1947 Directors Frb Minneapolis

ANNUAL REPORT

of

FEDERAL RESERVE BANK OF MINNEAPOLIS

to the

BOARD OF DIRECTORS

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX

High Lights.......................................... 1

Directors arid Officers.............................. 3

Changes of Directors and Officers.................... 6

Assets and Liabilities . .................. .. 7

Capital Accounts .............................. .. 19

Dividends . .......................................... 22

Bank Premises.......................................23

Earnings . . . . . . . . . . . . . .................. 25

Expenses.................. * ................... .. . 30

Departmental and Other Comments ...................... 42


KIGB-LIGBTS OF 1947

Earnings from our participation in the System Open Market

Account increased 11 percent over 1946.

Approximately 90 percent of net earnings paid to Treasury

Department,

Repurchase option of Treasury Bills terminated.

Federal Deposit Insurance Corporation stock held since 1933

canceled•

First budget submitted since 19420

On January 2, 1943 Forth Dakota Trill have State member bank

for first time since November 20, 1929*.

Five State banks in North Dakota adopt par clearance.

New volume records established.

International Business Machines and Hecordak equipment

being installed.


Consumer Credit controls discontinued.

Coin wrapping service offered to member banks„

Fiscal Agency operations at Helena Branch consolidated with

Head Office.

Redemption of Armed Forces Leave 3onds.

Five-day week proves successful after yearns operation.

Combined hospital and surgical benefits available to employees*

Reduction in custodianship activities for account of Recon~

struction Finance Corporation.


HEAD OFFICE DIRECTORS & MEMBER OF FEDERAL ADVISORY COUNCIL

Tern Expires December 31

Directors

Roger Bo Shepard, Chairman, and Federal Reserve Agent W0 D. Cochran, Deputy* Chairman

Class A

F, Do McCartney, Vice President9 The First National Bank 1948of Oakes, Oakes, North Dakota

Clarence E, Bill, Chairman of the Board, Northwestern 1949National Bank of Minneapolis, Minneapolis, Minn0

Jo R* &cKnight, President, The Pierre National Bank, 1950Pierre, South Dakota

Class B

Ray Co Iange, President, Chippewa Canning Co„, Chippewa Falls, Wisconsin

Homer P. Clark, Chairman of the Board,West Publishing Co., St. Paul, Minnesota

Walter H, McLeod, President, Missoula Mercantile Co., Missoula, Montana

Class C

Paul E. Miller, Director, Agricultural Extension Division, 1948University of Minnesota, Minneapolis, Minnesota

W0 D« Cochran, Cochran Freight Lines, Iron Mountain, Mlcho 1949

Rpger B. Shepard, 322 Endlcott Building, St. Paul, Minn* 1950

Member of Federal Advisory Council

1948

1949

1950

Henry Ea Atwood, President, First National Bank of Minneapolis, Minneapolis, Minnesota

1948


OFFICERS

Jo Ho Peyton* President

0, S» Powell, Firet Vice President

Ho G„ McConnell, Vice President Bank Examinations Security Exchange Act

A0 W0 Mills, Vice President & CashierGeneral supervision over all internal operationsBuildingProtectionPurchasingSuggestions

Otis R. Preston, Vice President Bank & Public Relations

R., E« Towle, Vice PresidentAssigned to Helena Branch

Sigurd Ueland, Vice President & Counsel Legal

Barry 1« Ziemer, Vice President Loans & Discounts

H* C« Core, Personnel Officer PersonnelOffice Boys & Pages

E. B» Larson, Assistant Vice President Fiscal AgencyPurchase & Sale of Securities

A 0 Re Larson, Assistant Cashier Check Collection Equipment Repairs Files & Old Records Ordinary Mail

C, Jo Larson, Assistant CashierAssigned to Helena Branch

Wo* Ec Peterson, Assistant Cashier Accounting Cafeteria Custodianships —

RFC, CCC, and others DuplicatingTelegraph, Transfers & Coding Withheld Taxes

W0 H„ Turner, Assistant Cashier Currency & Coin Noncash Collection Registered Mail Safekeeping of Securities Telephones Vault

Mo E0 Lysen, Operating Research Officer Efficiency Studies PlanningProcuresent of Furniture * Equipment Special Studies


OFFICERS(Continued)

Mo Ho Strothman, Jr«t Assistant Counsel Board*8 Letters Contracts InsuranceOperating Letters & Circulars Regulations

Paul W. McCracken, Director of Research Library Publications Research Statistics

0. W. Chnetad, Auditor

Term Expires December 31

1948

1948

1948

1949

1949

HELEKA BRANCH DIRECTORS

Ra B« Richardson, Chairman

Theodore Jacobs, President, First National Bank, Missoula, Montana

E„ D. MaoHaffie, President, State Publishing Co*, Helena, Montana

R» B. Richardson, President, Western Life Insurance Co., Helena, Montana

B. Mo Harris, President, The Yellowstone Bank, Columbus, Montana, and President,The Yellowstone Bank, Laurel, Montana

Malcolm E0 Holts, Agriculturist, Great Falls, Montana


CHANGES

DIRECTORS AMD OFFICERS

Changes In directors and officers of the bank included the re~

election in November of Mr. Je R. McKnlght, President of the Pierre National

Bank, Pierre, South Dakota, as Class A director, by Group 2 member banks,

and the election of MrP Halter H0 McLeod, President of the Missoula Mer

cantile Co., Missoula, Montana, as Class 8 director, by Group 3 member banks

of the district. Both were elected for three-year terms beginning January 1,

1946o

In December, Mr, Roger B„ Shepard, St„ Paul, Minnesota, was re

appointed Class C director for a three-year term ending December 31, 1950,

and was redesignated Chairman of the Board and Federal Reserve Agent for

the year 1948* At the same time, Mr. W, D. Cochran, proprietor of W. D0

Cochran Freight Lines, Iron Mountain, Michigan, was redesignated Deputy Chair

man of the Board for the year 1948 0

Mr, Malcolm E0 Holts, Great Falls, Montana, and Mr. B„ M, Harris,

President of The Yellowstone Bank, Columbus, Montana, were reappointed to the

directorship of the Helena Branch for two-year terms ending December 31 > 1949»

Mr, Holts received his appointment from the Board of Governors and Mr. Harris

was named by our directors.

On April 30, Mr. Ernest W« Swanson retired as Vice President in

charge of Bank Examinations. Mr. H» G. McConnell, Vice President, took over

Mr, Swanson9s duties as the officer in charge of Bank Examinations.

Mr* Henry E„ Atwood, President of the First Rational Bank of

Minneapolis, was reappointed by our direotors to the Federal Advisory Council

for the year ending December 31, 1948.


MAJOR MONETARY DEVELOPMENTS IN 19A7

The Business Situation

The major economic development of 1947 was the continued strong

upward surge of the dollar volume business activity. Our gross national

product was $232 billion for the year and was running at an annual rate

substantially in excess of $24-0 billion by the latter part of 194-7. These

represent very material increases over the 194-6 gr.’oss national product of

$204 billion, an increase of about 14. percent.

While regional data are not yet available in detail, it seems

evident that the business expansion in the district was at least as large

as nationally, perhaps in some cases larger. The data in the table present

Northwest Business Indexes (1935-39 • 100)

1947?% Change

194.0 1 S & *946-•£947Bank Debits - 93 Cities 112 252 306 + 21Bank Debits » Farming Centers 117 293 359 + 23Ninth District Dept. Store Sales 109 247 273 4 11City Dept. Store Sales 110 261 284 + 9Country Dept, Store Sales log 233 262 4- 12Ninth District rapt. Store Stocks 110 212 267 + 26City Dept, Store Stocks 107 208 243 + 17Country Dept. Store Stocks 112 214 286 4 34Country Lumber Sales 139 136 149 4- 10Miscellaneous Carloadings 108 127 132 ♦ 4Total Carioad5.ngs (excl. misc.) 112 112 123 + 10Faro Prices 86 212 272 4 28

p - preliminary

preliminary information for the major measures of district business activity

which will be carried in the next issue of our Monthly Review.

The least reassuring aspect of this business expansion was that

it was largely a rise in prices rather than output; the "unit" or "physical"

volume of production made only negligible gains during the year. The Fed«

eral Reserve index of industrial production, seasonally adjusted, averaged

189.3 during the first quarter of 194-7 and 190*7 during the final quarter.

(These are percentages of the average for 1935-39.) Agricultural produce

tion was actually lower in 1947 than in the previous year. The construc

tion industry, on a unit basis, made modest gains, as did also the public

utilities0

The wholesale price index rose 15=5 percent during the year,


about equal to the rise in the dollar volume of gross national product. A

substantial part of this rise is to be explained by the price spurt during

the latter half of the year. In fact, during April and May the wholesale

index was declining persistently. In view of the considerable attention

given to rising food prices during the latter part of the year, it is

worth noting that the prices of almost all types of commodities were mov

ing upward at a surprisingly even pace* From June to December, when about

two~thirds of the price increase occurred, the general wholesale price

index moved up 10<>2 percent. Farm products rose by the same amount (10.2

percent), and food prices by 10.4 percent. The average rise in all other

groups was only negligibly lower, 10.1 percent.

The cost of living index (technically the "consumers* price

index for moderate*income families in large cities*) pushed rather per

sistently upward again with the exception of April and May, concluding the

year with an 8*5 percent rise; retail food prices rose slightly more rapid

ly, 9o2 percent. In both cases a substantial part of the rise was con

centrated in the latter half of 1947,

The major characteristic of the 1947 business picture was, there

fore, a levelling out of actual production, as capacity rates of output

were achieved, and continued upward pressure on prices.

Causes of Rising Prices

What was the basic cause of our price inflation?

After capacity rates of production had baen achieved, we still

tried to spend in excess of our receipts or incomes. Since incomes and the

dollar value of production must always be exactly equal, any attempt to

spend in excess of incomes means that both the dollar volume of production

and incomes on the next round must inevitably increase correspondingly.

The response will take the form of increased real output, or increased

prices or both. Since by 1947 we had apparently reached capacity rates of

output, it is not surprising that virtually the whole response came in the

form of higher prices.

Businesses, for example, spent $25 billion on new plants, equip

ment and inventions in 1947• Their reserves and retained earnings lacked


$7 billion of being adequate to finance such expenditures. This $7 billion

^deficit” then had to be financed by borrowing or utilization of liquid

assets- While such capital formation over the long pull is the principal

means of raising our standards of living, it meant a net addition of

several billion dollars of demand in 194-7 in excess of then current rates

of production, with higher prices as a major result.

Also during 194-7, commercial bank loans increased from $31°i

billion to an estimated $38,5 billion, an expansion of 24 percent. In each

individual case the new or expanded loan unquestionably could be called a

sound, productive loan. Yet in the aggregate, the total effect of this ex

pansion of what seemed to be productive loans did not expand production in

1947; as we have already seen, production made no (Tains of consequence dur

ing 1947.

Consumers too were trying to make good on the arrears of the

war (and for housing the prewar decade also). While final data are not

yet available, it seems evident that a substantial number of consumers

cashed in bonds and drew down bank balances to buy houses and automobiles

and other largely durable goods. Such withdrawals supplemented incomes by

$10 billion in 1946; the amount in 1947 was probably of the same size

order* In addition, a $3 billion increase in consumer credit provided a

further supplement to incomes.

When production is at capacity levels, such extensions of ex

penditures beyond incomes are inevitably bound to call forth higher prices.

In addition to this our extremely low imports, about 60 percent

of an appropriate volume, together with exports perhaps 20 to 25 percent

above a normal volume, created further upward pressure on prices.

The transactions of the Federal government did provide some off

set, to this general picture of excessive demands, through a $5.6 billion

cash surplus. Thus the Federal government wa3 taking from the public

largely through taxes billion more than it was returning to the public

through expenditures. This was a deflationary and presumably salutory de

velopment since our uajor problem was one of inflation.

Principles of Monetary Policy

In a very real sense this posed, of course, a thoroughly ortho-

9Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

dox problem for monetary policy. It was in line with the long development,

both in the principles and the practice of central banking, which conceived

the central banking system*s major function to be to exercise a restraining

influence when disproportionate booms threatened - and the opposite when

depression was the problem.

Such restraint was to be applied in two ways. If the commercial

banks were borrowing from the Reserve banks, such borrowing should be made

expensive enough to discourage further loan expansion at the commercial

banks. This, of course, had limited application to the present situation

because of the negligible volume of member bank borrowing.

The second method was through open market operations. A loan

expansion created the same volume of additional deposits. Additional de

posits require additional member bank reserves at the Federal Reserve.

The volume of member bank reserves can be increased or decreased by the pur

chase or sale of securities by the Federal Reserve. Therefore, if a loan

expansion threatens to augment inflationary pressures, member bank reserves

should be held constant; if the situation warranted, they could be reduced.

By the creation of a tight reserve position, further increases in bank loans

could be restrained; theoretically they could even be reduced in this way*

Of course, during a depression the appropriate policy, in the tradition of

central banking, was Federal Reserve open market purchases to create an easy

reserve position and low discount rates.

In the prewar decade another recruit joined the ranks of Federal

Reserve Policy objectives - the maintenance of orderly conditions in the

money or capital markets* Federal Reserve purchases of U. S. Government

securities for the primary purpose of tempering a cumulative decline in

bond prices first occurred in early 1937, though pegging them at fixed levels

was no part of the new policy. From February to April 1937 the average yield

on long-term U. S. government bonds (all issues over 8 years) rose from 2.31

percent to 2.74 percent; their average price doclired from 107.2 in February

to 102 <>6 in March.

This is the genesis of the policy which has become paramount in

recent years - Federal Reserve support of U. S„ government bond prices.

While such did not occur prior to the war, it was predicted then


that at some atage the objective of supporting the government bond market

and the more traditional objective described above would clash.

This occurred with a vengeance in 1947*

Monetary Policy Steps in 1947

In a 3ense of separate actions the System, aided by Treasury debt

redemptions, did follow a restrictive program of modest dimensions during

1947.

First, the retirement of short-term bank-held debt out of Treasury

surpluses, while not restrictive in a formal sense, did inject some added

elements of caution by causing a relative lengthening of the commercial

banks1 bond portfolios. The major question is whether this restrained bank

credit expansion or accentuated the System’s problem of supporting a weak

market for long-term securities. The effect was probably not great either

way.

