Greenbook/Tealbook

Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. CONFIDENTIAL (FR) SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System January 7, 1966 SUPPLEMENTAL NOTES The Domestic Economy Employment and the labor force rose substantially further in December. Nonfarm employment increased by 400,000 and was 2.4 million higher than a year earlier. Unemployment was reduced to 3.1 million and the rate edged down further to 4.1 per cent from 4.2 per cent. The 90,000 reduction in unemployment in December was primarily among adult men and women. The rate of unemployment of men declined from 2.8 to 2.6 per cent; for married men the rate declined from 2.0 to 1.8 per cent. After several months of relative stability at 4.2 per cent, the unemployment rate for adult women declined to 3.9 per cent. This was the lowest rate since the spring of 1957. Teenage unemploy- ment was up slightly in December and the unemployment rate was 13.1 per cent compared with 15.7 per cent a year ago. Nonwhites also participated in the unemployment decline and their rate of unemployment fell to 7.3 per cent from 8.2 per cent in November and from 8.9 per cent a year earlier, but remained about double the rate for whites. The reduction in unemployment over the month was among those seeking work for less than 15 weeks. Long duration unemployment con- tinued at the November level, which was 200,000 less than a year earlier. The civilian labor force rose by 480,000 in December to 76.5 million and was 1.8 million higher than a year earlier. Teenagers accounted for 1 million of the increase and women for the rest. The 400,000 increase in employment of adult men from a year ago was equal - 2 - to the drop in their unemployment. The armed forces rose to 2,840,000 and was 100,000 above a year earlier levels. Seasonally adjusted new construction expenditures,which were revised upward in November, held at that advanced level in December. Private construction edged higher in December as residential construction held at its moderately reduced earlier rate while nonresidential construction expanded further. Public construction expenditures dipped somewhat, but this followed a sharp recovery in November. For the year as a whole, construction expenditures totaled a record $68.1 billion. This level as well as some of the year-to-year advances indicated in the table may be understated, however, on the basis of revisions which the Census Bureau expects to release within a month. These revisions, which will affect certain components of private nonresidential construction (back to mid-1962) and public construction (back to early 1963) will reflect improved techniques of measuring monthto-month movements in work put in place, but they may also have an effect on the annual estimates as well. NEW CONSTRUCTION PUT IN PLACE (billions)1/ Per cent change from year ago Year 1965 December $69.3 + 5 + 3 Private Residential Nonresidential Business 48.4 26.2 22.2 16.2 + 6 -+12 +12 + 4 + 1 +10 +13 Public 20.9 + 2 + 2 Total 1/ Seasonally adjusted annual rate; preliminary. -3Dealer deliveries of new domestic autos were at an annual rate of 8.5 million in December, a decline from November but somewhat higher than in October. over 9.0 million. Including imports, the total was at a rate of A cut of auto excise taxes by one percentage point at the beginning of January probably caused some postponement of December sales to January. The Domestic Financial Situation The Treasury announced on January 5 a $1.5 billion cash offering of new 10-month certificates of indebtedness. The new issue carries a 4-3/4 per cent coupon and has been priced to yield 4.85 per cent. Banks will be allowed to pay for the new issue through 100 per cent tax and loan credit. Subscriptions will be received on January 10 and settlement date is January 19. Early market reports indicated a favorable reception of the new issue. Underwriters were quite aggressive in bidding for this week's large supply of new corporate bonds. As a result, the new corporate yield series, adjusted to a Aaa basis, fell four basis points to 4.82 per cent from the postdiscount rate high but was still 2 basis points above the level prior to that action. was generally weak. Reception of these issues, however, Municipal bond yields were relatively stable. -4- Notes The Department of Commerce on Wednesday, January 5, released its revised estimates of gross national product, major expenditures components, and related incomes for the first three quarters of 1965. Thus, the figures for those three quarters shown in the Green Book for January 5, are no longer confidential. Corrections Page I - 4: by "over" The total labor force is expected to increase (instead of "only") 2 million. Substitute "emphasing" for "employing" in the last sentence of paragraph 1. SA - 1 SUPPLEMENTAL APPENDIX A: SURVEY OF BANK LENDING PRACTICES, DECEMBER 1965* The results of the sixth quarterly survey of changes in bank lending practices are summarized in the following paragraphs and accompanying tables. Reports were received from the 81 banks included in the quarterly interest rate survey. More than two-thirds of the respondents (55 out of 81 banks) reported that demand for commercial industrial loans had strengthened in the fourth quarter and most of these had indicated increased loan demand in previous quarters as well. So widespread and sustained