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 March 6, 1970 SUPPLEMENTAL NOTES The Domestic Economy Industrial production. Preliminary employment data for February, which show widespread declines in manufacturing employment and average hours worked, now indicate a further decline in industrial production of over one-half per cent rather than the little change as reported in the Greenbook. Output of durable manufacturers, which had fallen off 6 per cent through January, dropped further in February. Production of nondurable manufacturers, which had been maintained at record levels from July to January, also declined. Sales of new domestic autos rose Auto sales and production. sharply in the last selling period of February, mainly because of the introduction of two new models and early sales contests, and for the month as a whole were at an annual rate of 7.9 million units, 16 per cent above a month ago and 10 per cent below a year earlier. Seasonally adjusted dealers' stocks at the end of February declined 5.5 per cent further and were 10 per cent below a year earlier and 13 per cent below the October peak. Production schedules have been raised 6 per cent in March to a 6.9 million unit rate and in the first week of this month output has been at that level. Trade reports indicate that assembly schedules for the second quarter will be increased, and one source suggests a rise to an annual rate of 8 million units. Part of this increase is attributed to expectations of the usual spring rise in sales, but the possibility of a strike in the auto industry after midyear may be an important motivation. Consumer credit. Consumer instalment credit outstanding increased at a seasonally adjusted annual rate of $4.6 billion in January, the smallest monthly advance in more than 2 years. As in December, the increase was centered in nonautomotive consumer goods and personal loans; auto credit was up slightly after a small decline in December. Noninstalment credit rose at a $2.6 billion seasonally adjusted annual rate in January, the largest increase registered for this type of credit since last May. Substantial increases occurred in both single-payment loans and charge accounts. On a seasonally adjusted basis, extensions of instalment credit rose moderately in January after 4 consecutive monthly declines, but were still below the average of the three most recent quarters. Repayments of instalment debt, which had changed little since last spring, advanced to a new high. Credit extended for auto purchases remained near the 2-year low reached in December, reflecting continued slack demand. On the other hand, extensions for purchases of other consumer goods increased considerably and personal loans rose moderately. CONSUMER INSTALMENT CREDIT EXTENDED AND REPAID (Seasonally adjusted annual rates, in billions of dollars) Net Extended Repaid CNe Change 1969: QI QII QIII QIV 100.7 104.4 103.5 102.5 92.3 94.8 95.8 95.7 8.3 9.6 7.7 6.8 1970: January 102.3 97.7 4.6 - 3 - Labor market. was evident in Substantial further weakening in labor demand the employment and unemployment data for February. Employment and hours of work in manufacturing declined sharply, while the unemployment rate jumped to 4.2 per cent, its highest level since October 1965. Reflecting mounting weakness in the industrial sector, unemployment among manufacturing wage and salary workers--mainly in blue-collar occupations--continued to climb rapidly. The rise in unemployment occurred exclusively among adults, with men and women contributing about equally. men--to 2.8 per cent--was The marked increase in the rate for adult preceded by a comparable increase in January. SELECTED UNEMPLOYMENT RATES (Seasonally adjusted) 1969 February Total Males, aged 20 and over Females, aged 20 and over 16 to 19 years, total 1970 January February 3.3 1.9 3,6 12.0 3.9 2.5 3.6 13.8 White Negro and other races 3.0 5.9 3.6 6.3 3.8 7.0 Manufacturing workers Blue-collar workers 2.9 3.6 3.8 4.6 4.6 5.0 State insured 2.2 2.5 2.7 4.2 2.8 4.1 13.4 Manufacturing employment declined by 158,000 in February. The drop would have been considerably larger but for the net return of more than 120,000 workers (mainly G.E.) on strike the previous month. Employment in transportation equipment declined by 146,000. Although - 4- a large part of the there were substantial layoffs at auto