Second, the short-term rate was allowed to rise modestly to mitigate

the difficult position arising out of a guarantee of a pattern of rate3. (If

securities of all maturities are guaranteed at par, there should logically

be no buyers except for the longest maturity, highest rate issues.) On July 2

the Federal Open Market Committee directed the Federal Reserve banks "to

terminate the policy of baying all Treasury bills offered to them at a fixed

rate of 3/8 percent per annum and to terminate the repurchase option on

Treasury bills.” ^ The rate on bills rose then persistently to 0.950 per

cent in December.

On July 21 the Secretary of the Treasury announced that the one-

year certificates maturing on August 1 would be refunded into 7/8 percent

certificates maturing in eleven months. Thus was begun the shift from a

one-year 7/8 percent rate to higher rates which reached 1 l/8 percent at the

year end.

Third, on December 24 the Federal Open Market Committee lowered

the support levels of U. S. government bonds, The price of the 2 l/2 per

cent September 1967-72 securities dropped from 103,3 on December 23 to

1/ F.R.Bulletin, J u l y 1947, p. 776

1 1Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

101 cl on December 24., the yie3.d rising from 2*29 to 2„43 percent.

These policies had one important restrictive effect. By inject

ing into the situation some movement in interest rates, the money market

was kept in a state of uncertainty, thus increasing further the difficul

ties business was having in raising funds in the capital market. While

flotation of securities for new capital provided about §4 billion in 1947 (in

1946 it was $3.3 billion) much less equity capital was furnished. Further**

more, of total financing requirements of business, issues for new capital

supplied only one-sixth. Of the latter amount 30 percent were of the equity

type. In 1929 new capital issues supplied 60 percent of total requirements

and equity type issues constituted about 75 percent of this amount.

Unless the capital-market picture clarifies itself in 194-8, it

is not unreasonable to expect that businesses will continue to be in the

market in a substantial way for bank credit in the coming year. And it

follows that monetary policy may therefore be a more strategic factor in

economic developments than has been true for some years.

With this exegesis of monetary developments during 1947, the major

changes in our own balance sheet items become clear.

First, the large increase in our gold reserves is due to the gold

inflow nationally, which would account for about half our increase, and the

tendency during the year for funds to flow into our district from other

sections of the country because of our abnormally large cash farm incomes.

This heavy volume of business also helps to explain the continued

upward surge of notes of this bank in circulation, reaching $627 million by

the end of 1947.

The increase of $34 million in member bank reserve balances carried

at this bank is a reflection of the heavy open market purchases nationally,

described earlier, plus also the tendency for funds to flow into the district*

Bills purchased on repurchase option disappeared from our balance

sheet through action taken last July by the Federal Open Market Committee to

terminate it.


COMPARATIVE STATEMENT OF ASSETS(In thousands of dollars)

Assets;

Cash Reserves:Interdistrict Settlement Fund Gold Certificates with F.R. Agent Redemption Fund « F«R. Notes Total Gold Reserves

Vault Cash

Bills Discounted Foreign Loans on Gold U. S. Government Securities: Repurchase Agreement - Bills System Account Bills Certificates of Indebtedness Notes BondsTotal U. S. Government Securities

Due from foreign banksF.R. Notes of other F.R. BanksUncollected Items:Transit itemsExchanges for clearinghouse Other cash items Total Uncollected Items

Bank Premises Less reserve Bank Premises - Net

Inc. or Dec. 12-31-47 12-31-46 8inqe,12rJllr,46

$ 231,975 168,058 1+ 63,917200,000 189,000 + 11,00022.880 21.360 + 1*520

1 454,855 $ 378,418 76,437

6,793 5,734 ♦ 1,059

1,265 3,412 - 2,147

_ 26,264 — 26,264298,577 347,989 - 49,412223,788 228,144 - 4,35648,618 10,814 + 37,80493.936 . 22.929 71.007

$ 664,919 * 636,140 *+ 28,779

2 3 _ 18,158 4,337 + 3,821

61,290 56,887 ♦ 4,4033,532 3,129 + 4032.820 2.203 4 617

$ 67,642 * 62,2X9 5,423

2,493 2,497 - 4. 1.285 1.257 + 28

* 1,208 $ 1,240 32

Miscellaneous Assets:Fiscal Agency expense, reimbursableInterest accruedPremium on securitiesDeferred chargesAll other assets

Total Miscellaneous Assets

Total Assets

143 233 - 901,751 831 + 9201,726 302 + 1,424

25 18 ♦ 7- XI_______ 91 - 803,656 * 1,475 2,181

$1,208,498 $1,092,978 115,520

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vflASSETS H


COMPARATIVE STATEMENT OF LIABILITIES(In th0U8€UJd8 of dollars)

Inc. or Dec. 12-31-47 12-31-46 since 12-31-46

Liabilities:

Federal Reserve Notes in circulation $ 626,969 % 592,688 $+ 34,281

Deposits sMember bank - reserve accounts 450,542 398,588 + 51,954U. S. Treasurer - General account 43,975 20,506 ♦ 23,469Foreign deposits 6,225 11,914 - 3,689Remember bank - clearing accounts 852 1,805 - 953Officers' checks 452 189 ♦ 263Other deposits ..1.242... ___522- + 802Total Deposits * 505,388 $ 433,535 I* 71,853

Deferred availability i.wa*.U. S. Treasurer - General account 3,680 1,658 ♦ 2,022All other .._41.S21 ♦ ___6^212

Total Deferred Availability Items $ 57,023 % 48,689 8,334

Miscellaneous Liabilities:Discount on securities 319 170 ♦ 149Sundry items payable 548 + 422Total Miscellaneous Liabilities i 867 % 285 ♦+ 582

Total Liabilities ♦1,190,247 *1,075,197 t* 115,050

Capital Accounts:Capital Stock paid In Surplus Fund - Section #7 Surplus Fund - Section #13b Reserve for Contingencies Total Capital Accounts

Total Liabilities & Capital Accounts

$ 4,294 » 4,070 22411,232 10,997 ♦ 2351,073 1,073 -1.652 1.6U ♦ 11

$ 18,251 $ 17,781 1+ 470

$1,208,^98 $1,092,978 $♦ 115,520


LIABILITIESZJD

M n s .

#1,400

1,2 0 0

1,000

- 300

600

400

200


The most significant change in our balance sheet is the heavy in

crease in our holdings of U, S. Treasury notes and bonds - $33 million and

$71 million, respectively. Conversely holdings of U. S. Treasury bills de

clined $76 million during the year, and certificate holdings were reduced

by $4 million. The net result of these various changes was an increase in

our portfolio of U, S. government securities of $29 million to $665 million

by the year«end. These shifts in our portfolio from the short-term securi

ties into notes and bonds reflect the heavy open market transactions, parti

cularly during the latter part of 1947, in order to support bond prices.

All during November and December the Federal Reserve had been

supporting the long-term market heavily. System holdings of notes and bonds

increased from $1,567 million on November 5 to $4,157 million on December 30,

a rise of 156 percent. For this bank the corresponding figures are $48 million

on November 5, $137 million on December 30, and a rise of 186 percent* While

U. S. Government Security Holdings

Federal Reserve System (In millions of dollars)

l2-20ri7 11-J>*47 ChangeBills $11,619 $13,504 $ - 1,885Certificates 6,840 7,048 - 208Notes 1,477 859 ♦ 618Bonds 2.680 708 +1.972Total J22,61<j $22,119 e + 497

Federal Reserve Bank of Minneanolia

Bills $ 304 $ 348 $ 44Certificates 226 214 ♦ 12Rotes 49 26 + 23Bonds 88 ♦ 66Total $ 667 9 610 f + 57

holdings of short-term securities declined, the net effect of these open market

transactions, largely In support of the bond market, during November and Decem

ber, together with certain other changes, was an increase nationally of about

$500 million in securities held by the System, an increase of $900 million in

member bank reserves, and a temporary increase of $600 million in excess re

serves.

On balance the assets of the bank increased by $116 million in 1947

to a record $1,208 million by the end of 1947. Such an increase might normally

be a development to which one would point with some justifiable measure of


pride, About this further expansion in 19-47 one is less certain. In a very

real sense it portrays the difficulties encountered by monetary, fiscal, and

economic policies in coming grips with the substantial further inflation of

the price level.


CAPITAL ACCOONTS

CAPITAL STOCK paid in totaled $4,294 thousand on December 31, 1947,

an increase during the year of $223 thousand.

SURPLUS ACCOONTS. Surplus (Section 7) was inoreased $236 thousand,

which brought the total to $11,233 thousand on December 31, 1947* Surplus

(Section 13b) remained unchanged at $1,073 thousand.

CONTINGENCIES. No change was made during the year in the reserve

of $1 million set aside for losses in excess of the blanket bond coverage

or the reserve of $500 thousand earmarked for losses not covered by the Loss

Sharing Agreement.,

The reserve for registered mail losses totaled $152 thousand on

December 31, 1947, compared with $141 thousand for 1946, an increase of

$11 thousand for the year*

Below is a table shewing the changes made in this account during the

year 1947:

Reserve for registered mall losses beginning of year 1947 $141,259.23

Debits:Our proportional share of the retainer fee for advisory services from Harsh & HcLennon,

Credits:Additional recovery received on

loss of shipment of $5,000 in Cbe's and Five's to Northwestern National Bank, Litchfield, Minn., on December 17, 1945

Reserve for fiscal year, December 1,1946, to November 30, 1947, based on total shipments for year of

Inc., for 1947Total Debits

$564»462,3S7 at 2f per $1,000

Total Credits $11,291*25

Net Additions during year

Reserve for registered mall losses December 31, 1947

11.264,02

$152,523.25

The following gives a detail of shipments made during the fiscal

year December 1, 1946 to November 30, 1947:


1947 1946(OOP Qnltted) (OOP Chitted)

New F.R. currency from WashingtonFit F.R. notes to bank of IssueCurrency & coin between Minneapolis & HelenaOther currency & coin outgoing —Minneapolis 6 Helena

Other currency & coin Incoming —Minneapolis & Helena

All Other: (Delivered or picked up by truck) Other currency ft coin outgoing - Helena Other currency & coin Incoming - Helena

125,900 ' $ 111,00038,934 47,5894,898 5,907

187,673 165,798

199,647 172,730

3,067 2,589..A,2il 2.944

564,462 * 508,557

The following table shows the disposition of 1947 net earnings and

the changes made in the surplus accountss

Net Earnings - 1947 $ 2,613,643.19Dividends Paid $ 253,251.30Raid U.S0 Treasury (Interest on F.R. Hotes) 2,124,282.37Paid U.S* Treasury (Section 13b) 500.00 2,378.033<>67Transferred to Surplus (Section 7) $ 235,609.52

Surplus (Section 7) December 31, 1946 $10,996,957*86Transferred from Earnings 1947 235.609.52Surplus (Section 7) December 31, 1947 $11,232,567.38

Surplus (Section 13b) December 31, 1946 $ 1,072,621.34Transferred from Earnings 1947 __ HoneSurplus (Section 13b) December 31, 1947 $ 1,072,621.34

Reserve for Contingencies, December 31, 1947s

Reserve for looses in excess of blanketbond coverage $ 1,000,000*00

Reserve for losses not covered byLoss Sharing Agreement 500,000900

Reserve for Registered Mail Losses 152,523«25*$ 1,652,523.25

"See analysis on the preceding page.

Ob December 31, 1947, the accounts RFederal Deposit Insurance Corpo-

ration Stock" and "Reserve for Federal Deposit Insurance Corporation Stock" were

closed out each in the amount of $3,509,467.65 as the result of the cancellation

of such stock effective October 7, 1947®


CM


DIVIDENDS

N&tlo Bks St. Mbrs*

No* Natl* Banks Hoc State Members

Thia year’s payment of $253,251 is the largest ever paid by

this bank for one year9s dividends, Baking a grand total of 16,165,589 since

the organization of this bank, As of December 3-1, 1947, capital stock held

by the 475 member banks totaled $4,293,650, which Is an increase of 4 banks

and $223,100 over 1946*

TABLE CF DIVIDENDS PAID SINCE ORGANIZATION

For period November 1, 1914 through June 30, 1915* For period July 1, 1915 through December 31, 1917c

191419151916 $ 57,719*871917 363,894*191918 168,102*971919 180,186.211920 195,870o651921 211,657*031922 213,774.011923 212,732*681924 202,827,981925 193,559*461926 187,609*251927 180,726,511928 181,2025861929 184,029o921930 184,445.391931 180,454*531932 175,494o801933 171,568,891934 181,117*511935 185,448*451936 179,052*041937 174,057*311938 174,231.271939 174,905*391940 177,400, 581941 179,789,681942 183,336*331943 190,924.191944 206,158.741945 221,686,961946 238,372.301947 253.251*30

$6,165,589*25

($134*649*67 withdrawn from Surplus to pay dividenda)

DISTRIBUTION Of 1947 DIVID SEP

Michigan Minnesota No, Dakota So. Dakota Wisconsin Montana Total

$10,748o45 $161,138.89 $13,241,95 $14,692*54 $10,925.51 $17,127.27 $227,874,613,479,68 5.044,84 -_______ 4.288,28 2,686,20 9.877,69 25.376,69

$l4f228ol3 $166,183*73 $13,241,95 $18,980 82 $13,611.71 $27,004.96 $253,251.30

26 180 41 35 26 39 347

Jtl 28 NoneBiwm »i >ii mm-28 43 128

41 208 a 63 40 82 475


BANK PREMISES

During 1947 no additions were Bade to the book value of bank buildings

and fixed machinery and equipment, either at Head Office or Helena Branch, all

expense being charged to repairs and alterations* Noraal depreciation charges

of 2% on bank buildings at Minneapolis and Helena, and 10% on fixed machinery

and equipment at Helena, were made. Ho addition to the reserve for fixed machin

ery and equipment was made during the year of 1947 since the full reserve has

already been established* Deductions of $4f00Q from both fixed machinery and

equipment and its reserve at Minneapolis, representing the estimated original

cost of four large exhaust fans sold, were made, These fans were located in

the subbasement, had not been in operation since our air conditioning system

was revamped in 1938, and were sold for $540p which was credited to Profit and

Losso

To relieve congestion in the basement and subbasement at the Head

Officet the following steps were taken:

1* A concrete slab floor was constructed over a portion of the boiler

room at the basement floor level, and a tile wall was erected on one side,

making available for use approximately 550 square feet of floor space.

