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 June 20, 1969 SUPPLEMENTAL NOTES The Domestic Economy New orders for durable goods declined 3 per cent in May. Rail equipment and machinery accounted for most of the decline, as they had accounted for most of April's increase. Nevertheless, declines in May, like increases in April, were fairly general, with only the aircraft and motor vehicle industries showing moderate increases. The May decline was less than the April increase, and the April-May average was still above the first quarter average, both in current dollar terms and after allowance for price increase. PERCENTAGE CHANGE IN NEW ORDERS FOR DURABLE GOODS April-May average from first quarter average Durable goods manufacturers, total 1.7 Primary metals Iron and steel Machinery and equipment industries Defense products industries Consumer durables exc. autos All other durable goods 2.4 7.8 4.9 3.4 -4.6 2.6 Defense products -6.4 The second-quarter strength is mainly in capital goods and iron and steel. Orders for consumer durables (excluding autos) and the new defense products series declined in May for the third month. (The April-May strength in defense industries may reflect commercial aircraft orders.) Durable goods shipments changed little in May. They were still below new orders and the total backlog rose slightly further, Backlogs increased at iron and steel, machinery and equipment and motor vehicle plants, and declined at defense and other consumer durables plants. The Domestic Financial Situation Mortgage market. Mortgage commitments outstanding at insured S&L's and at New York State savings banks declined slightly during May for the first time this year, after seasonal adjustment, as these lenders became more cautious in approving new commitments. The commit- ment backlogs continued to represent about a 5-month volume of S&L mortgage acquisitions and a 9-month volume of savings bank lending, based on the moderate rate of loans disbursed by these institutions in May. RESIDENTIAL MORTGAGE COMMITMENTS OUTSTANDING AT SELECTED THRIFT INSTITUTIONS Outstanding Commitments. Date Total Insured S&L's Mutual Savings Banks (N.Y. State) Month-to-Month Change Total Insured S&L's ($ Billions, Seasonally Adjusted) 1968 May Mutual Savings Banks (N.Y, State) (Per Cent) 8.5 6.0 2.6 -0.9 -1.6 0.8 9.8 10.0 6.6 6.8 3.2 3.2 2.0 2.1 1.9 2.5 2.2 1.1 March 10.2 6.9 3.3 1.7 1.4 2.3 April May 10.3 10.2 7.0 7.0 3.3 3.2 1.4 -1.3 1.9 -0.7 0.2 -2.7 1969 January February Note: Based on seasonally adjusted dollar volume. Data from Federal Home Loan Bank Board and Savings Banks Association of New York State. Reporting savings banks account for about 70 per cent of total mortgage lending in the industry. Data for savings banks and insured S&L's include a minor amount of nonresidential commitments. Subtotals may not add to totals because of rounding. Savings and loan associations. Inflows to savings and loan associations during May were slightly lower than last year, following the same pattern as the savings banks. Similarly, the pace of inflows after seasonal adjustment has slowed perceptibly during the April-May period. During May, there was virtually no change in the S&L's liquid position, except for a slight reduction in net liquid holdings resulting from their borrowing activities during the month. -4SAVINGS GROWTH AT NONBANK DEPOSITARY INTERMEDIARIES (Seasonally adjusted annual rate, in per cent) Mutual Savings Banks Savings and Loan Associations Both 1968 - I II III IV 7.1 6.7 6.5 7.1 5.6 5.7 5.9 6.2 6.1 6.0 6.1 6.5 