142 - 477 525 490 10,048 16,996 3,881 12,050 29,411 6 375 1935 $ 9,044 — 1936 $ 8,805 — 10,626 6,196 9,307 11,474 1,254 — 7,222 6,974 9,494 11,387 1,211 - 498 1,196 13,657 16,472 4,085 12,469 35,988 - 991 160 1,374 13,535 13,640 4,141 14,203 24,572 57 721 1937 £ 8,704 — 10,884 321 9,340 10,245 1,205 — 4 1,391 13,638 13,748 3,995 12,781 23,870 - 582 — — - — — — — — — - — — — — — — — 194 — — $118,665 0118,785 0133,257 $117,496 $110,708 30,363 g 88.302 27,475 0 91,310 24.733 £108.524 20.523 « 96.973 20.337 8 90.371 There were t w e n t y - t h r e e branches i n the System which operated a t a h i g h e r annual cost than the N a s h v i l l e Branch i n 1937. (g) Volume of Operations a t N a s h v i l l e Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n the v a r i o u s departments o f the N a s h v i l l e Branch and the Head O f f i c e d u r i n g the l a s t six .144 months of 1956: N a s h v i l l e Branch Head O f f i c e Safekeeping Member bank s e c u r i t i e s 12-51-56 02,927,000 £77,459,000 Branches w i t h l a r g e r volume: A l l branches except B u f f a l o , C h a r l o t t e , Memphis, Birmingham, E l Paso, P o r t l a n d , S e a t t l e v Helena, Los Angeles, S a l t Lake C i t y and Spokane Currency and Coin 1 . Number o f b i l l s r e c e i v e d and counted 6,554,000 22,024,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Los Angeles and S e a t t l e . Cost per one thousand u n i t s handled 57 cents 41 cents Branches w i t h higher u n i t c o s t : A l l branches except Birmingham, New Orleans, and L i t t l e Rock. 2. Number o f coins r e c e i v e d and counted 5,510,000 7,225,000 Branches w i t h l a r g e r voluffie: A l l branches except C h a r l o t t e , J a c k s o n v i l l e , L i t t l e Rock, Helena, E l Paso, P o r t l a n d , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 20 cents 18 cents Branches w i t h h i g h e r u n i t c o s t : P i t t s b u r g h , Helena, Omaha, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Chock C o l l e c t i o n 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 708,000 1,567,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L o u i s v i l l e , Denver, Omaha, Houston and Los Angeles. Cost per one thousand u n i t s handled 01*21 §1.23 Branches w i t h higher u n i t c o s t : A l l branches except Birmingham. 2. Number o f country checks (outgoing) r e c e i v e d 1,703,000 5,704,000 Branches w i t h l a r g e r volume: A l l branches except L i t t l e Rock, Memphis, Helena, E l Paso and S e a t t l e . Cost per one thousand u n i t s handled C2.08 $1.85 Branches w i t h h i g h e r u n i t c o s t : A l l branches except P i t t s b u r g h , B a l t i m o r e , C h a r l o t t e , Birmingham, J a c k s o n v i l l e , L i t t l e Rock, L o u i s v i l l e , Memphis, Denver, Oklahoma C i t y , Omaha and Houston. Noncash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 8,254 15,278 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, New Orleans, L o u i s v i l l e , Helena, E l Paso, San Antonio, P o r t l a n d and Spokane. Cost per u n i t hcndled 9.4 cents 8 . 4 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except J a c k s o n v i l l e , L i t t l e Rock, Omaha, E l Paso and Houston. N a s h v i l l e Branch Head O f f i c e 2. Number of c o u n t r y c o l l e c t i o n s handled 4,640 21,273 Branches w i t h l a r g e r volume: A l l branches except Birmingham and E l Paso. Cost per u n i t handled 16.5 cents 7 cents Branches w i t h h i g h e r u n i t c o s t : Los Angeles and P o r t l a n d . 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,765 2,630 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, J a c k s o n v i l l e , Helena, Oklahoma C i t y , E l Paso P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Cost per u n i t handled 11.7 cents 10.8 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , Birmingham, New Orleans, L i t t l e Rock, Denver, Omaha, Houston, San Antonio and S e a t t l e . A schedule showing the volume o f operations o f the N a s h v i l l e Branch f o r the years 1931 to 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f N a s h v i l l e Branch by Board 1 s Examiner - 1933 During the course of an examination of the F e d e r a l Reserve Bank ^ f A t l a n t a , made as of November 18, 1933, the Board's examiners reviewed the o p e r a t i o n s o f the N a s h v i l l e Branch ana, based on i n f o r m a t i o n developed, expressed doubt as to the n e c e s s i t y f o r i t s continuance. I t was p o i n t e d out t h a t N a s h v i l l e i s 288 m i l e s from A t l a n t a , w i t h a ten hour m a i l schedule and a two hour a i r m a i l s e r v i c e ; t h a t 21 member bank p o i n t s i n the N a s h v i l l e zone were n o t w i t h i n o v e r n i g h t m a i l time o f A t l a n t a , b u t t h a t a m a j o r i t y of such c i t i e s and nember banks were small and unimportant i n s i z e and o p e r a t i o n s ; t h a t many o f such c i t i e s a l s o were n o t w i t h i n o v e r n i g h t m a i l time of the Branch due t o poor r a i l f a c i l i t i e s ; and t h a t the Branch ?/as one o f the smaller branches i n the System, based on the number and d o l l a r volume o f items handled. ( i ) Survey o f N a s h v i l l e Branch made by Federal Reserve Bank o f A t l a n t a - 1936 I n accordance v/ith the request contained i n the Board's l e t t e r o f March 25, 1356 (X-9552), o survey o f the operations o f the N a s h v i l l e Branch was made by the Federal Reserve Bank o f A t l a n t a . T h e r e a f t e r P r e s i d e n t Newton advised the Ik-ard as f o l l o w s : "The c l o s i n g o f the N a s h v i l l e Branch would cause comparatively l i t t l e inconvenience except t o banks l o c a t e d i n N a s h v i l l e and i n the immediate v i c i n i t y o f that c i t y . " Mr. Newton s t a t e d t h a t i n r e a c h i n g t h i s conclusion c o n s i d e r a t i o n had been given tc the a b i l i t y o f the Head O f f i c e to serve the branch zone, w i t h p a r t i c u l a r r e f e r e n c e to m a i l schedules. He f u r t h e r s t a t e d t h a t a f t e r a c a r e f u l i n v e s t i g a t i o n , which took i n t o account the probable increases i n p o s t a l , portation, trans- telephone and t e l e g r a p h costs which would be e n t a i l e d by s e r v i n g member banks i n the branch zone from A t l a n t a i n s t e a d of N a s h v i l l e , he was o f the o p i n i o n t h a t an aggregate annual saving of $49,785 would r e s u l t i f Branch were d i s c o n t i n u e d . (Based on operations f o r the year 1935.) the He s t a t e d t h a t t h i s saving would a r i s e c h i e f l y from a r e d u c t i o n i n overhead. No Cv>mment was made as to u n f a v o r a b l e r e a c t i o n s which might p o s s i b l y a r i s e upon c l o s i n g o f the Branch or to l o s s e s which might be sustained through abandonment o f the b u i l d i n g end equipment now used by the Branch. .147 NASHVILLE BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Received 2&ie Bills Di scountsd and Coin Received and Counted Checks Handled Ciil Country Govt. Checks Total Won Cash Collection lte»s Gov't AH Coupons Other Fiscal Agency Tr.WMMtiftDfL. Oirect Other Transfer of 1931 - 13,601,000 *,880,000 1,015,000 *,120,000 27*,000 5,*09,000 *3,*89 29,*39 - 6,258 1932 • 11,689,000 *,712,000 1,002,000 3,362,000 296,000 *,660,000 36,386 28,69* - 5,16* 1933 - 10,771,000 *,29*,000 1,63*4,000 3,1*9,000 38*,000 5,167,000 36,055 3*,056 - * , 109 193* - 12,886,000 6,555,000 1,291,000 3,553,000 669,000 5,513,000 *8,097 32,259 - 3,766 1935 - 12,570,000 *,672,000 1,325,000 3,12*,000 637,000 5,086,000 52,000 31,000 - 2,9*6 1936 - 12,718,000 6,263,000 1,32*1,000 3,3*9,000 5*0,000 5,213,000 *6,000 30,000 - 2,000 1931 *8,767 651 715,9*8 Amounts Handled in thousands of dollars]1 ( 29,108 1,036,998 291,9*2 366 29,*52 123,102 1932 - *2,351 52** 51*0, »*70 217,28* 23,365 781,119 339 33,535 - 6*,91* 1933 - 39,*75 970 568,8*0 227,96* 28,392 825,196 399 36,395 - 61,208 193* - 38,275 658 771,760 300,9*2 * 1,763 1,11*,*65 *97 50,780 mm 1935 - 37,3*5 585 858,159 259,98* * 1,555 1,159,698 528 50,659 - 88,9*6 1936 • 37,896 701 936,* i * 296,107 52,181 !,28*,*02 516 *7,580 - 9*,367 Digitized 30 for FRASER «r 76,613 MEW ORLEANS BRANCH; FEDERAL RESERVE BANK OF ATLANTA (a) C i t y o f New Orleans New Orleans, w i t h a populationc£ 458,762, i s the s i x t e e n t h l a r g e s t i n the U n i t e d States and the l a r g e s t c i t y i n L o u i s i a n a . city I t i s l o c a t e d i n the southeastern p a r t o f the S t a t e , on the M i s s i s s i p p i r i v e r , and serves a trade area extending approximately 60 m i l e s i n a l l d i r e c t i o n s . 840,000 i n h a b i t a n t s i n the m e t r o p o l i t a n area. There are about Ten r a i l r o a d s , i n c l u d i n g a l l of t h e major southern l i n e s , enter the c i t y , which i s a l s o served by numerous steamship l i n e s t o a l l w o r l d p o r t s and a number of a i r l i n e s . According t o the B i e n n i a l Census o f Manufactures Orleans P a r i s h , i n which New Orleans i s l o c a t e d , had 607 manufacturing concerns i n 1955, which had an o u t p u t valued a t $92,578,000 t h a t y e a r . The c h i e f manufactures were wash s u i t s , c o t t o n goods, candy, r o p e , c i g a r e t t e s and c i g a r s , i r o n and s t e e l , syrup canning, seafood packing and m i n e r a l o i l r e f i n i n g . shipping. The p r i n c i p a l i n d u s t r y i s According t o the Census o f American Business t h e r e were i n the same area 6,835 r e t a i l and 934 wholesale establishments which enjoyed sales aggregati n g $123,524,000 and 1414,188,000, r e s p e c t i v e l y , d u r i n g % e year 1935. Banking f a c i l i t i e s i n New Orleans are provided by two S t a t e banks ( l member) and t h r e e n a t i o n a l banks. These i n s t i t u t i o n s had d e p o s i t s aggregating #254,838,000, as o f December 31, 1936, and o f t h i s amount $252,959,000 was c a r r i e d w i t h the f o u r l o c a l member banks, t h r e e o f which were o p e r a t i n g an aggregate o f eighteen branches. D e b i t s t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated $2,463,348,000 d u r i n g t h e year 1936, or an average o f approximately $8,000,000 f o r each banking day. .149 (b) Branch T e r r i t o r y and F u n c t i o n s ; The New Orleans Branch was e s t a b l i s h e d September 10, 1915, and serves those p o r t i o n s o f t h e States o f Louisiana and M i s s i s s i p p i i n c l u d e d i n the S i x t h D i s t r i c t and two counties i n Alabama. T h i s t e r r i t o r y represents 22$ o f the l a n d area o f t h e d i s t r i c t and has 2Z% o f i t s t o t a l p o p u l a t i o n . Approximately 17% o f a l l banks i n the S i x t h D i s t r i c t are w i t h i n t h i s area. As o f December 51, 1956, t h e r e were 185 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 45, i n c l u d i n g 40 n a t i o n a l and 5 State i n s t i t u t i o n s , were members o f the System. member banks i n t h e zone were on the par l i s t . Only 8 o f t h e 140 non- The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f t h e same date show t h e s i z e o f member bank f o o t i n g s i n the branch zone as compared t o those o f t h e S i x t h D i s t r i c t as a wholes Sixth D i s t r i c t Branch Zone No. Member Banks Loans and Investments Capital and Surplus (000 o m i t t e d } Total Deposits 330 45 $1,026,849 287,865 $143,409 31,219 $1,458,473 403,414 There are o n l y s i x branch zones i n the System having l a r g e r member bank f o o t i n g s than t h e New Orleans zone$ namely, P i t t s b u r g h , Los Angeles, D e t r o i t , C i n c i n n a t i , B u f f a l o and B a l t i m o r e . The New Orleans Branch i s a " f u l l f l e d g e d " branch and renders the same s e r v i c e t o member banks i n i t s t e r r i t o r y as i s a v a i l a b l e a t t h e Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and loans t o .150 member banks are concerned. The Branch has i t s own general books and a l s o keeps the accounts o f i t s zone members and o t h e r Federal Reserve banks and branches. Transactions a r e , however, cleared d a i l y through an account maintained w i t h the Head O f f i c e . The Hew Orleans Branch i s t h e only branch i n t h e System h a n d l i n g the i s s u e and exchange o f Government s e c u r i t i e s and which has been a u t h o r i z e d t o purchase acceptances i n t h e open market w i t h o u t s p e c i f i c i n s t r u c t i o n s from the Head O f f i c e . I t does n o t have Bank Examination, Bank R e l a t i o n s o r Research departments. As o f J u l y 10, 19S7, member banks i n t h e branch zone had reserve balances as f o l l o w s : C i t y o f New Orleans Remainder o f Zone No. o f Banks Reserve Balances Deferred Balances Capital Stock 4 $35,964,108 ^16^460.956 $4,491,042 ^660.669 $487,500 ^462^400 Bills Discounted - New Orleans i s 495 t r a i n m i l e s (15 h r s . and 45 mins.) from A t l a n t a . There are 29 member bank p o i n t s , having 36 member banks, i n the New Orleans zone, which cannot be reached by o r d i n a r y m a i l from A t l a n t a before 10 A.M. on t h e day following mailing. A l l o f these places can be reached by o r d i n a r y m a i l from New Orleans b e f o r e 10 A.M. There are 31 c i t i e s , having 38 member banks, i n the branch zone, which cannot be reached by r e g i s t e r e d m a i l from A t l a n t a b e f o r e 10 A.M. on tiie day f o l l o w i n g m a i l i n g , whereas 12 o f these c i t i e s , w i t h 17 member banks, can be reached from New Orleans. I t i s clear, therefore, that discontinuance o f t h e New Orleans Branch would s e r i o u s l y a f f e c t t h e character o f the s e r v i c e rendered t o a s u b s t a n t i a l number o f member banks i n o u t l y i n g s e c t i o n s o f t h e zone, as w e l l as banks i n t h e C i t y o f New O r l e a n s , which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h t h e Branch. There are s i x t e e n .151 branch c i t i e s c l o s e r than New Orleans t o t h e i r r e s p e c t i v e head o f f i c e s , practically a l l o f which appear t o enjoy more e x p e d i t i o u s m a i l connections w i t h t h e i r head offices. I n c l u d e d i n t h i s number are J a c k s o n v i l l e , Birmingham, N a s h v i l l e , Little Rock, Memphis, Oklahoma C i t y and San A n t o n i o , which handle a smaller volume o f operations and serve l e s s important c e n t e r s . Other than New Orleans, t h e more populous c i t i e s i n t h e branch zone, all o f which have one or more member banks, are Mobile C i t y , Alabama, 68,202; Baton Rouge, L o u i s i a n a , 50,729} Jackson, M i s s i s s i p p i , 48,282; M e r i d i a n , M i s s i s s i p p i 21,954} and V i c k s b u r g , M i s s i s s i p p i , 22,945. (c) Branch B u i l d i n g s The New Orleans Branch has occupied i t s present q u a r t e r s a t Carondelet S t . and Common since October, 1925. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and c a r r y i n g v a l u e , as o f J u l y 10, 1957, o f t h e branch premisess Cost Land Building V a u l t and V a u l t Equipment Fixed machinery and equipment $ 201,500 635,647) 102.757) | 939,704 159.500 $1.099.204 Book Value 7-10-57 $ 146,600 420.700 $ .567,300 $ 567,500 (d) Earnings - Branch Bookst The Branch 1 s earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1957, i n c l u s i v e , were as f o l l o w s : Year Earnings 1951 1952 1935 1934 1955 1956 1957 $508,200 451,900 151,500 11,500 700 400 1,700 .152 These f i g u r e s are incomplete s i n c e , under present accounting procedure, the Branch does n o t r e c e i v e any c r e d i t f o r income received by t h e Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by the c a p i t a l stock investment and reserve balances o f banks i n the branch zone. The amount o f income shown on the books o f the Branch depends almost e n t i r e l y on the e x t e n t o f borrowing by member banks i n t h e zone. Income from t h i s source amounted t o $419,000 i n 1932 and t o only about $700 i n 1957. (e) Branch Personnels The r e p o r t o f examination o f the Federal Reserve Bank o f A t l a n t a , made as o f J u l y 10, 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t t h e New Orleans Branchs J u l y 10. 1957 Number Amount Officers Employees 3 59 62 $17,400 71.100 S,500 May 50. 1956 Number Amount 5 57 62 $29,600 62.400 $92,000 Decrease Number Amount 2# 2(lnc.) 0 $12,200 8.700(Inc.) $ 5,500 # Due t o discontinuance o f o f f i c e s o f A s s i s t a n t Manager and Assistant Auditor. O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . .153 ( f ) Branch Expense by F u n c t i o n s : The expenses o f t h e New Orleans Branch by f u n c t i o n s f o r the years 1932 t o 1937, i n c l u s i v e , were as f o l l o w s 1932 « . 1935 1934 1935 1936 1937 General Overheads $33,952 $32,309 #28,078 113,999 $19,833 $13,398 Controllable 9,794 Noncontrollable 15,219 14;542 34,971 20,052 35,149 31,586 23,231 35,733 -^Provision o f Space 11,596 21,090 511 P r o v i s i o n o f Personnel 506 5 8,853 17,104 20,900 20,859 21,799 17,949 General Service 20,725 12,685 12,619 10,464 9,829 Postage 8,246 12,344 2,321 2,253 4,299 2,772 2,404 4,743 Insurance 100 329 2 F a i l e d Banks 6,410 2,232 2,059 10,117 9,842 7,562 Loans, Redi scoun t s , E t c . 720 856 717 725 868 764 Securities 39,378 19,614 41,462 18,994 18,732 35,996 Currency & Coin 16,718 17,078 18,781 14,543 Check C o l l e c t i o n 18,244 21,001 4,771 5,135 4,668 4,896 5,172 Noncash C o l l e c t i o n 4,822 19,900 18,046 17,805 16,857 Accounting 21,900 20,502 65,911 112,354 177,706 196,012 176,407 F i s c a l Agency 36,963 70 2,170 1,550 500 600 1,656 Legal 2,706 4,422 2,421 1,583 Auditing 1,870 2,453 355 Federal Reserve Note Issue 277 S t a t i s t i c a l & Analytical 286 292 74 322 T o t a l Expense $228,577 $258,206 $313,466 $351,254 $371,818 $342,679 Less - Reimbursable F i s c a l Agency Expense 32.806 61.997 108.265 153>921 185.235 166.254 Net Expense $195.771 $186.209 $205.201 $217.333 $186.583 $176.425 * Represents t h e net expense - income from r e n t a l s having been deducted. There were t h i r t e e n branches i n the System which operated a t a h i g h e r annual cost than t h e New Orleans Branch i n 1937. A number o f these branches appear t o have handled a smaller volume o f i t e m s . .154 (g) Volume o f Operations a t New Orleans Branch s The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s d e partments o f the New Orleans Branch and t h e Head O f f i c e d u r i n g the l a s t six months o f 1936: New Orleans Branch Head O f f i c e Discount Department? Notes rediscounted 52 C o l l a t e r a l notes discounted 7 15 I n d u s t r i a l Advances 3 Branches w i t h l a r g e r volumes B u f f a l o , B a l t i m o r e , Memphis, Denver, Omaha, E l Paso, San A n t o n i o , and S a l t Lake C i t y . Safekeeping: Member bank s e c u r i t i e s 12-31-36 $8,603,000 $77,439,000 Branches w i t h l a r g e r volumes A l l branches except B u f f a l o , C h a r l o t t e , Birmingham, N a s h v i l l e , L o u i s v i l l e , Memphis, E l Paso, P o r t l a n d , S a l t Lake C i t y , S e a t t l e , Helena, Los Angeles, San A n t o n i o , and Spokane. Currency & Coins 1 . Number o f B i l l s received and counted 13,420,000 22,024,000 Branches w i t h l a r g e r volumes B u f f a l o > C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t and Los Angeles. Cost per one thousand u n i t s handled 26 cents 41 cents Branches w i t h h i g h e r u n i t costs A l l branches. 2. Number o f coins r e c e i v e d and counted: 12,006,000 7,223,000 Branches w i t h l a r g e r volumes B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e and Los Angeles. Cost per one thousand u n i t s handled 6 cents 18 cents Branches w i t h h i g h e r u n i t costs A l l branches. Check C o l l e c t i o n s 1 . Number o f c i t y checks ( c l e a r i n g s ) received 751,000 1,567,000 Branches w i t h l a r g e r volumes B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t , L o u i s v i l l e , Denver, Omaha, Houston and Los Angeles. Cost per one thousand u n i t s handled $1.22 $1.23 Branches w i t h h i g h e r u n i t costs A l l branches except Birmingham and N a s h v i l l e . 2. Number o f country checks (outgoing) received 1,837,000 3,704,000 Branches w i t h l a r g e r volumes A l l branches except N a s h v i l l e , L i t t l e Rock, Memphis, Helena, E l Paso and S e a t t l e . Cost per one thousand u n i t s handled $2.12 $1.83 Branches w i t h h i g h e r u n i t costs B u f f a l o , C i n c i n n a t i , D e t r o i t , Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. .155 New Orleans Branch Head O f f i c e Noncash C o l l e c t i o n s : 1 . Number o f c i t y c o l l e c t i o n s handled 6,161 15,278 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, Helena, E l Paso and San Antonio. Cost per u n i t handled 14.4 cents 8 . 4 cents Branches w i t h h i g h e r u n i t costs A l l branches except Birminghajn, J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, L o u i s v i l l e , Memphis, Helena, Denver, Oklahoma C i t y , Omaha, E l Paso, Houston aiid S a l t Lake C i t y . 2. Number o f country c o l l e c t i o n s handled 9,440 21,273 Branches w i t h l a r g e r volume: A l l branches except Birmingham, N a s h v i l l e , L i t t l e Rock, L o u i s v i l l e , Helena, E l Paso, Houston and San A n t o n i o . Cost per u n i t handled 11.3 cents 7 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , B a l t i m o r e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , Helena, Los Angeles, P o r t l a n d and Seattle. 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 3,990 2,630 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t , Omaha and Los Angeles. 8.8 cents 10.8 cents Cost per u n i t handled Branches w i t h h i g h e r u n i t costs A l l branches except C i n c i n n a t i , P i t t s b u r g h , Denver, Omaha and S e a t t l e . A schedule showing t h e volume o f operations o f the New Orleans Branch f o r t h e years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f New Orleans Branch by Board 1 s Examiners - 1933 During the course o f an examination o f t h e Federal Reserve Bank o f A t l a n t a , made as o f November 18, 1933, the Board's Examiners reviewed t h e o p e r a t i o n s o f the New Orleans Branch and expressed t h e o p i n i o n t h a t i t s continuance was j u s t i f i e d " i n view o f the importance o f the c i t y and i t s d i s t a n c e from the Head Office." ( i ) Survey o f New Orleans Branch made by Federal Reserve Bank o f A t l a n t a - 1936: I n accordance w i t h t h e request i n the Board's l e t t e r o f March 25, 1936 (X-9532), a survey o f t h e operations o f the New Orleans Branch was made by the .156 Federal Reserve Bank o f A t l a n t a . As a r e s u l t o f t h i s survey, P r e s i d e n t Newton submitted a r e p o r t t o t h e Board c o n t a i n i n g the f o l l o w i n g recommendations "The New Orleans Branch renders a v a l u a b l e s e r v i c e , and i n my o p i n i o n , should be r e t a i n e d . The l o c a t i o n o f t h e Branch, the importance o f New Orleans as a business center o f t h e New Orleans Branch zone, as w e l l as the volume o f business t r a n s a c t e d a t the Branch, form the basis f o r my o p i n i o n . " Mr. Newton s t a t e d t h a t a f t e r i n v e s t i g a t i n g the matter c a r e f u l l y he had reached the conclusion t h a t an aggregate annual saving o f approximately $113,900 would r e s u l t i f the New Orleans Branch were closed, c h i e f l y through t h e e l i m i n a t i o n o f overhead. He c a l l e d a t t e n t i o n t o t h e f a c t t h a t discontinuance o f any branch would be regarded as an inconvenience by banks l o c a t e d i n t h e immediate v i c i n i t y . The d i f f e r e n c e s between m a i l f a c i l i t i e s a v a i l a b l e t o member bank p o i n t s i n t h e branch zone from New Orleans and A t l a n t a and t h e volume o f operations a t t h e Branch, which have already been mentioned i n t h i s memorandum, were c i t e d t o amplify t h i s point. No comment was made r e g a r d i n g t h e p o s s i b i l i t y o f losses a r i s i n g from abandonment o f the q u a r t e r s occupied by the Branch or as t o any u n f a v o r a b l e r e a c t i o n on the p a r t o f bankers and c i v i c l e a d e r s which might develop i f the Branch were d i s c o n t i n u e d . NEW ORLEANS BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Coin Received Received and Non Cash Fi seal Agency Checks Handled Gov't All Mai OftHfififlS Other Direct Gov't and Transfer of Pate B i lis Pi,S£9upied 1931 11,952 28,372,000 27,186,000 1,015,000 2,270,000 782,000 4,067,000 120,471 29,509 9,181 2 15,474 1932 8,802 24,676,000 29,975,000 1,044,000 1,866,000 881,000 3,791,000 129,724 28,919 8,716 10 14,670 1933 3,^33 23,025,000 29,801,000 1,231,000 2,025,000 1,281,000 4,537,000 142,102 41,699 14,418 9 8,04! 193* 474 20,967,000 19,1*81,000 1,410,000 2,632,000 2,727,000. 6,769,000 185,489 42,710 53,987 229 7,221 1935 21 21,961,000 21,405,000 1,1406,000 2,940,000 2,545,000 6,891,000 208,000 37,000 37,736 11,002 7,803 1936 17 25,292,000 2*1,331,000 1,444,000 3,538,000 1,571,000 6,553,000 148,000 39,000 10,017 1,976 8,000 Counted Counted SUta. C&uf^ry CHe^s Other Amounts Handled ( i n thousands of dollars) 1931 204,678 103,859 3,30*4 1,384,294 247,613 99,891 1,731,798 1,547 36,614 49,030 too 631,474 1932 276,839 94,814 3,340 809,922 173,142 82,934 1,065,998 2,234 30,347 30,748 125 490,259 HJ33 55,654 97,530 4,677 830,911 220,138 111,830 1,162,879 2,406 43,708 27,698 9 336,612 1934 5,m 71,672 2,223 740,681 313,926 163,922 1,218,529 3,326 50,166 78,982 575 3H,630 t935 m 71,0*7 2,205 739,987 364,2H 154,008 1,258,206 3,018 62,973 60,110 9,42! 359,722 m 82,999 2,280 876,590 457,451 176*258 1,510,299 3,166 62,129 43,092 3,173 377,326 1936 SAVANNAH AGENCY - FEDERAL RESERVE BANK OF ATLANTA (a) C i t y o f Savannah: Savannah, w i t h a p o p u l a t i o n o f 85,024, i s the second l a r g e s t c i t y i n Georgia, I t i s l o c a t e d i n the southeastern p a r t o f t h e S t a t e on t h e south bank o f the Savannah R i v e r about 20 M i e s from t h e A t l a n t i c Ocean. Situated on a splendid l a n d l o c k e d h a r b o r , t h e c i t y has steamship connections w i t h f o r e i g n and P a c i f i c coast p o r t s , as w e l l as coast-wise s e r v i c e t o o t h e r Atlantic ports. I t i s one o f t h e more i m p o r t a n t c o t t o n e x p o r t and naval s t o r e s p o r t s o f t h e South. R a i l f a c i l i t i e s a r e provided by t h e C e n t r a l o f Georgia, Savannah and A t l a n t a , Seaboard A i r l i n e , A t l a n t i c Coast L i n e and Southern r a i l r o a d s . The c i t y i s a l s o served by numerous bus l i n e s and several air lines. The p r i n c i p a l i n d u s t r i e s o f t h e c i t y are c o t t o n warehousing and marketi n g , s h i p b u i l d i n g , lumbering, f i s h i n g , sugar r e f i n i n g , petroleum r e f i n i n g and t h e manufacture o f c o t t o n seed o i l p r o d u c t s , f e r t i l i z e r s , and r o s i n o i l . According t o t h e B i e n n i a l Census o f Manufactures f o r 19S5, t h e r e were 122 manufacturing establishments o p e r a t i n g i n Chatham County, i n which Savannah i s s i t u a t e d , which had an output valued a t #45,260,362 and p a y r o l l s amounti n g t o $5,126,909 d u r i n g t h a t y e a r . The Census o f American Business l i s t s 1,559 r e t a i l and 183 wholesale concerns o p e r a t i n g i n t h e same area. These f i r m s had sales aggregating $26,454,000 and #62,508,000, r e s p e c t i v e l y , d u r i n g 1955. Banking f a c i l i t i e s i n Savannah are provided by f o u r S t a t e banks (two members), two n a t i o n a l banks and f o u r savings and l o a n companies. These i n s t i t u t i o n s had d e p o s i t s aggregating $106,853,000 as o f December 31, 1936, .159 and o f t h i s amount $99,446,000 was c a r r i e d by the f o u r l o c a l member banks. One o f t h e l o c a l n a t i o n a l banks was o p e r a t i n g two branches i n Savannah and seven branches i n f i v e o t h e r c i t i e s o f Georgia. Debits t o i n d i v i d u a l accounts i n banks o f t h e c i t y amounted t o $363,276,000 d u r i n g the y e a r 1936, o r an average o f approximately $1,211,000 f o r each banki n g day. (h) Establishment and Operation o f Agency; The Savannah Agency was e s t a b l i s h e d on o n l y t h e f o u r member banks i n t h a t February 4 , 1919, and serves city. I t s operations are l i m i t e d t o t h e r e c e i p t and disbursement o f cash and the h o l d i n g o f s e c u r i t i e s pledged by t h e Savannah banks as c o l l a t e r a l t o bills d i s c o u n t e d f o r them by t h e Head O f f i c e . Savannah i s 293 t r a i n m i l e s (8 h r s . and 50 mins.) from A t l a n t a and 171 t r a i n m i l e 3 (3 h r s . and 25 mins.) from J a c k s o n v i l l e . I t i s apparent, therefore, t h a t f o r a l l but the most extreme emergencies the currency requirements o f member banks i n Savannah c o u l d be met by t h e Head O f f i c e or the J a c k s o n v i l l e Branch. A schedule showing t h e volume o f operations a t t h e Agency f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (c) Agency Quarters; The Agency i s l o c a t e d i n t h e main o f f i c e b u i l d i n g o f t h e C i t i z e n s and Southern N a t i o n a l Bank, occupying two a d j o i n i n g rooms i n t h e basement near the safe d e p o s i t v a u l t which have been remodeled and made a v a i l a b l e as an o f f i c e and counting room. Several compartments i n t h e safe d e p o s i t v a u l t are a l s o assigned t o t h e Agency. which i t No r e n t i s p a i d by t h e Agency f o r the space occupies. .180 (d) Agency Personnel: As o f December 51, 1937, the s t a f f o f t h e Agency c o n s i s t e d o f a manager and a s s i s t a n t manager w i t h annual s a l a r i e s t o t a l l i n g $6,400. A guard and two emergency custodians are each p a i d #12 per year by t h e Agency t o b r i n g them tinder t h e Federal Reserve banks 1 b l a n k e t bond. The guard devotes h i s full time t o t h e Agency and, i n a d d i t i o n t o t h e $12 p a i d by t h e Agency, i s p a i d a s a l a r y o f $900 per year by t h e f o u r member banks i n Savannah. (e) Agency Expenses O p e r a t i n g expenses o f t h e Savannah Agency f o r t h e years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Amount 1931 1932 1933 1934 1935 1936 1937 $ 9,800 10,100 9,700 10,100 9,700 8,300 8,400 ( f ) A t t i t u d e o f Federal Reserve Bank o f A t l a n t a Toward t h e Agency: As e a r l y as 1932, t h e Board r s Examiners i n r e p o r t s o f examination o f t h e Federal Reserve Bank o f A t l a n t a had questioned t h e n e c e s s i t y o f c o n t i n u i n g t h e Savannah Agency. Because o f t h i s f a c t , i n June, 1933, a committee appointed by t h e D i r e c t o r s o f t h e A t l a n t a Reserve Bank v i s i t e d t h e Savannah Agency and a f t e r meeting w i t h t h e Savannah C l e a r i n g House, which was made up o f f o u r member banks, a l l o f which favored continuance o f t h e Agency, subm i t t e d a r e p o r t c o n t a i n i n g t h e f o l l o w i n g observations and recommendation: " I t i s t h e o p i n i o n o f your Committee t h a t t h i s Agency i s p e r f o r m i n g a v a l u a b l e s e r v i c e t o the f o u r member banks l o c a t e d i n Savannah and t h a t , i n view o f i t s importance as a p o r t and t h e need f o r l a r g e sums o f money from time t o .161 t i m e beyond the normal amount o f money t h a t a bank would c a r r y , t h e c o n t i n u a t i o n o f t h e Agency i s j u s t i f i e d . n The Savannah banks make l a r g e shipments o f currency t o banks i n t h e i r t e r r i t o r y and some o f these banks are members o f t h e F e d e r a l Reserve System. To t h i s e x t e n t the Federal Reserve Bank i s r e l i e v e d o f t r a n s p o r t a t i o n cost on money shipped by Savannah banks t o our member banks. " I n view o f t h e l o n g and s a t i s f a c t o r y o p e r a t i o n o f t h e Agency as i t r e l a t e s t o our Savannah member banks, and a f t e r c o n s i d e r i n g t h e s e r v i c e t o our Savannah member banks t h a t t h i s Agency renders, i t i s t h e o p i n i o n o f your Committee t h a t i t should be continued, and we so recommend." The D i r e c t o r s o f t h e A t l a n t a Bank a f t e r r e v i e w i n g t h i s r e p o r t voted t o continue t h e Agency and so advised t h e Board. I n connection w i t h t h e general survey requested by t h e Board i n i t s l e t t e r o f March 25, 1936 (X-9532), the o p e r a t i o n s o f t h e Savannah Agency were again reviewed. I n t h e r e p o r t o f survey, P r e s i d e n t Newton s t a t e d t h a t i n h i s o p i n i o n t h e Agency should be closed and t h a t he would recommend t o h i s D i r e c t o r s t h a t such a c t i o n be taken e f f e c t i v e December 31, 1956, s u b j e c t o f course t o the approval o f t h e Board o f Governors. While t h e D i r e c t o r s o f t h e A t l a n t a Bank were acquainted w i t h Mr. Newton's recommendation, a c t i o n t o d i s c o n t i n u e t h e Agency was n o t taken d u r i n g 1936. definite However, i n January, 1937, a committee o f d i r e c t o r s , appointed t o i n v e s t i g a t e t h e q u e s t i o n f u r t h e r , r e p o r t e d t h a t i t was a matter o f considerable doubt whether the Agency was o f any b e n e f i t t o t h e general community as d i s t i n g u i s h e d from t h e f o u r l o c a l member banks, b u t recommended t h a t u n t i l t h e Havana Agency, which operates a t an annual l o s s o f approximately $30,000, was closed, or the cost t h e r e o f assumed p r o p o r t i o n a t e l y by other Reserve banks, no f u r t h e r consideration should be given t o discontinuance o f t h e Savannah Agency. .162 SAVANNAH AGENCY VOLUME OF OPERATIONS Currency and Coin Number o f u n i t s handled Currency Coin ft Gi Digitized C* for FRASER Amount o f u n i t s handled Currency Coin 1931 3,24.8,000 715,000 1*8,754,000 t106,000 1932 2,528,000 496,000 7,646,000 87,000 1933 3,529,000 660,000 10,399,000 171,000 1934 3,080,000 557,000 7,238,000 35,000 1935 3,222,000 437,000 7,947,003 36,000 1936 3,189,000 937,000 8,135,000 71,000 DETROIT BRANCH - FEDERAL RESERVE BANK OF CHICAGO (a) C i t y o f D e t r o i t : D e t r o i t , w i t h a p o p u l a t i o n o f 1,568,662, i s t h e f o u r t h l a r g e s t c i t y t h e U n i t e d States and t h e l a r g e s t c i t y i n Michigan. in I t i s l o c a t e d i n the n o r t h e a s t e r n p a r t o f the S t a t e , on t h e D e t r o i t R i v e r , one o f the connecting l i n k s i n t h e Great Lakes c h a i n , and i s s a i d t o serve a t r a d e area h a v i n g a r a d i u s o f approximately 50 m i l e s . W i t h i n t h i s area over 2,500,000 people reside. T r a n s p o r t a t i o n f a c i l i t i e s are provided t y n i n e r a i l r o a d s , including t h e Canadian P a c i f i c , Grand Trunk, Michigan Central', New York C e n t r a l , Pere Marquette, Pennsylvania and Wabash; also by v a r i o u s steamship l i n e s arid several air lines. According t o t h e B i e n n i a l Census o f Manufactures, Wayne County, i n which D e t r o i t i s l o c a t e d , had 2,465 manufacturing establishments i n 1935, which had an o u t p u t valued a t $976,295,000. The p r i n c i p a l i n d u s t r y i s t h e manufacturing of automobiles and accessories; over 85% o f a l l motor cars made i n the U n i t e d States being manufactured i n the D e t r o i t area. Other major i n d u s t r i e s were the p r o d u c t i o n o f machinery, machine s u p p l i e d , d r u g s , d r y goods, wearing a p p a r e l , j e w e l r y , tobacco p r o d u c t s , meat and meat products and paper. The area i s a l s o noted f o r d a i r y i n g and the r a i s i n g o f f r u i t and v e g e t a b l e s . The Census o f American Business f or T935~~33rstB 22,646 r e t a i l and 2,465 wholesale establishments o p e r a t i n g i n Wayne C o u n t y , which enjoyed sales aggregat- i n g $625,637,000 and #976,295,000, r e s p e c t i v e l y , d u r i n g t h a t y e a r . Banking f a c i l i t i e s i n D e t r o i t are provided by t h r e e S t a t e banks (2 members), two n a t i o n a l banis, t h r e e i n d u s t r i a l banks and f o u r t r u s t companies. These i n s t i t u t i o n s had d e p o s i t s aggregating $768,185,000 as o f December 31, 1936, and o f t h i s amount $695,775,000 was c a r r i e d by the f o u r l o c a l member banksj the .164 t h r e e l a r g e r o f which were o p e r a t i n g an aggregate o f 58 branches i n t h e c i t y . D e b i t s t o i n d i v i d u a l accounts i n banks o f t h e c i t y aggregated $10,616,325,000 d u r i n g t h e year 1936, or an average o f approximately $35,380,000 f o r each banki n g day. I n t h i s r e s p e c t D e t r o i t leads a l l o t h e r branch c i t i e s and a l l b u t f o u r Reserve bank c i t i e s . (b) Branch T e r r i t o r y and F u n c t i o n s ; The D e t r o i t Branch was e s t a b l i s h e d March 18, 1918, and serves n i n e t e e n c o u n t i e s l o c a t e d i n t h e southeastern p a r t o f t h e S t a t e o f Michigan. The branch zone c o n s t i t u t e s 6% o f t h e l a n d area o f t h e Seventh D i s t r i c t and has 17% of t o t a l population. its Approximately 8.2$ o f a l l banks i n the d i s t r i c t are w i t h i n t h i s area. As o f December 31, 1936, t h e r e were 214 banks, e x c l u s i v e o f mutual savings banks, i n t h e branch zone and o f t h i s number 81, i n c l u d i n g 23 n a t i o n a l and 58 S t a t e i n s t i t u t i o n s , were membeisof t h e System. banks i n t h e zone were on the par l i s t . A l l b u t two o f t h e 133 nonmember The f o l l o w i n g f i g u r e s taken from r e - p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n t h e branch zone as compared t o those o f t h e Seventh D i s t r i c t as a whole; No. Member Banks Seventh D i s t r i c t Branch Zone 741 81 Capital Loans and and Investments Surplus (000 o m i t t e d ) $4,277,515 $416,241 629,868 55,680 T o t a l Deposits $5,886,160 917,215 There were only two branch zones i n the System having l a r g e r member bank f o o t i n g s than t h e D e t r o i t zonej namely, P i t t s b u r g h and Los Angeles. The D e t r o i t Branch renders the same s e r v i c e t o banks i n i t s zone as i s a v a i l a b l e a t t h e Head O f f i c e i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , safekeeping o f .165 s e c u r i t i e s and loans t o member banks are concerned. The reserve accounts of member banks i n t h e branch zone, as w e l l as accounts o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t the Branch, which a l s o maint a i n s a memorandum general l e d g e r and record o f earnings and expenses. Trans- a c t i o n s are cleared d a i l y through c o n t r o l accounts maintained a t the Head O f f i c e . Member bank borrowings are passed upon a t the Branch and immediate c r e d i t g i v e n , s u b j e c t t o f i n a l approval o f the Head O f f i c e . is Schedules covering such t r a n s a c t i o n s are forwarded t o the Head O f f i c e , but the notes and c o l l a t e r a l , i f any, are r e t a i n e d by the Branch. The Branch has no Bank Examination, Bank R e l a t i o n s , F a i l e d Banks, Research, Legal or F i s c a l Agency departments. As o f September 25, 1937, member banks i n t h e branch zone had the f o l l o w i n g Reserve Bank balances? No. o f Banks City of D e t r o i t Remainder o f Zone 4 8£ 88 Reserve Balances $102,808,123 27.136 t 238 $129.944.361 Deferred Balances $6,931,996 1.091.111 $8.023.107 Capital Stock $1,180,500 597.700 $1.778.200 Bills Discounted $20.000 $20.000 D e t r o i t i s 284 t r a i n m i l e s (6 h r s . and 26 mins.) from Chicago. On any b u s i ness day t h e r e are a number of t r a i n s l e a v i n g both p o i n t s a f t e r 7 P.M. and a r r i v i n g a t the o t h e r b e f o r e 8 A.M. on the f o l l o w i n g day, i . e . , o v e r n i g h t m a i l . The Federal Reserve Bank of Chicago advises t h a t more than 90$ o f t h e member banks i n Michigan can be reached o v e r n i g h t from Chicago as w e l l as from D e t r o i t and t h a t more t r a i n s c a r r y i n g r e g i s t e r e d m a i l are a v a i l a b l e a t Chicago than a t Detroit. I t i s p o i n t e d o u t , however, t h a t approximately 66 2/3% o f a l l Michigan banks, i r r e s p e c t i v e o f branch zone l i n e s , r e m i t f o r Chicago and D e t r o i t cash l e t t e r s t o D e t r o i t and t h a t t h i s t r e n d i s g r a d u a l l y i n c r e a s i n g , a l s o t h a t 75% ' 166 o f a l l country checks, t h a t i s checks drawn on banks l o c a t e d i n Michigan o u t side o f D e t r o i t , are r e c e i v e d through D e t r o i t banks. F u r t h e r , i t i s s t a t e d t h a t the D e t r o i t Branch handles as many noncash c o l l e c t i o n s as t h e Head O f f i c e . Because of these f a c t o r s , i t i s i n d i c a t e d t h a t discontinuance o f t h e D e t r o i t Branch would n o t o n l y s e r i o u s l y a f f e c t the character o f s e r v i c e rendered t o banks i n D e t r o i t , b u t t h a t i t would a l s o slow up t h e s e r v i c e rendered t o o u t l y i n g banks and t o t h e System as a whole, p a r t i c u l a r l y i n s o f a r as t h e c o l l e c t i o n f u n c t i o n s are concerned. Other than D e t r o i t , the more populous c i t i e s i n t h e branch zone are F l i n t , 156,492; Saginaw, 80,715; Lansing, 78,397, P o n t i a c , 64,928; Hamtramck, 56,268; Jackson, 55,187; Highland Park, 52,959; Dearborn, 50,358; Bay C i t y , 47,555 and P o r t Huron, 31,361. A l l o f these c i t i e s except Hamtramck, which has t h r e e nonmember banks, i s served by one o r more member banks o r a branch o f a member bank. (c) Branch B u i l d i n g s The D e t r o i t Branch has occupied i t s present q u a r t e r s a t 160 West F o r t S t r e e t , sinee December, 1927. The f o l l o w i n g f i g u r e s show t h e o r i g i n a l cost and book v a l u e , as of September 25, 1957, o f the branch premises; Cost Land Building V a u l t and v a u l t equipment Fixed machinery and equipment $ 650,000 836,144) 170,725) $1,656,869 115.840 $1.772.709 Book Value 9 - 25- 37 $ 412,500 550,065 $ 762,565 9.496 I 772.061 I n commenting on t h e p o t e n t i a l sale v a l u e o f the branch b u i l d i n g i n the event t h e Branch were d i s c o n t i n u e d , t h e Reserve bank s t a t e s t h a t the b u i l d i n g o f t h e Bank of D e t r o i t ( c l o s e d ) , l o c a t e d w i t h i n o n e - h a l f block o f t h e Branch, .167 which was constructed a t about t h e same t i m e , i s t o be t o r n down and t h e ground used as a p a r k i n g space i n order t o pay taxes. (d) Earnings - Branch Books? The Branch's earnings as r e f l e c t e d by i t s books f o r t h e year 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1933 1934 1935 1936 1411,000 531,700 133,100 14,700 39,300 5,200 1937 5,000 The above f i g u r e s a r e , o f course, incomplete s i n c e t h e Branch r e c e i v e s no c r e d i t f o r income r e c e i v e d by the Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by the reserve balances and Reserve bank stock i n v e s t ment o f banks i n the branch zone. Branch earnings depend almost e n t i r e l y on the e x t e n t t o which member banks i n the branch zone use the c r e d i t o f t h e System. facilities Income d e r i v e d by the Branch from t h i s source amounted t o $500,400 i n 1932 and t o only $600 i n 1937. (e) Branch Personnel: The r e p o r t of examination o f the Federal Reserve Bank o f Chicago, as o f September 25, 1937, shows t h e f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the D e t r o i t Branch: Officers Employees Seat. 25. 