Federal Reserve Bank of Minneapolis
Historical Overview
On December 23, 1913, following years of political debate, President
Woodrow Wilson signed the Federal Reserve Act into law. The key responsibilities
of the Federal Reserve System were to serve as
lender-of-last-resort in times of crisis and to provide a national currency
that would expand and contract as needed.
The Federal Reserve Act stated that “not less than eight nor more
than twelve cities” would be designated as Federal Reserve cities.
After district lines were drawn and Reserve cities chosen, each Federal
Reserve Bank became a franchised corporation with stockholders, a board
of directors, and operating personnel. There were nine directors per Bank—six
were elected by district member banks, with three representing the banking
community and three the commercial community; three directors, including
the chairman, were appointed by the Federal Reserve Board and represented
the public.
A Federal Reserve Agent and Governor shared management responsibility
at the Federal Reserve Banks. The Agent was responsible to the public,
served as a liaison between the Board and the Reserve Bank, and chaired
the Bank's Board of Directors. The Governor was responsible for the internal
administration of the Bank and chaired the Executive Committee of the
Board of Directors.
The Federal Reserve Bank of Minneapolis was incorporated on May 18,
1914, and directors were elected during the summer. On October 1, 1914,
the Federal Reserve Board appointed John H. Rich, a successful banker
and businessman, to be Minneapolis' Federal Reserve Agent. At their first
meeting on October 14-15, 1914, directors adopted by-laws, set up an executive
committee, and appointed Theodore Wold chief administrative officer. As
Minneapolis' first Governor, Wold assembled and organized the Fed's staff
and coordinated work during the Bank's pioneer period as well as during
World War I.
At an October 1914 convention in Washington, a decision was made to
open the Federal Reserve Banks the following April. Fears of a panic because
of World War I moved the opening date up to November 16. Not yet fully
staffed, the Minneapolis Fed was temporarily headquartered in the directors'
room and a teller's cage at the Minnesota Loan & Trust Company until
more adequate quarters could be secured in the Lumber Exchange Building
at Fifth and Hennepin. The Bank officially opened on November 16, 1914,
with eight employees. Cash was stored in rented vault space in nearby
banks. In January 1915, the Bank's 18 employees and officers moved into
the New York Life Building at Second Avenue South and Fifth Street. Staff
continued to grow over the next two years as the Bank performed a growing
number of reserve banking functions.
During World War I, the Minneapolis Federal Reserve Bank expanded rapidly,
peaking at 500 employees in 1918. This expansion was due to the Fed's
responsibility, as agent for the Treasury Department, to issue war bonds.
World War I also resulted in a shift in the predominately male work force.
By 1918, women comprised about half of the Bank's staff.
Five years after the Federal Reserve System was established, the Board
of Governors authorized 18 branch banks but none for Minneapolis, despite
its being one of the largest regions geographically. Norman B. Holter,
a Helena businessman and member of the Minneapolis Board of Directors,
successfully campaigned to establish a branch in Helena. On February 1,
1921, the Helena branch was opened at the corner of Park and Edward Streets
with a staff of 36.
On October 1, 1919, Theodore Wold resigned as Governor and became first
vice president of the Northwestern National Bank of Minneapolis. Succeeding
him was Roy A. Young, who had come to the Fed in 1917 from Citizens National
Bank in Houghton, Michigan, as Wold's assistant. Young, an able administrator,
struggled to lead the Fed during the difficult 1920s.
The War years were a time of unparalleled prosperity in the Ninth District.
Farmers were able to sell a large volume of products at extremely high
prices. Consequently, the price of farmland in the district increased
dramatically. Bank deposits doubled, and the number of banks increased
by a third.
When European farm production was restored to prewar levels and foreign
demand for agricultural products disappeared, prosperity changed to adversity.
Prices fell, and faith in the banks plummeted. Runs on banks and panics
forced 20 percent of the nation's banks to close between 1921 and 1929.
Bank closings in the Ninth District were especially high: 31 percent in
Minnesota, 62 percent in North Dakota, and 70 percent in South Dakota
and Montana.
During this period, the Minneapolis Fed's building became cramped. Employees
were scattered throughout rented quarters in the New York Life Building
and two other buildings. A building site at Fifth Street and Marquette
was purchased, and Cass Gilbert, of New York, was selected to design a
new Bank building. The new building was occupied on February 1, 1925,
just a few months after the death of John Rich, who had envisioned the
building. Ironically, his successor, John R. Mitchell, who had opposed
the original building plans, was the first to occupy the office of Agent
in the new building.
In September 1927, Roy Young, Minneapolis' Governor, resigned to become
a Governor on the Federal Reserve Board. William B. Geery, who had served
as Deputy Governor for seven years at the Minneapolis Fed, took his place.
The farm depression lingered in the Upper Midwest until 1927. Conditions
improved, only to be reversed by the stock market crash in October 1929.
