Full text of Federal Reserve Notes : March 1975

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LO-

Federal Reserve Notes
FEDERAL RESERVE BANK OF SAN FRANCISCO
•
MARCH 1975
Serving Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah & Washington
—

FED ANNUAL REPORT
REVIEWS ROUGH YEAR

"One of the most difficult years in its
entire history," is how the Annual
Report of the Federal Reserve Bank
of San Francisco summed up the
1974 experience of the nation —

and of the nation's money manager.
In

a

joint

prefatory

statement,

Chairman 0. Meredith Wilson and
President John J. Balles said that the

nation was forced to deal last year
with the thankless combination of an

initial accelerating inflation and of
decelerating activity late in the year
— not to mention a seemingly insol
uble energy crisis. Perhaps the
economic troubles hit home hardest

and most clearly in the job market. In
the West, the average unemploy
ment rate rose from 7.2 percent to
8.5 percent over the course of the

year. And it promised to get worse.

At year-end, 24 of the 34 metropoli
tan areas in the West were classified

as areas of substantial or persistent
unemployment.

L. E. Cooney

H. A. Proctor

TWO NEW DIRECTORS JOIN BRANCH BOARDS
Two new directors have been ap
Lloyd E. Cooney, President and
pointed to fill unexpired terms on the
General Manager of KIRO-Radio
Boards of Directors of the Los
and Television (Seattle), was ap
Angeles and Seattle Branches.

pointed

by

the

Federal

Reserve

Bank to fill an unexpired term on the
Harvey A. Proctor, Chairman of the

Seattle Branch Board ending De

Board of Southern California Gas

cember 31, 1976.

Company, was appointed by the
Board of Governors of the Federal

Reserve System to fill an unexpired
one-year term on the Los Angeles
Board ending December 31, 1975.

Cooney is also a director of the Bon
neville International Corporation,
member of the Board of Trustees of

the Washington State International
Trade Fair and of the Downtown

So it was a rough year in the San
Francisco District, which encom
passes the one-sixth of the national
economy on the Western side of the
Continental Divide.

outpaced by an 11-percent rise in
consumer prices. Consumer buying

consumer

State Association of

later Chairman of the Board. He is

and of the Washington Council for

also Group Vice President, Oil and

International Trade.

Seattle Development Association,
board member of the Washington
Broadcasters

Gas, Pacific Lighting Corporation.

"Personal income expanded about
$188 billion— a rise of about 10 per
cent," the report noted. "But as in
the nation generally, the gain was

(and

Proctor joined Southern California
Gas Company in 1939. In 1971 he
was named President and a year

borrowing)

in

creased at only about half the 1973
pace. This performance reflected

(continued on page 3)

He

is

active

in

other

civic

duties

affairs

serves

and

He is a fellow of the American Soci

among

ety of Mechanical Engineers, chair

chairman of the Seattle-King County

as

man of the Board of Trustees of the

Convention

Institute of Gas Technology, director
of the Los Angeles Chapter of AID,

Cooney graduated from the Univer

and member of the American Gas
Association and of the Pacific Gas
Association.

He received a

BS in

mechanical engineering from the
University of Colorado.

and

Visitors

Bureau.

sity of Utah with a BS degree in polit
ical science and has done graduate
work in banking and finance at the
University of Utah and in broadcast
management at the Harvard Busi

ness School. %

DISTRICT-WIDE CAMPAIGN UNCOVERS
FIVE MILLION HIDDEN PENNIES
President John J. Balles of the San

what the Director of the Mint termed

Francisco Fed and Mrs. Mary
Brooks, Director of the United States

"a unique and extraordinarily suc
cessful public service program,"
Mrs. Mary Brooks acted as feature

Mint, presented distinguished serv
school

speaker at the awards luncheon
sponsored by the San Francisco

administrators and students who led

Fed. Mrs. Brooks said the program

the way in returning five million "hid
den" pennies to circulation.

effort other sections of the nation

ice awards last month to 17 bank

ers,

business

executives,

represented "the kind of innovative
could even now benefit from, in deal

The ceremony, which was observed
at the bank's headquarters office,

ing with a penny crunch that is still
not completely alleviated."

was the culmination of a lengthy

Penny Campaign spearheaded by

According to Mrs. Brooks, the cam

the Federal Reserve Bank of San

paign conducted in the West could

Francisco. The drive was initiated

be easily adapted to other areas.

last July to alleviate a critical penny
shortage that particularly plagued
restaurants, supermarkets, retail
stores—and the penny-conscious

The impact could well be a signifi
cant reduction in Mint expenditures

for stamping out additional pennies
that really are not needed.

consumer.