1937 Number Amount Nov. 21. 1936 Number Amount 3 13£ 136 4 122 126 $ 23,600 208.200 $231.800 | 29,400 194.100 $225.500 Increase Number Amount 1* 11 10 $ 5,$00* 14.100 $ 8.500 * Decrease O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . .168 ( f ) Branch Expense by Functionss The expenses o f t h e D e t r o i t Branch by f u n c t i o n s f o r the years 1932 t o 1957, i n c l u s i v e , ?/ere as followss 1932 1933 1934 1935 1936 1937 General Overheads Controllable $ 28,540 $ 30,608 $ 24,565 $ 17,400 $ 22,637 $ 21,075 Noncontrollable 18,815 109 240 136 24,215 18,483 -^Provision o f Space 65,791 47,235 75,177 76,169 51,887 46,719 P r o v i s i o n o f Personnel 63,040 3,603 4,324 33,829 54,532 4,164 General Service 74,277 80,826 76,268 53,068 61,709 54,562 Postage 19,629 20,298 21,376 23,719 21,350 21,677 Insurance 6,692 7,175 4,146 2,926 2,544 3,399 Loans,rediscounts,etc. 9,557 712 25,644 21,589 7,761 2,724 13,579 Securities 14,094 12,054 10,849 10,479 10,063 Currency & Coin 72,328 56,714 63,055 79,729 74,503 70,524 Check C o l l e c t i o n 74,691 68,187 53,600 54,625 61,956 57,411 Non-cash C o l l e c t i o n 21,896 20,315 21,709 24,703 24,388 20,675 Accounting 32,436 37,256 28,842 27,470 32,208 31,552 F i s c a l Agency69,398 194,002 205,078 214,125 163,526 135,900 Legal 3,032 3,131 4,047 300 400 503 Auditing 13,304 10,457 16,132 4,366 5,337 13,363 Bank R e l a t i o n s 5,551 1,178 3,804 1,141 1,596 1,590 Bank Examinations 3,675 19,038 15,737 13,587 4,153 796 2,568 632 F.R.Note Issues 752 813 383 25 Miscellaneous 53 91 2,074 T o t a l Expense #570,320 $696,289 $673,673 $651,346 $586,903 $496,019 Less - Reimbursable F i s c a l Agency Expense 66.321 189.538 197.551 183.441 147.782 120.489 Net Expense $505,999 $506,751 $476,122 $467,905 $439,121 $375,530 * Represents the n e t expense - income from r e n t a l s h a v i n g been deducted. There were twenty branches i n the System which operated a t l e s s expense than t h e D e t r o i t Branch i n 1937. D e t r o i t i s one o f t h e l a r g e s t branches i n t h e System based on t h e volume o f o p e r a t i o n s . (g) Volume o f Operations a t D e t r o i t Branch s The f o l l o w i n g i s a comparison o f t h e volume o f o p e r a t i o n s i n v a r i o u s departments o f the D e t r o i t Branch and the Head O f f i c e d u r i n g t h e l a s t six .169 months o f 1936s D e t r o i t Branch Head O f f i c e Discount Department; Notes rediscounted C o l l a t e r a l notes discounted 2 2 I n d u s t r i a l advances 2 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , New Orleans, Memphis, Denver, Omaha, E l Paso, Houston, San Antonio, S a l t Lake C i t y , and Spokane. Safekeeping: Member bank s e c u r i t i e s 12-31-36 Branches w i t h l a r g e r volume: P i t t s b u r g h $58,783,000 $1,079,753,000 Currency & Coin: 1. Number of b i l l s received and counted 26,106,000 118,745,000 Branches w i t h l a r g e r volume: B a l t i m o r e and Los Angeles. Cost per one thousand u n i t s handled 52 cents 38 cents Branches w i t h higher u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , Helena, Denver, Omaha, E l Paso, San Antonio, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number of coins received and counted 7,048,000 47,130,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, Houston and Los Angeles. Cost per one thousand u n i t s handled 16 cents 19 cents Branches w i t h higher u n i t c o s t : A l l branches except B u f f a l o , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New Orleans, L o u i s v i l l e , Memphis, Oklahoma C i t y , Houston and Los Angeles. Check C o l l e c t i o n : 1. Number of c i t y checks ( c l e a r i n g s ) received 3,088,000 10,243,000 Branches w i t h l a r g e r volumes P i t t s b u r g h and Los Angeles. Cost per one thousand u n i t s handled $1.45 $2.22 Branches w i t h higher u n i t costs A l l branches except B a l t i m o r e , C h a r l o t t e , Birmingham, Jacksonville., N a s h v i l l e , San Antonio and New Orleans. 2. Number of country checks (outgoing) received; 5,546,000 43,162,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , Baltimore and Oklahoma C i t y . Cost per one thousand u n i t s handled $2.62 $3.01 Branches w i t h higher u n i t costs B u f f a l o , Los Angeles, P o r t l a n d , S a l t Lake C i t y , Spokane and S e a t t l e . 170 D e t r o i t Branch Head O f f i c e Non-cash C o l l e c t i o n s : 1 . Number o f c i t y c o l l e c t i o n s handled 27,239 43,338 Branches w i t h l a r g e r volume: L i t t l e Rock and Omaha. Cost per u n i t handled 19.8 21.8 Branches w i t h h i g h e r u n i t c o s t : C i n c i n n a t i , P i t t s b u r g h , Los Angeles, P o r t l a n d and S e a t t l e . 2. Number of country c o l l e c t i o n s handled 13,572 190,808 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , Denver, Oklahoma C i t y , Omaha, Los Angeles, S a l t Lake C i t y and Spokane. Cost per u n i t handled 10.3 cents 6.4 cents Branches w i t h higher u n i t c o s t : B u f f a l o , B a l t i m o r e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans, Helena, San Antonio, Los Angeles, P o r t l a n d and S e a t t l e . 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 15,259 118,441 Branches w i t h l a r g e r volume: Baltimore Cost per u n i t handled 15.7 cents 13.3 cents Branches w i t h higher u n i t c o s t : C h a r l o t t e , J a c k s o n v i l l e , Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume of operations of the D e t r o i t Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f D e t r o i t Branch by Board's Examiners - 1934: During the course o f an examination o f the Federal Reserve Bank of Chicago, made as o f February 10, 1934, the Board's Examiners reviewed t h e operations of the D e t r o i t Branch and expressed the f o l l o w i n g o p i n i o n as t o the n e c e s s i t y f o r i t s continuance: "The D e t r o i t Branch i s one o f the l a r g e s t branches i n the System, but i n the o p i n i o n of your examiner, i t s continuance, l i k e t h a t o f the C i n c i n n a t i and P i t t s b u r g h branches, i s j u s t i f i e d only because of the importance of the branch c i t y . " I t was pointed out t h a t there were f o u r l i c e n s e d member banks w i t h t o t a l resources o f approximately $350,000,000 (now |746,000,000) i n the c i t y o f D e t r o i t , and t h a t a l l b u t f o u r o f seventy-four member bank p o i n t s i n the D e t r o i t zone were w i t h i n overnight m a i l time from Chicago. 171 An apparent change i n o p i n i o n i s r e f l e c t e d i n t h e f o l l o w i n g comment appeari n g i n the c o n f i d e n t i a l s e c t i o n o f the r e p o r t o f an examination o f t h e Chicago Reserve bank as o f November 21, 1936: " D u r i n g the past few years the management has given considerable thought and study w i t h the view t o determining whether the f u n c t i o n s o f t h e D e t r o i t branch could be t r a n s f e r r e d t o t h e head o f f i c e a t a s u b s t a n t i a l savings i n o p e r a t i n g costs w i t h o u t i m p a i r i n g the s e r v i c e s which the System i s now r e n d e r i n g member banks i n t h a t zone. A few minor f u n c t i o n s which d i d not d i r e c t l y a f f e c t s e r v i c e t o member banks have been t r a n s f e r r e d t o the head o f f i c e . However, i n vie?; o f the s i z e and importance o f t h e C i t y o f D e t r o i t and i n the i n t e r e s t of s e r v i c e t o member banks i n the branch t e r r i t o r y , i t was n o t considered f e a s i b l e t o t r a n s f e r any o f the more i m p o r t a n t o p e r a t i n g f u n c t i o n s t o the head o f f i c e , and i n t h i s your examiner agrees." ( i ) Survey o f D e t r o i t Branch made by Federal Reserve Bank o f Chicago—1956s The Federal Reserve Bank o f Chicago made a thorough survey o f the o p e r a t i o n of t h e D e t r o i t Branch, as requested i n t h e Board's l e t t e r o f March 25, 1956 (X-9532), t o determine whether any o f the o p e r a t i o n s being performed a t the Branch could be t r a n s f e r r e d t o the Head O f f i c e a t a s u b s t a n t i a l saving i n o p e r a t i n g cost and w i t h o u t i m p a i r i n g the s e r v i c e rendered t o member banks and through them t o commerce, i n d u s t r y and a g r i c u l t u r e . A t t e n t i o n was c a l l e d t o the f a c t t h a t a comprehensive survey o f t h e Branch was undertaken i n 1954 and t h a t as a r e s u l t c e r t a i n nonbanking f u n c t i o n s had been t r a n s f e r r e d t o the Head O f f i c e and t h a t a r e d u c t i o n i n s a l a r y expense aggregating approximately f10,000 per month had been e f f e c t e d w i t h o u t i m p a i r i n g t h e e f f i c i e n c y o f s e r v i c e t o member banks. I n view o f the previous s t u d i e s the 1956 survey was c o n f i n e d l a r g e l y toUie cash c o l l e c t i o n , noncash c o l l e c t i o n , currency and safe-keeping f u n c t i o n s ) p r i n c i p a l l y t h e c o l l e c t i o n f u n c t i o n s . As a r e s u l t o f t h i s survey, i t was concluded t h a t a saving o f a t l e a s t $100,000 could be made by t r a n s f e r r i n g a l l Branch f u n c t i o n s t o the Head O f f i c e , b u t t h a t such a move would s e r i o u s l y i m p a i r t h e s e r v i c e rendered t o member banks i n Michigan, and would arouse s t r o n g o p p o s i t i o n p a r t i c u l a r l y on the p a r t o f member banks i n D e t r o i t and i n i t s immediate v i c i n i t y . I t was p o i n t e d out t h a t , d e s p i t e e x c e l l e n t m a i l communication between Chicago and member bank p o i n t s i n Michigan, the n a t u r a l t r e n d o f banking i n the S t a t e was toward D e t r o i t and t h a t member banks i n the S t a t e would d e a l w i t h D e t r o i t correspondents preference t o sending t h e i r items t o Chicago. in I t was f u r t h e r s t a t e d t h a t o p e r a t i o n o f the D e t r o i t Branch q u a r t e r s merely as a currency depot would be uneconomical, the overhead expense being a l l out o f p r o p o r t i o n t o t h e s e r v i c e rendered; t h a t a move t o smaller q u a r t e r s would c a l l f o r d i s p o s i t i o n of t h e present q u a r t e r s , which could n o t be accomplished w i t h o u t a s u b s t a n t i a l l o s s ; and t h a t t r a n s f e r o f t h e currency f u n c t i o n t o Chicago would work a hardship on D e t r o i t banks, which would have t o m a i n t a i n h i g h e r cash r e s e r v e s , and a t t h e same time would save very l i t t l e as i t would increase s h i p p i n g charges from Washington and t o p o i n t s i n Michigan and r e q u i r e an augmented personnel a t Chicago. I n g e n e r a l , i t was i n d i c a t e d t h a t general o p e r a t i n g economies r a t h e r than c u r t a i l m e n t o f f u n c t i o n s was t h e more d e s i r a b l e means o f r e d u c i n g expenses a t t h e D e t r o i t Branch. DETROIT BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Received and Coin Received and Counted _________ Checks Handled Gov't Checks Non Cash Collect i on i terns AI I Gov't Fiscal Agency Transactions Coupons Other Direct Transfer Date Bills Dt scounted 1931 14,525 77,517,000 125,374,000 6,996,000 15,116,000 671,000 22,783,000 251,036 131,883 2,346 1932 17,396 69,731,000 121,043,000 6,630,000 10,475,000 672,000 17,777,000 248,732 131,762 2,320 10 36,550 1933 4,617 68,149,000 107,347,000 5,329,000 6,314,000 919,000 12,562,000 259,304 172,505 7,375 66 20,472 193** 168 69,475,000 120,170,000 5,588,000 8,678,000 2,417,000 16,633,000 402,762 157,658 12,022 18 21,578 1935 6 77,530,000 45,802,000 5,979,000 10,602,000 1,084,000 17,665,000 463,000 149,000 23,616 14,274 23,299 1936 2 60,395,000 25,895,000 6,073,000 10,811,000 1,061,000 17,945,000 370,000 115,000 6,292 6,605 128,298 5,508 6,982 78,214 11,361 205 6,942,347 6,147 105,727 12,155 135 2,191,959 7,660 138,779 8,408 125 2,154,164 7,482 186,411 11,688 3,030 2,726,719 6,597 193,423 10,327 1,527 2,207,086 Counted Country Total Other of Funds 46,291 5,076 23,000 Amounts Handled (in thousands of dollars) 1931 Iff* 1933 1934 1935 1936 512,650 592,395 104,670 5,359 277 85 § It*® 459,331 tyO 1, 112 544,691 418,353 475,622 303,309 7,342 3.885.294 1,075,278 106,324 5,066,896 2,554,522 723,688 81,561 3,359,771 2,305,206 592,107 97,955 2,995,268 4,025,318 821,224 140,733 4,995,275 5,540,391 1,050,441 153,683 6,744,515 6.008.295 1,027,542 192,998 7,228,835 7,357 17,064 7,908 3,142 1,869 4,662,218 LITTLE ROCK BRANCH - FEDERAL RESERVE BANK OF ST. LOUIS. (a) C i t y o f L i t t l e Rock L i t t l e Rock, w i t h a p o p u l a t i o n o f 81,679, i s the l a r g e s t c i t y i n Arkansas. I t i s l o c a t e d i n t h e c e n t r a l p a r t o f the S t a t e , on the Arkansas R i v e r , and i s said t o serve a t r a d e area extending approximately 64 m i l e s i n a l l d i r e c t i o n s i n which about 660,000 people r e s i d e . T r a n s p o r t a t i o n f a c i l i t i e s are provided by t h e M i s s o u r i P a c i f i c , S t . Louis Southwestern, and the Chicago, Rock I s l a n d & P a c i f i c r a i l r o a d s j a l s o by a number o f bus l i n e s and two a i r l i n e s . According t o the B i e n n i a l Census o f Manufactures t h e r e were 155 manuf a c t u r i n g establishments i n P u l a s k i County, i n which L i t t l e Rock i s l o c a t e d , 1955. in These concerns had an o u t p u t valued a t $24,275,000 d u r i n g t h a t y e a r . The p r i n c i p a l manufactures were cottonseed o i l , f e r t i l i z e r , f u r n i t u r e , canned goods, d a i r y products and meat products. textiles, The c i t y i s noted as a c o t t o n warehousing and marketing c e n t e r . The Census o f American Business f o r 1955 l i s t s 1,994 r e t a i l and 219 wholes a l e f i r m s o p e r a t i n g i n P u l a s k i County which enjoyed sales aggregating #58,925,000 and #52,467,000, r e s p e c t i v e l y , d u r i n g t h a t y e a r . Banking f a c i l i t i e s i n L i t t l e Rock are provided by t h r e e n a t i o n a l banks and one S t a t e member bank. as o f December 51, 1956. These i n s t i t u t i o n s had d e p o s i t s aggregating $40,887,000 D e b i t s t o i n d i v i d u a l accounts i n banks o f t h e c i t y amounted t o #418,295,000 d u r i n g 1936, or an average o f approximately $1,594,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions* The L i t t l e Rock Branch was e s t a b l i s h e d January 6 , 1919 and serves f i f t y - s i x c i t i e s i n the State o f Arkansas. While t h e branch t e r r i t o r y i s n o t determined by State o r County l i n e s i t i s estimated t h a t i t represents approximately 20% .175 o f the l a n d area o f the E i g h t h D i s t r i c t and has about 14$ o f i t s t o t a l population. Approximately 10$ o f a l l banks i n the d i s t r i c t operate i n c i t i e s served by the branch. As o f December 51, 1936, t h e r e were 169 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number o n l y 56, i n c l u d i n g 30 n a t i o n a l and 6 S t a t e i n s t i t u t i o n s , were members o f t h e System. member banks i n the zone were on t h e par l i s t . T h i r t y - n i n e o f t h e 133 non- The f o l l o w i n g f i g u r e s taken f r o m r e p o r t s of c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n t h e branch zone as compared t o those o f t h e E i g h t h D i s t r i c t as a whole: Eighth D i s t r i c t Branch Zone No. Member Banks Loans and Investments Capital and Surplus (000 omitted) Total Deposits 388 36 $1,092,425 56,134 $125,722 7,006 $1,480,335 89,283 There are o n l y two branch zones i n the System h a v i n g smaller bank f o o t i n g s than t h e L i t t l e Rock zone; namely, E l Paso and Spokane. The L i t t l e Rock Branch-rcnders s u b s t a n t i a l l y t h e same s e r v i c e t o member banks i n i t s t e r r i t o r y as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f member banks i n the zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t the Branch, which a l s o maintains a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t the Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t .181 i s given t o member banks f o r d i s c o u n t o f f e r i n g s received by the Branch, s u b j e c t t o f i n a l approval o f t h e Head O f f i c e . Schedules covering t r a n s a c t i o n s are forwarded t o the Head O f f i c e , but the notes and c o l l a t e r a l , i f any, are r e t a i n e d a t the Branch. The Branch does n o t have Bank Examination, Bank Rela- t i o n s , L e g a l , Research or F i s c a l Agency departments. As of November 27, 19S7, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s s No. o f Banks L i t t l e Rock Remainder o f Zone 4 51 55 Reserve Balances Deferred Balances Capital Stock Bills Discounted $ 5,785,927 $1,027,525 $ 68,250 5.401.878 259.808 142.150 fcLl.lB7.805 11.287.551 $210.400 L i t t l e Rock i s 549 t r a i n m i l e s (9 h r s . and 5 mins.) from S t . L o u i s . On any business day t r a i n s leave b o t h p o i n t s a t 7 P.M. o r l a t e r and a r r i v e a t the o t h e r before 8 A.M. on the day f o l l o w i n g , i . e . , o v e r n i g h t m a i l . There are 28 p o i n t s i n the branch zone i n which one or more member banks are l o c a t e d . A study o f m a i l schedules made i n 1954 by t h e Board's examiners i n d i c a t e d t h a t 21 o f these member bank p o i n t s were w i t h i n o v e r n i g h t m a i l time o f the Memphis Branch and t h a t 16 o f t h e p o i n t s were w i t h i n o v e r n i g h t m a i l time o f S t . L o u i s . I t appears, t h e r e f o r e , t h a t o n l y a small number o f o u t l y i n g banks i n t h e zone would be inconvenienced by discontinuance o f the Branch. I t would o f course c u r t a i l t h e s e r v i c e rendered t o the f o u r member banks i n the c i t y o f L i t t l e Rock, which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch. In t h i s connection, i t may be s t a t e d t h a t t h e r e are a s u b s t a n t i a l number o f l a r g e r and more important c i t i e s than L i t t l e Rock i n the U n i t e d States which do n o t have immediate access t o Reserve bank f a c i l i t i e s . .77 Other than L i t t l e Rock, the more populous c i t i e s i n the branch zone are Pine B l u f f , 20,760; Hot Springs, 20,238$ and E l Dorado, 16,421. (c) Branch B u i l d i n g s The L i t t l e Rock Branch has occupied i t s present q u a r t e r s a t T h i r d and L o u i s i a n a S t r e e t s since March, 1925. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book v a l u e , as o f November 27, 1937, o f t h e branch premises: Cost Land Building V a u l t and v a u l t equipment Fixed machinery and equipment $ 85,007 186,800) 46.279) $318,086 103*608 $421.694 Book Value 11-27-37 $ 80,000 143.404 $223,404 $223.404 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1933 1934 1935 1936 $ 61,500 38,600 14,200 8,700 5,200 100 1937 400 These f i g u r e s are incomplete since, under t h e present accounting p r o cedure, the Branch does n o t r e c e i v e any c r e d i t f o r income r e c e i v e d by the Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by the Reserve bank stock investment and reserve balances o f member banks i n t h e branch zone. Income c a r r i e d on the books o f t h e Branch i s d e r i v e d c h i e f l y from borrowings by member banks i n i t s zone. Income from t h i s source amounted t o $60,200 i n 1931 and t o l e s s than $100 i n 1937. .178 (e) Branch Personnel. The r e p o r t o f examination o f the Federal Reserve Bank o f S t . L o u i s , as o f November 27, 1957, shows the f o l l o w i n g regarding s a l a r i e s and personnel a t the L i t t l e Rock Branch: November 27. 1957 Number Amount Officers Employees 5 4£) H $17,100 54.800 $71.900 October 51. 1956 Number Amount 5 41 H $15,500 54.800 $70.100 Increase Number Amount $ 1,800 l(Dec.) i ( D e c . ) $ 1.800 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . ( f ) Branch Expense by F u n c t i o n s : The expenses of t h e L i t t l e Rock Branch by f u n c t i o n s f o r t h e years 1952 t o 1937, i n c l u s i v e , were as f o l l o w s : 1952 1955 1954 1955 1956 1957 General Overhead: Controllable $ 11, 650 iI 12,474 i} 11,827 ii! 11,990 $ 10,,770 <P 11, 215 Noncontrollable 5,459 4,953 3, 383 12, 911 10,858 9,618 7.,993 13, 560 * P r o v i s i o n o f Space 9,372 447 12,381 P r o v i s i o n o f Personnel 505 7,414 14a,161 1 , 168 16, 185 15, General Service 16,596 19,881 423 18,327 ,376 16, 317 ,429 697 5,415 4,187 Postage 6,062 6 , 4, 5, 077 2,295 1,942 ,854 Insurance 3,885 2, 1 , 544 1; 1,416 3 692 697 F a i l e d Banks 4, 990 3,818 8,888 2,264 903 Loans, r e d i s c o u n t s , e t c ,. 8 , 548 617 2,425 2,486 ,942 863 4,042 Securities 2, 5, 17,,271 17, 748 16,126 9,635 Currency & Coin 9,723 8 , 672 10,525 10,,346 10, 739 11, 284 11,476 Check C o l l e c t i o n 12,768 6,195 6,668 ,744 Non-cash C o l l e c t i o n 7,341 4 , 366 6, 7 , 478 10, 12,880 815 15, 634 13,855 14,615 11,,813 Accounting 35,637 49, ,618 42, 870 F i s c a l Agency 11, 289 21,874 50,953 Legal 25 3,276 3,998 Auditing 3,093 5> 881 5;,545 s , 222 86 463 92 Bank R e l a t i o n s 11 301 301 F . ft. Note Issues 768 700 364 72 85 159 144 S t a t i s t i c a l & A n a l y t i c a l 132 167 88 Works Progress T o t a l Expense $123,065 $135,656 $150,150 $168,728 $160,705 $146,824 Less - Reimbursable F i s c a l Agency Expense 10.569 20.695 54.414 42.690 42.575 55.561 Net Expense &112.694 &L14.961 1115.756 $126.058 $118.150 $111.465 * Represents the n e t expense - income from r e n t a l s having been deducted. .179 There were only f i v e branches i n the System which operated a t a lower net cost than t h e L i t t l e Rock Branch i n 1937; namely, Spokane, N a s h v i l l e , E l Paso, Birmingham and Helena. (g) Volume o f Operations a t L i t t l e Rock Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s d e partments o f the L i t t l e Rock Branch and t h e Head O f f i c e d u r i n g t h e l a s t six months o f 1936: L i t t l e Rock Branch Discount Department: Notes discounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: Head O f f i c e 2 31 2 B u f f a l o , B a l t i m o r e , New O r l e a n s , Memphis, Denver, Omaha, E l Paso, Houston, San A n t o n i o , S a l t Lake C i t y and Spokane. Safekeeping: Member bank s e c u r i t i e s 12-31-36 12,065,000 160,823,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , D e t r o i t , Denver, Oklahoma C i t y , Omaha and Houston. Currency & Coin: 1. Number o f b i l l s r e c e i v e d and counted 5,020,000 36,272,000 Branches w i t h l a r g e r volume: A l l branches except Helena, Denver, Omaha, Oklahoma C i t y , E l Paso, S a l t Lake C i t y and Spokane Cost per one thousand u n i t s handled 31 cents 37 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except New Orleans. 2. Number o f coins r e c e i v e d and counted 2,757,000 39,431,000 Branches w i t h l a r g e r volume: A l l branches except Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 19 cents 11 cents Branches w i t h h i g h e r u n i t c o s t : C i n c i n n a t i , P i t t s b u r g h , N a s h v i l l e , Helena, Omaha, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Check C o l l e c t i o n : 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 357,000 3,284,000 Branches w i t h l a r g e r volume: A l l branches except Helena and E l Paso. Cost per one thousand u n i t s handled $1.57 $1.91 Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , L o u i s v i l l e , Helena, Denver, Oklahoma C i t y , E l Paso, Houston Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. L i t t l e Rock Branch Head O f f i c e Check C o l l e c t i o n ( C o n t ' d . ) : 2. Number o f country checks (outgoing) received 1,585,000 11,820,000 Branches w i t h l a r g e r volume: A l l branches except Memphis and E l Paso. Cost per one thousand u n i t s handled $1.66 fl.85 Branches w i t h h i g h e r u n i t c o s t : A l l branches except Birmingham. Non-cash C o l l e c t i o n s : 41,811 1 . Number o f c i t y c o l l e c t i o n s handled Branches w i t h l a r g e r volumes Omaha Cost per u n i t handled 5 . 1 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except Omaha. 17,556 14.7 cents 2. Number o f country c o l l e c t i o n s handled 8,290 77,714 Branches w i t h l a r g e r volume: A l l branches except Birmingham, N a s h v i l l e , Helena, E l Paso and Houston, Cost per u n i t handled 6.3 cents 5 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except Memphis, S a l t Lake C i t y and Spokane. 3. Number o f coupons (except Government) and 2,667 14,700 country s e c u r i t y c o l l e c t i o n s handled Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , Omaha, San Antonio and Los Angeles. Cost per u n i t handled 10.7 cents 13.8 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , Birmingham, New Orleans, Denver, Omaha and S e a t t l e . A schedule showing the volume o f o p e r a t i o n s of t h e L i t t l e Rock Branch f o r t h e years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum, (h) Survey o f L i t t l e Rock Branch by Board's Examiners - 1934 During the course o f an examination o f the F e d e r a l Reserve Bank o f S t . L o u i s , as o f September 8 , 1934, the Board's Examiners reviewed t h e o p e r a t i o n s o f the L i t t l e Rock Branch and, based on i n f o r m a t i o n developed, questioned the n e c e s s i t y f o r i t s continuance. Reference was made i n t h a t r e p o r t t o t h e l i m i t e d number o f banks i n t h e C i t y o f L i t t l e Rock and the branch zone, and t o the f a c t t h a t the major p o r t i o n o f member bank p o i n t s i n the zone were w i t h i n ' o v e r n i g h t m a i l time o f both S t . L o u i s and Memphis. .181 ( i ) Survey o f Branches by Federal Reserve Bank o f S t . L o u i s - 1956 I n accordance w i t h the request contained i n t h e Board's l e t t e r o f March 25, 1936 (X-9532), t h e Federal Reserve Bank o f S t . L o u i s appears t o have reviewed the o p e r a t i o n s o f i t s branches w i t h a vie?/ t o a s c e r t a i n i n g whether any o f them should be d i s c o n t i n u e d o r t h e i r f u n c t i o n s c u r t a i l e d . A detailed r e p o r t , i n d i c a t i n g t h e thoroughness o f t h i s survey, was n o t submitted t o the Board. However, on August 5 , 1936, Deputy Chairman D i l l a r d wrote a l e t t e r t o t h e Board r e l a t i v e t o t h e general survey o f the S t . Louis Reserve Bank which contained the f o l l o w i n g comment concerning i t s t h r e e branches: " I n our o p i n i o n , a l l o f our branches are necessary, i f t h e s e r v i c e s o f the System t o member banks and through them t o commerce, i n d u s t r y and a g r i c u l t u r e , are n o t t o be i m p a i r e d . L i k e w i s e , we do n o t f i n d t h a t any o f t h e operations now b e i n g handled by t h e branches could be t r a n s f e r r e d t o the head o f f i c e w i t h o u t i m p a i r i n g the s e r v i c e s which the System i s r e n d e r i n g t o member banks." \ LITTLE ROCK BRANCH VOLUME OF OPERATIONS Nyifi^r 9f Pieces H a i t f M Bills Date DiflfMYOW Currency Coin Received Received and and Cowttftf S&MfiteS . Hon Cash Fiscal Agency Checks Handied Gov't m i Gov't Jfruptry Checks Total Coupons All Tranaac]Hons O^herr Transfer of Other 1931 2,5*47 7,*465,000 5,*48l,000 658,000 2,628,000 3*47,000 3,633,000 27,353 38,902 333 - 10,162 1932 96*4 6,389,000 5,OHO,000 555,000 1,9*43,000 3*41,000 2,839,000 3I,*4*»8 27,**03 172 - 9,398 1933 273 6,560,000 5,92*4,000 651,000 1,730,000 556,000 2,937,000 30,151 85,231 622 - 8,762 193*4 28 7, *»70, 000 if, 332,000 729,000 2,105,000 1,122,000 3,956,000 31,881 70,389 l,*405 - 8,207 1935 10 7,6**2,000 *4,608,000 811,000 2,51*1,000 790,000 *4, 115,000 58,000 6*1,000 2,295 735 6,961 1936 2 9,220,000 5,563,000 73k,000 3,062,000 671,000 *4,**67,000 *45,000 86,000 528 2*4*1 6,000 ( i n thousands of dolllars) 1931 5k ,577 29,786 531 *425, m 162,367 37,017 62*4,532 282 2*4,182 267 m 25*4,901 1932 32,066 2*4,572 m 257,126 I I I , 6*48 2*4,972 393, 7*46 396 20,98*4 253 - 179,030 1933 7,809 29,527 626 23*4,508 II9,*»72 38,92*1 392,90*4 386 31,903 **I5 - 130,737 193*1 655 28,981 *49l 327,587 961,982 *48,0*43 537,612 **7*4 33,367 836 - 1*4*4,163 1935 89 27,688 k90 517,938 190, 17*4 *43,I76 751,288 523 *t2,556 856 357 172,315 1936 100 3*4,*473 655 5914,022 235,162 52,905 882,089 **37 61,191 (*4l 93 212,296 CD for FRASER Digitized LOUISVILLE BRANCH - FEDERAL RESERVE BANK OF ST. LOUIS (a) C i t y o f L o u i s v i l l e : L o u i s v i l l e , w i t h a p o p u l a t i o n o f 307,745, i s t h e t w e n t y - f o u r t h l a r g e s t c i t y i n the United S t a t e s and t h e l a r g e s t c i t y i n Kentucky. I t i s located i n the extreme n o r t h c e n t r a l p a r t o f the S t a t e , on the Ohio R i v e r , and i s s a i d t o serve a t r a d e area extending approximately 50 m i l e s i n a l l d i r e c t i o n s i n which upwards o f 755,000 people r e s i d e . T r a n s p o r t a t i o n f a c i l i t i e s are p r o v i d e d by ten r a i l r o a d s , i n c l u d i n g t h e B a l t i m o r e & Ohio, Chesapeake & Ohio, Pennsylvania, Southern, L o u i s v i l l e & N a s h v i l l e and t h e I l l i n o i s C e n t r a l . I t i s a l s o served by two n a t i o n a l a i r l i n e s and i s t h e t e r m i n a l f o r a number o f Ohio R i v e r barge lines. According t o t h e B i e n n i a l Census o f Manufactures t h e r e were 593 manufacturi n g establishments o p e r a t i n g i n J e f f e r s o n County, i n which L o u i s v i l l e i s i n 1955 which had an output valued a t |302,844,000 d u r i n g t h a t y e a r . situated, The p r i n - c i p a l manufactures were tobacco products, a l c o h o l i c beverages, plumbing equipment, foundry and machine shop p r o d u c t s , motor v e h i c l e p a r t s and b o d i e s , implements, stoves and f u r n a c e s , t e x t i l e s and lumber p r o d u c t s . agricultural The Census o f American Business f o r 1935 l i s t s 4,915 r e t a i l and 529 wholesale establishments o p e r a t i n g i n the same area which had sales aggregating $104,852,000 and $165,896,000, r e s p e c t i v e l y , d u r i n g t h a t y e a r . Banking f a c i l i t i e s i n L o u i s v i l l e are provided by t h r e e n a t i o n a l banks, t e n S t a t e banks ( t h r e e members), two i n d u s t r i a l banks and two t r u s t companies; the l a t t e r d o i n g no commercial banking business. These i n s t i t u t i o n s had d e p o s i t s aggregating $173,466,000, as o f December 31, 1936, and o f t h i s amount $153,539,000 was c a r r i e d w i t h t h e s i x l o c a l member banks. 184, D e b i t s t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated $1,885,257,000 d u r i n g t h e year 1936, o r an average o f approximately $6,284,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions? The L o u i s v i l l e Branch was e s t a b l i s h e d December 3, 1917, and serves f o r t y one c i t i e s i n southern I n d i a n a and 168 c i t i e s i n the c e n t r a l and western p a r t o f Kentucky. While t h e branch t e r r i t o r y i s n o t determined by S t a t e o r county l i n e s i t i s estimated t h a t t h e area served by t h e branch r e p r e s e n t s approximately 14$ o f t h e t o t a l l a n d area o f t h e E i g h t h D i s t r i c t and has about 17% o f i t s population. total Approximately 19$ o f a l l banks i n t h e d i s t r i c t are i n c i t i e s served by t i i e Branch. As o f December 31, 1936, t h e r e were 303 banks, e x c l u s i v e o f mutual savings banks, i n t h e branch zone and o f t h i s number 67, i n c l u d i n g 61 n a t i o n a l and 6 S t a t e i n s t i t u t i o n s , were members o f t h e System. banks i n t h e zone were on t h e par l i s t . A l l b u t 11 o f the 236 nonmember The f o l l o w i n g f i g u r e s taken from r e p o r t s of c o n d i t i o n as o f t h e same date show t h e s i z e o f member bank f o o t i n g s i n the branch zone as compared w i t h the E i g h t h D i s t r i c t as a whole: Eighth D i s t r i c t Branch Zone No.Member Banks Loans and Investments Capital and Surplus (000 omitted) Total Deposits 388 67 $1,092,425 148,897 $125,722 20,848 $1,480,335 198,055 There are t e n branch zones i n the System having s m a l l e r member bank f o o t i n g s than t h e L o u i s v i l l e zone, namely, Spokane, E l Paso, L i t t l e Rock, Helena, C h a r l o t t e , San A n t o n i o , N a s h v i l l e , Birmingham, Memphis and S a l t Lake C i t y . The L o u i s v i l l e Branch renders s u b s t a n t i a l l y t h e same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t t h e Head O f f i c e , i n s o f a r as r e c e i p t s and d i s - 185, burscaaents o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings o f member banks are concerned. Reserve accounts o f member banks i n t h e zone, as w e l l as o f nonmember c l e a r i n g banks and other Federal Reserve banks, are maintained a t the Branch, which a l s o maintains a memorandum general l e d g e r and a r e c o r d o f earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given t o member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by the Branch, s u b j e c t t o f i n a l approval o f the Head O f f i c e . Schedules c o v e r i n g t r a n s a c t i o n s are forwarded t o the Head O f f i c e , b u t t h e notes and c o l l a t e r a l , i f any, arc r e t a i n e d a t the Branch. The branch does n o t have Bank Examination, Bank R e l a t i o n s , L e g a l , Research o r F i s c a l Agency departments. As o f November 27, 1957, member banks i n t h e branch zone had balances w i t h t h e Reserve bank as f o l l o w s : No. o f Banks Indiana Kentucky: Louisville Remainder of S t a t e Reserve Balances Deferred Balances Capital Stocks Bills Discounted 16 $ 1,572,011 $ 3,065 $ 66,950 $ ~ 6 45 67 18,451,227 5.125.812 $25.147.050 4,560,144 — $4.565.209 419,700 221.400 $708.050 — 22.000 $ 22.000 L o u i s v i l l e i s 274 t r a i n m i l e s (8 h r s . and 10 mins.) from S t . L o u i s . On any business day t h e r e are s e v e r a l t r a i n s l e a v i n g b o t h p o i n t s a t 7 P.M. or l a t e r and a r r i v i n g a t t h e other p r i o r t o 8 A. M. on t h e f o l l o w i n g day, i . e . , nail. overnight The branch zone i n c l u d e s 46 p o i n t s i n which one or more member banks are l o c a t e d and m a i l schedules i n d i c a t e t h a t 22 o f these p o i n t s cannot be reached by i u a i l from S t . L o u i s b e f o r e 10 A.M. on t h e day f o l l o w i n g m a i l i n g . It appears, t h e r e f o r e , t h a t a s u b s t a n t i a l number o f o u t l y i n g banks i n t h e branch zone would 191, be inconvenienced by discontinuance o f the Branch. Banks i n the C i t y o f L o u i s v i l l e which now have an o v e r - t h e - c o u n t e r c o n t a c t w i t h the Branch would o f course s u f f e r the g r e a t e s t inconvenience. Other than L o u i s v i l l e , t h e most populous c i t i e s served by t h e Branch are New Albany, I n d i a n a , 25,819; Paducah, Kentucky, 53,541 and Owensboro, Kentucky, 22,765. (c) Branch B u i l d i n g ; The L o u i s v i l l e Branch has occupied i t s present q u a r t e r s a t 5th and Market S t r e e t s since June, 1929. The f o l l o w i n g f i g u r e s show t h e o r i g i n a l cost and book v a l u e , as o f November 27, 1937, o f the branch premises: Cost Land Building V a u l t and V a u l t Equipment Fixed Machinery and Equipment $131,177 183,373) 42,886) $357,436 55,250 $392.666 Book Value 11-27-37 $ 90,000 110,543 $200,543 1200.543 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r t h e years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Xear Earnings 1931 1952 1935 1934 1935 1936 1937 $ 80,200 99,200 33,000 6,100 4,300 1,000 400 The above f i g u r e s are incomplete since, under the present accounting procedure, the Branch receives no c r e d i t f o r income r e c e i v e d by the Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by the Reserve bank stock investment and 187, reserve balances of member banks i n the branch zone. They are i n t e r e s t i n g o n l y i n s o f a r as they show the shrinkage i n Branch earnings, which are d e r i v e d c h i e f l y from b i l l s discounted f o r member banks i n the zone. Income from t h i s source amounted t o o n l y $200 i n 1937, as compared t o $83,500 i n 1932. (e) Branch Personnels The r e p o r t of examination o f the Federal Reserve Bank o f S t . L o u i s , as o f November 27, 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the L o u i s v i l l e branchs Nov. 27. 1937 Number Amount Officers Employees 3 77 80 $ 15,900 94,700 $110*600 Oct. .51. 1956 Nu&ber Amount 3 74 77 $ 17,900 91.100 $109.000 Increase Number Amount 5 5 $ 2,000 * 5.600 $ 1.600 * Decrease O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . A r e l i e f guard, employed a t $5.55 1/5 per day, i s a l s o not i n c l u d e d . 188, ( f ) Branch Expense b:y Functions; The expenses o f the L o u i s v i l l e Branch by functions f o r the years 1932 to 1957, i n c l u s i / e , were as f o l l o w s : 1952 1955 }934 1955 1926 1957 General Overhead Controllable $ 12,551 $ 12,512 0 12,455 $ 12,752 $ 11,884 # 15,145 N onc^ntroilable 1 25 5,554 5,784 29 6,521 * P r o v i s i o n o f Space 15,965 50,122 15,790 12,554 14,590 12,555 5,495 P r o v i s i o n o f Personnel 1,515 11,818 16,978 19,264 2,252 General Service 25,281 27,121 21,714 26,472 29,069 27,542 Postage 10,740 12,648 12,217 15,781 11,655 14,654 Insurance 5,074 5,650 2,628 2,176 2,115 2,215 — F a i l e d Banks 988 2,885 1,675 5,570 Loans, r e d i s c o u n t s , e t c . 14,792 10,626 7,529 4,446 2,921 5,252 5,121 Securities 5,544 4,075 5,621 5,651 Currency and Coin 18,064 18,299 26,015 27,241 16,995 26,641 Chock C o l l e c t i o n 28,562 51,012 25,979 50,512 52,046 28,715 4,279 Nun-Cash C o l l e c t i o n 5,819 6,427 4,440 4,862 4,845 Accounting 16,459 15,765 15,552 15,961 16,055 16,142 F i s c a l Agency 21,157 26,544 21,215 85,514 14,525 — — Legal 16 Auditing 5,627 5,162 4,624 4,641 5,652 5,215 175 Bank R e l a t i o n s 9 554 599 2 25 — — — — — Bank Examinations 1 — 228 F. R. Note Issues 948 790 515 1,004 80 98 Statistical & Analytical 25 45 69 69 — — — — — . 170 Works Progress T o t a l Expense 0 172,111 $109,294 $197,157 $207,125 $205,104 $216,371 Less - Reimbursable F i s c a l Agency Exp. 12.565 18.$56 17.074 15.862 16.955 24.209 Net Expense ft 159.546 $170.956 $180.083 $191.263 $188.169 $192.162 — ' — — — — * Represents t h e n e t expense - income from r e n t a l s having been deducted. There were eleven branches i n t h e System which operated a t a h i g h e r cost than t h e L o u i s v i l l e Branch i n 1937. (g) Volume o f Operations a t L o u i s v i l l e Branch: The f o l l o w i n g i s a comparison of t h e volume o f operations i n v a r i o u s departments of t h e L o u i s v i l l e Branch and t h e Head O f f i c e d u r i n g t h e l a s t six months o f 1936: 189, L o u i s v i l l e Branch Head O f f i c e Safekeeping* Menher bank s e c u r i t i e s 12-51-36 $7,152,000 $137,655,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L i t t l e Rock, Denver, Oklahoma C i t y , Omaha and Houston. Currency & Coin: 1. Number o f b i l l s received and counted 9,002,000 36,272,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i * P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , New Orleans, D e t r o i t , Memphis, and Los Angeles. Cost per one thousand u n i t s handled 37 cents 37 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except Birmingham, New Orleans N a s h v i l l e and L i t t l e Rock. 2. Number of coins received and counted 6,600,000 39,451,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g , B a l t i m o r e , New Orleans, D e t r o i t , Houston, and Los Angeles. C j s t j>er one thousand u n i t s handled 15 cents 11 cents Branches w i t h l a r g e r volume: A l l branches except B u f f a l o , B a l t i m o r e , New Orleans, J a c k s o n v i l l e , Memphis and Oklahoma C i t y . Check C o l l e c t i o n : 1. Number of c i t y checks ( c l e a r i n g s ) received 966,000 3,284,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t , Omaha and Los Angeles. C^st per one thousand u n i t s handled $2.11 $1.91 Branches w i t h higher u n i t c o s t : Helena, Oklahoma C i t y , Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Nuiiber of country checks (outgoing) received 4,224,000 11,820,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t Oklahoma C i t y , Omaha and Los Angeles. Cost per one thousand u n i t s handled $1.75 $1.85 Branches w i t h h i g h e r u n i t c o s t : A l l Branches except Birmingham, J a c k s o n v i l l e , L i t t l e Rock, Denver, Oklahoma C i t y and Omaha. Non-cash Co31ections: 1 . Number of c i t y c o l l e c t i o n s handled 7,026 17,556 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, New Orleans, Helena, E l Paso, San Antonio and Portland. Cost per u n i t handled 12.5 cents 14.7 cents Branches w i t h higher u n i t c o s t : A l l branches except J a c k s > m v i l l e , N a s h v i l l e , L i t t l e Rock, Memphis, Helena, Oklahoma C i t y , Omaha, E l Paso, Houston and S a l t Lake C i t y . 2. Uuiaber of country c o l l e c t i o n s handled 8,550 77,714 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New Orleans, D e t r o i t , Memphis, Denver, Oklahoma C i t y , Omaha, San Antonio, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 190 2. C / u n t r y C o l l e c t i o n s (Continued) L o u i s v i l l e Branch Head O f f i c e Cost per u n i t handled 0 . 7 cents 5 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except C h a r l o t t e , L i t t l e Rock, Memphis, Omaha, E l Paso, S a l t Lake C i t y and Spokane. 3. Nuuber of coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 2,466 14,700 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L i t t l e Rock, Omaha, San Antonio and Los Angeles. Cost per u n i t handled 15.5 cents 13.8 cents Branches w i t h h i g h e r u n i t c o s t : C h a r l o t t e , J a c k s o n v i l l e , D e t r o i t , Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing t h e volume o f operations o f the L o u i s v i l l e Branch f o r the years 1951 t o 1956, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f L o u i s v i l l e Branch by B o a r d s Examiners: 1954 During an examination o f t h e Federal Reserve Bank o f S t . L o u i s , made as of September 8 , 1954, t h e 3 o a r d f s Examiners reviewed t h e operations of t h e L o u i s v i l l e Branch and expressed t h e o p i n i o n t h a t i t s continuance was warranted only i n view of t h e s i z e and importance o f t h e branch c i t y . I n reaching t h i s conclusion c o n s i d e r a t i o n was given t o the volume o f operations a t t h e Branch, t h e & a i l schedules between S t . L o u i s and member bank p o i n t s i n t h e branch zone and the number and s i z e o f banks i n the c i t y o f L o u i s v i l l e . ( i ) Survey o f L o u i s v i l l e Branch aade by Federal Reserve Bank of S t . Louis—1956 As requested i n the Board's l e t t e r o f March 25, 1936, (X-9552) a survey o f t h e L o u i s v i l l e Branch was made by the Federal Reserve Bank o f S t . L o u i s . The f o l l o w i n g e x c e r p t taken fror* a l e t t e r addressed t o the Board by Deputy Chairman Paul. D i l l a r d on August 5, 1956, summarizes t h e c o n c l u s i o n reached by the Reserve bank: " I n our o p i n i o n , a l l of our branches are necessary, i f t h e s e r v i c e s o f the System t o member banks and through then t o commerce, i n d u s t r y , and a g r i c u l t u r e , are n o t t o be impaired. L i k e w i s e , we do n o t f i n d t h a t any o f the o p e r a t i o n s now b e i n g handled by t h e branches could be t r a n s f e r r e d t o the head o f f i c e w i t h o u t i m p a i r i n g t h e s e r v i c e s which the System i s now r e n d e r i n g t o member banks. 