plants, decline reflected temporary plant shutdowns during the survey week. Outside of transportation equipment, there were widespread relatively small declines in all but a few manufacturing industries. The average workweek of manufacturing production workers was reduced by 0.4 hour--for the second month in a row--to 39.9 hours in Reductions were wide- February, its lowest level since January 1962. spread with large cuts in equipment. fabricated metals, Average overtime, machinery, and electrical at 3.2 hours, was down slightly. Nonfarm payroll employment was little changed in February from the upward revised 70.78 million of January, largely because of employment increases in trade and construction. The latter increase was a recovery from a very low January level (which reflected in part unusually bad weather), and construction employment was still down 50,000 from December. Employment in the service industries and govern- ment remained near January levels. NONFARM PAYROLL EMPLOYMENT (Seasonally adjusted, in thousands) 1970 February January 70,766 -12 1,252 Manufacturing Durable goods Nondurable goods 19,806 11,544 8,262 -158 -120 -38 -259 -295 36 Construction Trade Government Service and other 3,409 14,978 12,425 20,148 81 65 1 -1 38 497 309 667 Total Change from: Year earlier - 5 The Domestic Financial Situation INTEREST RATES 1969 Hih High 1970 Febuary 9 March 5 Short-Term Rates Federal funds (weekly averages) 9.61 (9/24) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issues Secondary market 6-month Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary 8.03 8.62 12.50 8.39 8.25 (12/29) (12/15) (6/10) (11/20) (12/3) 9.39 (2/18) 7.93 8.75 10.50 8.30 3.33 (1/16) (1/13) (1/9) (1/7) (1/28) 9.21 (2/4) 8.32(3/4) 7.30 6.88 8.38 8.00 9.51 9.32 8.17 (2/16)7.27 8.25 8.00 6.00 9.05 (12/31) 6.75 9.10 (1/7) 6.75 6.75 8.75 (2/6) 8.25 8.09 8.75 8.88 8.58 7.99 8.88 9.12 8.50 (1/8) (1/30) 7.43 8.50 8.62 8.38 (2/6) (1/7) 7.00 7.00 8.95 (2/6) 8.50 (12/29) (12/15) (10/8) (11/20) (1/5) (1/13) 6.78 8.12 8.50 7.39 6.25 9.15 (12/31) 7.00 7.86 (11/24) 6.25 (12/11) 7.62 (1/30) 5.60 (1/7) 7.22 6.63 5.30 (2/6) 4.40 8.33 (12/29) 7.14 (12/29) 8.30 (1/7) 6.98 (1/7) 8.04 6.65 7.18 6.62 7.91 (12/31) 8.91 (12/31) 7.97 (2/12) 8.96 (1/7) 7.97 8.80 7.79 8.60 7.80 (6/20) 8.85 (12/5) 8.63 (2/6) 3.25 8.63 (2/6) (2/6) -0.25 Municipal Bond Buyer Index Moody's Aaa 6.90 (12/19) 6.57 (12/26) 6.79 (1/2) 6.52 (1/2) 6.54 (2/6) 6.00 6.28 (2/6) 5.85 Mortgage--implicit yield in FNMA biweekly auction 1/ 8.87 (12/29) 9.36 (1/2) 9.28 1-year Treasury bills (bid) Prime municipals 9.15 Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa No call protection Call protection 1/ 9.25(2/24) 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 Bank of England lowered its discount rate Thursday, March 5, from 8 to 7-1/2 per cent. It was the first change in Bank Rate since February 27, 1969, when it was raised from 7 to 8 per cent. The Bank's action reflects in part an attempt to slow the exceptionally heavy flow of funds into sterling dating from the end of February. The authorities may have feared that the recent inflow was abnormally high and could be quickly reversed. However, the almost continuously strong demand for sterling since last September has permitted Britain to make substantial repayments of its outstanding shortand medium-term external debt. The sharp increase in the demand for sterling in the week preceding the Bank Rate reduction was a consequence of a sudden, steep increase in short-term interest rates in Britain. For example, the yield on 90-day local authority deposits jumped from 9-1/8 per cent on February 26 to 10-1/4 per cent on March 4. The upward spurt in short-term rates stems from the liquidity squeeze on British business. Constantly hard-pressed for cash because of the ceiling on bank lending and the import deposit scheme, British firms are under particularly severe pressure now because corporate tax payments come due in the first quarter. Though the timing of the cut in the discount rate may have been influenced by recent inflows, a reduction would probably have been made soon in any case. With the balance of payments now in substantial surplus, the authorities are in a position to encourage the industrial -7 - capital investment so vital to enduring improvement in Britain s competitive position. An easing of monetary