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X *


August 1956

Volume X X X V III

Number 8

J.HE Reserve Bank Organization Committee faced
a difficult task in designating Federal Reserve districts
and Reserve cities. But only minor changes were
afterward made in the framework of the System,
except for the establishment of branches.
The Federal Reserve Board at first authorized
branches reluctantly. However, recognizing the “unity
and paramount responsibility9 of parent banks, the
Board in 1917 authorized ten branches, and by the
end of 1920 the branch structure of the System was
nearly complete, with two distinguishable groups of
branches. Three Eighth District branches were
formed: Louisville, Memphis, and Little Rock.
Civic leaders of Louisville had been disappointed
over their failure to get a Reserve Bank, but it was
not until 1916 that an application for a branch was
presented. After hearings in St. Louis and Washing-

ton, at which economic reasons for the founding of a
branch were urged, the Federal Reserve Board ap­
proved the branch in Louisville. Following the estab­
lishment of an agency in 1916, Memphis experienced
little difficulty in securing a branch and Little Rock
obtained one shortly thereafter.
The branch system, cast in essentially its present
form by 1921, underwent only a few structural changes
in the 1920s and ’30’s. For two decades after 1921
some branches enjoyed a greater degree of autonomy
than others. In 1942 the Board of Governors expressed
a desire to increase the responsibilities of branches
and strengthen their personnel. Accordingly, within
the past decade or so branches have greatly increased
their services and their participation in the two-way
flow of information between the monetary authority
and the business community.


F ederal

R esrn c


df7St. Louis



The Reserve Bank Organization Committee faced a
difficult task in designating Federal Reserve
districts and Reserve cities.

more, the latter two cities going so far as to request
the Federal Reserve Board to recognize their claims
to a Reserve Bank as being superior to those of
Cleveland and Richmond, respectively.

T h e task of the Reserve Bank Organization Com­
mittee, which set to work soon after the passage of
the Federal Reserve Act, was scarcely an enviable
one. Assigned the duties of dividing die continental
United States into not less than eight nor more than
twelve Federal Reserve districts and designating a
Federal Reserve city in each, the Committee went
about its work under only the most general statutory
guides. Throughout the country the Committee held
public hearings, during which enthusiastic repre­
sentatives of more than 200 communities asked that
a total of 37 cities be designated as the headquarters
of a Federal Reserve Bank.
With admirable dispatch, considering the magni­
tude of the problem, the Committee submitted its
decision on April 2, 1914. Some observers had ex­
pected the Organization Committee to select only
eight districts, but the maximum number of twelve
districts and twelve Reserve cities was chosen. Even
with the larger number of cities chosen, several major
contenders for a bank were bound to suffer disap­
pointment. Perhaps the keenest sense of loss was felt
in New Orleans, where interested citizens had con­
sidered selection certain. Scarcely less frustration
was felt in Louisville, Denver, Pittsburgh, and Balti­
Page 90

Moreover, there was much dissatisfaction with the
designation of district boundary lines, and the Board
received requests from border-line sections for trans­
fer from one district to another. There was on the
Federal Reserve Board itself a majority opinion that
the number of districts should be reduced by at least
four, and the matter was not finally settled until what
Warburg has called “the re-districting intermezzo"
ended in an Attorney General’s decision against the
proposed reduction in the number of districts.1
But only minor changes were afterward made in
the framework of the System, except for the
establishment of branches.
The framework of the System continued, with only
minor alterations, as originally established by the
Reserve Bank Organization Committee. In one major
respect, however, the System underwent a structural
change during the first half-dozen years of its exis­
tence. Section 3 of the Federal Reserve Act pro­
vided for the establishment of branches of Federal
Reserve Banks, each branch to be operated by a
Paul M. Warburg, The Federal Reserve System, Its Origin and Growth,
(New York: The Macmillan Company, 1930) Vol. 1, pp. 424-455. Sec
also the Second Annual Report of the federal Reserve Board, p. 19.

board of seven directors who were to possess the
same qualifications as directors of the parent banks.
Yet the Act said nothing about the functions of
branches, nor did it specify the degree of autonomy
which they should enjoy.
In a preliminary report to the Organization Com­
mittee, H. Parker Willis had remarked that the prob­
lem of branches was likely to be "decidedly serious”
and went on to point out that they might be estab­
lished in two ways. Branches, he thought, could be
created as "mere local boards of directors” perform­
ing routine clerical functions or as "full-fledged branch
banking institutions” charged with most of the re­
sponsibilities of the parent bank. In any case,
Willis counseled against haste in resolving the prob­
lems of branches.2 Interested members of the bank­
ing community in the larger cities of the country were
not disposed to such caution. During the hearings of
the Organization Committee it became apparent that
branches would be readily acceptable to those cities
which failed to secure a Federal Reserve Bank, and
in at least one instance it was argued that a branch
would serve an area better than a parent bank.3

The Federal Reserve Board at first authorized
branches reluctantly.

