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. 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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 December 8, 1967 SUPPLEMENTAL NOTES The Domestic Financial Situation On the basis of additional data, the November estimates for commercial bank credit have been revised downward from those shown in the Greenbook. still It should be emphasized that these new estimates are preliminary and are subject to revision when final data are available. The latest estimates--shown below--indicate larger liquida- tions in bank holdings of government securities and slower rate of growth in bank loans, the latter because of smaller increases in loans to businesses and nonbank financial institutions and a decline in security loans. CHANGES IN BANK CREDIT IN 1967 ALL COMMERCIAL BANKS (Seasonally adjusted annual rate, per cent) 1st Half JulyAugust Total loans & investments 9.9 21.6 9.4 4.9 11.9 U.S. Gov't. securities 6.3 69.3 4.9 -17.3 15.6 31.2 10.7 13.6 26.6 25.1 5.9 12.1 9.9 4.9 7.8 Other securities Loans 1/ SeptemberOctober Ne November- 1st 11 1/ months- All November rates are preliminary estimates based on incomplete data and are subject to revision. NOTE: Data are on a last-Wednesday-of-the-month basis. - 2 - COMPOSITION OF LOAN GROWTH IN 1967 ALL COMMERCIAL BANKS (Seaisonally adjusted annual rate, per cent) 1st Half JulyAugust SeptemberOctober 1/ November- 1st I/ 11 11 months- Total loans 5.9 12.1 9.9 4.9 7.8 Business 10.9 6.5 3.6 5.7 8.5 Real Estate 5.6 7.6 7.5 10.6 6.9 Consumer 4.1 6.1 9.0 8.9 5.9 Security -17.7 158.3 39.6 -49.5 19.3 Nonbank Financial -11.6 -5.3 37.2 -- -0.9 All November rates are preliminary estimates based on incomplete data and are subject to revision. NOTE: Data are on a last-Wednesday-of-the-month basis. 1/ The table on the following page brings up to date selected key interest rate figures shown in the December 6 Greenbook. - 3 - KEY INTEREST RATES 1966 High Nov. 17 1/ 1967 Nov. 24 Dec. 8 Short-Term Rates 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Secondary market 5.88 (12/31) 4.67 4.88 5.75 5.05 5.13 4.915.13 6.75 5.20 5.25 4.89 5.38 6.25 5.20 5.38 5.50 (12/31) 5.90 (9/21) 5.25 5.30 5.50 5.60 5.50 5.60 5.98 (9/19) 5.13 5.13 5.13 5.40 5.48 5.38 5.50 5.45 5.44 5.63 5.50 5.50 5.38 5.60 5.50 6.00 5.50 6.00 5.94 (9/21) 6.13 (9/23) 4.25 (9/21) 5.27 3.40 5.56 5.80 3.75 5.63 5.88 3.75 5.89 (8/29) 5.12 (8/29) 5.72 5.70 5.77 5.70 5.80 5.61 5.53 (9/8) 6.20 (12/23) 6.13 6.76 6.10 6.79 6.13 6.92 5.98 (9/2) 6.10 (12/2) 6.53 6.68 Municipal Bond Buyer Index Moody's Aaa 4.24 (9/2) 4.04 (8/26) 4.33 3.98 FHA home mortgages 30-years 6.81 (Nov.) 6.63(Sept.) 6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary market 1-year Treasury bills (bid) Federal agencies Prime municipals 5.59 5.75 7.06 5.76 (9/21) (10/25) (10/4) (9/21) 6.00 (9/23) 6.00 (12/31) 6.04 (9/21) 5.50 (12/31) 6.30 (9/28) 5.75 Intermediate and Long-Term Treasury coupon issues 5-years 20 years Corporate Seasoned Aaa Baa New Issue Aaa With call protection Without call protection 6.55 4.37 4.03 4.45 4.15 6.65(Oct. ) 1/ Pre-devaluation yield levels. N.B. Lows for 1967 may be found in various tables of the latest Greenbook. -4 - International Developments Revised data for the U.S. balance of payments deficit in October, an estimate for November, and details of selected "special" transactions affecting the deficit for the year through November are given in the table on the next page. The measure of the liquidity deficit for October (not seasonally adjusted) is now $936 million, compared to the Greenbook figure of $1,021 million (p. I - T - 3 and p. IV - 1). The official reserve transactions deficit for October (not seasonally adjusted) is now given as $380 million, rather than the $300 million estimated in the Greenbook (p. IV - 2). Ne'- York and Chicago bank liabilities to their branches abroad increased by over $300 million to Wednesday December 6 from the preceding Wednesdey. This was a period in which Euro-dollar rates were easing off markedly, as shown in the table on p. IV - 8 of the Greenbook, as a result of the injection of German bank funds (pp, IV - 9 to 11). CONFIDENTIAL (FR) MEASURES OF THE U.S. BALANCE OF PAYMENTS, AND SELECTED "SPECIAL" TRANSACTIONS (Millions of dollars) 1967 Q-2 Tot.l 19 Q-1 Liquidity deficit (-), not seasonally adjusted Seasonal adjustment Liquidity deficit, seasonally adjusted -1,357 14. 