1969 - I March April May 6.2 7.1 2.9 6.7 6.1 8.1 1.9 4.3 6.1 7.8 2.2 5.1 6.8 4.8 4.9 3.1 5.5 3.7 Memo: April - May 1968 1969 1/ Because of seasonal adjustment difficulties, patterns are more reliable than monthly. Federal finance. quarterly or bi-monthly Treasury receipts and expenditures data becoming available in the critical closing weeks of June suggest that the Treasury balance at the end of the fiscal year may fall somewhat short of $6 billion--about $500 million below the Greenbook projection. With the balance at this lower level, the Treasury is expected to opt for a larger cash financing in July--possibly as much as $4 billion. To assure an attractive tax and loan carry for bank subscribers to this financing, the Treasury would probably have to receive payment in the third week of July and announce before the next meeting of the Open Market Committee. On June 18, the Senate passed a fiscal 1970 spending ceiling that is substantially different in form and level from the HouseThe Senate ceiling is approved version referred to in the Greenbook. similar to the one now operative for fiscal 1969 in that it exempts certain "uncontrolable" spending categories. But in addition to the Vietnam defense, interest, veterans benefit, farm price support, and social insurance benefit categories already exempted, the new Senate ceiling exempts education expenditures as well. To make the re- strictive effect of its ceiling seem credible relative to that of the House, the Senate proposal also calls for a cut of $1.9 billion in the Administration's overall budget, as shown in the table. EFFECT OF SENATE CEILING ON 1970 OUTLAYS (In billions of dollars) Total outlays requested by administration Share of total represented by exempt programs Ceiling for outlays in covered programs Non-Vietnam defense Nondefense Estimated budget cut from administration request 192.9 111.0 80.0 55.0 25.0 1.9 KEY INTEREST RATES 1969 tows Highs May 28 Ju.ne 19 Short-Term Rates Federal funds (weekly averages) 5.95 (1/1) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper 5.91 6.38 7.14 6.08 6.25 9.20 (6/4) (3/24) 6.81 (6/12) (2/17) 8.12 (6/18) (1/2) 12.50 (6/10) (3/26) 7.36 (6/19) 7.25 (6/18) (2/6) 8.93 8.54 6.08 7.50 9.82 6.85 6.88 6.60 8.12 11.23 7.36 7.25 CD's (prime NYC) Highest quoted new issue Secondary market 6-month Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies 6.00 6.45 (2/13) 6.00 8.25 (6/18) 6.00 7.40 6.00 8.25 6.04 6.50 6.25 6.32 6.98 8.25 8.38 7.78 (6/11) (6/18) (6/18) (6/19) 6.37 7.62 7.50 6.77 6.74 8.25 8.38 7.78 6.25 6.50 (1/30) 6.25 8.25 (6/18) 6.25 7.50 6.25 8.25 5.86 (1/16) 3.90 (1/2) 6.96 (6/12) 5.40 (6/11) 6.27 4.40 6.82 5.25 6.11 (1/20) 5.91 (4/14) 6.76 (6/9) 6.46 (5/28) 6.68 6.46 6.73 6.26 6.56 (1/2) 7.26 (2/3) 7.03 (6/19) 7.76 (6/19) 6.86 7.59 7.03 7.76 7.05 (1/9) 6.90 (2/20) 7.45 (4/9) 7.75 (6/11) 7.44 7.71 4.82 (1/23) 4.57 (1/2) 5.82 (6/11) 5.60 (6/18) 5.60 5.40 5.79 5.60 7.66 (1/9) 8.26 (6/16) 7.91 8.26 (3/25) (2/17) (1/7) (1/16) CD's (prime NYC) Highest quoted new issue Secondary market 1-year Treasury bills (bid) Prime municipals Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa No call protection Call protection .