11 191, LOUISVILLE BRANCH VOLUME OF OPERATIONS Number Bil Is Date Ptainted 1931 9f pjece? Hapdted Non Cash Currency Coin Received Received and and P<mt<l<* Counted Oil* 18,908,000 19,998,000 1,757,000 7,378,000 595,000 9,730,000 I82,*»85 **2,58*» 1,057 5 13,56*4 C o l l e c t i o n Items Checks Handled Gov't Gov't Other l2iaL Pantry All F i s c a l Agency TrftniKitaitD i r e c t Other Transfer of Funds 1932 2,951 17,032,000 16,739,000 1,619,000 6,378,000 632,000 8,629,000 212,763 *40,090 821 25 12,631 1933 902 17,080,000 I3,*»29,000 1,758,000 5,879,000 718,000 8,355,000 2*47,858 *47,03*4 1,785 *49 10,510 »93U 79 17,139,000 I2,*42*4,000 1,9*42,000 6,196,000 l,*4*4*»,000 9,582,000 28*1,96*4 *47,550 11,707 1*43 9,393 1935 8 16,937,000 12,533,000 2,0*47,000 7,*4I2,000 87*4,000 10,333,000 327,000 39,000 17,736 3,656 8,*47*4 1936 2 18,9*42,000 12,952,000 1,9&8,000 8,1*40,000 93*4,000 11,022,000 299,000 36,000 2,289 1,587 9,000 1931 335,8*10 82,976 l,*»26 l,**6**,253 298,020 5*4,*405 1,816,678 2,51*1 *4*4,3I3 1,5*41 250 656,217 1932 286,893 68,*m 1,37*1 1,161,756 2*4*4,555 *4**,970 1,1451,281 3,012 Ml ,*4l*4 2,112 1,030 *467,773 1933 63,695 86,282 5,312 1,191,3*45 261,332 55,579 1,508,256 3,** 76 *48,639 606 66 382,557 193*4 *4,209 68,115 1,373 1,507,786 31*4,231 10*4,916 1,926,933 3,503 68,575 *4,7*47 266 *4l5,181 1935 125 66,580 1,159 1,727,112 388,662 7I,*4*48 2,487,222 3,86*4 66,5*«6 6,182 1,553 396,231 1936 26 77,39M 1,251 1,907,352 *430 ,110 86,03*1 2,*423,*»96 3,897 58,156 755 761 5*17,378 (»n thousands of d o l l a r s )\ MEMPHIS BRANCH - FEDERAL RESERVE BANK OF ST. LOUIS, (a) C i t y o f Memphis: Memphis, w i t h a p o p u l a t i o n o f 253,143, i s the t h i r t y - s i x t h l a r g e s t c i t y i n the United S t a t e s and t h e l a r g e s t c i t y i n Tennessee. I t i s l o c a t e d i n the extreme south- western p a r t o f the S t a t e , on t h e M i s s i s s i p p i R i v e r , and i s s a i d t o serve a t r a d e area w i t h a r a d i u s o f approximately 75 m i l e s . T r a n s p o r t a t i o n f a c i l i t i e s are p r o - vided by t e n r a i l r o a d s , i n c l u d i n g the Chicago-Rock I s l a n d & P a c i f i c , F r i s c o L i n e , I l l i n o i s C e n t r a l , L o u i s v i l l e & N a s h v i l l e , Southern, M i s s o u r i P a c i f i c , S t . L o u i s Southwestern and the Nashville-Chattanooga & S t . L o u i s . v a r i o u s bus l i n e s and a i r l i n e s . The c i t y i s a l s o served by I n a d d i t i o n t h e r e i s a l a r g e amount o f r i v e r traffic between Memphis and o t h e r M i s s i s s i p p i and Ohio River p o r t s . According to the B i e n n i a l Census o f Manufactures, Shelby County, i n which Memphis i s l o c a t e d , had 351 manufacturing establishments i n 1935 which had an o u t put valued a t $130,199,000. The p r i n c i p a l a c t i v i t i e s were the warehousing and marketing o f c o t t o n and the p r o d u c t i o n o f mixed feed, c o t t o n seed d e r i v a t i v e s and lumber; Memphis being the center o f one o f the l a r g e s t hardwood areas i n the U n i t e d States. The Census o f American Business f o r 1935 l i s t s 3,727 r e t a i l and 627 wholesale establishments o p e r a t i n g i n Shelby County. These f i r m s enjoyed sales aggregating $105,617,000 and #387,054,000, r e s p e c t i v e l y , d u r i n g that year. Banking f a c i l i t i e s i n Memphis are provided by two S t a t e banks (nonmember) and t h r e e n a t i o n a l banks. These i n s t i t u t i o n s had deposits aggregating ^151,287,000, as o f December 31, 1936 and o f t h i s amount £149,497,000 was c a r r i e d by t h e t h r e e l o c a l member banks. 193, Debits t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated $1,594,020,000 d u r i n g the year 1936, o r an average o f approximately <£5,313,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions: The Memphis Branch was e s t a b l i s h e d September 3* 1918, and serves t e n c i t i e s i n n o r t h e r n M i s s i s s i p p i , f i f t e e n c i t i e s i n southwestern Tennessee and twelve c i t i e s i n e a s t e r n Arkansas. While the branch zone i s not determined by S t a t e or County l i n e s , the area served by t h e branch represents approximately l&fo o f the l a n d area o f the E i g h t h D i s t r i c t and has about 21% o f i t s t o t a l p o p u l a t i o n . Approximately 14 1/2$ o f a l l banks i n the d i s t r i c t are w i t h i n t h i s area. As o f December 31, 1936, t h e r e were 234 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 28, i n c l u d i n g 26 n a t i o n a l and 2 S t a t e i n s t i t u t i o n s , were members o f t h e System. the zone were on t h e par l i s t . Only 25 o f the 206 nonmember banks i n The f o l l o w i n g f i g u r e s taken f r o m r e p o r t s o f condi- t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared w i t h those Eighth D i s t r i c t Branch Zone o f the E i g h t h D i s t r i c t as a whole: No. Member Banks Loans and Investments 388 28 $1,092,425 115,610 Capital and Total Surplus Deposits (000 omitted) §125,722 12,852 $1,480,335 184,978 There are e i g h t branch c i t i e s i n the System having smaller bank f o o t i n g s t h a n the Memphis Branch, namely, Spokane, E l Paso, L i t t l e Rock, Helena, C h a r l o t t e , San A n t o n i o , N a s h v i l l e and Birmingham. The Memphis Branch renders s u b s t a n t i a l l y the same s e r v i c e t o banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , 194, safekeeping o f s e c u r i t i e s , and loans t o member banks are concerned. The reserve accounts o f member banks i n t h e branch zone, as w e l l as accounts o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained at the Branch, which also maintains a memorandum general l e d g e r and a r e c o r d o f some* earnings and expenses. Transactions are cleared d a i l y through c o n t r o l accounts maintained a t the Head O f f i c e . Member bank borrowings are passed upon at the Branch and im- mediate c r e d i t i s g i v e n , s u b j e c t t o f i n a l approval o f the Head O f f i c e . Schedules covering such t r a n s a c t i o n s are forwarded t o the Head O f f i c e , but the notes and c o l l a t e r a l , i f any, are r e t a i n e d at the Branch. t i o n , Bank R e l a t i o n s , F a i l e d Banks, The Branch has no Bank Examina- Research, Legal or F i s c a l Agency departments. As o f November 27, 1937, member banks i n the branch zone had the f o l l o w i n g Reserve bank balances: C i t y o f Memphis Remainder o f Zone Kb. o f Banks Reserve Balances Deferred Balances Capital Stock 3 26 22 $17,565,231 3,21^,456 $20,778i687 $1,309,719 26.491 fcL.336.210 #307,500 102,400 $409I900 Memphis i s 305 t r a i n m i l e s (8 hours) from S t . L o u i s . t r a i n s leave b o t h p o i n t s a f t e r 7 on the f o l l o w i n g day. by the Branch. Bills Discounted # — 10,000 &10-000 On any business day which a r r i v e at the o t h e r p r i o r t o 8 A.M. There are 21 o u t l y i n g member bank p o i n t s now being served M a i l schedules r e v e a l t h a t a l l but 8 o f these p o i n t s can be reached o v e r n i g h t from S t . L o u i s . I t appears, t h e r e f o r e , t h a t discontinuance o f the Branch would inconvenience o n l y a l i m i t e d number o f member banks. Banks i n Memphis, which now have an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h t h e Branch, would o f course, have t o r e v i s e t h e i r operations considerably i n d e a l i n g w i t h the Head O f f i c e . Other t h a n Memphis, the more populous c i t i e s served by the Branch are Jackson Tennessee, 22,172; G r e e n v i l l e , M i s s i s s i p p i , 14,807; Columbus, M i s s i s s i p p i , 10,743; 195, and B l y t h e v i l l e , Arkansas, 10,098. (c) Branch B u i l d i n g : The Memphis Branch has occupied i t s present q u a r t e r s a t T h i r d & J e f f e r s o n S t r e e t s since June, 1929* The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book v a l u e , as o f November 27, 1937, o f the branch premises: Book Value 11-27-37 Cost Land Building V a u l t & v a u l t equipment Fixed machinery & equipment $100,906 192,153) 41,492) *334,551 44»062 fr?76.6l3 $ 60,000 177.519 $>237,519 9.54? $247,066 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1933 1934 1935 1936 1937 $32,600 32,500 34,600 8,700 19,700 2,400 4,200 The above f i g u r e s are incomplete s i n c e , under t h e present accounting procedure, t h e Branch r e c e i v e s no c r e d i t f o r income r e c e i v e d by t h e Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by the Reserve bank stock i n v e s t ment and reserve balances o f banks i n the branch zone. They are i n t e r e s t i n g o n l y i n so f a r as they show the shrinkage i n Branch e a r n i n g s , which f o r m e r l y were d e r i v e d c h i e f l y from b i l l s discounted f o r member banks i n the zone. Income from t h i s source amounted t o approximately $1,800 i n 1937 as compared w i t h $31,200 i n 1931. 201, (e) Branch Personnel: The r e p o r t o f e x a m i n a t i o n o f the F e d e r a l Reserve Bank o f S t . L o u i s , as o f November 27, 1937, shows t h e f o l l o w i n g i n r e g a r d t o s a l a r i e s and personnel a t t h e Memphis Branch: Nov. 27, 1937 Number Amount Officers Employees Total 3 12 $17,500 76,4.00 O c t . 31. 1936 Number Amount 2 46 & Increase Number Amount $13,800 66,200 &80.000 1 8 # 3,700 10,200 ¥13.900 O f f i c e r s and employees whose s a l a r i e s and wages are r e i m b u r s a b l e are not cluded i n t h e above f i g u r e s . There has been an a c t u a l i n c r e a s e o f f o u r employees a t the Branch - t h e r e m a i n i n g i n c r e a s e o f one o f f i c e r and due t o a r e d u c t i o n i n t h e in- t h r e e employees b e i n g amount o f r e i m b u r s a b l e work performed, ( f ) Branch Expense by F u n c t i o n s : The expenses o f the Memphis Branch by f u n c t i o n s f o r t h e years 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 1922 M 1924 m i 1936 1937 G e n ' l Overhead Controllable $' 14,185 15,945 ; 1 1 5 , 0 0 2 $ 1 4 , 9 0 9 1t <11,902!. 12,950 Noncontrollable 5,085 84 23 3,793 6,033 13,024 12,686 ^ P r o v i s i o n o f Space 9,118 7,350 9,494 1 5 , 6 7 8 P r o v i s i o n o f Personnel 1,030 17,122 1,023 20,051 9,364 1,835 General S e r v i c e 24,510 17,005 18,380 23,345 23,649 22,445 Postage 4,892 2,930 4,492 6,345 6,594 5,307 Insurance 2,890 4,211 2,401 2,229 2,034 1,851 (420) 2 F a i l e d Banks 9,663 1,165 1,353 Loans, r e d i s c o u n t s , e t c . 10,296 2,442 7,004 9,274 2,533 2,547 Securities 3,032 1,672 1,856 2,301 1,695 1,371 Currency and Coin 2 2 , 2 4 2 17,962 25,476 18,244 24,469 18,495 11,966 Check C o l l e c t i o n 10,024 10,301 7,925 10,159 9,997 8,082 7,486 Non-Cash C o l l e c t i o n 6,665 7,494 5,459 7,249 10,180 Accounting 12,790 14,503 16,584 14,559 16,569 4,260 F i s c a l Agency 57,393 1 1 1 , 0 7 7 101,042 74,945 24,114 8 150 Legal (19) 4,556 Auditing 3,948 4,643 3,284 3,987 5,057 101 6 29 Bank R e l a t i o n s 443 77 24 Bank Examinations 20 4 F.R. Note I s s u e s 452 623 1,041 557 748 178 190 S t a t i s t i c a l and A n a l y t i c a l 169 169 147 121 $143,324 $166,693 #196,630 $237,872 $230,801$194,096 Less - Reimbursable F i s c a l Agency Expense 3,041 23,048 $6,463 ?2,478 92,820 69,165 Net expense $140.283 $14^,64^ $j>140,l67 $145>394 1136,981&L24,931 * Represents t h e net expense - income from r e n t a l s h a v i n g been deducted. 197, There were s i x branches i n t h e System which operated a t a lower net cost than t h e Memphis Branch i n 1937; namely, Spokane, N a s h v i l l e , E l Paso, Helena, Birmingham and L i t t l e Rock. (g) Volume o f Operations a t Memphis Branch: The f o l l o w i n g i s a comparison o f t h e volume o f o p e r a t i o n s i n v a r i o u s departments o f the Memphis Branch and the Head O f f i c e d u r i n g the l a s t s i x months o f 1936: Memphis Branch Discount Department: Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: Head O f f i c e 8 31 2 B u f f a l o , B a l t i m o r e , Denver, Omaha, E l Paso, San Antonio and S a l t Lake C i t y . Safekeeping: Member bank s e c u r i t i e s 12-31-36 £ 1,443,000 #160,828,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , P o r t l a n d , S e a t t l e , Helena, Los Angeles and Spokane. Currency & Coin: 1. Number o f b i l l s r e c e i v e d and counted 11,695,000 36,272,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t and Los Angeles. Cost per one thousand u n i t s handled 38 cents 37 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except Birmingham, N a s h v i l l e , New Orleans, L i t t l e Rock, and L o u i s v i l l e . 2. Number o f coins r e c e i v e d and counted 5,631,000 39,431,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L o u i s v i l l e , Houston, Los Angeles and S e a t t l e . Cost per one thousand u n i t s handled 11 cents 11 cents Branches w i t h higher u n i t c o s t : A l l branches except B u f f a l o , B a l t i m o r e , New Orleans and Oklahoma C i t y . Check C o l l e c t i o n : 1. Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 756,OOOfr Cost per 1,000 u n i t s handled #1.85 jf I n c l u d e s a l l c i t y items r e c e i v e d . 2. Number o f country checks (outgoing) r e c e i v e d 998,000 Branches w i t h l a r g e r volume: A l l branches have a l a r g e r volume. 3,284,000 #1.91 11,820,000 Cost per one thousand u n i t s handled #1.99 $1.85 Branches w i t h h i g h e r u n i t c o s t : A l l branches except B a l t i m o r e , P i t t s b u r g h , Birmingham, J a c k s o n v i l l e , L i t t l e Rock, L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha and Houston. 198, Memphis Branch Non-cash C o l l e c t i o n s 1. Number o f c i t y c o l l e c t i o n s handled 19,682 Branches w i t h l a r g e r volume: D e t r o i t , L i t t l e Rock and Omaha. Cost per u n i t handled Branches w i t h higher u n i t cost: Head O f f i c e 17,556 11.7 cents 14.7 cents A l l branches except J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, Oklahoma C i t y , Omaha, E l Paso and Houston. 2. Number o f country c o l l e c t i o n s handled 12,143 77,714 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , D e t r o i t , Denver, Oklahoma C i t y , Omaha, Los Angeles, S a l t Lake C i t y and Spokane. Cost per u n i t handled 6.2 cents 5 cents Branches w i t h higher u n i t cost: A l l branches except S a l t Lake C i t y and Spokane. 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,856 14,700 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L i t t l e Rock, L o u i s v i l l e , Denver, Omaha, Houston, San Antonio and Los Angelea Cost per u n i t handled 14.8 cents 13.8 cents Branches w i t h higher u n i t cost: C h a r l o t t e , J a c k s o n v i l l e , D e t r o i t , L o u i s v i l l e , Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume o f operations of the Memphis Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f Memphis Branch by Board's Examiners - 1934 During an examination o f the f e d e r a l Reserve Bank o f S t . L o u i s , made as o f September 8, 1934, the Board's Examiners reviewed the operations o f the Memphis Branch and expressed the o p i n i o n t h a t i t s continuance was warranted o n l y i n view of the size and importance o f the branch c i t y . conclusion c o n s i d e r a t i o n was g i v e n t o the I n reaching t h i s volume o f operations at the Branch, the m a i l schedules between S t . Louis and member bank p o i n t s served by the Branch and the number and s i z e o f banks i n the branch zone. I t was i n d i c a t e d , in the event t h a t the L i t t l e Rock Branch were discontinued, a s u b s t a n t i a l number o f p o i n t s i n t h a t zone could be served j u s t as e x p e d i t i o u s l y from Memphis. 199 ( i ) Survey o f Memphis Branch made by Federal Reserve Bank o f S t . Louis-1936 A survey o f the Memphis Branch was made by the Federal Reserve Bank o f S t , L o u i s , as requested by the Board i n i t s l e t t e r o f March 25, 1936, (X-9532), and on August 5, 1936, Deputy Chairman Paul D i l l a r d advised the Board as f o l l o w s : " I n our o p i n i o n , a l l of our branches are necessary, i f the s e r v i c e s o f the System t o member banks and through them t o commerce, i n d u s t r y and a g r i c u l t u r e , are not t o be impaired. L i k e w i s e , we do not f i n d t h a t any o f t h e operations now being handled by the branches could be t r a n s f e r r e d t o the head o f f i c e w i t h o u t i m p a i r i n g the s e r v i c e s which the System i s now r e n d e r i n g t o member banks." MEMPHIS BRANCH VOLUME OF OPERATIONS NM»frpr 9f Pfeces Bills Date Pi scounted Currency Coin Received Received and and Counted Counted Non Cash Checks Handled Gov't 1932 1933 1,86*4 2,650 320 193*4 72 1935 12 1936 10 16,630,000 l*f,8*47,000 15,607,000 18,162,000 18,602,000 21,505,000 9,826,000 9,500,000 8,371,000 8,299,000 9,593,000 10,367,000 Collection items Fiscal Agency Gov't Transact ions Coupons City Po u nt r Y 1931 fondled Bssks AlI Other Direct Transfer of Other Funds M i l 1,211,000 1,509,000 368,000 3,088,000 1,217,000 *432,000 2,7*42,000 1,191,000 690,000 3,021,000 1,387,000 1,309,000 3,987,000 1,7*40,000 883,000 **, 160,000 1,817,000 728,000 *4,022,000 1,093,000 1,1*40,000 1,291,000 1,529,000 l,*477,000 ****,293 *4*4,9*45 50*4 *f9,075 *45,0I I 360 7 11,261 56,806 59,795 *406 175 10,737 57,859 55,051 2,633 2*4 10,110 00,000 **6,000 5,1*43 871 8,776 65,000 58,000 962 798 9,000 11,979 Amounts Handled ( i n thousands of dollars) 1931 39,115 55,51*1 1,588 631,09*4 77,763 ****,680 75**, 337 500 35,928 *453 1932 35,417 *48,335 1,390 519,679 62,283 39,73*4 621,696 726 32,152 1,520 190 358,667 1933 30,661 58,888 2,921 563,5*10 79,619 70,OIH 713,173 8*43 *48,97l *49l 175 352,222 193** 1,277 50,508 2,058 686,*456 106,128 95,780 008,36*4 871 5*4,509 1,092 600 392,800 1935 **25 51,707 1,81*4 7*40,337 109,885 07,010 937,732 85** 52,09** 1,958 879 *465,035 1936 19*4 58,626 2,75*4 930,0*40 125,081 87,**0*4 l,l**2,525 786 59,09*4 *465 572 560,609 **6**,330 HELENA BRANCH - FEDERAL RESERVE BANK OF MINNEAPOLIS. (a) C i t y o f Helena Helena, w i t h a p o p u l a t i o n o f 11,803, i s t h e c a p i t a l o f Montana and t h e sixth largest c i t y i n that State. I t i s l o c a t e d i n t h e west c e n t r a l p a r t o f t h e S t a t e and serves a r a t h e r s p a r s e l y s e t t l e d t r a d e area i n which general a g r i c u l t u r e , stock r a i s i n g and mining are the c h i e f a c t i v i t i e s . Transporta- t i o n f a c i l i t i e s are p r o v i d e d by t h e Northern P a c i f i c and Great Northern R a i l r o a d s and by s e v e r a l bus and a i r l i n e s . According t o t h e B i e n n i a l Census o f Manufactures f o r 1935, t h e r e were 25 manufacturing f i r m s i n Lewis & Clark County, i n which Helena i s which had an o u t p u t valued a t $10,131,000. situated, The Census o f American Business l i s t s 31 wholesale and 291 r e t a i l establishments o p e r a t i n g i n the same area and i n d i c a t e s t h a t such concern enjoyed sales aggregating $4,043,000 and $10,283,000, r e s p e c t i v e l y , d u r i n g 1935. Banking f a c i l i t i e s i n Helena are p r o v i d e d by one n a t i o n a l bank and one S t a t e member bank. As o f December 31, 1936, these i n s t i t u t i o n s had t o t a l d e p o s i t s o f $16,446,000. D e b i t s t o i n d i v i d u a l accounts i n banks o f t h e c i t y amounted t o $123,991,000 d u r i n g t h e year 1936; or an average o f approximately $413,000 f o r each banking, day. (b) Branch T e r r i t o r y and Functions The Helena Branch was e s t a b l i s h e d on February 1 , 1921, and serves t h e e n t i r e S t a t e o f Montana. The branch zone represents Z5% o f the l a n d area o f t h e N i n t h Federal Reserve D i s t r i c t and has about 10% o f i t s t o t a l p o p u l a t i o n . Approximately 9% o f a l l banks i n t h e d i s t r i c t are l o c a t e d i n t h i s area. 202, As o f December 31, 1956, t h e r e were 120 bonks, e x c l u s i v e o f mutual savings banks, i n t h e branch zone and o f t h i s number 66, i n c l u d i n g 45 n a t i o n a l and 21 S t a t e i n s t i t u t i o n s were members o f t h e System. i n the zone were on t h e par l i s t . 33 o f t h e 54 nonmember banks The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f t h e same date show t h e s i z e o f member bank f o o t i n g s i n t h e branch zone as compared t o t h e N i n t h D i s t r i c t as a whole: No.Member Banks Ninth D i s t r i c t Helena Zone 481 66 Loans and Investments $782,049 76,774 Capital and Surplus ( 000 o m i t t e d ) #96,485 10,177 Total Deposits $1,051,848 117,607 There are o n l y t h r e e branch zones i n t h e System having smaller member bank f o o t i n g s than t h e Helena Branch, namely, Spokane, E l Paso and L i t t l e Rock. The Helena Branch renders s u b s t a n t i a l l y t h e same s e r v i c e t o member banks i n i t s zone as I s a v a i l a b l e a t t h e Head O f f i c e , i n s o f a r as r e c e i p t s and d i s bursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f banks i n t h e zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r F e d e r a l Reserve banks, are maintained a t t h e Branch, which a l s o maintains a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given t o member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by t h e Branch,' s u b j e c t t o f i n a l approval o f t h e Head O f f i c e . Schedules c o v e r i n g t r a n s a c t i o n s are forwarded t o the Head O f f i c e , b u t t h e notes and c o l l a t e r a l , i f any, are r e t a i n e d a t t h e Branch. The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , Research o r F i s c a l Agency departments. As o f November 2, 1937, member banks i n t h e branch zone had balances w i t h t h e Reserve bank as f o l l o w s : No.of Banks Helena Remainder o f Zone Reserve Balances Deferred Balances Capital Stock Bills Discounted 2 63 $ 2,984,900 $ 11.366.200 546,500 520.100 $ 39,000 265.800 $31.800 65 £14.551.100 $1.066.600 $304.800 $31.800 Helena i s 1,120 t r a i n m i l e s (27 h r s . and 30 mins.) from M i n n e a p o l i s , and i t i s 270 t r a i n m i l e s (10 h r s . ) from Helena t o t h e western border o f Montana. The p r e v a i l i n g i n t e r - d i s t r i c t time schedule i s two days from Helena t o Minneapolis and t h r e e days from Minneapolis t o Helena. Other than by a i r m a i l no p o i n t i n t h e Helena zone i s w i t h i n o v e r - n i g h t m a i l t i m e o f M i n n e a p o l i s . I n f a c t , p o i n t s o u t s i d e o f Helena, o t h e r than t h e l a r g e r c i t i e s , are i n many cases t h r e e o r f o u r days m a i l t i m e from M i n n e a p o l i s . I t i s clear, therefore, t h a t discontinuance o f t h e Helena Branch would n o t o n l y inconvenience t h e two member banks i n Helena, which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h t h e Branch, b u t t h a t i t would a l s o slow up t h e s e r v i c e rendered t o banks i n o u t l y i n g s e c t i o n s o f Montana. Other than Helena, the more populous c i t i e s i n t h e branch zone are B u t t e , 39,532; Great F a l l s , 28,822; B i l l i n g s , 16,380; M i s s o u l a , 14,657 and Anaconda, 12,494. A l l o f these c i t i e s have one or more member banks. ( c ) Branch B u i l d i n g : On August 7 , 1937, a s i t e f o r a new branch b u i l d i n g was purchased f o r $15,000 and on November .10, 1937, a c o n t r a c t was l e t f o r the c o n s t r u c t i o n o f a new one s t o r y r e i n f o r c e d concrete b u i l d i n g w i t h basement. The Branch moved 204, i n t o i t s new q u a r t e r s on June 13, 1958. The t o t a l cost o f c o n s t r u c t i n g , f u r n i s h i n g and occupying t h e new b u i l d i n g was i n t h e neighborhood o f $100,OCX). (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r t h e years 1951 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1933 1934 1935 1936 $26,000 68,400 22,500 900 100 100 1937 500 These f i g u r e s are incomplete s i n c e , under t h e present accounting procedure, t h e Branch does n o t r e c e i v e any c r e d i t f o r income r e c e i v e d by the Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by t h e Reserve bank stock investment and reserve balances o f member banks i n t h e Helena zone. Branch income depends almost e n t i r e l y on t h e e x t e n t t o which member banks i n t h e branch zone use ttie c r e d i t f a c i l i t i e s o f t h e System. Income from t h i s source amounted t o $64,900 i n 1952 as compared t o l e s s than $200 i n 1937. (e) Branch Personnel: The r e p o r t o f examination o f t h e Federal Reserve Bank o f M i n n e a p o l i s , made as o f November 2, 1937, shows t h e f o l l o w i n g i n r e g a r d t o s a l a r i e s and personnel a t t h e Helena Branch: November 2. 1957 Number Amount Officers Employees 3 26 29 $14,700 40.100 $54.800 October 10. 1956 Number Amount 3 28 51 $14,700 41.500 $56.000 Decrease Number Amount 2 2 fl.200 &L.200 205, O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n t h e above f i g u r e s . ( f ) Branch Expense by F u n c t i o n s : The expenses o f t h e Helena Branch by f u n c t i o n s f o r t h e years 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 1935 1934 1932 1935 General Overhead: Controllable $ 6,529 $ 7,774 $ 9,494 $ 9,375 Non-controllable 5,423 8,096 8,161 6,297 5,793 9,129 6,245 * P r o v i s l o n o f Space P r o v i s i o n o f Personnel 673 864 5,857 6,827 General Service 13,460 14,878 16,924 17,706 4,944 Postage 4,623 6,144 5,416 Insurance 3,516 3,573 2,201 2,309 — F a i l e d Banks 2,405 Loans, Rediscounts,etc,. 3,434 3,123 3,657 2,713 Securities 2,560 3,444 5,480 Currency and Coin 5,849 4,700 5,953 15,316 Check C o l l e c t i o n 9,791 12,902 13,632 9,898 Non-cash C o l l e c t i o n 3,016 3,158 3,103 3,198 11,555 10,815 Accounting 9,635 8,576 F i s c a l Agency 5,105 8,352 10,619 14,077 Legal 625 624 628 804 Auditing 4,150 5,214 2,717 3,328 Bank R e l a t i o n s 19 294 388 350 Bank Examinations 509 473 216 271 195 S t a t i s t i c a l and A n a l y t i c a l 140 215 249 T o t a l Expanse $85,206 $94,097 $112,526 $117,877 Less - Reimbursable F i s c a l Agency Expense 5,105 8.352 10.609 10.085 N e t Expense 880.101 $85,745 $101,917 5107.792 1936 $ 11,214 1937 $ 10,543 — - 5,019 12,068 18,401 6,366 2,003 5,343 2,992 18,003 6,182 1,848 970 1,051 17,306 13,676 3,731 9,754 13,210 73 4,728 215 216 39 $120,040 563 143 15,706 10,194 3,169 9,258 12,721 35 4,596 472 240 39 $102,047 8.791 Sill.249 7.184 $ 94.863 ^Represents t h e n e t expense - income from r e n t a l s having been deducted. There were o n l y t h r e e branches i n the System which operated a t a lower n e t cost than t h e Helena Branch i n 1937; namely, Spokane, N a s h v i l l e , and E l Paso. (g) Volume o f Operations a t Helena Branch: The f o l l o w i n g i s a comparison o f t h e volume o f o p e r a t i o n s i n v a r i o u s departments o f t h e Helena Branch and t h e Head O f f i c e d u r i n g t h e l a s t s i x months o f 1936: Helena Branch Discount Department; Notes r e d i s c o u n t e d C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h smaller volume: Head O f f i c e 3 17 Ten o t h e r branches handled no d i s c o u n t s during period. Safekeeping: Member bank s e c u r i t i e s - 12-31-36 45,000 0358,465,000 Branches w i t h smaller volume: C h a r l o t t e , S e a t t l e , P o r t l a n d , Los Angeles and Spokane. Currency and Coin: 1 , Number o f b i l l s r e c e i v e d and counted Branches w i t h s m a l l e r volume: None. Cost per one thousand u n i t s handled Branches w i t h h i g h e r u n i t c o s t : Spokane. 2. Number o f coins r e c e i v e d and counted Branches w i t h smaller volume: None. 1,335,000 26,227,000 0.96 $.41 573,000 Cost per one thousand u n i t s handled $.89 Branches w i t h h i g h e r u n i t c o s t : E l Paso and Spokane. Check C o l l e c t i o n : 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d Branches w i t h smaller volume: None. Cost per one thousand u n i t s handled Branches w i t h h i g h e r u n i t c o s t : None. 114,000 $3.61 2 . Number o f country checks (outgoing) r e c e i v e d 1,671,000 Branches w i t h s m a l l e r volume: Memphis, S e a t t l e and E l Paso. 8,006,000 $.41 2,114,000 01.82 9,403,000 Cost per one thousand u n i t s handled §2.15 $1.94 Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , D e t r o i t , E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e , and Spokane. 207, Memphis Branch Non-cash C o l l e c t i o n s : 1 . Number o f c i t y c o l l e c t i o n s handled Branches w i t h smaller volume: Charlotte. 3,917 Head O f f i c e 354,756* * Non-cash c i t y c o l l e c t i o n s handled a t Head O f f i c e are l a r g e l y g r a i n d r a f t s c o l l e c t e d a t small c o s t . Cost per u n i t handled Branches w i t h higher u n i t c o s t : 12.3 cents 2.6 cents A H branches except J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rode, L o u i s v i l l e , Memphis, Oklahoma C i t y , Omaha, E l Paso, Houston and S a l t Lake City. 2. Number o f country c o l l e c t i o n s handled 7,653 42,451 Branches w i t h smaller volume: Birmingham, N a s h v i l l e and E l Paso. U n i t cost per item handled Branches w i t h higher u n i t c o s t : 13.8 cents 6.5 cents B u f f a l o , Birmingham, N a s h v i l l e , Los Angeles, P o r t l a n d and S e a t t l e . 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 652 22,858 Branches w i t h smaller volume: E l Paso, S a l t Lake C i t y and Spokane. U n i t cost per u n i t handled Branches w i t h higher u n i t c o s t : 19 cents 8 . 2 cents C h a r l o t t e , J a c k s o n v i l l e , E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume o f operations of the Helena Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum, (h) Proposed Conversion o f Helena Branch - 1926 I n the e a r l y p a r t o f 1926 t h e Federal Reserve Bank o f Minneapolis advised the Board t h a t c o n s i d e r a t i o n was being given t o c o n v e r t i n g t h e Helena Branch i n t o an agency, and t h a t p r e l i m i n a r y estimates i n d i c a t e d a saving o f $50,000 per annum would r e s u l t from the change. Governor Young o f Minneapolis subsequently wrote Dr. M i l l e r (Board Member) t h a t a f t e r v i s i t i n g Helena and c a r e f u l l y considering the matter he was convinced approximately $35,000 could be saved annually i f the rediscount f u n c t i o n s and member bank reserves were t r a n s f e r r e d from the Branch t o t h e Head O f f i c e , thus l i m i t i n g Branch 208 a c t i v i t i e s t o h a n d l i n g currency and c o i n , safekeeping, t r a n s i t items and non-cash c o l l e c t i o n s . Mr. Young s a i d t h e proposed change was f a v o r e d by bankers i n o u t l y i n g towns o f Montana, who found i t more convenient t o s e t t l e i n Minneapolis exchange, b u t t h a t i t was s t r o n g l y opposed by bankers i n Helena. The Board discussed t h e m a t t e r and Dr. M i l l e r was i n f o r m a l l y advised t h a t he might s t a t e t h a t i f t h e banks i n Helena agreed t o t h e conversion o f the Branch i n t o an agency, t h e Board would be disposed t o approve a r e d u c t i o n i n t h e i r reserve requirements t o the country bank f i g u r e . The p l a n t o convert the Branch appears t o have been abandoned, presumably because o f o p p o s i t i o n on the p a r t o f member banks i n Montana. I n any event, t h e m a t t e r was n o t f u r t h e r pursued by t h e Board a t the t i m e . ( i ) Survey o f Helena Branch by Federal Reserve Bank o f Minneapolis - 1955 On June 6, 19S5, t h e Board addressed a l e t t e r t o Mr. J . N. Peyton, then Federal Reserve Agent a t M i n n e a p o l i s , which read i n p a r t as f o l l o w s : "The s i t u a t i o n . . . ariphasizes t h e q u e s t i o n which has e x i s t e d f o r some time as t o t h e n e c e s s i t y o r j u s t i f i c a t i o n f o r t h e continuance o f a branch a t Helena. I t i s suggested t h a t a f t e r you have had an o p p o r t u n i t y t o f a m i l i a r i z e y o u r s e l f w i t h t h e a f f a i r s o f t h e Minneapolis bank, you arrange t o v i s i t t h e Helena Branch f o r t h e purpose o f o b t a i n i n g f i r s t hand i n f o r m a t i o n as t o i t s operations and t h e requirements o f t h e t e r r i t o r y served by i t and submit t o t h e Board a d e t a i l e d r e p o r t on the q u e s t i o n o f t h e a d v i s a b i l i t y o f t h e d i s continuance o f the Branch." P r i o r t o t h e r e c e i p t o f Mr. Peyton 1 s r e p o r t t h e Board was advised by A. R. McDermott, P r e s i d e n t o f t h e Montana Bankers 1 A s s o c i a t i o n , i n a l e t t e r dated J u l y 29, 1955, t h a t such a s s o c i a t i o n had unanimously voted t o request the Board and t h e Minneapolis bank t o continue t h e Helena Branch as a complete o p e r a t i n g u n i t f o r the s e r v i c c and p r o t e c t i o n o f the people, business and banks 209, o f Montana. Mr. McBermott s t a t e d t h a t t h i s a c t i o n was taken a f t e r careful c o n s i d e r a t i o n and d i s c u s s i o n o f the past and present e x c e l l e n t s e r v i c e rendered by t h e Branch i n c o l l e c t i n g checks, meeting currency requirements, safekeeping s e c u r i t i e s and h a n d l i n g d i s c o u n t s f o r bankers i n Montana, who were otherwise f a r removed from any f i n a n c i a l c e n t e r . The Board considered Mr. McDermott's l e t t e r on September 12, 1933, and forwarded a copy t o M r . Peyton, w i t h the request t h a t he submit h i s r e p o r t on t h e Helena Branch, which he was w i t h h o l d i n g pending a d i s c u s s i o n o f certain phases o f the q u e s t i o n w i t h o f f i c i a l s o f t h e Federal Reserve Bank o f San Francisco. 1933. Mr. P e y t o n ' s memorandum was forwarded t o t h e Board on October 9 , I n i t he s t a t e d there were t h r e e p o i n t s o f view from whi'ch t h e q u e s t i o n o f c o n t i n u i n g t h e Helena Branch must be considered; namely, s e r v i c e , expense and p o l i t i c a l . He submitted d a t a bearing on these t h r e e aspects o f the ques- t i o n and drew t h e f o l l o w i n g conclusions: (1) The Branch s u p p l i e s s e r v i c e t o member banks which cannot be as e x p e d i t i o u s l y or conveniently s u p p l i e d from M i n n e a p o l i s . (2) The discontinuance o f the Helena Branch would e f f e c t a saving of approximately $59,000 t h i s year and p o s s i b l y an a d d i t i o n a l amount i n f u t u r e y e a r s , b u t a t the time o f discontinuance t h e book value o f t h e Helena b u i l d i n g , i n the amount o f $53,281.26, should be completely charged o f f as an asset on t h e books o f t h e F e d e r a l Reserve Bank o f Minneapolis. (5) Outside o f the d i s t u r b a n c e t o l o c a l p r i d e , i t would be b e t t o r from a p o l i t i c a l p o i n t o f view t o d i s c o n t i n u e the Helena Branch. (Mr. Peyton r e f e r s c h i e f l y t o the p o l i t i c a l cleavage i n t h e S t a t e between c e r t a i n mining i n t e r e s t s and an o p p o s i t i o n f a c t i o n , which he says i s very e v i d e n t i n Helena, t h e c a p i t a l c i t y o f Montana.) Mr. Peyton c a l l e d a t t e n t i o n t o the f a c t t h a t the Spokane Branch was o n l y 100 miles from t h e Western Montana border and t h a t the discontinuance 210, o f t h e Helena Branch might cause t h e western p o r t i o n o f t h e S t a t e , despite i t s n a t u r a l r e l a t i o n s h i p w i t h t h e e a s t , t o apply f o r t r a n s f e r t o t h e T w e l f t h District. He s a i d t h a t Minneapolis d i d n o t wish t o l o s e such t e r r i t o r y and suggested San Francisco be approached w i t h regard t o discontinuance o f t h e Spokane Branch i f i t was deemed a d v i s a b l e t o close t h e Helena Branch. Mr. Peyton's memorandum, and a proposed l e t t e r t o t h e San Francisco Reserve Bank on t h e q u e s t i o n r a i s e d by Mr. Peyton, was discussed by t h e Board on October 26, 1933, and November 15, 1933, b u t t h e m a t t e r was d e f e r r e d on both occasions. The o p i n i o n was expressed t h a t t h e Board should adopt a general p o l i c y r e g a r d i n g t h e continuance o f branches before making i t s decision r e g a r d i n g Helena o r Spokane. ( j ) A c t i o n r e g a r d i n g Helena Branch i n 1934: A t a meeting o f t h e Board on December 12, 1934, Governor Eccles r e f e r r e d t o t h e Helena Branch q u e s t i o n which had been h e l d on t h e docket w i t h o u t a c t i o n since t h e f a l l o f 1933, and s t a t e d he f e l t i t would be inopportune a t t h e time t o g i v e c o n s i d e r a t i o n t o t h e discontinuance o f a branch o f a F e d e r a l Reserve bank. I t was v o t e d t h a t t h e m a t t e r be l a i d on t h e t a b l e . ( k ) Survey o f Helena Branch made by Federal Reserve Bank o f Minneapolis - 1936 The Board 1 s l e t t e r o f March 25, 1936 (X-9532) addressed t o t h e Chairman o f a l l F e d e r a l Reserve banks, r e q u e s t i n g a thorough survey o f t h e i r o r g a n i z a t i o n s i n t h e i n t e r e s t o f economy and e f f i c i e n c y , contained t h e f o l l o w i n g i n r e g a r d t o branches: I n making these s t u d i e s i t i s i m p o r t a n t t h a t c a r e f u l thought be given t o t h e operations now handled by branches o f F e d e r a l Reserve banks w i t h p a r t i c u l a r r e f e r e n c e t o t h e n e c e s s i t y f o r t h e branches. I f t h e branches are considered necessary a review o f t h e i r operations should be made t o determine whether 211, any o f t h e o p e r a t i o n s now being handled by than should be t r a n s f e r r e d t o t h e head o f f i c e a t a s u b s t a n t i a l saving i n o p e r a t i n g cost and w i t h o u t i m p a i r i n g t h e s e r v i c e s which t h e System i s now r e n d e r i n g t o member banks and through them t o commerce, i n d u s t r y and a g r i c u l t u r e . M I n s o f a r as the Helena Branch was concerned t h e q u e s t i o n r a i s e d by t h e Board was o f prime importance. The Helena Branch b u i l d i n g , which had l o n g been considered inadequate, was badly damaged by earthquakes d u r i n g t h e F a l l o f 1955 and was a t t h e t i m e considered u n s a f e . On A p r i l 18, 1956, P r e s i d e n t Peyton o f t h e Minneapolis bank, addressed a l e t t e r t o t h e Board i n which he o u t l i n e d t h e conclusions reached i n h i s 1955 survey o f t h e Branch and s t a t e d t h a t t h e present s i t u a t i o n contained t h e following actuating factors: "1. The Helena t e r r i t o r y can n o t reach Minneapolis by o v e r n i g h t railway mail. 2. Discontinuance o f t h e Helena Branch undoubtedly would cause s t r o n g sentiment on t h e p a r t o f Western Montana t o annex i t s e l f t o t h e San Francisco d i s t r i c t , which i s a l r e a d y unwieldy i n s i z e , and t h a t p a r t o f Montana i s i n t h e n a t u r a l t r a d e t e r r i t o r y o f t h e Minneapolis d i s t r i c t . 5. I have no reason t o b e l i e v e the San Francisco bank w i l l ever be allowed t o d i s c o n t i n u e t h e Spokane Branch, and t h e Spokane Branch presupposes t h e continuance o f our Helena Branch. Even should San Francisco d i s c o n t i n u e t h e Spokane Branch, t h e S e a t t l e Branch would o f f e r much the same problem. 4. Helena has been s u b j e c t t o a continuous s e r i e s o f earthquakes, w i t h damage t o t h e Branch b u i l d i n g r e s u l t i n g , though the framework and u n d e r - p i n n i n g o f t h e b u i l d i n g are i n t a c t . 5. The Helena b u i l d i n g i s e n t i r e l y inadequate i n i t s cubic c o n t e n t , i t s l o c a t i o n and i t s appearance. The i n s i d e measurements o f t h e b u i l d i n g are 25 x 68 f e e t , e x c l u s i v e o f t h e v a u l t , and t h e r e are 4,700 square f e e t o f space on the two f l o o r s . The b u i l d i n g i s on a corner so surrounded by o t h e r b u i l d i n g s t h a t i t i s imposs i b l e t o add t o i t i n any d i r e c t i o n . The t y p e o f b u i l d i n g makes i t u n d e s i r a b l e and i n e f f i c i e n t t o add s t o r i e s . I recommend immediate p l a n s f o r t h e e r e c t i o n o f a s u i t a b l e b u i l d i n g t o 212, adequately house Branch f u n c t i o n s and t o present a proper appearance o f d i g n i t y and i n t e g r i t y t o t h e Federal Reserve System. The m a t t e r should r e c e i v e immediate c o n s i d e r a t i o n as i t appears w a s t e f u l t h a t necessary r e p a i r s be made t o t h e present Branch b u i l d i n g , should the Board g i v e f a v o r a b l e c o n s i d e r a t i o n t o a new Branch b u i l d i n g a t Helena. When plans have been consummated, t h e t i m e o f i n i t i a t i o n o f a c t u a l cons t r u c t i o n should be l e f t t o the d i s c r e t i o n o f the Executive Committee o f t h e Federal Reserve Bank o f M i n n e a p o l i s , t o i n s u r e a g a i n s t premature a c t i o n , i n view o f t h e present e a r t h quake s i t u a t i o n . " I n J u l y 1936 r e p r e s e n t a t i v e s o f the Minneapolis Reserve Bank, i n c l u d i n g P r e s i d e n t Peyton, v i s i t e d Helena a t the request o f the Re-Organization Comm i t t e e o f t h e Minneapolis Reserve Bank. The outgrowth o f t h i s v i s i t was a complete a u d i t and i n v e s t i g a t i o n o f a l l a c t i v i t i e s o f t h e Helena Branch. A program o f r e o r g a n i s a t i o n was f o r m u l a t e d which i n v o l v e d a few changes i n personnel and methods o f procedure, t h e establishment o f d e f i n i t e departmental r e s p o n s i b i l i t y , a program f o r t r a i n i n g o f f i c e r s o f t h e Branch by p e r i o d i c a l assignment t o t h e Head O f f i c e , c l o s e r a u d i t s u p e r v i s i o n by the Head O f f i c e and modernization o f equipment. A copy o f the r e o r g a n i z a t i o n program f o r the Branch was submitted as a supplement t o the Minneapolis Bank Survey. At the same time p a r t i c u l a r a t t e n t i o n was given t o the b u i l d i n g s i t u a t i o n and on J u l y 28, 1936, Mr. Peyton advised t h e Board t h e i r survey showed f o u r p o s s i b l e s o l u t i o n s t o the problem, (a) Repair the b u i l d i n g as i t stood, (b) Repair the b u i l d i n g and add another s t o r y o r r e a r a d d i t i o n , (c) Rent o t h e r q u a r t e r s , (d) E r e c t a new b u i l d i n g . Mr. Peyton s t a t e d t h a t a t a meeting o f Branch and Head O f f i c e d i r e c t o r s the Branch Manager had been requested t o o b t a i n o p t i o n s on two b u i l d i n g s i t e s and t o o b t a i n b i d s from t h r e e f i r m s o f a r c h i t e c t s on the cost o f r e p a i r i n g the o l d b u i l d i n g w i t h and w i t h o u t an a d d i t i o n and o f c o n s t r u c t i n g a s u i t a b l e new b u i l d i n g on the o p t i o n e d s i t e s ( n o t t o exceed $100,000). 