During the early formative years, a majority of
the members of the Federal Reserve Board was not
in favor of structural additions which would result in
decentralization of authority in the System. Yet rea­
sons for the establishment of branches, cogently
argued, were compelling. In 1915, upon application
of the Federal Reserve Bank of Atlanta, a branch at
New Orleans was authorized, and the branch was
Opened for business on September 10. However, in
the Annual Report for 1915 the Board questioned
whether the expense of fully equipped branches
might not be too heavy for most Reserve Banks and
suggested that local "agencies” might be a practicable
substitute. In the Annual Report for 1916 it was re­
marked with some satisfaction that a number of Fed­
eral Reserve Banks were contemplating the estab­
lishment of agencies in areas requiring special serv­
ices, such as the collection of checks, and the estab­
lishment of such an agency in Memphis was noted.
Late in the year, however, an application for a branch
had come from the bankers in Louisville, and a hear­
ing on the matter had been held in Washington.
2 H. Parker Willis, The Federal Reserve System (New York: The Ronald
Press Company, 1923), pp. 577*78.
3 Hearings of the Reserve Bank Organization Committee at St. Louis,
pp. 1604-05.

However, recognizing the "unity and paramount
responsibilityof parent banks, the Board in 1917
authorized ten branches. . . .

The year 1917 witnessed the first flurry of branch
formation. In the Annual Report of that year the
Board observed that questions relating to the estab­
lishment and operation of branches had been simpli­
fied by an amendment to Section 3, which provided
that the Board might "permit or require” a Federal
Reserve Bank to establish branches within its dis­
trict.4 The change provided an easier machinery for
the establishment of branches and seemed to lessen
the Board’s reluctance to approve them. In the late
summer and fall of 1917 branches at Spokane, Seattle,
Omaha, Portland, and Louisville were opened for
business in that order, and by the end of the year
branches had been authorized at Pittsburgh, Cin­
cinnati, Detroit, Baltimore, and Denver. By this
time stated Board policy in the establishment of
branches was
. . to recognize the unity and para­
mount responsibility of the Federal Reserve Bank,
while extending full facilities to the banks in the
territory served by the branch.”5
The addition of ten branches in 1918 brought the
total to sixteen in operation, among them a branch at
Memphis which on September 3 had been changed
from agency status. A branch at Little Rock, author­
ized in 1918, began business on January 6, 1919, and
was followed in that year by Buffalo, Houston, and
Nashville. In 1919 the Federal Reserve Bank of
Atlanta also established an agency to take care of
currency needs at Savannah.

. . , and by the end of 1920 the branch structure
of the System was nearly complete, with two
distinguishable groups of branches.

By the end of 1920 the branch structure of the
Federal Reserve System was nearly complete,
branches at Oklahoma City and Los Angeles opened
in that year having brought the total to 22 plus the
Savannah agency. Too, by 1920 the Board was dis­
tinguishing two main lines of branch development.
It reported that
. . branches located at Cincinnati,
Pittsburgh, Birmingham, Jacksonville, Nashville, and
Oklahoma City confine their operations largely to
clearing and collection of checks, and to supplying
currency, both paper and coin, to member banks in
branch territories, while the remaining sixteen
4 Branches were to operate under a local board of not more than seven
nor less than three directors, of whom a majority of one should be ap­
pointed by the Reserve Bank of the District and the rest by the Board.
5 Annual Report of the Federal Reserve Board, 1917, p. 25.

Page 91

Boundaries of Federal Reserve Districts and Their Branch Territories

Map reprinted from the

F e d e r a l R eserve B u l l e t in


Boundaries of Federal Reserve Districts

----------- Boundaries of Federal Reserve Branch Territories

Board of Governors of the Federal Reserve System


Federal Reserve Bank Cities


Federal Reserve Branch Cities

ROM the establishment of the first branch of Federal Reserve Banks, the one at New Orleans in
1915, the branch structure of the Federal Reserve System rapidly developed to virtually its present
form. The 12 Reserve banks and 24 branches of the system are shown on the map above.

As ex­

plained in the article, agencies located at Havana, Cuba, for a number of years have since been dis­
continued so that system offices are now located entirely within limits of the continental United
States. Branch territories of the Federal Reserve Bank of St. Louis are also shown on the map in
color, page 90.

Page 92

branches render practically the same services to mem­
ber banks in the branch territories as the parent
banks render to member banks in other parts of the
district.”6 Branches in the former group did not then
engage in discount operations but transmitted applica­
tions to the parent bank, nor did they carry the
reserves of the member banks within their territory.
Branches in the latter group, on the other hand, dis­
counted paper (subject to head office review), carried
the reserve balances of member banks on their own
books, and, with the exception of Buffalo, participated
in the daily clearing through the gold settlement
fund. Size of operation was clearly not the criterion
by which the type of branch activity was determined.
Pittsburgh, from the point of view of items handled
for collection and currency received and paid out,
had done the most business during 1920, the volume
of items handled running to nearly $6 billion as
compared with a little over $0.5 billion each for
Spokane and El Paso.7
Three Eighth District branches were formed; Louisville,
Memphis, and Little Rock.

By 1921, the year in which establishment of the
Helena branch raised the total to 23, the Board
seemed to accept branches as necessary and even
valuable parts of the System. After 1922 there were
no further references to the expense involved in their
operation nor to the impracticability of establishing
branches “merely to gratify civic pride.” That ac­
ceptance should have become a fact within so short
a period of time is surprising in view of the original
reluctance of the Board to establish branches.
How had this reluctance been overcome? The
best insights can be gained by tracing briefly the
steps by which particular branches came into being.
No more instructive examples can be found than the
stories of the establishment of the Louisville, Mem­
phis, and Little Rock branches of the Federal Reserve
Bank of St. Louis.
Civic leaders of Louisville had been disappointed
over their failure to get a Reserve Bank, . . .