Between 1929 and 1933 about 10,000 banks failed nationwide. In March 1933,
President Roosevelt declared a bank holiday to assess the national monetary
situation and develop a remedial plan. The Emergency Banking Act, passed
on March 9, gave the executive branch control of the banks and authority
to reopen banks in sound condition. Congress passed other banking acts,
including the Banking Act of 1935, which changed the organization, structure,
and purpose of the Federal Reserve System. It replaced the dual roles
of Agent and Governor with a President, to be elected by the Board of
Directors and approved by the Board of Governors.
John Mitchell died in 1933 and John N. Peyton became the Minneapolis
Federal Reserve Agent. At six feet four inches and about 240 pounds, Peyton
was a forceful and commanding figure, and it was clear at the Bank that
he was in charge. Geery, Governor of the Bank at that time, depended heavily
on his subordinates. When the executive responsibilities of the Bank were
consolidated into one position, Peyton was named President, and Geery
became Chairman and Federal Reserve Agent.
The United States was ushered into World War II on December 7, 1941,
with the bombing of Pearl Harbor. To finance the War, the Treasury Department
issued securities that were sold to the public. As the Treasury's fiscal
agent, the Federal Reserve Banks experienced a considerable increase in
paperwork. By 1943, the number of employees at the Minneapolis Fed had
soared to over 900.
The 1940s also marked a major change in the check collection process.
In the early years, check clearing was a manual operation. In 1947, mechanical
check sorters were introduced. These IBM Proof Machines automatically
placed checks in appropriate compartments and computed totals. John Peyton
retired on June 30, 1952, and was succeeded by Oliver Powell, who had
served as First Vice President of the Bank and as a member of the Board
of Governors. Powell was interested in monetary economics, and he depended
heavily on his First Vice President to supervise Bank operations. Powell
resigned for health reasons in 1957 and was replaced by Frederick L. Deming,
First Vice President of the Federal Reserve Bank of St. Louis. During
his eight years as President, Deming established a close relationship
with the Board of Governors. During the Deming years, eight floors were
added to the Bank building, which allowed the Bank to consolidate all
its operations under one roof.
In 1965, Deming resigned to become U.S. Undersecretary of the Treasury
for Monetary Affairs. Hugh D. Galusha, Jr., a lawyer and Certified Public
Accountant from Helena, Montana, was appointed President. He served until
1971 when he died during a snowmobile trip to Yellowstone National Park.
Emphasizing the Bank's regional responsibility, Galusha held economic
roundtables for Bank officers, staff, and representatives from the business
community. He helped get legislation passed that required Minnesota banks
to pay their checks at par. Planning for the Bank building at 250 Marquette,
designed by Gunnar Birkerts and Associates, began during Galusha's presidency.
Bruce K. MacLaury became President in 1971. He was previously with the
Treasury as Deputy Undersecretary for Monetary Affairs and with the Federal
Reserve Bank of New York. During his presidency, the major responsibilities
for the operations of the Bank were in the hands of the first vice president.
MacLaury's view of the president's role was monetary policy and serving
as spokesperson for the Federal Reserve as well as a funnel from the community
back to Washington. He resigned in 1977 to accept a position as president
of The Brookings Institution in Washington, D.C.
MacLaury was succeeded by Mark H. Willes, First Vice President of the
Philadelphia Fed. An economist, he attempted to further this Bank's research
agenda both within the System and with the public. He was quite vocal
and many times cast dissenting votes on the Open Market Committee when
he disagreed with System policy. Willes accepted an executive position
at General Mills in 1980 and was replaced by E. Gerald Corrigan, who came
from the New York Federal Reserve Bank.
During Corrigan's tenure, a major change in the nation's banking system
occurred with the passage in 1980 of the Depository Institutions Deregulation
and Monetary Control Act. To comply with this act, the Fed had to price
its financial services, establish reserve requirements for all eligible
financial institutions, and offer financial services to all depository
institutions.
Corrigan assumed the presidency of the New York Federal Reserve Bank
in 1985, and Gary Stern was named president of the Minneapolis Fed. During
his tenure, Stern has encouraged involvement in System responsibilities.
Recent assignments include the Electronic Payments Product Office and
selection as a savings bonds processing site. He has taken an active role
in promoting awareness of the Minneapolis Fed through enhanced publications
and district dialogues with community leaders.
Since its inception in 1914, the Federal Reserve System has evolved
from a passive institution designed primarily to prevent bank panics into
an active promoter of overall monetary stability as well as a multi-faceted
player in the financial services industry. As Seymour S. Cook, the first
cashier of the Bank, said in a speech nearly ten years after the opening
of the Fed:
“What the future may have in store, no man can foretell, yet it
is safe to assume that if men of equal ability, earnestness and loyalty
continue to be selected as members of the Federal Reserve Board and
as directors and officers of the Federal Reserve Banks and their branches;
and that if wisdom and statesmanship are manifested in the halls of
Congress, the Federal Reserve System will continue to serve the people
of the United States and their government with the same efficiency and
adaptability to changing conditions as it has done in the past.”
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Helena Branch