policy will stimulate investment, and the lowering of Bank Rate appears to be a signal that the authorities are now taking at least a short step in the direction of reduced monetary stringency. The Bundesbank announced on March 6 that effective Monday, March 9, the German discount rate will be raised from 6 to 7-1/2 per cent. This is the largest increase in the rate in the postwar period. The new effective rate is also the highest since the establishment of the Bundesbank in 1948. Correction: Page II - 29. The first sentence of the last paragraph on wholesale prices should read, "Meat prices declined in February, but prices of livestock--which were about 10 per cent above a year earlier in January--rose further." SUPPLEMENTAL APPENDIX A: SURVEY OF BANK LENDING PRACTICES, FEBRUARY 1970* About three-fourths of the respondents in the February 15 Bank Lending Practices Survey indicated that the strength of loan demand remained generally unchanged during the previous three months (Table 1). Only about 10 per cent of the banks expected a strengthening of loan demand in the next three months (compared with more than 30 per cent in the prior survey) while nearly 20 per cent anticipated some weakening. Terms and conditions on loans to nonfinancial business remained essentially unchanged during the past three months at about two-thirds of the responding banks and were generally tightened further at the rest of the banks. For example, nearly a third of the banks reported higher interest rates and more stringent compensating balance requirements in the current survey, and a fifth indicated stricter standards with regard to credit worthiness and the maturity of term loans. Established and local service area customers generally received the same treatment as in prior months--although about 20 per cent of the banks did tighten lending terms to these borrowers--while new and nonlocal service area customers continued to receive closer scrutiny. On average one-fourth of the respondents also indicated that such factors as the intended use of the loan and the value of the loan applicant as a collateral source of business were being considered more carefully when reviewing credit applications. Lending terms and conditions to "noncaptive" finance companies remained essentially unchanged from three months ago at 70-80 per cent of the banks. The remaining banks typically raised interest rates on such loans, tightened and increasingly enforced compensating balance requirements, and were less willing to establish new or larger credit lines. Also, about 75-80 per cent of participating banks reported that their willingness to make certain other types of loans had not changed greatly during the previous three months while the rest were less willing to make such loans. This increased reluctance was slightly more pronounced in mortgage loans and term loans to businesses then in other categories. There was little size of bank variation in responses regarding the strength of current or future loan demand (Table 2). However, a somewhat larger proportion of smaller banks (with deposits * Miss Marilyn E. Connors, Research Assistant, Banking Section, Division of Research and Statistics. A - 2 of less than $1 billion) tightened lending terms and conditions further than of larger banks (with deposits of $1 billion or more). This was particularly evident with regard to credit lines or loan applications for new and nonlocal business borrowers, the intended use of business loans, and compensating balance requirements as well as credit lines of finance companies. Smaller banks also were noticeably less willing to make most other types of loans. Banks generally reported that the recurring response of "essentially unchanged" did not indicate any weakening in credit policy, but a continuation of the restrictive policies which evolved over the past year (Table 2A). Deposit shrinkage and weak liquidity positions accounted for this continued tight policy. Several banks also reported that they were restricting lending policies further pending a final pronouncement on the commercial paper issue. (STATUS PAGE 01 TABLE 1 NOT FOR QUOTATION OR PUBLICATION QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. 