- Municipal Bond Buyer Index Moody's Aaa Mortgage--implicit yield in FNMA weekly auction 1/ 1/ Yield on 6-month forward commitment after allowance for commitment fee and required purchase and holding of FNMA stock. Assumes discount on 30-year loan amortized over 15 years. International Developments The German central bank increased its discount rate from 4 to 5 per cent and its rate for advances against securities from 5 to 6 per cent to be effective from June 20. As money market rates in Germany had been above the discount rate since the beginning of June--in some instances by more than one percentage point--this action in part represents a technical adjustment. More fundamentally, however, the rate increase indicates an unwillingness to counteract tightening tendencies in the market, in view of rising inflationary pressures in Germany--especially in the absence of strong fiscal measures, which the Bundesbank would prefer, following the May 9 decision by the German government not to revalue the DM. SUPPLEMENTAL APPENDIX A: SURVEY OF BANK LOAN COMMITMENTS. APRIL 1969* The results of the April 30 survey of bank loan commitments indicated that total unused commitments--at 33 banks that responded to all items in the current and the previous survey--declined slightly further during the three months covered by the survey. Reductions in unused commitments to nonbank financial institutions and on real estate mortgages more than offset the rise in these commitments to commercial and industrial firms. At the end of April unused commitments amounted to 62 per cent of total loans outstanding at the reporting banks compared with 69 per cent in late October. New commitments made during the period covered by the recent survey were in excess of $15 billion, and were substantially larger than those reported in the previous survey. Most of this acceleration took place in confirmed lines of credit to commercial and industrial firms and in commitments to finance companies, which are subject to annual review by banks, and may reflect in part delays in renewal which would tend to bias downward the amount of these commitments reported in the previous survey and inflate the amount reported in the current survey. However, in view of the widespread nature of these increases--virtually every bank in the current survey reported an increased volume of these commitments made--this possible explanation should be viewed with caution. In several other areas, new commitments were significantly less than those made in the period covered by the previous survey. New commitments made on term loans to businesses in particular had been reduced, as might be expected during a period in which the availability of lendable funds was being rapidly curtailed and interest rates were rising. This is consistent with the fact that 85 per cent of the respondents indicated that their commitment policies were firmer than at the time of the previous survey, with 95 per cent of these banks giving "reduced availability of funds," and 60 per cent "increased loan demand" as the reasons for their more restrictive policies. Takedowns were somewhat larger in the three months covered by the current survey than in the period covered by the previous survey. Takedowns by finance companies, in particular, were almost twice as large as in the previous period, and may have reflected some temporary diversion of borrowing demands from the commercial * Prepared by Joseph Burns, Economist, Division of Research and Statistics. SA-2 paper market to banks as money market tightened late in April. Takedowns by C&I firms were also slightly larger than in the previous period, but these were concentrated solely in confirmed lines of credit, with takedowns of all other types of commitments by C&I firms significantly less than in the previous period. NOT FOR QUOTATION OR PUBLICATION QUARTERLY SURVEY OF BANK LOAN COMMITMENTS AT SELECTED LARGE U.S. bANKS 1 (AS OF APR 30, 