Federal Reserve Bank...Directors and Officers, 1934 DIRECTORS CLASS A CHESS LAMBERTON, Franklin,...

Federal Reserve Bank

of Cleveland

1933

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NINETEENTH ANNUAL REPORTTO THE

FEDERAL RESERVE BOARD

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

ANNUAL REPORT

of the

Federal Reserve Agentof the

Fourth FederalReserve District

to the

Federal Reserve Board

Covering Operations

for the

Calendar Year

1933

FEDERAL RESERVE BANK OF CLEVELAND


Directors and Officers, 1934

DIRECTORS

CLASS A

CHESS LAMBERTON, Franklin, Pa., 1934

ROBERT WARDROP, Pittsburgh, Pa., 1935

BEN R. CONNER, Ada, Ohio, 1936

CLASS B

R. P. WRIGHT, Erie, Pa., 1934

G. D. CRABBS, Cincinnati, Ohio, 1935J. E. GALVIN, Lima, Ohio, 1936

CLASS C

L. B. WILLIAMS (Chairman), Cleveland, Ohio, 1934E. S. BURKE, JR. , (Deputy Chairman), Cleveland, Ohio, 1935

W. W. KNIGHT, Toledo, Ohio, 1936

OFFICERS

L. B. WILLIAMS, Chairman of the Board E. R. FANCHER, Governorand Federal Reserve Agent M. J. FLEMING, Deputy Governor

W. H. FLETCHER, Assistant Federal F. J. ZURLINDEN, Deputy GovernorReserve Agent H. F. STRATER, Cashier and Secretary

J. B. ANDERSON, Assistant Federal W. F. TAYLOR, Assistant CashierReserve Agent C. W. ARNOLD, Assistant Cashier

HOWARD EVANS, Assistant Federal G. H. WAGNER, Assistant CashierReserve Agent D. B. CLOUSER, Assistant Cashier

F. V. GRATSON, Auditor P. A. BROWN, Assistant CashierE. A. CARTER, Assistant CashierA. G. FOSTER, Assistant Cashier

CINCINNATI BRANCHDIRECTORS OFFICERSW. H. COURTNEY C. F. MCCOMBS, Managing DirectorTHOS. J. DAVISB. H. KROGER B. J. LAZAR, CashierC. F. MCCOMBSJOHN OMWAKE H. N. OTT, Assistant CashierS. B. SUTPHINGEO. M. VERITY BRUCB KENNELLY, Assistant Cashier

PITTSBURGH BRANCHDIRECTORS OFFICERSA. E. BRAUN J. C. NBVIN, Managing DirectorRICHARD COULTERA. L. HUMPHREY T. C. GRIGGS, CashierJ. S. JONESJ. C. NEVIN F. E. COBUN, Assistant CashierJAMES RAELLOYD W. SMITH C. J. BOLTHOUSE, Assistant Cashier

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NINETEENTH ANNUAL REPORTOF THE

FEDERAL RESERVE BANKOF CLEVELAND

At the beginning of 1933 the country was in the fourth winterof the depression and it was generally believed that the worst ofthe financial difficulties characteristic of such a period were past.There had been a reduction in the number of bank failures fromthe high level of late 1931 and early 1932; still they were toonumerous to inspire confidence. Inflation, free silver coinage,barter plans, and debt reduction were being discussed with in-creasing freedom. Unemployment was serious and local relieffunds were insufficient to meet needs. Share-the-work plans hadbeen in operation for approximately two months, under the direc-tion of the Banking and Industrial committees. The report ofthe Share-the-work organization in the fourth district for March 1,shortly before the work was taken over by the Chamber of Com-merce of the United States, showed that in 2,649 establishments,131,165 persons had been added to or retained on pay rol?s onaccount of work-sharing. The Federal Home Loan Bank Act waspassed in July 1932, and by the beginning of 1933 some of thetwelve Home Loan banks that were to form a reserve system forsavings, building and loan associations were doing business. TheReconstruction Finance Corporation had been in operation for tenmonths and had made actual cash loans of $1,502,168,402. Bankshad been advanced more funds than any other class of borrowers.The Banking and Industrial committees had been at work in Federalreserve districts for seven months. Their efforts were directed atestablishing contacts between industries that needed and deservedcredit and banks with money to lend.

Two disturbances in the banking system, in widely separatedparts of the nation, and three months apart in time, were propheticof a breakdown in the financial system of the United States, a sys-tem that can only function smoothly when the flow of business iscontinuous and uninterrupted in any of its component parts, andwhen the confidence of the public is unimpaired. The period wasmarked by bank failures and by business holidays and moratoriaproclaimed by the mayors of various cities and towns.

Authorities in Nevada proclaimed a twelve-day business andbank holiday beginning November 1, 1932, for the purpose of allow-ing a State group banking organization respite from the demands ofdepositors. On February 3, 1933, the Governor of Louisiana de-clared February 4 to be a holiday. This action provided a largeNew Orleans bank with time to prepare to meet requests for pay-

o


ment of accounts when the banks reopened on Monday, February6. Rumors as to the bank's solvency, started in another part of thecountry, had gained newspaper publicity and consequent credenceamong depositors of the southern bank.

On February 14, because of the inability of a group bankingorganization in Detroit to meet the demands of its depositors forextraordinary withdrawals, the Governor of Michigan declared aneight-day holiday. All banks and exchanges in the state were closed,and the situation of the people of Michigan started a wave of fearthat spread across the country, with the result that on InaugurationDay, March 4, practically all banks in the United States had closedtheir doors to the panic-stricken demands of their depositors, or hadplaced restrictions on the withdrawal of funds.