1/ COMPARED TO THREE MONTHS EARLIER) OF POLICY ON FEBRUARY 15, 1970 (NUMBER OF BANKS & PERCENT OF TOTAL BANKS REPORTING) MUCH STRONGER TOTAL BANKS PCT BANKS PCT MODERATELY STRONGER ESSENTIALLY UNCHANGED BANKS PCT BANKS PCT MODERATELY WEAKER BANKS PCT MUCH WEAKER BANKS PCT STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) COMPARED TO THREE MONTHS AGO ANTICIPATED DEMAND IN NEXT 3 MONTHS 125 100.0 12 9.6 95 76.0 15 12.0 125 100.0 14 11.2 87 69.6 23 18.4 ANSWERING QUESTION BANKS LENDING TO NONFINANCIAL PCT MUCH FIRMER POLICY BANKS PCT MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY BANKS BANKS PCT PCT MODERATELY EASIER POLICY BANKS PCT BUSINESSES TERMS AND CONDITIONS: INTEREST RATES CHARGED 100.0 28.8 64.0 COMPENSATING OR SUPPORTING BALANCES 100.0 32.0 61.6 100.0 16.8 77.6 100.0 12.8 82.4 18.4 80.0 STANDARDS OF CREDIT WORTHINESS MATURITY OF TERM LOANS REVIEWING CREDIT LINES OR LOAN APPLICATIONS ESTABLISHED CUSTOMERS 100.0 NEW CUSTOMERS 100.0 15.2 20.8 62.4 LOCAL SERVICE AREA CUSTOMERS 100.0 0.0 15.2 84.0 100.0 16.1 15.3 68.6 NONLOCAL SERVICE AREA CUSTOMERS 1/ SURVEY OF LENDING PRACTICES AT 125 LARGE BANKS REPORTING AS OF FEBRUARY 15, 1970. 0.8 IN THE FEDERAL RESERVE QUARTERLY INTEREST RATE SURVEY MUCH EASIER POLICY BANKS PCT TABLE NOT FOR QUOTATION OR PUBLICATION ANSWERING QUESTION BANKS FACTORS RELATING TO APPLICANT PCT 1 MUCH FIRMER POLICY BANKS PAGE (CONTINUED) PCT MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY BANKS BANKS BANKS PCT PCT MUCH EASIER POLICY BANKS PCT 2/ VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS 124 100.0 10.5 19.4 87 70.1 INTENDED USE OF THE LOAN 125 100.0 9.6 12.0 98 78.4 INTEREST RATES CHARGED 124 100.0 3.2 12.1 104 COMPENSATING OR SUPPORTING BALANCES 124 100.0 4.8 16.9 97 78.3 ENFORCEMENT OF BALANCE REQUIREMENTS 124 100.0 6.5 24.2 86 69.3 ESTABLISHING NEW OR LARGER CREDIT LINES 124 100.0 16.1 16.1 84 67.8 LENDING TO "NONCAPTIVE" PCT 02 FINANCE COMPANIES TERMS AND CONDITIONS: ANSWERING QUESTION BANKS PCT CONSIDERABLY LESS WILLING BANKS PCT 83.9 MODERATELY LESS WILLING ESSENTIALLY UNCHANGED BANKS BANKS PCT PCT MODERATELY MORE WILLING BANKS WILLINGNESS TO MAKE OTHER TYPES OF LOANS TERM LOANS TO BUSINESSES 125 100.0 6.4 15.2 98 78.4 CONSUMER 124 100.0 2.4 16.1 100 80.7 SINGLE FAMILY MORTGAGE LOANS 122 100.0 6.6 13.9 96 78.7 MULTI-FAMILY MORTGAGE LOANS 119 100.0 9.2 12.6 93 78.2 ALL OTHER MORTGAGE LOANS 122 100.0 11.5 12.3 91 74.6 PARTICIPATION LOANS WITH CORRESPONDENT BANKS 123 100.0 10 8.1 108 87.8 LOANS TO BROKERS 122 100.0 17 13.9 97 79.5 INSTALMENT LOANS 2/ FOR THESE FACTORS, FIRMER MEANS THE FACTORS WERE CONSIDERED MORE IMPORTANT CREDIT REQUESTS, AND EASIER MEANS THEY WERE LESS IMPORTANT. IN MAKING DECISIONS FOR.APPROVING PCT CONSIDERABLY MORE WILLING BANKS PCT COMPARISON PAGE 03 TABLE 2 NOT FOR QUOTATION OR PUBLICATION OF QUARTERLY CHANGES IN BANK LENDING PRACTICES AT BANKS GROUPED BY SIZE OF TOTAL DEPOSITS I/ (STATUS OF POLICY ON FEBRUARY 15, 1970. COMPARED TO THREE MONTHS EARLIER) (NUMBER OF BANKS IN EACH COLUMN AS PER CENT OF TOTAL BANKS ANSWERING QUESTION) SIZE TOTAL OF BANK MODERATELY STRONGER MUCH STRONGER $1 C OVER TOTAL DEPOSITS IN BILLIONS - UNDER $1 $1 & OVER UNDER $1 ESSENTIALLY UNCHANGED MODERATELY WEAKER $1 C OVER $1 & OVER UNDER $1 UNDER $1 MUCH WEAKER t$1 OVER UNDER $1 t1 C OVER UNDER $1 COMPARED TO THREE MONTHS AGO 100 100 0 3 9 10 82 72 9 14 0 1 ANTICIPATED DEMAND IN NEXT 3 MONTHS 100 100 0 0 11 12 66 72 23 15 0 1 STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) TOTAL MUCH FIRMER $1 C OVER UNDER $1 MODERATELY FIRMER ESSENTIALLY UNCHANGED MODERATELY WEAKER $1 E OVER t$ C UNDER $1 OVER $I C OVER UNDER $1 UNDER $1 MUCH WEAKER $1 E OVER UNDER $1 $1 & OVER UNDER $1 INTEREST RATES CHARGED 100 100 4 8 28 29 66 63 2 0 0 0 COMPENSATING OR SUPPORTING BALANCES 100 100 4 8 30 33 66 59 0 0 0 0 STANDARDS OF CREDIT WORTHINESS 100 100 2 8 21 14 77 78 0 0 0 0 MATURITY OF TERM LOANS 100 100 0 8 17 10 83 82 0 0 0 0 ESTABLISHED CUSTOMERS 100 100 0 1 17 19 83 79 0 1 0 0 NEW CUSTOMERS 100 100 13 17 13 26 72 56 2 1 0 0 LOCAL SERVICE AREA CUSTOMERS 100 100 0 0 13 17 87 82 0 1 0 0 100 100 9 21 20 13 71 66 0 0 0 0 LENDING TO NONFINANCIAL BUSINESSES TERMS AND CONDITIONS: REVIEWING CREDIT LINES OR LOAN APPLICATIONS NONLOCAL SERVICE AREA CUSTOMERS 1/ SURVEY OF LENDING PRACTICES AT 47 LARGE BANKS (DEPOSITS OF $1 BILLION OR MORE) AND 78 SMALL BANKS (DEPOSITS OF LESS THAN FEBRUARY 15, 1970. $1 BILLION) REPORTING IN THE FEDERAL RESERVE QUARTERLY INTEREST RATE SURVEY AS OF Ln PAGE 04 TABLE 