1969) TABLE 1 UNUSED AND NEW COMMITMENTS 2 PART A -- MILLIONS OF DOLLARS UNUSED COMMITMENTS PERCENT NUMBER OF BANKS 5 GRAND TOTAL COMMITMENTS TOTAL-COMMERCL + INDUS FIRMS TOTAL-NONBANK FINANCIAL INST TOTAL-REAL ESTATE MORTGAGES MEMO-CONSTR LOANS (INCL ABOVE) AS OF APR 30 1969 CHANGE FROM JAN 31 1969 (1) (2) CHANGE FROM JAN 31 1969 (33) .4 185 + 173 .6 4.0 279 79 3.8 (293) +(16.2) 41,416 31,734 6,917 2,765 (2,634) TOTAL-COMMERCL + INDUS FIRMS TERM LOANS REVOLVING CREDITS TOTAL TERM + REVOLVING 6 CONFIRMED LINES OF CREDIT OTHER COMMITMENTS 1,611 7,975 10,030 21,098 606 223 678 547 480 106 TOTAL-NONBANK FINANCIAL INST FINANCE COMPANIES FOR MORTGAGE WAREHOUSING ALL OTHER 4,211 1,234 1,472 293 4 TOTAL-REAL ESTATE MORTGAGES RESIDENTIAL OTHER 780 1.985 + - DURING QUARTER ENDING APR 30 1969 AS A PERCENT OF UNUSED COMMIT TAKEDOWNS. EXPIRATIONZ AND LANCELLATIONS DURING QUARTER ENDING APR 30 1969 AS A PlkFCtl\T OF AVAILABLL COMMIT 4 (3) (33) 35 NEW COMMITMENTS (33) 15,731 12,542 2,370 819 (646) (33) (33) (33) 40.8 42.5 15,916 12,369 2,649 898 (353) 29.3 31.1 (14.4) 34.1 39.6 (35.8) 29.4 28.5 19.6 11.9 7.1 2.2 21.2 1.063 2,090 3.131 8,871 54U 93.2 36.6 40.9 41.5 108.0 840 1,412 2,5d4 9,351 434 38.1 18.1 24.0 30.9 41.7 - 6.6 .4 + 1.3 37.1 26.5 30.9 1,932 304 413 31.9 21.2 18 1,639 300 431 9 88 + - 1.5 b.0 274 545 46.5 36.9 22.6 30.7 31.3 PARTICIPANTS IN QUARTERLY INTEREST RATE SURVEY WITH TOTAL DEPOSITS OF MORE THAN $1 BILLION (48 BANKS). DETAILED DATA NOT AVAILABLE FOR ALL BANKS THEREFORE ACTUAL COMMITMENTS MAY BE MORE THAN INDICATED HERE. NEW COMMITMENTS DURING CURRENT PERIOD AS A PERCENT OF UNUSED COMMITMENTS AT END OF PREVIOUS PERIOD. AVAILABLE COMMITMENTS ARE DEFINED AS UNUSED COMMITMENTS AT END OF PREVIOUS PERIOD PLUS NEW COMMITMENTS DURING THE CURRENT PERIOD. PARENTHESES INDICATE MATCHED SAMPLE OF BANKS. MAY EXCEED SUM OF PREVIOUS TWO ITEMS BECAUSE SOME BANKS REPORT COMBINED TOTAL ONLY. NOT FOR QUOTATION OR PUBLICATION TABLE 1 UNUSED AND NEW COMMITMENTS PART B -- PERCENTAGES UNUSED COMMITMENTS AS OF APR 30 1969 NEW COMMITMENTS DURING QUARTER ENDING APR 30 1969 TAKEDOWNS, EXPIRATION S AND CANCELLATIONS DURING QUARTER ENDING APR 30 1,69 (1) NUMBER OF BANKS (33) (33) 100.0 76.6 16.7 6.7 (6.4) 100.0 79.7 15.1 5.2 (4.1) 100.0 77.7 16.7 5.6 (2.2) TOTAL-COMMERCL + INDUS FIRMS TERM LOANS REVOLVING CREDITS TOTAL TERM + REVOLVING CONFIRMED LINES OF CREDIT OTHER COMMITMENTS 100.0 5.1 25.1 31.6 66.5 1.9 100.0 8.5 16.7 25.0 70.7 4.3 100.0 16.8 11.4 20.9 75.6 3.5 TOTAL-NONBANK FINANCIAL INST FINANCE COMPANIES FOR MORTGAGE WAREHOUSING ALL OTHER 100.0 60.9 17.8 21.3 100.0 69.1 12.7 18.2 100.0 72.9 TOTAL-REAL ESTATE RESIDENTIAL OTHER IuO.U 28.2 71.8 100.0 33.5 66.5 100.0 29.5 70.5 GRAND TOTAL COMMITMENTS TOTAL-COMMERCL + INDUS FIRMS TOTAL-NONBANK FINANCIAL INST TOTAL-REAL ESTATE MORTGAGES MEMO-CONSTR LOANS (INCL ABOVE) MORTGAGES 11.5 15.6 NOT FOR QUOTATION OR PUBLICATION TABLE 2 RATIOS OF UNUSED COMMITMENTS TO LOANS OUTSTANDING UNUSED COMMITMENTS.......AS A PERCENT OF........LOANS OUTSTANDING 1 NUMBER OF BANKS TOTAL UNUSED COMMITMENTS COMMERCL + INDUSTRL FIRMS NONBANK FINANCIAL INST REAL ESTATE MORTGAGES 1 GROSS LOANS COMMERCIAL + INDUSTRIAL LOANa LOANS-NONBANK FINANCIAL INST REAL ESTATE LOANS COMMERCL + INDUSTRL FIRMS TERM LOANS REVOLVING CREDITS TOTAL TERM + REVOLVING CONFIRMED LINES OF CREDIT OTHER COMMITMENTS COMMERCIAL COMMERCIAL COMMERCIAL COMMERCIAL COMMERCIAL NONBANK FINANCIAL INST FINANCE COMPANIES MORTGAGE WAREHOUSING ALL OTHER LOANS TO FINANCE COMPANIES OTHER NONdANK FINANCIAL I\,jT OTHER NONBANK FINANCiA I', - REAL ESTATE