The Governor of Ohio, on the day the Michigan moratorium onbanking operations was declared, issued a statement to the effectthat at that time there was no necessity for a similar move in Ohio.His decision was based on the fact that there was no appreciabledisturbance to the banks of the state.

Member banks of the Cleveland Clearing House Association de-cided on Sunday, February 26, that restrictions on withdrawalsshould go into effect the following day. All but two banks alloweddepositors to draw out 5 per cent of their accounts. One of thesepaid 1 per cent and the other continued to pay 100 per cent. Otherclearinghouse associations in the state followed the Cleveland ex-ample, and within two days nearly all banks in Ohio had institutedsome method of limiting the amounts paid out to depositors.

The Ohio Legislature met in special session on February 27 andpassed two bills designed to safeguard Ohio banking. These bills,named for their sponsors the Lawrence bill and the Gradison bill,were immediately signed by the Governor and became law. TheLawrence Act permitted any bank, with permission of the Statesuperintendent of banks, to limit withdrawals, make payments fromdeposits in whole or pro rata in part, and to segregate deposits. TheGradison Act made provision for reopening of closed banks.

National banks in the fourth district were able to take advantageof State emergency banking laws through the Couzens amendmentto the National Banking Act, signed February 25 by the President,which granted to the Comptroller of the Currency power to exercisethe same authority over national banks as was held by State officialsover State banks in emergency situations.

The privilege of restricting deposits on and after February 28was given the banks of Pennsylvania by resolution of the Legisla-ture. The resolution, made a part of the Pennsylvania bankinglaw March 8, was made retroactive to February 27, and was to be inexistence for six months. Pittsburgh papers on March 4 announcedthat "Pittsburgh bankers today almost unanimously ignored thebanking holiday declared by Governor Pinchot and conducted theirbusiness as usual."

Under authority of an emergency amendment to the WestVirginia law passed February 28 by the regular session of the State


Legislature, the State banking commissioner issued instructions toall banks under his jurisdiction to restrict withdrawals of funds to5 per cent of accounts, beginning March 1.

The Governor of Kentucky on March 1 invoked an old Kentuckylaw authorizing the Governor to proclaim legal holidays by designat-ing certain days of thanksgiving. He said in his statement that "Inconsideration of the nation-wide banking situation and in view ofthe fact that the people of the State of Kentucky, though sufferingfrom a general depression, may perhaps in comparison with thepeople of other states have reason for thanksgiving," he would de-clare a four-day legal holiday. All banks were closed on March 1,but on the other three days of the State holiday they were allowedto pay out an aggregate of 5 per cent of deposits.

Franklin D. Roosevelt was inaugurated as President of theUnited States on March 4, and his administration began with theentire nation in a state of financial chaos. Nearly all banks wereclosed; the ones that remained open were conducting business on avery restricted basis; commodity and stock exchanges were closed.The Federal Reserve Bank of Cleveland remained open to the publicuntil the closing hour, March 4. Early on Monday, March 6,President Roosevelt issued a proclamation to the effect that allbanks were to observe a holiday from March 6 to March 9, inclusive.This was also to prevent the export, hoarding, or earmarking of goldand silver coin, bullion, or currency, or speculation in foreign ex-change. The new Congress was called into special session on March9, and at its first meeting passed an emergency bank act. The fiveparts of the Banking Act of March 9 gave the President and theSecretary of the Treasury broad powers and confirmed previousemergency decrees; provided for the reorganization of some of thenational banks; provided for the recapitalization of some banksthrough issuance of preferred stock; provided for new currency andcredits by Federal reserve banks; and provided for amendment ofthe law and for funds to carry out its provisions. On March 9, also,the national banking holiday was indefinitely extended.

Plans to reopen the banks were announced on March 10. Banksin Federal reserve cities opened on March 13, banks in cities withorganized clearinghouse associations opened on March 14, and banksin other communities opened on March 15. Member banks werelicensed by the Treasury Department with the cooperation ofFederal reserve banks, and nonmember banks were licensed by Stateauthorities.

Bald statement of the essential facts fails utterly to reveal theexcitement and tension of the period of the bank holiday, themagnitude of the tasks that were set and accomplished, and theoverwhelming display of loyalty and devotion of persons who wereconcerned in any way with restoring the banking system to workingorder.

By the end of the business day March 15, well over 900 of the1,409 member and nonmember banks in existence in the fourthdistrict on January 1, 1933, had been licensed by the Treasury De-


partment or by State authorities to resume full operations. The re-port for April 1 showed that 1,042 of the 1,392 banks then existing inthe district were licensed. Through the months that followed, theslow, gruelling task of examining, reorganizing, consolidating, andplacing in liquidation the banks that were not in a position to re-ceive licenses immediately after the holiday was carried out. At theend of the year, 1,161 banks had received licenses and 175 were stilloperating on a restricted basis.

One natural and important consequence of the depression phaseof the business cycle is the demand for legislative changes. Thisyear in the fourth district was no exception. State legislatures earlyin the year passed laws amending their respective banking codes insuch a way as to cope with the emergency and to conform withnational enactments. The Ohio Legislature, which was in sessionthe greater part of the year, passed laws allowing banks to restrictwithdrawals and providing for reorganization and reopening orliquidation of banks not in a position to continue business. At thistime also, provision was made for State banks to sell capital notes ordebentures. Authority for the Governor of Ohio to appoint a bank-ing advisory board of seven members, to include and to serve withthe superintendent of banks, was written into the law. An act waspassed in Ohio providing for separate reports of condition of trustcompanies and banks doing a trust business and according a pref-erence to trust moneys deposited in another department of such aninstitution. In December the Governor of Ohio signed a bill per-mitting the establishment in Ohio of mutual savings banks. Thethree mutual savings associations in operation in Ohio had eachpreviously been provided for by individual acts of the Legislature.