213, On October 17, 1956, the Board o f D i r e c t o r s o f t h e Minneapolis Reserve Bank passed a r e s o l u t i o n f a v o r i n g t h e e r e c t i o n o f a new branch b u i l d i n g , j e c t t o approval o f t h e Board sub- o f Governors, a t a cost n o t t o exceed $100,00tf e x c l u s i v e o f the cost o f one o r t h e o t h e r o f two p r o s p e c t i v e s i t e s . Mr. Peyton appeared before t h e Board on November 25, 1936, t o discuss the q u e s t i o n o f c o n t i n u i n g t h e Branch and t h e need f o r a new b u i l d i n g . He o u t l i n e d the general h i s t o r y o f t h e Helena Branch and compared t h e s e r v i c e which i t rendered t o Montana banks t o t h a t which could be rendered from Minneapolis. He expressed t h e o p i n i o n t h a t l i t t l e would be saved by con- v e r t i n g t h e Branch i n t o an agenqy and s a i d he f e l t t h e r e would be considerable o p p o s i t i o n on t h e p a r t o f i n d i v i d u a l s i n Helena and i n Montana g e n e r a l l y if t h e Branch were d i s c o n t i n u e d e n t i r e l y , and t h a t such o p p o s i t i o n would be g r e a t e r i f t h e Spokane Branch o f t h e San Francisco Reserve Bank were r e t a i n e d . Mr. Poyton s t r e s s e d t h e need f o r an immediate d e c i s i o n i n view o f t h e u n s a t i s f a c t o r y c o n d i t i o n o f the Helena Branch b u i l d i n g . Mr. Peyton was advised t h a t t h e Board was s t u d y i n g t h e general q u e s t i o n o f the continuance and scope o f branch f u n c t i o n s . I t was suggested t h a t necessary r e p a i r s , estimated a t $4,000, be made t o t h e present branch b u i l d i n g t o i n s u r e s a f e t y and t h a t any d e c i s i o n r e s p e c t i n g t h e Helena Branch be d e f e r r e d u n t i l t h e Board had completed i t s study. I t was a l s o suggested t h a t considera- t i o n be given t o t h e q u e s t i o n whether, i n view o f present business and banking a c t i v i t i e s , Helena was t h e l o g i c a l l o c a t i o n f o r a branch i n Montana. I n keeping w i t h a motion unanimously passed a t t h e above meeting, a l e t t e r was d r a f t e d , approved and sent t o Mr. Peyton, which read as f o l l o w s : 214, "Pursuant t o t h e a c t i o n taken a t t h e meeting o f the Board o f Governors o f t h e F e d e r a l Reserve System on November 25, 1956, a t which you were p r e s e n t , t h i s l e t t e r i s addressed t o you f o r t h e purpose o f a d v i s i n g t h a t , i n t h e l i g h t o f t h e d i s c u s s i o n s a t the meeting o f the Board w i t h respect t o t h e Helena Branch, t h e Board f e e l s t h a t a d e c i s i o n on the a c t i o n taken a t t h e j o i n t meeting o f t h e Boards o f d i r e c t o r s o f t h e Federal Reserve Bank o f Minneapolis and i t s Helena Branch on October 17, 1936, i n connection w i t h t h e e r e c t i o n o f a new branch b u i l d i n g a t Helena, should be d e f e r r e d f o r a p e r i o d o f n o t t o exceed s i x months t o a l l o w s u f f i c i e n t t i m e f o r t h e completion o f t h e study now b e i n g made by t h e Board o f the general q u e s t i o n o f t h e continuance o f branches o f F e d e r a l reserve banks and t h e i r f u n c t i o n s . As soon as t h e r e p o r t i s a v a i l a b l e and t h e Board has had an o p p o r t u n i t y t o consider i t , t h e q u e s t i o n o f t h e e r e c t i o n o f a new b u i l d i n g t o house t h e a c t i v i t i e s o f t h e Helena Branch w i l l be given f u r t h e r consideration. "However, as you were advised a t the meeting, t h e Board suggests t h a t steps be taken by t h e Federal Reserve Bank o f Minneapolis as promptly as p o s s i b l e t o make such r e p a i r s t o the present b u i l d i n g as are necessary f o r t h e s a f e t y o f t h e employees o f t h e Branch." On February 6 , 1937, Mr. Peyton submitted a survey r e l a t i v e t o t h e best place f o r t h e l o c a t i o n o f a branch o f t h e Minneapolis Reserve Bank i n Montana, as suggested a t t h e November h e a r i n g . T h i s survey i n d i c a t e d t h a t on the basis o f (1) t o t a l deposits served, (2) t o t a l p o p u l a t i o n served, (3) t o t a l number o f banks served, and (4) m a i l s e r v i c e , Helena was the most d e s i r a b l e l o c a t i o n f o r a branch i n Montana. I n t h e survey Mr. Peyton s t a t e d t h a t t h e f i n a l d e c i s i o n i n regard t o the Helena Branch now r e s t e d w i t h the Board o f Governors and t h a t the Minneapolis bank would await t h e i r d e c i s i o n . Subsequently, the Federal Reserve Bank o f Minneapolis sought t o purchase adequate q u a r t e r s i n Helena w i t h o u t success, and on J u l y 9 , 1937, t h e Board sanctioned t h e purchase o f t h e most d e s i r a b l e o f t h e two b u i l d i n g s i t e s h e l d under o p t i o n f o r $15,000 and steps were t a k e n , w i t h t h e Board's a p p r o v a l , t o e r e c t a s u i t a b l e branch b u i l d i n g a t a cost o f n o t more than $100,000. As p r e v i o u s l y s t a t e d i n t h i s memorandum, the new branch premises were completed, f u r n i s h e d and occupied by t h e Branch on June 13, 1938. 215, HELENA BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Date Currency Coin Received Received Bi l i s and and Pi scounted Counted Counted Ci tv Non Cash Checks Handled Govtt 1931 2,054 1,715,000 1,8*t7,COG 210,000 1932 3,096 1,323,000 1,797*000 186,000 1933 990 1,334,000 1,101,000 199,000 1934 25 »,557,000 959,000 258,000 1935 I 2,135,000 I ,474,000 292,000 1936 I 2,105,000 1,209,000 2*40,000 Countfv Checks Total 1,525,000 218,000 1,953,000 1,139,000 228,000 1,553,000 1,387,000 312,000 1,898,000 2,106,000 802,000 3,166,000 2,418,000 587,000 3,297,000 3,147,000 600,000 4,067,000 Co I lection items Fiscal Agency Gov11 Transactions All Direct Other Transfer of Coupons Other 41,526 13,084 8,211 42,437 16,541 8,160 40,944 22,686 7,450 52,797 20,860 8,121 48,000 25,000 10,582 40,000 23,000 11,000 Funds Amounts Handled ( i n thousands of d o l l a r s ) £ 1931 5,535 15,344 621 179,655 144,675 29,107 353,437 403 5,350 1932 10,039 13,029 401 117,807 100,598 26,011 245,216 435 5,988 1933 6,527 13,103 621 88,265 124,703 41,502 254,470 524 9,301 34,236 1934 205 I i ,354 353 101,6*42 224,071 73,491 400,004 549 14,705 102,578 1935 9 12,626 I,mo 119,161 294,404 68,640 482,285 415 20,895 1936 14 15,354 334 119,334 323,754 81,254 524,342 452 20,012 Digitized Qi for FRASER - — 10 - — 133,908 96,284 145,414 167,570 DENVER BRANCH - FEDERAL RESERVE BANK OF KANSAS CITY (a) C i t y o f Denver.* Denver, w i t h a p o p u l a t i o n o f 287,861, i s the t w e n t y - n i n t h l a r g e s t c i t y the U n i t e d S t a t e s and the l a r g e s t c i t y i n Colorado. in I t i s l o c a t e d near the center o f t h e S t a t e and i s s a i d t o serve a t r a d e area extending approximately 30 m i l e s i n a l l d i r e c t i o n s i n which about 575,000 people r e s i d e . Transportation f a c i l i t i e s are provided by e i g h t r a i l r o a d s , i n c l u d i n g t h e Atchison-Topeka & Santa Fe, Union P a c i f i c , B u r l i n g t o n Route, Denver & Rio Grande-Western and the Chicago-Rock I s l a n d & P a c i f i c . The c i t y i s a l s o served by the Tfyoming A i r L i n e which connects w i t h t h e U n i t e d A i r Lines a t Cheyenne. The p r i n c i p a l l o c a l i n d u s t r i e s are l i v e s t o c k , meat packing, s m e l t i n g and r e f i n i n g , petroleum r e f i n i n g , beet sugar p r o d u c t i o n , canning, c l a y products and automobiles and accessories. According t o the B i e n n i a l Census o f Manu- f a c t u r e s t h e r e were 600 manufacturing establishments o p e r a t i n g i n Denver County i n 1935, which had an o u t p u t valued a t $90,117,000 d u r i n g t h a t y e a r . The Census o f American Business f o r the same year l i s t s 4,184 r e t a i l and 835 wholes a l e establishments o p e r a t i n g i n t h e same area; such f i r m s e n j o y i n g sales aggregating $127,497,000 and $261,593,000, r e s p e c t i v e l y , d u r i n g t h e y e a r . Banking f a c i l i t i e s i n Denver are provided by seven n a t i o n a l banks, t h r e e S t a t e banks (two members) and one i n d u s t r i a l bank. These i n s t i t u t i o n s had d e p o s i t s aggregating $200,232,000, as o f December 31, 1936, and o f t h i s amount $197,484,000 was c a r r i e d by t h e n i n e l o c a l member banks. Two s m a l l n a t i o n a l banks w i t h d e p o s i t s aggregating $1,629,000, l o c a t e d i n o u t l y i n g s e c t i o n s o f t h e c i t y were a u t h o r i z e d t o c a r r y c o u n t r y bank r e s e r v e s . 217, Debits t o i n d i v i d u a l accounts i n banks o f t h e c i t y aggregated $1,945,488,OCX) i n 1936; o r an average o f approximately $6,480,000 f o r each banking day. ( b ) Branch T e r r i t o r y and Functions: The Denver Branch was e s t a b l i s h e d on January 14, 1918, and serves the e n t i r e S t a t e o f Colorado and the n o r t h e r n p o r t i o n o f the S t a t e o f New Mexico i n c l u d e d i n the Tenth D i s t r i c t . This t e r r i t o r y represents approximately 31% o f the l a n d area o f the Tenth D i s t r i c t and has about 16% o f i t s t o t a l population. Approximately 8.7% o f a l l banks i n the d i s t r i c t are l o c a t e d i n t h i s area. As o f December 31, 1936, there were 168 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 90, i n c l u d i n g 84 n a t i o n a l and 6 State i n s t i t u t i o n s , were members o f the System. member banks i n the zone were on the par l i s t . A l l b u t 1 o f t h e 78 nonThe f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n t h e branch zone as compared w i t h t h e Tenth D i s t r i c t as a whole: Tenth D i s t r i c t Branch Zone No. Member Banks Loans and Investments 726 90 $1,119,013 203,648 Capital and Surplus (000 omitted} $133,006 23,955 Total Deposits $1,762,865 334,086 There are f o u r t e e n branch zones i n the System having s m a l l e r member bank f o o t i n g s than the Denver zone, namely, Spokane, E l Paso, L i t t l e Rock, Helena, C h a r l o t t e , San Antonio, N a s h v i l l e , Birmingham, Memphis, S a l t Lake C i t y , L o u i s v i l l e , P o r t l a n d , J a c k s o n v i l l e and Omaha. The Denver Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and d i s bursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash 218, c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings o f member banks are concerned. Reserve accounts o f member banks i n the zone, as w e l l as o f non- member c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t the Branch, which a l s o m a i n t a i n s a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t the Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given t o member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by the Branch, s u b j e c t t o f i n a l approval o f t h e Head O f f i c e . Schedules covering t r a n s a c t i o n s are forwarded t o the Head O f f i c e , b u t the notes and c o l l a t e r a l , i f any, are r e t a i n e d a t the Branch. The Branqh does n o t have Bank Examination, Bank R e l a t i o n s , L e g a l , Research o r F i s c a l Agency departments. As o f February 27, 1957, member banks i n the branch zone had the f o l l o w i n g Reserve bank balances: Colorado: Denver Remainder o f S t a t e New Mexico No. o f Banks Reserve Balances Deferred Balances 9 74 J7 90 $31,675,657 10,724,927 2.406.085 $44,806.647 $3,924,900 169,890 108,001 $4,202,791 Capital Stock Bills Discounted $581,900 266,300 54.150 $702,550 Denver i s 666 t r a i n m i l e s (16 h r s . and 45 m i n s . ) from Kansas C i t y . It i s impossible t o send m a i l by t r a i n from e i t h e r p o i n t a f t e r 7 P. M. on any business day and have i t a r r i v e a t the o t h e r before 8 A. M. on the f o l l o w i n g day. Consequently, Denver i s n o t considered t o be w i t h i n o v e r n i g h t m a i l time o f Kansas C i t y . There are 73 member bank p o i n t s i n the branch zone. Only 11 o f these p o i n t s are w i t h i n o v e r n i g h t m a i l o f Kansas C i t y , whereas 42 are w i t h i n o v e r n i g h t m a i l o f Denver. I t i s clear, therefore, that d i s - continuance o f t h e Denver Branch would n o t o n l y inconvenience banks i n t h a t 219, c i t y , which now e n j o y an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch, b u t t h a t i t would a l s o i m p a i r the s e r v i c e rendered t o a s u b s t a n t i a l number o f member banks s i t u a t e d i n o u t l y i n g c i t i e s o f t h e branch zone. Other than Denver, the most populous c i t i e s i n the branch zone are Pueblo, Colorado, 50,096} Colorado Springs, Colorado, 55,257; and Greeley, Colorado, 12,205. ( c ) Branch B u i l d i n g : The Denver Branch has occupied i t s present q u a r t e r s a t 17th and Araphoe S t r e e t s since November 1925. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book v a l u e , as o f February 27, 1937, o f the branch premises: Cost Land Building V a u l t and v a u l t equipment Fixed machinery and equipment $101,512 59S,5?4) 113^502) $551,388 60,593 $611,981 Book Value 2-27-57 $ 80,000 282,784 $362,784 5,087 $365,871 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r t h e years 1951 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1935 1954 1935 1936 1937 $ 65,900 139,600 61,100 9,700 4,900 1,300 2,700 The above f i g u r e s are incomplete s i n c e , under the p r e s e n t accounting procedure, t h e Branch i s g i v e n no c r e d i t f o r income r e c e i v e d by the Head 220, O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by t h e Reserve bank stock investment and r e s e r v e balances o f member banks i n the branch zone. They are i n t e r e s t i n g o n l y i n s o f a r as they show the shrinkage i n Branch earnings which are d e r i v e d c h i e f l y from b i l l s discounted f o r member banks i n the zone. Earnings from t h i s source aggregated $155,800 I n 1932 and t o o n l y $2,300 i n 1937. (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f Kansas C i t y , made as o f February 27, 1937, shows the f o l l o w i n g i n r e g a r d t o s a l a r i e s and personnel a t the Denver Branch: February 27, 1937 Number Amount Officers Employees 3 68 71 $ 18,100 94.800 &L12.900 May 8, 1956 Numbed Amount 3 69 72 $ 18,000 99,100 $117,100 Decrease Number Amount 1 | $ 100(Inc.) 4,500 14,200 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n t h e above f i g u r e s . ( f ) Branch Expense by F u n c t i o n s : The expenses o f the Denver Branch fcy f u n c t i o n s f o r the years 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 221, 1952 1955 1954 1955 1956 1957 G e n ' l . Overhead Controllable $ 17,770 $ 18,166 $ 15,749 § 15,982 # 15,500 0 16,558 8,879 67 Noncontrollable 15,084 12,152 31 2 ^Provision o f Space 21,181 21,174 16,807 18,630 19,162 33, 150 P r o v i s i o n o f Personnel 858 15,746 19,846 701 10,815 1 , 598 General S e r v i c e 27,929 28,428 32,360 31,453 30,255 30, 013 Postage 11,230 15,106 14,309 14,645 14,322 14, 065 Insurance 4,973 4,824 3,461 2,461 2,538 2, 240 F a i l e d Banks 256 35 1 462 323 Loans, r e d i s c o u n t s , e t c . 9,014 11,606 2,882 6,146 3,192 1 , 238 4,003 3,491 4,101 5,090 4,113 Securities 3, 735 Currency & Coin 28,489 13,665 13,824 14,675 31,352 32, 552 Check C o l l e c t i o n 33,336 29,254 27,228 27, 046 31,964 29,961 Non-Cash C o l l e c t i o n 7,063 6,936 7,178 7,942 7,061 7, 925 Accounting 20,487 18, 577 22,122 21,210 21,904 23,374 F i s c a l Agency 6,010 9,528 12,365 22,900 15, 954 18,993 Auditing 5,238 5,477 4,771 4,374 4,625 4, 705 Bank R e l a t i o n s 1 14 10 6 942 61 — — Bank Examinations 168 65 62 — — 47 F . R. Note I s s u e s 149 34 283 S t a t i s t i c a l and A n a l y t i c a l 128 176 1,043 325 752 1 , 087 $192,551 $202,656 #215,498 $226,625 $218,084 $211,752 Less - Reimbursable F i s c a l Agency Expense 2,845 6,557 11,958 14,414 10,654 8,874 Net Expense £189,706 &L96.299 S201.560 &212.211 $207,450 £202,858 * Represents the n e t expense - income from r e n t a l s having been deducted. There were nine branches i n the System which operated a t a h i g h e r n e t cost than the Denver Branch i n 1957, namely, P i t t s b u r g h , Los Angeles, B a l t i m o r e , C i n c i n n a t i , D e t r o i t , B u f f a l o , S a l t Lake C i t y , Omaha and S e a t t l e , (g) Volume o f Operations a t Denver Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s departments o f the Denver Branch and the Head O f f i c e d u r i n g the l a s t months o f 1956s i Denver Branch Discount Department: Notes r e d i s c o u n t e d C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: six 26 29 - Head O f f i c e 55 2 15 E I Paso 227, Memphis Branch Head O f f i c e Safekeeping: Member bank s e c u r i t i e s 12-31-36 $15,030,000 $284,078,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , Baltimore, J a c k s o n v i l l e , D e t r o i t and Omaha. Currency and Coin: 1. Number o f b i l l s received and counted 4,987,000 20,168,000 Branches w i t h l a r g e r volume: A l l branches except Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 67 cents 54 cents Branches w i t h higher u n i t c o s t : C i n c i n n a t i , Helena, E l Paso, S a l t Lake C i t y and Spokane. 2. Number o f coins received and counted 3,946,000 17,754,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, Helena, E l Paso, P o r t l a n d , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 19 cents 11 cents Branches w i t h higher u n i t c o s t : C i n c i n n a t i , P i t t s b u r g h , N a s h v i l l e , Helena, Omaha, E l Paso, San Antonio, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Check C o l l e c t i o n : 1 . Number o f c i t y checks ( c l e a r i n g s ) received 935,000 2,186,000 Branches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, D e t r o i t , L o u i s v i l l e , Omaha and Los Angeles. Cost per one thousand u n i t s handled $2.08 . $1.86 Branches w i t h higher u n i t c o s t : L o u i s v i l l e , Helena, Oklahoma C i t y , Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f countiy checks (outgoing) received 3,783,000 10,423,000 Branches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, D e t r o i t , L o u i s v i l l e , Oklahoma C i t y , Omaha and Los Angeles. Cost per one thousand u n i t s handled $1.74 $2.24 Branches w i t h higher u n i t c o s t : A l l branches except Birmingham, Jacksonv i l l e , L i t t l e Rock, Oklahoma C i t y and Omaha. Non-cash C o l l e c t i o n s : 1 . Number o f c i t y c o l l e c t i o n s handled 14,606 9,177 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , D e t r o i t , L i t t l e Rock, Memphis, Omaha, Houston and Los Angeles. Cost per u n i t handled 14.3 cents 16.7 cents Branches w i t h higher u n i t c o s t : A l l branches except Birmingham, Jacksonv i l l e , N a s h v i l l e , L i t t l e Rock, L o u i s v i l l e , Memphis, Helena, Oklahoma C i t y , Omaha, E l Paso, Houston and S a l t Lake C i t y . 223 Denver Brnnch Head O f f i c e Non-cash C o l l e c t i o n s ( C o n f t . ) 2. Number o f country c o l l e c t i o n s handled 17,098 64,955 Branches w i t h l a r g e r volume: B u f f a l o , Baltimore, C h a r l o t t e , Oklahoma C i t y , Omaha, S a l t Lake C i t y and Spokane. Cost per u n i t handled 9.6 cents 7 . 4 cents Branches w i t h higher u n i t cost: B u f f a l o , B a l t i m o r e , Birmingham, Jacksonv i l l e , N a s h v i l l e , New Orleans, D e t r o i t , Helena, San Antonio, Los Angeles, P o r t l a n d and S e a t t l e . 5. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 2,356 5,063 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , Memphis, Helena, Oklahoma C i t y , E l Paso, Houston, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Cost per u n i t handled 4 . 1 cents 20 cents Branches w i t h higher u n i t c o s t : A l l branches except C i n c i n n a t i , P i t t s b u r g h and S e a t t l e . A schedule showing the volume o f operations o f the Denver Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f Denver Branch by Board's Examiners - 1934: During an examination o f the Federal Reserve Bank o f Kansas C i t y , made as o f September 29, 1934, the Board's Examiners reviewed the operations of the Denver Branch. P a r t i c u l a r a t t e n t i o n was given t o the s i z e and importance o f the branch c i t y and i t s distance from the Head O f f i c e , the m a i l f a c i l i t i e s a v a i l a b l e between Kansas C i t y and member bank p o i n t s i n the branch zone, and t o the volume o f operations conducted a t the Branch. I t was concluded t h a t the continued o p e r a t i o n o f the Branch was warranted. ( i ) Survey o f Denver Branch made by Federal Reserve Bank o f Kansas C i t y - 1956: I n accordance w i t h the request made i n the Board's l e t t e r o f March 25, i 1936 (X-9532), the Federal Reserve Bank of Kansas C i t y surveyed the operations o f i t s branches. I t was estimated t h a t a saving o f $350,830, based on 224 o p e r a t i n g costs o f $679,090 f o r the y e a r 1955, would be r e a l i z e d i f t h r e e branches were d i s c o n t i n u e d . all However, t h e i r discontinuance was not recommended, c h i e f l y because o f the v a l u a b l e services which they were p e r forming f o r member banks and t h e f a c t t h a t over a p e r i o d o f years thqy had become i m p o r t a n t f a c t o r s i n the economic l i f e o f the c i t i e s and t e r r i t o r i e s which they served. I t was s t a t e d t h a t any suggestion t h a t such branches were t o be d i s c o n t i n u e d would be s t r o n g l y opposed by the p u b l i c as w e l l as by the member banks they serve. As an a l t e r n a t i v e , the o p i n i o n was expressed t h a t the Omaha and Denver Branches should be converted i n t o l i m i t e d power branches and t h a t t h i s could be done w i t h o u t reducing the value o f the s e r v i c e s which were being rendered t o member banks i n such branch zones. I t was estimated t h a t , based on con- d i t i o n s then e x i s t i n g , a saving o f approximately $21,000 would be r e a l i z e d through such conversion and t h a t such a c t i o n would also strengthen Head O f f i c e c o n t r o l over these branches. I n accordance w i t h the above o p i n i o n , P r e s i d e n t Hamilton o f the Kansas C i t y Reserve Bank addressed a l e t t e r t o the Board on January 12, 1937, r e q u e s t i n g i t s approval o f the conversion o f the Omaha and Denver Branches i n t o l i m i t e d power branches t o be operated on the same b a s i s as the Oklahoma C i t y Branch. On January 21, 1937, the Board wrote P r e s i d e n t Hamilton approving the proposed conversion and r e q u e s t i n g to be advised o f the date on which the change would be made e f f e c t i v e . President Hamilton r e p l i e d on February 4, 1937, t h a t h i s d i r e c t o r s had voted to approve i n p r i n c i p l e the proposed conv e r s i o n , b u t had postponed s e t t i n g an e f f e c t i v e date f o r the conversion u n t i l r e p r e s e n t a t i v e s o f b o t h branches had had an o p p o r t u n i t y t o stucty" necessary changes. 225, Opposition t o the proposed conversion developed and on A p r i l 10, 1937, t h e Board o f Governors was advised t h a t t h e d i r e c t o r s o f t h e Federal Reserve Bank o f Kansas C i t y a t a r e g u l a r meeting on A p r i l 8 , 1937, had acted as follows: "President Hamilton r e p o r t e d on meetings h e l d a t Denver, Colorado, and Omaha, Nebraska, f o r t h e purpose o f d i s c u s s i n g w i t h banker groups t h e proposed conversion o f t h e Denver and Omaha Branches o f t h i s bank i n t o memorandum branches. He s t a t e d t h a t a f t e r a thorough d i s c u s s i o n o f the e f f e c t o f the proposed change upon the s e r v i c e rendered t o member banks i n t h e branch zones, the meetings had ended w i t h r e a f f i r m a t i o n o f t h e bankers present o f t h e i r o p p o s i t i o n t o t h e change. A general d i s c u s s i o n f o l l o w e d , a f t e r which the d i r e c t o r s voted unanimously, i n view o f the general p r o t e s t , t o d i s c o n t i n u e c o n s i d e r a t i o n o f conversion o f t h e Denver and Omaha Branches o f t h i s bank i n t o memorandum branches, and t o p e r m i t them t o remain i n t h e i r present s t a t u s . " The l e t t e r c o n t a i n i n g t h i s advice was acknowledged by the Board on A p r i l 88, 1937, and no f u r t h e r a c t i o n has been taken i n t h e m a t t e r . 226, DENVER'BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Received and Counted Non Cash Collection items Gov't Al I Coin Total Coupons Other Fiscal Agency Transactions Direct Other 565,000 8,555,000 191,549 55,968 3,543 5 18,222 4,986,000 563,000 6,798,000 196,156 57,724 1,236 3 15,821 1,453,000 4,999,000 701,000 7,153,000 206,037 68,332 1,511 92 12,570 11,197,000 1,733,000 5,649,000 1,354,000 8,736,000 239,214 73,196 7,416 140 10,131 I0,769,000 7,586,000 1,846,000 6,202,000 910,000 8,958,000 265,000 64,000 12,306 2,369 8,719 10,117,000 7,994,000 1,832,000 7,083,000 873,000 9,788,000 204,000 65,000 2,161 1,060 8,000 3,636 41,680 20,612 250 896,440 Received and Counted Checks Handled Gov't Country Checks Date Bills Pi scounted 1931 3,972 8,1*69,000 9,099,000 1,478,000 6,512,000 1932 7,075 7,369,000 8,256,000 I,249,000 1933 2,860 9,097,000 8,300,000 1934 79 8,662,000 1935 129 1936 83 City Transfer of Funds 193! 37,333 47,703 2,547 794,223 Amounts Handled ( i n thousands of do 11 are) 775,561 89,965 1,659,749 1932 99,192 Ml, 066 2,667 572,784 516,023 74,132 1,162,939 3,815 32,256 9,124 150 553,933 1933 35,778 56,**92 6,530 509,833 562,377 91,946 1,164,156 3,778 39,336 5,447 132 471,359 1931* 953 52,417 2,377 654,980 758,310 135,403 1,548,693 3,966 55,524 7,158 131 437,445 1935 1,231 62,878 1,529 798,907 926,667 136,777 1,862,351 3,625 61,201 6,403 751 560,126 1936 3,834 70,U82 1,711 932,812 1,049,927 176,473 2,159,212 2,939 68,677 7,501 338 598,993 OKLAHOMA CITY BRANCH - FEDERAL RESERVE BANK OF KANSAS CITY. (a) C i t y o f Oklahoma C i t y Oklahoma C i t y , w i t h a p o p u l a t i o n o f 185,389, i s t h e f o r t y - t h i r d l a r g e s t c i t y i n the U n i t e d States and the l a r g e s t c i t y i n Oklahoma. It i s located i n the c e n t r a l p a r t o f the S t a t e and i s said t o serve a t r a d e area extending 58 m i l e s n o r t h , 72 m i l e s south, 61 m i l e s east and 94- m i l e s west. 926,000 people r e s i d e i n t h i s area. six railroads, including T r a n s p o r t a t i o n f a c i l i t i e s are provided by the Santa Fe, Chicago-Rock I s l a n d & P a c i f i c , L i n e s , F o r t Smith & Western and the Missouri-Kansas & Texas. a i r service i s Approximately Frisco I n addition regular available. O i l p r o d u c t i o n and r e f i n i n g , meat packing, f l o u r and feed m i l l i n g , printing and p u b l i s h i n g , and the manufacture o f i r o n and s t e e l products are the p r i n c i p a l local industries. The B i e n n i a l Census o f Manufactures f o r 1935 l i s t s 269 p l a n t s o p e r a t i n g i n Oklahoma County, i n which Oklahoma C i t y i s s i t u a t e d , and shows t h a t such f i r m s had an output valued at $67,910,000 d u r i n g t h a t y e a r . According t o the Census o f American Business t h e r e were 2814- r e t a i l and 462 wholesale establishments i n the same area, which enjoyed sales aggregating $>76,200,000 and $161,853,000, r e s p e c t i v e l y , i n 1935 • Banking f a c i l i t i e s i n Oklahoma C i t y are provided by s i x n a t i o n a l banks, one small S t a t e nonmember bank and a branch M o r r i s P l a n bank. These i n s t i t u t i o n s had d e p o s i t s aggregating %>107,94.7,000 as o f December 31, 1936, and o f t h i s amount #107,088,000 was c a r r i e d by t h e s i x l o c a l member banks, t h e s m a l l e s t o f which i s a u t h o r i z e d t o c a r r y country bank reserves. Debits t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated #1,135,973,000 d u r i n g the year 1936, o r an average o f approximately $3,790,000 f o r . e a c h bank- i n g day. 228, (b) Branch T e r r i t o r y and F u n c t i o n s : The Oklahoma C i t y Branch was e s t a b l i s h e d August 2 , 1920 and serves a l l t h a t p a r t o f t h e S t a t e o f Oklahoma l o c a t e d i n t h e Tenth D i s t r i c t . This terri- t o r y r e p r e s e n t s 1% o f t h e l a n d area o f t h e d i s t r i c t and has a p p r o x i m a t e l y 28$ of i t s t o t a l population. About 20$ o f a l l banks i n t h e T e n t h D i s t r i c t are w i t h i n t h i s area. As o f December 31> 1936, t h e r e were 384 banks, e x c l u s i v e o f mutual savings banks, i n t h e branch zone and o f t h i s number 207, i n c l u d i n g 20U n a t i o n a l and 3 S t a t e i n s t i t u t i o n s , were members o f t h e F e d e r a l Reserve System. 177 nonmember banks i n t h e zone were on the par l i s t . A l l but 9 o f the The f o l l o w i n g f i g u r e s t a k e n from r e p o r t s o f c o n d i t i o n a s o f t h e same date show t h e s i z e o f member bank f o o t i n g s i n t h e branch zone as compared t o those o f t h e T e n t h D i s t r i c t as a Tenth D i s t r i c t Branch Zone No. Member Banks Loans and Investments Capital and Surplus (000 o m i t t e d ) 726 207 £>1,119,013 247,626 &133,006 36,113 whole: Total Deposits ^1,726,865 371,331 There are o n l y e i g h t branch zones i n t h e System h a v i n g l a r g e r member bank f o o t i n g s t h a n t h e Oklahoma C i t y Zone; namely, P i t t s b u r g h , Los Angeles, Detroit, C i n c i n n a t i , B u f f a l o , B a l t i m o r e , New Orleans and S e a t t l e . The Oklahoma C i t y Branch i s operated on t h e "memorandum p l a n " . A l l general l e d g e r accounts, as w e l l as accounts o f member banks, nonmember c l e a r i n g banks and o t h e r F e d e r a l Reserve banks, are m a i n t a i n e d a t t h e Head O f f i c e . A transcript o f a l l e n t r i e s a f f e c t i n g t h e accounts o f banks i n t h e branch zone i s sent t o t h e Head O f f i c e d a i l y by w i r e . Member banks i n t h e branch zone may f o r w a r d t h e i r count o f f e r i n g s e i t h e r t o t h e Branch o r t h e Head O f f i c e . dis- O f f e r i n g s r e c e i v e d by t h e Branch are examined t o see t h a t t h e paper i s t e c h n i c a l l y i n o r d e r and t h e 229, amount o f each o f f e r i n g i s w i r e d t o the Head O f f i c e , which i n t u r n w i r e s t e n t a t i v e approval o r d i s a p p r o v a l , c r e d i t being c a t i o n i s r e c e i v e d a t the Branch. g i v e n as o f the date the a p p l i - Notes are t h e n forwarded t o the Head O f f i c e f o r f i n a l approval, but t h e s u p p o r t i n g c o l l a t e r a l , i f any, o f the Branch. its remains i n custody The Branch gives t h e same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , check c o l l e c t i o n s , non-cash c o l l e c t i o n s , w i r e t r a n s f e r s and safekeeping o f s e c u r i t i e s are concerned. The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , F a i l e d Banks, Research or F i s c a l Agency departments. As o f February 27, 1937, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : No. o f Banks Oklahoma C i t y Remainder o f S t a t e i n Zone 6 Reserve Balances ^>15,557,855 Deferred Balances &2,970,225 Capital Stock $ 276,300 Bills Discounted v 3?8|89? 784 1 9QQ 3,771 3291120 &1,06l.200 $3>771 Oklahoma C i t y i s 343 m i l e s (9 h r s . and 20 mins.) from Kansas C i t y . any business day t r a i n s leave both c i t i e s a f t e r 9 P»M. which a r r i v e a t t h e o t h e r p r i o r t o 8 A.M. on the f o l l o w i n g day. the branch zone. On There a r e 149 member bank towns i n An examination o f m a i l schedules i n d i c a t e s t h a t a l l but 20 o f such p o i n t s are w i t h i n o v e r n i g h t m a i l time o f Oklahoma C i t y , whereas 50 o f such p o i n t s are not w i t h i n o v e r n i g h t m a i l time o f Kansas C i t y . Therefore, i t ap- pears t h a t discontinuance o f the Oklahoma C i t y Branch would c u r t a i l the s e r v i c e rendered t o a s u b s t a n t i a l number o f member banks l o c a t e d i n o u t l y i n g sections o f the branch zone, as w e l l as banks i n Oklahoma C i t y which now have an o v e r - t h e counter r e l a t i o n s h i p w i t h t h e Branch. 230, Other t h a n Oklahoma C i t y , the more populous c i t i e s i n the branch zone are T u l s a , Oklahoma, 141,258; Muskogee, Oklahoma, 32,026; E n i d , Oklahoma, 26,399; Shawnee, Oklahoma, 23,283, and Okmulgee, Oklahoma, 17,097. (c) Branch B u i l d i n g : The Oklahoma C i t y Branch has occupied i t s present q u a r t e r s a t 226 West T h i r d S t r e e t since A p r i l , 1923. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and c a r r y i n g value as o f February 27, 1937, o f the branch premises: Cost Land Building V a u l t & v a u l t equipment Fixed machinery & equipment $ 65,021 333,490) 76,400) #474,911 ' 77,480 Book Value 2-27-37 & 63,721 238 f 244 #301,965 1,553 (d) Earnings - Branch Books: No r e c o r d o f earnings i s maintained a t the Oklahoma C i t y Branch as i t is operated on the "memorandum p l a n " . (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f Kansas C i t y , made as o f February 27, 1937, shows the f o l l o w i n g i n r e g a r d t o s a l a r i e s and personnel a t t h e Oklahoma C i t y Branch: February 27, 1937 Number Amount Officers Employees 3 64 62 $ 18,90091,500 $110 ? 400 May 8 , 1936 Number Amount 3 68 2k & 16,900 97,300 $116,200 Decrease Number Amount J± J^ f5,800 &5.800 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are not i n c l u d e d i n the above f i g u r e s . 231, ( f ) Branch Expense by Functions: The expenses o f t h e Oklahoma C i t y Branch by f u n c t i o n s f o r the years 1932 t o 1937 > i n c l u s i v e , were as f o l l o w s : 1222 General Overhead Controllable $ 17,258 Non-Controllable 7,205 * P r o v i s i o n o f Space 13,044 P r o v i s i o n o f Personnel 1,016 General Service 27,291 Postage 18,066 Insurance 4,949 Loans, Rediscounts, etc. 3,706 Securities 2,995 Currency & Coin 11,905 Check C o l l e c t i o n 50,606 Non-Cash C o l l e c t i o n 7,641 Accounting 15,082 F i s c a l Agency 6,356 Legal Auditing 3,533 Bank R e l a t i o n s 62 F. R. Note Issue Statistical & Analytical 134 T o t a l Expense f 190,849 Less - Reimbursable F i s c a l Agency Exp. 5,639 Net Expense $185,210 1933 $ 17,909 11,860 12,199 900 27,764 19,388 4,692 3,463 3,131 12,398 51,120 7,567 14,237 9,261 - 4,444 45 1934 $ 14,561 $ 1 5 , 0 2 6 9,968 9,063 8,914 16,820 11,085 28,815 26,985 18,124 21,357 3,409 2,649 2,327 493 5,492 4,017 24,596 13,244 49,362 53,171 8,196 7,414 14,532 12,897 18,120 31,381 139 3,688 3,837 19 79 246 70 166 99 1937 1936 W 5 $ 14,686 $ 14,223 - - 10,148 20,152 18,358 1,738 28,091 22,437 2,825 393 5,509 26,925 44,200 7,935 28,082 22,042 2,362 467 4,056 27,387 42,873 7,733 13,590 22,815 14,124 23,848 15 4,145 - $200,484 $210,151 $230,210 112 $225,793 4,759 781 256 . 109 1211,631 8,460 $192,024 17,656 $192,49? 20,651 $209,559 16,969 $208,824 17,627 $194,004 - 106 - 248 * Represents the net expense - income from r e n t a l s having been deducted. There were t e n branches i n the System which operated a t a h i g h e r annual cost t h a n the Oklahoma C i t y Branch i n 1937; namely, P i t t s b u r g h , Los Angeles, B a l t i m o r e , C i n c i n n a t i , D e t r o i t , B u f f a l o , S a l t Lake C i t y , Omaha, S e a t t l e and Denver. (g) Volume o f Operations a t Oklahoma C i t y Branch The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s departments o f t h e Oklahoma C i t y Branch and the Head O f f i c e d u r i n g the l a s t six months o f 1936: 282, Oklahoma C i t y Branch Head O f f i c e Safekeeping: Member bank s e c u r i t i e s 12-31-36 412,426,000 $284,078,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , D e t r o i t , Denver and Omaha. Currency & Coin: 1. Number of b i l l s received and counted 5,020,000 20,168,000 Branches w i t h l a r g e r volume: A l l branches except Helena, Denver, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 52 cents 54 cents Branches w i t h higher u n i t cost: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , Helena, Denver, Omaha, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y , S e a t t l e , Spokane and L i t t l e Rock. 2. Number o f coins received and counted 4,842,000 17,754,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Houston, San Antonio, Los Angeles and S e a t t l e . Cost per one thousand u n i t s handled 7 cents 11 cents Branches w i t h higher u n i t cost: A l l branches except New Orleans. Check C o l l e c t i o n : 1. Number o f c i t y checks ( c l e a r i n g s ) received 504,000 2,186,000 Branches w i t h l a r g e r volume: A l l branches except J a c k s o n v i l l e , L i t t l e Rock, Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled $2.18 $1.86 Branches w i t h higher u n i t cost: Helena, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f country checks (outgoing) received 7,132,000 10,423,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h and B a l t i m o r e . $1«72 &2.24 Cost per ono thousand u n i t s handled Branches w i t h higher u n i t cost: A l l branches except Birmingham, J a c k s o n v i l l e , and L i t t l e Rock. Non-Cash C o l l e c t i o n s 1. Number o f c i t y c o l l e c t i o n s handled 13,602 9,177 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , B a l t i m o r e , D e t r o i t , L i t t l e Rock, Memphis, Denver, Omaha, Houston and Los Angeles. Cost per u n i t handled 10.8 cents 16.7 cents Branches w i t h higher u n i t cost: A l l branches except J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, Omaha, E l Paso and Houston. 2. Number o f country c o l l e c t i o n s handled 17,407 64,935 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , Omaha, S a l t Lake C i t y , and Spokane. Cost per u n i t handled 9 cents 7-4 cents Branches w i t h higher u n i t cost: B u f f a l o , B a l t i m o r e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans, D e t r o i t , Helena, Denver, San Antonio, Los Angeles, P o r t l a n d and S e a t t l e . 283 Oklahoma C i t y Branch Head O f f i c e Non-Cash C o l l e c t i o n s (Cont'd) 3# Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,494 5,063 Branches w i t h l a r g e r volume: A l l branches except Birmingham, J a c k s o n v i l l e , Helena, E l Paso, S a l t Lake C i t y , S e a t t l e and Spokane. Cost per u n i t handled 12.8 cents 20 cents Branches w i t h higher u n i t cost: B u f f a l o , C h a r l o t t e , J a c k s o n v i l l e , D e t r o i t , L o u i s v i l l e , Memphis, Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume o f operations o f the Oklahoma C i t y Branch f o r the years 1931 to 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey of Oklahoma C i t y Branch by Board*s Examiners - 1934 During an examination o f the Federal Reserve Bank o f Kansas C i t y , made as o f September 29, 1934, the Board's examiners reviewed the operations of the Oklahoma C i t y Branch. Special c o n s i d e r a t i o n was given t o the number and size o f banks i n the branch c i t y , m a i l f a c i l i t i e s a v a i l a b l e t o member bank p o i n t s in the zone from both Kansas C i t y and Oklahoma C i t y , the volume o f operations conducted at the Branch and the net cost o f o p e r a t i n g the Branch. As a r e s u l t o f t h i s i n v e s t i g a t i o n , the Board's examiners questioned the necessity f o r continu- i n g the Branch. ( i ) Survey o f Oklahoma C i t y Branch made by Federal Reserve Bank o f Kansas C i t y - 19?6 A survey o f operations o f a l l o f i t s branches was made by the Federal Reserve Bank o f Kansas C i t y , as requested i n the Board's l e t t e r o f March 25, 1936, (X-9532). I t was estimated t h a t an aggregate saving of $350,830, based on t o t a l o p e r a t i n g costs o f $679>090 f o r the year 1935, could be r e a l i z e d i f , such branches were e l i m i n a t e d . I t was s t a t e d , however, t h a t : ii* * * Because o f the very valuable services performed f o r member banks at these branches, t h e i r discontinuance a t t h i s time i s not recommended." 234 " C o n s i d e r a t i o n must also be g i v e n t o the f a c t t h a t our branches were e s t a b l i s h e d many years ago, have become important f a c t o r s i n the c i t i e s i n which they are l o c a t e d and i n the t e r r i t o r i e s served, and t h a t any suggestion o f t h e i r d i s continuance would be s t r o n g l y opposed by the p u b l i c as w e l l as by the member banks they serve." I t was recommended t h a t the Denver and Omaha Branches be converted i n t o "memorandum p l a n " branches s i m i l a r t o Oklahoma C i t y , and subsequently the Board o f Governors 1 approval o f such conversion was requested and obtained. As i n d i c a t e d i n the comments r e l a t i n g t o such branches t h i s p l a n was l a t e r abandoned - t h e c h i e f reason f o r i t s abandonment b e i n g the development o f s t r o n g o p p o s i t i o n by bankers i n t h e t e r r i t o r y served, i . e . , l o c a l p r i d e . OKLAHOMA CITY BRANCH VOLUME OF OPERATIONS Number of Pieces fondled Currency Bills Siis Discounted 1931 Non Cash Coin Recei ved and Counted Checks Handled Citv Country Gov't Checks Collection Items All Gov«t Total Fiscal Apencv Transfer Transact i ons Other of Funds Coupons Other Oirect 7,732,000 8,056,000 1,157,000 I3,5**5,000 297,000 1**,999,000 37, 2**3 67,861 920 - 8,639 1932 - 7,565,000 7,0^*0,000 1,027,000 10,800,000 308,000 12,135,000 37,071 60*133 **25 - 8,031 1933 - 8,1*83,000 6,1*72,000 1,1*0**, 000 10,630,000 612,000 12,61*6,000 **7,**22 63,715 1,773 - 7,893 193*4 - 8,796,000 6,5^9,000 1,202,000 I I , 5*13,000 2,**68,000 15,213,000 82,717 55,398 l,2**5 2** 6,896 1935 - 8,712,000 7,209,000 1,1*22,000 13,01**,000 l,**5**,000 15,890,000 87,000 53,000 5,172 59 5,860 1936 - <0,11*1,000 9,056,000 1,105,000 1*4, 1 »+9,000 1,0****,000 .16,298,000 59,000 59,000 ****9 kkS 2,000 **86 26,586 1,316 193! 