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 December 10, 1971 By the Staff Board of Governors of the Federal Reserve System SUPPLEMENTAL NOTES The Domestic Economy Inventories. Book value of retail trade inventories declined at a $0.5 billion annual rate in October, GAAF outlets declined. as stocks at automotive and Based on the advance retail sales estimate, the retail stock-sales ratio declined slightly, from 1.45 to 1.44. For total manufacturing and trade stocks, the October increase was at a $5.7 billion rate compared with $6.1 billion in the third quarter. The turnaround from negative to positive in manufacturing stocks almost offset the switch from positive to negative at retail. The over- all inventory-sales ratio rose from 1.55 in September to 1.56 in October. Manufacturers' inventory and sales anticipations. surveyed in November, When manufacturers anticipated adding to the book value of their inventories at an annual rate of $5.2 billion in the fourth quarter; this was slightly higher than their anticipations taken three months earlier, and if realized would be the highest rate since 1969-III. For the first quarter of next year they anticipate a $2.4 billion rate of accumulation. However, inventory growth fell short even of the more reliable second anticipation in the two latest quarters, with the actual third quarter rate a rundown instead of the anticipated $1.6 billion rate buildup. Third quarter sales also declined rather than increasing as anticipated. - 2 - For sales, a slight increase is expected in the fourth quarter and a 3.2 per cent rise (quarterly rate) in the first quarter, resulting in a rise in the inventory-sales ratio in December and then a drop to 1.70 by March. The amount and percentage of inventory reported as excess (net) were unchanged from June to September and were below 1970 levels. -3The Domestic Financial Situation Mortgage quality. The quality of home mortgage debt outstanding deteriorated further during the third quarter, according to the Mortgage Bankers Association after-the-fact delinquency and foreclosure series, The average delinquency which are heavily weighted with FHA and VA loans. rate of 3.59 per cent was the highest for any third quarter in the history of the series, which began in 1953. The further rise partly re- flected an additional spurt in delinquency rates on loans under FHA's Sec. 235 program that subsidizes interest rates down to 1 per cent for eligible lower-income homeowners. Delinquency rates on these subsidized loans continued to run more than twice the average rates indicated for other types of FHA-insured loans in the MBA series. Meanwhile, foreclosure rates edged up to a new third-quarter high of .41 per cent. DELINQUENCY AND FORECLOSURE RATES ON HOME MORTGAGES (Per cent) Third quarter averages 1954-61 1962-71 1966 1967 Third quarter 1968 1969 1970 Delinquent 2.66 3.11 3.09 3.15 2.93 2.91 3.10 In foreclosure n.a. .32 .36 .31 .26 .25 .31 NOTE: 1971 3.59 Mortgage Bankers Association survey based on several million mortgages on 1-to 4-family properties held or serviced by approximately 400 member respondents, largely involving FHA and VA loans. .41 -4- Monetary aggregates. The revisions to recent M1 data noted in the Greenbook now have been completed and the resulting rates of change are shown in the revised Monetary Aggregates table. The annual rate of decline in M 1 for September has been reduced to -2.1 from the -3.2 per cent shown earlier, while October now shows a 0.5 per cent rate of growth as compared with the previous 1.6 per cent rate of decline. The annual rate of increase for November has been reduced to 0.5 per cent from the 1.1 per cent rise shown earlier, a somewhat smaller downward adjustment than was anticipated. This smaller November adjustment is not related to the effects of the revision but reflects final figures for the last week of the month which came in considerably stronger than the preliminary unpublished estimate. - 5 - MONETARY AGGREGATES (Seasonally adjusted changes) Nov.1971 SOct. QI QI QIII Oct. Nov. Annual percentage rates 1. 