MORTGAGES RESIDENTIAL OTHER REAL REAL ESTATE ESTATE + + + + + INDUSTRIAL INDUSTRIAL INDUSTRIAL INDUSTRIAL INDUSTRIAL LOANa LOANS LOANS LOANS LOAN~ LOANS LOANS AS REPORTED ON THE WEEKLY REPORT OF CONDITION (FR416) -ui NEAREST THE SURVEY DATE. 31 1968 JAN 31 1969 APR 30 1969 (1) (2) (3) 34 42 35 OCT 68.6 109.0 131.2 23.2 63.0 luO.5 135.5 25.1 62.0 d7.9 115.6 34.3 5.4 22.5 34.4 69.6 2.3 4.8 25.3 29.8 65.9 3.8 4.5 22.1 27.8 56.4 1.7 164.1 53.4 173.2 '7.4 46.2 1Z6.4 46.6 55.4 o.3 17.0 7.1 18.1 ).7 24.6 53.5 THE WEDNeSDAY NOT FOR QUOTATION OR PUBLICATION TABLE 3 VIEWS ON COMMITMENT POLICY PART A -- NUMBER OF BANKS TOTAL NUMBER OF BANKS UNUSED COMMITMENT IN THE PAST THREE MONTHS HAVE RISEN RAPIDLY RISEN MODERATELY REMAINED UNCHANGED DECLINED MODERATELY DECLINED RAPIDLY TAKEDOWNS IN THE NEXT THREE MONTHS SHOULD RISE RAPIDLY RISE MODERATELY REMAIN UNCHANGED DECLINE MODERATELY DECLINE RAPIDLY COMMITMENT POLICY COMPARED WITH THREE MONTHS AGO IS MUCH MORE RESTRICTIVE SOMEWHAT MORE RESTRICTIVE UNCHANGED LESS RESTRICTIVE MUCH LESS RESTRICTIVE OCT 31 1968 JAN 31 1969 APR 30 1969 (1) 12) (3) 47 48 48 1 25 18 3 3 19 17 9 4 19 11 14 1 27 19 - 4 28 15 1 2 26 17 3 1 9 33 8 28 12 26 15 7 4 - - NOT FOR QUOTATION OR PUBLICATION TABLE 4 COMPARISON OF SELECTED RESPONSES IN THE JAN 31 1969 AND APR 30 1969 SURVEYS PART A -- NUMBER OF BANKS APR 30 JAN 31 1969 1969 UNUSED COMMITMENTS IN THE PAST THREE MONTHS HAVE UNUSED COMMITMENTS IN THE PAST THREE MONTHS HAVE RISEN REMAINED UNCHANGED DECLINED TOTAL NUMBER OF BANKS 22 17 9 48 RISEN 11 7 5 23 REMAINED UNCHANGED 9 5 1 11 DECLINED 6 5 3 14 TAKEDOWNS IN THE NEXT THREE MONTHS SHOULD TAKEDOWNS IN THE NEXT THREE MONTHS SHOULD RISE REMAIN UNCHANGED 32 15 RISE 19 9 REMAIN UNCHANGED 13 4 DECLINE 2 DECLINE 1 - - 1 TOTAL 48 28 17 3 TAKEDOWNS IN THE NEXT THREE MONTHS SHOULD COMMITMENT POLICY COMPARED TO THREE MONTHS AGO IS MORE RESTRICTIVE UNCHANGED LESS RESTRICTIVE TOTAL 36 12 RISE 22 6 REMAIN UNCHANGED 12 5 48 28 17 DECLINE 2 1 3 UNUSED COMMITMENTS IN THE PAST THREE MONTHS HAVE TAKEDOWNS IN THE NEXT THREE MONTHS SHOULD RISE REMAIN UNCHANGED DECLINE TOTAL 32 15 48 RISEN 15 8 23 REMAINED UNCHANGED B 3 11 DECLINED 9 4 14 NOT FOR QUOTATION OR PUBLICATION TABLE 5 CROSS CLASSIFICATION OF SELECTED RESPONSES IN THE CURRENT SURVEY PART A -- NUMBER OF BANKS COMMITMENT POLICY COMPARED TO THREE MONTHS AGO IS UNUSED COMMITMENT. IN THE PAST THREE MONTHS HAVE NUMBER OF BANKS MORE RESTRICTIVE UNCHANGED LESS RESTRICTIVE RISEN REMAINED UNCHANGED DECLINED TOTAL IN THE UNUSED COMMITMENTS IN THE PAST THREE MONTHS HAVE RISE TAKEDOWNS NEXT THREE MONTHS SHOULD REMAIN UNCHANGED DECLINE 1 1 1 3 6 5 RISEN REMAINED UNCHANGED DECLINED TOTAL COMMITMENT POLICY COMPARED TO THREE MONTHS TAKEDOWNS IN THE NEXT THREE MONTHS SHOULD RISE REMAIN UNCHANGED DECLINE TOTAL MORE RESTRICTIVE UNCHANuED AGO IS LESS RESTRICTIVE NOT FOR QUOTATION OR PUBLICATION TABLE 6 EXPLANATION OF RECENT CHANGE IN NEW COMMITMENT POLICY AS INDICATED IN THE CURRENT SURVEY INDICATED CHANGE NUMBER OF BANKS INDICATING CHANGE REASONS FOR CHANGE (NUMBER OF BANKS) INCREASED LOAN DEMAND REDUCED AVAILABILITY OF FUNDS BOTH DEMAND AND FUNDS DECREASED LOAN DEMAND INCREASED AVAILABILITY OF FUNDS BOTH DEMAND AND FUNDS MORE RESTRICTIVE LESS RESTRICTIVE NONE 

Federal Reserve (1969, June 23). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19690624_part3

@misc{wtfs_greenbook_19690624_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1969},
  month = {Jun},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19690624_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}