30,681* 1,057 655,177 Amounts Handled ( i n thousands of dollars) 752,1 7*4 1*0,202 l,****7,553 2I9,**96 1932 - 29,283 909 572,5**6 630,6**** 29,701 1,232,891 **82 22,181 326 - 155,799 1933 - 35,****8 1,3**0 633,690 7**2,3I** **6,1 **7 t,*422, 151 53** 26,525 729 - 130,1*8** 193** - 32,860 9**** 776,863 9**2,856 89,837 1,809,556 931 23,8*16 537 33 !50,**I6 1935 - 31,81*3 932 878,131 1,0*47,931 78,210 2,00**,272 812 27,766 I,**I8 51 222,569 1936 • 35,91** 1,052 802,**92 1,091,819 89,351 1,983,662 77** 26,8**2 **l** 202 67,388 <0 S? Received and Cpunted Qi OMAHA BRANCH - FEDERAL RESERVE BANK OF KANSAS CITY (a) C i t y o f Omaha: Omaha, w i t h a p o p u l a t i o n o f 214,006, i s the t h i r t y - n i n t h l a r g e s t i n the U n i t e d States and t h e l a r g e s t c i t y i n Nebraska. city I t i s located i n the extreme east c e n t r a l p a r t o f t h e S t a t e and i s s a i d t o serve a t r a d e area extending from 25 t o 40 m i l e s i n a l l d i r e c t i o n s . Transportation facilities are p r o v i d e d by t e n r a i l r o a d s , i n c l u d i n g t h e Chicago-Rock I s l a n d & P a c i f i c , B u r l i n g t o n , M i s s o u r i P a c i f i c , Chicago & N o r t h Western, and Union P a c i f i c . The c i t y i s a l s o served by s e v e r a l a i r l i n e s and numerous bus l i n e s . The p r i n c i p a l i n d u s t r i e s are meat packing, f l o u r m i l l i n g and s m e l t i n g . The c i t y i s noted f o r t h e h a n d l i n g o f l i v e stock and o t h e r a g r i c u l t u r a l and dairying products. The B i e n n i a l Census o f Manufactures f o r t h e year 1955 l i s t s 397 manufacturing establishments o p e r a t i n g i n Douglas County, i n which Omaha i s s i t u a t e d , which had an o u t p u t valued a t $185,078,000 d u r i n g t h a t y e a r . The Census o f American Business f o r the same year shows 5,269 r e t a i l and 613 wholesale establishments i n t h e area. These f i r m s enjoyed sales aggregating $93,441,000 and $356,374,000, r e s p e c t i v e l y , i n 1935. Banking f a c i l i t i e s i n Omaha are p r o v i d e d by s i x n a t i o n a l banks and t h r e e S t a t e nonmember banks. As o f December 31, 1936, these i n s t i t u t i o n s had d e p o s i t s aggregating $128,921,000, and o f t h i s amount $126,807,000 was c a r r i e d w i t h the s i x l o c a l member banks. D e b i t s t o i n d i v i d u a l accounts i n banks o f t h e c i t y amounted t o $1,840,600,000 d u r i n g 1936, o r an average o f approximately $6,155,000 f o r each banking day. 237, (b) Branch T e r r i t o r y and Functions; The Omaha Branch was e s t a b l i s h e d on September 4 , 1917, and serves the e n t i r e States o f Nebraska and Wyoming. This area represents approximately 56% of the l a n d area o f the Tenth D i s t r i c t and has about 20% o f i t s population. total Approximately 25% o f a l l banks i n t h e d i s t r i c t are l o c a t e d i n t h i s area. As o f December 51, 1956, t h e r e were 494 banks, e x c l u s i v e o f mutual savings banks, i n t h e branch zone and o f t h i s number 182, i n c l u d i n g 161 n a t i o n a l and 21 S t a t e i n s t i t u t i o n s , were members o f the System. banks i n the branch zone were on the par l i s t . 152 o f the 512 nonmember The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n t h e branch zone as compared w i t h t h e Tenth D i s t r i c t as a whole: No. Member Banks Loans and Investments C a p i t a l and Sdrplus (000 omitted) Total Deposits Tenth D i s t r i c t 726 $1,119,015 $155,006 $1,762,865 Branch Zone 182 216,968 25,665 518,042 There are t h i r t e e n branch zones i n the System h a v i n g smaller member bank f o o t i n g s than the Omaha zone, namely, Spokane, E l Paso, L i t t l e Rock, Helena, C h a r l o t t e , San A n t o n i o , N a s h v i l l e , Birmingham, Memphis, S a l t Lake C i t y , L o u i s v i l l e , P o r t l a n d and J a c k s o n v i l l e . The Omaha Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and d i s bursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f member banks i n t h e zone, as w e l l as o f nonmember c l e a r i n g banks 238, and o t h e r Federal Reserve banks, are maintained a t t h e Branch, which also maintains a memorandum general ledger and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given t o member banks f o r discount o f f e r i n g s r e c e i v e d by t h e Branch, s u b j e c t t o f i n a l approval o f t h e Head O f f i c e . Schedules c o v e r i n g t r a n s a c t i o n s are forwarded t o t h e Head O f f i c e , but t h e notes and c o l l a t e r a l , i f any, are r e t a i n e d a t t h e Branch. The Branch does n o t have Bank Examination, Bank R e l a t i o n s , L e g a l , Research or F i s c a l Agency departments. As o f February 27, 1937, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : Nebraska: Omaha Remainder o f S t a t e Wyoming No. o f Banks Reserve Balances 6 142 55 185 $19,010,076 22,585,454 5,165,626 $46.761.156 Deferred Balances Capital Stock $5,221,505 777,195 96^585 $245,850 592,050 158.650 $776,550 Bills Discounted $17,500 Omaha i s 196 t r a i n miles (7 h r s . and 2 mins.) from Kansas C i t y . On any business day t r a i n s leave both p o i n t s a f t e r 8 P.M. which a r r i v e a t the o t h e r before 8 A.M. on t h e f o l l o w i n g day, i . e . , o v e r n i g h t m a i l . The branch zone i n c l u d e s 140 p o i n t s i n which one or more member banks are l o c a t e d . Mail schedules i n d i c a t e t h a t 62 o f these p o i n t s have o v e r n i g h t m a i l s e r v i c e t o Omaha, whereas o n l y 47 are w i t h i n o v e r n i g h t m a i l o f Kansas C i t y . therefore, that at least It appears, 15 p o i n t s i n t h e branch zone can be served more e x p e d i t i o u s l y by t h e Branch than by t h e Head O f f i c e . Banks l o c a t e d a t these p o i n t s and banks i n t h e c i t y o f Omaha would o f course s u f f e r the g r e a t e s t inconvenience i f t h e Branch were d i s c o n t i n u e d . 244, Other than Omaha, the more populous c i t i e s i n t h e branch zone are L i n c o l n , Nebraska, 75,935j Grand I s l a n d , Nebraska, 18,041; Cheyenne, Wyoming, 17,361 and Casper, Wyoming, 16,619. (c) Branch B u i l d i n g : The Omaha Branch has occupied i t s present q u a r t e r s a t 1701-5 Dodge S t r e e t since December 1925. The f o l l o w i n g f i g u r e s show the o r i g i n a l c o s t and book v a l u e , as o f February 27, 1957, o f the branch premises: Cost Land Building V a u l t & v a u l t equipment F i x e d machinery & equipment $176,427 286,955) 110,985) $574,565 75,479 $647*844 Book Value 2-27-57 $176,427 249,221 $425,648 1,795 $427,445 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1951 t o 1957, i n c l u s i v e , were as f o l l o w s : Year Earnings 1951 1932 1955 1954 1955 1956 1957 $202,000 506,700 81,700 20,600 6,000 3,700 5,400 The above f i g u r e s are incomplete s i n c e , under the present accounting procedure, t h e Branch i s given no c r e d i t f o r income r e c e i v e d by t h e Head O f f i c e on investments, a p o r t i o n o f which i s made p o s s i b l e by t h e Reserve Bank stock investment and reserve balances o f member banks i n the branch zone. They are i n t e r e s t i n g o n l y i n s o f a r as t h e y show the shrinkage i n branch e a r n i n g s , which 210, are d e r i v e d c h i e f l y from b i l l s discounted f o r member banks i n the zone. Income from t h i s source amounted t o $301,500 i n 1952 and t o o n l y $3,200 i n 1937. (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f Kansas C i t y , made as o f February 27, 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the Omaha Branch: Feb. 27, 1937 Number Amount Officers Employees 3 72 TO $ 21,600 108,900 $150,500 May 8. 1936 Number Amount 3 77 80 $ 21,500 .117,700 $159,200 Decrease Number Amount 5 5 $ 100(Inc..) 8,800 $8,700 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . ( f ) Branch Expense by Functions: The expenses o f the Omaha Branch by f u n c t i o n s f o r t h e years 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 1932 General Overhead Controllable $ 18,027 Noncontrollable 9,881 * P r o v i s i o n o f Space 23,180 P r o v i s i o n o f Personnel 1,017 General Service 30,255 Postage 16,041 Insurance 5,091 F a i l e d Banks 1,927 Loans, Rediscounts, e t c . 16,554 Securities 5,771 Currency and Coin 14,194 Check C o l l e c t i o n 36,630 Non-Cash C o l l e c t i o n 6,938 Accounting 21,445 F i s c a l Agency8,916 Legal Auditing 5,774 Bank R e l a t i o n s 242 — F.R. Note Issues Statistical & Analytical 547 T o t a l Expense |222,430 Less - Reimbursable F i s c a l 6.116 Agency Expense Net Expense $216,314 1933 1934 1935 1936 19557 $ 15,628 57 23,077 22,091 34,269 17,143 3,068 36 3,822 11,154 35,411 30,461 7,423 29,636 41,669 47 7,546 397 337 142 $283,414 $ 14,698 40 20,270 27,625 30,643 17,813 2,891 5 2,358 8,493 35,280 29,814 7,812 28,415 36,495 40 6,555 1,518 324 64 $271,153 $ 15,611 33 26,327 3,079 30,932 16,975 2,450 561 $239,840 $ 14,967 16,347 22,645 15,441 33,637 16,505 2,500 296 7,367 9,717 17,279 34,335 7,885 2*,252 103,329 3 7,181 341 106 500 $334,633 15.606 $224,234 100.761 $233,872 26.092 $257,322 26.072 $245,081 19.691 $218,276 17,807 16,754 23,493 1,271 30,988 17,732 4,956 1,311 16,726 5,544 16,323 32,212 7,448 22,944 17,666 - 5,944 160 — — 2,592 6,034 32,985 30,023 8,854 25,956 29,825 6 5,029 892 306 58 $237,967 ^Represents t h e n e t expense - income from r e n t a l s having been deducted. 4 241. There were seven branches i n t h e System which operated a t a h i g h e r n e t qost than the Omaha Branch i n 1937 j namely, P i t t s b u r g h , Los Angeles, B a l t i m o r e , C i n c i n n a t i , D e t r o i t , B u f f a l o and S a l t Lake C i t y , (g) Volume o f Operations a t Omaha Branch; The f o l l o w i n g i s a comparison o f t h e volume o f o p e r a t i o n s i n v a r i o u s departments o f the Omaha Branch and t h e Head O f f i c e d u r i n g t h e l a s t s i x months o f 1936s Omaha Branch Discount Department: Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: Denver and E l Paso. 33 10 Head O f f i c e 35 2 13 Safekeeping: Member bank s e c u r i t i e s 12-31-36 $33,227,000 $284,078,000 Branches w i t h l a r g e r volume: P i t t s b u r g h , B a l t i m o r e and D e t r o i t . Currency and Coin: 1 . Number o f b i l l s r e c e i v e d and counted 5,127,000 20,168,000 Branches w i t h l a r g e r volume: A l l branches except L i t t l e Rock, Helena, Denver Oklahoma C i t y , E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 55 cents 54 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , Helena, Denver, E l Paso, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f coins r e c e i v e d and counted 4,623,000 17,754,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, Helena, Denver, E l Paso, P o r t l a n d , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 25 cents 11 cents Branches w i t h h i g h e r u n i t c o s t : Helena, E l Paso, San A n t o n i o , P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Check C o l l e c t i o n : 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 1,275,000 2,186,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t and Los Angeles. Cost per one thousand u n i t s handled $1.55 $1.86 Branches w i t h h i g h e r u n i t c o s t : A l l branches except B a l t i m o r e , C h a r l o t t e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans, D e t r o i t , and San A n t o n i o . Memphis Branch Head O f f i c e Check C o l l e c t i o n : 2. Number o f country checks (outgoing) received 4,503,000 10,425,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , Baltimore, D e t r o i t , Oklahoma C i t y and Los Angeles. Cost per one thousand u n i t s handled $1.73 $2.24 Branches w i t h higher u n i t cost: A l l branches except Birmingham, J a c k s o n v i l l e , L i t t l e Rock and Oklahoma C i t y . Non-cash C o l l e c t i o n s 1. Number o f c i t y c o l l e c t i o n s handled Branches w i t h l a r g e r volume: None. Cost per u n i t handled Branches w i t h higher u n i t cost: 43,555 4 cents 9,177 16.7 cents A l l branches.v 2. Number o f country c o l l e c t i o n s handled 21,255 Branches w i t h l a r g e r volume: B u f f a l o , S a l t Lake C i t y and Spokane. 64,935 Cost per u n i t handled 7 cents 7 . 4 cents Branches w i t h higher u n i t cost: A l l branches except L i t t l e Rock, Memphis, S a l t Lake C i t y and Spokane. 5. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 6,103 5,065 Branches w i t h l a r g e r volume: P i t t s b u r g h , B a l t i m o r e , D e t r o i t and Los Angeles. 7.7 cents 20 cents Cost per u n i t handled Branches w i t h higher u n i t c o s t : A l l branches except C i n c i n n a t i , P i t t s b u r g h , Denver and S e a t t l e . A schedule showing the volume o f operations o f the Omaha Branch f o r the years 1951 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f Omaha Branch by Board's Examiners - 1954 During an examination o f t h e Federal Reserve Bank o f Kansas C i t y , made as o f September 29, 1954, the Board's Examiners reviewed the operations o f the Omaha Branch and expressed the o p i n i o n t h a t i t s continuance was warranted. I n a r r i v i n g a t t h i s conclusion consideration was given t o the number and s i z e of member banks i n the C i t y o f Omaha, the number o f member banks i n o u t l y i n g sections o f the branch zone, and the m a i l f a c i l i t i e s a v a i l a b l e between banking p o i n t s i n the branch zone and the c i t i e s o f Omaha and Kansas C i t y . 243 ( i ) Survey o f Omaha Branch by Federal Reserve Bank o f Kansas C i t y ~ 1856 I n accordance w i t h the r e q u e s t made i n the Board's l e t t e r o f March 25, 1956 (X-9552), the Federal Reserve Bank o f Kansas C i t y surveyed the operations o f i t s branches* I t was estimated t h a t a saving o f 0550,050, based an o p e r a t i n g costs o f $679,090 f o r the year 1955, would be r e a l i z e d i f a l l t h r e e branches were d i s c o n t i n u e d . However, t h e i r discontinuance was n o t recommended, chiefly because o f the v a l u a b l e s e r v i c e s which they were performing f o r member banks and the f a c t t h a t over a p e r i o d o f years they had become i m p o r t a n t f a c t o r s i n the economic l i f e of the c i t i e s and t e r r i t o r i e s which they served. I t was s t a t e d t h a t any suggestion t h a t such branches were to be d i s c o n t i n u e d would be s t r o n g l y opposed by the p u b l i c as w e l l as by the member banks they serve. As an a l t e r n a t i v e , the o p i n i o n was expressed t h a t the Omaha and Denver branches should be converted i n t o l i u i t e d power branches and t h a t t h i s could be done w i t h o u t r e d u c i n g the value o f the services which were b e i n g rendered t o member banks i n such branch zones. I t was estimated, based on c o n d i t i o n s then e x i s t i n g , a saving o f approximately $21,000 would be r e a l i z e d through such conv e r s i o n and t h a t such a c t i o n would a l s o strengthen Head O f f i c e c o n t r o l over the branches. I n accordance w i t h the above o p i n i o n , P r e s i d e n t Hamilton o f the Kansas C i t y Reserve bank addressed a l e t t e r t o the Board on January 12, 1937, r e questing i t s approval o f the conversion o f the Omaha nnd Denver Branches i n t o l i m i t e d power branches t o be operated on the same basis as the Oklahoma C i t y Branch, On January 21, 1957, the Board wrote P r e s i d e n t Hamilton approving the proposed conversion and r e q u e s t i n g t o be advised as t o the date on which the change would be made e f f e c t i v e . P r e s i d e n t Hamilton r e p l i e d on February 4, 1957 t h a t h i s d i r e c t o r s had voted t o approve i n p r i n c i p l e the proposed converaion, 244, b u t had postponed s e t t i n g an e f f e c t i v e date f o r the conversion u n t i l r e p r e s e n t a t i v e s o f the branches had had an o p p o r t u n i t y t o study necessary changes. O p p o s i t i o n to the proposed conversion developed and on A p r i l 10, 1937, the Board o f Governors was advised t h a t the d i r e c t o r s o f the Federal Reserve Bank o f Kansas C i t y a t a r e g u l a r meeting on A p r i l 8 , 1937, had acted as follows: "President Hamilton r e p o r t e d on meetings h e l d a t Denver, Colorado, and Omaha, Nebraska, f o r the purpose o f d i s c u s s i n g w i t h banker groups the proposed conversion o f the Denver and Omaha Branches o f t h i s bank i n t o memorandum branches. He s t a t e d t h a t a f t e r a thorough d i s c u s s i o n o f the e f f e c t o f the proposed change upon the s e r v i c e rendered t o member banks i n the branch zones, the meetings had ended w i t h r e a f f i r m a t i o n o f the bankers present o f t h e i r o p p o s i t i o n t o the change. A g e n e r a l d i s c u s s i o n f o l l o w e d , a f t e r which the d i r e c t o r s voted unanimously, i n view o f the general p r o t e s t , t o d i s c o n t i n u e c o n s i d e r a t i o n o f conversion o f the Denver and Omaha Branches o f t h i s bank i n t o memorandum branches, and t o p e r m i t them t o remain i n t h e i r present s t a t u s . " The l e t t e r c o n t a i n i n g t h i s advice was acknowledged by the Board on A p r i l 20, 1957, and no f u r t h e r a c t i o n has been taken i n the m a t t e r . 245, OMAHA BRANCH VOLUME OF OPERATIONS M v l u r of Date Bi I Is Discounted Currency Coin Received Received and and Counted Counted P j . H a i l e d Non Cash Country Checks Coupons Other Gov't Gov't City Fiscal Agency Transactions Direct O^her Co 11ect i on i terns Checks Handled Total AH Transfer of Funds 193! 11,573 7,386,000 9,6*40,000 1,768,000 9,*45*4,000 *47*4,000 11,696,000 189,*455 55,52*4 1,59*4 8*4 23,77*4 1932 17,221 7,209,000 11,178,000 1,668,000 6,771,000 1481,000 8,920,000 16*4,995 69,739 l,*4 55 38 21,302 1933 if, 737 7,859,000 9,679,000 1,7*15,000 6,367,000 635,000 8,7*47,000 181,968 72,095 !,*439 385 22,913 193*4 161 9,211,000 8,501,000 2,077,000 7,3C9,000 1,663,000 11,05*4,000 267,2*40 83,560 5,2*41 1,036 f9,822 1935 330 9,505,000 9,500,000 2,2*43,000 8,075,000 1,295,000 H,613,GOO 279,000 86,000 9,255 2,*4R7 16,207 1936 92 9,780,000 9,375,000 2,729,000 8,692,000 1,009,000 I2,*430 , 000 2*40,000 131,000 1,9*49 1,081 1*4,000 Amounts Handled ( i n thousands of dollars) 1931 63,202 38,789 2,280 900,682 *»75,088 57,578 l,*433,3*48 2,203 62,990 *4,9*4l 1,7*40 ' ,02^,76*4 1932 60,516 36,013 2,095 620,677 329,7*49 55,897 1,006,323 2,223 5*4,218 6,116 1,085 679,958 1933 26,1*20 *43,623 3,30*4 653,868 3*41,579 98,969 J,09*4,*4l6 2,ty23 59,871 *4,785 1,002 635,190 193*4 3,368 *4o,372 2,118 975,319 507,201 178,735 1,661,255 3,197 96,*46*i *4,97*4 1,059 708,262 1935 1,752 *43,3S7 1,71*4 1,037,016 56*4,6*45 165,357 1,767,018 3,320 96,13*4 6,2*10 1,350 653,395 !936 766 *40,*43l 1,629 1,135,060 655,657 1*46,788 1,937,505 2,9o I 111,25** 2,387 1,019 771,975 EL PASO BRANCH - FEDERAL RESERVE BANK OF DALLAS (a) C i t y o f E l Paso: E l Paso, w i t h a p o p u l a t i o n o f 102,421, i s the f i f t h l a r g e s t c i t y i n the S t a t e o f Texas and the e i g h t y - s i x t h l a r g e s t c i t y i n the U n i t e d S t a t e s . It i s l o c a t e d i n the extreme Western p a r t o f the S t a t e on the Rio Grande R i v e r , and serves a trade area extending from 350 t o 400 m i l e s i n a l l Approximately 439,400 i n h a b i t a n t s r e s i d e i n t h i s a r e a . directions. I t i s adjacent to J u a r e z , Mexico, w i t h which i t i s connected by two i n t e r n a t i o n a l 'bridges} two c i t i e s being the l a r g e s t on the b o r d e r . the T r a n s p o r t a t i o n f a c i l i t i e s i n the community and i t s t r a d e area are p r o v i d e d by f i v e r a i l r o a d s , i n c l u d i n g the Texas & P a c i f i c , Southern P a c i f i c , A t c h i s o n , Topeka & Santa Fe and two Mexican roads. S e r v i c e i s a l s o p r o v i d e d by v a r i o u s coach and a i r p l a n e l i n e s . The E l Paso area i s l a r g e l y given over t o m i n i n g and c a t t l e raising, a l t h o u g h i n r e c e n t years i r r i g a t i o n p r o j e c t s have s t i m u l a t e d the development of a g r i c u l t u r e . The p r i n c i p a l i n d u s t r i e s o f the c i t y proper are copper r e f i n i n g , f l o u r m i l l i n g , meat packing, o i l r e f i n i n g , s m e l t i n g and the manuf a c t u r e o f b r i c k s , brooms, cement, petroleum products and wood p r o d u c t s . The B i e n n i a l Census o f Manufactures f o r the year 1935 l i s t s 126 manufacturing establishments o p e r a t i n g i n E l Paso County. a t $46,044,000 t h a t year. These f i r m s had an o u t p u t valued The Census o f American Business f o r the year 1935 i n d i c a t e s t h a t t h e r e were 1,516 r e t a i l and 193 wholesale establishments which had sales aggregating $33,905,000 and $41,943,000, r e s p e c t i v e l y , o p e r a t i n g i n the same area. Banking f a c i l i t i e s i n E l Paso are f u r n i s h e d by two n a t i o n a l banks. These i n s t i t u t i o n s had d e p o s i t s aggregating $31,002,000 as o f December 31, 1936. D e b i t s to i n d i v i d u a l accounts i n banks o f the c i t y amounted t o $294,228,000 d u r i n g the year 1936, or an average o f approximately $980,000 f o r each banking day. (b) Branch T e r r i t o r y and F u n c t i o n s : The E l Paso Branch was e s t a b l i s h e d on June 17, 1918, and serves f o u r t e e n counties i n the western p a r t o f Texas and a l l t h a t p a r t o f the S t a t e s o f i \ r i s o n a and New Mexico i n c l u d e d i n Federal Reserve D i s t r i c t Eleven. The branch zone represents approximately 52$ o f the l a n d area o f the E l e v e n t h D i s t r i c t and has about 756 o f i t s t o t a l p o p u l a t i o n . Only 4.2$ o f e l l banks i n the d i s t r i c t are l o c a t e d i n the branch zone* As o f December 31, 1936, t h e r e were 43 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 30, i n c l u d i n g 26 n a t i o n a l and 4 S t a t e i n s t i t u t i o n s , wore members o f the System. i n the zone were on the par l i s t . 12 o f t h e 13 nonmember banks The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared to those o f the Eleventh D i s t r i c t as a whole: Eleventh D i s t r i c t Branch Zone No. Member Banks _ Loans and Investment ~ 550 30 $826,850 41,379 Capital and Surplus (000 omitted) $127,747 4,496 Total Deposits $1,314,452 64,574 There i s o n l y one branch i n the System having smaller member bank f o o t i n g s than the E l Paso Branch, namely, Spokane. The E l Paso Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and d i s bursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrovdLngs are concerned. Reserve accounts o f member banks i n the zone, as w e l l as o f nonmember c l e a r i n g banks 248, and other Federal Reserve banks, are maintained a t the Branch, which a l s o maintains a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t the Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given be member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by the Branch, s u b j e c t t o f i n a l approval o f the Head O f f i c e . Schedules c o v e r i n g t r a n s a c t i o n s are forwarded t o the Head O f f i c e , b u t the notes and c o l l a t e r a l , i f any, are r e t a i n e d a t the Branch. The Branch does n o t have Bank Examination, Bank Relations^ F a i l e d Bank, L e g a l , Research or F i s c a l Agency departments. As o f February 6 , 19S7, member banks i n the branch zone had balances w i t h the Reserve Bank as f o l l o w s : Number o f Banks Arizona New Mexico Texas C i t y o f E l Paso Remainder o f Zone Reserve Balances Deferred Balances Capitol Stock Bills Discounted 3 19 854,700 2,871,500 $ #27,250* 42,600 $5,700 2 JS 30 3,609,300 485.000 $7,820.500 500 15,900 1,064,200 4,400 $1,085,000 48,000 17.150 $135,000 $5,700 * $15,500 c a p i t a l stock s u b s c r i p t i o n o f one Arizona bank which d i s c o n t i n u e d on February 11, 1935, b u t which has n o t y e t been voted i n t o v o l u n t a r y l i q u i d a t i o n i s n o t i n c l u d e d , although s t i l l o u t s t a n d i n g . E l Paso i s 647 t r a i n m i l e s (18 h r s . and 10 mins.) from D a l l a s and 620 t r a i n m i l e s (17 h r s . and 10 m i n s . ) from San Antonio. The c i t y i s n o t w i t h i n o v e r n i g h t m a i l time of e i t h e r the Head O f f i c e or the San Antonio Branch. There are 26 member bank p o i n t s i n the E l Paso Branch zone and o f t h i s number o n l y 4 , having 5 member banks, are w i t h i n o v e r n i g h t m a i l time o f the Head O f f i c e , whereas 25 p o i n t s , having 29 member banks, are w i t h i n o v e r n i g h t m a i l o f E l Paso. D i s continuance o f the E l Paso Branch would, t h e r e f o r e , inconvenience the two r e l a t i v e l y l a r g e member banks i n E l Paso, as w e l l as the m a j o r i t y o f member 249, banks s i t u a t e d i n o u t l y i n g p o i n t s o f the zone. Other than E l Paso, the more populous c i t i e s i n the branch zone are Tucson, A r i z o n a , 52,506; Roswell, New Mexico, 11,173j C l o v i s , New Mexico, 8,027 and Midland, Texas, 5,484. (c) Branch B u i l d i n g : The E l Paso Branch has occupied i t s present q u a r t e r s a t 351 M y r t l e Avenue since August, 1920. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book value as o f February 6 , 1937, o f the branch premises: Cost Land Building V a u l t & v a u l t equipment $ 39,004 78,035) 53>533) $150,372 10,824 $161,196 Fixed machinery & equipment Book Value 2-6-57 $25,004 51,585 $76,589 250 $76,859 (d) Earnings - Branch Books: The Branch 1 s earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1933 1934 1935 1936 $30,800 43,100 13,000 1,000 1,000 1,700 1937 1,000 These f i g u r e s are incomplete s i n c e , under the present accounting procedure, the Branch r e c e i v e s no c r e d i t f o r income r e c e i v e d by the Head O f f i c e on i n v e s t ments, a p o r t i o n o f which i s made p o s s i b l e by the Reserve bank stock investment and r e s e r v e balances o f member banks i n the Branch zone. Income shown on the Branches books i s d e r i v e d c h i e f l y from r e d i s c o u n t s o f member banks, reserve p e n a l t i e s , r e n t a l o f banking house space and i n d u s t r i a l loans* Income from r e d i s c o u n t s has s t e a d i l y d e c l i n e d i n r e c e n t years, amounting t o approximately $400 i n 1937 as compared t o 042,100 i n 1982. (e) Branch Personnel: The r e p o r t of examination o f the F e d e r a l Reserve Bank o f D a l l a s , made as o f February 6 , 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s end personnel a t the E l Paso Branch: February 6 , 1957 Number Amount Officers Employees 2 30 32 #8,900 46,600 §55,500 March 8 , 1956 Number Amount 2 31 53 $ 8,900 48,900 £57,800 Decrease Number Amount 1 1 S2.500 &2,50Q O f f i c e r s and employees who g i v e the major p o r t i o n o f t h e i r time t o r e imbursable work are n o t i n c l u d e d i n the above comparison. N e i t h e r does i t i n c l u d e .amounts p a i d f o r such reimbursable work, ( f ) Branch Expense by F u n c t i o n s : The expenses o f the E l Paso Branch by f u n c t i o n s f o r the years 1952 t o 1957, i n c l u s i v e , were as f o l l o w s : 251, 1932 General Overhead Controllable $ 10,425 Non-Controllable 4,070 * P r o v i s i o n o f Space 6,260 P r o v i s i o n o f Personnel 1,010 General S e r v i c e 16,535 Postage 4,116 Insurance 2,504 F a i l e d Banks 40 Loans,Rediscounts, e t c . 5,507 Securities 924 Currency & Coin 9,292 Check C o l l e c t i o n 13,116 Non-cash C o l l e c t i o n 2,119 Accounting 18,188 F i s c a l Agency 4,114 Legal Auditing 3,732 Bank R e l a t i o n s 173 F.R. Note Issues Statistical & Analytical 278 T o t a l Expense §102,403 Less «• Reicbursable F i s c a l Agency Exp. 3,317 Net Expense £ 99.086 1933 1934 $ 9,735 5,016 6,041 1,198 18,377 4,543 2,571 11 4,187 877 8,697 13,035 1,944 12,729 4,403 4 3,784 107 48 145 $97,452 0 8,603 4,972 5,687 6,449 19,737 4,624 1,912 4.082 &93.570 1935 $ 6,622 1936 0 7,473 — — 5,276 10,962 16,384 5,380 1,418 — 1,C94 1,070 8,205 12,482 2,244 11,214 6,715 $ 6,760 - 5,150 8,802 19,335 4,722 1,624 1937 8,062 945 16,921 5,798 1,431 — — 3,760 273 20 168 $99,229 1,251 1,193 12,941 10,565 2,405 11,884 14,608 5 4,336 104 224 167 $105,938 4,122 112 207 156 ^107,470 997 595 13,877 13,128 2,472 10,276 15,076 5 4,038 427 188 75 $101,784 6.183 S93.046 7.284 5 98.654 13.418 £ 94.052 11.088 8 90.696 - 947 634 13,506 10,979 2,399 10,346 17,882 - * Represents the n e t expense - income from r e n t a l s having been deducted. There were only two branches i n the System which operated a t a lower n e t cost than the E l Paso Branch i n 1957; namely, Spokane and N a s h v i l l e , (g) Volume o f Operations a t E l Paso Branch: The f o l l o w i n g i s a comparison o f the volume o f operations i n v a r i o u s departments o f the E l Paso Branch and the Head O f f i c e d u r i n g the l a s t s i x months o f 1956: E l Paso Branch Discount Department Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: 71 None. Head O f f i c e 524 35 E l Paso Branch Head O f f i c e Safekeeping Member bank s e c u r i t i e s 12-31-36 $1,636,000 $73,714,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Memphis, P o r t l a n d , S e a t t l e , Helena, Los Angeles and Spokane. Currency and Coin 1 . Number o f b i l l s received Branches w i t h l a r g e r volume: 2,023,000 19,826,000 A l l branches except Helena and Spokane Cost per one thousand u n i t s handled 92 cents 45 cents Branches w i t h higher u n i t c o s t : Helena, S a l t Lake C i t y and Spokane. 789,000 17,795,000 2m Number of coins received and counted Branches w i t h l a r g e r volume: A l l branches except Helena and Spokane. Cost per one thousand u n i t s handled Branches w i t h higher u n i t c o s t : Spokane. 01.28 Check C o l l e c t i o n 1. Number of c i t y checks ( c l e a r i n g s ) received 235,000 Branches w i t h l a r g e r volume: A l l branches except Helena. .13 1,322,000 Cost per one thousand u n i t s handled 01.98 $1.57 Branches w i t h h i g h e r o m i t c o s t : L o u i s v i l l e , Helena, Denver, Oklahoma C i t y , Houston, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number of country checks (outgoing) received 1,342,000 Branches w i t h l a r g e r volume: A l l branches except Memphis. 10,343,000 Cost per one thounsand u n i t s handled §2.28 $2.31 Branches w i t h higher u n i t c o s t : B u f f a l o , C i n c i n n a t i , D e t r o i t , Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 4,689 14,769 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham and Helena. Cost per u n i t handled 8 . 1 cents 13.5 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except J a c k s o n v i l l e , L i t t l e Hock, and Omaha. 2. Number o f country c o l l e c t i o n s handled 4,396 Branches w i t h l a r g e r volume: A l l branches except Birmingham, Cost per u n i t handled Branches w i t h higher u n i t c o s t : 39,412 8 cents 8.9 cents A l l except L i t t l e Rock, Memphis, Omaha, S a l t Lake C i t y , and Spokane. Portland Branch Non-cash C o l l e c t i o n s 3. Number of coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled Branches w i t h l a r g e r volume: A l l branches. Cost per u n i t handled Branches w i t h higher u n i t c o s t : Head O f f i c e 214 55.3 cents 4,440 25 cents None. A schedule showing the volume of operations o f the E l Paso Branch f o r the years 1931 to 1936, i n c l u s i v e , i s attached to t h i s memorandum. (h) Survey o f E l Paso Branch by Board* s Examiners - 1934: The Board's Examiners reviewed the operations o f the E l Paso Branch, as o f June 23, 1934, and concluded t h a t the o n l y j u s t i f i c a t i o n f o r i t s continuance was i t s distance from the Head O f f i c e . I n reaching t h i s conclusion considera- t i o n was given t o the volume and c o s t o f operations a t the Branch, the number and importance o f member banks i n the branch c i t y and zone, and the m a i l f a c i l i t i e s a v a i l a b l e between p o i n t s i n the branch zone and the Head O f f i c e a t Dallas. ( i ) Survey o f E l Paso Branch by Federal Reserve Bank o f D a l l a s - 1936 As requested by the Board i n i t s l e t t e r of March 25, 1956 (X-9552) the i n t e r n a l operations o f the E l Paso Branch were surveyed by the Federal Reserve Bank o f D a l l a s . T h e r e a f t e r , a r e p o r t c o n t a i n i n g t h e f o l l o w i n g conclusions r e l a t i v e t o discontinuance of the Branch, c u r t a i l m e n t of i t s f u n c t i o n s , or the p o s s i b i l i t y o f otherwise e f f e c t i n g economies i n i t s operations was submitted t o the Board: 1 . That, based on o p e r a t i n g expenses o f f98,500 f o r the year 1955, an estimated saving o f 071,500 would be r e a l i z e d i f the Branch were discontinued. 2. That o p e r a t i n g expenses were very heavy considering the l i m i t e d number o f banks served by the Branch, b u t t h a t i t was questionable whether the mere number o f banks p r o p e r l y r e f l e c t e d the need, a c t u a l and p o t e n t i a l , 254 f o r branch f a c i l i t i e s ; i t being necessary t o consider a l s o the g r e a t d i s t a n c e between the branch t e r r i t o r y and the Head O f f i c e , the importance o f the C i t y o f E l Paso from the standpoints o f domestic and i n t e r n a t i o n a l t r a d e , the apparent prospects f o r development o f the t e r r i t o r y along such l i n e s i n f u t u r e years and the f a c t t h a t banking, i n d u s t r y and p r o d u c t i o n i n the branch zone wore e n t i t l e d t o enjoy the b e n e f i t s o f the System on a basis comparable w i t h other r e g i o n s of the c o u n t r y , which would n o t be p o s s i b l e i f the Branch were d i s c o n t i n u e d . 5. That w h i l e some o f the f u n c t i o n s performed by the Branch could be t r a n s f e r r e d t o the Head O f f i c e the saving would n o t be l a r g e i n the aggregate and i n t h e i r o p i n i o n would be i n s u f f i c i e n t to induce them to e f f e c t the t r a n s f e r . 4. That c o n s i d e r a t i o n had from time to time been given t o reducing the Branch t o a currency depot or agency, but t h a t such a c t i o n , unless i n pursuance o f a w e l l d e f i n e d p o l i c y a p p l i c a b l e t o the whole c o u n t r y , would r e s u l t i n much d i s s a t i s f a c t i o n , accompanied by g r e a t p r e s s u r e , both c i v i c and o t h e r w i s e , and would a l s o q u i t e p o s s i b l y l e a d t o a p p l i c a t i o n s f o r the c r e a t i o n o f s i m i l a r depots i n other towns o f t h e d i s t r i c t l i k e A m a r i l l o and Shreveport, and 5. That, i n view o f economies a l r e a d y e f f e c t e d over a p e r i o d o f years, i t appeared improbable t h a t t h e personnel o f the Branch could be reduced or apenses otherwise lowered w i t h o u t i m p a i r i n g the e f f i c i e n c y o f i t s o p e r a t i o n s * I n s u b m i t t i n g t h i s r e p o r t the O f f i c e r s and D i r e c t o r s o f the D a l l a s bank s t a t e d t h a t they d i d n o t wish i t t o be considered as a recommendation i n r e s p e c t t o the E l Paso Branch, since they were merely endeavoring t o o u t l i n e the f a c t s to. the Board o f Governors, and t h a t , i f the Board d e s i r e d t o give s p e c i a l c o n s i d e r a t i o n to such Branch, they would be pleased t o make a more thorough i n v e s t i g a t i o n and, i f i t were the Board's w i s h , submit d e f i n i t e sugg e s t i o n s i n respect t h e r e t o . I t was p o i n t e d o u t t h a t Congress i n the Federal Reserve Act had taken cognizance o f the f a c t t h a t w i t h o n l y twelve Federal Reserve banks many o u t l y i n g member banks and t h e i r communities would s u f f e r disadvantages and i n convenience as compared to those nearer the Head O f f i c e , and had a u t h o r i z e d the 255, establishment o f branches i n order t o equalise the b e n e f i t s and f a c i l i t i e s o f the System. I t was s t a t e d f u r t h e r t h a t Congress, w h i l e a p p a r e n t l y aware o f the expense which the establishment o f branches would e n t a i l d i d n o t under the Federal Reserve Act seem to contemplate d i f f e r e n t types o f branches, "memorandum p l a n " branches or " f u l l - f l e d g e d " branches. i.e., The o p i n i o n was expressed t h a t each branch should render t o member banks i n i t s t e r r i t o r y , so f a r ris p r a c t i c a b l e , a l l the services i n c i d e n t to membership, s u b j e c t o n l y t o the general c o n t r o l o f and s u p e r v i s i o n by the Head O f f i c e , and t o the o p e r a t i n g p o l i c i e s e s t a b l i s h e d by i t . I t was i n d i c a t e d t h a t the t r a n s f e r o f f u n c t i o n s o f a branch t o the Head O f f i c e would tend t o show a l a c k o f need f o r the branch and t h a t , as a consequence, the r e a l q u e s t i o n seemed t o be whether any branch nor i n o p e r a t i o n should be d i s c o n t i n u e d , r a t h e r than whether i t s f u n c t i o n s should be c u r t a i l e d . I n c o n c l u s i o n , i t was s t a t e d t h a t the q u e s t i o n o f branches was one o f general p o l i c y f o r d e t e r m i n a t i o n o f the Board and t h a t the Board alone, a c t i n g f o r the System as a whole, could provide a " y a r d s t i c k " by which the need f o r continuance o f any s p e c i f i c branch could be determined. I n c l u d e d i n the r e p o r t submitted by the D a l l a s Bank was a memorandum prepared by the Managing D i r e c t o r o f the E l Paso Branch s e t t i n g f o r t h the reasons which he f e l t warranted i t s maintenance. Among such reasons, and n o t p r e v i o u s l y mentioned i n t h i s memorandum, was the v e r y v a l u a b l e s e r v i c e s which the branch i s performing f o r t h e R e c o n s t r u c t i o n Finance C o r p o r a t i o n and o t h e r Government agencies. EL PASO BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Bills Currency Co i n Received Received and and Non Cash Checks Handled Collection Items Gov't Gov't Al I Coupons Other pate Pi scounted Counted Counted City Country Checks Total 1931 1,7*45 4,289,0t0 3,025,000 495,000 1,997,000 206,000 2,698,000 19,365 1932 2,132 3,446,000 2,6*40,000 418,000 1,673,000 21*4,000 2,305,000 1933 096 3,200,000 2,382,000 362,000 1,5*42,000 326,000 193*4 5 3,5*47,000 1,556,000 308,000 1,786,000 1935 8*4 3,213,003 1,512,000 *4I8,OGO J 936 99 3,801,000 1,760,000 *467,000 Fiscal Agency Transactions Transfer of Direct Other Fupds 13,597 - - 8,200 21,276 l*4,*473 - ~ 6,986 2,230,000 23,917 16,9*46 - - 5,711 616,000 2,790,000 30,379 1*4,270 - ~ 4,874 2,133,000 376,000 2,927,000 33,000 13,000 - - *4,259 2,603,000 *42l ,000 3,491,000 24,000 18,000 - - 4,000 Amounts Handled ( i n thousands of d o l l a r s ) 1931 15,757 23,396 983 273,73*4 141,609 25,573 440,916 296 8,630 - - 282,959 1932 10,59*4 16,685 2,879 15*4,731 95,343 20,622 270,696 319 7,999 - - 102,238 1933 *4,276 15,352 1,030 IO*4,*4*42 93,419 26,491 224,352 3io 10,425 - - 130,220 193*4 88 !3,*439 327 1*45,171 120,679 46,686 312,536 366 10,219 - - 31,362 1935 39 13,476 317 16*4,6*43 152,007 36,371 353,021 317 12,298 - - 98,323 191,868 53,683 445,553 272 14,134 - - 110,452 J 936 65 15,582 356 200,002 HOUSTON BRANCH - FEDERAL RESERVE BANK OF DALLAS ( a ) C i t y o f Houston: Houston, w i t h a p o p u l a t i o n o f 292,352, i s t h e t w e n t y - s i x t h l a r g e s t c i t y i n t h e U n i t e d States and t h e l a r g e s t c i t y i n Texas. I t i s l o c a t e d i n the southeastern p a r t o f the S t a t e and i s s a i d t o serve a t r a d e area which extends 50 m i l e s t o the south and 100 m i l e s i n a l l o t h e r d i r e c t i o n s i n which a p p r o x i mately 1,000,000 people r e s i d e . The c i t y has an o u t l e t t o t h e G u l f o f Mexico through t h e Houston Ship Channel and numerous steamship l i n e s connect i t o t h e r G u l f and ocean p o r t s . with T r a i n f a c i l i t i e s are provided by t h e Southern P a c i f i c , M i s s o u r i P a c i f i c , Santa Fe, Burlington-Rock I s l a n d , M. K. & T. and t h e Galveston-Houston & Henderson r a i l w a y s . The c i t y i s a l s o served by v a r i o u s bus and a i r l i n e s • The p r i n c i p a l i n d u s t r i e s o f t h e community are petroleum r e f i n i n g , milling, vegetable o i l r e f i n i n g , and t h e manufacture o f cottonseed p r o d u c t s , o i l w e l l machinery, car wheels and o t h e r i r o n and brass p r o d u c t s . p o r t a n t j o b b i n g and s h i p p i n g c e n t e r . I t i s a l s o an im- The B i e n n i a l Census o f Manufactures f o r 1935 l i s t s 470 p l a n t s o p e r a t i n g i n H a r r i s County, i n which Houston i s l o c a t e d , and shows t h a t such f i r m s had an output valued a t $222,774,000 d u r i n g t h a t year. According t o t h e Census o f American Business t h e r e were 4,589 r e t a i l and 600 wholesale establishments i n the same area i n 1935, which enjoyed sales aggregating $124,662,000 and $333,438,000, r e s p e c t i v e l y , d u r i n g t h e y e a r . Banking f a c i l i t i e s i n Houston are f u r n i s h e d by t e n n a t i o n a l banks and f o u r S t a t e nonmember banks. These i n s t i t u t i o n s had d e p o s i t s aggregating $248,503,000, as o f December 31, 1936, and o f t h i s amount $231,534,000 was c a r r i e d by t h e t e n l o c a l member banks; t h e s m a l l e s t o f which i s l o c a t e d i n an o u t l y i n g d i s t r i c t and p e r m i t t e d t o c a r i y c o u n t i y bank reserves. 