15. 16. 17. 18. 19. Liquidity deficit (S.A.) before reduction by "special" transactions -1,208 + 538 550 - 670 n.a. n.a. 757 196 305 70 634 24 - 228 1 244 -8 8 70 2 "Special" transactions affecting official settlements balance Official settlements balance (S.A.) before reduction by "special" transactions - 54 57 3 - --300 428 Nov. 196 1967 -700 n.a. n.a. -3,309 13 n.a. n.a. 41 134 -527 15 -240 .- 52 -1 -3 139 23 323 125 444 6 4 30 10 209 -168 -167 1,005 879 -768 -533 (NSA) (NSA) 30 -- 150 374 757 904 -1,327 225 -1,282 -- - 225 -1,813 691 139 830 2 460 462 -380 n.a. n.a. n.a. n.a. n.a. 9 82 4 -294 -221 912 458 n.a. n.a. -2,942 Official settlements deficit (-), not seasonally adjusted Seasonal adjustment Official settlements deficit, seasonally adjusted -936 224 326 1,585 Total, selected 'special" transactions Oct. 241 289 530 -1,357 Selected "special" transactions Investments in long-term deposits Foreign governments (excluding U.K.) International and regional institutions Investments in U.S. Gov't. Agency securities by international and regional institutions U.K. official transactions in U.S. nonliquid assets Nonscheduled debt repayments to the U.S. Gov't. Transactions in nonmarketable, nonconvertible, medium-term U.S. Gov't. securities Canadian Government transactions Advance purchases of Canadian bonds Purchase of IBRD bonds Rescheduling of new Canadian issues Q-3 Nov. Est. 184 - 531 -1,822 - - -4,314 (NSA) n.a. n.a. n.a. - 420 - 6 - NOTE: The Commerce-SEC plant and equipment expenditures detailsfor nonmanufacturing industries for the second quarter of 1968 shown in the table on page II - 22 are not being released by Commerce or the Securities and Exchange Commission. Thus, these figures are confidential and must not be used outside the System. Errata: Page IV - 15. The sentence at the end of the first paragraph, on Germany dealing with movements in the industrial production index, should conclude as follows: a new advance in October brought the average for the last three months to 1 per cent above that of the preceding three months. APPENDIX A: SURVEY OF BANK LENDING PRACTICES. NOVEMBER 1967* Nearly one-third of the respondents (38 out of 125 banks) reporting in the Bank Lending Practices Survey indicated increased loan demand between mid-August and mid-November. (See Table 1.) This was about the same proportion as in the August survey. In contrast to the two previous Surveys, however, the highest percentage of banks reporting a stronger loan demand was among the largest banks. Nearly two-fifths of all respondents with total deposits of $1 billion and over experienced stronger loan demand in the August-November period, compared with about one-fourth for banks of smaller size. (See Tables 2 and 3.) As in the August Survey, over two-thirds of the banks anticipated increased loan demand in the next three months. Lending terms and conditions While, as is often the case, most respondents did not change either their price or non-price terms and conditions of lending to nonfinancial businesses over the three-month period, the number of banks indicating firmer policies--in nearly all factors covered by the Survey-was larger in November than in the preceding Survey. Moreover, more banks had "much firmer" policies than in August. At the same time, the number of banks that eased their policies declined. Three-tenths of all respondents reported firmer interest rate policies in the November Survey even though the Survey was conducted several days before the devaluation of the pound and the ensuing increases in the discount rate and the prime rate. Nearly as many banks (26 per cent of the total) also had firmer policies on compensating balance requirements. (The corresponding percentages in the preceding Survey had been a little over one-fifth.) For the most part the same banks that firmed interest rates also firmed compensating balance requirements. Tighter policies on the maturities of term loans were also instituted by 14 per cent of the respondents. In reviewing credit lines and loan applications for new customers as well as for those in nonlocal service areas, indications of a change in posture in the November Survey took the form of a decline in the proportion of respondents that had easier