Civic leaders of Louisville, like those of New
Orleans, were disappointed in the final selection of
Reserve Bank cities and district boundary lines. They
pointed out that Louisville had for 100 years stood
with Baltimore and New Orleans as one of the three
leading southern cities, and that close ties of friend­
6 Annual Report of the Federal Reserve Board, 1920, p. 92.
7 Ibid., pp. 92-93. Other branches toward the top of the list in 1920
volume of operations were Baltimore, Cincinnati, Detroit, and Buffalo.

ship bound together the commercial relations exist­
ing between Louisville and the territory it served.
Less than two days before the announcement of the
boundaries of the districts, Louisville bankers had
been told unofficially that their city was one of the
twelve selected for a Reserve Bank, so that their
disappointment was especially keen when the final
announcement was made. Finally, injury was com­
pounded when the state of Kentucky was split in
two in the setting of district boundaries, the eastern
half being placed in the Fourth District with the
Reserve Bank at Cleveland, the western half in the
Eighth District with the Reserve Bank at St. Louis.
. ., but it was not until 1916 that an
application for a branch was presented. *

For a year or so after the beginning of System
activity, Louisville national banks made no move to
obtain a branch in their city, but on July 3, 1916,
seven national banks in Louisville made formal ap­
plication to the Federal Reserve Bank of St. Louis for
a branch bank in Louisville.9 The application was re­
ceived without enthusiasm, both in St. Louis and, upon
transmittal to the Board, in Washington. The Federal
Reserve Bank of St. Louis wrote Governor Harding
of the Federal Reserve Board that in its opinion what
Louisville needed was a collection agency. The
records of the St. Louis office, it was remarked,
showed that Louisville banks and many of those in
the surrounding area had done practically no re­
discounting with the St. Louis Federal Reserve Bank
and that, furthermore, it seemed unwise at the time
to increase the expenses of the St. Louis bank by the
establishment of a branch. Governor Harding agreed
that he could see no good reason for the establish­
ment of a full-fledged Louisville branch. Only a few
days later, however, Vice Governor Delano wrote
the chief officer of the Federal Reserve Bank of St.
Louis, commenting on the general dissatisfaction of
Louisville bankers at having been put in the St. Louis
rather than in the Chicago district and at having had
the state cut in two. He added that an ordinary col­
lection agency was not what Louisville bankers
wanted, that they were insisting on a full-fledged
branch so that the paper of local banks could be
rediscounted by a committee experienced with local
conditions. The Federal Reserve Bank of St. Louis
replied that the need for care in handling the applica­
tion of the Kentucky banks was appreciated, but
that on purely economic grounds there was no need
for the establishment of a branch.
9 Signers of the petition were the National Bank of Kentucky, AmericanSouthern National IBank, Citizens, National Bank, National Bank of Com­
merce, Louisville National Banking Company, First National Bank, and
Union National Bank.

Page 93

over, checks drawn on banks in the Louisville area
were unnecessarily sent to St. Louis during the col­
lection process. It was urged that men preferred to
deal with their friends and neighbors, that bankers
would take a personal and not a theoretical interest
in a branch, and that merchants would not fear the
rediscount of their paper with a branch located close
to home. Finally, and this argument was intended
to cap them all, the establishment of a branch would
remove friction and attract new members to the Sys­
tem. Louisville bankers were prepared to back up
their assertion with a guaranty of the expenses of
the proposed branch.
. . . the Federal Reserve Board approved the
branch in Louisville.

The new Louisville branch building, now under

After hearings in St. Louis and Washington, at
which economic reasons for the founding of
a branch were urged, . , .

Two months later a committee of Louisville bank­
ers earnestly presented their case before the board of
directors of the Federal Reserve Bank of St. Louis,
arguing that the establishment of a Louisville branch
would increase the amount of rediscounting done by
the banks of the area. The Louisville representatives
contended that a branch would be profitable and
would, moreover, attract state banks into the System.
The latter contention especially was calculated to
influence the Federal Reserve Board, as will be noted
presently, but at the time no one either in St. Louis
or in Washington seemed to be especially impressed
by the arguments.
It was finally agreed, however, that a hearing
should be held before the Federal Reserve Board in
Washington on the afternoon of December 21, 1916,
at which the Louisville petitioners could be heard.
Having learned that both the Board and the St.
Louis Reserve Bank were not disposed to establish a
branch in Louisville or, for that matter, in any other
city, the Louisville bankers presented their case with
great force and vigor. Whiskey paper and tobacco
paper, they contended, should be judged by men
familiar with the industries involved. The establish­
ment of the Federal Reserve Bank in St. Louis had
diverted deposits of state banks and trust companies
in Kentucky and southern Indiana to their St. Louis
correspondents, the result being that deposits in
Louisville were not growing as they should. More­
Page 94