258, Debits t o i n d i v i d u a l accounts i n banks o f the c i t y amounted to a p p r o x i mately $2,222,896,000 d u r i n g 1936; o r an average o f about $7,400,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions: The Houston Branch was e s t a b l i s h e d August 4, 1919 and serves f o r t y one counties i n t h e southeastern p a r t o f Texas. The branch zone represents about 9% o f t h e l a n d area o f t h e Eleventh D i s t r i c t and has approximately 20$ of i t s t o t a l population. Approximately 19% o f a l l banks i n the d i s t r i c t are w i t h i n the t e r r i t o r y a l l o t t e d t o t h e Branch. As o f December 31, 1936, t h e r e were 192 banks, e x c l u s i v e o f mutual savi n g s banks, i n the branch zone and o f t h i s number 85, i n c l u d i n g 72 n a t i o n a l and 13 State i n s t i t u t i o n s , were members o f the System. nonmember banks i n the zone were on the par l i s t . Only 66 o f the 107 The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show t h e s i z e o f member bank f o o t i n g s i n the branch zone as compared t o those o f the Eleventh D i s t r i c t as a whole: No. Member Banks Eleventh D i s t r i c t Branch Zone 550 85 Loans and Investments $826,850 223,538 Capital and Surplus (000 o m i t t e d ) $127,747 35,638 Total Deposits $1,314,452 355,356 There are only nine branch zones i n the System having l a r g e r member bank f o o t i n g s than the Houston Branch, namely, P i t t s b u r g h , Los Angeles, Detroit, C i n c i n n a t i , B u f f a l o , B a l t i m o r e , New Orleans, S e a t t l e and Oklahoma C i t y . The Houston Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f member banks i n t h e zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t t h e Branch, which a l s o maintains a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s g i v e n t o member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by the Branch, s u b j e c t t o f i n a l approval o f t h e Head O f f i c e . Schedules c o v e r i n g t r a n s - a c t i o n s are forwarded t o t h e Head O f f i c e , b u t t h e notes and c o l l a t e r a l , apy, are r e t a i n e d a t the Branch. if The Branch does n o t have Bank Examination, Bank R e l a t i o n s , F a i l e d Bank, L e g a l , Research o r F i s c a l Agenqy departments. As o f February 6, 1957, member banks i n t h e branch zone had balance® w i t h the Reserve bank as f o l l o w s ; Number o f Banks Houston Remainder o f Zone 10 76 86 Reserve Balances Deferred Balances $28,596,900 21.605.500 $50.000.200 $2,215,000 645.800 $2.856.800 Capital Stock Bills Discounted $ 679,500 595.800 $1.075,100 Houston i s 264 t r a i n m i l e s (8 h r s . and 50 mins.) from D a l l a s . On any business day t h e r e are t r a i n s l e a v i n g b o t h p o i n t s a f t e r 8 P.M. which a r r i v e a t the o t h e r p r i o r t o 8 A.M. on t h e f o l l o w i n g day, i . e . , o v e r n i g h t m a i l . There are 56 o u t l y i n g c i t i e s i n the branch zone i n which one o r more member banks are l o c a t e d . An examination o f m a i l schedules i n d i c a t e s t h a t 17 o f these c i t i e s are n o t w i t h i n o v e r n i g h t m a i l time o f t h e Head O f f i c e , whereas a l l b u t 5 are w i t h i n o v e r n i g h t m a i l o f Houston. I t appears, t h e r e f o r e , t h a t a t l e a s t 12 p o i n t s i n the branch zone can be served more e x p e d i t i o u s l y by the Branch than by t h e Head O f f i c e . Banks l o c a t e d a t these p o i n t s and the t e n member 260, banks i n Houston, which now have an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch, would s u f f e r t h e g r e a t e s t inconvenience i f the Branch were d i s c o n tinued. Other than Houston, the more populous c i t i e s i n t h e branch zone are Beaumont, 57,752; Galveston, 52,958 and P o r t A r t h u r , 50,902. (c) Branch B u i l d i n g : The Houston Branch has occupied i t s present q u a r t e r s a t Texas Avenue and C a r o l i n e S t r e e t since February, 1922. The f o l l o w i n g f i g u r e s show t h e o r i g i n a l c o s t and book v a l u e , as o f February 6 , 1957, o f t h e Branch premises: Cost Land Building V a u l t and v a u l t equipment Fixed machineiy and equipment $ 66,512 255,058) 54.958) $554,508 60.001 &414.509 Book Value 2-6-57 $ 66,512 145.562 $211,874 $211.874 (d) Earnings - Branph Books: The Branch 1 s earnings as r e f l e c t e d by i t s books f o r the y e a r s 1951 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1952 1933 1934 1935 1936 $14,300 20,600 7,000 2,400 7,800 11,500 1937 5,600 These f i g u r e s are incomplete s i n c e , under t h e present accounting procedure, the Branch receives no c r e d i t f o r income r e c e i v e d by the Head O f f i c e on i n vestments, a p o r t i o n o f which i s made p o s s i b l e by t h e Reserve bank stock 261, investment and reserve balances o f member banks i n t h e branch zone. Income shown on t h e Branch's books i s d e r i v e d c h i e f l y from r e d i s c o u n t s o f member banks, reserve p e n a l t i e s , r e n t a l o f banking house space and i n d u s t r i a l advances and commitments. Income from the f i r s t mentioned source has s t e a d i l y d e c l i n e d , amounting t o o n l y $500 i n 1937 as compared t o $19,900 i n 1932. (e) Branch Personnel: The r e p o r t o f examination o f t h e Federal Reserve Bank o f D a l l a s , made as o f February 6, 1937, shows t h e f o l l o w i n g i n regard t o s a l a r i e s and p e r sonnel a t t h e Houston Branch: m February 6 , 1937 Number Amount Officers Employees 2 46 H $ 9,500 69,800 $79.300 March 18, 1936 Number Amount 2 46 H $10,500 70,900 $81.400 Decrease Number Amount - $1,000 1,100 $2.100 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are not i n c l u d e d i n the above f i g u r e s . ( f ) Branch Expense by F u n c t i o n s : The expenses o f t h e Houston Branch by f u n c t i o n s f o r the y e a r s 1932 t o 1937, i n c l u s i v e , were as f o l l o w s : 262, 1932 General Overhead Controllable $ 10,626 Noncontrollable 7,841 15,705 ^ P r o v i s i o n o f Space P r o v i s i o n o f Personnel 2,457 General Service 18,325 Postage 8,249 3,121 Insurance F a i l e d Banks Loans, Rediscounts, e t c . 3,956 Securities 1,712 Currency & Coin 11,096 Check C o l l e c t i o n 22,707 Non-Cash C o l l e c t i o n 5,172 17,762 Accounting 5,788 F i s c a l Agency _ Bank R e l a t i o n s Legal 3,858 Auditing S t a t i s t i c a l & A n a l y t i c a l 1,045 — F. R. Note Issue T o t a l Expense 0139,420 Less-Reimbursable F i s c a l Agency Exp. 5.369 Net Expense &L34.051 1933 1934 1935 0 10,541 & 10,354 10,959 10,918 14,398 13,043 924 7,264 20,108 a , 743 9,323 9,500 2,994 2,277 — 2,786 1,731 10,545 21,867 6,033 16,134 11,988 — 7,781 0 $ 10,339 20 29,058 1,078 21,007 10,912 1,862 1 1,552 1,380 24,863 20,733 5,400 16,574 36,262 231 9,495 11 9,382 14,815 18,946 10,450 1,978 - 9,478 12,270 22,648 10,442 2,147 - — 2,721 1,870 10,177 21,408 6,510 17,245 29,807 — $ 1937 1936 7,291 1,899 20,501 19,930 6,310 16,619 40,955 3,746 1,341 22,763 19,451 5,588 15,896 37,625 — — 4,137 1,185 16 3,674 765 3,969 466 0145,612 $169,333 0182,706 §176,065 4,390 304 64 0186,031 11.875 0133.737 29.586 §139.747 3}.tQ57 $151.649 55,§71 5142.394 31.705 £154.326 - (13) 4,220 371 - — — - * Represents the n e t expense - income from r e n t a l s having been deducted. There were f i f t e e n branches i n t h e £3ystem which operated a t a h i g h e r n e t cost than the Houston Branch i n 193?5 namely, P i t t s b u r g h , Los Angeles, B a l t i m o r e , C i n c i n n a t i , D e t r o i t , B u f f a l o , S a l t Lake C i t y , Omaha, S e a t t l e , Denver, Oklahoma C i t y , L o u i s v i l l e , P o r t l a n d , New Orleans and C h a r l o t t e . (g) Volume o f Operations a t Houston Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s o f the v a r i o u s departments o f t h e Houston Branch and the Head O f f i c e d u r i n g t h e l a s t six months o f 1936: Houston Branch Discount Department: Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: Head O f f i c e 4 524 35 B u f f a l o , B a l t i m o r e , New Orleans, Memphis, Denver, Omaha, E l Paso, San Antonio and S a l t Lake C i t y . 263, Seattle Branch Head O f f i c e Member bank s e c u r i t i e s 12-31-36 $10,908,000 $73,714,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , Jacksonv i l l e , D e t r o i t , L i t t l e Rock, Denver, Oklahoma C i t y and Omaha. Currency & Coin: 1 . Number o f b i l l s received and counted 6,020,000 19,826,000 Bx*anches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, C h a r l o t t e , J a c k s o n v i l l e , N a s h v i l l e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Los Angeles and S e a t t l e . Cost per one thousand u n i t s handled 48 cents 45 cents Buffalo, Cincinnati, Pittsburgh, Baltimore, Branches w i t h higher u n i t c o s t : D e t r o i t , Helena, Denver, Oklahoma C i t y , Omaha, EL Paso, San Antonio, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f coins received and counted 8,569,000 17,795,000 Branches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, New Orleans and Los Angeles. Cost per one thousand u n i t s handled 15 cents 13 cents Branches w i t h higher u n i t c o s t : Cincinnati, Pittsburgh, Charlotte, Birmingham, N a s h v i l l e , D e t r o i t , L i t t l e Rock, Helena, Denver, Omaha, E l Paso, San Antonio, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e -and Spokane. Check C o l l e c t i o n : 1. Number o f c i t y checks ( c l e a r i n g s ) received 874,000 1,322,000 Branches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, D e t r o i t , L o u i s v i l l e , Denver, Omaha and Los Angeles. Cost per one thousand u n i t s handled $2.05 $1.57 L o u i s v i l l e , Helena, Denver, Oklahoma C i t y , Branches w i t h higher u n i t c o s t : Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f country chocks (outgoing) received 2,821,000 10,343,000 Branches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, C h a r l o t t e , D e t r o i t , L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha, Los Angeles and S a l t Lake C i t y . Cost per one thousand u n i t s handled $1.86 $2.31 Branches w i t h higher u n i t c o s t : A l l branches except Birmingham, Jacksonv i l l e , L i t t l e Rock, L o u i s v i l l e , Denver, Oklahoma C i t y and Omaha. 264 Seattle Branch Head O f f i c e Non-cash Collectionss 1 . Number o f c i t y c o l l e c t i o n s handled 16,967 14,769 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , D e t r o i t , L i t t l e Rock, Memphis, Omaha and Los Angeles. Cost per u n i t handled 8.7 cents 13.5 cents Branches w i t h higher u n i t c o s t : A l l branches except J a c k s o n v i l l e , L i t t l e Rock, Omaha and EL Paso. 2. Number o f country c o l l e c t i o n s handled 7,761 39,412 Branches w i t h l a r g e r volume: A l l branches except Birmingham, N a s h v i l l e , Helena and E l Paso. Cost per u n i t handled 9 cents 8.9 cents Branches w i t h higher u n i t c o s t : B u f f a l o , B a l t i m o r e , Birmingham, Jacksonv i l l e , N a s h v i l l e , New Orleans, D e t r o i t , Helena, Denver, San Antonio, Los Angeles, P o r t l a n d and S e a t t l e . 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 2,311 4,448 Branches w i t h l a r g e r volume: Buffalo, Cincinnati, Pittsburgh, Baltimore, New Orleans, D e t r o i t , L i t t l e Rock, L o u i s v i l l e , Denvwr, Omaha, San Antonio and Los Angeles. Cost per u n i t handled 10.8 cents 25 cents Branches w i t h higher u n i t c o s t : A l l branches except C i n c i n n a t i , P i t t s burgh, B a l t i m o r e , Birmingham, New Orleans, L i t t l e Rock, Denver, Omaha and S e a t t l e . A schedule showing the volume o f operations o f the Houston Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum, (h) Survey o f Houston Branch by B o a r d s Examiners - 1934 During an examination o f t h e Federal Reserve 3ank of D a l l a s , made as o f June 23, 1934, the Board's Examiners reviewed the operations o f the Houston Branch and expressed the o p i n i o n t h a t i t s continuance appeared t o be warranted o n l y i n view o f i t s long establishment and the importance o f the C i t y o f Houston as a business center and p o r t . I n reaching t h i s conclusion considera- t i o n was given t o the volume and cost o f operations a t the Branch, the number o f member banks i n the branch c i t y and zone, and the m a i l f a c i l i t i e s available between p o i n t s i n the branch zone and the Head O f f i c e a t D a l l a s . 265 ( i ) Survey o f Houston Branch by Federal Reserve Bank o f D a l l a s - 1956 I n accordance w i t h the request made by the Board i n i t s l e t t e r o f March 25, 1956, (X-9532) the Federal Reserve Bank o f D a l l a s reviewed t h e i n t e r n a l operat i o n s o f t h e Houston Branch and advised t h a t t h e f o l l o w i n g conclusions had been reached i n regard t h e r e t o : 1. i n view o f economies already e f f e c t e d over a p e r i o d o f y e a r s , i t appeared improbable t h a t t h e personnel o f t h e Branch could be reduced o r expenses otherwise lowered w i t h o u t i m p a i r i n g the e f f i c i e n c y o f i t s operations. That, 2. That w h i l e some o f t h e f u n c t i o n s performed by the Branch c o u l d be t r a n s f e r r e d t o the Head O f f i c e t h e saving would n o t be l a r g e i n t h e aggregate and i n t h e i r o p i n i o n would be i n s u f f i c i e n t to induce them t o e f f e c t t h e t r a n s f e r , and 5. That, i n the absence o f a general p o l i c y adopted by the Board which would e l i m i n a t e a l l o r a subs t a n t i a l p o r t i o n o f a l l e x i s t i n g branches, they b e l i e v e d maintenance o f t h e Houston Branch was warranted. I t was p o i n t e d out t h a t Congress i n the Federal Reserve Act had taken cognizance o f t h e f a c t t h a t w i t h only twelve Reserve banks many o u t l y i n g member banks and t h e i r communities would s u f f e r disadvantage and inconvenience as compared t o those nearer the Head O f f i c e , and had a u t h o r i z e d the establishment o f branches i n o r d e r t o equalize t h e b e n e f i t s and f a c i l i t i e s o f t h e System. It was s t a t e d f u r t h e r t h a t Congress, w h i l e a p p a r e n t l y aware o f t h e expense which t h e establishment o f branches would e n t a i l , d i d n o t under the Federal Reserve Act seem t o contemplate d i f f e r e n t types o f branches, i . e . , "memorandum plan 11 o r " f u l l - f l e d g e d " branches. The o p i n i o n was expressed t h a t each branch should render t o member banks i n i t s t e r r i t o r y , so f a r as p r a c t i c a b l e * a l l t h e services i n c i d e n t t o membership, s u b j e c t only t o the general c o n t r o l o f and s u p e r v i s i o n by t h e Head O f f i c e , and t o t h e o p e r a t i n g p o l i c i e s e s t a b l i s h e d by i t . I t was 271, i n d i c a t e d t h a t t h e t r a n s f e r o f f u n c t i o n s o f a branch t o t h e Head O f f i c e would tend t o show a l a c k o f need f o r the branch and t h a t , as a consequence, the real, q u e s t i o n seemed t o be whether any branch now i n o p e r a t i o n should be d i s c o n t i n u e d , r a t h e r than whether i t s f u n c t i o n s should be l i m i t e d . I n t h i s connection, i t was admitted t h a t s t r i c t l y speaking t h e r e e x i s t s no n e c e s s i t y f o r the continuance o f any branch, since t h e member banks i n v o l v e d , even though they might f e e l g r e a t l y inconvenienced and i n some cases d i s c r i m i n a t e d a g a i n s t , would nevertheless a d j u s t themselves t o t h e change. I n c o n c l u s i o n , i t was s t a t e d t h a t t h e q u e s t i o n o f branches was one o f general p o l i c y f o r d e t e r m i n a t i o n o f the Board and t h a t t h e Board alone, a c t i n g f o r t h e System as a whole, could p r o v i d e a " y a r d s t i c k " by which t h e need f o r continuance o f any s p e c i f i c branch c o u l d be determined. In t h e absence o f such a y a r d s t i c k f a c t s r e l a t i n g t o banking, business and m a i l schedules i n the Houston zone, s i m i l a r t o those i n c l u d e d i n t h i s memorandum, were submitted t o support t h e i r c o n t e n t i o n t h a t t h e continued o p e r a t i o n o f the Houston Branch was warranted. 267, HOUSTON BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Bi ( I s Date Oi scounted Currency Received and Coi n Received and Counted Counted Non Cash Collection Items Al 1 Gov't Checks Handled Gov't Sit* Checks Cfun^ry Other Total Fiscal Agency Transfer Transact ions of Direct Other 1931 1,667 10,101,000 13,945,000 1,354,000 5,108,000 270,000 6,732,000 58,119 39,820 - - 24,242 1932 1,521 8 ,"987,000 12,999,000 1,103,000 4,089,000 266,000 5,458,000 59,211 46,180 - - 23,093 1933 547 9,481,000 10,359,000 1,215,000 3,650,000 476,000 5,341,000 63,272 56,879 - - 23,669 1934 22 10,624,000 11,365,000 1,383,000 4,123,000 1,068,000 6,574,000 98,497 61,714 - - 20,315 1935 7 10,483,000 11,607,000 1,505,000 4,890,000 755,000 7,150,000 112,000 52,000 - - 18,474 1936 II 11,328,000 15,297,000 1,848,000 5,532,000 668,000 8,048,000 88,000 53,000 - - 17,000 Amounts Handled ( i n thousands of dollars) 1931 10,623 38,528 1,383 878,136 374,021 37,622 1,289,779 796 42,342 • - 1,401,025 1932 14,690 33,122 1,180 527,183 271,263 26,124 824,570 931 40,046 - - 1,021,494 1933 5,034 39,539 2,384 561,932 275,613 48,668 886,213 1,073 59,434 - - 938,540 1934 516 37,444 1,235 734,353 354,095 01,245 1,169,693 1,423 78,529 - - 886,822 1935 260 35,826 1,177 774,824 416,141 66,034 1,256,999 1,607 79,670 - - 1,073,606 1936 425 39,318 1,527 985,988 509,962 69,429 1,565,379 1,627 63,130 - - 1,162,452 00 SAN ANTONIO BRANCH - FEDERAL RESERVE BAM OF DALLAS (a) C i t y o f San A n t o n i o : San A n t o n i o , w i t h a p o p u l a t i o n of 231,542, i s the t h i r t y - e i g h t h l a r g e s t c i t y i n the U n i t e d States and t h e t h i r d l a r g e s t c i t y i n Texas. I t i s located i n the south c e n t r a l p a r t o f t h e S t a t e and i s s a i d t o serve a t r a d e area e x tending 125 m i l e s n o r t h , 300 m i l e s south, 130 m i l e s east and 165 m i l e s west. This area i s devoted t o a g r i c u l t u r e and l i v e s t o c k } the r e g i o n l y i n g west and southwest o f San Antonio b e i n g noted as one o f t h e most i m p o r t a n t l i v e s t o c k breeding grounds i n the U n i t e d S t a t e s . Being s i t u a t e d n o t v e r y f a r d i s t a n t from the Rio Grande, San Antonio t r a n s a c t s considerable business w i t h t h e Rep u b l i c o f Mexico. T r a n s p o r t a t i o n f a c i l i t i e s are provided by the M. K. & T . , M i s s o u r i P a c i f i c and Southern Railways; a l s o by v a r i o u s bus l i n e s and a i r The p r i n c i p a l i n d u s t r i e s are the manufacture o f t e x t i l e s , vegetable o i l p r o d u c t s , d a i r y p r o d u c t s , s t e e l and i r o n p r o d u c t s , meat packing, o i l i n g and f l o u r m i l l i n g . lines. refin- According to the B i e n n i a l Census o f Manufactures f o r 1935, t h e r e were 318 manufacturing f i r m s o p e r a t i n g i n Bexar County, i n which San Antonio i s s i t u a t e d , which had an output valued a t $37,295,000 d u r i n g t h a t year. The Census o f American Business f o r t h e same year l i s t s 4,679 r e t a i l and 441 wholesale establishments o p e r a t i n g i n the county. These concerns had sales aggregating $83,251,000, and $86,784,000, r e s p e c t i v e l y , d u r i n g the year 1935. Banking f a c i l i t i e s i n San Antonio are provided by e i g h t n a t i o n a l banks, two S t a t e nonmember banks, one of which has no banking and d i s c o u n t p r i v i l e g e s , and one M o r r i s Plan bank. These i n s t i t u t i o n s had d e p o s i t s aggregating $92,428,000 as o f December 31, 1936 and o f t h i s amount $86,173,000 was c a r r i e d w i t h t h e e i g h t 289, l o c a l member banks. D e b i t s t o i n d i v i d u a l accounts i n banks o f the c i t y amounted t o $757,187,000 d u r i n g 1936, or an average o f approximately $2,523,000 f o r each banking day. (b) Branch T e r r i t o r y and F u n c t i o n s : The San Antonio Branch was e s t a b l i s h e d on J u l y 5, 1927, and serves f i f t y - f o u r counties i n the southwestern and south c e n t r a l p a r t o f Texas. This area represents approximately 17$ o f the l a n d area o f the Eleventh D i s t r i c t and has about 16% o f i t s t o t a l p o p u l a t i o n . Approximately 15% o f a l l banks i n the d i s t r i c t are l o c a t e d i n t h i s area. As o f December 31, 1936, t h e r e were 149 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 73, i n c l u d i n g 65 n a t i o n a l and 8 State i n s t i t u t i o n s , were members of the System. banks i n the branch zone were on the par l i s t . Only 54 o f t h e 76 nonmember The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared w i t h the Eleventh D i s t r i c t as a whole: No. Member Banks Eleventh D i s t r i c t Branch Zone 550 73 Loans and Investments $826,850 107,940 Capital and Surplus (000 omitted) $127,747 15,682 Total Deposits $1,314,452 168,494 There are only f i v e branch zones i n the System which have smaller member bank f o o t i n g s than the San Antonio Branch, namely, Spokane, E l Paso, L i t t l e Rock, Helena and C h a r l o t t e . The San Antonio Branch renders s u b s t a n t i a l l y t h e same s e r v i c e t o member bonks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements of currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash 270, c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f member banks i n t h e zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t t h e Branch, which a l s o maint a i n s a memorandum g e n e r a l ledger and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t the Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given t o member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by t h e Branch, s u b j e c t t o f i n a l approval o f t h e Head O f f i c e . Schedules covering t r a n s a c t i o n s are forwarded t o the Head O f f i c e , b u t the notes and c o l l a t e r a l , i f any, are r e t a i n e d a t t h e Branch. The Branch does n o t have Bank Examination, Bank R e l a t i o n s , F a i l e d Bank, L e g a l , Research or F i s c a l Agency departments. As o f February 6 , 1937, member banks i n the branch zone had balances w i t h the Reserve bank as f o l l o w s : Number o f Banks Reserve Balances Deferred Balances $ 9,551,375 11,342,444 $20,893>819 $1,709,955 378,425 $2,088,380 Capital Stock Bills Discounted Texas San Antonio Remainder o f Zone 8 73 $214,200 257,600 $471,800 San Antonio i s 292 t r a i n m i l e s (8 h r s . ) from D a l l a s and 211 t r a i n m i l e s (5 h r s . ) from Houston. There are 58 p o i n t s i n the branch zone i n which one o r more member banks are l o c a t e d . F i f t y - t h r e e o f these p o i n t s appear t o be w i t h i n o v e r - n i g h t m a i l t i m e o f San A n t o n i o , 47 w i t h i n o v e r - n i g h t m a i l time o f Houston and 2 are w i t h i n o v e r - n i g h t m a i l time of E l Paso. A small number o f t h e p o i n t s which are w i t h i n o v e r - n i g h t m a i l time o f Houston and San A n t o n i o , are a l s o w i t h i n o v e r - n i g h t m a i l o f D a l l a s . I f t h e San Antonio Branch were d i s c o n t i n u e d and i t s t e r r i t o r y d i v i d e d between t h e Houston and E l Paso Branches 271, o n l y 4 o u t l y i n g member bank p o i n t s would receive l e s s e x p e d i t i o u s s e r v i c e than i s now f u r n i s h e d from San Antonio. Member banks i n t h e C i t y o f San A n t o n i o , which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h t h e Branch would, o f course, have t o a d j u s t t h e i r business t o o v e r - n i g h t m a i l communication. Other than San A n t o n i o , the more populous c i t i e s i n the branch zone are A u s t i n , 55,120; Laredo, 32,618; Corpus C h r i s t i , 27,741 and B r o w n s v i l l e , 22,021. A l l o f these places have one or more member banks. (c) Branch B u i l d i n g : The San Antonio Branch has occupied i t s present q u a r t e r s a t J a r d i n and V i l l i t a S t r e e t s since October, 1928. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book v a l u e , as o f February 6, 1937, o f the branch premises: Cost Land Building V a u l t and v a u l t equipment Fixed machinery and equipment $ 75,002 139,189) 18,769) $232,960 21,258 $254.198 Book Value 2-6-37 $ 30,000 102.816 $152,816 4,247 $157.065 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1951 1932 1933 1934 1935 1936 1937 $65,500 67,100 20,000 2,500 8,000 7,600 5,200 These f i g u r e s are incomplete since under the present accounting procedure the Branch r e c e i v e s no c r e d i t f o r income r e c e i v e d by the Head O f f i c e on i n v e s t ments, a p o r t i o n o f which i s made p o s s i b l e by the Reserve bank stock i n v e s t ment and reserve balances o f member banks i n the branch zone. Income shown on the Branch's books i s d e r i v e d c h i e f l y from rediscounts o f member banks, reserve p e n a l t i e s , r e n t a l of banking house space and i n d u s t r i a l l o a n s . Income fr.>m the f i r s t mentioned source has s t e a d i l y d e c l i n e d , amounting t o a p p r o x i mately $600 i n 1957 as compared t o $63,600 i n 1932. (e) Branch Personnel: The r e p o r t of examination o f the Federal Reserve Bank o f D a l l a s , made as o f February 6, 1957, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the San Antonio Branch: February 6, 1957 Number Amount Officers Employees 2 41 4Z $10,100 58,700 $68,800 March 18, 1956 Niiah>jr.. Amoynt 2 42 U $10,000 61,000 $71,000 Decrease Number Amount 1 i $ 100* 2,500 $2,200 ^Increase O f f i c e r s end employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . 273, ( f ) Branch Expense by Functions: The expenses o f t h e San Antonio B ranch by f u n c t i o n s f o r the years 1952 t o 1937, i n c l u s i v e , were as f o l l o w s : 1932 General Overhead: Controllable N on~C ont r o l l a b l e ^ P r o v i s i o n of Space P r o v i s i o n o f Personnel General Service Postage Insurance F a i l e d Banks Loans, r e d i s c o u n t s , e t c . Securities Currency & Coin Check C o l l e c t i o n Non-Cash C o l l e c t i o n Accounting F i s c a l Agency Legal Auditing Bank R e l a t i o n s F . R. Note Issues Statistical & Analytical T o t a l Expense Less - Reimbursable F i s c a l Agency Expense Net Expense 1933 1934 1935 1936 1937 $ 13,562 $ 12,354 $ 9,826 i> 10,167 it 9,936 $ 10,564 9,204 12,158 11,329 5,527 13,691 9,975 6,578 6,144 8,325 1,695 11,090 1,321 1,010 6,924 12,113 18,030 20,051 20,707 17,718 17,102 18,303 10,037 8,245 8,851 8,538 9,163 10,110 2,795 1,764 2,931 2,145 1,594 1,354 3 8,327 1,270 5,986 3,608 1,743 2,431 909 1,715 1,214 1,039 1,672 1,643 25,020 27,562 11,530 10,746 11,314 23,363 18,168 17,988 18,526 20,785 18,797 19,964 3,371 3,607 4,409 4,546 4,271 4,755 14,545 13,705 11,951 12,117 14,000 14,441 5,607 31,515 31,612 9,146 17,671 29,098 1 9 10 9 4,395 4,428 4 , 4 2 1 5,820 3,958 3,495 58 8 12 62 3 — 44 41 39 — — — — 142 13 $129,846 $132,058 $143,595 $156,083 $155,818 $156,389 - 26,617 16,347 26,363 5,142 8.793 20,024 $124,704 $123,265 $127,248 $136,059 $129,455 $129,772 * Represents the n e t expense - income from r e n t a l s having been deducted. There were seventeen branches i n the System which operated a t a h i g h e r n e t cost than the San Antonio Branch i n 1937; namely, P i t t s b u r g h , Los Angeles, B a l t i m o r e , C i n c i n n a t i , D e t r o i t , B u f f a l o , S a l t Lake C i t y , Omaha, S e a t t l e , Denver, Oklahoma C i t y , L o u i s v i l l e , P o r t l a n d , Hew Orleans, C h a r l o t t e , Houston and Jacksonville. 274, (g) Volume o f Operations a t San Antonio B r anch: The f o l l o w i n g i s a comparison o f the volume o f operations i n v a r i o u s departments of the San Antonio Branch and t h e Head O f f i c e d u r i n g the l a s t six months o f 1956: San Antonio Branch Discount Department Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances Branches w i t h l a r g e r volume: 22 8 Head O f f i c e 324 55 Denver, Omaha and E l Paso. Safekeeping Member bank s e c u r i t i e s 12-51- •36 $75,714,000 $6,274,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L i t t l e Rock, L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha and Houston. Currency & Coin 1. Number o f b i l l s received and counted 5,338,000 19,826,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , C h a r l o t t e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Houston, Los Angeles and S e a t t l e . Cost per one thousand u n i t s handled 54 cents 45 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , Helena, Denver, Omaha, E l Paso, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 2. Number o f coins r e c e i v e d and counted 4,919,000 17,795,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Houston, Los Angeles and S e a t t l e . Cost per one thousand u n i t s handled 27 cents 13 cents Branches w i t h h i g h e r u n i t costs Helena, E l Paso, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Check C o l l e c t i o n 1. Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 627,000 1,322,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, J a c k s o n v i l l e , L i t t l e Rock, Helena, Oklahoma C i t y , E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled $1.45 $1.57 Branches w i t h h i g h e r u n i t c o s t : A l l branches except B a l t i m o r e , C h a r l o t t e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans and D e t r o i t . 275, San Antonio Branch Head O f f i c e Check C o l l e c t i o n (Continued) 2. Number o f country checks (outgoing) received 2,792,000 10,343,000 Branches w i t h l a r g e r volumes A l l branches except Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans, L i t t l e Rock, Memphis, Helena, E l Paso, P o r t l a n d , S e a t t l e and Spokane. Cost per one thousand u n i t s handled f2.ll $2.51 Branches v / i t h h i g h e r u n i t costs B u f f a l o , C i n c i n n a t i , New Orleans, D e t r o i t , Helena, E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 5,193 14,769 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, Helena and E l Paso. Cost per u n i t handled 1 7 . 1 cents 13.5 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , C h a r l o t t e , D e t r o i t , Los Angeles, P o r t l a n d and S e a t t l e . 2. Number o f country c o l l e c t i o n s handled 0,715 39,412 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New Orleans, D e t r o i t , Memphis, Denver, Oklahoma C i t y , Omaha, Los Angeles, P o r t l a n d , S a l t Lake C i t y , S e a t t l e and Spokane. 10.7 cents 8 . 9 cents Cost per u n i t handled Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , B a l t i m o r e , Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New O r l e a n s , Helena, Los Angeles, P o r t l a n d and S e a t t l e . 3. Number of coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 3,077 4,448 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , Omaha and Los Angeles. Cost per u n i t handled 1 1 . 1 cents 25 cents Branches w i t h h i g h e r u n i t c o s t : B u f f a l o , C h a r l o t t e , J a c k s o n v i l l e , N a s h v i l l e , D e t r o i t , L o u i s v i l l e , Memphis, Helena, Oklahoma C i t y , E l Paso, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. A schedule showing the volume o f operations o f t h e San Antonio Branch f o r tiie years 1951 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f San Antonio Branch by Board's Examiners - 1934: During an examination o f t h e Federal Reserve Bank o f D a l l a s , made as o f June 23, 1954, t h e Board's Ex&raincrs reviewed the operations o f t h e San Antonio Branch and i n d i c a t e d i n t h e i r r e p o r t t h a t t h e r e was some q u e s t i o n as t o the n e c e s s i t y f o r i t s continuance. I t was p o i n t e d out t h a t p r e v a i l i n g m a i l schedules would permit o v e r n i g h t m a i l s e r v i c e t o a m a j o r i t y o f member bank p o i n t s i n the 281, branch zone from e i t h e r Houston or D a l l a s and t h a t a v i a t i o n s e r v i c e had become s u f f i c i e n t l y dependable t o p e r m i t currency shipments from the Head O f f i c e i n cases of emergency. ( i ) Survey o f San Antonio Branch by Federal Reserve Bank o f D a l l a s - 1956: I n accordance w i t h the request made by t h e Board i n i t s l e t t e r o f March 2b, 1936, (X-9532) t h e Federal Reserve Bank o f D a l l a s reviewed t h e i n t e r n a l operations o f t h e San Antonio Branch and advised t h a t the f o l l o w i n g conclusions had been reached i n regard t h e r e t o : 1. I n view o f economies already e f f e c t e d over a p e r i o d o f y e a r s , i t appeared improbable t h a t the personnel o f the Branch could be reduced or expenses otherwise lowered w i t h o u t i m p a i r i n g the e f f i c i e n c y o f i t s operations. 2. Although some of the f u n c t i o n s performed by the Branch could be t r a n s f e r r e d t o the Head O f f i c e the saving would n o t be l a r g e i n the aggregate and i n t h e i r o p i n i o n would be i n s u f f i c i e n t t o induce them t o e f f e c t t h e t r a n s f e r . 5. I n t h e absence o f a general p o l i c y adopted by the Board, which would e l i m i n a t e a l l o r a s u b s t a n t i a l p o r t i o n o f a l l e x i s t i n g branches, they b e l i e v e d maintenance o f the San Antonio Branch was warranted. I t was p o i n t e d out t h a t Congress i n the Federal Reserve Act had taken cognizance o f the f a c t t h a t w i t h only twelve Reserve banks many o u t l y i n g member banks and t h e i r communities would s u f f e r disadvantage and inconvenience as compared t o those nearer the Head O f f i c e , and had a u t h o r i z e d the establishment o f branches i n order t o equalize t h e b e n e f i t s and f a c i l i t i e s o f t h e System. It was s t a t e d f u r t h e r t h a t Congress, w h i l e apparently aware of t h e expense which the establishment o f branches would e n t a i l , d i d n o t under the Federal Reserve Act seeu t o comtemplate d i f f e r e n t types of branches, i . e . , "memorandum p l a n " or " f u l l - f l e d g e d " branches. The o p i n i o n was expressed t h a t each branch should render t o member bonks i n i t s t e r r i t o r y , so f a r as p r a c t i c a b l e , a l l the s e r v i c e s 277, i n c i d e n t t o membership, subject only t o the general c o n t r o l o f and s u p e r v i s i o n by t h e Head O f f i c e , and t o the o p e r a t i n g p o l i c i e s e s t a b l i s h e d by i t . I t was i n d i c a t e d t h a t the t r a n s f e r o f f u n c t i o n s o f a branch t o t h e Head O f f i c e would tend t o show a l a c k o f need f o r t h e branch and t h a t , as a consequence, the r e a l q u e s t i o n seemed t o be whether any branch now i n o p e r a t i o n should be d i s c o n t i n u e d , r a t h e r than whether i t s f u n c t i o n s should be l i m i t e d . I n t h i s connection, i t was admitted t h a t s t r i c t l y speaking t h e r e e x i s t s no n e c e s s i t y f o r t h e continuance o f any branch, since the member banks i n v o l v e d , even though they might f e e l g r e a t l y inconvonienced and i n some cases d i s c r i m i n a t e d a g a i n s t , would n e v e r t h e l e s s a d j u s t themselves t o the change. I n c o n c l u s i o n , i t was s t a t e d t h a t the q u e s t i o n o f branches was one o f general p o l i c y f o r d e t e r m i n a t i o n o f t h e Board and t h a t the Board a l o n e , a c t i n g f o r t h e System as a whole, could p r o v i d e a " y a r d s t i c k " by which the need f o r continuance o f any s p e c i f i c branch could be determined. In the absence o f such a y a r d s t i c k f a c t s r e l a t i n g t o banking, business and m a i l schedules i n the San Antonio zone, s i m i l a r t o those i n c l u d e d i n t h i s memorandum, were submitted t o support t h e i r c o n t e n t i o n t h a t the continued o p e r a t i o n of the San Antonio Branch was warranted. 278, SAN ANTONIO BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Bilis Currency Coin Received Received and and Counted Counted _ _ Non Cash Collection Items Checks Handled Gov't Gov't Total Fiscal Agency Al 1 Other Transfer of Funds Country Checks 1,061,000 4,184,000 220,000 5,465,000 33,903 21,231 - 14,389 6,715,000 913,000 3,481,000 224,000 4,610,000 43,071 24,199 - 13,127 8,219,000 6,235,000 876,000 3,372,000 399,000 4,647,000 46,789 28,829 - 12,614 27 8,707,000 5,276,000 979,000 4,054,000 865,000 5,898,000 78,248 31,896 1935 63 9,233,000 6,797,000 1,104,000 4,627,000 541,000 6,272,000 87,000 36,000 - IC,4f0 1936 55 10,701,000 8,175,000 1,245,000 5,391,000 564,000 7,200,000 65,000 36,000 - 0,000 Date Pi scounted Ci\y 1931 3,486 10,803,000 6,584,000 1932 4,265 8,412,300 1933 1,585 1934 CouDons Direct Other 11,094 Amounts Handled ( i n thousands of dollars) 1931 24,206 47,131 1,167 355,783 429,434 38,986 824,203 456 23,184 1932 14,036 34,676 0 263,863 275,029 29,304 568,196 605 23,185 - 334,676 1933 4,952 *fc,224 277,990 260,951 37,744 576,685 703 28,499 - 279,020 347,400 56,552 793,527 1,026 38,734 - 285,700 911,845 973 46,752 - 338,956 1,077,911 807 39,459 - m k 1935 1936 135 103 53 32,648 32,725 36,594 2,603 706 324 1,049 389,575 461,583 510,757 398,506 490,300 51,756 63,854 470,578 - 316,269 LOS ANGELES BRANCH - FEDERAL RESERVE BANK OF SAN FRANCISCO (a) C i t y o f Los Angeles Los Angeles, w i t h a p o p u l a t i o n o f 1,238,000, i s t h e f i f t h l a r g e s t i n t h e U n i t e d S t a t e s and the l a r g e s t c i t y i n C a l i f o r n i a . city I t i s located i n t h e southwestern p a r t o f t h e S t a t e and i s s a i d t o serve a t r a d e area extending 55 n i l e s n o r t h , 50 m i l e s south and 50 m i l e s e a s t ; approximately 2,300,000 people r e s i d e i n t h e m e t r o p o l i t a n area. T r a n s p o r t a t i o n f a c i l i t i e s are provided by the Atchison-Topeka & Santa Fe, Union P a c i f i c , Southern P a c i f i c and P a c i f i c E l e c t r i c r a i l w a y s and by v a r i o u s a i r l i n e s and bus l i n e s . Los Angeles a l s o enjoys dix*ect steamship s e r v i c e t o a l l the p r i n c i p a l p o r t s of the w o r l d , app r o x i m a t e l y $774,800,000 i n cargoes having passed over i t s wharves d u r i n g the year ending June 50, 1955. The p r i n c i p a l i n d u s t r i e s o f t h e c i t y are motion p i c t u r e s , petroleum p r o d u c t s , i r o n and s t e e l , food p r o d u c t s , p l a n i n g m i l l s , f u r n i t u r e , wearing a p p a r e l , clay p r o d u c t s , automobiles and automobile accessories and a i r craft. According t o t h e Biennial Census o f Manufactures f o r 1955, t h e r e were 4,568 manufacturing f i r m s o p e r a t i n g i n Los Angeles County, which had an output valued a t $844,006,000 d u r i n g t h a t y e a r . The Census o f American Business f o r 1955 shows 5,042 wholesale and 41,059 r e t a i l establishments i n t h e same area, which enjoyed sales aggregating $1,119,952,000 and $959,409,000, r e s p e c t i v e l y , d u r i n g the. y e a r . Banking f a c i l i t i e s i n Los Angeles are f u r n i s h e d by f o u r S t a t e banks, two o f which are members o f the System, f o u r n a t i o n a l banks, one i n d u s t r i a l bank, f o u r t i t l e and t r u s t companies, and t h r e e branches o f f o r e i g n banks. Branch banking has been h i g h l y developed i n Los Angt l e s and throughout t h e S t a t e o f California. The f o l l o w i n g f i g u r e s r e l a t e t o member banks o p e r a t i n g i n Los 280, Angeles on December 51, 1936: Name C i t i z e n s N.T. & Svgs.Bk. S e c u r i t y - F i r s t N a t « l Bk. C a l i f o r n i a Bank Union Bank & T r . Co. Farmers & Merchants N.B. B k . o f America N.T.& S.A. Totals Head O f f i c e Los Los Los Los Los San Angeles Angeles Angeles Angeles Angeles Francisco Number o f Branches C i t y o f Outside T o t a l Los Los for Angeles Angeles S t a t e 53 65 42 2 56 11 55 119 53 86 224 579 448 465 672 Total Deposits $ 114,595,000 580,651,000 100,413,000 39,505,000 127,674,000 1,298.977.000 $2.261.815.000 D e b i t s t o i n d i v i d u a l accounts i n banks o p e r a t i n g i n Los Angeles aggregated $10,216,206,000 f o r t h e year 1936, o r an average o f approximately $34,COO,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions: The Los Angeles Branch was e s t a b l i s h e d on January 2, 1920, and serves t h a t p a r t o f t h e S t a t e o f Arizona l o c a t e d i n Federal Reserve D i s t r i c t Twelve and n i n e counties i n t h e southern p a r t o f C a l i f o r n i a . The brarich zone represents approximately 21$ o f the l a n d area o f the T w e l f t h D i s t r i c t and has about 34$ of i t s t o t a l population. Approximately 16$ o f a l l banks i n t h e d i s t r i c t are l o c a t e d i n t h i s area. As o f December 31, 1936, t h e r e were 107 banks, e x c l u s i v e o f mutual savings bonks i n the branch zone and o f t h i s number 63, i n c l u d i n g 55 n a t i o n a l banks and 8 S t a t e i n s t i t u t i o n s , were members o f the System. t h e zone were on t h e par l i s t . The 44 nonmember banks i n The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f t h e same date show the s i z e o f member bank f o o t i n g s i n t h e branch zone as compared t o t h e T w e l f t h D i s t r i c t as a wholes 281, No .Member Banks Twelfth D i s t r i c t Los Angeles Zone 322 63 Loans Capital and and Investments Surplus (000 omitted) $3,650,503 925,855 There i s o n l y one branch zone i n the $337,201 91,097 Total Deposits $4,483,284 1,166,712 System having l a r g e r member bank f o o t i n g s than t h e Los Angeles Branch, namely P i t t s b u r g h . The Los Angeles Branch renders s u b s t a n t i a l l y t h e same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash c o l l e c t i o n s and borrowings a r e concerned. Reserve accounts o f member banks i n the zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t t h e Branch, which a l s o maintains a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t i s given t o member banks f o r d i s - count o f f e r i n g s r e c e i v e d by t h e Branch, s u b j e c t t o f i n a l approval o f t h e Head Office. Schedules covering t r a n s a c t i o n s are forwarded t o t h e Head O f f i c e , but the notes and c o l l a t e r a l , i f any, are r e t a i n e d a t t h e Branch. The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , Research o r F i s c a l Agency d e p a r t ments. As o f January 8 , 1957, member banks i n t h e branch zone had balances w i t h t h e Reserve bank as f o l l o w s : Los Angeles Remainder o f Zone No.of Banks Reserve Balances Deferred Balances Capital Stock Bills Discounted 6 57 63 $108,487,700 17.858.500 $126.526.000 $5,418,500 1.172.000 $6.590.500 $2,258,800 558,100 $2.796,900* - ^ C a p i t a l stock f i g u r e i n c l u d e s holdings o f f i v e banks which have been absorbed by o t h e r member bank3, but whose stock investment i n t h e Reserve bank had n o t been surrendered. 282, Los Angeles i s 471 t r a i n m i l e s (12 h r s . and 30 mins.) from San F r a n c i s c o . On any business day t h e r e are s e v e r a l t r a i n s l e a v i n g both p o i n t s a f t e r 8 P.M. which a r r i v e a t t h e o t h e r b e f o r e 9 A.M. on the f o l l o w i n g day. Other than Los Angeles t h e r e are 52 member bank p o i n t s i n t h e branch zone and o f t h i s number 48 are w i t h i n o v e r n i g h t m a i l o f Los Angeles, whereas o n l y 14 are w i t h i n o v e r n i g h t m a i l o f Sen F r a n c i s c o . I t i s c l e a r , t h e r e f o r e , t h a t discontinuance o f the Los Angeles Branch would n o t o n l y inconvenience t h e member banks i n t h e O i t y o f Los Angeles, which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h t h e Branch, but t h a t i t would a l s o slow up t h e s e r v i c e rendered t o a subs t a n t i a l number o f member banks s i t u a t e d i n o u t l y i n g c i t i e s . Other than Los Angeles, t h e more populous c i t i e s o f t h e branch zone are San Diego, 147,995; Long Beach, 142,052; Pasadena, 76,086; Glendale, 62,736; San Bernadino, 37,481 and Santa Monica, 37,146. (c) Branch B u i l d i n g : The Los Angeles Branch has occupied i t s present q u a r t e r s a t 10th and O l i v e S t r e e t s since A p r i l , 1930. The f o l l o w i n g f i g u r e s show t h e o r i g i n a l cost and book value as o f January 8, 1957, o f the branch premises: Cost Land Building V a u l t & v a u l t equipment F i x e d machinery & equipment $ 453,458 839,477) 148.652) $1,441,567 282.698 Si,724.265 Book Value 1-8-57 $ 298,866 815,949 $1,114,815 84.967 Si.199,782 (d) Earnings - Branch Books: The Branch 1 s earnings as r e f l e c t e d by i t s books f o r t h e years 1951 t o 1937, i n c l u s i v e , were as f o l l o w s : 283, Year Earnings 1951 1932 1955 1934 1935 1936 $ 65,100 159,100 59,700 5,100 1,600 3,500 1957 3,800 These f i g u r e s are incomplete since t h e Branch r e c e i v e s no c r e d i t f o r income r e c e i v e d by t h e Head O f f i c e on investments, a p o r t i o n of which i s made p o s s i b l e by the Reserve bank stock investment and reserve balances o f banks i n t h e branch zone. Income shown on t h e Branch 1 s books i s d e r i v e d c h i e f l y from r e d i s c o u n t s o f member banks, reserve p e n a l t i e s and the r e n t a l o f banking house space. Income from t h e f i r s t mentioned source amounted t o $151,200 i n 1932 as compared t o o n l y $3,200 i n 1937. (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f San F r a n c i s c o , made as o f January 8, 1937, shows the f o l l o w i n g i n r e g a r d t o s a l a r i e s and p e r sonnel a t the Los Angeles Branch: January 8 , Amount 1957 Number Officers Employees 4 221 225 $ 25,200 548.700 $575,900 A p r i l 11, Amount 1956 Number 4 227 251 O f f i c e r s and employees whose s a l a r i e s i n c l u d e d i n the above f i g u r e s . $ 24,400 559.000 $585.400 DecreaseAmount Number .6 | $ 800 I n c . 