policies. The proportion of banks with firmer policies in these areas was about the same in the last two Surveys. The trend toward greater firmness was also evident in lending to 'noncaptive" finance companies--but to a lesser degree than to other business borrowers. One-tenth of the respondents reported firmer * Prepared by Caroline Cagle, Economist, Banking Section, Division of Research and Statistics. A - 2 policies on interest rates and compensating balance requirements to finance companies, with about twice this proportion indicating firmer policies on enforcement of balance requirements apd establishing new lines of credit. Willingness to make other types of loans More banks were also less willing to extend certain types of Between one- and two-tenths of all recredit than in earlier Surveys. spondents reported less willingness in November to make term loans, mortgage loans, and loans to brokers than in August. One bank commented that term loans were screened or curtailed to avoid being locked in with fixed interest rates, while another bank wished to avoid term loan commitments because of anticipated weakness in time deposits. One reason given for firmer policies on residential mortgage loans was the low legal interest rate ceiling in some States. By contrast, no bank reported that it was less willing to make consumer instalment loans and about one-sixth of the banks stated they were more willing to do so than three months earlier. This no doubt reflects the attractive yields available on this type of lending. One Texas bank reported that the State law now allowed higher rates on these loans. One-tenth of the banks were also more willing to make participation loans. Changes in policies by size of bank Smaller banks moved toward firmer lending practices between August and November to a much greater extent than the larger banks in all factors covered by the Survey. Moreover, a lower percentage of the smaller banks were "more willing" to lend to new customers and These changes occurred those in nonlocal service areas than big banks. despite the fact that stronger loan demand was reported in this period by a greater proportion of big than smaller banks. A partial explanation of this may be the lag effect of a stronger loan demand at smaller banks earlier in the year, since a larger proportion of small than large banks reported stronger demands in both the May and August Surveys. Anticipated loan demand In was also greater at small banks in the two preceding surveys. that the banks stated some smaller commenting on their firmer policies ratio high level of their loan portfolio and/or their high loan/deposit was a factor. Some also expressed apprehension over inability to handle future loan demand, fear of tight money and higher interest rates in the future, and fear of losing time deposits because of higher bond yields. On the other hand, one very large bank reported A - 3 loan demand had been relatively flat during the past three months and this coupled with the substantial decline in its loan/deposit ratio had increased its interest in certain types of lending. Another of the larger banks commented that it had more money to use than formerly. Important size of bank differences also were evident in the types of loans banks were willing to make. Whereas nearly one-fifth of all smaller banks were less willing in November than in August to make single family mortgage loans, no larger bank was in this category. A higher percentage of smaller than of larger banks also was less willing to make participation loans and loans to brokers. On the other hand, in such high yield areas as consumer instalment loans and nonresidential mortgages, the percentage of smaller banks that was willing to make these loans was greater than for the larger banks. TABLE 1 Not for quotation or publication QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. 