A resolution of the Ohio Legislature late in March empowered aSenate committee to make an investigation into banking practiceswhich have prevailed in Ohio during recent years, with a view topreparing remedial legislation. Through the medium of hearings onclosed banks in Cleveland and Toledo, the Senate committee wasnearly ready, at the end of the year, to present a program for reformof Ohio bank laws.

The following paragraph is an excerpt from the introductorynote to the Pennsylvania bank law:

"The codification and revision by the 1933 Legislature of thelaws relating to banks, trust companies, and building and loan asso-ciations . . . is the first time in the history of the state (Pennsylvania)that the laws on these important subjects have been embodied incomplete self-sustaining acts. Sixteen years ago the Legislature bythe Act of July 25, 1917, created a commission of five persons tocodify and revise the laws relating to banks, private bankers, andtrust companies. By the Act of July 21, 1919, the commission wascontinued for a period of two years and was directed to include inthe scope of its work the laws relating to savings institutions, build-ing and loan associations, loan brokers, and all other institutions andpersons under the supervision of the Banking Department. By the


Act of May 27, 1921, the commission was again continued for twoyears. The commission made its report in 1923 but the Legislaturefailed to adopt the result of its work. In 1926 another attempt wasmade to prepare a codification and revision of the banking laws.The 1931 session of the Legislature made an appropriation to theDepartment of Justice directing it to submit to the 1933 sessioncodifications and revisions of the banking and building and loanassociation laws. The banking codes were thoroughly consideredby representatives of the State bankers' association and of the lead-ing banking institutions of Philadelphia and Pittsburgh. Certainfeatures were incorporated in the bills by the Legislature that werenot originally proposed. The issuance of preferred stock wasauthorized, mortgage pools were prohibited except in trust depart-ments, and the organization of trust companies without bankingprivileges was made possible." The building and loan code wasapproved by Governor Pinchot on May 5, 1933, and the depart-ment of banking code and the banking code on May 15, 1933.

The West Virginia Legislature met in regular and in extra-ordinary session in 1933. Emergency legislation was passed late inFebruary, giving the commissioner of banking additional powersover banking institutions, a small loans bill became law without theapproval of the Governor, laws affecting the deposit of State fundsin banks were amended, as was the law concerning consolidation ofbanks, and in May a law was passed affecting county depositories.An act was passed providing for conservators for banks and pro-viding for reopening of banks, and the law pertaining to limitationson loans by banking institutions and to the valuation of securitiespurchased by them was amended.

The Banking Act of 1933—the "Glass bill" revised, amended,and added to—was signed by the President on June 16, 1933. Itsprovisions are national in scope, and banks in this district made ad-justments throughout the year to conform. Interest on demanddeposits was prohibited immediately on passage of the law, and theFederal Reserve Board in August issued a regulation limiting thepayment of interest on time deposits. Sections of the law pertainingto the regulation and divorcement of affiliates of member banksnecessitated long, tedious hours of work by the Federal reservebank and counsel. Member bank directorates were increased or de-creased in number to agree with the law.

The provision of the law for the insurance of bank deposits wasthe section that created the greatest interest and received the mostcomment in the press. Directors of the Federal Deposit InsuranceCorporation were announced in September, and the task of ex-amining applying banks was begun, with the object of having thetemporary insurance fund in working order by January 1. All mem-ber banks were required to become members of the temporary de-posit insurance fund, which began operations on January 1, 1934.The first report of the Federal Deposit Insurance Corporation givesthe number of banks in each state which made application and are

— 7 —


now members of the temporary insurance fund. Of 1,001 banks inPennsylvania on June 30,1933, 995 were members of the insurancefund when it became operative; of 168 banks in West Virginia as ofthe same date, 157 qualified for deposit insurance; and of 422 banksin Kentucky, 378 held membership in the Federal Deposit InsuranceCorporation. All member banks and all State nonmember banksin Ohio that applied for membership were admitted to the fund.The Ohio banking department announced that 401 State banks, 350of which are nonmember banks, applied.

The history of the demand for gold early in 1933 is a chapter ofthe year that stands by itself and each staff member has personalreminiscences of a period that is unique in the annals of the FederalReserve System. Gold coin in quantity was not shipped out of thisbank to member banks for some time previous to the heaviest de-mand for gold for private hoarding early in 1933. Depositors ofmember banks who asked for gold were requested to come to theoffices of the reserve bank for it. This practice may have deterredsome persons from obtaining gold coin, although to onlookers in thebank on March 4 it seemed that everyone who could possibly wantgold was in the lobby. The President's order of March 6, whichdeclared the national banking holiday, also stopped the payment ofgold coin and certificates.

COIN RECEIVED AND COUNTED

1926 1927 1928 1929 1930 1931 1932 1933

The daily figures for payment of gold coin and certificates fromthe three offices of this bank from February 1 to March 4 reveal ac-curately the degree of panic that was prevalent. Two days after theLouisiana holiday, February 7, $46,810 in gold coin and certificateswas paid out, and on February 14, the day the Michigan holidaywas declared, $71,100 was paid out and the next day the figurejumped to $127,970. The day Cleveland banks declared restrictionson withdrawals, February 27, the total of gold coin and certificatespaid out, which had been creeping higher for several successive days,amounted to $287,392. The demand for gold became fanatic duringthat week, and on Saturday, March 4, the bank paid out $864,000.