2« A doorway was cut into an obsalete, horizontal air duct at the boiler

r~ai level and a new one-position gun range was constructed in this area, This

eliminated the old gun range, which was located in the subbasement, and made

available an additional 1,500 square feet of floor space„

3» The sale and removal of four large exhaust fans made available 800

square feet of floor space.,

4« Approximately 2,200 square feet of storage space was rented from the

Minneapolis Van & Warehouse Company at an annual rental of $1,320 for the storage

of old records, of which 70% is reimbursable*

5 c Approximately 440 square feet of additional storage space was rented

from the Minneapolis Van & Warehouse Company at $55 per month far storage of

Fiscal Agency-owned surplus furniture and equipment« Sale* transfer* or removal

from storage of this furniture had reduced the rental to $7*50 by year-end0

All of this expense was reimbursable*

A detail of changes in the bank premises account is shown on the

following page0


BANK BUILDING:

Gross Book Value: Beginning of 1947 Additions during year

Total

£1,384,281.50

HeadOffice

$1,283,281.50

HelenaBranch

$101,000,00

Deductions during year - - -

End of Year $1,384,281.50 $1,283,281.50 $101,000.00

Allowance for Depreciation: Beginning of 1947 Creditsa* Normal depreciation b Other

$ 577,393.56

27,685.56

1 564,643.56

25,665.60

f 12,750*00

2,019.96

Debits - -

End of Year $ 605,079-12 S 590,309.16 $ u , 769.96

Net book value December 31, 1947 e 779,202,. 38 * 692,972,34 $ 86,230,04

FIXED MACHINERY AND EQUIPMENT:

Gros3 Boo1: Value; Beginning of 1947 Additions during year

$ 702,171.34 £ 664,969,35 $ 37,201,99

Deductions during year (estimated original cost of exhaust fans and motors sold) 4.000,00 4c000*00

End of Year $ 698,171.34 e 660,969,35 $ 37,201,99

Allowance for Depreciation: Beginning of 1947 Credits

a0 Normal depreciation b0 Other

$ 679,735,26

3,720.24

$ 664*969*35 $ 14,'765,91

3,720,24

Debits (estimated original cost exhaust fans and motors sold)

of4.000.00 4*000*00

End of Year $ 679,455.50 $ 660*969o35 $ 18,486,15

Net book value December 31, 1947 $ 18,715.84 $ - $ 18,715,84

LAND;

Net book value December 31, 1947 $ -410,520,66 $ 400*520*66 $ 10*000*00

TOTAL BANK PREMISES;

Net hook value December 31, 1947 $1,208*438o88 ^1,093,493.00 $114,945088


NET EARNINGS & PROFITS

Net earnings and profits totaled $2*614 thousand during 1947, an

increase of $248 thousand compared with 1946* Compared with 1946, total

current earnings increased $434 thousand, represented by an increase in

earnings on bills discounted $16 thousand, interest from securities in the

Open Market account $473 thousand, deficient reserve penalties $4 thousand,

reductions in interest on foreign loans on geld $8 thousand, and interest

on bills held under repurchsse agreement $50 thousand.

Our net expenses increased $309 thousand, dividends paid $15 thous

and (due to an increase in capital stock of $223 thousand), and interest on

Federal Reserve notes $2,124 thousand*

The Profit and Loss account, as shown in the table below, was $123

thousand more compared with 19469 due to an increase in additions to current

net earnings consisting of net profit on U„ S. securities sold $24 thousand,

decreased deductions from current earnings for charge-off on bank premises

(second floor addition at Helena Branch) $27 thousand, retirement system

salary computation adjustments $73 thousand, and an increase in deductions

for reserve for registered mail losses $1

Current earningsCurrent expenses

Current Net Earnings

Additions to Current Net Earnings:Profit on U.S.SeCo sold, net $74,733All Other 782Total Additions $75,515

Deductions from Current Net Earnings: Charge-offs on bank premises Reserve for registered mail

losses 11,289Retirement System salary com

putation adjustment All Other 593Total Deductions $11,882

Net Additions to Current Net Earnings

Net Earnings & Profits

thousand

Inc. or Dec,1247

54,613,1082.063.098$2,550,010

$ + +433,749.308,561

$ «• 125,188

+w

23,685559

+ 23,126

60 27,314

+ 1,118

* 72,807496

$ - 99,499

+ 122,625

$2,613,643 $ + 247,813


C<DRET CURRENT EARNINGS ^

. „ \/


CURRENT EARNINGS


The table beloT? giyes a breakdown of the Profit and Los3 transactions

during 1947:

TotalHeadOffice

HelenaBranch

Additions to Current Net Earnings: Profit on U„S. Govt* Sec,, sold, net $74,733 $74,733Profit on mutilated currency & coin 202 20& O ^Recovery of items previously charged

to Profit & Loss 30 30Exhaust fans and motors sold 540 540 cm

Credit for check returned - endorsing bank unknown 10 10Total Additions $75,515 $75,519 $ • A

Deductions from Current Net Earnings:Reserve for registered mail losses $11,289 $11,289 $ -Discount on foreign currency & coin 11 11 oc

Loss on counterfeits 80 70 10Difference account ?02 505 - 3

Total Deductions $11,882 $11,875 $ - 7

Net Additions to Current NetEarnings $63,633 £63,644 $ - 11

EARNINGS

Earnings from current operations totaled $4,613 thousand during

1947v an increase of $434 thousand over one year earlier. The largest source

of earnings in 1947 was from U. S„ Government securities - System account,

$4,422 thousand, an increase of $473 thousand over last year.

A table of earnings is shown belowx

Inc, or Dec.1?47 from 1946

Discounts $ 80,910 $ ♦ 16,305Foreign loans on gold 15,534 - 8,250UvSo Sec, - System Account 4,422,404 + 472,632U.S. Sec, * Repurchase Option 84,266 - 50,146Deficient Reserve Penalties 8,782 + 3,604Sale of wastepaper, money bags,etc. 620 + 364

Service charge * Safekeeping 5 -Commission on bills bought forforeign banks 169 + 115

Clearinghouse fines 182 + 36Savings in Registration Fees, etc.,

on registered mail shipments formember banks 206 902

Interest on personal loans toemployees ______ 3Q * . _ 2

$4,613,108 $ ♦ 433,749

Our average daily holdings of bills discounted for the year 1947

were $8,213 thousand, with earnings of 080,910 compared with last year’s

totals of $7,331 thousand, with earnings of $64,605. The return is one

percent. Average daily participation in foreign loans on gold during 1947

was £1,493 thousand compared with a daily average of $2,341 thousand in

1946o The earnings received on these loans during 1947 totaled $15,534


compared with $23,784 earned for the year 194.6. The yield for 19-47 was 1.059

percent«, Average daily participation in Open Market securities and bills

held under repurchase option totaled $642 million, a daily average increase

of $8 million compared with the year 1946 * with an average yield of .703

percent this year against *648 percent for the year 1946 „ The earnings on

these securities for this year were £4,507 thousand compared with $4,084

thousand last year.

banks, foreign loans on gold, and U. S. securities was „708 percent compar

ed with .654 percent for the year 19460

year ago. Open Market account bonds increased $71 million, and notes $38

million, while decreases occurred in Open JSarket account bills $49,412

thousand, certificates of indebtedness $4,356 thousand, and bills held

under repurchase agreement (which was discontinued as of October 2, 1947*

because this agreement was of war-time duration only) $26,264 thousand.

account and bills held under repurchase agreement for the last business day

of 1947 and 1946;

of $3,603»48 over last year's earnings of $5j.l78o01e While this year*s

earnings are the largest since 1932, the increase is largely due to three

banks in Montana being penalised a total of 25 timos, amounting to

$4*320,62.

During 1947, a total of 134 banks were penalized 276 times, com

pared with 114 banks ana 208 penalties in 1946.

For the year 1947 the average yield from loans to Ninth District

On the last day of the year 1947, compared with the same day a

The table below shows our participation in the System Open Market

12-31-47 12-31-46 (000 omitted) (000 omitted)

BondsNotesBillsCertificates of Indebtedness Bills - Repurchase Option

I 93,936 $ 22,92948,618 10*814

298,577 347,989223,788 228,144

Earnings from deficient reserve penalties for the period Decem

ber 16, 1946 through December 15, 1947, totaled $8„781<.49, an increase


Comparative Report of Deficient Reserve Penalties

Number of Banks Affected

Penalties Assessed Penalties Waived Assessed Waived

No,> ...1947 No,y______ No. 1947 No,. 1946 1947 1946 1947 m

Michigan 34 t 522.94 34 e 721.71 11 $ 18.83 8 $ 15.12 17 11 9 6Minnesota 86 1,016,83 70 1,494°87 44 126.71 35 156.31 47 42 30 31No.Dakota 17 587.69 18 455*88 3 11*25 9 33«01 10 10 3 8So*Dakota 41 1,107.22 26 696.80 11 20 c 43 12 24.52 23 15 9 9Wisconsin 24 416,23 22 530.20 18 24.91 6 4.36 12 12 14 6Head OfficeTotals 202 $3,650.91 170 $3,899.46 87 $202.13 70 $233.32 109 90 65 60

Montana 74 5.130.58 38 1.278.55 17 33*28 f4 5.39 25 24 4

CombinedTotals 276 £8»7Sio49 208 $5,178.01 104 $235.41 74 $238.71 134 114 78 64

No changes were made in the percentage of reserve required al

though one change was made in authorized deductions„ Under the supplement

to Regulation D dated April 13, 194-3, War Loan deposits and Series E Bond

account became exempt from reserve requirements until six months after the

cessation of hostilities of World War II* On December 31, 1946, the President

of the United States proclaimed the cessation of hostilities as of noon that

date? therefore, effective July 1, 194-7, such deposits ceased to be deductible

when computing net deposits subject to reserves.

NONREIMBURSABLE EXPENSES

Inc. or Dec*194.7 from 1946

Head Office $1,859,542 $ + 279,047Helena Branch 203.556 + 29* 5L6.

$27063^093 $ 7 3 0 8 t # l

Head Office expense, after deduction of reimbursable expense,

increased $279 thousand compared with the year 1946. Principal increases

over last year were in salaries; retirement system contributions; travel**

ing expense; postage and expressage; telephone and telegraph; printing,

stationery and supplies; insurance; taxes on bank premises; light, heat,

power and water; miscellaneous expense; assessment for estimated expenses

of the Board of Governors .of the Federal Reserve System* and cost of Federal

Reserve currency. Rental of space received from Government agencies in

creased, thereby reducing expense by a like amount*

Helena Branch costs increased $30 thousand over last year. The


I


larger increases were in salaries, postage ard expressage, telephone and

telegraph, insurance, and depreciation on barJc building* Decreases occurred

in repairs and alterations, furniture and equipment, and miscellaneous expenses

Rental of space received from governmental agencies decreased, thereby reduc~

ing the deduction from expense by a like amount,

SALARIES

Inc, or Dec,1947 from 1946

Head Office $1,066,713 $ + 177,172Helena Branch 112,936 + 21.745

$1,179,6,*9 * ♦ 198,917

Head Office salaries for 1947 totaled $1,067 thousand (which in

cludes $20 thousand overtime), an increase of $177 thousand over last year.

Salaries increased $186 thousand, while overtime payments decreased $9

thousand. This increase in salaries is due to the two blanket increases to

employees effective in 1946, merit increases, and a small increased number

of employees in some departments because of the five day week,

Helena Branch salaries for the same period increased $22 thousand,

due to the same reasons mentioned above.

RETIREMENT SYSTEM CONTRIBUTIONS


Head Office $ 95,586 $ + 16,394Helena Branch 9.530 + 2,460

$105,116 $ + 18,854

Head Office retirement system contributions totaled $95,586, an

increase of $16 thousand compared with 1946, due to increased salaries and

to the change in the rate of contributions from 9,01% to 9.62%, effective

July 1, 1946,

Helena Branch costs increased $2,460 for the same period,

DIRECTORS * FEES & EXPENSES


Head Office $11,087 $ ♦ 1,432Helena Branch 4.530 ± 1,067

$15,617 $ + 2,499

Directors" fees and expenses totaled $16 thousand, an increase of

$2,499 over the year 1946„ This increase is due partly to the following re

vised schedule of fees, allowances, etc* for Head Office and Helena Branch

directors from this district, effective February 15, 1947s


Directors’ meeting of Head Office directors —

A daily fee of $25»00 to Head Office directors residing

within 25 miles, and $50o00 residing more than 25 miles

from place of meeting.

Directors5 meeting of Helena Branch directors —

A daily fee of $25*00 to Helena Branch directors residing

within 25 miles„ and $30*00 residing more than 25 miles

from the place of meeting.

Committee meetings of Head Office or Helena Branch directors —

A daily fee of $25*00 provided only one fee will be paid

for each day of meeting, regardless of the number of meet

ings o If there is a difference in the amount of fee pay

able for two meetings on one day*, the larger fee shall be

paid.

Allowances for expenses —

For all directors residing 25 miles or more from the place

of meeting there shall be paid necessary transportation

expense* plus a subsistence allowance of $15.00 for each

day, or portion of a day, during which the director is

away from his home city.

FEDERAL ADVISORY COUNCIL FEES & EXPENSES

Inc. or Dec.

Federal Advisory Council fees and expenses totaled $1,843, an

increase of $283 over last year due to the change in fees and allowances

for representatives on the Federal Advisory Council from this district.

The following schedule for out-of-town meetings was effective February 15,

1947: a daily fee of $50o00 for each day, or portion of a day, of meeting,

together with necessary transportation expense and a subsistence allowance

of $15*00 for each day, or portion of a day, during which the member is away

from his home city*

Head Office1947 from 1946 $1*843 $ ♦ 283

TRAVELInc0 or Dec

1947 from 1946Head Office Helena Branch

$35,9X9 $ + 4,351-I»g3-Q- !__ 228

$39,749 t * 4,879


Travel expense at the Head Of. totaled $36 thousand, an increase

of $4,351 over the year 19460 The larger increases in travel expense are Bank

Examination $2,500, and Bank Relations $2 thousand *

Helena Branch cost was $528 more for the same period.