1/ (STATUS OF POLICY ON NOVEMBER 15, 1967, COMPARED TO THREE MONTHS EARLIER) (Number of banks & percent of total banks reporting) Total No. of banks STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (after allowance for bank's usual seasonal variation) COMPARED TO THREE MONTHS AGO ANTICIPATED DEMAND IN THE NEXT 3 MONTHS LENDING TO NONFINANCIAL BUSINESSES Term and Conditions 'terest rates charged Compensating or supporting balances Standards of credit worthiness Maturity of term loans Moderately Stronger Essentially Unchanged Moderately Weaker Much Weaker No. of banks No. of banks No. of banks No. of banks No. of banks per cent 0 0.0 0 0.0 per cent per cent per cent 125 100.0 .9 37 29.6 70 56.0 17 125 100.0 .9 89 71.1 34 27.1 1 Answering Question No. of per banks cent Reviewing Credit Lines or Loan Applications Established customers New customers Local service area customers Nonlocal service area customers Factors Relating to Applicant 2/ Value as depositor or source of collateral business Intended use of the loan per cent Much Stronger 125 125 Much Firmer Policy No. of per banks cent Moderately Firmer Policy No. of per banks cent Essentially Unchanged Policy No. of per banks cent 100.0 100.0 100.0 100.0 27.2 22.6 5.6 11.3 69.6 73.4 91.2 84.7 100.0 100.0 100.0 100.0 6.4 18.4 7.3 15.6 93.6 72.0 91.9 76.2 16.8 98 12.8 101 78.4 80.8 100.0 100.0 1/ Survey of Lending Practices at 125 Large Banks Reporting 5 5 4.0 4.0 21 16 per cent 13.5 .9 Moderately Easier Policy No. of per banks cent 0.0 .8 0.0 1.6 Much Easier Policy No.of per banRs cent 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 3 in the Federal Reserve Quarterly Interest Rate Survey as of November 15. 1967. 2/ For these factors, firmer means the factors were considered more important in making decisions for approving credit requests, and easier means they were less important. 0.0 0.0 (Continued Table 1 (Continued) Answering Question per No. of banks cent LENDING TO "NONCAPTIVE" Much Firmer Policy No. of per banks cent Moderately Firmer Policy No. of per banks cent Essentially Unchanged Policy per No. of banks cent Moderately Easier Policy per No. of banks cent Much Easier Policy No. of banks per cent FINANCE COMPANIES Terms and Conditions Interest rate charged Compensating or supporting balances Enforcement of balance requirements Establishing new or larger credit lines 100.0 100.0 100.0 100.0 Answering Question No. of per banks cent 8.8 10.4 16.8 12.0 Considerably less willing No. of per banks cent Moderately less willing No. of per banks cent 89.6 88.8 82.4 74.4 Essentially Unchanged per No. of banks cent 0 0 0.0 0.0 0 0 0 7 0.0 5.6 0 0 Moderately more willing No. of per banks cent Considerably more willing No. of banks WILLINGNESS TO MAKE OTrER TYPES OF LOANS Term loans to businesses Consumer instalment loans Single family mortgage loans Multi-family mortgage loans All other mortgage loans Participation loans with correspondent banks Loans to brokers 125 124 121 121 122 100.0 100.0 100.0 100.0 100.0 3 0 2 4 4 125 125 100.0 100.0 1 2 1.7 3.3 3.3 14 18 18 15.2 0.0 11.6 14.9 14.8 96 104 94 94 94 76.8 83.9 77.7 77.7 77.0 7 18 11 5 5 5.6 9.6 103 101 82.4 80.8 14 9 5.6 0 14.5 2 9.0 0 4.1 4.1 0 1 11.2 7.2 0 1 per cent Rot for quotation or publication TABLE 2 QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT BANKS WITH DEPOSITS OF $1 BILLION OR MORE 1/ (STATUS OF POLICY ON NOVEMBER 15, 1967, COMPARED TO THREE MONTHS EARLIER) (Number of banks in each column as per cent of total banks answering question) Total STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (after allowance for banks's usual seasonal variation) COMPARED TO THREE MONTHS AGO ANTICIPATED DEMAND IN THE NEXT 3 MONTHS Much Stronger Moderately Stronger Essentially Unchanged 100.0 38.5 48.7 100.0 74.4 25.6 Much Answering Firmer Question .Policy Moderately Firmer Policy Essentially Unchanged Policy Moderately Weaker Much Ieaker 12.8 0.0 Moderately Easier Policy Much Easier Policy .. D ING TO IOUFiINANCIAL BUSINESSES Terms and Conditions Interest rates charged Compensating or supporting balances Standards of credit worthiness Maturity of term loans 100.0 100.0 100.0 100.0 5.1 2.7 2.6 0.0 20.5 15.5 5.3 10.5 74.4 81.8 92.1 89.5 0.0 0.0 0.0 0.0 Reviewing Credit Lines or Loan Applications Established customers New customers Local service area customers Hlonlocal service area customers 100.0 100.0 100.0 100.0 0.0 5.1 0.0 0.0 2.6 15.4 2.6 10.8 97.4 74.4 97.4 83.8 0.0 5.1 0.0 5.4 1/ Survey of Lending Practices at as of November 15, 1967. 39 large banks reporting in 0.0 0.0 0.0 0.0 (continued) the Federal Reserve Quarterly Interest Rate Survey Table 2 (Continued) Answering Question Factors Relating to Applicant 2/ Value as depositor or source of collateral business Intended use of the loan Much Firmer Policy Moderately Firmer Policy Essentially Moderately Easier Unchanged Policy Policy Much Easier Policy 100.0 100.0 2.6 2.6 5.1 7.7 92.3 84.6 0.0 5.1 0.0 100.0 100.0 100.0 100.0 2.6 0.0 0.0 5.1 7.7 10.3 12.8 10.3 89.7 89.7 87.2 82.