The President's order of March 6, closing the banks, stopped thepaying out of gold and forbade hoarding. The gold began to bereturned almost immediately, from two motives probably, becauseof the President's order, and because the safe disposition of any

— 8 —


quantity of gold proved difficult to holders of the metal. On March14, the first day banks in clearinghouse cities were open, this bankand its branches received $2,821,341 in gold coin and gold certif-icates, the largest amount that was received in any one day duringthe year. March 22 was the first day after March 10 that dailyreceipts dropped below one million dollars a day. Since gold re-ceipts for a month after the sixth of March were so much largerthan gold payments for a month immediately preceding the sixthof March, it was evident that long-hoarded gold was coming out ofhiding as well as the gold that had recently been demanded in greatquantity. Fluctuations in gold receipts throughout the year closelyfollowed press announcements of Presidential and Treasury warn-ings concerning penalties for failure to return gold.

The Banking Act of March 9 contained a provision that theReconstruction Finance Corporation might purchase preferred stockof national banks or make loans thereon in an attempt to aid in re-organizing the banks or strengthening the capital structure. Thelaw also permitted the Reconstruction Finance Corporation to pur-chase preferred stock of State banks and trust companies in thosestates in which such institutions are authorized to issue preferredstock. Late in September a letter was sent by the ReconstructionFinance Corporation to all banks urging them to issue preferredstock or capital notes or debentures in a general effort to bolster thecapital strength of the banks of the entire country and to preparebanks for membership in the Federal Deposit Insurance Corpora-tion. Clearinghouse associations in the various cities of the districtmet and endorsed this move and banks acceded to the request of thePresident and the Reconstruction Finance Corporation. In Octobera special nonmember preferred stock board was formed as a divisionof the Reconstruction Finance Corporation with the intent of assist-ing nonmember banks to make ready for the insurance of deposits,and Mr. H. J. Stoddard was appointed supervisor for the fourthdistrict. The Ohio Legislature passed a law allowing State banksto sell capital notes or debentures, the Kentucky Legislature gave toState banks the privilege of selling preferred stock, and the Pennsyl-vania banking law had incorporated in it a provision for the sale ofmore than one class of stock by State banks.

While figures for operations of the Reconstruction Finance Cor-poration in the fourth district are not available for publication,comparison of national figures at the end of 1933 with figures at thebeginning of the year show the colossal growth of the Corporation'sactivities, in which this district shared. The fourth district re-ceived a proportionate number of the 12,584 loans, amounting to$2,749,227,461, made by the Corporation up until December 30,1933, of which 37.4 per cent had been repaid at that time.

The Federal Home Loan Bank System had grown throughout1933 until its membership numbered 2,065 at the end of the year,with total resources of $2,600,000,000, about 34 per cent of the en-tire assets of all building and loan associations in the United States.The Cincinnati Home Loan Bank was the first to pay a dividend.On October 23 President Roosevelt was handed a check for $95,830

— 9 —


as the Government's share in the first dividend declared by any ofthe Home Loan banks. The Home Owners Loan Corporation, adivision of the Federal Home Loan Bank System, began operationsin August in an effort to relieve urban home owners who were un-able to meet mortgage payments and to aid the mortgage holders.In 1933 over 40,000 of these loans were made throughout the countryand the Corporation had tentatively approved about 248,000applications. Ohio and Pennsylvania have been leading states inthe number of loans made.

RESERVE BANK OPERATIONSFlexibility of the Federal Reserve System was displayed in

operations at the Federal Reserve Bank of Cleveland in the year1933, though, to a considerable extent, the fluctuations were a re-sult of factors not related to trade and industry. In the period im-mediately prior to, and for a time following the banking holiday inMarch, activity in practically all departments of this bank increasedsharply, but as banking conditions improved a contraction in opera-tions occurred generally.

BANKS ACCOMMODATED

1926 1927 1928 1929 1930 1931 1932 1933

For the year as a whole the total volume of credit extended tomember banks was $823,000,000, compared with $1,889,000,000 in1932, and was lower than in any year since the formative period ofthe Federal Reserve System. Despite this low total, bills discountedrose sharply in late February and early March (because of the de-mand for currency at that time) to approximately the level of late1931 or early 1932, but they declined rapidly following the bank re-openings. During the year only 383 banks were accommodated, thesmallest number in over twelve years and there were only 6,666 loanapplications approved, less than half as many as in the precedingyear. As a result, the total number of items handled by the discountdepartment dropped to 26,857, compared with 46,140 items in 1932.A $25,000,000 rediscount, the first since shortly after the war, wasmade by this bank for about ten days in March for another Federalreserve bank.

There was a slight decrease from 1932 in the amount of accept-ances purchased or acquired in the year, but the total volume,$32,000,000 (including bills payable in foreign currencies), was quite

— 10 —


insignificant in comparison with the total amount of earning assets.These were made up chiefly of Government securities, purchases ofwhich amounted to $334,000,000 in the year, only slightly less thanin the preceding twelve months. Daily average earning assets in1933 were $224,000,000, a gain of about $19,000,000 from 1932, butwith the average rate of return only 2.05 per cent, current netearnings were down from the preceding year, despite the higherdaily average of earning assets.

BILLS PURCHASED AND ACQUIREDor

DOLLARS2 5 0 -

1926 1927 1928 1929 1930 1931 1932 1933

* REVISED FIGURE

These earnings amounted to $1,790,000 in 1933, comparedwith $2,545,000 in 1932. Dividend payments to member banksaggregated $789,000. After setting up a special reserve of$800,000 and making allowance for depreciation, etc., there was adeficit to surplus of $57,374.47. The Banking Act of 1933 abolishedthe franchise tax requirement of the Federal Reserve Act.