POSTAGE & EXPRESSAGE

Inc, or Dec.194.7 from 19^6_

Head Office $191,117 +' 28,675Helena Branch 32.908 * 31260

£224,025 # + 31,935

Postage and expressage for the Head Office totaled $191,117, an

increase of £29 thousand compared with 1946. The largest increases occurred

in postage on; incoming currency $5,600, outgoing currency $4,000, and

ordinary mail postage $15,500 (which includes the reimbursement to member

banks of £1,500 for postage and expressage on cash items routed direct to

other Federal Reserve bank3 and branches); express on: incoming currency

$1,200, and incoming coin $4,100o Postage on outgoing coin shows a decrease

of $2,500o

TELEPHONE & TELEGRAPH

Inc* or Dec,1947 from 1946

Head Office $ 7,485 $ + 2,945Helena Branch 7n286 + lt,6l5

$14*771 $ + 4,560

Telephone and telegraph expense at the Head Office totaled $7,485,

an increase of $2,945 compared with the year 1946* This increase is due to

the increase in commercial wire rates effective December 29, 1946, and to a

change in the Board’s MANUAL effective April 1, 1947, governing reimbursement

for telephone stations used by the various government agencies. The charge

per station prior to that date was $4.50, which included some of the telephone

operators’1 salaries. Operators* salaries were eliminated as a reimbursable

expense which reduced our recovery to $2*79 per station*

Helena Branch costs increased $1,615 for this period.

PRINTING, STATIONERY & SUPPLIES

Inc0 or Dec, 1947 from 1946

Head Office $ 58,789 $ + 13,940Helena Branch 7 ,100 + 135

$ 55^889 $ + 14,075


Printing^ stationery and supplies at the Read Office totaled

$58,789* an increase of $13,940 compared with the year 194.6. This increase

is due to a change in our procedure whereby we now charge reimbursable units

for supplies as they are requisitioned out of "Stock1* rather than when

supplies are purchased , to increased costs of printing, stationery and supplies

over the year 1946, and to the purchase of some items in 1947 for which there

wa3 not comparable expense in 1946, such as; uniforms for guards £800, bronze

memorial plaque (with names) for lobby $400, pre«*crimped coin wrappers $1,400,

book "The Rising Tide of Bank Lending11 , by Paul McCracken §900, coin bags

$1,700 and a large order of Recordak film and spools paid for in December

1947, $3,500 (to be used by Transit when the installation is complete on the

24 Recordak machines),

QTHSR INSURANCES (Does not include insurance on currency, coin and securities0)

Inc0 or Dec. from 1946

Head Office $14,373 t * 5#86lHelena Branch la662 ± lll96

#16,035 $ ♦ 7,057

Other insurance expense for the Head Office totaled $14,3739 an

increase of $5$861 compared with a year ago* The largest changes are;

lo Effective April 1, 1947, the bank began absorbing approximately

two-thirds of the expense in connection with Blue Cross and Surgical Benefit

insurance offered to employees and dependents, The gross expense of the Blue

Cross and Surgical Benefit insurance plan for the nine months of 1947 ^as

$13<>331? of which $4*698 was paid by the employees, $1,710 was recovered from

the various government agencies, leaving a net amount of $6,923 absorbed by

the banko

2o Group Life insurance gross expense totaled $17,860 for 1947, an

increase of $2,361 over last yearQ Of this gross amount, $8,471 was paid by

the employees^ leaving a net amount of $9*389 absorbed by the bank for the

year 1947# an increase of $1,219 compared with 1946„ A dividend of $8,810

was received from the Equitable Life Assurance Society for the policy year

ended April 1, 1947 and for the third successive year, the employees were

given benefits of this dividend totaling $2*764 as compared with $2,452 in


194.6o Distribution of the employees * share >f the dividend was made by the

bank absorbing the employees’share of the premium for the months of August,

September and October.

3* Military Service insurance totaled $470 for the year 194-7, a de

crease of $2,570 when compared with 1946„ This decrease was expeoted since

most of the service personnel returned in 1946. VJith all military personnel

returned, this expense will be completely eliminated in 1948»

Helena Branch insurance costs increased Cl,196 for the same period.

The largest changes are;

lv Blue Cross and Surgical Benefits insurance became effective April 1,

1947, and gave the employees the same benefits as those at the Head Office,

The net amount absorbed by the Branch was $679.

2o Group Life insurance gross expense totaled §1,416 for the year 1947,

which is the same as for the year 1946. Of this amount $690 was paid by the

employees, leaving a net amount of 6726 absorbed by the bank for the year 1947

compared with $718 for the year 1946 a A dividend of $817 was received from

the Equitable Life Assurance Society for the policy year ended April ly 1947,

and for the third time the employees were given the benefit of this dividend

by the bank absorbing the employees * share of the premium for the three months

of August, September and October, totaling $289 in 1947 compared with $216 for

1946,

TAXES ON BANK PREMISES

Inc* or Dec„1947 from 1946

Head Office $ 80,960 t ♦ 3,765Helena Branch 3 ,.983 + 187

£ 84,943 t + 3,952

Taxes on Head Office bank premises totaled $80,960, an increase of

$3*765 over the year 1946 due entirely to the increase in tax rate to 129

mills for 1947 compared with 123 mills in 1946a

Helena Branch cost was $187 more for the same period due to an in

crease in tax rates and a higher valuation on the building because of the

second floor addition«


DEPRECIATION ON BANK GULPING AND FIXED MACHINERY & EQUIP! 1EKT

Inc. or Dec*19^7 from 1946

Head Office $25^666 $Helena Branch .. J: «74Q + 2.320

$31,406 $ * 2,320

Depreciation on bank building at the Head Office shows no change

compared with 1946, while Helena Branch depreciation increased $2,320 ($520

on building and $1,800 on fired machinery and equipment) due to the second

floor addition to the Helena Branch building during 19460

LIGHT« HEAT. POTTER & WATER

Inc. or Dec.19£Z from 1946

Head Office $22,691 1 + 2,597Helena Branch 2M286 » 196

$24,977 £ + 2,401

Light, heatP power and water at the Head Office totaled $22,691,

an increase of $2,597 compared with the year 1946, The classifications

under this heading showing the largest increases are: (l) light and power

$900, and (2) fuel oil $1,600, due to increase in price from .045 cents per

gallon in November 1946 to a09 cents per gallon at the time of the last

purchase,

Helena Branch cost decreased $196 for this period*

REPAIRS & ALTERATIONS

Inc. or Dec.1947 from 1946

Head Office $21,574 $ ♦ 1,381Helena Branch ___570 - 3.456

$22,144 $ - 2,075

Cost of repairs and alterations at the Head Office totaled $21,574,

an increase of $1,381 compared with the previous year* The largest items in

repairs and alterations during 1947 are;

10 A new reinforced concrete sidewalk and curb was laid for $7,435«

20 Construction of a concrete slab over a portion of the boiler room

at basement level with a carrying capacity of approximately 150 lbs, per square

footo Tile walls erected inside of the new space were plastered, a door was

installed and pipes and air ducts were moved * Total cost of this work was

*2,222o

3 7


3„ After motors and fans were taken out of old air conditioner in sub~

basement and sold for $540,00s the net cost of connecting the return air ducts

in subbasement was $922.

Helena Branch costs decreased $3,4-56 because of repairs and altera*

tions made to the original building at the t.ime of the second floor addition

in 1946o

FURNITURE & EQUIPMENT


Head Office 113,664 I ♦ 12Helena Branch 1.642 - lft463■«'» » ' f i -j 1 1 i » w w — 1 ■ »W i 11 n> t n JPi<

$15,306 $ - 1,451

Furniture and equipment purchased at the Head Office totaled

$13,664, an increase of only $12 compared with 1946, The largest purchases

during 1947 were: four Remington typewriters $563, three coin wrapping

machines $2,739, a Bunn tying machine $680, six ?/onroe adding machines $2,381,,

and four 8-compartment money counting machines $7i>091.

Obsolete furniture and equipment, such as adding machines, type

writers, chairs, desks, etc,, sold during 1947 totaled $2,322.

RENTAL OF OUTSIDE SPACE

Inc, or Dec.1947 from 1946

Head Office $ 452 $ ♦ 452

Effective February 15, 1947, an agreement was consummated with the

Minneapolis Van & Warehouse Company for the lease of approximately 2,200 square

feet of space in their warehouse located at 100 First Avenue North at an annual

rental of $1,320. This space is used for the storage of old records of the

bank as well as for reimbursable functions,. The nonreimbursable expense for

the year was $452. This lea3© is on an annual basis, giving us an option to

renew at the end of one year.

MISCELLANEOUS NET EXPENSE

Inc. or Dec, 19A7 from m e

Head Office $81,189 $ + 12,089Helena Branch 11.013 -• 3.198

$92,202 $ + 8,891


Miscellaneous net expense at the Hoad Office totaled $81,189* an

Increase of $12 thousand compared with the year 1946. The items showing the

largest increases during 3.947 are:

1. Rental, repairs and maintenance of furniture and equipment increased

$8,152, Of this amount $3,100 was for rental since April 1, 1947 of Internationa

al Business Machines for safekeeping records, $3,400 for rental since July 1947

of International Business proof machines for listing city and country checks,

and $760 for a yearns rental on coin wrapping machines,

2. Foreign — Our pro rata share of the operating expenses of the

Foreign Department by the Federal Reserve Bank of New York totaled $9,072,

an increase of $1,300 over the previous year*

3* Membership dues to the Minnesota Bankers Association totaled $750,

an Increase of $500 over 1946*

4o Ninth District Conference expense totaled $12,365, an increase of

$351 over the year 1946*

5o Federal Reserve Forum expenses totaled $7,007, an increase of $2,116

over the cost of the first forum held in 1946»

BOARD ASSESSMENT

Inc, or Dec,1% 7 from 1946

Head Office $65,186 $ + 9,856

The assessment for expenses of the Board of Governors of the Federal

Reserve System totaled $65,186, an increase of $10 thousand over the previous

year.

The Board of Governors of the Federal Reserve System levies semi™

annually upon the Federal Reserve banks, in proportion to capital stock and

surplus, an assessment sufficient to pay estimated expenses and salaries of

Its members and employees for the half-year succeeding the levying of such

assessment, together with any deficit carried forward from the preceding half-

year O

The basis for our assessments for the years 1947 and 1946 is shown

below:First Half 1947 1946Capital Stock $ 4,070,550 $ 3,861,350Surplus (Section 7) 10,996,958 8,869,500Surplus (Section 13b) 1,072,621 1„072,621

$16,140,129 $13,803,471


(Cont'd) m i

Assessment Rate ,00204 .00161

Total Assessment for First Half $32,925.86 $22,223.59

Second Half Capital Stock Surplus (Section 7) Surplus (Section 13b)

t 4,223,300 10,9*56,958

$16,292,879

$ 3,963,100 8,869,500 1.072.621

$13,910,221

Assessment Rate .00198 .00238

Total Assessment for Second Half $32,259o90 $33,106,33

COST OF FEDERAL RESERVE CURRENCY

Inc. or Dec,194-7 from 194.6

Original cost (including shipping charges) $ 90,473 $ - 2,384 Redemptions (including shipping charges) 18a610 + 5,'4.05

$109*083 $ + 3,021

The cost of new currency totaled $90,473, a decrease of $2,38-4

compared with the year 1946« Printing cost decreased $5,500 compared with

194-6, while postage and surcharges increased $3,100 due to the $15 million

increase of new money received in 19-47 over 194-6„

Redemption costs, including shipping charges, increased $5,405

compared with the previous year due to the assessment for expenses of re

demption of Federal Reserve nctesc In addition to payment of $3,552 for

the fiscal year ended June 30# 194-7 we paid $1,686 for the year ended

June 30, 1946, and $1,800 for the first half of the fiscal year ending June 30,

1948.

RENTAL RECEIVED'

Inc* or Dec,1947 from 1946

Head Office $41,753 $ + 5,057Helena Branch 3,566 • 3 >247

$45,319 9 ♦ 1,810

Rental received from government agencies for space and furniture

and equipment, which is deducted from total expenses, totaled $45,319 during

1947 for tho Head Office and Helena Branch, an increase of $1,810 compared with

the previous year. Rental for space at the Hsad Office totaled $37,422, an

increase of $6,061 over a year age due to units of the Fiscal Agency Depart

ment returning to the bank from the annex. Helena Branch rental of space

decreased $2,550 because of Fiscal Agency activities being transferred to

the Head Office on June 1, 1947* This transfer also caused a decrease of


$700 in rental received for the use of furniture and equipment at the Helena

Branch c

REIMBURSABLE EXPENDITURES

1947Inc„ or Dec, from 19-46

Public Debt $ 562,611 * «* ~ 151,O HWithholding Taxes 9,967 + 1,673Foreign Funds Control - • 292Currency Reports 174 - 269Reconstruction Finance Corp, 45,392 - 11,168Federal Farm Mortgage Corpe 79 323Federal Land Banks 109 913Federal Intermediate Credit Banks 24- + 20Federal Public Housing Authority 24 + 12Commodity Credit Corporation 8,200 34,219Maritime Commission - - 180War Department 371 - 2,406Navy Department • - 4-40Office of Price Administration 4,905 • 4,403Federal Works Agency 19 • 78Home Owners Loan Corporation 53 - 105Leased Wire Service 2,881 + 715Photostat Service 1,310 619Coin Wrapping Service „ 4*225 +

$ 640,344 $ - 199,784

Reimbursable expenditures at the Head Office and Helena Branch

totaled $640 thousand9 a decrease of $200 thousand compared with the year

1946c The agencies showing the greatest decreases ares Public Debt $151

thousands Reconstruction Finance Corporation $11 thousand? Commodity Credit

Corporation $34 thousand, War Department $2 thousand, and Office of Price

Administration 04- thousand,, We received $4 thousand from banks for coin

wrapping service,,


DEPARTMENTAL AND OTHER COMMENTS

Accounting . . . . . .................................... A3

Armored Car Service ............................ 4*3

Bank and Public Relations ...............................44-

Cafeteria........ ..................................... 4-7

Check Collections ................................. 4.8

Consumer C r e d i t ................................ .. 50

Currency and Coin ...................................... 50

Discounts .......................... ................ .53

Duplicating ...................... .....................54.

Examinations .................................... .. . . . 54-

Fiscal A g e n c y .......................................... 56

Industrial Advances .................................... 60

Interest on Federal Reserve Notes ...................... 61

Noncash Collections .................................... 64.