was loan demand in 1965 that half of the banks indicated increased loan demand in at least three of the four quarters and only 5 banks reported no increase during the year. The survey revealed that firming in lending standards both to business borrowers and finance companies was more widespread than in any previous survey. Reflecting the increase in the discount rate and the prime rate in early December, all but four of the banks firmed interest rates to business borrowers in the fourth quarter and about two-thirds of these also tightened requirements with respect to compensating balances. Higher standards of credit-worthiness were applied to such borrowers by about one-third of the respondents while about one-fourth firmed policies with respect to the maturity of the loan and nearly onefifth with respect to collateral requirements. Firming of lending standards applicable to finance companies also was quite general. All but six of the banks firmed interest rates on loans to such companies in the fourth quarter and about one-third indicated a firmer policy on compensating balances, probably affecting mainly the smaller independent companies. Among those banks that submitted explanatory comments on their recent firming of lending standards, the most often mentioned reasons heavily loaned positions, and the were the heavy demand for loans, tightness of money. Reflecting these and other factors, two-thirds of the banks reported that the applicant's value to the bank as a depositor or source of collateral business was more important than formerly and about the same number bad firmed policies on loans to new business borrowers. Nearly one-third of the banks stated that they were less aggressive in seeking new loans and about the same number were less willing than formerly to make term loans. In all of these areas, the proportion of banks with firmer policies was higher than in any previous survey, as shown in Table 2. *Prepared by Banking Section, Division of Research and Statistics. NOT FOR QUOTATION OR PUBLICATION January 5, 1966. SA--T - 1 Table 1 Survey of Changes in Bank Lending Practices September-December 1965 (Number of banks) Lending to Nonfinancial Businesses Stronger 1. Strength of loan demand 55 Greater 2. Aggressiveness of bank in seeking new loans 3. Factors considered in deciding whether to approve credit requests: Weaker 1 Less Unchanged 25 Unchanged More important Less important Unchanged Firmer Easier Unchanged Firmer Easier Unchanged Applicant's value to the bank as a depositor or source of collateral business Applicant's intended use of loan proceeds 4. Practices with respect to reviewing lines of credit or loan applications of: Established customers New customers Local service area customers Nonlocal service area customers 5. Terms and conditions of loans: Interest rates Compensating or supporting balances Standards of credit-worthiness Type and amount of collateral Maturity 77 4 SA--T - 1 (continued) NOT FOR QUOTATION OR PUBLICATION -2- 6. Term loans Less willing More willing 24 1 Willingness to make Shorter Longer Unchanged 56 Unchanged Maximum maturity bank will approve Number of banks Years 2 3 5 6 7 8 10 n.a. 1 6 41 Lending to Finance Companies Firmer Interest rates Size of compensating or supporting balances required Enforcement of balance requirements Establishing new or larger credit lines Source: Companies Easier Unchanged 75 Survey of Lending Practices at Large Banks in the Federal Reserve Quarterly Interest Rate Survey conducted as of December 15, 1965. SA--T - 2 NOT FOR QUOTATION OR PUBLICATION Table 2 Net Number of Banks Reporting Firmer Lending Policies in Lending Practices Survey (Number of banks reporting firmer policies less number reporting easier policies Item Dec. 1965 Sept. 1965 Date of survey June Mar. Dec. 1965 1965 1964 Sept. 1964 Lending to nonfinancial businesses Aggressiveness of bank in seeking new loans Factors considered in deciding whether to approve credit requests: Applicant's value to the bank as a depositor or source of collateral business Applicant's intended use of loan proceeds Practices with respect to reviewing lines of credit or loan applications of Established customers New customers Local service area customers 24 13 11 -6 -2 -2 53 36 33 24 34 44 29 16 16 20 14 25 18 51 15 6 32 8 4 35 8 4 19 3 6 21 7 2 26 4 35 35 27 15 22 27 77 44 40 46 35 13 51 29 15 23 39 22 10 11 28 22 12 14 29 15 10 5 33 22 14 4 22 30 15 3 23 14 13 6 7 7 8 - 3 -2 -2 -4 75 10 10 13 12 3 26 5 11 7 8 - 38 18 19 17 22 13 47 38 23 13 16 18 54 41 45 37 27 48 Nonlocal service area customers Terms and conditions of loans Interest rates Compensating or supporting balances Standards of credit-worthiness Type and amount of collateral Maturity Term loans Willingness to make Maximum maturity bank will approve Lending to finance companies Type of requirement: Interest rate Size of compensating or supporting balances required Enforcement of balance requirements Establishing new or larger credit lines Strength of loan demand (net number reporting stronger demand) p - Preliminary. 

Federal Reserve (1966, January 10). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19660111_part1

@misc{wtfs_greenbook_19660111_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1966},
  month = {Jan},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19660111_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}