2 (CONTINUED NOT FOR QUOTATION OR PUBLICATION SIZE NUMBER ANSWERING QUESTION $1 & OVER UNDER $1 OF BANK MJCH FIRMER POLICY S1 E OVER UNDER $1 -- TOTAL DEPOSITS IN BILLION:S MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY $I C OVER $1 C OVER S1 C OVER UNDER $1 UNDER $1 UNDER $1 MUCH EASIER POLICY SL C OVER UNDER $1 FACTORS RELATING TO APPLICANT 2/ VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS 100 100 INTENDED USE OF THE LOAN 100 100 LENDING TO "NONCAPTIVE" FINANCE COMPANIES TERMS AND CONDITIONS: INTEREST RATES CHARGED O 5 COMPENSATING OR SUPPORTING BALANCES 0 8 ENFORCEMENT OF BALANCE REQUIREMENTS 2 9 7 22 ESTABLISHING NEW OR LARGER CREDIT LINES NUMBER ANSWERING QUESTION $1 E OVER UNDER $1 CONSIDERABLY LESS WILLING $1 C OVER UNDER $1 MODERATELY LESS WILLING ESSENTIALLY UNCHANGED $1 E OVER $1 E OVER UNDER $1 UNDER $1 MODERATELY MORE WILLING $1 E OVER UNDER $1 WILLINGNESS TO MAKE OTHER TYPES OF LOANS TERM LOANS TO BUSINESSES CONSUMER INSTALMENT LOANS SINGLE FAMILY MORTGAGE LOANS MULTI-FAMILY MORTGAGE LOANS ALL OTHER MORTGAGE LOANS 2/ PARTICIPATION LOANS WITH CORRESPONDENT BANKS 100 100 LOANS TO BROKERS 100 100 FOR THESE FACTORS, FIRMER MEANS THE FACTORS WERE CONSIDERED MORE CREDIT REQUESTS, AND EASIER MEANS THEY WERE LESS IMPORTANT. IMPORTANT IN MAKING DECISIONS FOR APPROVING CONSIDERABLY MORE WILLING $1 E OVER UNDER $1 A - 7 Table 2A NET RESPONSES OF BANKS IN LENDING PRACTICES SURVEYS (In per cent) Feb. May. Aug. _1968119681168 Strength of loan demand-' (compared to 3 months ago) Anticipated demand in next 3 months 64.8 -2.t Nov. Feb. May Aug. Nov. Feb. 1968 196911969 1969 1,969 1970 -8.0 50.0 66.4 -- 54.4 49.2 60.0 41.8 30.6 28.0 -1.6 5.7 8.9 -8.0 34.4 16.1 7.3 1.6 93.6 56.8 32.8 32.8 0.8 27.2 86.2 4.8 10.4 64.3 4.8 4.8 32.8 1.6 1.6 30.3 91.0 75.6 41.4 42.3 78.3 68.3 40.6 42.2 49.6 57.6 36.0 35.2 34.4 38.4 22.4 17.6 -0.8 10.5 2.5 11.6 28.0 64.8 30.0 56.9 47.2 80.2 46.7 71.3 51.6 81.4 48.8 68.8 36.8 60.8 32.0 56.5 18.4 34.4 14.4 31.4 19.2 12.0 54.4 12.8 16.0 58.6 67.2 44.4 8.1 6.4154.5 71.6 65.0 46.0 29.9 68.5 39.2 21.6 22.4 5.6 12.8 7.2 60.5 25.0 32.3 53.2 -4.0 -22.6 -4.9 7.4 49.6 4.8 -0.8 -0.8 -11.3 -15.3 32.0 44.1 -3.3 8.2 36.4 4.1 43.4 3.4 1.7 25.6 20.8 LENDING TO NONFINANCIAL BUSINESSES 2 / Terms and Conditions Interest rates charged Compensating or supporting balances Standards of credit worthiness Maturity of term loans Reviewing Credit Lines Established customers New customers Local service area customers Nonlocal service area customers -1.6 -5.6 6.4 -5.6 -5.6 -4.1 10.6 15.4 32.5 61.7 30.9 49.5 Factors Relating to Applicant (Net percentage indicating more important) Value of depositor as source of business Intended use of loan LENDING TO NONCAPTIVE FINANCE COMPANIES-' Terms and Conditions Interest rates charged Compensating or supporting balances Enforcement of balance requirements Establishing new or larger credit lines 2.4 -26.4 2.4 2.4 8.1 3.2 15.3 4.8 53.3 22.9 29.5 54.9 50.8 27.9 42.6 62.4 48.0 35.0 42.3 62.0 19.3 26.7 34.7 48.4 14.5 21.7 30.7 32.2 48.8 4.2 30.8 40.1 42.5 64.3 17.2 45.5 57.5 62.0 65.9 26.9 49.7 58.3 62.5 48.0 24.2 30.4 36.3 42.3 21.6 17.7 19.7 21.8 22.2 WILLINGNESS TO MAKE OTHER LOANS-3 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 8.8 16.0 1.6 23.4 1.6 6.5 1.6 18.7 38.4 34.2 40.0 48.4 31.5 10.6 59.3 36.1 20.5 1/ Per cent of banks reporting stronger loan demand minus per cent of banks reporting weaker loan demand. Positive number indicates net stronger loan demand, negative number indicates net weaker loan demand. 2/ Per cent of banks reporting firmer lending policies minus per cent of banks reporting weaker lending policies. Positive number indicates net firmer lending policies, negative indicates net easier lending policies. 