Personnel........ .. ........................... .. 65

Protection........ ............................. .. 69

Purchasing . . . ............................ . . . . . . 70

Reconstruction Finance Corporation ...................... 70

Research . . . . . . . . ................ . . . . . . . . 7 3

Safekeeping........................................ .. . 75

4 2


ACCOUNTING DEPARTMENT

For the firot tine since 1942 all Federal Reserve banks were

asked to resume the submission of annual budgets which had been temporarily

discontinued because of the difficulty of estimating, in advance, the cost

of various war activities, The responsibility for the compilation of the

figuresy as well as the analysis of the monthly expenditures, is being

handled by this department,

During the year, the MANUAL OF INSTRUCTIONS GOVERNING THE PREPA

RATION OF FUNCTIONAL EXPENSE REPORTS was completely revised. Some of the

more important changes weres (a) with certain exceptions, dally time records

are to be maintained by each employee where time is devoted to more than one

unit, (b) reports are to be submitted monthly on a noncumulative basis plus

an annual copulative report for each year, and (c) formal functional expense

report forms and records of a permanent nature are to be maintained by all

banks and branches covering the distribution of salaries and other expense

items9 daily time records sod volume of work figures«

The primary object of these changes is to unify the cost system so

that costs may be more accurately compared with those of other Federal Reserve

banks,

ARMORED CAR SERVICE

Negotiations were conducted during the year with Brink's Incorpo

rated to amend a clause in the contract limiting its liability to losses

caused by the negligence or misconduct of its employees so that Brinks

Incorporated would aseua© the entire liability up to $5 million for any loss

of any property while in the possession of its employees* The contract was

amended to provide such coverage effective August 1, 1947, and the necessary

changes were made in our operating procedure to make thit additional coverage

effective 0


BANK AND PUBLIC REUTIOflS

The program of visits to Ninth District banks by representatives

of the Federal Reserve Bank, begun in 1933, was continued during the year.

In 19-47 a record number of 2,360 bank calls were made by officers and senior

members of our bank staff*

Twenty sen form the bank relations group which is responsible for

the program* The five States in the district served by our Head Office have

been divided Into sections with two men ordinarily assigned to call on all

the banks In a particular section. The program, therefore, calls for two

visits to each bank, except those in Montana and the Twin Cities, each year*

There are 1,134 such banks, and in 1947 all except 12 were visited at least

twice, The remaining 12 were visited once. Ther3 were also 104 calls to

branches, stations, and offices of banks during the year.

This year's total of 2,360 calls under the program compares with

2,143 In 1946, 1,175 in 1945, and 411 in 1944* Not included in the above

total, since they were not a part of the regular program, were approximately

35 calls made by Head Office representatives on Montana banks, 45 on Twin

City banks, and numerous others which were made incidental to speaking en

gagements, attendance at conventions and meetings, research trips, membership

calls, bank open house and anniversary celebrations, etc* The bank was also

represented by one or more men at each of the State Bankers Conventions of

the six States in the District, the National A.B.A. Convention, and practically

all group, clearinghouse$ and study conference meetings* In some cases where

banks held individual celebrations of anniversaries, openings, or new or re

modeled quarters, and where this bank was not represented, letters of con

gratulation or citations were sent.

In conjunction with the program of calling on banks, bank relations

men encourage bankers to call at the Federal Reserve Bank whenever they are

in Minneapolis, and during 1947 many bankers made tours of our bank and had

luncheon with our officers*


On April 26, the seventh Federal Reserve Conference for Ninth

District bankers was held* Conference registration included 948 bankers

representing 885 backso The program consisted of a reception at the bank,

lunch at the Nicollet Hotel, an afternoon of addresses followed by &

reception at the hotel, dinner9 and the Ice Follieso After opening re

marks by President Peyton, the speaking program Included addresses by

Dr„ Austin A* Dowell of the University of Minnesota; Mr, Vernon Lo

Peterson of the DuPont Corporation; Mr* Leonard W0 Brookington, promi

nent member of the Canadian Bar; and a panel discussion on questions

submitted by the bankers9 in which five of our people participated —

Paul McCracken, Franklin Parsons, Harold McConnell, Sigurd Ueland, and

Oliver Pcwell, On Friday evening preceding the conference, a compli

mentary dinner iras held at the Minneapolis Club for the Commissioners

of Banks in the District, the officers of the State Bankers Associations,

the Directors of the Federal Reserve Bank and the Helena Branch, and

Governor Clayton* After the dinner* brief talks were made by Governor

Clayton and by Mr* George L* Peterson, Associate Editor of the Minneapolis

Star0

The second Federal Reserve Forum for supporting executives of

member banks In the Ninth Federal Reserve District was held on September 18

and 19? There were in attendance 422 men and wouen other than Federal Re

serve personncd* This was an Increase of 7 ever the 3946 attendance. An

analysis of the member bank officers who attended reveals a larger propor

tion of cashiers and vice presidents and a smaller percentage of junior

officers attending in 1947 as oenpared with 1946c

Ob October 7* the members of the Congressional Committee con

ducting price hearings In Minneapolis that week and 25 Twin City business

men were guests of the bank at a dinner at the Minneapolis Club. The members

of the Congress&on&l party also were our guests at luncheon at the bank on

October 7* 8 and 9o

Thirteen additional luncheons were held at the bank, with commercial

bank officials„ prominent businessmen, and University professors as our

guests^ At each luncheon a guest speaker discussed some topic of the day*


There were 57 bank tours made by high school, college, and

other student group3* Five of these groups were our guests at luncheon*

Bank officers and representatives delivered 91 addresses to

an estimated audience of 9f394 people0

The attendance at showings of the Federal Reserve Bank movie

during 1947 was 13P378, bringing the cumulative total to 491 thousand0

The bank continued its cooperation with the Wisconsin Bankers Association

with regard to showing of the Federal Reserve movie and furnished them

two new prints to meet the demands for bookings and supplement the print

they have had for distribution since 1940* This is the eleventh year of

showings of this movie0

Sixty-six requests were received for 750 copies of the picture

book "Your Money and The Federal Reserve System" in 1947* This booklet

was completed and first distributed in Hay 1942a

The operating ratio statement covering 194-6 operations of member

banks in this district was mailed out to all member banks. Special studies

of operating ratios were computed for the State Banking Departments of

North Dakota and South Dakota and in Wisconsin for Ninth District banks

in that state? as well as for fifty-three State banks in Minnesota who

requested it»

Two indu*trial tours were arranged, including visits to Minne-

apolis-Moline Implement Company and the Foley Manufacturing Company» The

officers fluid public relations men also made a one-day trip to visit three

’ scientific farms near Oiratonnao

The year saw some progress in the trend toward par clearance

in the district and increases in the capital accounts of many banks to

a point where they are eligible for Federal Reserve membership* The last

nonpar bank in Montana went on the par list in March, making that State

along with the Upper Penlnsual of Michigan, one hundred per cent par.

Late in the year there was a movement for par clearance in North Dakota.

Five State banks in North Dakota went on the par list in 1947 and five

mere announced par clearance as of January 2, 1948*

As reported by the Examination Department, six State banks

joined the Federal Reserve System during the year0 and, as of January 2,


194-3; we will have a State member in North Dakota for the first time

since November 20, 1929, whan the Farmers State Bank, Fullerton, North

Dakota, voluntarily withdrew fro* the System.

At the close of the year there were 1,285 banks in the district

as compared with 1,279 at the close of 1946* Of the 1947 total* there

were 347 national banks, 128 State member banks, and 810 nonmembers with

140 of those on the par list and 670 nonpar. The breakdown at the end

of 1946 was as follows: 348 national banks, 123 State members8 and 808

nonmembers, of which 128 were par banka and 680 were nonpar. Of the 140

banks now on the par list* 103 have sufficient capital funds and are

otherwise eligible for membership, and of the 670 nonpar banks 571 now

have sufficient capital funds to belong to the Federal Reserve System„

Both figures on eligible banks show Increases ever last year.

CAFETERIA

On January 1, 1947, Urs, Eelen Pearson succeeded Miss Esther

Bisenbarth as menager of the cafeteria under the same arrangement as

theretoforeo

Because of rising food and operating coatst with a correspond

ing increase in the monthly deficit being absorbed by the bank, the coet

of a complete meal to an employee was raised 7£ to 10£ in February (depend

ing upon the choice of dessert)0 Howevere no substantial reduction in the;

deficit resulted? and in May and June a survey was made to determine what

might be done to bring about a more economical operation, A detailed study

was made covering food purchases and costs8 menus and food values9 returns

against costp and a program of purchasing and menus worked out which appeared

to be satisfactory, Hiss llinda Anderson, who had been the first assistant

of the previous operators, succeeded Mrs® Pearson as manager of the

cafeteria.


CHECK COLLECTION DEPARTMENT

The year of 1947 was one in which nearly all previous high volume

figures were shattered. During 1947 the Check Collection Department func

tioned 46,542 thousand itemsf which is an increase of 5»6£ over the 1946

total of 44*077 thousand items* When compared with the previous high prewar

year (1941)» this year’s total is 44 1/2J& greater.

Breaking down the 1947 volume into various sections, it is in

teresting to note that country checks numbered 32,376 thousand items which

reflects an increase of 9% over the 1946 number of 29,625 thousand items

and an increase of U7% over the 1941 figures of 22*010 thousand items* The

month of October was rather unusual because on the 14th a new high of 169,009

country checks was established., This record, h or ever, lasted only one day

because on the 15th% 172,600 checks were functionedc Country oheck records

were not the only ones to break previous marks because during 1947 a total

of 7*207 thousand Twin City clearing items were handled* This total repre

sents an increase of lt>8£ over the 1946 total of 7,080 thousand and a 39£

increase over the 1941 total of 5,177 thousand „ Here again the month of

October was outstanding when on October 17 a new high in clearing checks was

reached with 60,671 iteas being functioned*

Checks returned to depositors during 1947 also increasede although

this trend is normal due to the increased volume of country and clearing

items«, During 1947 the 452 thousand items returned represents an increase

of 6$ over the 1946 total of 426 thousand and a 23 1/2% increase over the

366 thousand items in 1941o

The volume of Treasury checks dropped, with 6,436 thousand items

handled, showing a decrease of 6„3% from the 1946 total of 6,872 thousand,

but an increase of U5% over the 1941 total of 4,577 thousand.

Drafts drawn on this tack fluctuated slightly during the year 1947.

The 71 thousand items handled is 3 thousand items less than in 1946 and 7

thousand less than in 1941*

To bring our Check Collection Department up to date on new procedure

and equipment, a comprehensive study of methods used by other Federal Reserve


banks m s Bade, a result, a number of new machines have been installed*

with more on order0

During the period of July to September, ten I.B.tf. proof machines

were installed, The machines were first used for instruction and practice

by our employees, as we did not have experienced operators on our staff«

After a number of operators were trained in the touch system for operating

the 10 key adding machine and the 24 interdepartment selector keys on the

proof machines, the machines were utilised for handling clearing items„

At present approximately 75% of the clearing items volume is being handled

in this manner, The machines are also being used for proving deposits of

country checks, with a few being assigned to handle deposits of Michigan

and Wisconsin banks* As a result of this arrangement, items on a number

of the larger country banks are being listed9 proved, and endorsed in one

operation without being rehandled as was formerly the case* An additional

ten I.B.M. proof machines are scheduled for delivery in March 1948

The Reserve banks plan to discontinue their requirement that member

banks describe deposits of country cash items or that member banks be in a

position to furnish suoh description upon request. In preparation for this

additional service at the Head Office, twenty-four Hecordak machines for

photographing all country checks, Government checks, and drafts on us are

being installed, Upon completion of the installation, items forwarded to

drawee banks will be listedv photographed front and back, and endorsed in

one handling* In order to permit this plan of operation, special adding

machine stands are being constructed and seme improvements are being made

on the Recordak equipment *

The classified check volume figures for the years 1941 through

1947 inclusive, are given in the following table*

dumber of Checks Handled (In thousands)

Country Clearing Drafts Return UoS* Treas, U.S. Treas. Total ofChecks Cheoks On Us Checks Paper Checks Card Checks All Checl

19a 22,010 5,177 78 366 4,577 32,2081942 23,057 4,960 64 294 3,928 32,3031943 23,232 5,417 91 246 4,998 33,9841944 23,675 6,673 80 265 2,357 3,909 36,9591945 25,404 7,158 86 311 1,676 5,852 40,4871946 29,625 7,080 74 426 1,435 5,437 44,0771947 32,376 7*207 71 452 926 5*510 46,542

4 9


CONSUMER CREDIT

In view of congressional determination that consumer credit

should not be regulated after Hoveaber 1, 1947, field investigations

were discontinued as of August 1P 19470

During the first seven months of 1947 the bank9s consumer credit

(Regulation W) representatives called on 1,772 lenders and vendors in 102

communities in the Kinth Federal Reserve District, Of the concerns visited,

817 appeared not to be engaged in making extensions of credit of the kind

subject to the ter®a of Regulation Wa At 955 establishments which were

engaged in such business, 59,838 credit transactions were reviewed by the

representatives0 There were 3,523 instances of violation noted at 77 con

cerns* All were classified as "Class k Violators"; that is, those whose

violations are consequential but are not such as to call for any action

other than discussion in the field or a letter from the bank. No violator

was reported whose violations appeared to call for disciplinary conference

or other more drastic actionD

CDRRSfiCY & COIN

Shipments of currency and coin received during 1947 Increased in

number and amount as compared with 1946 and previous years„ Receipt of

22,757 currency shipments in the amount of #324,217 thousand during 1947

reflected an Increase of 4$ in number of shipments and 11$ in dollar amount

over 1946o Receipt of 3,169 coin shipments totaling $7,065 thousand repre

sented an Increase of 34$ in number of deposits and 65% in value0

Outgoing shipments of currency to banks and others in Head Office

territory nuribered 24,119 for $320,499 thousand, composed of 54,250 thousand

bills during 1947, and represented a decrease of 7$ in number of shipments

but an increase of 9 1/2$ in dollar amount as compared with 1946. The princi

pal reason for the increase in the dollar amount of ehlpments during 1947 was

the preparation for and redemption of Armed Forces Leave bonds. Currency

shipments to the Helena Branch and to member banks in the Chicago Reserve

district during 1947 numbered 564 totaling $36,587 thousand, and represented

an increase over 1946 with 556 shipments totaling $32,625 thousand0


Outgoing coin shipments during 1947 decreased 15 per cent in

number and in amount 13 1/2 per cent as compared with 1946, the 1947 volume

figures being 11,877 shipments in the amount of $6,475 thousand*

The number of bills received and counted during 1947 was

57,536,478* which represented an all time high and a slight increase over

19460 The number of bills reh&ndled (5*435*559)t however, and the number

of notes verified by hand (4*646*427) reflected decreases when compared with

1946.