10.500 $ 9.500 and wages are reimbursable are n o t The January 8 , 1957, f i g u r e i n c l u d e s s i x em- ployees w i t h t o t a l annual s a l a r i e s o f $7,200 who were employed on a temporary basis t o handle t h e u s u a l p o s t - h o l i d a y increase i n unassorted currency. A l l o w i n g f o r these i n d i v i d u a l s , t h e r e was a r e d u c t i o n o f 12 nonreimbursable employeevS since A p r i l 11, 1956. 284, ( f ) Branch Expenses by Functions: The expenses o f t h e Los Angeles Branch by f u n c t i o n s f o r t h e years 1952 t o 1937, i n c l u s i v e , were as f o l l o w s : 1932 1933 General Overhead Controllable $ 16,769 0 18,776 51,834 Noncontrollable 41,996 P r o v i s i o n o f Space 59,601 60,109 P r o v i s i o n o f Personnel 15,893 19,941 General Service 78,615 86,673 Postage 21,999 19,942 Insurance 9,321 8,105 F a i l e d Banks 8,828 22,296 Loans, R e d i s c o u n t s , e t c . 26,141 31,699 Securities 1,419 2,676 Currency & Coin 62,528 63,261 Check C o l l e c t i o n 92,348 83,248 Non-cash C o l l e c t i o n 26,586 29,522 Accounting 44,929 44,647 F i s c a l Agency 35,742 41,072 Legal Auditing 4,068 4,441 Bank R e l a t i o n s 461 444 Bank Examinations 5 31 S t a t i s t i c a l & A n a l y t i c a l 1,590 2,052 Works Progress T o t a l Expense $546,839 $590,769 Less-Reimbursable F i s c a l Agency Expense 31.054 35.599 Net Expense 0515.785 §555.170 1934 1935 0 14,074 48,955 56,648 44,912 90,467 11,015 4,312 12,590 36,139 2,792 61,347 81,405 25,915 44,185 41,340 160 4,932 402 110 2,949 0 11,219 52 52,993 59,924 95,559 18,543 3,637 6,043 67,733 3,019 122,206 75,804 22,328 47,483 59,237 0584,649 33.186 3551.463 - 5,681 503 54 1,462 1936 0 14,528 — 50,909 68,615 89,765 20,344 3,676 2,789 33,112 1,627 134,992 81,275 20,597 45,668 54,064 50 5,597 495 1937 0 14,968 4 99,830 33,232 88,474 18,723 3,449 1,071 20,275 1,846 142,728 84,546 17,328 36,611 46,010 - 4,346 859 — — $653,480 1,627 111 0629,841 1,079 $615,379 24.420 0629.060 26.733 0603.108 25.377 0590.002 There were 23 branches i n t h e System which operated a t a lower cost than t h e Los Angeles Branch i n 1937. A l l o f these branches, w i t h t h e p o s s i b l e ex- c e p t i o n o f B a l t i m o r e , appear t o have handled a smaller volume o f work. Balti- more, o f course, serves a much more compact t e r r i t o r y than does Los Angeles• (g) Volume o f Operations a t Los Angeles Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s departments o f t h e Los Angeles Branch and the Head O f f i c e d u r i n g t h e l a s t s i x months o f 1936: 285, Los Angeles Branch Discount Department Notes rediscounted C o l l a t e r a l notes discounted I n d u s t r i a l advances ( * ) Branches w i t h l a r g e r volumes Head O f f i c e 38 31 2 Denver, B u f f a l o , B a l t i m o r e , S a l t Lake C i t y , Omaha, Memphis, New Orleans, San A n t o n i o , Houston, Spokane, D e t r o i t , L i t t l e Rock, P o r t l a n d and EL Paso. (*•) A l l i n d u s t r i a l advances are c a r r i e d on t h e books o f t h e Head O f f i c e but those o r i g i n a t i n g i n t h e branch zone are s e r v i c e d by t h e Branch. Safekeeping Member bank s e c u r i t i e s 12-31-36 Branches w i t h l a r g e r volume: A l l branches except Spokane. Currency & Coin 1 . Number o f b i l l s r e c e i v e d and counted Branches w i t h l a r g e r volume: None. 41,134,000 0353,000 25,977,000 Cost per one thousand u n i t s handled 44 cents 46 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except, C h a r l o t t e , Birmingham, N a s h v i l l e , New Orleans, L i t t l e Rock, L o u i s v i l l e and Memphis. 2. Number o f coins r e c e i v e d and counted Branches w i t h l a r g e r volume: B a l t i m o r e . 38,650,000 39,378,000 Cost per one thousand u n i t s handled 16 cents 16 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except B u f f a l o , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L o u i s v i l l e , Memphis, Oklahoma C i t y and Houston. Check C o l l e c t i o n 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d Branches w i t h l a r g e r volume: Pittsburgh. Cost p e r one thousand u n i t s handled Branches w i t h h i g h e r u n i t c o s t : Helena. 3,178,000 $3.45 3,055,000 $1.78 2. Number o f country checks (outgoing) r e c e i v e d 5,294,000 3,259,000 Branches w i t h l a r g e r volume: C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , D e t r o i t and Oklahoma C i t y . Cost p e r one thousand u n i t s handled Branches w i t h h i g h e r u n i t c o s t : None. 03.66 $2.31 291, Log Angeles Branch Head O f f i c e Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 10,154 12,352 Branches w i t h l a r g e r volume: D e t r o i t , L i t t l e Rock, Memphis, and Omaha. Cost per u n i t handled Branches w i t h h i g h e r u n i t c o s t : 24.9 cents 27.5 cents C i n c i n n a t i , P i t t s b u r g h and P o r t l a n d . 2. Number o f country c o l l e c t i o n s handled 16,462 43,331 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , Denver, Oklahoma C i t y , Omaha, S a l t Lake C i t y and Spokane. Cost per u n i t handled 17 cents 6.3 cents Branches w i t h h i g h e r u n i t c o s t : Portland. 3. Number o f coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 6,212 Branches w i t h l a r g e r volume: P i t t s b u r g h , B a l t i m o r e , and D e t r o i t . Cost per u n i t handled Branches w i t h h i g h e r u n i t c o s t : 30 cents J a c k s o n v i l l e and E l Paso. 3,465 19.3 cents A schedule showing t h e volume o f operations o f t h e Los Angeles Branch f o r t h e years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f Los Angeles Branch by Board 1 s Examiners - 1933 During an examination o f t h e Federal Reserve Bank o f San F r a n c i s c o , made as o f September 2, 1933, the 3 o a r d f s examiners reviewed t h e o p e r a t i o n s o f t h e Los Angeles Branch and i n c o r p o r a t e d t h e f o l l o w i n g statement as t o i t s continuance i n t h e i r r e p o r t : "The branch a t Los Angeles would appear t o be j u s t i f i e d i n view o f t h e s i z e and importance o f t h e c i t y and i t s d i s t a n c e from t h e Head O f f i c , * * * . " ( i ) Survey o f Los Angeles Branch by Federal Reserve Bank o f San Francisco - 1956. I n accordance w i t h t h e request made by t h e Board i n i t s l e t t e r o f March 25, 1936 (X-9532) the Federal Reserve Bank o f San Francisco made a comprehensive survey o f i t s f i v e branches. A r e p o r t o f t h i s survey was submitted t o t h e Board, w i t h o u t a d e f i n i t e recommendation as t o t h e discontinuance o f any 287, branch. I n the l e t t e r o f t r a n s m i t t a l , dated August 26, 19S6, i t was s t a t e d t h e D i r e c t o r s o f t h e San Francisco Reserve Bank, a f t e r a f u l l d i s c u s s i o n o f t h e m a t t e r , f e l t t h a t b e f o r e any recommendation could be made i t would be necessary f o r t h e Board o f Governors t o g i v e c o n s i d e r a t i o n t o t h e q u e s t i o n from a n a t i o n a l v i e w - p o i n t and e s t a b l i s h some d e f i n i t e p o l i c y i n regard thereto. The survey contained a d e s c r i p t i o n o f the t e r r i t o r i e s served and f u n c t i o n s performed by a l l t h e branches o f t h e San Francisco Reserve Bank, as w e l l as s t a t i s t i c s and c h a r t s covering t h e i r operations f o r the years 1926 t o 1955, inclusive. 288, LOS ANGELES BRANCH VOLUME OF OPERATIONS Number Date 1931 B> I Is Discounted 4,319 Pieces Handled Non Cash Currency Received and Counted Co i n Received and Ceunted cik 67,222,000 38,100,000 7,920,000 13,385,000 1,438,000 22,743,000 264,190 73,514 3,363 - 32,148 6,547,000 9,803,000 1,532,000 17,882,000 311,532 98,882 4,480 - 31,620 5,842,000 7,509,000 1,857,000 15,208,000 362,207 138,928 13,458 - 44,098 5,482,000 7,165,000 3,084,000 15,731,000 439,627 107,023 21,521 - 43,890 5,974,000 10,929,000 1,903,000 18,806,000 539,000 08,000 54,510 10,837 40,458 6,479,000 10,497,000 2,498,000 19,474,000 429,000 86,000 6,204 4,894 36,000 I 1932 6,847 67,536,000 54,843,000 1933 2,233 64,077,000 51,518,000 1934 231 64,588,000 50,823,000 1935 81 73,010,000 55,141,000 1936 19 81,992,000 70,321,000 Checks Handled Gov't Checks Country lalii Collection Items A! 1 Gov't Other COUBftM F» seal Agency Transaction* Transfer of 9t h e r Amounts Handled Or i thousands of dollars) <0 0D 193! 35,566 327,786 13,317 2,315,640 703,773 295,247 3,314,660 6,041 68,660 36,323 - 3,566,723 1932 97,933 306,546 17,511 1,776,195 496,198 261,660 2,534,053 7,570 49,020 38,858 - 2,256,933 1933 38,819 314,800 30,008 1,712,021 411,708 260,951 2,384,680 7,824 53,870 34,284 - 1,702,173 1934 8,269 260,428 15,296 1,888,212 434,057 310,965 2,633,234 9,196 54,273 33,953 - 1,562,138 1935 4,436 301,156 16,231 2,331,990 571,175 252,746 3,<55,91i 9,810 68,513 84,159 4,286 2,050,478 1936 1,920 338,811 8,794 2,683,325 687,088 366,212 3,736,625 10,029 87,660 23,987 2,001 1,876,174 PORTLAND BRANCH - FEDERAL RESERVE BANK OF SAN FRANCISCO (a) C i t y of P o r t l a n d P o r t l a n d , w i t h a p o p u l a t i o n of 501,815, i s the t w e n t y - f i f t h l a r g e s t i n the U n i t e d States and t h e l a r g e s t c i t y i n the State o f Oregon. city I t i s located i n the extreme northwestern p a r t o f the S t a t e and l i e s along both sides o f the W i l l a m e t t e River a t i t s j u n c t u r e w i t h the Columbia, where t h e r e i s a s p l e n d i d p o r t deep enough f o r the l a r g e s t ships t o dock. The c i t y serves a t r a d e area extending approximately 30 m i l e s i n a l l d i r e c t i o n s ; more than 380,000 people r e s i d i n g w i t h i n the m e t r o p o l i t a n area alone. T r a n s p o r t a t i o n f a c i l i t i e s are f u r - nished by t h e Union P a c i f i c , Great N o r t h e r n , Northern P a c i f i c , Southern P a c i f i c and the Spokane, P o r t l a n d & S e a t t l e r a i l r o a d s and t h e P o r t l a n d e l e c t r i c way. rail- I t i s a l s o served by the American and U n i t e d a i r l i n e s . According t o t h e B i e n n i a l Census o f Manufactures, Multnomah County, i n which P o r t l a n d i s s i t u a t e d , had 679 manufacturing establishments i n 1935, which had an o u t p u t valued a t $120,312,000 t h a t y e a r . The c h i e f products were lumber, canned goods, l e a t h e r goods, d a i r y p r o d u c t s , f l o u r , woolen goods, harness, r o o f i n g m a t e r i a l s and a i r cleaners. There was a l s o a s u b s t a n t i a l amount o f brewing and meat packing. The Census o f American Business f o r 1935 l i s t s 5,562 r e t a i l and 885 wholesale concerns o p e r a t i n g i n the same a r e a , which had sales aggregating $151,985,000 and $278,103,000, r e s p e c t i v e l y , d u r i n g t h a t y e a r . Banking f a c i l i t i e s i n P o r t l a n d are p r o v i d e d by two n a t i o n a l banks, two S t a t e nonmember banks, one mutual savings bank and one t i t l e and t r u s t company; a l s o by a branch o f the Bank o f C a l i f o r n i a , N.A. and a branch o f t h e Canadian Bank o f Commerce. As o f December 31, 1936, the banks h a v i n g t h e i r head o f f i c e s i n P o r t l a n d had t o t a l d e p o s i t s aggregating $207,028,000 and o f t h i s amount 290, $201,280,000 was c a r r i e d by the two l o c a l member banks; such banks o p e r a t i n g a t o t a l o f twelve branches w i t h i n the c i t y l i m i t s . D e b i t s t o i n d i v i d u a l accounts i n banks o f the c i t y amounted t o $1,953,740,000 f o r t h e year 1936, or an average o f approximately $6,500,000 f o r each banking day, (b) Branch T e r r i t o r y and Functions The P o r t l a n d Branch was e s t a b l i s h e d on October 1 , 1917, and serves the e n t i r e S t a t e o f Oregon, and t h e town of I l w a c o and f i v e c o u n t i e s i n the southwestern p a r t o f the S t a t e o f Washington. The branch zone represents 14$ o f the l a n d area o f t h e T w e l f t h D i s t r i c t and has about 11$ of i t s t o t a l p o p u l a t i o n . Approximately 17$ o f a l l banks i n t h e d i s t r i c t are l o c a t e d i n t h i s area. As o f December 31, 1936, t h e r e were 109 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 49, i n c l u d i n g 42 n a t i o n a l banks and 7 S t a t e i n s t i t u t i o n s , were members o f t h e System. member banks i n the zone were on the par l i s t . A l l b u t 6 o f t h e 60 non- The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f t h e same date show t h e s i z e o f member bank f o o t i n g s i n the branch zone as compared t o the T w e l f t h D i s t r i c t as a wholes No. Member Banks Twelfth D i s t r i c t P o r t l a n d Branch 322 49 Loans and Investments $3,630,503 192,342 Capital and Total Surplus Deposits (000 omitted) $337,201 16,492 $4,483,284 257,117 There are t h i r t e e n branch zones i n the System having l a r g e r member bank f o o t i n g s than t h e P o r t l a n d Branch; namely, P i t t s b u r g h , Los Angeles, D e t r o i t , C i n c i n n a t i , B u f f a l o , B a l t i m o r e , New Orleans, S e a t t l e , Oklahoma C i t y , Houston, Denver, Omaha and J a c k s o n v i l l e . The P o r t l a n d Branch renders s u b s t a n t i a l l y t h e same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t t h e Head O f f i c e , i n s o f a r as r e c e i p t s and d i s b u r s e 291, ments o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , noncash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f member banks i n the zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t t h e Branch, which a l s o maintains a memorandum general l e d g e r and a record o f c e r t a i n earnings and expenses. t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Con- sent-a Immediate c r e d i t i s given t o member banks f o r d i s c o u n t o f f e r i n g s received by the Branch, s u b j e c t t o f i n a l approval o f the Head O f f i c e . Schedules covering t r a n s a c t i o n s are forwarded t o the Head O f f i c e , b u t t h e notes and c o l l a t e r a l , i f any, are r e t a i n e d a t the Branch. The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , Research or F i s c a l Agency departments. As o f January 8 , 1937, member banks i n t h e branch zone had balances w i t h the Reserve bank as f o l l o w s : No. o f Banks Oregon: Portland Remainder o f S t a t e Washington 2 42 J7 51 Reserve Balances Deferred Balances $20,684,700 3,915,500 831,900 $25.432,100 $1,439,600 52,200 16,300 $1.508.100 Capital Stock $357,000 128,500 22,100 $507.600 Bills Discounted - The above t a b l e i n c l u d e s two banks which have been acquired by o t h e r member banks t o be operated as branches but whose c a p i t a l stock h o l d i n g s i n the Reserve bank had n o t y e t been surrendered. P o r t l a n d i s 771 t r a i n m i l e s (23 h r s . and 30 mins.) from San F r a n c i s c o . Consequently, the P o r t l a n d Branch does n o t enjoy o v e r n i g h t m a i l communication w i t h the Head O f f i c e . Other than P o r t l a n d , t h e r e are 44 member bank c i t i e s i n the branch zone and of t h i s number only 5 can be reached by o v e r n i g h t m a i l from San F r a n c i s c o , whereas approximately 40 are w i t h i n o v e r n i g h t m a i l from 222, Portland, I t i s c l e a r , t h e r e f o r e , t h a t discontinuance o f t h e P o r t l a n d Branch would n o t only a f f e c t t h e c h a r a c t e r o f s o r v i c e rendered t o member banks i n t h a t c i t y , which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h t h e Branch, b u t t h a t i t would a l s o slow up t h e services performed f o r t h e m a j o r i t y o f member banks l o c a t e d i n o u t l y i n g sections of t h e zone. Other than P o r t l a n d , the more populous c i t i e s i n t h e branch zone are Salem, Oregon, 26,266; Eugene, Oregon, 18,901; Klamath F a l l s , Oregoi^ 16,095 and Vancouver, Washington, 15,766. (c) Branch B u i l d i n g s The P o r t l a n d Branch occupies rented q u a r t e r s i n the P o r t e r b u i l d i n g a t S i x t h and Oak S t r e e t s under a l e a s e which e x p i r e s December 31, 1942. Under the terms o f t h e lease the Branch i s provided w i t h approximately 14,111 square f e e t o f space a t an annual r e n t a l of $21,560. Usable f l o o r space amounts t o 12,989 square f e e t and i s a l l occupied by the Branch except f o r a small area f o r which t h e P o r t l a n d C l e a r i n g House A s s o c i a t i o n pays $240 per y e a r . (d) Earnings - Branch Books The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1935 1934 1935 1936 1937 $44,200 98,800 24,300 1,400 100 2,300 600 These f i g u r e s are incomplete s i n c e , under the present accounting procedure, the Branch receives no c r e d i t f o r income received by the Head O f f i c e on i n v e s t ments, a p o r t i o n o f which i s made p o s s i b l e by the Reserve bank stock investment 298, and reserve balances o f banks i n the branch zone. Income shown on the Branch's books i s d e r i v e d c h i e f l y from rediscounts o f member banks. Income from t h i s source has d e c l i n e d s t e a d i l y i n recent y e a r s amounting t o $95,600 i n 1932 and t o s l i g h t l y l e s s than $100 i n 1937. (e) Branch Personnel The r e p o r t o f examination o f the Federal Reserve Bank o f San F r a n c i s c o , made as o f January 8 , 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the P o r t l a n d Branch 2 January 8 . 1937 Number Amount Officers Employees 3 £5 68 $ 16,200 „ 1 0 5tgQQ $121,800 A p r i l 11, 1956 Number Amount 3 M TO $ 16,200 q0g,8QQ $125,000 Decrease Number Amount £ £ ffStl£0Q I>5,a00 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . ( f ) Branch Expense by Functions The expenses o f the P o r t l a n d Branch by f u n c t i o n s f o r t h e years 1932 t o 1937, i n c l u s i v e , were as followss 1956 1955 1957 1952 1955 1954 General Overhead: $ 14,974 i£ 16,527 $ 11,082 |I 8,245 $ 11,590 $ 11,422 Controllable ft on e on t r o l l a b l e 7,784 10 4 6,019 8,116 22,059 P r o v i s i o n o f Space 20,116 16,898 22,515 20,589 20,180 P r o v i s i o n of Personnel 14,766 21,897 9,145 4,758 4,795 20,542 General Service 51,487 52,10?, 52,569 51j0o7. 29,152 26,411 10,551 8,747 9,746 Postage 9,515 9,564 8,665 1,474 1,597 1,821 1,622 Insurance 2,997 5,051 284 4 F a i l e d Banks 12,194 6,605 585 25,675 15,515 22,169 15,804 11,257 Loans, Rediscounts, e t c . 16,805 9,942 545 700 800 1,247 952 Securities 506 15,447 20,591 Currency & Coin 11,012 12,924 25,654 24,626 26,801 50,717 Check C o l l e c t i o n 27,005 50,107 25,722 29,572 9,790 9,805 Non-Cash C o l l e c t i o n 7,154 11,526 9,641 8,596 Accounting 27,240 26,520 26,708 25,749 24,809 19,526 F i s c a l Agency 22,988 25,696 58,595 55,544 55,299 12,051 2,788 2,825 Auditing 2,440 2,966 5,257 2,454 Bank R e l a t i o n s 558 490 249 592 605 551 65 Bank Examinations 66 56 75 54 44 551 S t a t i s t i c a l & Analytical 655 701 554 520 819 $204,09? $240,224 $221,185 $254,785 $254,855 $216,114 T o t a l Expense Less - Reimbursable 21,756 F i s c a l Agency Expense 18,851 25.446 24,206 20,909 9.805 Net Expense $194,294 $219,515 $202,554 $215,027 $211,587 $191,908 294, There were twelve branches i n the System which operated a t a lower n e t cost than the P o r t l a n d Branch i n 1937} namely, Spokane, N a s h v i l l e , E l Paso, Helena, Birmingham, L i t t l e Rock, Memphis, San Antonio, J a c k s o n v i l l e , Houston, C h a r l o t t e and New Orleans. (g) Volume o f Operations a t P o r t l a n d Branch The f o l l o w i n g i s a comparison of the volume of operations i n v a r i o u s d e p a r t ments o f t h e P o r t l a n d Branch and the Head O f f i c e d u r i n g t h e l a s t s i x months of 1956: P o r t l a n d Branch Head O f f i c e Discount Department Notes rediscounted 58 C o l l a t e r a l notes discounted 2 51 I n d u s t r i a l advances 2 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , New Orleans, Memphis, Denver, Omaha, E l Paso, Houston, San A n t o n i o , S a l t Lake C i t y and Spokane. Safekeeping Member bank s e c u r i t i e s 12-31-36 §447,000 $355,000 Branches w i t h l a r g e r volume: A l l branches except Los Angeles, S e a t t l e , Spokane and C h a r l o t t e . Currency & Coin 1. Number o f b i l l s r e c e i v e d and counted 5,147,000 25,977,000 Branches w i t h l a r g e r volumes A l l branches except L i t t l e Rock, Helena, Denver, Oklahoma C i t y , Omaha, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 66 cents 46 cents Branches w i t h h i g h e r u n i t costs C i n c i n n a t i , Helena, Denver, E l Paso, S a l t Lake C i t y and Spokane. 2. Number o f coins received and counted 3,381,000 39,378,000 Branches w i t h l a r g e r volumes A l l branches except C h a r l o t t e , J a c k s o n v i l l e , L i t t l e Rock, Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled 36 cents 16 cents Branches w i t h h i g h e r u n i t costs Helena, E l Paso, S a l t Lake C i t y and Spokane. Check C o l l e c t i o n 1 . Number o f c i t y checks ( c l e a r i n g s ) received 657,000 3,055,000 Branches w i t h l a r g e r volumes A l l branches except C h a r l o t t e , Birmingham, Jacksonv i l l e , L i t t l e Rock, Memphis, Helena, Oklahoma C i t y , E l Paso, San A n t o n i o , S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled $2.61 $1.78 Branches w i t h h i g h e r u n i t costs Helena, Los Angeles, S a l t Lake C i t y and S e a t t l e . 300, P o r t l a n d Branch Head O f f i c e Check C o l l e c t i o n (Continued) 2. Number o f country checks (outgoing) received 2,614,000 3,259,000 Branches w i t h l a r g e r volume: A l l branches except Birmingham, J a c k s o n v i l l e , N a s h v i l l e , New Orleans, L i t t l e Rock, Memphis, Helena, E l Paso, S e a t t l e and Spokane. Cost per one thousand u n i t s handled $3.36 $2.31 Branches w i t h higher u n i t c o s t : Los Angeles. Non-cash C o l l e c t i o n s 1. Number of c i t y c o l l e c t i o n s handled Branches w i t h l a r g e r volume: A l l branches except Orleans, Helena, E l Cost per u n i t handled Branches w i t h higher u n i t c o s t : P i t t s b u r g h . 6,212 12,352 C h a r l o t t e , Birmingham, New Paso and San Antonio. 39.8 cents 27.5 cents 2. Number of country c o l l e c t i o n s handled 11,020 43,331 Branches w i t h l a r g e r volume: B u f f a l o , B a l t i m o r e , C h a r l o t t e , D e t r o i t , Memphis, Denver, Oklahoma C i t y , Omaha, Los Angeles, S a l t Lake C i t y and Spokane. Cost per u n i t handled 18 cents 6.3 cents Branches w i t h a higher u n i t c o s t : None. 3. Number of coupons (except Government) and country s e c u r i t y c o l l e c t i o n s handled 1,548 3,465 Branches w i t h l a r g e r volume: A l l branches except Birmingham, J a c k s o n v i l l e , Helena, Oklahoma C i t y , E l Paso, S a l t Lake C i t y , S e a t t l e and Spokane. Cost per u n i t handled 24.8 cents 19.3 cents Branches w i t h higher "unit c o s t : J a c k s o n v i l l e , E l Paso, Los Angeles and S a l t Lake City. A schedule showing the volume of operations of the P o r t l a n d Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached to t h i s memorandum, (h) Survey of P o r t l a n d Branch by Board 1 s Examiners - 1933 During an examination of the Federal Reserve Bank of San Francisco, made as of September 2, 1933, the Board's Examiners reviewed the operations of the P o r t l a n d , S e a t t l e and Spokane Branches and reached the conclusion t h a t i t would be possible t o consolidate the operation of such branches i n P o r t l a n d w i t h o u t s e r i o u s l y a f f e c t i n g the character of the s e r v i c e rendered to member banks i n the P a c i f i c Northwest, v / i t h the possible exception of those l o c a t e d i n the c i t i e s of S e a t t l e and Spokane. I t was i n d i c a t e d t h a t m a i l f a c i l i t i e s , both f o r ordinary and emergency purposes, had improved s u b s t a n t i a l l y since the 301 branches were e s t a b l i s h e d and t h a t t h e s e r v i c e which could be rendered t o member banks throughout t h e P a c i f i c Northwest from P o r t l a n d was comparable t o t h a t being rendered by t h e Spokane and S e a t t l e Branches. I t was a l s o s t a t e d t h a t , a f t e r a l l o w i n g f o r some i n c r e a s e i n personnel and p h y s i c a l f a c i l i t i e s at P o r t l a n d , t h e work o f a l l t h r e e branches could be handled a t a c o n s i d e r a b l e saving and t h a t , s i n c e a l l t h e branches occupied leased q u a r t e r s , t h e c o n s o l i d a t i o n could be e f f e c t e d w i t h o u t any l o s s on r e a l e s t a t e and b u i l d i n g s . I t was f u r t h e r i n d i c a t e d * however, t h a t t h e management o f t h e San Francisco Reserve Bank, w h i l e agreeing t h a t t h e r e was no need f o r t h r e e branches i n t h e P a c i f i c Northwest, b e l i e v e d i t would be inopportune t o d i s c o n t i n u e any branch a t t h a t t i m e because o f t h e s e r v i c e s which t h e Reserve banks were p e r f o r m i n g f o r o t h e r Government agencies. ( i ) Survey o f P o r t l a n d Branch made by t h e Federal Reserve Bank o f San Francisco - 1956 The Federal Reserve Bank o f San F r a n c i s c o , as requested i n a l e t t e r from t h e Board, dated March 25, 1956 (X-9552), made a comprehensive survey o f f i v e branches. its A r e p o r t o f t h i s survey was submitted t o t h e Board, w i t h o u t a d e f i n i t e recommendation as t o t h e discontinuance or c u r t a i l m e n t o f any branch. I n t h e l e t t e r o f t r a n s m i t t a l , dated August 26, 1956, i t was s t a t e d t h e D i r e c t o r s o f t h e San Francisco Reserve Bank, a f t e r a f u l l d i s c u s s i o n o f t h e m a t t e r , f e l t t h a t b e f o r e any recommendation could be made i t would be necessaiy f o r t h e Board o f Governors t o g i v e c o n s i d e r a t i o n t o t h e q u e s t i o n from a n a t i o n a l v i e w p o i n t and e s t a b l i s h a d e f i n i t e p o l i c y i n regard t h e r e t o . The survey contained a d e s c r i p t i o n of the t e r r i t o r i e s served and t h e f u n c t i o n s performed by a l l o f t h e branches o f the San Francisco Reserve Bank, as w e l l as s t a t i s t i c s and c h a r t s covering t h e i r operations f o r the years 1926 t o 1955, i n c l u s i v e . 297, A iaemorandum r e l a t i v e t o c u r t a i l m e n t o f the Spokane Branch was attached t o the above survey, and on January 17, 1957, on t h e recommendation o f t h e Reserve Bank and w i t h the Board 1 s a p p r o v a l , the e n t i r e t e r r i t o r y previously served by the Spokane Branch, except the c i t y o f Spokane, was t r a n s f e r r e d t o the S e a t t l e Branch. A t t h e same time t h r e e c i t i e s i n southwestern Oregon, f o r m e r l y served by t h e Head O f f i c e , were t r a n s f e r r e d t o t h e P o r t l a n d Branch. These changes, p a r t i c u l a r l y t h a t w i t h r e s p e c t t o t h e Spokane Branch, have r e s u l t e d i n a s u b s t a n t i a l saving i n the cost o f o p e r a t i o n s . The lease on t h e q u a r t e r s occupied by t h e Spokane Branch w i l l e x p i r e on December 51, 1938. I n January 1937, when t h e t e r r i t o r y o f t h a t Branch was r e - duced i t was contemplated t h a t a new lease c o v e r i n g a reduced amount of space a t a lower r e n t a l could be n e g o t i a t e d . However, t h e management was unable t o o b t a i n a s a t i s f a c t o r y lease and because o f t h i s s i t u a t i o n , t h e d i r e c t o r s o f t h e San Francisco Reserve bank r e c e n t l y reviewed t h e operations o f t h e Spokane Branch and recommended i t s e n t i r e discontinuance. As a r e s u l t P r e s i d e n t Day addressed a l e t t e r t o t h e Board of Governors on August 9 , 1938, a d v i s i n g o f the a c t i o n taken by h i s d i r e c t o r s and r e q u e s t i n g approval o f the discontinuance o f the Spokane Branch. I t was i n d i c a t e d a p o r t i o n o f the t e r r i t o r y f o r m e r l y served by the Spokane Branch, which was t r a n s f e r r e d t o t h e S e a t t l e Branch on January 17, 1937, would be r e a l l o c a t e d t o t h e P o r t l a n d Branch i f t h e Spokane Branch was closed. 298, PORTLAND BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Received Bills Date Discounted and Counted Non Cash Co i n Checks Handled Received and Counted 1932 1933 2,781 It, 325 7*42 193^ k5 1935 - 1936 5,690,000 5,678,000 6,137,000 7,008,000 8,*479,000 2 9,400,000 7,306,000 7,183,000 6,831,000 5,3*49,000 5,7*45,000 6,999,000 Gov't pi t y Qountrv 1931 CpU+crtfon Items Gov't Checks All Fiscal Agency Transact 19ps Direct Other Transfer of Funds Coupons Other 1*45,812 3*4,887 2,00*4 11,889 1*48,775 32,1*45 907 10,555 1*45,206 61,801 3,505 7 8,560 1*46,078 55,026 12,8*40 5*4 6,331 166,000 39,000 28,999 3,577 6,791 125,000 36,000 2,63*4 1,730 6,000 Total 1,365,000 5,ty95,000 *419,000 7,279,000 *4, 187,000 1*13,000 5,797*000 3,212,000 537,000 *4,791,000 3,*426,000 1,017,000 5,*47l,000 U,061,000 63**,G00 5,703,000 14,857,000 69*4,000 6,831,000 1,197,000 1,0*42,000 1,028,000 1,080,000 1,280,000 Aaounts Handled ( i n thousands of d o l l a r s ) 1931 27,700 3D,853 I,6\k 092,003 203,021 61,855 1,237,679 1,999 30,**85 2,650 - 696,951 1932 97,4*42 36#72*4 1,523 615,762 200,837 50,145 1 0 67,050 1,889 23,2*40 1,446 - *495»CI0 1933 12,663 37,67*4 3,*467 529,082 177,996 68,212 776,090 1,660 26,867 2,605 7 393,000 1934 1,023 *40,5*45 1,230 600,017 236,392 97,088 933,497 1,792 42,479 *4,673 52 *429,57*4 1935 - HO,866 1,302 727,360 320,537 94,257 1,1*42,162 1,809 30,278 12,063 1,271 *4*42,9C0 147,471 1,615 86*4,762 367,371 117,063 1,3*49,196 1,583 3*4,35*4 67*4 732 493,278 1936 *40 SALT LAKE CITY BRANCH - FEDERAL RESERVE BANK OF SAN FRANCISCO (a) C i t y o f S a l t Lake C i t y : S a l t Lake C i t y , w i t h a p o p u l a t i o n o f 140,267, i s t h e l a r g e s t c i t y i n the S t a t e o f Utah and t h e f i f t y - n i n t h l a r g e s t c i t y i n the U n i t e d States- It is l o c a t e d i n the n o r t h c e n t r a l p a r t o f the S t a t e and i s said t o serve a t r a d e area extending 150 m i l e s n o r t h , 37 m i l e s south, 85 m i l e s east and 266 m i l e s t o the west. Approximately 200,000 people r e s i d e w i t h i n t h i s area. Transportation f a c i l i t i e s are provided by the Denver & Rio Grande Western, Union P a c i f i c and Western P a c i f i c r a i l r o a d s , and by t h r e e i n t r a n s t a t e e l e c t r i c r a i l w a y s . The c i t y i s a l s o served by a number o f bus l i n e s and several a i r - l i n e s . According t o t h e B i e n n i a l Census o f Manufactures S a l t Lake County i n 1935 had 273 manufacturing f i r m s which had an output valued a t $67,368,000 d u r i n g that year. The p r i n c i p a l i n d u s t r i e s were m i l l i n g , canning, o i l refining, mining and s m e l t i n g , l i v e s t o c k , general a g r i c u l t u r e and the manufacture o f c l o t h i n g , m i l l i n e r y , clay products and powdered m i l k . The Census o f American Business f o r 1935 l i s t s 437 wholesale and 2,129 r e t a i l establishments o p e r a t i n g i n the same area which had sales aggregating $101,709,000 and $67,035,000, r e s p e c t i v e l y , d u r i n g the y e a r . Banking f a c i l i t i e s i n S a l t Lake C i t y are provided by t h r e e n a t i o n a l banks and s i x S t a t e banks (3 members). These i n s t i t u t i o n s had d e p o s i t s aggregating $89,970,000, as o f December 31, 1936, and o f t h i s amount $73,528,000 was c a r r i e d w i t h the s i x l o c a l member banks. Debits t o i n d i v i d u a l accounts i n banks o f t h e c i t y aggregated $770,152,000 i n 1936; o r an average o f approximately $2,567,000 f o r each banking day. 300, (b) Branch T e r r i t o r y and Functions: The S a l t Lake C i t y Branch was e s t a b l i s h e d A p r i l 1 , 1918, and serves the e n t i r e State o f Utah, t h i r t y - f o u r counties i n southern Idaho and f o u r counties i n eastern Nevada. This t e r r i t o r y represents 27 percent o f t h e l a n d area o f the T w e l f t h D i s t r i c t and has approximately 9 percent o f i t s t o t a l p o p u l a t i o n . Approximately 15 percent o f a l l banks i n the d i s t r i c t are l o c a t e d w i t h i n t h i s area. As o f December 31, 1936, t h e r e were 98 banks, e x c l u s i v e o f mutual savings banks, i n the branch zone and o f t h i s number 56, i n c l u d i n g 29 n a t i o n a l and 27 S t a t e i n s t i t u t i o n s , were members of the F e d e r a l Reserve System. A l l of the 42 nonmember i n s t i t u t i o n s i n t h e branch zone were on the par l i s t . The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show the s i z e o f member bank f o o t i n g s i n the branch zone as compared t o t h e T w e l f t h D i s t r i c t as a wholes No. Member Banks Twelfth D i s t r i c t Branch Zone 322 56 Loans and Investments Capital and Surplus (000 omitted) $3,630,503 128,803 $337,201 15,228 Total Deposits $4,483,284 188^,229 There are f i f t e e n branch zones i n the System having l a r g e r member bank f o o t i n g s than the S a l t Lake C i t y zone; namely, P i t t s b u r g h , Los Angeles, D e t r o i t , C i n c i n n a t i , B u f f a l o , B a l t i m o r e , New Orleans, S e a t t l e , Oklahoma C i t y , .Houston, Denver, Omaha, J a c k s o n v i l l e , P o r t l a n d and L o u i s v i l l e . The S a l t Lake C i t y Branch renders s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s zone as i s a v a i l a b l e a t t h e Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g s , non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and borrowings are concerned. Reserve accounts o f member banks i n t h e zone, as w e l l as o f nonmember c l e a r i n g banks and o t h e r Federal Reserve banks, are maintained a t the Branch, which a l s o maint a i n s a memorandum general ledger and a record o f c e r t a i n earnings and expenses. C o n t r o l accounts a r e , o f course, maintained a t t h e Head O f f i c e which i s sent a d a i l y t r a n s c r i p t o f e n t r i e s a f f e c t i n g such accounts. Immediate c r e d i t is given t o member banks f o r d i s c o u n t o f f e r i n g s r e c e i v e d by the Branch, s u b j e c t t o f i n a l approval o f the Head O f f i c e . Schedules covering t r a n s a c t i o n s are forwarded t o t h e Head O f f i c e , b u t t h e notes and c o l l a t e r a l , i f any, are r e t a i n e d a t t h e Branch. The Branch has no Bank Examination, Bank R e l a t i o n s , L e g a l , Research or F i s c a l Agency departments. As o f January 8 , 1957, member banks i n t h e branch zone had balances w i t h t h e Reserve bank as f o l l o w s : No. o f Banks State Idaho Nevada U t a h - S a l t Lake C i t y Remainder o f State 22 2 6 26 56 Reserve Balances $ 6,755,500 202,500 12,155,500 5.528.900 $24.642.200 Deferred Balances Capital Stock Bills Discounted 579,400 5,162,000 420.500 $4.161,900 #117,550 5,950 196,950 150.600 $450,850 - $ S a l t Lake C i t y i s 785 t r a i n m i l e s (22 h r s . and 47 mins.) from San F r a n c i s c o . There are 42 member bank p o i n t s i n the branch zone and an examination o f train schedules i n d i c a t e s t h a t none o f these p o i n t s i s w i t h i n o v e r n i g h t m a i l time of San F r a n c i s c o , whereas a l l but t h r e e o f such p o i n t s appear t o be w i t h i n o v e r n i g h t m a i l o f S a l t Lake C i t y . I t i s apparent, t h e r e f o r e , t h a t discontinuance o f t h e S a l t Lake O i t y Branch would m a t e r i a l l y c u r t a i l t h e e f f i c i e n c y o f the s e r v i c e rendered t o member banks i n S a l t Lake C i t y and throughout the branch zone. t j 8 x«ur Other than S a l t Lake C i t y , the more populous c i t i e s i n the branch zone are Ogden, Utah* 40,272; B o i s e , Idaho, 21,544} P o c a t e l l o , Idaho, 16,471; and Provo, Utah, 14,766. One o r more member banks are l o c a t e d i n each o f these c i t i e s . (c) Branch B u i l d i n g : The S a l t Lake C i t y Branch has occupied i t s present q u a r t e r s a t South Temple and East S t a t e S t r e e t since February, 1927. The f o l l o w i n g f i g u r e s show the o r i g i n a l cost and book v a l u e as o f January 8 , 1957, o f t h e branch premises: Book Value 1-8-57 Cost Land Building V a u l t and v a u l t equipment Fixed machinery and equipment $114,075 289,772) 51,677) 455,524 84,814 $540.558 $100,000 256,149 356,149 $556.149 (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the y e a r s 1951 t o 1937, i n c l u s i v e , were as f o l l o w s : Year Earnings 1931 1932 1935 1954 1955 1936 $ 50,000 155,600 28,400 1,200 400 2,700 1937 1,400 These f i g u r e s are incomplete s i n c e , under the present accounting procedure, the Branch receives no c r e d i t f o r income received by t h e Head O f f i c e on i n v e s t ments, a p o r t i o n o f which i s made p o s s i b l e by t h e Reserve bank s t o c k investment and reserve balances o f banks i n t h e branch zone. c Income shown on the Branch books i s d e r i v e d c h i e f l y from r e d i s c o u n t s o f member banks, reserve p e n a l t i e s and r e n t a l of banking house space. Income from the f i r s t mentioned source amounted t o $151,000 i n 1932 and t o o n l y $1,100 i n 1937. 303, (e) Branch Personnels The r e p o r t of examination o f the Federal Reserve Bank o f San F r a n c i s c o , made as of January 8 , 1937, shows t h e f o l l o w i n g i n regard t o s a l a r i e s and p e r sonnel a t the S a l t Lake C i t y Branch t January 8 , 1957 Number Amount Officers Employees 5 76 79 I 15,000 127,600 $142,600 A p r i l 11. 1956 Number Amount 5 78 81 Decrease Number Amount $ 200 $ 15,200 151.800 $147.000 2 2 4.200 $4.400 mi.. a. >n i • O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n t h e above f i g u r e s . ( f ) Branch Expense by F u n c t i o n s : The expenses o f the S a l t Lake C i t y Branch by f u n c t i o n s f o r the years 1952 t o 1937, i n c l u s i v e , were as f o l l o w s s 1952 General Overhead; Controllable $ 12,520 5,716 Noncontrollable 40,574 P r o v i s i o n o f Space P r o v i s i o n o f Personnel 4,051 General Service 59,544 9,489 Postage Insurance 4,572 F a i l e d Banks 28,914 25,957 Loans,rediscounts,etc. 1,114 Securities 15,546 Currency & Coin Check C o l l e c t i o n 26,609 Non-Cash C o l l e c t i o n 9,855 Accounting 24,259 11,607 F i s c a l AgencyAuditing 1,759 Bank R e l a t i o n s 184 Bank Examinations 15 Statistical & Analytical 570 T o t a l Expense $257,795 Less - Reimbursable F i s c a l Agency Expense 10,219 Net Expense $247,576 1955 1954 1955 1956 1957 ifc 15,278 $& 10,214 i* 10,197 i\ 10,290 it 11,125 8 7,002 6,515 47,821 59,896 57,618 58,914 56,164 24,181 4,121 4,220 15,792 22,675 46,279 42,468 41,165 45,818 45,469 11,719 15,218 9,805 10,064 9,751 2,178 1,697 2,245 1,625 5,962 29 1,441 22,954 6,841 959 12,500 6,291 8,525 1,614 1,716 984 1,196 1,152 1,011 12,427 21,840 22,616 12,696 24,250 52,859 57,845 29,515 24,841 52,140 8,881 15,556 12,457 15,519 11,675 50,069 23,424 25,298 27,009 28,145 28,579 25,621 15,505 29,591 22,972 2,898 2,598 2,771 1,947 2,197 525 681 407 569 551 10 64 15 61 35 586 966 1,040 746 851 $257,265 $247,235 $267,261 $258,217 $244,207 21,177 11,187 12,657 21,423 17,406 $236,088 $256.048 $254,624 $256,794 $226,801 There were s i x branches i n the System which operated a t . a h i g h e r n e t cost than the S a l t Lake C i t y Branch i n 1957j namely, P i t t s b u r g h , Los Angeles, B a l t i m o r e , C i n c i n n a t i , D e t r o i t and B u f f a l o . A l l of such branches, however, handled a l a r g e r volume o f work, 304, (g) Volume o f Operations a t S a l t Lake C i t y Branchs The f o l l o w i n g i s a comparison o f the volume o f operations i n v a r i o u s departments o f t h e S a l t Lake C i t y Branch and the Head O f f i c e d u r i n g t h e l a s t six months o f 1956: S a l t Lake C i t y Branch Head O f f i c e Discount Departments Notes rediscounted 38 C o l l a t e r a l notes discounted 15 31 I n d u s t r i a l advances 2 Branches w i t h l a r g e r volumes B u f f a l o , B a l t i m o r e , Denver, Omaha, E l Paso and San Antonio. Safekeeping: Member bank s e c u r i t i e s 12-31-56 $2,591,000 $555,000 Branches w i t h l a r g e r volumes B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , J a c k s o n v i l l e , New Orleans, D e t r o i t , L i t t l e Rock, L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha, Houston and San Antonio. Currency & Coins 1 . Number o f b i l l s r e c e i v e d and counted 2,760,000 25,977,000 Branches w i t h l a r g e r volumes A l l branches except Helena, E l Paso and Spokane. Cost per one thousand u n i t s handled 94 cents 46 cents Branches w i t h h i g h e r u n i t c o s t : Helena and Spokane. 1,182,000 59,578,000 2. Number o f c o i n s r e c e i v e d and counted Branches w i t h l a r g e r volumes A l l branches except Helena, E l Paso and Spokane. Cost per one thousand u n i t s handled 85 cents 16 cents Branches w i t h h i g h e r u n i t costs Helena, E l Paso and Spokane• Check C o l l e c t i o n s 1 . Number o f c i t y checks ( c l e a r i n g s ) r e c e i v e d 470,000 5,055,000 Branches w i t h l a r g e r volumes A l l branches except L i t t l e Rock, Helena, E l Paso and Spokane. Cost per one thousand u n i t s handled $5.15 $1.78 Branches w i t h h i g h e r u n i t costs Helena, Los Angeles and S e a t t l e . 2. Number o f country checks (outgoing) received 5,416,000 5,259,000 Branches w i t h l a r g e r volumes B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , C h a r l o t t e , D e t r o i t , L o u i s v i l l e , Denver, Oklahoma C i t y , Omaha and Los Angeles. Cost per one thousand u n i t s handled $2.88 $2.51 Branches w i t h h i g h e r u n i t costs B u f f a l o , Los Angeles, P o r t l a n d and S e a t t l e . 305, S a l t Lake C i t y Branch Head O f f i c e Non-cash C o l l e c t i o n s s 1. Number o f c i t y c o l l e c t i o n s handled 12,425 12,352 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , B a l t i m o r e , D e t r o i t , L i t t l e Rock, Memphis, Denver, Oklahoma C i t y , Omaha, Houston and Los Angeles. Cost per u n i t handled 1 2 . 1 cents 27.5 cents Branches w i t h h i g h e r u n i t c o s t : A l l branches except J a c k s o n v i l l e , N a s h v i l l e , L i t t l e Rock, Memphis, Oklahoma C i t y , Omaha, E l Paso and Houston. 2. Number o f country c o l l e c t i o n s handled Branches w i t h l a r g e r volumes None. Cost per u n i t handled Branches w i t h h i g h e r u n i t c o s t : A l l branches. 79,630 43,331 4.7 cents 6 . 