The closing of some member banks prior to or at the time of thebanking holiday caused a reduction in paid-in capital stock of thisbank in an amount greater than the expansion resulting from in-creased capitalization of some member banks in 1933, in a numberof cases through the issue of preferred stock. At the year end thecapital structure of the Federal Reserve Bank of Cleveland was:

Capital stock paid in $12,403,700.00Capital stock subscribed 24,807,400.00Surplus 28,236,352.85

orDOLLARS

6000

4000

2000

BILLS DISCOUNTED

" ^ ^ ^ ^ ^ ^ |6059] |5827|

LZJ kllj M M Fl1926 1927 1928 1929 1930

FOR

IlS90|

1931

MEMBERS

[I889J ^^L

1932 1933

— 1 1 —


MEMBER BANK CREDITThe closing of all banks in early March and the reopening of a

smaller number than were in operation prior to the banking holidaydestroyed the comparability of current banking statistics with thoseof preceding years, but certain conclusions as to the trend of bankingdevelopments in 1933 can be drawn from the figures that are avail-able for a smaller group of banks.

A rapid shrinkage in deposits occurred at member banks in thisdistrict in the first ten weeks of 1933, (judging by the weekly figuresof reporting member banks) when depositors were withdrawingfunds from banks generally.

Following the restoration of more normal operating conditionsin late March, banks in this district experienced a sharp rise in totaldeposits. From March 1 to the end of 1933 total deposits, excludingGovernment deposits, were up approximately 11 per cent at theweekly reporting banks. This resulted partly from a return flow ofdeposits transferred to other sections of the country, chiefly NewYork, prior to the banking holiday, and to a redeposit of hoardedfunds. In addition, the Banking Act of 1933, which, among otherthings, prohibited the payment of interest on demand deposits,caused a considerable transfer of funds from demand to time ac-counts. As a result, demand deposits at the year end were approxi-mately the same as in mid-March when the banks reopened, whiletime deposits at reporting banks were up about 17 per cent. Sizableadditions were made to the banks' investments following the bankreopenings, entirely through the purchase of Government securities,but a continued liquidation of loans was evident throughout theyear, both security and "all other" loans sharing in the decline.

The increase in holdings of Government securities at reportingmember banks in the period following the banking holiday wasslightly greater than the contraction in loans and investments inother than Government securities, but when the fact that 93 mem-ber banks remained unlicensed at the year end is considered, theliquidation of all member bank credit in the year 1933, amountingto about 20 per cent, was substantial, even though total loans andinvestments of reporting banks increased slightly toward the yearend.

Condition of Fourth District Member Banks(Figures in Millions)

Loans and discountsInvestments—U. S. Govt. securitiesInvestments — all other securities

Total loans and investments

Demand depositsTime depositsUnited States deposits

Total deposits*

Number of banks

Dec. 30,1933

$1,033673392

2,098

880997

62

2,111

544**

Dec. 31,1932

$1,538591514

2,643

9931,243

33

2,539

630

% change 1933from 1932

—32.9+ 13.8—23.7

—20.6

—11.4—19.8+87.9—16.9

—13.7* Including other items.

•* Licensed member banks from which condition reports were received.

— 12 —


Total resources of 544 licensed member banks reporting onDecember 30, 1933, were $2,664,000,000 in contrast with $3,265,000,000 for all fourth district member banks on December 31, 1932.The following table shows the principal resources and liabilities oflicensed member banks at the close of 1933, and all member banksat the end of the preceding year.

Despite the decline in deposits and the number of banks, mem-ber bank reserves with the Federal Reserve Bank of Cleveland wereup sharply—amounting to $182,000,000 at the end of 1933, com-pared with $147,000,000 at the end of 1932.

MEMBERSHIP CHANGESBy reason of bank suspensions in January and February of 1933,

the closing of all banks in early March, and the reopening only ofthose whose condition met requirements set up by the Secretary ofthe Treasury, and increased interest in Federal reserve membershipon the part of State banks, changes in membership in the year werenumerous. As shown by stock records of this bank there were 643member banks on December 30, 1933, but a considerable numberwere not licensed to operate 100%. At the beginning of the yearthere were 634 stockholding member banks in this district.

Many new national banks were organized in the year chiefly totake over assets of banks not licensed following the banking holidayand therefore caused no change in the number of banks actuallyoperating. In this district 21 State banks were admitted to mem-bership in 1933, the greatest number in many years.

CURRENCY AND COIN OPERATIONS

The value of this bank's Federal reserve notes and bank notes incirculation at the end of 1933 was approximately $30 millions higherthan at the close of 1932, and the total amount was somewhat greaterthan might have been expected under more normal conditions, judg-ing by the relatively low level of business activity. Over the twelve-month period fluctuations in note circulation were unusually sharp.At the start of the year the volume of notes in circulation was some-what under the level at the beginning of 1932, but, due to hoardingand increased needs of cash for business as a result of bank closings

CASH RECEIPTS AND DISBURSEMENTSMILLIONSorDOLLARS

1000-

DISBURSEMENTS

Ulllui1926 1927 1928 1929 1930 1931 1932 1933

— 13 —


in some communities, the decline in the number of checking accountsas a result of the check tax, metered service plans, etc., was con-siderably above the level even of 1929.

In mid-February, as banking conditions became more strained,demand for cash from banks increased sharply and note circulationof this bank rose nearly $150,000,000 to $423,000,000, a new highrecord, in little over a month. Following the banking holiday, notecirculation declined rapidly and in the last half of the year was closeto $300,000,000.

MILLIONS

orDOLLARS

1250

CURRENCY RECEIVED AND COUNTED

FICURCS INDICATE MILLIONS OF PICCCS

1926 1927 1928 1929 1930 1931 1932 1933

The law requires that a reserve of at least 40 per cent gold bemaintained against Federal reserve notes in circulation and byreason of gold withdrawals in the early part of the year and thesharp increase in note circulation in the period, the reserve ratiodeclined sharply; in one week of March it was only slightly aboveits legal limit.