A wrapped coin service was offered to member banks effective

May lf 1947,, 0to the basis of our estimated out-of-pocket expenses for

performing the services the schedule of charges adopted and still In effect

per $1,000 arex

Cents $10a60 Nickels 2*80 Dimes 1.50Quarters .70 Halves .70

Member banks are utilising this service to an increasing extent? and by the

close of the year 50 per cent of the member banks had made use of it* To

provide wrapped coin during the eight months the service was offered,

35*767*200 coins were wrapped amounting to $1,572f410* principally in cents,

nickels and dimes0 Service charges received during the year amounted to

$3,768.32, It is apparent that to date country member banks have not

deposited loose coin in order to obtain wrapped coin* as the number and

amount of coin shipments made has decreased as compared with 1946* Further*

outgoing shipping charges during the second half of 1947 were less than

similar expenses during the first half of the year before banks were making

substantial use of the service.

The volume of coin received and counted during 1947 increased

substantially» An abnormal quantity of nickels* dimes and quarters were

received as a result of the enforcement of restrictions on pin ball and

slot machines in Minnesotau Sufficient coins in the nickel and quarter

denominations were received In deposits for the full year's requirements,

and of dimes and halves for the first half of the year's needs. During

the year, $400 thousand in cents, $550 thousand in dimes and $400 thousand

in halves were received from the mints or other Federal Reserve banks

5 1


The Currency and Coin Department retires froa ciroul&tion unfit

and uncurrent currency and coin, During the year the department retired

froa circulation 28,261,951 bills aggregating $111,904,300 and 1,945,000

coin* with a value of $83,475.

Three Sattley coin counting and wrapping machines were purchased

during the year and four Brandt machines rented to handle the coin wrapping

service and additional volume of coin., Four currency counting machines were

received at the close of the year and will be installed during 1948.

Volume figures for the principal operations of the departnent followt

Currency Paid Out to Hlnth Dlstrlot Commercial Banks & Governmental Agenolea

1947 1946l's and 2's $ 28,995,091 9 28,030,0005's 49,439,000 46,501,000

10's 103,069,000 91,021,00020's 90,474,000 82,374,00050's 9,342,000 8,155,000100’s 34,987,000 32,268,000500's 1,612,000 1,480,0001000‘s 2.581.000 2.844.000

$ 320,499,091 $ 292,673,000

Outgoing Shipments

......1947.................. 1946........Hunber Amount Humber Amount

Currency paid out 24,119 $320,499,091 25,889 $292,673,316 Currency shipped to Helena Branchand for other F. R. banks 564 36,587,000 556 32,625,000

Coin 11.877 6,474.988 13.906 7-489.0;ILJEZ 6,474.988 13.906 7,489,044 36,560 $363,561,079 40,351 $332,787,360

Incoming Shipments

CurrencyCoin

* e • e e e e19^7tHunber22,757 3.169 25,926

Amount $324,217,322 - 7,065,350

$331,282,672

e e e e e • • 1%^«Hunber 21,890 -2x272 24,262

Amount

$291,556,463 ..4,.2SP,2.2

$295,846,692

Hunber & Amount of Pieces Handled Currency

Billa received * countedBills rehandledHand vertification of bills

Hunber57,536,4785,435,5594.646.42767,618,464

,1947................. ,1946,Amount Humber

$354,384,710 57,485,76366,103,950 6,366,970

. M u m J i L Q 3.213.313 ___________$504,562,310 69,066,046 $455,034,480

Amount $311,349,910 70,920,530


Humber & Amount of Pieces Handled Colo

......1947......Niaiber Aaount

Coles received & counted 35*225,185 |6K462,046Coins rehandled 4,369,740 918,045Coins wrapped .JSJfiZAQO 1^7^410

125,362,125 #8,952,501

Aaount of Coin Received fro U. S. Mints

1947

$1,350,000

DISCOUNT DEPARTMENT

During the year 1947 the discount rate reaalned at 1 per cent.

At the Head Office fifteen banks took advantage of loan privileges

during 1947, borrowing an aggregate aaount of #969 Billion, all of which was

represented by member bank bills payable with United States Government ob

ligations as collateral security. The large total was caused by one bank

borrowing in large amounts for one day only, Eleven million eight hundred

fifty thousand dollars of the total advanced represented borrcarings of

members other than Twin City banks. In 1946, fifteen banks were accommodated

to the extent of $1,009 million. As of December 31, 1947, there was no

member bank Indebted to us, which was also true on the same date one year

earlier0

Collateral to secure bills payable voluntarily offered by two

Twin City banks amounted to $31,921 thousand as of December 31, 1947. Six

teen million dollars of that aaount is held for us by the Chase National

Bank of Hew Torko

At the Helena Branch, $4,655 thousand was discounted during 1947

compared with $8,525 thousand in 1946c

United States Treasury bills bought under repurchase option totaled

$394 million during 1947 compared with $709 million during 1946«> The policy

of buying all Treasury bills offered to Federal Reserve banks at a fixed

rate of 3/8 per cent per annum under repurchase option was terminated with

the bills maturing October 2t 19470

...... 1946.......Humber Aaount

47,978,790 $3,806,903 6,762,045 1,510,035 Hone Hone

54,740,835 »5,316,938

5 3


No industrial advances ware nade in 1947y and no industrial loan

applications were under consideration as of December 31* 1947.

As of December 31, 1947, there was one Regulation V loan outstand

ing in the amount of $104,927*78, of which $77,646.58 is guaranteed by the

Department of the Any,

DUPLICATING

The Duplicating Department is an Important service unit within

the bank. During the year 1947 this department reproduced the staggering

total of 3,295,480 copies of 4,474 different forms, and 12,017 photoetatic

copies of various documents were made. In addition, the department addresso-

graphed daily about 2,100 envelopes and 3,800 forms. As will be noted from

the table below the bulk of the photostatic work was done for organizations

other than our own bank ,

War Assets Administration 7,232Fiscal Agency Department 1,717Bank work 1,251Commodity Credit Corporation 679Department of Internal Revenue 449Commercial banks 326R.F,C, Loan Agency 284Personal 79

12,017

During the year 1947 there was an average of eight employees

assigned to thli* department*

EXAMIKATICB DEPARTMENT

On December 31, 1947, there were 347 national and 128 State mem*

ber banks in our district as compared with 348 national and 123 State member

banks a year ago*

During 1947 all State member banks were examined once by our bank

examiners and, in addition, the trust departments of thirteen State member

banks exercising trust pewers were examined, Nine other State member banks

are not exercising their trust posers*


There are three holding company affiliates within this district

— the Northwest Bancorporation, Bank Shares, Inc., and the First Bank

Stock Corporation,, Only the latter two were examined during 1947.

On December 31, 1946, there were five applications for member

ship still pending. Of the five, one application was withdrawn and the

other four became members* Four applications for membership were received

during 1947• Two of these have been approved and the banks admitted as

members, one was withdrawn, and while the remaining one has been approved,

membership was not effective until January 2, 1948*

A total of 336 applications for adjustment of holdings of

Federal Reserve bank stock was received from member banks during the year.

Stock was Issued to six new member banks and two banks surrendered their

stock as a result of liquidation and consolidation

No applications for national bank charters were referred to the

bank by the comptroller's office during 1947*

During the year, three calls for a report of condition of each

member bank were issued0 In addition, all member banks were required to

submit semiannual reports of earnings and dividends* The condition reports

and the reports of earnings and dividends were checked and recorded.

Total membership in this bank was increased by a net total of

four banks during the year 1947. The tables below show the banks which

terminated their menbership and the banks which became members*

MEMBER BANKS SEVERING CONNECTIONS WITH THIS FEDERAL RESERVE BARK DURING 1947

NATIONAL BANKS ABSORBED BT OTHER NATIONAL BANKS

No. of SharesDate Name of Bank Location Surrendered

6/24/47 First National Bank in Deer Greek, Minn. 23

(Absorbed by The First National Bank in Wadena, Hinn.)

STATE MEMBER BANKS TAKEN OVER BY OTHER STATE MEMBER BANKS

1/20/47 The Hill County State Bank of Havre, Mont. 90

(Assets purchased and liabilities assumed by Cltlaens Bank of Montana, Havre, Montana.)


STATE BANKS TfllCB BECAME MEMBERS PUKING 1947

Name of Bank Location

Grand Maraia State BankLiberty County BankCulbertson State Bank of CulbertsonFirst State Bank of FroidLivingston State BankBank of Sheridan

Grand Marais, Minnesota Chester, Montana Cullertson, Montana Froid, Montana Livingston, Montana Sheridan, Montana

FISCAL AGENCY

During the year, three major changes have been Bade in the

operations of the Fiscal Agency Department*

First, in conformity with the economy program, the Treasury

Department requested that consideration be given to consolidating with

the Head Office certain Fiscal Agency activities which had been temporarily

assigned to the various branch banks during the war period. After having

considered? in the light of banking relationships, service to issuing

agents9 paying agents and the general public, certain consolidations were

found to be practical. Consolidation date was as of May 31, 1947. Prior

to May 31, 1947* all banks and others concerned were Informed by the Helena

Branch regarding the consolidation and were furnished with specific instruc

tions for handling transactions affecting Savings bonds and that the War

Loan accounts were to be transferred to the Head Office. Under the present

setup, the Helena Branch acts in the same capacity as any other issuing

agent, except that it has authority to Issue Series F and G bonds, in

addition to Series E0 Bonds received for redemption which the Branch as

paying agent is not authorized to pay, and all bonds received for reissue,

are forwarded to the Head Office after they have passed on the sufficiency

of evidence and the forms required„ The Branch also answers inquiries re

ceived regarding Savings bonds* Its safekeeping facilities continue to be

available to all holders of Savings bonds* Because of the small volume of

work being handled by the Helena Branch, this consolidation was made without

hiring additional personnel0


Second, as the volume of work declined, divisions of this de

partment that had been located in the War Savings Bond Annex were gradually

transferred to the main office, the Savings Bond Redemption Division being

the last to move over0 The annex was completely vacated as of February 15,

1947 O

Third, Armed Forces Leave bonds were Bade payable on demand

starting September 2, 194-7P Any qualified paying agent of Savings bonds

was authorized to act as paying agent* The procedure and Instructions con

formed substantially to those prescribed for the payment of Savings bonds.

Treasury Issues and Exchanges. — During the year 1947 the Treas

ury Department offered in addition to Treasury bills, Savings bonds and

Savings notes, only one issue of securities for cash subscription» That

issue was the 2 1/2$ Treasury bonds, Investment Series A-1965* Subscrip

tions to this issue of securities were restricted to insurance companies,

savings banks, savings and loan associations, building and loan associations

and other similar organizations having funds eligible for long-term invest

ment, Commercial banks were eligible to subscribe according to a formula

based on their time certificates of deposits and savings deposits« The

total amount of subscriptions received and allotted to this bank for this

issue aggregated $35,325 thousand, which was 3*6$ of the national total

of $970,220 thousand. The total number of subscriptions received by this

bank was 965, of which 922 were from banks 0 These bonds were issued in

registered form only and are not transferable* They may be redeemed prior

to maturity on or after April 1, 1948, at the owners option, on the first

day of any calendar month, on one month#s written notice, at fixed redemp

tion values*

During the year, 1,218 tenders for Treasury bills aggregating

$260,669 thousand were received, of which $209,799 thousand were accepted.

The total tenders received represented 1,223 subscribers as compared with

1,840 tenders in 1946 covering 1,845 subscribers, totaling $391,368 thousand

of which $294*522 thousand was accepted 0


After the unpegging of the rate of 3/8$ on Treasury bills which

began with the issue of bills dated July 10* 194-7* the average equivalent

rate of discount increased until it reached *951% for the issue of bills

dated December 26, 1947. With the unpegging of the Treasury bill rate,

tenders for $200 thousand or less were accepted at the average rate on a

noncompetitive basis without a stated price.

There were 12 exchange offerings during the year .1947, consisting

of two issues of Treasury notes and 10 issues of certificates of indebtedness*

The total number of subscriptions received by this bank for all such issues

irae 9,787* of which 9,194 were from banks. Exchange subscriptions received

during 1947 totaled $760*849 thousand e with an aggregate allotment of

$696,199 thousandj, compared with $766,678 thousand with an allotsient of

$573*775 thousand in 1946,

U. S Savings Bonds. — A new procedure authorized by the Treasury

Department was instituted August 19 1947* for the handling of the payment

of U, So Savings bonds, Series F and Q, permitting the Federal Reserve banks

to approve (1) the request for payment, (2) the supporting evidence required,

and (3) the Banner in which checks should be drawn * This eliminates the

necessity of approval for the same requirements by the Treasury Department

and places more responsibility on the Federal Reserve banks.

The number of qualified Issuing agents of Series E Savings bonds

in this district, exclusive of branches acting under the quslifioatlons of

the parent organisation, was 1,429 as of December 31, 1947, compared with

1*453 on the same date in 1946* These agents issued 1,063,801 Series £

Savings bonds totaling $176,555 thousand (issue price) compared with

1*303,723 totaling $132*865 thousand (issue price) in 1946*, In addition,

this bank Issued On S Savings bonds* Series E, F and G* in the amount of

$123,123 thousand (issue price) involving 299*564 pieces compared with $116,998

thousand (issue price) involving 385,892 pieces for 1946*,

During the year 1947, 0, S. Savings bonds, Safekeeping Division*

received an average of 3,127 pieces per month compared with 4,926 during


194.6* The monthly average number of bonds released fran safekeeping was

3,080 pieces in 1947 compared with 4,207 in 1946* The number of pieces

held in safekeeping decreased while the dollar value based on issue price

increased to $30*439 thousand in 1947 compared with $29,407 thousand in

19460

The daily average number of bonds redeemed during 1947 was 11,907

compared with 14,662 in 1946? These figures include redemptions by paying

agents and direct redemptions by this bank, On December 31? 1947, there

were 1*244 incorporated banks with 106 branches and 27 miscellaneous paying

agents qualified to redeem certain classes of S, Savings bonds* Series A

through E* compared with 1^225 banks with 99 branches and 20 miscellaneous

paying agents as of the same date in 1946 These paying agents were reim

bursed $320,316 for 2*450*211 pieces handled, Included in these figures

Is $11*927 reimbursed to paying agents by Helena Branch before consolidation,.