At the conclusion of the hearing the Federal Re­
serve Board made plain its difficulties in deciding
upon a general policy for the establishment of
branches of Reserve Banks, and no definite opinion
was expressed regarding the merits of the Louisville
petition. Six months later, however, Vice Governor
Delano of the Board wired the Federal Reserve Bank
of St. Louis that the Louisville request would shortly
be taken up, and he intimated that action would be
favorable in the hope that a branch would attract
state bank membership. It is a fair inference that
stimulation of interest in the System on the part of
nonmember banks was the chief motive leading to
Board approval of branches in 1917.1 In any case,
on July 3, 1917, the board of directors of the Federal
Reserve Bank of St. Louis granted the petition for a
branch bank in Louisville, and in August Board au­
thorization was received to open the Louisville branch
as soon as the necessary quarters and fixtures could
be secured. Although the branch did not open for
business until December 3, well after some other
branches had commenced operations, there is no
question that the efforts of Louisville bankers were
largely instrumental in overcoming the obstacles to
branch establishments generally.
One other point is of interest in connection with
the early Louisville operation. The territory to be
served by the Louisville branch consisted of the part
of Kentucky located in the Eighth District and
thirteen counties in southern Indiana. In a letter
addressed to member banks in this territory, Gov­
ernor Wells of the St. Louis Bank wrote that no
member bank would be required to deal with the
The.Board explicitly noted the stimulating effect on state bank mem­
bership which the establishment of a branch had had in Omaha, Detroit,
and other cities. See for example, Annual Report of the federal Reserve
Board, 1917, p. 511, p. 437,

branch. "The branch will be established/' he said,
"upon the theory that it is an office of the Federal
Reserve Bank of the district opened for the con­
venience of such member banks as may desire to use
it.” Member banks were to have the option of send­
ing paper either to St. Louis or to Louisville for dis­
count and could treat either the Federal Reserve
Bank of St. Louis or the branch bank as the Federal
Reserve office with which they would deal on most
matters. Only in the matter of transfers of funds,
currency shipments, and cash deposits and with­
drawals were banks located in the Louisville zone
required to deal with the branch and not with the
Federal Reserve Bank of St. Louis.

Following the establishment of an agency in 1916,
Memphis experienced little difficulty
in securing a branch, , , .

Unlike their counterparts in Louisville, bankers in
Memphis for a time showed little enthusiasm for the
establishment of a branch in their city. However, in
the fall of 1916 the Federal Reserve Bank of St.
Louis deemed it wise to establish an agency during
the cotton season to facilitate the exchange of cotton

ft K *


H ill)
r-.-sja -1
sa 1

the authorization of a Memphis branch. The Federal
Reserve Bank of St. Louis was favorably inclined to
the proposal, and on June 5 its board of directors
approved the formal application of the Memphis
banks. Federal Reserve Board authorization was
quickly forthcoming.
Directors were appointed,
rented quarters were quickly obtained, and the Mem­
phis branch started operations on September 3.
. .. and Little Rock obtained one shortly thereafter.

Meanwhile, agitation had begun for a branch in
Little Rock. A tentative inquiry in 1915 from Com­
missioner John M. Davis of the Arkansas State Bank­
ing Department had elicited an unfavorable response
from the Federal Reserve Bank of St. Louis, and
nothing further was done for nearly three years. But
when wind of the Memphis petition reached Little
Rock, member and nonmember banks alike began
an insistent campaign for a branch in that city.
After negotiations extending over several weeks,
both the St. Louis Bank and the Federal Reserve
Board were agreeable to a branch which would be
operated on a limited scale, the Board suggesting a
facility which might be operated at an expense not to
exceed $7,500 a year as compared with budgets of
from $40,000 to $50,000 a year for the larger branches.
Such a reduced operation was not acceptable to
Little Rock banks; nothing less than a branch in all
respects like that of Memphis would do. A lengthy
correspondence followed in which most of the argu­
ments of the Louisville petitioners were advanced
with some effect. Once again, the contention that a
branch would induce reluctant state banks to join
the System was especially telling, though the guar­
anty of the Little Rock Clearing House Association
that annual expenses would not exceed $25,000 may
have influenced the outcome. The result was the
authorization early in September of a branch with
the same powers and functions as those of the
branches at Louisville and Memphis, and on January
6,1919, the Little Rock branch opened for business.

The Memphis branch building

warehouse receipts that were held as collateral to the
loans made by the St. Louis Bank. Again during the
1917 season the agency proved useful, and by the
spring of 1918 nearly all of the eligible state banks in
Memphis had entered the System.
When it appeared that the Board would be favor­
ably disposed to the formation of branches throughout
the country, the banks in Memphis began to secure
letters from their country correspondents requesting

The branch system, cast in essentially its present
form by 1921. under went only a few structural
changes in the 1920’s and ’lO’s.