3/ Per cent of banks reporting less willingness to make loans minus per cent of banks more willing to make loans. Positive number indicates less willingness, negative number indicates more willingness. SUPPLEMENTAL APPENDIX B: ____ _JANUARY SURVEY OF BANK LOAN COMMITMENTS, 1970* According to the January 31 Survey of Bank Loan Commitments, new commitments extended in the preceding three months by 43 major money market banks amounted to $13.8 billion, close to the $13 billion total reported in the prior survey (Table 1). Both recent surveys show new commitments sharply below the $19-20 billion level indicated in earlier surveys last year. The moderate volume of new commitments in the latest survey was evident in virtually every loan category. The small increase in total new commitments over those in the previous survey went largely to commercial and industrial firms in the form of revolving credits. The continued relatively low level of new commitments is consistent with the restrictive commitment policies reported by banks in the January survey (Table 2). About three-fifths of the banks indicated that they were maintaining tight policies initiated last year, while the balance firmed these policies somewhat further. And, as in the past three surveys, banks that tightened their commitment policies gave reduced availability of funds as the primary reason, although a few also stated that increased loan demand played a part in the policy change (Table 3). Takedowns. expirations, and cancellations of commitments (hereafter referred to simply as takedowns) dropped sharply further in the three months covered by the recent survey. This decline resulted entirely from a reduction in takedowns by commercial and industrial firms, particularly with regard to revolving credits and confirmed lines of credit. Takedowns by finance companies and for nonresidential mortgages both were substantially greater than those reported in the prior survey. However, since the survey is relatively new, we are unable to judge the extent to which these changes may have reflected seasonal influences. Unused commitments rose sharply on balance during the period covered by the recent survey, as new commitments exceeded takedowns. On January 31, 1970, total unused commitments at these 43 respondent banks were nearly $63 billion, or about $7.5 billion more than was reported in the prior survey. * Prepared by Joseph Burns, Economist, Banking Section, Division of Research and Statistics. Not tor quotation or publication QUARTERLY SURVEY OF BANK LOAN COMMITMENTS AT SELECTED LARGE U. S. BANKS 1/ Table 1: NEW AND UNUSED COMMITMENTS (Billions of dollars, not seasonally adjusted) Takedowns, expirations, New commitments made and cancellations during during 3-months ending 3-months ending July 311 Oct. 311 Jan. 31 July 31 Oct. 31 Jan. 31 Unused Commitments Change during 3-months ending July 31 Oct. 31 Jan.31 Uutstanding on Jan. 31, 1970 Grand total commitments 19.1 13.0 13.8 19.4 9.7 6.4 - .3 3.2 7.4 62.7 Total-Comm. & Indust. Total-Nonbank Finan. Institutions Total-Real Estate Mortgages 15.4 9.8 10.4 15.7 8.2 1.8 - .3 1.6 8.6 50.8 2.7 2.1 2.3 2.6 .6 3.0 .1 1.5 - .8 9.1 1.0 1.0 1.1 1.2 1.0 1.6 .1 3/ - .5 2.9 .9 .7 .8 .8 1.1 1.1 1.1 3.2 .7 2.5 .7 2.9 1.3 3.2 1.0 2.4 1.2 1.2 4.5 3.3 3.7 4.6 3.4 10.2 .7 6.1 .4 6.3 .4 10.6 .5 1.7 1.1 1.3 MEMO: Const. Loans (Included above) Total-Comm. & Indust. Term Loans Revolving Credits Total Term & Revolving 2/ Confirmed Lines of Credit Other Commitments - 3/ - .4 - .4 2.3 - .2 3/ - .3 .1 - .5 1.7 1.2 13.3 2.6 - .1 - .1 1.5 15.5 4.4 .4 1.2 .7 - .3 .2 7.4 .3 33.4 1.8 1.6 3/ 2.2 .2 - .9 5.5 1.7 .1 - Total-Nonbank Finan. Institutions Finance Companies For Mortgage Warehousing All other Total-Real Estate Mortgages Residential Other 1/ -1.1 .5 .4 .4 .5 .4 .4 - .1 3/ 3/ 1.5 .5 .5 .5 .4 .1 .4 .1 .4 .2 2.1 .4 .6 .4 .6 .3 .8 .5 .7 .4 .6 .5 1.1 .1 3/ 3/ 3/ .2 .3 .9 2.0 Participants in Quarterly Interest Rate Survey with total deposits of - more than banks). (43 billion $1 This item may exceed sum of previous two items because some banks report combined total only. Less than $50 million. - B - 3 Table 2: VIEWS ON COMMITMENT POLICY Number of Banks Total number of banks responding: Jan. 31 1969 Apr. 30 1969 July 31 1969 Oct. 31 1969 Jan. 31 1970 48 48 48 48 48 Unused commitments in the past Three months have: Risen rapidly Risen moderately Remained unchanged Declined moderately Declined rapidly Takedowns in the past three months have: Risen rapidly Risen moderately Remained unchanged Declined moderately Declined rapidly Commitment policies in the past three months were: 1/ Much more restrictive Somewhat more restrictive Unchanged Less restrictive Much less restrictive Table 3: Indicated Change More restrictive EXPLANATION OF RECENT CHANGE IN NEW COMMITMENT POLICIES AS INDICATED IN THE CURRENT SURVEY Number of Banks Indicating Change Reasons for Change (Number of banks) Both Reduced Demand Availability Increased Loan Demand of Funds A nd