There are cases where it is necessary to reissue Savings bonds

because of a change made on the bond* such as: to add, omit, or substitute

a beneficiary; add a co»owner or change a beneficiary to a co-owner; or

when original bonds have been Incorrectly inscribed; and many other types

of cases where it becomes necessary to issue a new bond in order to effect

the proper change, During the year 1947 there were 92,806 reissues far

one purpose or another, totaling $11,898 thousand (maturity value) compared

with 85$462 totaling $11f001 thousand in 1946,

Armed Forces Leave Bonds. — Since September 2, 1947, 205,112

Armed Forces Leave bonds totaling $43,787 thousand have been redeemed by

us and lp383 paying agents* Reimbursement to the paying agents is on the

same basis as U» Sa Savings bonds»

Government Coupons., — During the year 1947, 545,823 government

coupons totaling $42,063 thousand were redeemed compared with 581,78:

totaling $46,695 thousand in 19460 In addition, 14,272 government agency

coupons totaling $445 thousand were redeemed compared with 12,657 totaling

$275 thousand in 1946»

There were 155 employees assigned to the Fiscal Agency Depart

ment on December 31$ 1947* compared with 181 in 19460


INDUSTRIAL APVAKCSS UND5H SECTION 13b AND CANCBLLATIOH OF faDJ.C, STOCK

The aot of Juno 199 193**e added to the Federal Reserve Act a new

section, known as section 13b, under which in exceptional circumstances and

pursuant to authority granted by the Federal Reserve Board, a Federal Reserve

bank could on a reasonable and sound basis make loans to or purchase obliga

tions of an established industrial or commercial business which is unable to

obtain requi&ite financial assistance from the usual sources, for the purpose

of providing such business with working capital, and could make commitments

with respect to such loans or purchases, subject to a limitation of 5 years

upon the maturity of any such obligation or commitment. Federal Reserve banks

were also authorized by this act to acquire such working oapltal obligations

of such businesses from banks or financing institutions by discount or pur

chase, to make loans on the security of such obligations, and to make com

mitments with respect to such discounts, purchases, or loans. Under the

law each such financing institution uiust obligate Itself to the Federal Reserve

bank for at least 20 percent of any loss which may be sustained upon any such

obligation or, in lieu thereof, furnish at least 20 percent of the working

capital advanced to such established industrial or commercial business.

In order to enable the Federal Reserve banks to make the industrial

advances described, the Secretary of the Treasury was authorized by the law

to pay to each Federal Reserve bank a sum equal to but not In excess of the

par value of Its holdings of stock (All reserve banks, $139 Billion - Our

portion $3«509t467»65) In the Federal Deposit Insurance Corporation, upon

agreement by the Federal Reserve bank to hold such stock unencumbered and

to pay to the United States all proceeds thereof. The provisions of this

aot were to remain in force until final liquidation of such stock by the

Federal Deposit Insurance Corporation.

In his budget message delivered in January of 19** 7» the President

of the United States recommended that Congress authorize the Federal Deposit

Insurance Corporation to repay the $139,000,000 of capital furnished by the

Federal Reserve banks and accepted the proposal of the Board of Governors

that Congress at the same time authorize the payment of this suit to the Treas


ury of the Federal Reserve hacks. Phis recommendation was pat into

bill form, paesod by both houses and signed toy the President on August 5» 19^7

As a result of this action* the Federal Deposit Insurance Corporation stook

was canceled as of October 7, 19^7» and payments under section 13b(o) were no

longer required.

Under the provision of this act, a total of $l<f007,71*6.96 of the

authorised allotment of $3* 5^9* **67 *65 *&s received from the Secretary of

the Treasury* These funds were received in four equal installments of

$251,93607^ during 193** and 1935 and were set up in the account. Surplus

Fund, Section 13b„ In making loans, these funds were used in conjunction

rith our own and distribution of profits or losses were made on a ratio basis,,

The aggregate of the daily amount of funds received from the Secretary of the

Treasury compared with the aggregate amount of Federal Reserve Bank funds used

determined the ratio for distributing the net profits, losses, or reserves.

During the years which the provisions of this act were In force, a

total of 19^ industrial loans and 7 commitments were made* In all, a total of

$131*689,60 in profits were realized and distributed aB follows:A**'

Federal Reserve Banlre share $ 11

Paid to Secretary of the Treasury

Credited to Surplus, Section 13b 64.87 .,38$131.&9.60

The balance of $1,072,621*3*1 will remain in the account, Surplus Fund, Seotion

13b until instructions as to final disposition are received,

INTEREST OS FEDERAL RESERVE HOTES

On April 21** 19^7* the Board of Governors of ths Federal Reserve

System announced that it had decided to invoke the authority granted to it

under Section l6(U) of the Federal Reserve Act and to levy an interest charge

on the dally average of Federal Reserve notes not covered by gold certificates

The purpose of the charge is to pay Into the Treasury Department approximately

90% of the net earnings of the Reserve banks for 19^7*

As a result a total of $2*12^,262*37 was transferred to the Treasury


during the year , The table below ehows the payments and the rate of

interest charged in determining these amounts:

Bate of Period

Daily Avg. FcR, Hotes not Secured

Paymen & Covered by Gold Ctfs. Rate

k-zk-kj First Quarter $ 418.1HS,369 .44*7-31-*/ Second Quarter. 418,714,776 .35

10-30-47 laird Quarter 424.635,593 .5412-31-47 Fourth Quarter 444.27;>,t>20 .6492

Amount

$ 453.955=27 365.371.66 577.969.76 1& & 1 - M

$2,124,282,37

The authority to levy an interest charge on Federal Reserve notes not covered

by gold certificates haB not been used previously, chiefly because of the ex~»

istence prior to 1933 oi ® so-called franchise tax. Provisions of the franchise

tax came into existence on June 21, 1^17* when Section 7 of the Federal Reserve

Act was emended to read as follows: “After all necessary expenses of a Federal

Reserve Bank have bean paid or provided for, the stockholders shall be entitled

to receive an annual dividend of 6$ on the paid-in capital stock, which dividend

shall be cumulative* After the aforesaid dividend claims have been fully mete

all the net earnings shall be paid to the U. S, Government as a franchise taxD

except that one~half of such net earnings shall be paid into a surplus fund until

it shall amount to U0$ of the paid-in capital stock of such bank*" While operat

ing under the foregoing provisions, only the Federal Reserve Bank of New York

paid a franchise tax during the year of 1917 but during 1918 several more

reserve banks* Including Minneapolis, reached a point where their surplus was

greater than Ubfi of the paid-in capitals

On March 3* 192-99 slq amendment to Section J of the Federal Reserve

Act w&s enacted whereby all net earnings, after a deduction of for

dividends* were to bo paid into a surplus fund until such fund reached 100£

of the total subscribed capital, and that thereafter 10$ of such net earnings

was to be carried to surplus, while the remainder was to be paid as a fran

chise tax to the governments As a result of this change, and as noted in

ths table shown on the next page this bank did not pay a franchise tax for

the year 1919# although payments were made for each successive year with the

exception of 1931* For the year 1931 our net earnings available for dividendsB


surplus and franchise tax was only $45DSQ^aS6 making It necessary to transfer

from surplus* $13^*6*49*67 *° P8^ annual dividend of $lSQeU54053 which

dropped the surplus account below 100$ of our subscribed capital<»

The provisions of this Act remained In force until June l68 1933»

when the Banking Act of 1933 was passed, 71tn the establishment of the Fed

eral Deposit Insurance Corporation* all Federal Reserve banks were required

by Section 12B of the Federal Reserve Act to subscribe to shares of capital

stock of the FBIC in an amount equal to one-half of their surplus. The

entire stock subscription amounted to $139*299*557* of which we Invested

$3«509^67. This, of course, reduced the surplus of the Federal Reserve

basks to less than one^half of their subscribed capital and prompted Congress

to eliminate the payment of a franchise tax, Net earnings for the next 10 years

were relatively small; in fact, at the end of 19*& the combined surplus of

the Federal Reserve banks was less than 75 Percent of their subscribed capital*

However, during the next two years* net earnings increased substantially

through system account open market operations. The bulk of these net earnings

was .transferred to surplus accounts, and at the end of 19 6 the combined

surplus of the Federal Reserve banks was once again greater than 100 percent

of tho subscribed capital<,

It is interesting to note that out of the net earnings for 19^7*

sho^n on the table below we paid to the Treasury9 $2,12^*000 which is only

$13*000 less than our franchise tax payments for the years 1922 through 1932c

STATEMENT OF TOTAL FRANCHISE TAX PAID SINCS ORGANIZATION

12-31-IS $ 37,500*001919 Non#

12- 31-20 521*. 233-5»6- 30-21 i ,2sM 97,62

12-31-21 1, 166,1*68.9812*" 31*” 2 52, 1*23. 36'12- 31-22 512.028.9812- 31-23 101.1*50.2512-31-2* 113,61*6.5812- 31*25 37,255.01*12- 31-26 231*,380.9112- 31-27 103.815.9012*31-25 390, 150.5812- 31*29 51*9,658.5812- 31-30 3,229.6012- 31-31 None12-31-32 ____8.1d58..5!t

$5, 202,898.50

•Underpayment years 1920 and 1921


MOMCASH COLLECTIOK DEPARTMENT

During 19U7 'tilla department handled $QJs22^ grain drafts totaling

$1,082 million which is an all time high both in number and dollar amount*

This was an increase of 99?521 in number of items handled and an increase

in dollar valua of $39^ million,

There was a small increase of l60 items in city collections and a

decrease of 2,7*12 items in country collections compared with 19^S»

Security collections showed a decrease of 60 items, although the

dollar value Increased about $2 million*

Our member banks forwarded 2,6H6 direct-sent collections to other

Federal Reserve banks as compared to 4,2^9 during 19^6« The dollar value of

these collections totaled $12 million for 19^7 as compared to $20 million for

1946.

fixelusive of dlrect»sent collections, this department handled

during 19 7 a total of l901*>fi998 items with a dollar value of $1*399 million.

This is an Increase of 9^»^79 items handled and in dollar value, an in-*

crease of $35*+ million.

Comparison of dumber of Items Received for collection

City Collections Country Collections Security Collections1957 ipE Ip 7 1955 191*7 lpS

Humber of ItemsGrain Drafts 907,22$ S0Jt 70kCity Items 28«S86 ._as„726

*936.111 S357530 53.969 56.711 25.918 25.978

Dollar Value (000 Omitted)

Grain Brafts$lf081,915 $637*856City Items __ 2>*L?M 28^528

$1,329.1* W K W $52,789 $55,181 $17,218 $15,381


PERSONNEL DEPARTMENT

Head Gffice personnel as of December 31* 1947y totaled 602 s a de<=

crease of 34 from the December 31, 1946 figure of 636, and a decrease of 126

from the 1945 year-end figure of 728, A comparison with the war-time peak

of 909 reached on July 1, 1943, as shown below* indicates that a decline

of 307 fro® the peak may bs attributed to decreased activity in Fiscal Agency

and Reconstruction Finance Corporation * Commodity Credit Corporation func«

tions:

Head Gffice Personnel

12-31-47 7-1-43 Inc* or 1Officers 16 17 1Bank General. 254 248 + 6Transit and Mail 170 153 + 17Fiscal Agency 154 344 - 190RoF.C. « C.C.C, 8 m 139

602 909 - 307

The chart below illustrates the growth and decline of the number of

Head Office officers and employees over the past nine years.

Number of Head Office Officers & Employees


The labor market, exceptionally tight during the war* has remained

unexpectedly competitive, particularly for fesaale fcelpo Beginning girl

clerks or typists, as well as experienced stenographers, have been very

scarce whenever we have sought to employ them.

For the past two years it has been necessary to employ new help at

beginning levels at almost a constant rate to meet the demands of heavy work

in many of the regular operating departments * However, declining personnel

requirements for Fiscal Agency post-war operations and a declining turnover

of employees were helpful factors*

The five day week, which the bank placed in effect December 1,

1946, proved itself an employment aid during 194-7* Frequently applicants

for employment here had left other offices in search of a five day week.

The chart below depicts separations and accessions by years since

1939.

TOTAL SEPARATIONS AND ACCESSIONS

BY YEARS

I___I- A-

11939

IPARATION 3

SESSIONS

1940 1941 19421

1943 1944I

600

1945

500

400

300

200

100

1946 19476 6Digitized for FRASER

http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

During the latter half of Haroh the bank announced ite offer of

combined hospltal-surgical benefits for employees and their dependents,

two-thirds of the cost of this protection to be paid by the bank, and one~

third by the employee. The benefits* a combination of Minnesota Hospital

Service Association'a broadest contract and a surgical schedule through the

Connecticut General Life Insurance Company, became effective April 1, 19470

The table below indicates the number and dollar amount of surgical

claims paid during the past nine Months.

Number Total Paid Average ClaimEmployees 28 $1,300 $46.42Dependents 31 1.197 35.21

62 $2,497 $40,27

F nal steps were completed on our Job Evaluation project and a

special report was mailed to the Board of Governors at Washington during the

latter part of July* This report includedi

1, Copies of our Job Evaluation procedural manual,

2* Copies of our Job Evaluation forms.

3* Charts and schedules specifically prepared to illustrate the Minneapolis Job Evaluation plan,

Formal approval of our plan was received from the Board of Governors

August 28, 1947* Forms and schedules were prepared for use in departmental

salary administration,, Personnel Department records were revised to Job Evalu

ation titles» salaries were studied and reviewed in light of Job Evaluation

salary rangesy and trial schedules were run,

During the year, 181 suggestions were submitted by employees,

including 105 suggestions submitted during a special suggestion contest

conducted for a three-month period in the spring. Thirty-eight suggestions

were approved* the regular awards paid therefor aggregating $282*500 In

additionf special awards of $100, $75 and $50 were paid to the employees

placing first* second and third* respectively„ in the suggestion contest*

All awards and special awards were net to the recipients* the bank having

paid the normal federal income tax thereon,


At tbs present tine there are two organizations within the bank —

the Federal Reserve Club and the twenty Year Club*

The Federal Reserve Club encompasses nearly all officers and

e&plcyees of the bank0 Membership dues in this club sure $2 a year, with

the bank contributing the additional funds p according to an approved bud

get, to carry out a well rounded calendar of social activities0 During

1947 the social activities Included a winter carnival, nixed bowling party,

a sports event (hockey game) and a summer picnic* In addition* there were

separate women^s activities, such as a bowling league, picnic, theater party

and game party, For the men there wore two bowling twos in the Bankers

League and two stags. The Christmas party is the climax of the social season

and consists of a dinner* entertainment and dancing, The expense of this

function is borne entirely by the bank.