The Federal Reserve Act was amended by the act of March 9,1933, to permit the issuance by Federal reserve banks of Federalreserve bank notes which could be secured by direct obligations ofthe United States Government up to 100 per cent of their value orby any notes, drafts, and bills acquired by the Federal reserve banksup to 90 per cent of their value. No reserves were required to be heldagainst these notes. Issuance of Federal reserve bank notes by thisbank was started in the latter part of March. By November 1stapproximately $27,000,000 of these bank notes had been issued, butin the remainder of the year a slight contraction occurred.

The accompanying tables and charts show the extent to whichoperations of the money department increased in the year, but coinand currency receipts and disbursements were below the peak years,indicating a smaller turnover of funds. Much of the currency was

Total Cash Receipts and Disbursements

ClevelandCincinnatiPittsburgh

Total

Receipts

$578,690,539.93210,480,949.93347,193,375.70

$1,136,364,865.56

Disbursements

$584,717,944.33212,922,780.46349,651,689.79

$1,147,292,414.58

14 —



Total


Total

Currency Received and CountedPieces

52,523,55728,520,49138,829,048

119,873,096

Coin Received and Counted

Pieces

45,384,01140,355,78532,632,113

118,371,909

Amount

$347,211,830.00125,908,540.00203,280,355.00

$676,400,725.00

Amount

$11,444,796.007,735,570.846,694,708.00

$25,875,074.84

used by banks prior to the banking holiday to increase their cashposition and was never circulated, being returned in many cases inits original packages.

CHECK COLLECTIONSIn the year 1933 checks collected through the Federal Reserve

Bank of Cleveland numbered 67,356,172 and had a total value of$13,657,000,000. These figures represent declines from 1932 of 8and 5 per cent, respectively, but the loss for the year was confinedto the first six months. In the last half of the year an increase over1932 was recorded, and the smaller decline in dollar volume than innumber of items handled was partly attributed to the increase inprices in the last half of the year and to the advance in wage ratesand pay rolls. The number of checks collected was about the sameas in 1923, the total being sharply reduced at the time of the bankholiday in February and March, in which period many checks werereturned unpaid and several thousands of cash letters containingtens of thousands of checks were returned without being handled.As a result the year established an all time high for returned checks,the volume for March being twelve times any single previous month.The reduction in the number of checks handled in 1933 also wasaffected by bank closings, the continuance of the check tax, and themore stringent regulations in regard to service charges.

CHECK COLLECTIONSFIGURES INDICATE MILLIONS OF CHECKS

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The volume of checks collected in the first quarter of the yearwas down 24 per cent from the corresponding period of 1932. Im-provement was noticed in the latter months and in December thenumber of checks collected was 14.5 per cent ahead of December1932, and the dollar value was up 11 per cent in the same period.Part of this increase represented Government checks distributed inthe latter half of the month through newly-created Federal agencies.The number of Government checks paid in the entire year reached anew high, a gain of 27.8 per cent from 1932 being shown. This re-flected increased Government spending generally in this district,chiefly through other than CWA and PWA agencies, for operationof these two organizations did not get under way until the latterpart of December.

Transit Department Check Clearings and Collections for Year 1933Cleveland

Items on Cleveland banksItems on other banks in district No. 4Items on banks in other districtsItems on Treasurer of the United States

TotalItems sent to Cincinnati and Pittsburgh branches

Items

5,506,47917,418,198

1,388,8842,099,651

26,413,212395,222

Amounts

$2,990,259,709.531,510,773,949.20

154,588,759.50326,385,137.33

$4,982,007,555.56$ 45,903,048.70

Cincinnati

Items on other banks in district No. 4Items on banks in other districtsItems on Treasurer of the United States

TotalItems sent to Main Office and Pittsburgh Branch

Items

3,219,3629,916,647

421,8511,175,260

14,773,120134,280

Amounts

$1,352,112,277.33622,225,278.53

47,312,093.76116,791,982.27

$2,138,441,631.89$ 14,662,552.62

Pittsburgh

Items on Pittsburgh banksItems on other banks in district No. 4Items on banks in other districtsItems on Treasurer of the United States

TotalItems sent to Main Office and Cincinnati Branch

Items

8,277,20815,878,723

1,179,481874,428

26,209,840119,455

Amounts

$5,260,588,705.00969,465,728.86211,360,041.70

94,988,425.00

$6,536,402,900.5617,422,465.08

Recapitulation

Total number of items handledTotal amount of items handledItems and amounts handled by both Main Office and

branches and not duplicated in above figures

Items

67,356,172

648,957

Amounts

$13,656,852,088.01

$ 77,988,066.40

NON-GASH COLLECTIONThe non-cash collection department handled 468,444 items

amounting to $405,846,056.45 in 1933. This was an increase of 15per cent in number of items and of 26 per cent in amount fromthe preceding year.

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The number and amounts of items handled at the main officeand branches at Cincinnati and Pittsburgh are as follows:

Number AmountsMain OfficeCincinnati BranchPittsburgh Branch

Total

397,94938,76431,731

468,444

$299,224,273.0759,583,564.5847,038,218.80

$405,846,056.45

On items handled through the three offices, collecting banksmade collection charges on 41,291 items, aggregating $11,256,235.83,at a rate of .127 of one per cent.

Member banks sent direct to other Federal reserve banks andbranches for collection 86,717 items, aggregating $73,824,566.55.