3 cents 3. Number o f coupons (except Government) and c o u n t r y s e c u r i t y c o l l e c t i o n s handled 608 3,465 Branches w i t h l a r g e r volume: A l l branches except E l Paso and Spokane. Cost per u n i t handled 25.6 cents 19.3 cents Branches w i t h h i g h e r u n i t c o s t : J a c k s o n v i l l e , E l Paso and Los Angeles. A schedule showing t h e volume o f operations of t h e S a l t Lake C i t y Branch f o r the years 1931 t o 1936, i n c l u s i v e , i s attached t o t h i s memorandum. (h) Survey o f S a l t Lake C i t y Branch by Board 1 s Examiners - 1933 During an examination of the Federal Reserve Bank of San F r a n c i s c o , made as o f September 2, 1933, the Board's examiners reviewed the o p e r a t i o n s o f t h e S a l t Lake C i t y Branch and reached the conclusion t h a t i t s continuance was j u s t i f i e d i n view o f S a l t Lake C i t y ' s importance i n the i n t e r - m o u n t a i n country and i t s d i s t a n c e from the Head O f f i c e a t San F r a n c i s c o . ( i ) Survey o f S a l t Lake C i t y Branch by Federal Reserve Bank o f San Francisco - 1936. I n accordance w i t h t h e request made by the Board i n i t s l e t t e r of March 25, 1936 (X-9532) the Federal Reserve Bank o f San Francisco made a comprehensive survey o f i t s f i v e branches. A r e p o r t o f t h i s survey was submitted t o the Board, w i t h o u t a d e f i n i t e recommendation as t o the discontinuance o f any branch. I n the l e t t e r o f t r a n s m i t t a l , dated August 26, 1936, i t was s t a t e d s o a t h e D i r e c t o r s o f t h e San F r a n c i s c o Reserve Bank, a f t e r a f u l l d i s c u s s i o n o f t h o m a t t e r , f e l t t h a t before any recommendation could be made i t would be necessary f o r the Board o f Governors t o give c o n s i d e r a t i o n t o the q u e s t i o n from a n a t i o n a l viewpoint and e s t a b l i s h some d e f i n i t e p o l i c y i n r e g a r d t h e r e t o , Tho survey contained a d e s c r i p t i o n o f the t e r r i t o r i e s served and f u n c t i o n s performed by a l l t h e branches o f t h e San Francisco Reserve Bank, as w e l l as s t a t i s t i c s and c h a r t s covering t h e i r operations f o r the years 1926 t o 1935, inclusive. soy SALT LAKE CITY BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Bi Ms Qa1;e Oi scounted Currency Received and Co i n Received and Counted Canted Non Cash Checks Handled Collection I tegs Ai 1 Gov't Gov't Ci tv SmttY Checks Other FJ seaI Agency Transfer Transactions of Funds I&iat Coupons 6,555,000 61,325 90,261* 626 - 16,717 - 13,982 • 12,897 Direct Qther 1931 5,176 3,813,000 3,337,000 677,000 5,588,000 1932 7,205 3,819,000 2,997,000 571,000 3,865,000 296,000 k,732,000 69,1*89 11*0,827 1*78 1933 1,318 3,003,000 2,1*01,000 65**, 000 3,552,000 1*77,000 **,683,000 65,661 21*3,212 2,171* \93k 52 3,91*6,000 3,0^,000 769,000 1*,I31*,000 1,038,000 5,9** 1,000 91*,619 21*6,732 3,625 2 f 1,198 1935 17 k,586,000 3,07U,000 818,000 I*, 796,000 609,000 6,223,000 137,000 198,000 7,389 *,251* 9,71*8 1936 13 5,062,000 3,1*1*9,000 938,000 6,256,000 553,000 7,7^*7,000 112,000 173,000 1,010 651 9,000 290,000 Amounts Handled ( i n thousands of dollars) 193! W,9I8 31,21*8 1,231 1*00,912 303,662 1*1,290 71*5,861* 758 32,623 731* - 1*95,515 1932 260,1*03 3k,Q€M 1,030 300,199 2I6,7M* 39,1*89 556,1*32 853 21*, 279 1*1*7 - 31*2,557 1933 20,**I5 30,161* 1,568 295,918 235,663 81*,1*18 615,999 875 38,81*1* 1,899 - 359,51*1* 193** 7**2 26,907 1,789 362,890 297,232 115,687 775,809 1,290 1*7,875 2,000 1 336,1*93 1935 288 29,250 1,99*4 1*20,072 351,667 106,73^* 878,U73 1,326 1*5,021 3,01*2 335 360,357 1936 230 30,015 930 507,15! 1*96,1*36 95,678 1,099,265 1,3*0 1*3,709 215 11*8 31*8,638 SEATTLE BRANCH - FEDERAL RESERVE BANK OF SAN MtANCISCO ( a ) C i t y of Seattle; S e a t t l e , w i t h a p o p u l a t i o n o f 565,583, i s the t w e n t i e t h l a r g e s t c i t y i n the United States and the l a r g e s t c i t y i n the State o f Washington* It is l o c a t e d i n the west c e n t r a l p a r t o f the State on Puget Sound and i s s a i d t o serve a trade area having a r a d i u s o f from 25 to 30 m i l e s i n which c.bout 513,000 people r e s i d e . T r a n s p o r t a t i o n f a c i l i t i e s are f u r n i s h e d by the Chicago- Milwaukee & S t . Paul, Great Northern, Union P a c i f i c , Northern P a c i f i c , and P a c i f i c Coast r a i l r o a d s and fcy various bus l i n e s and a i r l i n e s . A l a r g e number of steamship l i n e s also p l y between S e a t t l e and the p r i n c i p a l P a c i f i c coast and world p o r t s . The major i n d u s t r i e s o f the c i t y are canning, lumbering, t e x t i l e s , paper, ship b u i l d i n g and the manufacture of a i r p l a n e and automobile bodies, ammonia and chemicals, f u r n i t u r e , i r o n and s t e e l a r t i c l e s , r e f r i g e r a t o r s , rope and cordage, t o o l s and n a u t i c a l supplies. According t o the B i e n n i a l Census o f Manufactures f o r 1955, t h e r e were 1,064 manufacturing f i r m s operating i n King County, i n which S e a t t l e i s s i t u a t e d , which had an output valued a t $131,200,000 d u r i n g t h a t y e a r . The Census o f American Business f o r 1935 l i s t s 1,346 wholesale and 7,855 r e t a i l establishments o p e r a t i n g i n the same area, which enjoyed sales aggregating $355,559,000 and $184,408,000, r e s p e c t i v e l y , d u r i n g the year. Banking f a c i l i t i e s i n S e a t t l e are f u r n i s h e d by f o u r S t a t e banks (two members), two mutual saving banks, f o u r n a t i o n a l banks, two branches o f f o r e i g n banks and one branch o f a n a t i o n a l bank having i t s head o f f i c e i n San Francisco, which also operates branches i n P o r t l a n d , Oregon, and Tacoma, Washington. The i n s t i t u t i o n s having t h e i r head o f f i c e s i n S e a t t l e had deposits 309, aggregating $526,581,000, as o f December 51, 1936, and o f t h i s amount $262,252,000 was c a r r i e d by the s i x l o c a l member banks. Three o f the l a r g e r member banks were o p e r a t i n g an aggregate o f 31 branches; 15 w i t h i n the c i t y and 18 elsewhere i n the S t a t e o f Washington. One o f the s m a l l e r l o c a l member banks was a u t h o r i z e d t o c a r r y country bank r e s e r v e s . Debits t o i n d i v i d u a l accounts i n banks o f the c i t y aggregated $2,515,849,000 f o r the year 1956, or an average o f approximately $7,719,000 f o r each banking day. (b) Branch T e r r i t o r y and Functions: The S e a t t l e Branch was e s t a b l i s h e d on September 19, 1917. The branch t e r r i t o r y , which was r e v i s e d as o f January 18, 1957, i n c l u d e s ten counties i n Northern Idaho and the e n t i r e State o f Washington, except f i v e counties i n the extreme southern p a r t , the town o f Ilwaco and the c i t y o f Spokane. This t e r r i t o r y represents approximately 1556 o f the l a n d area o f the T w e l f t h D i s t r i c t and has approximately 18$ o f i t s t o t a l p o p u l a t i o n . Approximately 28% o f all banks i n the d i s t r i c t are w i t h i n t h i s area. As o f December 51, 1936, there were 182 banks, e x c l u s i v e o f mutual savings banks, i n the t e r r i t o r y now assigned t o the Branch and o f t h i s number 81, i n c l u d i n g 55 n a t i o n a l and 26 S t a t e i n s t i t u t i o n s , were members o f the System. 74 o f the 101 nonmember banks i n the zone were on the par l i s t . The f o l l o w i n g f i g u r e s taken from r e p o r t s o f c o n d i t i o n as o f the same date show t h e s i z e o f member bank f o o t i n g s o f banks i n the t e r r i t o r y now assigned t o the Branch as compared to those o f the T w e l f t h D i s t r i c t as a wholes 310, No* Member Banks Twelfth D i s t r i c t Branch Zone 322 81 Loans and Investments $3,630,503 282,138 Capital and Surplus (000 omitted) $337,201 31,148 Total Deposits $4,483,284 376,225 There were only seven branch zones i n the e n t i r e System having l a r g e r member bank f o o t i n g s than the S e a t t l e Zone; namely, P i t t s b u r g h , Los Angeles, D e t r o i t , C i n c i n n a t i , B u f f a l o , Baltimore and New Orleans. The S e a t t l e Branch r e n d e r s s u b s t a n t i a l l y the same s e r v i c e t o member banks i n i t s t e r r i t o r y as i s a v a i l a b l e a t the Head O f f i c e , i n s o f a r as r e c e i p t s and disbursements o f currency and c o i n , w i r e t r a n s f e r s , check c l e a r i n g and c o l l e c t i o n , non-cash c o l l e c t i o n s , safekeeping o f s e c u r i t i e s and loans t o member banks are concerned. Reserve accounts o f member banks i n the branch zone, as w e l l as accounts o f nonmember c l e a r i n g banks and o t h e r F e d e r a l Reserve banks, are maintained a t the Branch, which a l s o m a i n t a i n s a memorandum general l e d g e r and a r e c o r d o f c e r t a i n earnings and expenses. Transactions are c l e a r e d d a i l y through c o n t r o l accounts maintained a t the Head O f f i c e . Member bank borrowings are passed upon a t the Branch and immediate c r e d i t i s g i v e n , s u b j e c t t o f i n a l approval o f the Head O f f i c e . Schedules c o v e r i n g such t r a n s a c t i o n s are forwarded to the Head O f f i c e , but the notes and c o l l a t e r a l , i f any, are r e t a i n e d by the Branch. The Branch has no Bank Examination, F a i l e d Banks, Research, L e g a l or F i s c a l Agency departments. As o f Januaiy 8 , 1937, member banks i n the t e r r i t o r y now assigned t o the Branch had t h e f o l l o w i n g Reserve Bank balances: No. o f Banks C i t y of Seattle Remainder o f Zone 6 75 81 Reserve Balances Deferred Balances $24,973,870 11.995.752 S56.969*622 $2,234,137 574.111 &2.808.248 Capital - Stock Bills Discounted $573,650 566.600 $940,250 311, S e a t t l e i s 771 m i l e s (26 h r s . and 52 mins.) from San Francisco and as a consequence the S e a t t l e Branch does n o t enjoy o v e r - n i g h t communication by m a i l w i t h t h e Head O f f i c e . the branch zone. Other than S e a t t l e t h e r e are 61 member bank p o i n t s i n An examination o f m a i l schedules i n d i c a t e s t h a t none o f these p o i n t s are w i t h i n o v e r - n i g h t m a i l time o f San F r a n c i s c o , whereas a l l b u t 10 o f such p o i n t s are w i t h i n o v e r n i g h t m a i l time o f the Branch. I t i s clear, there- f o r e , t h a t discontinuance o f the S e a t t l e Branch would n o t o n l y c u r t a i l the c h a r a c t e r o f s e r v i c e rendered to banks i n the c i t y o f S e a t t l e , which now enjoy an o v e r - t h e - c o u n t e r r e l a t i o n s h i p w i t h the Branch, but t h a t i t would a l s o slow up the s e r v i c e given t o banks i n o u t l y i n g sections o f t h e zone. There a r e , o f course, a number o f member bank p o i n t s i n the S e a t t l e zone t h a t are a l s o w i t h i n o v e r - n i g h t m a i l time o f the P o r t l a n d Branch. Other than S e a t t l e , the more populous c i t i e s i n the branch zone are Tacoma, 106,817, Bellingham, 50,823, E v e r e t t , 30,567 and Yakima 22,101. All o f these c i t i e s have one or more member banks. (c) Branch B u i l d i n g s The S e a t t l e Branch occupies q u a r t e r s a t Second Avenue and Spring S t r e e t a t on annual r e n t a l o f $17,400 under a l e a s e which e x p i r e s on February 28, 1941. D u r i n g the year 1956, the Branch r e c e i v e d approximately §800 from government agencies f o r s u b l e t space. (d) Earnings - Branch Books: The Branch's earnings as r e f l e c t e d by i t s books f o r the years 1931 t o 1937, i n c l u s i v e , were as f o l l o w s : Years 1931 1932 1933 1934 1935 1936 1937 Earnings #30,500 87,000 27,200 700 200 1,100 500 These f i g u r e s are incomplete s i n c e , under present accounting p r o c e d u r e , the Branch r e c e i v e s no c r e d i t f o r income on Head O f f i c e investments, a p o r t i o n o f which i s made p o s s i b l e by the Federal Reserve bank stock investment and r e s e r v e balances o f banks i n the branch zone. Income shown on the Branch 1 s books i s d e r i v e d c h i e f l y from r e d i s c o u n t s o f member banks, r e s e r v e p e n a l t i e s and r e n t a l o f banking room space to o t h e r government agencies. The above f i g u r e s are i n t e r e s t i n g i n t h a t t h e y r e f l e c t the d e c l i n e i n income from the f i r s t mentioned source, which amounted t o $85,500 i n 1932 as compared t o o n l y §500 i n 1937. (e) Branch Personnel: The r e p o r t o f examination o f the Federal Reserve Bank o f San F r a n c i s c o , as o f January 8 , 1937, shows the f o l l o w i n g i n regard t o s a l a r i e s and personnel a t the S e a t t l e Branch. January 8 . 1957 Number Amount Officers Employees 3 56 59 $15,400 90,100 8105,500 A p r i l 11, 1956 Number Amount 5 57 60 $15,400 91,600 $107,000 Decrease Number Amount 1 1 $1.500 £1,500 O f f i c e r s and employees whose s a l a r i e s and wages are reimbursable are n o t i n c l u d e d i n the above f i g u r e s . During the examination one o f f i c e r and eleven employees, w i t h annual s a l a r i e s o f $24,400 a f t e r one r e d u c t i o n o f $480, were t r a n s f e r r e d from the Spokane Branch to the S e a t t l e Branch, and one o f f i c e r w i t h an annual s a l a r y o f §3,900 was t r a n s f e r r e d from the S e a t t l e t o the Los Angeles Branch, b r i n g i n g the t o t a l p a y r o l l to $126,000 per annum. ( f ) Branch Expense by F u n c t i o n s : The expenses o f the S e a t t l e Branch by f u n c t i o n s f o r the years 1952 t o 1957 i n c l u s i v e , were as f o l l o w s : SIS 1932 1933 1954 General Overhead: Controllable 0 9,047 0 11,381 0 8,492 Non C o n t r o l l a b l e 6,985 8,804 9,421 P r o v i s i o n o f Space 25,576 23,151 23,108 P r o v i s i o n o f Personnel 4,047 3,686 11,506 General Service 25,200 26,899 27,186 5,700 7,130 Postage 7,037 1,269 Insurance 2,276 2,6a F a i l e d Banks 1,111 2,546 2,447 5,457 L o a n s , r e d i s c o u n t s , e t c . 5,715 6,257 905 800 Securities 925 Currency & Coin 17,859 18,474 17,432 Check C o l l e c t i o n 23,526 25,392 23,095 Non-cash C o l l e c t i o n 6,485 7,539 8,072 Accounting 22,686 21,058 21,728 F i s c a l Agency 12,212 16,616 .13,163 Auditing 2,979 2,779 2,042 Bank R e l a t i o n s 100 529 405 — Bank Examinations 73 51 S t a t i s t i c a l & Analytical 754 779 760 T o t a l Expense $171,201 0183,595 0104,673 Less - Reimbursable F i s c a l Agency Exp. 9.016 15,650 10,080 Net Expense &L62.105 $169,945 §175,793 1956 1955 $ § 9,562 1937 $ 10,402 7,688 7 21,211 14,882 29,546 7,302 1,167 771 11,199 887 24,979 22,147 8,203 21,035 19,927 3,027 157 24 980 §195,139 19,365 17,147 28,551 7,605 1,095 164 5,514 895 28,359 25,527 8,231 21,576 17,670 2,805 254 20 1,126 0193,244 4,135 929 35,221 31,141 8,627 25,180 10,805 3,247 529 22 1,291 $288,750 9.658 £105.401 10,398 $182,846 11,065 §207,687 — — 27,669 10,419 29,610 12,042 1,483 — There were s i x t e e n branches i n the System which operated a t l e s s expense than the S e a t t l e Branch i n 1957. (g) Volume o f Operations a t S e a t t l e Branch; The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s departments o f the S e a t t l e Branch and the Head O f f i c e d u r i n g the l a s t six months o f 1936: S e a t t l e Branch Safekeeping: Member bank s e c u r i t i e s 12-31-36 $295,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e . Head O f f i c e $553,000 Currency & Coin: 1 . Number o f b i l l s r e c e i v e d and counted 7,594,000 25,977,000 Branches w i t h l a r g e r volume: B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , C h a r l o t t e , J a c k s o n v i l l e , New O r l e a n s , D e t r o i t , L o u i s v i l l e , Memphis and Los Angeles. Cost per one thousand u n i t s handled 56 cents 46 cents Branches w i t h h i g h e r u n i t c o s t : Helena and Spokane. s t S e a t t l e Branch Head O f f i c e Currency & Coin 2. Number o f coins received and counted 6,550,000 59,578,000 Branches w i t h l a r g e r volumes B u f f a l o , C i n c i n n a t i , P i t t s b u r g h , B a l t i m o r e , New Orleans, D e t r o i t , L o u i s v i l l e , Houston and Los Angeles. Cost per one thousand u n i t s handled 29 cents 16 cents branches w i t h higher u n i t c o s t : Helena, E l Paso, P o r t l a n d , S a l t Lake C i t y and Spokane. Check Collections 1. Number o f c i t y checks ( c l e a r i n g s ) received 669,000 3,055,000 Branches w i t h l a r g e r volume: A l l branches except C h a r l o t t e , Birmingham, P o r t l a n d , J a c k s o n v i l l e , L i t t l e Rock, Helena, Oklahoma C i t y , M e m p h i s * E l Paso, San Antonio, S a l t Lake C i t y and Spokane. Cost per one thousand u n i t s handled $5.41 $1.78 Branches w i t h higher u n i t costs Helena and Los Angeles. 2. Number o f country checks (outgoing) received 1,661,000 3,259,000 Branches w i t h l a r g e r volumes A l l branches except L i t t l e Rock, Memphis and E l Paso. Cost per one thousand u n i t s handled 05*55 $2.51 Branches w i t h higher u n i t costs Los Angeles and P o r t l a n d . Non-cash C o l l e c t i o n s 1 . Number o f c i t y c o l l e c t i o n s handled 9,991 12,552 Branches w i t h l a r g e r volumes B u f f a l o , C i n c i n n a t i , B a l t i m o r e , J a c k s o n v i l l e , D e t r o i t , L i t t l e Rock, Memphis, Denver, Oklahoma C i t y , Omaha, Houston, Los Angeles and S a l t Lake City. Cost per u n i t handled 2 2 . 1 cents 27.5 cents Branches w i t h higher u n i t c o s t : C i n c i n n a t i , P i t t s b u r g h , Los Angeles and Portland. 2. Number o f country c o l l e c t i o n s handled 10,246 45,531 Branches w i t h l a r g e r volumes B u f f a l o , Baltimore, C h a r l o t t e , J a c k s o n v i l l e , D e t r o i t , Memphis, Denver, Oklahoma C i t y , Omaha, Los Angeles, P o r t l a n d , S a l t Lake C i t y and Spokane. Cost per u n i t handled 14.5 cents 6.5 cents Branches w i t h higher u n i t c o s t : B u f f a l o , Birmingham, N a s h v i l l e , Los Angeles and P o r t l a n d . 5. Number of coupons (except Government) and' country s e c u r i t y c o l l e c t i o n s handled 773 5,465 Branches w i t h l a r g e r volume: A l l branches except Helena, E l Paso, S a l t Lake C i t y and Spokane. Cost per u n i t handled 4 cents 19.3 cents Branches w i t h higher u n i t costs A l l Branches except C i n c i n n a t i and Pittsburgh. 315 A schedule showing the volume o f o p e r a t i o n s o f the S e a t t l e Branch f o r t h e years 1951 t o 1956, i n c l u s i v e , i s attached t o t h i s memorandum. ( h ) Survey o f S e a t t l e Branch by Board's Examiners - 1955 D u r i n g the course o f an examination o f the F e d e r a l Reserve Bank o f San F r a n c i s c o , made as o f September 2, 1953, t h e Board 1 s examiners reviewed the o p e r a t i o n s o f the S e a t t l e , P o r t l a n d and Spokane Branches and reached the conclusion t h a t i t would be p o s s i b l e t o c o n s o l i d a t e t h e o p e r a t i o n o f such branches a t P o r t l a n d w i t h o u t s e r i o u s l y a f f e c t i n g the c h a r a c t e r o f the s e r v i c e rendered t o member banks i n the P a c i f i c Northwest, w i t h the p o s s i b l e exception o f those l o c a t e d i n t h e c i t i e s o f Spokane and S e a t t l e . I t was i n d i c a t e d t h a t m a i l f a c i l i t i e s , b o t h f o r o r d i n a r y and emergency purposes, had improved subs t a n t i a l l y since the branches were e s t a b l i s h e d ; t h a t as a r e s u l t o f this improvement the o p e r a t i o n o f a l l t h r e e branches c o u l d be handled a t P o r t l a n d a t a considerable saving a f t e r some increase i n personnel and p h y s i c a l f a c i l i t i e s ; and t h a t , since none o f t h e Northwest branches owned t h e i r banking q u a r t e r s , i t would be p o s s i b l e t o e f f e c t the c o n s o l i d a t i o n w i t h o u t any l o s s through t h e sale o f r e a l e s t a t e o r b u i l d i n g s • I t was f u r t h e r i n d i c a t e d t h a t the q u e s t i o n o f c o n s o l i d a t i o n had been discussed w i t h the management o f the San Francisco Reserve Bank, which, w h i l e agreeing t h a t t h e r e was no reason f o r more than one branch i n t h e P a c i f i c Northwest, b e l i e v e d i t inopportune t o d i s c o n t i n u e any branch because o f the s e r v i c e which the Reserve banks were r e n d e r i n g t o other Government agencies. ( i ) Survey o f S e a t t l e Branch made by Federal Reserve Bank o f San Francisco - 1956 I n accordance w i t h the request made by the Board i n i t s l e t t e r of March 25, 1956 (X-9552), the Federal Reserve Bank o f San Francisco made a comprehensive survey o f i t s f i v e branches• A r e p o r t o f t h i s survey was sub- m i t t e d t o the Board, w i t h o u t a d e f i n i t e recommendation as t o the discontinuance 316, o r c u r t a i l m e n t o f any branch. I n t h e l e t t e r o f t r a n s m i t t a l , dated August 26, 1936, i t was s t a t e d t h e D i r e c t o r s o f the San Francisco Reserve Bank, a f t e r a f u l l d i s c u s s i o n o f t h e m a t t e r , f e l t t h a t b e f o r e any recommendation could be made i t would be necessaiy f o r the Board o f Governors t o consider t h e q u e s t i o n from a n a t i o n a l v i e w p o i n t and e s t a b l i s h a d e f i n i t e p o l i c y i n regard t h e r e t o . The survey contained a d e s c r i p t i o n o f t h e t e r r i t o r i e s served and f u n c t i o n s performed by a l l o f the branches o f t h e San Francisco Reserve Bank, as w e l l as s t a t i s t i c s and c h a r t s covering t h e i r o p e r a t i o n s f o r the y e a r s 1926 t o 1935, inclusive. A memorandum r e l a t i v e t o c u r t a i l m e n t o f t h e f u n c t i o n s performed by t h e Spokane Branch was a l s o a t t a c h e d . On January 17, 1937, w i t h the Board 1 s a p p r o v a l , t h e e n t i r e territory p r e v i o u s l y served by t h e Spokane Branch, except t h e C i t y o f Spokane, i n c l u d i n g eighteen counties i n western Washington and t e n counties i n Northern Idaho, was t r a n s f e r r e d t o t h e S e a t t l e Branch. As a r e s u l t o f t h i s change t h e net expense o f t h e S e a t t l e Branch has increased from $184,200 i n 1936 t o $207,000 f o r the y e a r 1937, o r approximately $22,800j whereas t h e r e has been a r e d u c t i o n i n n e t expense a t the Spokane Branch from $165,800 i n 1936 t o $70,700 i n 1937, o r approximately $95,100 - t h e net saving r e s u l t i n g from the change being about $72,000. I n t h e c o n f i d e n t i a l s e c t i o n o f t h e r e p o r t o f examination o f t h e Federal Reserve Bank o f San F r a n c i s c o , made as o f J u l y 15, 1938, i t is s t a t e d t h a t t h e change i n t e r r i t o r y has proved e n t i r e l y p r a c t i c a b l e , b u t t h a t under present c o n d i t i o n s t h e cost o f o p e r a t i n g t h e Spokane Branch w i l l cont i n u e t o be approximately $70,000 per y e a r , and t h a t t h i s expenditure i s n o t j u s t i f i e d by the s e r v i c e s rendered by t h e Branch. I n t h i s connection, the Board's examiner again expressed the o p i n i o n t h a t the P a c i f i c Northwest could be s a t i s f a c t o r i l y served by one branch. 317, At t h e time t h e Spokane Branch was c u r t a i l e d i t was a n t i c i p a t e d t h a t t h p lease on i t s banking q u a r t e r s , which expires December 31, 1938, could be r e newed f o r l e s s space and a t a reduced r e n t a l . However, the management has been unable t o n e g o t i a t e a s a t i s f a c t o r y lease and, because o f t h i s situation, t h e d i r e c t o r s o f the Reserve bank r e c e n t l y again reviewed t h e o p e r a t i o n s o f the Branch and recommended i t s complete discontinuance. A letter request- i n g approval o f the discontinuance was addressed t o t h e Board o f Governors on August 9 , 1938. I t was i n d i c a t e d t h a t i n t h e event t h e Spokane Branch were d i s c o n t i n u e d e n t i r e l y a p o r t i o n o f i t s former t e r r i t o r y , which was t r a n s f e r r e d t o the S e a t t l e Branch on January 17, 1937, would be r e a l l o c a t e d t o t h e P o r t l a n d Branch. On August 30, 1938, t h e Board approved t h e discontinuance o f the Spokane Branch. i 318, SEATTLE BRANCH VOLUME OF OPERATIONS WVfftor of P f e ^ s Ha^dletj Currency Rece i ved and Bills Date Discounted Non Cash Coin Recei ved Counted and Counted Checks Handled £ii* Svmirx GovU Checks Collection Items M a i Gov't All faWMft Other Fiscal Agency Transfer Transit UM, Direct Other of iMfM!? .. 1931 1,131 10,123,000 II,161,000 2,460,000 3,116,000 533,000 6,109,000 116,398 30,184 1,393 * 14,030 1932 3f4l6 9,560,000 11,080,000 1,863,000 2,328,000 532,000 4,723,000 120,034 33,598 904 - 12,939 1933 1,502 10,520,000 0,977,000 1,595,000 1,924,000 648,000 4,167,000 128,769 49,976 4,431 - 11,606 1934 44 11,563,000 8,790,000 1,688,000 2,273,000 1,192,000 5,153,000 150,560 46,679 6,921 - 8,426 1935 t9 11,911,000 9,649,000 1,916,000 2,692,000 767,000 5,375,000 168,000 44,000 12,367 2,074 7,237 13,990,000 13,546,000 2,130,000 3,116,000 896,000 6,142,000 125,000 40,000 1,917 676 7,000 1936 - Amounts Handled ( i n thousands of dollars) 1931 198,632 76,218 2,281 840,055 221,743 116,727 1,178,525 1,578 29,101 5,686 - 1,262,416 1932 445,730 71,410 2,111 516,493 157,645 111,254 785,392 1,714 16,992 5,579 - 1,020,859 1933 63,103 71,490 3,541 486,781 142,771 95,332 724,884 1,821 23,389 4,982 - 759,342 1934 846 67,553 1,939 639,522 197,909 155,407 992,838 2,050 29,628 3,649 - 537,831 1935 1,702 65,943 2,034 711,979 240,531 166,394 1,118,904 1,924 34,669 5,309 610 465,714 76,603 2,693 801,639 312,485 192,185 1,306,309 1,412 415 482,338 1936 - 1,933 39,709 SPOKANE BRANCH - FEDERAL RESERVE BANK OF SaN JfltAMCISCO (a) C i t y o f Spokane Spokane, w i t h a p o p u l a t i o n o f 115,514 i s t h e second l a r g e s t city i n t h e S t a t e o f Washington and the s e v e n t i e t h l a r g e s t c i t y i n t h e U n i t e d States. I t i s l o c a t e d i n t h e extreme west c e n t r a l p a r t o f t h e S t a t e , on t h e Spokane R i v e r , a t t h e o n l y p o i n t n o r t h o r south a t w h i c h r a i l r o a d s cross t h e Rocky Mountains on a reasonable grade and, because o f t h i s can fact, i s considered t h e n a t u r a l gateway between the P a c i f i c t i d e w a t e r and t h e interior. It i s about 92 m i l e s d i s t a n t from the s i t e o f Grand Coulee Dam. The c i t y i s r e p o r t e d t o serve a t r a d e area e x t e n d i n g f r o m 100 t o 150 m i l e s i n a l l d i r e c t i o n s i n w h i c h a p p r o x i m a t e l y 564,000 people r e s i d e . Transpor- t a t i o n f a c i l i t i e s are f u r n i s h e d by s i x r a i l r o a d s , i n c l u d i n g t h e Great N o r t h e r n , t h e Chicago-Milwaukee, S t . P a u l and P a c i f i c , t h e N o r t h e r n P a c i f i c and the Union P a c i f i c ; a l s o by v a r i o u s motor coach l i n e s and s e v e r a l a i r lines. The p r i n c i p a l i n d u s t r i e s o f Spokane are t h e h a n d l i n g o f g e n e r a l farm c r o p s , l i v e s t o c k , w o o l , f r u i t and lumber, and b r e w i n g . According to t h e B i e n n i a l Census o f Manufactures f o r 1935, t h e r e were 256 m a n u f a c t u r i n g f i r m s i n Spokane County w h i c h had an o u t p u t v a l u e d a t $43,877,000 d u r i n g t h a t year. The Census o f American Business l i s t s 2,332 r e t a i l and 1,585 wholesale e s t a b l i s h m e n t s o p e r a t i n g i n t h e same a r e a . These concerns had s a l e s aggre- g a t i n g 062,951,000 and $72,173,000, r e s p e c t i v e l y , d u r i n g t h e year 1935. Banking f a c i l i t i e s i n Spokane are f u r n i s h e d by two S t a t e banks (one member), two n a t i o n a l banks, one nonmember t r u s t company and by two branches o f t h e S e a t t l e - F i r s t N a t i o n a l Bank, S e a t t l e , Washington. Banks h a v i n g t h e i r head o f f i c e s i n Spokane had d e p o s i t s a g g r e g a t i n g ^ 3 4 , 1 8 3 , 0 0 0 , as o f December 31, 1937, and o f t h i s amount 033,500,000 was c a r r i e d by member i n s t i t u t i o n s . 320, The S e a t t l e - F i r s t N a t i o n a l Bank had deposits o f v 138,742,000 as o f the same date o f which approximately ^31#000,000 was h e l d by i t s two branches i n Spokane. Debits to i n d i v i d u a l accounts i n banks o f t h e c i t y amounted t o $537,754,000 d u r i n g the year 1936, or an average o f approximately $1,792,000 f o r each banking day, (b) Branch T e r r i t o r y and Functions: The Spokane Branch was e s t a b l i s h e d on J u l y 26, 1917 and u n t i l January 17, 1937 served a t e r r i t o r y c o n s i s t i n g o f t e n counties i n Northern Idaho and e i g h t e e n counties i n e a s t e r n Washington. On January 17, 1937 a l l o f t h i s terri- t o r y , except the c i t y o f Spokane, was t r a n s f e r r e d t o t h e S e a t t l e Branch. The Spokane Branch now maintains the reserve accounts o f banks l o c a t e d w i t h i n the c i t y , handles cash and non-cash items payable i n the c i t y o f Spokane, handles m a i l and t e l e g r a p h i c t r a n s f e r s t o and from Spokane banks, furnishes currency and c o i n t o such banks, r e c e i v e s and a c t s upon a p p l i c a t i o n s f o r r e d i s counts o f banks i n the c i t y and performs c e r t a i n f i s c a l agency f u n c t i o n s f o r them. The Branch also acts as custodian f o r the R e c o n s t r u c t i o n Finance Cor- poration. The l a s t mentioned a c t i v i t y was t r a n s f e r r e d t o the P o r t l a n d Branch i n November, 1937, but was r e s t o r e d on J u l y 5, 1938. As o f J u l y 15, 1938, the t h r e e member banks i n the c i t y o f Spokane had balances w i t h t h e Branch as f o l l o w s : Mb. o f Banks Reserve Balances Deferred Balances Capital Stock 3 ^7,330,600 ^543,900 #76,500 Bills Discounted Spokane i s 330 t r a i n m i l e s (9 t o 10 h r s . ) from S e a t t l e and 379 t r a i n m i l e s (10 to 11 h r s . ) from P o r t l a n d . On any business day t r a i n s leave Spokane a f t e r 6 P.M. and a r r i v e i n P o r t l a n d or S e a t t l e p r i o r t o 8 A.M. on the f o l l o w i n g 321, day i . e . , overnight mail time. There i s also overnight mail from both Portland and Seattle to Spokane between the same hours. Daily a i r mail service is also available to and from the three c i t i e s . Discontinuance of the Spokane Branch would, of course, r e s u l t i n some inconvenience to the three member banks located i n Spokane, which now enjoy an over-the-counter relationship with the Branch, since they would have to adapt themselves to over-night mail schedules. I n t h i s connection, however, a t t e n t i o n i s called to the fact that there are a number of c i t i e s throughtout the United States that are as important as Spokane as centers of population, finance and industry which do not enjoy immediate access to Reserve bank f a c i l i ties. This group includes Indianapolis, Indiana, Columbus and Toledo, Ohio, Grand Rapids, Michigan, Hartford, Connecticut and Milwaukee, Wisconsin; to name but a few. (c) Branch B u i l d i n g ; The Spokane Branch occupies quarters i n the Old National Bank building under a lease which expires December 31, 1933. Under the terms of the lease the Branch i s provided with approximately 16,715 square f e e t o f space a t an annual r e n t a l of §12,000. Usable floor space amounts to 11,222 square feet, of which 6,854 square feet are occupied by the Branch and 4,368 square feet are vacant. The vacant space arises from curtailment of the functions of the Branch. An e f f o r t has been made to renew the lease for a reduced amount of space at a lower r e n t a l without success. (d) Branch Personnel: The report of examination of the Federal Reserve Bank of San Francisco, made as of July 15, 1938, shows the following i n regard to salaries and personnel at the Spokane Branch: 322, J u l y 15, 1933 Amount Number Officers Less - Reimbursable Employees Less - Reimbursable Total Less - Reimbursable 1.00 $ 5,500 1,650 •2° .70 January 8 , 1937 Number Amount 3.00 .20 117,200 900 2.80 16.300 31.00 8.11 22.89 12,67? 66.00 9-78 99,720 l?,959 125.207 56.22 #82,761 32.00 8.A1 23.. 59 ¥53,380 14,22,3 $29,057 69.00 ^116,920 47,880 9.98 16.859 59.02 $100,061 Decrease Number Amount 2.10 $12,45c 35.A3 &61.00Z As w i l l be noted from t h e above t a b l e , the personnel c o n s i s t s o f one o f f i c e r and 31 employees w i t h annual s a l a r i e s o f &53>380 o f which $>14,323 i s reimbursable. A f t e r allowance f o r reimbursable s a l a r i e s , t h i s r e f l e c t s a r e - d u c t i o n between examinations o f two o f f i c e r s and 33 employees, w i t h annual s a l a r i e s o f $61,004. The decrease i s due t o c u r t a i l e d o p e r a t i o n s r e s u l t i n g from the t r a n s f e r o f branch t e r r i t o r y , other t h a n the c i t y o f Spokane, t o the S e a t t l e Branch on January 17, 1937* (e) Branch Expense by Functions: The expenses o f t h e Spokane Branch by f u n c t i o n s f o r the years 1932 t o 1937> i n c l u s i v e , were as f o l l o w s ; 323, 1222 1224 ±m General Overhead: Controllable § 10,814 0-12,945 Non-controllable 4,520 2,788 P r o v i s i o n o f Space 15,625 18,733 6,092 P r o v i s i o n o f Personnel 3,623 General Service 24,386 29,967 Postage 8,322 6,310 Insurance 3,486 2,953 F a i l e d Banks 18,406 33,660 Loans, r e d i s c o u n t s , e t c . 24,948 23,088 Securities 2,127 1,323 Currency & Coin 9,202 8,506 Check C o l l e c t i o n 18,626 15,719 Non-Cash C o l l e c t i o n 9,898 5,423 Accounting 20,076 23,439 F i s c a l Agency 13,861 30,357 Auditing 2,111 3,837 Bank R e l a t i o n s 564 645 Bank Examinations 5 S t a t i s t i c a l & A n a l y t i c a l . . 514 .. 792 T o t a l Expense ^178,754 $238,938 Less - Reimbursable F i s c a l Agency Expense 12 v 8?2 28,666 Sl65^922 $210,272 Net Expense $ 10,323 5,440 19,718 14,243 33,556 7,150 2,040 20,792 4,118 1,416 11,663 1935 $ 10,104 1226 31,812 4,296 961 11 m 1200,160 $ 10,365 15 15,505 19,387 32,134 7,615 1,274 230 3,015 1,490 17,729 17,159 6,697 23,137 27,984 3,222 921 5 924 #188,808 19.220 , 20.750 £185.46^ 1^80,940 . 22,091 #165,717 16,568 8,267 22,678 23,103 3,427 651 6 1,055 $206,214 - 15,167 20,512 34,076 7,188 1,439 4,649 6,374 1,151 16,292 15,695 7,149 22,291 1222 $ 6,404 - 457 11,005 19,269 801 1,146 - 634 406 7,514 3,583 2,204 13,131 18,769 1,404 217 - 556 $87,500 15,97* £71.522 The r e d u c t i o n i n expenses f o r the year 1937, as compared t o p r i o r y e a r s , was due t o the c u r t a i l m e n t o f Branch t e r r i t o r y and f u n c t i o n s on January 17, 1937• ( f ) Volume o f Operations at Spokane Branch: The f o l l o w i n g i s a comparison o f the volume o f o p e r a t i o n s i n v a r i o u s departments o f t h e Spokane Branch d u r i n g the l a s t s i x months o f t h e years 1936 and 1937, i . e . , b e f o r e and a f t e r t h e change i n b r a n c h t e r r i t o r y : Last s i x monts 1^36 Discount Department Notes Rediscounted C o l l a t e r a l notes r e d i s c o u n t e d I n d u s t r i a l advances 3 Last s i x months 1937 Currency & Coin Number o f b i l l s Cost per one Number o f coins Cost per one received thousand received thousand and counted u n i t s handled and counted u n i t s handled Check C o l l e c t i o n Number o f c i t y checks ( c l e a r i n g s ) handled Cost per one thousand u n i t s handled Number o f country checks (outgoing) r e c e i v e d Cost per one thousand u n i t s handled Last s i x months 1936 Last s i x months 1937 1,485,000 1,134,000 #1.26 $1.12 698,000 603,000 #1-95 78 cents 389,000 294,000 $2.30 $2.63 $2.76 $11.56 1,948,000 11,000 Non-cash C o l l e c t i o n s Number o f c i t y c o l l e c t i o n s handled Cost per u n i t handled Number o f country c o l l e c t i o n s handled Cost per u n i t handled 7,949 15.6 cents 24,720 6 . 1 cents 2,524 25.7 cents Number o f coupons (except kovernments) and country s e c u r i t y c o l l e c t i o n s handled Cost per u n i t handled U5 24*5 cents 79 28.9 cents 1,928 2 , 2 cents (g) Survey o f Spokane Branch by Board*s Examiners - 1933 During t h e course o f an examination o f t h e Federal Reserve Bank o f San F r a n c i s c o , made as o f September 2 , 1933, the B o a r d ' s examiners reviewed the o p e r a t i o n s o f t h e Spokane, S e a t t l e , and P o r t l a n u Branches and reached t h e c o n c l u s i o n t h a t i t would bo p o s s i b l e t o c o n s o l i d a t e the o p e r a t i o n o f such branches a t P o r t l a n d w i t h o u t s e r i o u s l y a f f e c t i n g the c h a r a c t e r o f the s e r v i c e rendered t o member banks i n t h e P a c i f i c Northwest, w i t h t h e p o s s i b l e e x c e p t i o n o f those l o c a t e d i n tho c i t i e s o f Spokano and S e a t t l e . I t was i n d i c a t e d t h a t m a i l f a c i l i t i e s , b o t h f o r o r d i n a r y and emergency purposes, had improved subs t a n t i a l l y since t h e branches were e s t a b l i s h e d ; t h a t as a r e s u l t o f N this improvement the o p e r a t i o n o f a l l t h r e e branches could be handled a t P o r t l a n d , a f t e r some increase i n personnel and p h y s i c a l f a c i l i t i e s , a t a considerable saving; and t h a t , s i n c e none o f the Northwest branches owned t h e i r banking 325, q u a r t e r s , i t would b© p o s s i b l e t o e f f e c t the c o n s o l i d a t i o n w i t h o u t any l o s s through the sale o f r e a l e s t a t e o r b u i l d i n g s . I t was f u r t h e r i n d i c a t e d t h a t the q u e s t i o n o f c o n s o l i d a t i o n had been discussed w i t h the management o f the Reserve Bank, which, w h i l e agreeing t h a t t h e r e was no reason f o r more t h a n one branch i n the P a c i f i c Northwest, b e l i e v e d i t inopportune t o d i s c o n t i n u e any branch because o f the s e r v i c e which the Reserve banks were r e n d e r i n g t o o t h e r Government agencies. (h) Survey o f Spokane Branch made by Federal Reserve Bank o f San Francisco - 1 9 3 6 I n accordance w i t h the request made by t h e Board i n i t s l e t t e r o f March 25, 1936 (X-9532), the Federal Reserve Bank o f San F r a n c i s c o made a comprehensive survey o f i t s f i v e branches. A r e p o r t o f t h i s survey was sub- m i t t e d t o the Board, w i t h o u t a d e f i n i t e recommendation as t o the d i s c o n t i n uance o f any branch. However, a memorandum r e l a t i v e t o c u r t a i l m e n t o f the f u n c t i o n s performed by the Spokane Branch, which had been prepared f o r the d i r e c t o r s o f the Reserve bank, was attached. On December 10, 1936 President Day advised t h e Board t h a t h i s d i r e c t o r s , i n the i n t e r e s t o f economy and subj e c t t o the approval o f t h e Board, had voted t o t r a n s f e r a l l o u t - o f - t o w n r e serve accounts c a r r i e d by member banks w i t h the Spokane Branch t o the S e a t t l e Branch and t o d i s c o n t i n u e at t h e Spokane Branch a l l s e r v i c e s , o t h e r t h a n the c o l l e c t i o n o f checks payable i n t h e c i t y o f Spokane and currency s e r v i c e f o r Spokane banks. On December 17, 1936, the Board w i r e d i t s approval o f the contemplated change and i t was made e f f e c t i v e as o f January 17, 1937- As a r e s u l t o f the change the net expense o f t h e S e a t t l e Branch increased from $184,200 i n 1936 t o $207,000 i n 1937, o r approximately $23j000; whereas there has been a r e d u c t i o n i n net expense at the Spokane Branch from $.165,800 i n 1936 to#70,500 i n 1937, or approximately $95,000 - the i n d i c a t e d net s a v i n g t o the Federal Reserve Bank o f San Francisco being i n the neighborhood o f $72,000. I n the c o n f i d e n t i a l s e c t i o n o f the r e p o r t o f examination o f the Federal Reserve Bank o f San Francisco, made as o f J u l y 15, 1938, i t i s s t a t e d t h a t the change i n t e r r i t o r y has proved e n t i r e l y p r a c t i c a b l e , but t h a t under present conditions the cost o f o p e r a t i n g the Spokane Branch w i l l continue t o be approximately £•70,000 a y e a r , and t h a t t h i s expenditure i s not j u s t i f i e d by the s e r v i c e s rendered by the Branch. I n t h i s connection, the Board* s Examiner r e f e r s t o comments made i n previous r e p o r t s o f examination r e g a r d i n g t h e Spokane, P o r t l a n d and S e a t t l e Branches and s t a t e s : « * * * y 0 U r examiner continues o f the o p i n i o n t h a t , not o n l y could the Spokane branch be d i s c o n t i n u e d w i t h o u t m a t e r i a l l y a f f e c t i n g the s e r v i c e s rendered by the Reserve Bank, but a l s o t h a t the Northwest t e r r i t o r y served by the t h r e e branches could be s a t i s f a c t o r i l y served by one b r a n c h , " As p r e v i o u s l y mentioned i n t h i s memorandum the lease on the q u a r t e r s occupied by the Spokane Branch w i l l e x p i r e on December 31, 1938* When the t e r r i t o r y served by the Branch was reduced t o the c i t y o f Spokane i n January, 1937 > i t was a n t i c i p a t e d t h a t a new lease f o r l e s s space and a t a reduced r e n t a l , i n keeping w i t h the c u r t a i l e d needs o f the Branch, could be n e g o t i a t e d . However, t h e management has been unable t o o b t a i n a s a t i s f a c t o r y lease and, because o f t h i s s i t u a t i o n , t h e d i r e c t o r s o f the Reserve bank have r e c e n t l y again reviewed the o p e r a t i o n s o f the Branch and recommended i t s complete d i s continuance. As a r e s u l t P r e s i d e n t Day addressed a l e t t e r t o the Board o f Governors on August 9> 1938, a d v i s i n g o f the a c t i o n t a k e n by h i s d i r e c t o r s and r e q u e s t i n g approval o f the discontinuance o f the Spokane Branch. I t was i n d i - cated t h a t i n t h e event the Branch were d i s c o n t i n u e d a p o r t i o n o f i t s territory, 327, p r e v i o u s l y t r a n s f e r r e d t o the S e a t t l e Branch, would be r e a l l o c a t e d t o the P o r t l a n d Branch and t h a t c o n s i d e r a t i o n should be g i v e n t o changing the reserve c i t y d e s i g n a t i o n o f Spokane. On August 30, 193S, the Board approved the p l a n t o d i s c o n t i n u e the Spokane Branch, under which the reserve accounts o f the t h r e e member banks l o c a t e d i n Spokane would be t r a n s f e r r e d t o the S e a t t l e Branch. I n approving the p l a n the Board s t a t e d t h a t i t would be glad t o c o n s i d e r any recommendation the Reserve Bank might w i s h t o make r e g a r d i n g the r e a l l o c a t i o n o f i n the S e a t t l e and P o r t l a n d zones. territory SPOKANE BRANCH VOLUME OF OPERATIONS Number of Pieces Handled Currency Received and Counted Co in Received Non Cash Checks Handled Gov»t Country Checks Fiscal Agency Lii Total 21*4,000 3,99*4,000 5*4,376 15,872 736 2,256,000 210,000 3,011,000 5*4,195 29,*422 23*4 25 8,53*4 7*41,000 2,027,000 317,000 3,085,000 5*4,382 I0I,*463 1,562 37 9,313 1,687,000 898,000 2,53*4,000 697,000 *4,129,000 56,*49*4 83,569 3,208* 1*48 7,117 2,589,000 I,820,000 878,000 3,121,000 *437,000 *4,*436,000 63,000 53,000 6,620 I,139 6,S20 2,719,000 2,188,000 798,000 3,611,000 *433,000 *45,000 58,000 525 1,007 12,000 Pate 8i lis Discounted 1931 3,U09 1,9*42,000 1,530,000 627,000 3,153,000 1932 10,895 1,702,000 1,795,000 5*45,000 <933 2,219 t ,95*4,000 I,if 16,000 193** 8t 2,143*4,000 >935 5 1936 *4 CgMfftfd Cifry *4,8*42,000 AI I Other Tr ansfer of Gov't Coupons and Direct Other 9,1*48 Amounts Handled (in thousands of dollars) 1931 13,881 t*4,*432 *458 251,582 188,776 23,996 *46*4,35*4 5*42 13,358 t , 159 1932 61,178 1*4,135 580 181,91*4 133,053 22,3*42 337,309 613 9,575 500 1,130 157,7*47 1933 17,185 16,552 908 2!3,l*43 f*45,79*4 70,798 *429,735 555 22,721 830 *45 13*4,36*4 193*4 699 16,901 733 305,6*42 252,565 95,115 653,322 655 22,079 1,662 17*4 160,719 1935 26 16,916 5*46 361,251 323,287 68,703 753,2*41 578 21,268 3,053 670 1*41,111 1936 120 17,215 6*47 370,11*4 350,357 50,*486 770,957 5*48 20,563 132 *438 19$,961 283,695