As suggested earlier, the branch system had taken
approximately its present form by 1921. Moreover,
the status of branch responsibility to the parent in­
stitution was clearly settled by that year. As the
Board succinctly remarked in the Annual Report for
1921: "The branches are in no sense independent
banks, but are, as is implied in the official title of
Section 3, ‘branch offices’ ” This statement meant
Page 95

opposed the plan, it was finally arranged that an
agency of the Federal Reserve Bank of Boston would
buy and sell paper, and that an agency of the Fed­
eral Reserve Bank of Atlanta would handle the money
function. This arrangement persisted for several
years, the agencies so established being the only for­
eign ones ever authorized by the Federal Reserve

The Little Rock branch building

that the work of the branches was largely to be con­
fined to performance of the service functions of the
central bank with only indirect contribution to the
monetary control functions. And these service func­
tions were extremely important. Indeed, the volume
of business done by the branches was annually in­
creasing at a rapid rate, and with the closing of the
sub-treasuries in 1920 and 1921, branches of Federal
Reserve Banks, like the parent institutions, took on
additional fiscal agency operations.
During the 1920’s and ’30’s a few structural changes
in the branch system occurred, one of them of special
interest to historians of the Federal Reserve System.
In 1923, two agencies in Havana, Cuba, were estab­
lished by the Federal Reserve Banks of Boston and
Atlanta. Boston banks played an important part in
the financing of trade with Cuba, and it was felt that
the establishment of an agency of the Federal Re­
serve Bank of Boston, authorized to buy and sell
cable transfers and to buy, sell, and collect bankers
acceptances and bills of exchange, would serve both
American and Cuban interests by stabilizing the rate
of exchange and enabling banks in Cuba to operate
on lower cash reserves. There was the further prob­
lem of issuing and withdrawing United States cur­
rency, which was legal tender in Cuba and used in
a considerable volume. But it was the notes of the
Sixth, or Atlanta, District which circulated for the
most part, and the commercial and business relation­
ships between Cuba and the Sixth District were close.
After hearings before the Federal Reserve Board,
during which the Federal Reserve Bank of New York
Page 96

Only a few structural changes affecting Reserve
Bank branches have taken place since inauguration of
the Havana agencies.
In 1927, two additional
branches were created, one at San Antonio, Texas, and
the other at Charlotte, North Carolina. Beginning on
January 1 of that year the Boston agency in Havana
was discontinued, and its functions were taken over
in part by the Atlanta agency. No further changes
occurred until 1938 when, with the approval of the
Board of Governors, the agency of the Federal Re­
serve Bank of Atlanta in Havana was discontinued.
In the same year the Spokane Branch of the Federal
Reserve Bank of San Francisco ceased operations, the
only time in the history of the System that a domestic
branch has been discontinued.
For two decades after 1921 some branches
enjoyed a greater degree of autonomy than

For two decades after 1921 the activities of Fed­
eral Reserve Bank branches were unexciting and
without incident. As late as 1925 the Board was still
making the previously mentioned distinction between
Group I and Group II branches, the former perform­
ing practically all of the functions of a Federal Re­
serve Bank and the latter executing only certain rou­
tine functions under specific instructions from the
parent bank. Not until 1943, however, when this dis­
tinction was removed, was any public mention again
made of differences in branch functions. In general
all branches seemed to slip into the comfortable
routine of performing service functions for the banks
of their territory under the direction of the parent
Reserve Bank.
In 1942 the Board of Governors expressed a desire
to increase the responsibilities of branches and
strengthen their personnel.

In 1942, the Board of Governors took a renewed
interest in the functions of Federal Reserve branches.
In large part the resurgence of interest was prompt­
ed by the increasing work loads imposed upon branch
banks as a consequence of the war. In the 1942
For further details see Joseph H. Taggart, The federal Reserve Bank
of Boston, (Boston-New York: Bankers Publishing Company, 1938) pp.
91-96. See also Annual Report of the Federal Reserve Board, 1923, pp. 44-47.

Annual Report the Board stated that it sought “. . .
to increase the services rendered by branches of the
Federal Reserve Banks . . .” and “. . . to adjust the
services of each branch to the increasing requirements
of the territories it serves rather than to develop a
uniform pattern of expansion for all branches.” The
immediate preoccupation was with increasing the
wartime services of branches, but the Board was also
concerned with “. . . ways in which the public inter­
est would be served by a decentralization of peace­
time functions/’ As a first step in carrying out this
change in policy, the Board corresponded with in­
dividual Reserve banks concerning a program for
increasing the responsibilities of branches and
strengthening their personnel.
The Annual Report of 1943 told of progress in the
expansion of operations and functions of branches.
For one thing the old distinction between Group I
and Group II branches was removed, as the branches
at Cincinnati, Pittsburgh, Birmingham, Jacksonville,
Nashville, and Oklahoma City began to carry on their
books the reserve accounts of member banks in their
territories. Of more significance was the designation
by several Federal Reserve Banks of vice presidents
to serve as resident heads of their branches, eight of
the twenty-four branches being under the direction
of vice presidents at the end of 1944.
Effective January 1, 1946, the officers in charge of
the Louisville, Memphis, and Little Rock branches of
the Federal Reserve Bank of St. Louis were desig­
nated as vice presidents of the Reserve Bank and as
Managers of their respective branches, and at the end
of 1946 twelve branches were headed by vice presi­
dents. Within another year the chief officers of all
branches, save the one at Buffalo, were resident vice
presidents, and in 1952 all chief officers of branches
held this title.

Accordingly, within the past decade or so branches
have greatly increased their services . . .

Branches of Federal Reserve Banks have in the
past decade or so greatly increased their services to
their territories. Indeed, with respect to the service
functions such as check collection, non-cash collec­
tion, and money handling, some branches carry on a
greater volume of operations than do many parent
banks. With respect to the monetary and credit con­
trol function, however, the historic position of Federal
Reserve branches, forged in the first seven years, has
remained essentially unchanged.
Insofar as vice
presidents and managers participate in the councils of
officers of the parent banks, they contribute to policy
discussions, but their influence is neither greater nor
less than this.
. . . and their participation in the two-way flow of
information between the monetary authority and the
business community.