NON-CASH COLLECTIONS

FIGURES INDICATE THOUSANDS OF ITEMS

1929 1930 1931 1932 1933

FISCAL AGENCY OPERATIONSBecause of the increased flotation of Government securities,

operations of the fiscal agency department expanded. During theyear 1933 there were issued forty-six series of Treasury bills, fiveseries of certificates of indebtedness, four series of notes, and twoseries of bonds, a total of 57 issues as compared with 47 in 1932.

Allotments of ninety-one day Treasury bills in the fourth dis-trict, totaling $50,483,000, were made on twenty-three of the forty-six series. Certificates of indebtedness amounting to $64,499,000,Treasury notes aggregating $68,103,800, and bonds having a valueof $190,387,900, were distributed in the year. The total value of allallotments in the period was $373,473,700.

Government securities delivered on allotment numbered148,233 pieces.

Government securities received for exchange of denomination orform (within the issue) consisted of 42,384 pieces in coupon form and11,198 pieces in registered form, aggregating $149,493,000, including$94,015,200 received for transfer by wire.

Wire transfers of Government short-term securities from otherdistricts to this district aggregated $115,756,100; from this districtto other districts $94,015,200.

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Government coupons redeemed totaled 2,542,027, aggregating$48,442,723.95. Federal farm loan coupons redeemed totaled272,955, aggregating $8,253,624.52.

GOVERNMENT COUPONS REDEEMED

FIGURES INDICATE THOUSANDS OF COUPONS

1926 1927 1928 1929 1930 1931 1932 1933

Government obligations presented for redemption numbered32,859 in registered form and 128,812 in coupon form and had avalue of $233,440,340.

Federal farm loan bonds and Federal intermediate credit bankdebentures presented for redemption numbered 616 and had avalue of $1,827,000.

OFDOLLARS

(210

6

6

4

2

-

_

-

FIGURES

•

89 1

1926

TRANSFERS

INDICATE THOUSANDS OF

1_

101 1 1 1151 I 1271

1927 1928 1929

OF

TRANSFERS

H _•IH P1271 I 117

1930 1931

FUNDS

1

i LJ M1932 1933

PERSONNELIn the annual election by member banks in Group 3, Ben R.

Conner of Ada, Ohio, was reelected Class A director and John E.Galvin of Lima, Ohio, was reelected Class B director for three-yearterms ending December 31, 1936. The Federal Reserve Boardappointed Lewis B. Williams Chairman of the Board and FederalReserve Agent on March 15, 1933, to fill the unexpired term ofGeorge DeCamp who resigned, having served as Chairman of theBoard and Federal Reserve Agent since December 1925. E. S.Burke, Jr., Cleveland, Ohio, was appointed Class C director andDeputy Chairman of the Board of Directors for the term of officeexpiring December 31, 1935.

The Board of Directors appointed Lloyd W. Smith of Pittsburghdirector of the Pittsburgh Branch, to fill the vacancy created by thedeath of R. B. Mellon which occurred on December 1, 1933.

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Howard Evans, Chief Examiner, was appointed Assistant FederalReserve Agent, effective March 15. Elbert A. Carter was ap-pointed Assistant Cashier on March 11 and Arthur G. Foster alsowas made Assistant Cashier, effective October 1.

The death of Charles L. Bickford, Assistant Cashier in charge ofthe money department, occurred on April 23, and on May 16 P. A.Brown, Assistant Cashier at Pittsburgh, was transferred to Cleve-land to fill the vacancy created by Mr. Bickford's death. Charles J.Bolthouse was elected Assistant Cashier and transferred to thePittsburgh Branch to assume charge of the money department atthat office.

Increased activity in many departments, particularly in thefiscal agency and custodies departments, in the latter instance tohandle collateral pledged with the Reconstruction Finance Corpora-tion, necessitated the employment of much additional help. At theend of 1933 there were 1,201 officers and employees at the mainoffice and branches, compared with 1,047 at the close of 1932. Ofthis number salaries of 149 were reimbursable to the bank.

NUMBER OF EMPLOYEES

1932 REVISED

The Share-the-work movement created on December 15, 1932,through voluntary contribution on the part of all officers and em-ployees, was terminated on June 15, 1933, and practically all of theapproximately 50 persons given employment when the plan wasadopted were transferred to the regular pay roll of the bank in de-partments where the volume of work had increased.

GENERAL BUSINESS CONDITIONSIn the fields of trade and industry, as well as finance, the year

1933 no doubt can be classified as one of the most unusual on record.Variations in the rate of industrial production, in employment, andin public sentiment were very pronounced. Many new elements,such as the various newly-created Federal agencies, entered thegeneral business picture, some of which, for a time at least, werequite confusing. Still, at the close of the year there was little doubtbut that considerable progress toward recovery from the most severedepression on record had been made, notwithstanding the fact thatmany problems remained to be solved.

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In the first quarter of 1933 the volume of production and tradewas very limited in all important lines in this district. Steel ingotproduction was 30 per cent below the first three months of 1932.Building contracts awarded in this district were down 43 per cent;tire production was off 38 per cent; cement output 32 per cent;electric power production 8 per cent; department store sales 28 percent; and debits to individual accounts, which represent chieflycheck payments, were 24 per cent smaller in the first quarter (whichincluded the bank holiday) than in the same period of 1932. TheFederal tax on checks and the bank closings were factors contribu-ting to this decline in bank debits, but they were responsible for onlya part of the reduction.

Following the bank reopenings in mid-March and the readjust-ment of financial conditions so far as possible in such a short periodof time, an unusually sharp increase in production occurred in manylines. The spring rise in manufacturing occurred later than usual, ata time when operations generally are tapering off for the summer.This, coupled with the increased demand for goods, resulting largelyfrom talk of inflation and fear of rising prices, caused theadjusted production indexes in many lines to rise sharply betweenApril and July.