"Over 60 billion pennies of identical

The shortage was precipitated by a
serious but short-lived disruption in

design are already in existence,"

copper production in early 1974,
which triggered record prices on the

billion 'hidden' pennies would save
taxpayers $150 million in production

world's metal exchanges as well as
widespread hoarding by spec
ulators. Further complicating the
squeeze was the ingrained tend
ency of Americans to save and col
lect pennies in piggy banks, bottles

Mrs. Brooks said. "Recovering 15

costs and would save almost two

years of Mint production. Moreover,
the nation would save an irreplace
able resource. In a year, penny pro

duction uses up about 33,000 tons
of copper."

Faced with the magnitude of the

In presenting the awards, Mrs.
Brooks paid tribute to those who
made the effort to participate in a

of Crocker National Bank, received

Daniel Heeke and Assistant Princi

mercial

21,000 pennies, received the sec
ond place award.

Make

Cents."

Slowly but surely, the pennies began
rolling in.

sented to Bayside Middle School in

Lee Kothny with 41,000 pennies.

trict. Its employees turned in nearly
600,000 pennies. The first-place

Doesn't

The award for the outstanding indi
vidual school in California was pre

Linda Cillis,

in the Twelfth Federal Reserve Dis

banking
offices
and
schools
throughout the West, the Fed
launched a public-service program
asking young and old to bring their
excess pennies to the nearest com

Pennies

presented to Dr. Richard Fickel,
Superintendent of Schools for Santa

San Mateo. Its students—consisting
of sixth, seventh and eighth graders
—scoured San Mateo and came up
with 60,000 pennies. The top ten
student
contributors,
Principal

With the assistance of thousands of

strong editorial support to the cam
paign and its slogan: "Pinching

outstanding

Cruz County. Over 900,000 pennies

ployees. Crocker organized the out
standing bank-employee campaign

gave

the

were returned to circulation through
the Santa Cruz County program.

tion.

media

for

good. Robert K. Wilmouth, President
an award from the Director of the
Mint in behalf of the bank's em

The

award

county-wide school campaign was

voluntary program for the public

that as many as 30 billion pennies
nationwide had gone out of circula

bank.

in California.

The

and dresser drawers.

shortage, the San Francisco Fed
decided to gear up for an all-out
campaign to bring missing pennies
out of hiding. The Mint estimated

cessful customer-oriented program

winner in the Crocker campaign was
who turned

in over

pal Russell Bayley were awarded ci
tations from the United States Mint.

Hibernia Bank recovered 600,000

President Balles characterized the

pennies after organizing an advertis
ing and marketing campaign di

Penny Campaign as a "joint effort

rected

at

its

customers.

Michael

To pay tribute to the efforts of bank

Tobin, Executive Vice President, re

ers, businessmen and students in

ceived an award for the most suc

that underscores in very concrete
terms and in convincing fashion how
commercial
bankers,
the
Fed,
businessmen and students can work

UTAH BANCORPORATION ACQUISITION APPROVED
The San Francisco Federal Reserve

Bank announced approval this
month for Utah Bancorporation of
Salt Lake City to operate a new bank

in Ogden, Utah. The new bank will
be incorporated as Weber Valley

ing subsidiary bank, operates 14 of
fices in Salt Lake County and has
total deposits of approximately $134
million. Utah Bancorporation is the
sixth largest of 52 banking organiza
tions in Utah.

Bank.

Utah Bancorporation is presently a
one-bank holding company. Valley
Bank and Trust Company, its exist-

The approval was granted by the
San Francisco Fed under authority

delegated by the Board of Gover
nors of the Federal Reserve System.
w

FED ANNUAL REPORT

(continued from page 1)
the severe slump in durable-goods
purchases. Total retail sales rose
about 61/2 percent, but durable sales
dropped 2 percent in response to
plummeting new-car sales."

• i

Despite the turbulent business and
financial scene, Western banks ex

panded total credit to $104 billion.
Business loans dominated the statis

tics with a $3-billion gain, and at
year-end they constituted 35 per
cent of total loan portfolios.

together to accomplish programs in
the public interest."
"The campaign was conducted
throughout the West," Balles said,
"and today we are paying tribute to

Nevertheless, District banks tight
ened their lending practices in an ef
fort to slow the expansion and re
duce their loan-deposit and capital
ratios. As these tightened policies

those

took

whose

achievements

were

truly outstanding. But I also wish to
express our gratitude to the
thousands of others who willingly
gave of their time to make our cam
paign a real success. They are
anonymous but their contributions
were invaluable and very real."
While

California

accounted

hold

deepened,

and

the

as

the

recession

business

lending

pace slackened—at first modestly,
and then quite steeply. Meanwhile,
with the slump in the regional hous
ing market, the mortgage-loan gain
business-loan gain after years of
dominating regional lending activity.

from bankers and schools in Idaho,

Liability management came to the
fore during the year as Western
banks relied more heavily on this
means of finding funds than on more
traditional asset management. Total
deposits rose more than 101/2 per
cent in line with the national pace.
Demand deposits rose modestly
(about $500 million), but time-andsavings deposits jumped more than

Utah and Nevada. The Salt Lake City

$9 billion.

other offices of the San Francisco

Fed realized significant results in
their areas.