In another and highly significant respect branches
of the Federal Reserve Banks participate in the whole
work of the American central bank. The directors
of the branches, men of position in their communi­
ties, possessed of personal charm and proven capabili­
ties, are a continuing source of information and coun­
sel. They, with the officers and employees of the
branches, contribute to the vast network of economic
intelligence which has become one of the great
strengths of the Federal Reserve System. At the
same time the directors and officers of branches do
much to familiarize the people of their communities
with the rationale of Federal Reserve policy and with
the broad objectives of the central bank. In an
economy as complex as that of the United States, the
faithful performance of these functions is a necessary
contribution to the practice of central banking.
Ross M.

R obertson

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Department, Federal Reserve Bank of St. Louis, St. Louis 2, Missouri.
Articles or excerpts may be reprinted. A credit line would be ap­

Page 97

IjH E PACE of business in the Eighth District mod­
erated slightly during July, reflecting the balance of
nationwide and district forces. While employment
and production in most areas were close to record
levels, there was noticeable easing in durable manu­
autos, metal products and machinery—
an air of uncertainty over the possible effects of the
steel strike. Despite a moderate trend toward a shorter
workweek over the first six months of the year, the
rise in average weekly earnings of production workers
has sustained purchasing power. Retail sales have
held up well, department store sales running about
2 per cent ahead of a year ago in July. The cumula­
tive rainfall deficit in much of the district has been
made up by recent showers, and crops are reported
to be in good condition. A strong demand continues
for business loans at district banks.



Total economic activity in Eighth District metro­
politan centers appeared to hold close to or above
y e a r-a g o levels in July, reflecting the con tin u ed
strength of demand throughout the nation and the
district’s consequent contribution to the “$400-billionplus” gross national product.
Employment gains in May and June over a year
ago in St. Louis, Little Rock, Louisville and Memphis
totaled about 26,000 workers, though about 4,000
fewer are at work in the Evansville area. From this
near-record level in May and June, a slight business
decline in durable manufactures and seasonal slow­
ness in a number of other industries created a summer
lull in July. Production of automobiles and certain
other consumer durables continued to slacken as man­
ufacturers and dealers worked off excess inventories;
in the Eighth District, St. Louis, Evansville and Louis­
ville were most affected by this trend. Southern pine
lumber production this year has been at the highest
level since 1948 but showed usual seasonal slowing in
June and July. Hardwood mill operating rates in the
first half-year also have exceeded year-ago rates but
likewise probably turned down seasonally in July.
Pine lumber prices weakened slightly in response to
Page 98

slower residential construction. District steel mills,
however, continued operations during the steel strike
under agreement to make retroactive wage adjust­
ments, following the general settlement both in tim­
ing and pattern. Local mills raised product prices
$8.50 to $12.00 a ton, with prices subject to further
review. Operations were at 95 per cent of capacity in
June, according to final figures, and averaged 91 per
cent (preliminary) during July. Few strike influences
were apparent in the district in July with the possible
exception of slight effects in coal mining and trans­
portation. The pinch of strike-caused shortages was
beginning late in the month, despite virtually com­
plete settlement of the strike, with first effects in heavy
construction and light sheet metal products.
Among nondurable manufacturing industries and
nonmanufacturing activities, coal mining, besides pos­
sible strike effects, was in its summer doldrums.
Crude oil output, which jumped in 1954 and 1955,
has apparently stabilized at the high level of 380,000
barrels per day. Livestock slaughter at district meat
packing plants has been especially heavy in recent
months and in June and early July was 20-25 per
cent above a year ago. The apparel and shoe indus­
tries began their fall pickup in July. The gain in shoe
production followed some cutback in June for inven­
tory adjustment.
Construction activity in the district has been fol­
lowing the national pattern, with commercial build­
ing strong. In the St. Louis suburban area, commer­
cial construction tripled its year-ago rate the first six
months of the year. District construction contract
awards during the first six months of 1956 averaged
about one-eighth higher (in value) than a year ear­
lier; the margin of lead was about one-third for the
month of June alone. However, employment in con­
struction in June was only 5 per cent higher than a
year ago in St. Louis and Memphis, showed no change
in Louisville, and was down about 6 per cent in
Evansville and Little Rock.
Growth of the economy over the year has resulted
in higher total employment and lower unemployment