The expansion, however, was not paralleled by an increase inconsumption, partly because employment and pay rolls, and there-fore purchasing power, lagged behind the increased production.

From August to November, though output in many lines ex-ceeded the corresponding months of 1932, industrial production de-clined generally while surpluses piled up in the late spring and earlysummer were being absorbed. At the same time employment andpay rolls were expanding, partly through limitation of the numberof hours worked and the establishment of minimum wage ratesunder the National Recovery Administration.

By November, employment and pay rolls had improved to thepoint where they were in closer balance with production than formany months. In the latter part of that period output increasedsharply, a more pronounced gain being shown by the heavy in-dustries.

This expansion continued in December and accompanying it wasan increased demand for consumers' goods, resulting from distribu-tion of a large volume of purchasing power through Civil and PublicWorks Administration channels.

Although the fluctuations in operating rates were unusuallysharp in the period, most important lines of trade and industry inthe fourth district reported a larger business volume than in 1932.

The employment situation in the fourth district improved in1933, after declining for over three years. As the year ended theindexes for Ohio and western Pennsylvania were slightly below thepeak touched in October, but average gains of 9 and 15 per cent,respectively, for the entire year were shown at industrial plants inthese two sections. Pay roll indexes, which had fallen to lowerlevels in early 1933 than did those of employment, showed a pro-

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portionately greater increase in the latter part of the year becauseof the greater number of hours worked and wage increases.

Living costs of wage earners and lower-salaried workers in prin-cipal cities of the fourth district declined in the first half of 1933 tothe lowest level since 1916, but an increase of about 5 per cent oc-curred in the latter half of the year. The gain was the first since1929, but it was slightly smaller than the average increase in theentire country in the period.

There were only 1,685 commercial failures reported in the dis-trict in the entire year, a reduction of 42 per cent from 1932 and thesmallest number reported since 1923. Liabilities of the defaultingconcerns were 42.5 per cent less than in 1932.

The dollar volume of retail sales at department stores was justabout the same in 1933 as in 1932, the gains in the closing months ofthe year offsetting the large reductions which occurred in the earlyperiods. Higher retail prices were partly responsible for the in-creased volume of sales reported in the closing months of the yearfrom similar periods of 1932, but as the year ended sales showed agreater gain from late 1932 than could be accounted for by the ad-vance in prices. Collections improved in the period and there wascomparatively less buying on credit than in 1932.

In the latter half of the year the dollar volume of wholesale salesin the four reporting lines in this section increased sharply and forthe entire year hardware and dry goods sales were up about 11 percent. Wholesale drug sales were down 7 per cent and grocery sales1.8 per cent in the same period.

The following table shows changes in some business indicatorsof more or less importance to the fourth district:

1933

12,686,000122,4545,417

129,02721,508i13,19222,8791,959

43,94589,91523,522

4916,32332,333

1932

12,051,000127,0846,599

113,82323,264

18,67413,3231,371

38,88249,91920,558

352,70725,173

% change 1933from 1932

Fourth District Unless Specified(000 omitted)

Electric power production (Ohio, Pa., Ky.) . .k.w.h.Building contracts awarded $Cement production (Ohio, Pa., W. Va.) bbls.Coal production tonsPetroleum production (Ohio, Pa., Ky.) bbls.Shoe production pairsPig iron production, U. S tonsSteel ingot production, U. S tonsAutomobile production, U. S unitsTire production, U. S unitsPlate glass production, U. S sq. ft.Glass container production, U. S grossIndex of machine tool orders, U. S. —1922-24 = 100Iron ore receipts — Lake Erie ports tonsCoal shipments — Lake Erie ports tons

1 Confidential

With the automobile industry showing a 43 per cent productiongain in 1933 from the low level of 1932, many closely allied industriesin this district showed a corresponding or greater improvement.

A few lines, however, operated at low levels throughout most ofthe period. Brick production and cement output in the year wereconsiderably below 1932, the stimulation afforded the building in-dustry through Public and Civil Works Administration channels

+ 5.3— 3.6—17.9+ 13.4— 7.5+ 23.5+ 52.1+ 71.7+42.9+ 13.0+ 80.1+ 14.4+ 40.0

+ 503.0+ 28.4

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not occurring early enough in the year to allow the work to get underway in any volume. Building contracts awarded in the closingmonths of the year, however, were unusually large; in Decemberthey were five times greater than in December 1932. The recentgains were nearly enough to offset the large reductions in the firstpart of the year, and there were indications of increased activity atbrick and tile plants as the year closed.

Generally speaking, the smaller industries of the district ex-perienced a gain in production in the year 1933 from 1932. Con-siderable variation was apparent in employment and operating ratesover the entire period in the various lines, but for most of them theyear's results were better than in 1932. Paint sales increased quitesharply and stocks were reduced; sales of electrical apparatus im-proved ; and operations of clothing plants, judging by employmentreports, were at substantially higher levels than in 1932.

The agricultural situation was confusing. Yield per acre ofprincipal crops in this district was considerably below the averageof the preceding ten years, but as a result of higher prices, the farmvalue of these crops was up sharply from the low level of 1932. Onthe other hand, livestock prices remained unusually low and becauseof this, the gross increase in farm income (excluding production-control payments) for 1933, estimates for which are not yet avail-able, was probably less than the gain in crop values. It was sub-stantial, however, according to the Department of Agriculture, andfarm purchasing power was up several points at the year end fromthe close of 1932. Stocks of grain and livestock on farms in thissection were reduced in 1933.

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Federal Reserve Bank...Directors and Officers, 1934 DIRECTORS CLASS A CHESS LAMBERTON, Franklin,...

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