Funds 18 Decreased Loan Demand Reduced Availability of Funds Both Demand And Funds Less restrictive 1/ Only 47 banks responded to this item in the January 31, 1970 Survey. SUPPLEMENTAL APPENDIX C: INTEREST RATES PAID ON SAVINGS DEPOSITS AND SINGLE MATURITY, SMALL DENOMINATION TIME DEPOSITS AS OF FEBRUARY 2, 1970* Following the increase in the maximum permissible rates of interest payable by member banks on savings and other time deposits on January 21, 1970, the overwhelming majority of member banks in all Federal Reserve Districts and in all bank size classes moved immediately to the new ceilings on small denomination, single maturity time deposits. A substantial majority of banks also moved to the new 4-1/2 per cent ceiling on regular savings deposits, but the increases were less universal than for time deposits and showed more variation by District and size of bank. These are the principal conclusions derived from a special survey of the maximum rates on savings deposits and on single maturity time deposits issued in denominations of less than $100,000 which the Reserve Banks conducted as of February 2, 1970, at the Board's request.-The banks surveyed were the sample of about 1,400 member banks that report regularly in the quarterly survey of interest rates on time and savings deposits--a group which includes all member banks with $20 million or more of time and savings deposits of individuals, partnerships and corporations and a sample representation of smaller banks. These banks account for a high percentage of all time and savings deposits at member banks. Savings deposits. Between January 21 and the February 2 survey date, three-fourths of the sample banks increased their offering rates on savings deposits above 4 per cent. At the end of last October, four-fifths of all member banks holding 95 per cent of all regular savings deposits were at the old 4 per cent ceiling. Nearly all of the banks that raised rates went to the new 4-1/2 per cent ceiling, with a few small banks that had been offering a rate below the old ceiling moving to 4 per cent. Most banks that made no change were at the old ceiling, but 7 per cent of all sample banks were still offering 3-1/2 per cent or less on savings deposits on February 2. Both the proportion of banks raising rates on savings accounts and the proportion increasing their maximum rate to 4-1/2 per cent by February 2 varied directly with the size of bank, as shown in * Prepared by Caroline H. Cagle, Economist, Banking Section, Division of Research and Statistics. 1/ This survey did not cover rates on multiple maturity time deposits, where the only change in ceiling rates was an increase for maturities of less than 90 days from 4 to 4-1/2 per cent. 2/ Some banks that reported no change in the maximum rate paid on savings deposits and on single maturity consumer-type time deposits as of February 2 indicated rate changes would be discussed at the next meeting of their board of directors. C- 2 Table 1. Nearly all of the largest institutions (total deposits of $500 million and over) had increased their rate to 4-1/2 per cent. In contrast, less than two-thirds of the smallest banks (deposits of less than $10 million) had done so, and as many as 13 per cent of the banks of this size were still paying 3-1/2 per cent or less. Banks paying these low rates, many of which were located in the middle west, held relatively little savings deposits. Some geographic differences also were noted in the proportion of banks raising rates on savings deposits. This probably reflects a number of factors, including variations among districts in the proportions of small vs. large banks, in the degree of financial sophistication of depositors, and in the extent and intensity of competition for savings. Among Federal Reserve Districts the proportion of sample banks raising rates varied from about half in the St. Louis and Minneapolis Districts-where rates have been relatively low for some years--to nearly all in the Dallas and San Francisco Districts--where competition for savings deposits recently has been keen. Single maturity, small denomination time deposits. Competition for small denomination time deposits, other than savings, has been so strong in recent years that nearly all banks in the country were paying the 5 per cent ceiling in late 1969. Inflows had been substantial