2. 3. M 1 (Currency plus private demand deposits) 9.1 10.6 3.7r 18.1 12.4 4.4r 7.lr 6 .8p 19.0 14.7r 7.4r 9.1r 8.3p 10.9 8.4 7.6 4.8 Total time and savings deposits 28.8 14.7 8.2 17.1 9.6 p Time and savings deposits other than large CD's 27.5 14.0 5.3 13.7 13.5p M2 (Ml plus commetcial bank time and savings deposits other than large CD's) M 3 (M2 plus savings deposits at mutual savings banks and S&L's) 4. Adjusted bank credit proxy 5. Other aggregates a) b) 12.2p Billions of dollars c) Negotiable CD's (Monthly or monthly average) Nondeposit sources (Monthly or monthly average) r - Revised p - Preliminary .8 1.1 d) -1.5 -. 9 -. 1 .8 .5p - 6 - INTEREST RATES 1971 Highs Aug. Lows 13 Nov. 15 Dec. 9 Short-Term Rates Federal funds (wkly. avg.) 5.59 (9/15) 3.29 (3/10) 5.59 (8/11) 4.93(11/10) 4.59 3-month Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies 5.53 5.62 10.00 5.70 Comm. paper (90-119 day) 5.88 CD's (prime NYC) Most often quoted new 5.75 6.05 Secondary market 6-month Treasury bills (bid) Bankers' acceptances Comm. paper (4-6 mo.) Federal agencies 5.84 5.75 5.88 6.02 (7/19) (8/23) (8/17) (7/30) (8/18) 3.22 (3/11) 5.15 3.88 (3/10) 5.,62 4.94 <3/17) 7.89 3.27 (2/24) 5.58 4.25 <4/12) 5.68 4.11 4.75 4.50 5.90 6.64 4.33(11/10) 4.17 4.16 4.88 4.75 (8/11) 3.62 (3/24) 5.75 4.75(11/10) 4.75 (8/18) 3.80 (3/17) 5.88 (8/11) 4.88(11/10) 4.80 (7/24) 3.35 (3/11) 5.51 (8/23) 4.00 (3/10) 5.75 <e) (8/18) 4.00 (3/29) 5.88 (7/30) 3.53 (3/10) 5.83 4.31 4.88 (e) 5.00 4.43(11/10) 4.30 4.62(e) 4.88 4.55 CD's (prime NYC) Most often quoted new Secondary market 1-year Treasury bills (bid) CD's (prime NYC) Most often quoted new Prime municipals 6.00 (8/11) 4.00 (3/24) 6.00 6.40 (8/18) 3.70 (3/3) 5.00(11/10) 4.88 6.25 <8/11) 5.00(11/10) 5.02 6.01 (7/28) 3.45 (3/11) 5.85 6.25 (8/11) 3.60 (8/12) 4.38 (3/3) 6.25 2.15 (3/24) 3.60 4.40 4.54 5.12(11/10) 5.13 2.70(11/10) 2.90 Intermediate and Long-Term Treasury coupon issues 5-years 20-years 7.03 (8/10) 4.74 (3/22) 6.78 6.56 (6/15) 5.69 (3/23) 6.32 5.71 5.84 5.79 6.00 Corporate Seasoned Aaa Baa 7.71 (8/13) 7.05 <2/16) 7.71 8.93 (1/5) 8.33 (2/25) 8.87 7.26 8.37 7.24 8.42 8.23 <5/20) 6.76 (1/29) 7.97 7.12(11/12) 7.08 Municipal Bond Buyer Index Moody's Aaa 6.23 (6/24) 5.00 (3/18) 6.03 5.90 (6/30) 4.65 (10/21)5.80 5.19(11/10) 5.23 4.90(11/11) 5.00 Mortgage--implicit yield in FNMA auction 1/ 8.07 (7/26) 7.32 (4/12) -- 7.70 New Issue Aaa 7.6(11/2 Yield on short-term 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. e - estimated. 1/ - 7- International Developments Direct investment control. The Office of Foreign Direct Investment issued an amendment to its regulations on December 9 which had the effect of giving direct investors a grace period of the first two months in 1972 for complying with the OFDI regulations as they would have affected 1971. Direct investors are allowed to credit towards their 1971 compliance requirements long-term borrowings abroad or net reductions in amounts due from foreign affiliates effected during the first two months of 1972. In addition, the requirement that they repatriate unused proceeds of foreign borrowings at year-end was suspended. The likely effect of these amendments will be to eliminate any abnormal return flow of funds that would have resulted from speculative outflows during 1971, and it is also likely that corporations will take advantage of the grace period to delay their ordinary year-end windowdressing until some time early in 1972. CORRECTIONS: Section I, page 4, line 4 of paragraph 1, insert "in" after however and before the tax. Section I, page 5, line 8 of Outlook change foreign "inventories" to foreign currencies. Section II, page 20, caption in lower part of the table should be Per cent change in "November" from a year earlier (not August). Section III - page 3, line 1 of last paragraph should read offsetting some of the expansion in "Government deposits" (not interbank balances). Section