The Twenty Year Club is, as the name implies, a group of officers

and employees who have twenty or more years of service with the bank* At

present there are 99 members of this select group,, The social activities of

the club are limited to an annual bank-sponsared dinner party.

While the Amerioan Institute of Banking is an organization outside

of the bank, it is made up of bank employees with education the primary pur

pose, Its numerous activities serve to bring the employees of banks together

in a social way. Each member is assessed dues of $4 a year which are returned

in the form of activities other than education. The educational expense of

instructors, etcop is largely borne by the banks in proportion to the number

of eligible officers and employees of eaoh Minneapolis banko During 1947

this bank contributed $2,460 for that purpose* As an added incentive to our

employee members,,the bank in most cases refunds the tuition fees and in 1947

this bank refunded $414*50 to A.I.B. students who successfully completed

courses of study.


PROTECTION

During the paot year several of the Federal Reserve banks

arranged for surveys of their protection system by agents of the Federal

Bureau of Investigation, The reports and recommendations resulting froa

the survey were shared by all banks, and as a result of our participation

and review of all findingsv several charges were made in the protection

procedure* Some of the more important changes are as follcarss

lo The use of female messengers for delivery of securities

was discontinued.,

2S A direct line to the Police Department was installed,

3, Floodlights were installed over the garage doors on the

alley side and are left on from darkness until dawn,

^11 guards are given training on all firearms as well

as their sldearms*

5* New gas masks were purchased and all posts equipped,,

Additional masks are stored in the guardroom to be used

in emergency,,

6, All gas bombs and cartridges were renewed*

7* Weekly6 old ammunition is fired and new ammunition issued«

8<, All bank personnel were issued general instructions as

to their activities and responsibilities in the event of

an emergency,.

In addition to these changes, an additional precaution has been

taken; that isf pictures of new employees are turned ever to the Protection

Department and are posted in the guardroom for all guards to see. Also,

an investigation of all new employees is made at the Identification Bureau

of the Minneapolis Police Department*


PURCHASING

The Purchasing Department is operated with a full-time purchasing

agent, a full-time stock clerk and a part-time general clerk*

In 1947 purchase orders were placed for 2,250 items, and during

the year the departments of the bank requisitioned from the stockroom a

total of 9*200 itemsy listed an 4*276 requisitions0

Many items were still scarce and difficult to obtain. Perhaps

the most difficult items to obtain were gummed tape, wrapping paper* en

velopes and currency straps. Prices continued to rise throughout the year*

The table below shows the price increase on a few items since O.P.A. con

trols were dropped:

3W gummed Kraft tape, per 600 s roll Kraft wrapping paper, per CWT Regular #11 white envelopes,

printed,, per M Heavy brown Kraft envelope

6 1/2"x 12 1/2" for mailing large check collection letters, per M

#6 industrial fuel oil, per gallon 16 lb* #4 white sulphite paper,

per lb,Lead seals f per IE Lead pencils imprinted for F.R.B,,

per gross Rubber bandss per lbQ

Last price under O.P.A* controls

$ .53580 850

3.160

60 810=055

,1209c350

2o350,634

Highest price paid during1242_________

$ 1.12 13.60

3o76

7„97,09

.16 1/2 11*95

2o75*70

Since we now have a rather good Inventory on handtf It will not be

necessary to spend much for supplies during the first half of 1948*

CUSTODIANSHIP OF RECONSTRUCTIOS FINANCE CCR- ORATION __________ AND OTHER GOVERNMENTAL AGENCIES________

The Corporation is effecting a decentralization of its activities;

more responsibility is being placed in Its Loan Agencies; certain accounting

records heretofore maintained by Federal Reserve banks as custodians are

also being transferred to the Loan Agencies*


After these changes are completed on or about January 15, 1943*

the Federal Reserve banks will .issue checks against requisitions, have custody

of documents and handle collections of iteas, cash and noncash. This depart

ment apparently will continue to handle certain transactions whioh never have

been handled by or through the Loan Agencies,

Some of the var programs were discontinued and activity in other

programs was less than formerly, A considerable part of the volume this

last year has been clean-up work* The personnel of the department has been

reduced from time to time accordingly*

As of January 22, 1947, the Blanket Participation Loan Program

was terminated as to further agreements or commitments thereunder* The

agreements effected remained in force as to all commitments and loans which

had been made thereunder0 In this district the Corporation, to date, has

been called on to purchase its agreed participation in only six loans with

aggregate unpaid principal balances of $237,371*99, of which the Corporation's

share was $175,667*49* The present unpaid balance of the Corporation's share

in these loans is $137,920c53•

When the Blanket Participation Agreements Program was terminated,

a similar program (not blanket) called "Small Loan Participations” was offered.

Under the Small Loan Participations Program9 the Corporation has been called

on to purchase its agreed participation in only one loan with an unpaid

balance of $100 thousand* The Corporation's share was $75 thousand, now

reduced to $60 thousand*

While it appeared that payments of subsidies were about finished

a year agoP we are still disbursing for claims (principally meat) on which

payment was deferred pending audits of the claims0

The Reconstruction Finance Corporation Mortgage Company purchased

a number of Veterans Home Loans prior to its absorption on June 30, 1947,

by the Reconstruction Finance Corporation, Since then the Reconstruction

Finance Corporation has made purchases in those cases where the Reconstruc

tion Finance Corporation Mortgage Company had committed itself to purchase.


The lent Reconstruction Finance Corporation audit at Minneapolis,

covering i er four years* activity, was made as of September 28, 1945, and

completed on April 30, 1946* Recently the Reconstruction Finance Corpora

tion advised the Board of Governors (Federal Reserve System) that audits of

Federal Reserve banka revealed few exceptions, which evidenced effective

internal controls and, therefore* no further audits at Federal Reserve banks

would bo aadej this was agreeable to the Board, The decentralization program

tends to ?aake such audits less valuable or necessary.

Details as to reports and methods of operation to be used after

decentralization is completed have not been received.

Commodity Credit Corporation operations were light during 1947,

Because of the price situation loans were not advantageous to producers and

operations were mostly purchases of grains„ etc. Our activities have been

mostly Halted to issuance of checks against requisitions and collection of

its itess, cash and noncash3

Outstanding drafts for the Emergency Wheat, Daijy Production, Sheep,

I&mb end Beef Production programs (subsidies) were paid in the usual manner

until Kay 29, 1947; thereafter, such items were returned for presentment to

the County Committees, which directed them to the local Commodity Credit

Corporation office which requisitioned checks from us to cover.

During the year the first sight drafts under the Wool Program were

paid* This prograss has not been active0

A trend toward having each Regional Office handle Commodity Pro

grams in its osrn district is seen in the transfer as of February 1, 1947,

frcsa the Chicago to the oneapolis Regional Office of the Potato Program

for this district- The Corn Program, we understand, will also be similarly

decentralized* Thus far, this has not added much to our volume as activity

has been limited to purchases*

Activities for other government agencies, such as the Public Hous

ing Administration and Federal Works Agency, have been very light this last

year*


RESEARCH DEPARTMENT

The department continued to emphasise its extension or public

relations activities. During the year members of the department partici

pated in 67 speaking engagements with a combined audience of approximately

7,000c This does not include certain other bank conferences In whose

program members of the department participated« It has continued to be

the policy of the department, wherever possible, to satisfy the demands

for speakers — particularly when requests come from bankers in the dis-

trlct and when the Individuals concerned may make some contribution to

the subject in question.

Two members of the department have had charge of A.I.B, classes

in Minneapolis this year, Franklin Parsons, Agricultural Economist, has

been teaching a course In Principles of Economics, and Oscar Lltterer, In*

duetrial Economist* has been teaching a course in Money and Banking.

The major special study which the department completed in 1947

was an analysis of the structure of commercial loans at member banks in

our district. The results of this study were published in the form of a

pamphlet, "The Rising Tide of Bank Lending,” by Paul V, McCracken, with

an appendix on sampling methodology by Jc A, MacDonald, Later in the

year an analysis of loans to farmers was begun, and the results of this

survey will be published as soon as this material can be written up*

A major proportion of the research activities of the Research

Department this year found their market, as in the past, in special arti

cles appearing in our "Monthly Review of Business Conditions”, A list of

these special articles in the 1947 Reviews is as follows$

March "Food Relief and Ninth District Agriculture” F. L. Parsons"Bank Earnings Leveling Off” Banking Section

April "Industrial Growth Can Stabilize Economy” 0, F, Lltterer"Rapid Price Rise Upsets Price Relationships" 0, F. Lltterer

June "Urban Realty Prices Display Spotty Rise" 0, F, LlttererAugust "What About Farm Programs * F. L. ParsonsSeptember "Federal Tax Impact Greater Than Collections" 0. F, Lltterer Qstober "Economy Expands Despite Population Drop" 0. F. Lltterer

In addition to these materials, three articles were published In

the Hew York Commercial and Financial Chronicle during the year on various

phases of banking and business conditions*

7 3


During 1947 we experienced a considerable demand for oar regular

publications on business activity* The circulation of our Monthly Review

increased from 5,537 in 1946 to 6,538 at the end of 1947, There was a

particularly large relative increase in requests from foreign sources to

be placed on our wailing list* A further major change in typography in

the Monthly Review was developed in 1947 when we shifted fro® a two column

to a three column makeup« This was done in an effort to augment the read

ability and appearance of the publication0

The largest relative expansion in circulation was enjoyed by

our Farm News which during the year considerably more than doubled ita

mailing list* Farm News circulation rose from lp664 in 1946 to 4»474 by

the end of the year0

The Library Letter has been issued monthly except during the summer

months and has resulted in some further demand for our library services.

While there has been a considerable emphasis on regional research

during the past year, members of the department have participated actively

in System-wide research work. The various members of the department are at

present members of the following Federal Reserve System committees *

1. Paul W, McCrackena<, System Research Advisory Committee bo Subcommittee of the Presidents' Conference

Committee on Research c0 Executive committee of the Subcommittee of the

Presidents4 Conference Committee on Research do Banking and Credit Policy Committee11 e„ Subcommittee of the Presidents1 Conference Committee

on Legislation

2« Franklin L Parsonsa. Agricultural Committee*

3« 0* F, Littererao Business Finance Committee*

4» A, MacDonalda* Committee on Current Reporting Series*

♦Subcommittees of System Research Advisory Committee and/orSubcommittee of the Presidents* Conference Committee on Research,

The major activities of the library have again been directed along

two lines, First* the library has served as a reference arm of the Research

Department., In this connection it has made particularly great effort during


the l&et few months to augment its receipt cf peuaphlets, periodicals,

releases, and other materials which are particularly useful in such of

our research work.

Second? the library has continued to develop its circulating

library program among banks in the districto Its circulation in 1947 was

approximately 20 per cent above 1946c In an effort to stimulate this fur

ther there has been in preparation a complete catalog of books in the

library^ the catalog to be issued early in 1948°

Circulation of Research Department Publications

1947 1946

Monthly Review - total 6,538 5,537• foreign 48 31

Monthly Review Press Release 190 237Farm News 4,474 1,664Library Letters 1*487 1,450Bank Debits Release 716 704Retail Trade Summary 609 660

Library Activity in 1947

New Acquisitions 253 250Books Circulated 2,415 2*056Periodicals Received 251 75Books on Shelves 4*275 4»000

SAFEKEEPING DEPARTMENT

Securities held for safekeeping and collateral purposes as of

December 31r 1947, were $1,406 million, a decrease of $143 Billion compared

with the $1,549 million held a year ago. The decrease in securities held

during the year occurred as a result of the termination as of July 1, 1947,

of the safekeeping privilege afforded nonmember banks for Treasury bills

and Certificates of Indebtedness of the United States, the decrease in the

balances in War Loan Deposit accounts of the Treasury releasing War Loan

collateral, and the discontinuance of the policy of all Reserve banks buy

ing Treasury bills at a fixed rate of 3/8$ per annum under repurchase optionQ

The reduction in the national debt also contributed to the decrease men

tioned above.


12-31-47 12-31-46 Inc. or Deo, (000 Omitted!

Accounts;Goverunout and miscellaneous securities held in safekeeping for members andnoneembers $ 937,849 $ 978,991 1 - a, 142

Securities pledged to secure publicdeposits 280,925 226,608 ♦ 54,317

Securities held for U* S„ Treasurerand others 3,316 3,215 ♦ 101

Securities held for R.F.C. 8,999 12,631 «e> 3,632Collateral to War Loan Deposits 156,646 253,093 • 96,447U« So Depositary Bonds - time deposits 131 122 9Federal Works Administration 133 H O - 7Collateral to Rediscounts & Bills Payable 16,271 -46,132 OB 29,861Securities held for S. HousingAuthority 1,735 1,7a - 6

Collateral to Consignment Account -

U0 So Savings Bonds, Series £ 78 U 6 68Treasury Bills held under Repurchase

Option - 2(>.26l - 26.264♦1,406,083 $1,549,083 I - 143,000

The Safekeeping Department received 57*866 pieces of securities!

issued 9,152 receipts, and delivered 77f959 pieces in 10,337 transactions,

resulting in a net decrease of 20*093 pieces of securities held during the

year., During 1947* as in 1946F safekeeping operations were on the decreasef

while in the five-year previous period the activity steadily Increased „

This department also made 5,790 transfers of securities from one

account to another, and clipped 287,239 coupons from securities held during

1947c

The table belcw shows comparative volume figures for 1947 and 1946«

1947 1946 Ino. or DeoReceipts Issued 9,152 12,004 - 2,852Pieces received 57,866 66,139 - 8,273Withdrawals handled 10,387 12,181 - 1,794Pieces delivered 77,959 85,353 - 7,394Transfers from one account

to another 5,790 6,143 353Coupons clipped 287,239 312,785 - 25,546

In order to permit the rapid and accurate preparation of lists of

securities held in safekeeping for audit and examination reconcilements with

out interference with operations of other departmentss records of securities

held were established on tabulation cards during the early part of the year*

The tabulation was used for the preparation of reconcilements for two audits

of securities held in safekeeping during the year, the Boardvs examination

having been made prior to the establishment of the punch card records0 At the

close of the year, t a b u l a t i o n card records were also established to permit the

listing of advices of and credits for maturing coupons and authorisations to

clip coupons to vault custodians, which system will be effeotive early In 1948,


In order to establish tabulating records for safekeeping operations, it

was necessary to key punch approximately 50 thousand cards for outstanding

receipts, and a similar number for maturity and income credit purposes.


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1947 Directors Frb Minneapolis

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