Vice President Grant Holman, man

ager of the Salt Lake City Branch,
elicited especially strong support

With consumers boosting their sav
ings, as they normally do during re
cession periods, and with deposit
rates again becoming competitive,
banks should benefit from an im

proved inflow of relatively inexpen
sive savings deposits this year.
Moreover, with business capital ex
penditures probably lagging, a
larger pool of corporate funds could
become available for investment in

CDs. The recent sharp decline in the
cost of funds, along with a lagged
adjustment in the prime rate, could
generate wider profit margins in
coming months. But some banks
could find their profits limited by a
slowdown in loan expansion and by
actual loan losses.

In summing up 1974, Wilson and
Balles said the extraordinary events
of the year placed intense pressures
on the financial community. But
banks generally handled this pres
sure remarkably well.

"The banking system performed
very creditably in the face of these
difficulties," they said. "Serious
problems developed at a few banks,
but that cannot dim the banking
system's overall accomplishment in
meeting the essential credit needs
of consumers and businesses in this

Branch recovered almost two million

pennies during the campaign. 1^

funds climbed to an all-time high in
July and then declined during the
rest of the year. CD funds were very
expensive, as offering rates reached
12 percent in July and August be
fore declining to 8% percent by
year-end.

fell more than one-third below the

for

nearly half of the five million pennies
rounded up during the campaign,

much of 1974. The cost of bank

Money costs to banks soared during

District." Ijjflr

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NEW DESCRIPTION
OF FED SYSTEM
A completely rewritten edition of The
Federal Reserve System-Purposes
and

Functions

is

now

available

through the offices of the San Fran
cisco Fed. This publication has been
called the "paperback bible" for Fed
followers. It covers in seven concise

chapters such essentials as mone
tary policy, the system's structure,
open-market operations, interna
tional finance, foreign-currency op
erations and bank regulatory and
supervisory functions.

While primarily a handbook of policy
tools, this sixth edition also includes

descriptions of economic relation
ships, market structures and the
theoretical underpinnings of central
banking.
Single copies of Purposes & Func
no charge
through any office of the San Fran
cisco Fed. For additional copies

tions are available at

contact:

BOOK ENTRY KEEPS

Federal Home Loan Banks, the Fed

ON EXPANDING

eral National Mortgage Association,
the United States Postal Service,

There was a time when if the Fed

held securities for a bank, it did just
that—that is, it held paper certifi
cates in safekeeping. But in a soci
ety dominated by paper in the form
of checks, reports, securities and
countless other things, the Fed
eventually decided to eliminate as
much of the paper it could by sub
stituting computer accounting en
tries for the actual paper certificates.
The Fed calls this "book entry."
A recent report by Federal Reserve
Banks throughout the nation dis

closes that the Fed is continuing to
make headway in converting mar
ketable government securities held
by member banks into book-entry
form. By the end of 1974, nearly 70
percent of marketable Treasury
securities outstanding had been
converted into book-entry form
—about $188 billion out of a total of

and now the new Federal Financing
Bank — are also eligible for bookentry procedure. Thus, a total of
$171/2 billion of the $66 billion eli

gible had been converted as of last
August. This is roughly 26 percent of
the total.

Conversion to book-entry makes the
government-securities market func
tion much more efficiently. There is
another highly important considera
tion. In a recent eight-month period,
$26 million in government securities
was reported lost or stolen. And
that's something that can't happen
when you don't have a paper certifi

cate around to get misplaced. Ijjfr

BANKING TO GET
IN ITS LICKS

A commemorative stamp honoring
banking has been selected by the

Publications Services

$271 billion. Of the remaining $83
billion of Treasury securities eligible

Division of Administrative Services

for conversion, about $76 billion of

Postal Service for issuance at the
time of the ABA Centennial Conven

Board of Governors of the

total marketable Treasury securities

Federal Reserve System
Washington, D.C. 20551

tion in October. The selection was

are held in

bearer form and more

than $6 billion in registered form.

The price for additional copies is $1
each or, for quantities of 10 or more

Obligations of other agencies —the

sent to one address, 75 cents each.

Farm Credit Administration, the
Farmers Home Administration, the

W

made by an 11-member Citizens
Stamp Advisory Committee which
annually considers some 5,000
suggestions for commemorative

stamps, ijfp