and at the end of last October, member banks held $45 billion of these deposits, about three-fifths as much as they held in savings deposits. Nevertheless, with increasingly higher rates being offered on competing market instruments, inflows into these deposits had slowed appreciably in 1969, and over the three months ending last October, had almost ceased. More than nine-tenths of the sample banks reported on February 2, 1970, that they offered a small denomination, single maturity time deposit instrument with a maturity of 1 to 2 years, and four-fifths of the sample offered an instrument of this kind with a maturity of 2 years or more. Between January 21 and February 2 about nine-tenths of the sample banks offering these instruments raised their maximum rate. These banks, with few exceptions, moved to the new ceilings of 5-1/2 per cent for maturities of 1 to 2 years and to 5-3/4 per cent of maturities of 2 years and over. (See Tables 2 and 3.) For single maturity instruments with maturities of less than 1 year--where there was no change in the ceiling rate--the sample banks continued to offer 5 per cent. Of the issuing banks, those not taking advantage of the new higher ceilings for instruments with maturities over 1 year constituted about 10 per cent or less of the total in all size classes except the smallest (total deposits of less than $10 million). In this size class, C-3 26 per cent of the banks stayed with the old 5 per cent ceiling for maturities of 1 to 2 years, and 18 per cent did so for maturities of 2 years and over. These institutions, which are located for the most part in smaller communities, generally face less competition from market instruments and from other banks and savings institutions than their larger competitors. C-4 Table 1 REGULAR SAVINGS DEPOSITS: MAXIMUM INTEREST RATE PAID BY MEMBER BANKS, FEBRUARY 2, 1970 (Percentage of sample banks in each group) Group All sample banks All sample banks 100 Banks raising rate since January 21, 1970 Maximum rate (per cent) 4 or Total 4-1/2 less 77 75 Banks not raising rate Maximum rate (per cent) 3 or 4 3-1/2 less Total 23 Size group (total deposits in $ million) Under 10 10-50 50-100 100-500 500-1,000 1,000 and over 100 100 100 100 100 100 Federal Reserve District Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco 100 100 100 100 100 100 100 100 100 100 100 100 75 68 58 77 78- 82 78 50 39 83 92 93 1/ Includes one bank that raised its rate to 4-1/4 per cent. 16 3 4 C - 5 Table 2 SINGLE MATURITY TIME DEPOSITS IN DENOMINATIONS OF LESS THAN $100,000 WITH MATURITIES OF 1 BUT UNDER 2 YEARS: MAXIMUM RATES PAID BY MEMBER BANKS, FEBRUARY 2, 1970 (Percentage of sample banks in each specified group) Group All sample banks All sample banks 100 Banks raising rate since January 21, 1970 Maximum rate (per cent) 5 or less 5-1/2 Total 88 88 1/ Banks not raising rate Maximum rate (per cent) 4-1/2 or less 5 Total 12 11 Size group (total deposits in $ million) Less than 10 10-50 50-100 100-500 500-1,000 1,000 and over 100 100 100 100 100 100 73 89 90 93 100 98 Federal Reserve District Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco 100 100 100 100 100 100 100 100 100 100 100 100 1/ Less than 0.5 per cent. NOTE: Excludes banks that did not offer an instrument of the type indicated. C - 6 Table 3 SINGLE MATURITY TIME DEPOSITS IN DENOMINATIONS OF LESS THAN $100,000 WITH MATURITIES OF 2 YEARS AND OVER: MAXIMUM RATES PAID BY MEMBER BANKS, FEBRUARY 2, 1970 (Percentage of sample banks in each specified group) Group All sample banks All sample banks 100 Banks raising rate since January 2 1, 1970 Maximum rate (per cent) 5 or Total 5-3/4 5-1/2 less 91 91 1/ 1/ Banks not raising rate Maximum rate (per cent) 4-1/2 or less 5 Total 9 9 1/ Size group (total deposits in $ million) Less than 10 10-50 50-100 100-500 500-1,000 1,000 and over 82 92 94 93 100 98 Federal Reserve District Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco 1/ Less than 0.5 per cent. NOTE: Excludes banks that did not offer an instrument of the type indicated. 

Federal Reserve (1970, March 9). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19700310_part1

@misc{wtfs_greenbook_19700310_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1970},
  month = {Mar},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19700310_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}