now than a year ago. As might be expected, there
was some variation within the district; unemployment
rates have been below a year ago in St. Louis, Mem­
phis, and Little Rock, but higher in Evansville, which
was harder hit by auto and refrigerator cutbacks.
However, unemployment recently turned upwards,
primarily as a result of entry of students into the labor
market, the drop in production of automobiles and
fabricated metal products and the aforementioned
seasonal slowness. Weekly hours of work are generally
about equal to a year ago when recovery from reces­
sion was in full swing but have shown a slight de­
cline since January. Hourly and weekly earnings of
factory workers show a favorable over-the-year rise,
stimulating personal consumption and hence retail
and service business.
Department store sales in the district registered a
2 per cent gain over a year ago in the four weeks
ending July 21. New car sales continue to lag, how­
ever, with May registrations 20 to 25 per cent lower
than a year ago, though June probably showed some
Generally favorable crop growing conditions con­
tinued to prevail over most of the district during the
month of July. The north and northwest portions of
Missouri, which had suffered rather severely from lack
of moisture during June, received rainfall in July at
the critical period resulting in excellent corn and soy­
bean prospects. Corn and tobacco crops continue to
look good over most of Kentucky. Pasture and hay
crops are also doing satisfactorily. The major por­
tions of Tennessee and Arkansas have received ample
rainfall with the result that cotton is growing and
fruiting satisfactorily with only moderate weevil in­
festation. Mississippi is the only district state where
generally dry weather has caused substantial damage.
Corn has suffered rather severely. Pastures are also
drying up rapidly, causing a number of farmers to
start early feeding of silage. Cotton, however, has
not deteriorated to any great extent.
Most district livestock and livestock products prices
rose slightly in the four-week period ending July 20,
while crop prices were mixed. Compared to a year
ago, crop prices were generally higher, as were milk
and eggs, but livestock prices were slightly lower.
In finance, total loans (except interbank) at dis­
trict weekly reporting banks, now 10 per cent above

year-ago levels, rose $29 million or nearly 2 per cent
from June 20 through July 18, a normal expansion for
this time of year. However, bankers report that the
strength of loan demand would have pushed outstand­
ing loans even higher but for several special circum­
stances which held the expansion to “seasonal” pro­
portions. Although limited availability of funds has
forced bankers to screen loan applications closely and
interest rates are at or near the postwar peak, most
major types of commercial and industrial firms in­
creased their indebtedness more than usual in the
four weeks ending July 18. Advances to processors
of food, liquor and tobacco were especially large for
this time of year; outstanding loans in this category
jumped $15 million compared to an average $5 mil­
lion in recent years. This advance probably arises
from higher operating costs as well as from slightly
more production volume.
Other relatively heavy net borrowers were produc­
ers of textiles, apparel, leather, rubber, petroleum,
coal and chemicals as well as retail outlets, wholesale
firms and public utilities. These loan increases were
brought about partly for temporary capital financing
as well as to finance fall season inventories in some
Despite the added loan demand of the foregoing
industries, loan expansion was held to seasonal pro­
portions by net repayments by other borrowers. Sales
finance companies made sizable net repayments to
weekly reporting banks of the district during the fourweek period ending July 18, reportedly from pro­
ceeds of sales of commercial paper. Manufacturers
of metal and metal products who had been substantial
net borrowers through the first half year began re­
ducing loan balances after the Fourth of July as steel
inventories accumulated during the earlier months of
the year were drawn down. Contractors matched new
loans with repayments in contrast to normal seasonal
increases in loans, perhaps reflecting a slight restric­
tion of operations due to reduced availability of cer­
tain types of structural steel. Advances secured by
real estate continued to expand but at a rate much
less rapid than in earlier postwar years, in keeping
with the lower house construction rate. However,
"other” (mainly consumer) loans increased about the
usual amount for late June and the first two weeks
of July.

Page 99


June 1956*
compared with
May 1956 June 1955


Industrial Use of Electric Power (thousands of KWH per working day, selected
industrial firms in 6 district cities).............................................................................. ..
Steel Ingot Rate, St. Louis area (operating rate, per cent of capacity)....................
Coal Production Index— 8th Dist. (Seasonally adjusted, 1 9 4 7 -4 9 = 1 0 0 )....................
Crude Oil Production— 8th Dist. (Daily average in thousands of bb ls.)...............
Freight Interchanges at RRs— St. Louis. (Thousands of cars— 25 railroads—
Terminal R. R. Assn.).................................................................................
Livestock Slaughter— St. Louis area. (Thousands of head— weekly average).........
Lumber Production— S. Pine (Average weekly production— thousands of bd. ft.) .
Lumber Production— S. Hardwoods. (Operating rate, per cent of capacity)...........

97 p

- 0-


+ 2

— 5
+ 20
4- 2

— 3
+ 29
+ 2
+ 2
Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate, and the coal
production index, show the relative percentage change in production, and not the dop in index points or in percents of
p Preliminary. N.A. Not available.

Six Largest Centers:
East St. Louis—
National Stock Yards,
111. .............................
Evansville, Ind.
Little Rock, Ark.
Louisville, Ky. . . . . . .
Memphis, Tenn.
St. Louis, M o ..........
Total— Six Largest
Centers ..................



Total— 22 Centers

— 5%

+ 1

— 5


Other Reporting Centers:
Alton, 111........................
Cape Girardeau, Mo.
El Dorado, Ark.
Fort Smith, Ark..........
Greenville, Miss.
Hannibal, Mo.
Helena, Ark.................
Jackson, Tenn...............
Jefferson City, Mo.
Owensboro, Ky.............
Paducah, Ky. .............
Pine Bluff, Ark.............
Quincy, 111....................
Sedalia, M o..................
Springfield, Mo............
Texarkana, Ark.
. . ______ 23.0
T otal— Other
Centers . . . . . . .