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 .O LENDING TO "NONCAPTIVE" FINANCE COMPANIES Terms and Conditions Interest rate charged Compensating or supporting balances Enforcement of balance requirements Establishing new or larger credit lines Answering Question Considerably less willing Moderately less willing Essentially Unchanged 15.4 0.0 0.0 13.8 13.5 2.6 5.1 82.0 92.2 91.7 80.6 81.1 89.7 89.8 Moderately mo.e willing > Considerably more willing WILLINGNESS TO MAKE OTHER TYPES OF LOANS Term loans to businesses 100.0 Consumer instalment loans 100.0 Single family mortgage loans 100.0 Multi-family mortgage loans 100.0 All other mortgage loans 100.0 Participation loans with correspondent banks 100.0 Loans to brokers 100.0 2/ 0.0 0.0 0.0 2.8 5.4 0.0 0.0 2.6 7.8 8.3 2.8 0.0 7.7 5.1 For these factors, firmer means the factors were considered more important in making decisions for approving credit requests, and easier means they were less important. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Not for quotation or publication TABLE 3 QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT BANKS WITH DEPOSITS LESS THAN $1 BILLION 1/ (STATUS OF POLICY ON NOVEMBER 15, 1967, COMPARED TO THREE MONTHS EARLIER) (Number of banks in each column as per cent of total banks answering question) Total STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (after allowance for banks's usual seasonal variation) COMPARED TO THREE MONTHS AGO ANTICIPATED DEMAND IN THE NEXT 3 MONTHS Much Stronger Moderately Stronger Essentially Unchanged Moderately Weaker Much Weaker 100.0 25.5 59.3 0.0 100.0 69.8 27.8 0.0 Much Answering Firmer Question .Policy Moderately Firmer Policy Essentially Unchanged Policy Moderately Easier Policy Much Easier Policy LENDING TO NONFINANCIAL BUSINESSES Terms and Conditions Interest rates charged Compensating or supporting balances Standards of credit worthiness Maturity of term loans 100.0 100.0 100.0 100.0 30.3 25.5 5.8 11.6 67.4 69.8 90.7 82.6 0.0 1.2 0.0 2.3 Reviewing Credit Lines or Loan Applications Established customers New customers Local service area customers Nonlocal service area customers 100.0 100.0 100.0 100.0 8.1 19.8 9.4 17.6 91.9 70.9 89.4 72.9 0.0 2.3 1.2 1.2 1/ Survey of Lending Practices at as of November 15, 1967. 86 large banks reporting in 0.0 0.0 0.0 0.0 (continued) the Federal Reserve Quarterly Interest Rate Survey Table 3 (Continued) Answering Question Factors Relating to Applicant 2/ Value as depositor or source of collateral business Intended use of the loan Much Firmer Policy Moderately Firmer Policy Essentially Moderately Easier Unchanged Policy Policy Much Easier Policy 100.0 100.0 4.7 4.7 22.0 15.0 72.1 79.1 1.2 1.2 0.0 0.0 100.0 100.0 100.0 100.0 1.2 1.2 1.2 9.3 9.3 10.5 18.6 12.8 89.5 88.3 80.2 70.9 0.0 0.0 0.0 7.0 0.0 0.0 0.0 0.0 LENDING TO "NONCAPTIVE" FINANCE COMPANIES Terms and Conditions Interest rate charged Compensating or supporting balances Enforcement of balance requirements Establishing new or larger credit lines Answering Question Considerably less willing Moderately less willing Essentially Unchanged Moderately mo.e willing Considerably more willng UILLINGNESS TO MAKE OTHER TYPES OF LOANS Term loans to businesses 100.0 Consumer instalment loans 100.0 Single family mortgage loans 100.0 Multi-family mortgage loans 100.0 All other mortgage loans 100.0 Participation loans with correspondent banks 100.0 Loans to brokers 100.0 2/ 3.5 0.0 2.4 3.5 2.4 1.2 2.3 15.1 0.0 16.5 15.3 15.3 7.0 11.7 74.4 80.3 71.8 76.5 75.3 79.0 76.7 7.0 17.4 9.3 4.7 5.8 12.8 8.1 0.0 2.3 0.0 0.0 1.2 0.0 1.2 For these factors, firmer means the factors were considered more important in making decisions for approving credit requests, and easier means they were less important. 

Federal Reserve (1967, December 11). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19671212_part1

@misc{wtfs_greenbook_19671212_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1967},
  month = {Dec},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19671212_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}