June 1956
compared with



— 3

+ I

+ 5
— 5

4 2
2% + 1%




+ 1
+ 2
+ 2
4~ 1
+ 7
+ 1
+ i
+ 2
+ 2

+ 3%


+ 6
+ 2
+ 11


+ 9
+ 8

(In thousands
of dollars)
Arkansas . . ! 23,288
Illinois. . .
Indiana. . .
Mississippi .
Missouri . . .

$ 578.5



2% + 2%


Seasonally Adjusted (1 9 4 7 -1 9 4 9 = 1 0 0 )
1 Debits to demand deposit accounts of individuals,
partnerships and corporations and states and political

Percentage Change
Jan. thru May
May ’56
compared with
May >55 1955
+ 11% + 3 6 % + 2 2 %
-0— 5
—12 — 8 — 15
+ 3 —22 — 27
+ 35
+ 18
± 3
— 9
— 18
+ 10 — 8
+ 8

7 States . .
$369,628 — 3
+ 3
— 8
8th District
$151,790 — 1
+ 6
— 5
Source: State data from USDA preliminary
estimates unless otherwise indicated.
R— January-May 1956 Revised.

Loans1 ......................................
Business and Agricultural .
Security ...............................
Real Estate ........................
Other (largely consumer) .
U. S. Government Securities
Other Securities ....................
Loans to Banks ......... .........
Cash Assets .............................
Other Assets ...........................
Total Assets ......................

T otal...........
A llO th er .

278.4 p
315.4 p
261.2 p



Seasonally adjusted
T otal...........
246.4 p
279.1 p
. 231.2 p



* Based on three-month moving average
(centered on mid-month) of value of awards, as
reported by F. W. Dodge Corporation.
p Preliminary


All Member Banks
Change from
June 27,
May 30,
$ + 13


+ 2
— 3




$— 31

Liabilities and Capital
$ 676
$ + 24
$ + 58
Demand Deposits of Banks . . .
$ 695
Other Demand Deposits ...........
— 35
- 0574
Time Deposits ...........................
4~ 5
— 26
+ 28
Borrowings and Other Liabilities
- 0275
Total Capital Accounts .............
4- 1
$— 31
$ + 18
Total Liabilities and Capital
1 For weekly reporting banks, loans are adjusted to exclude loans to banks; the total is reported
net; breakdowns are reported gross. For all member banks loans are reported net and include loans
to banks; breakdown of these loans is not available.


on Hand

Percentage of Accounts
Stocks- and Notes Receivable
Sales Outstanding June 1, ’56,
Ratio collected during June.
Instal. Instalment
Accounts Accounts

8th F.R. District Total .
+ 11 %
Fort Smith Area, Ark.1 .
— 14
4- 5
Monthly stocks and
Little Rock Area, A rk.. .
— 21
+ - 0§
stocks-sales ratio data
— 3
Quincy, 111.....................
not available in time
— 3
Evansville Area, In d .. . .
+ 12
for publication in the
Louisville Area, Ky., Ind.
+ 9
Monthly Review. Data
-0- + 23
Paducah, K y ...................
will be supplied upon
+ 12
St. Louis Area, Mo., 111.
+ 9
Springfield Area, Mo. . .
4" 2
4- 8
Memphis Area, T enn.. .
+ 12
+ 19
All Other Cities2 ...........
4- 2
1 In order to permit publication of figures for this city (or area), a special sample has been con­
structed which is not confined exclusively to department stores. Figures for any such nondepartment
stores, however, are not used in computing the district percentage changes or in computing depart­
ment store indexes.
2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; Dan­
ville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi;
and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of June, 1956, were 5 per cent larger than
on the corresponding date a year ago.


Sales (daily average), unadjusted3 ...............................................
Sales (daily average), seasonally adjusted3 ...............................
Stocks, unadjusted4 ........................................................................
Stocks, seasonally adjusted4 ........................................................
3 Daily average 19 4 7 -4 9 = 100
4 End of Month average 1 9 4 7 -4 9 = 1 0 0
N. A. Not available.
Trading days: June, 1956— 26; May, 1956— 26; June. 1955— 26.

(1947-1949 = 100)
May 1956 Apr. 1956 May 1955

Weekly Reporting Banks
Change from
June 20
July 18, 1956
$ + 29
+ 19
__ i
+ 1
— 7
— 17
- 046
$ + 18

(In Millions of Dollars)

Net Sales
June, 1956
6 mos. ’56
compared with
to same
May, ’56 June, ’55 period ’55




+ 14
+ 28
+ 11





Net Sales
June, 1956
compared with
May, ’56 June, ’55
+ 12%
8th Dist. Total1 ___ 5 %
+ 21
St. Louis Area . . — • 6
— 1
Louisville Area . . + 1
— 5
Memphis Area . . + 9
Little Rock Area + 1
+ 5
Springfield A rea.
+ 1

June, 1956
compared with
May, ’56 June, ’ 55
— 4%

+ 4%
+ 6
+ 4
- 0—1

* Not shown separately due to insufficient coverage,
but included in Eighth District totals.
1 In addition to the cities shown separately in the
table, the total includes stores in Blytheville, Fort
Smith, Pine Bluff, Arkansas; Owensboro, Kentucky;
Greenwood, Mississippi; Evansville, Indiana; and Cape
Girardeau, Missouri.
Note: Figures shown are preliminary and subject to

Cash Sales
Credit Sales .............
Total Sales ...........

June, *56

May, ’56

100 %

June, ’55