III, page 16, line 5, last word should be "eased" (not evened). A- 1 SUPPLEMENTAL APPENDIX A: LOAN COMMITENTS* The Federal Reserve survey of loan commitment activity at 48 large banks in the three months ending October 31, 1971, confirms the Although outstanding unused general weakness in business loan demand. commitments rose to the highest level in the three years of the survey, the increase in unused commitments was the smallest in one and a half years. At the same time, the quarter-to-quarter declines in the flow of new commitments and in takedowns were the largest in the history (See Table 1.) As indicated in Table 2, although one of the survey. fourth anticipated some pickup, two thirds of the respondents expected their rate of takedowns to remain modest (unchanged) in the three About one fourth of those surveyed have months ending January, 1972. adopted a less restrictive commitment policy than existed in the previous three months; no respondent has adopted a more restrictive policy. As indicated in Table 3, those adopting less restrictive policies explain their action by weak loan demand and the availability of funds. The weakness in new commitments and takedowns, expirations and cancellations centered mainly in the business loan category and in loans to finance companies. However, the continued policy of business firms to extend the maturity structure of their liabilities is indicated by the increase in both new commitments and takedowns for term loans over the three month period. * Prepared by Marilyn Barron, Research Assistant, Banking Section, Division of Research and Statistics. QUARTERLY SURVEY OF BANK LOAN COMMITMENTS AT SELECTED LARGE U.S. October 31, 1971 Table 1: NEW AND UNUSED COMMITMENTS (Billions of dollars, not seasonally adjusted) New commitments made during 3-month ending Apr. 31 IJuly 311 Oct. 31 i Grand total commitments Total-Comm. & Industrial Total-Nonbank Financial Institutions Total-Real Estate Mortgages NEMD: Const. Loans (included above) S Total-Comm. & Industrial Term Loans Revolving Credits Total Term & Revolving 2/ Confirmed Lines of Credit Other Commitments Total-Nonban Financial Institutions Finance Companies For Mortgage Warehousing All Other Total-Real Estate Mortgages Residential Other A m Takedowns, expirations and cancellations during 3-months ending IAnr. 31lJulv 311 Oct. 31 ' 3 . r O BANKS 1/ 'Unused commitments Change during 3-months Outstanding endine on /Aar_ -,-r--- 307Jalu -- . ?II 3 n~t. t 1l Onr-t 'l'l 'AT 24.5 35.0 21.2 20.7 32.0 18.8 3.7 2.9 2.4 67.5 18.9 27.4 16.8 16.0 24.8 15.1 2.9 2.5 1.7 51.7 4.0 5.5 2.9 3.7 5.2 2.4 0.3 0.4 0.5 12.2 1.6 2.1 1.5 1.1 2.0 1.3 0.5 3/ 0.2 3.6 1.2 1.4 1.0 0.7 1.2 1.0 0.4 0.2 3/ 2.9 1.9 4.8 1.9 6.8 2.2 3.8 1.6 4.7 1.7 6.4 1.8 3.5 0.3 0.1 0.1 0.4 0.4 0.3 13.6 6.9 8.9 6.2 6.7 8.4 5.6 0.2 0.5 0.6 16.5 11.1 0.9 14.9 3.5 9.5 1.1 8.8 0.5 13.4 3.0 9.0 0.5 2.3 0.4 1.5 0.5 0.5 0.6 31.0 4.2 2.2 3.5 1.7 2.2 3.4 1.3 0.1 0.4 7.7 0.6 1.2 0.9 1.1 0.5 0.7 0.7 0.9 0.7 1.0 0.5 0.7 0.2 0.1 0.1 0.4 1.9 2.6 0.6 1.0 0.9 1.2 0.8 0.8 0.4 0.6 0.8 1.3 0.6 0.7 0.2 0.4 > 3/ 2.3 2/ 0.1 0.2 -0.1 0.1 Participants in Quarterly Interest Rate Survey with total deposits of more than $1 billion (4 2 banks). This item may exceed sum of previous two items because some banks report combined total only. Less than $50 million. NOTE: Figures may not add to total due to rounding. ' 1.3 2.3 -- ATable 2: 3 VIEWS ON COMMIMENT POLICY Total number of banks responding: Jan. 31 1970 Apr. 30 1970 July 31 1970 Oct. 31 1970 Jan. 31 1971 Apr. 30 1971 July 31 1971 Oct. 31 1971 48 48 48 48 47 48 48 48 Unused commitments 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 to three months ago is: Much more restrictive Somewhat more restrictive Unchanged Less restrictive Much less restrictive Table 3: Indicated Change EXPLANATION OF RECENT CHANGE IN NEW COMMITMENT POLICIES AS INDICATED IN THE CURRENT SURVEY Number of Banks Indicating Change More restrictive Less restrictive 11 Reasons for Change Increased Loan Demand Reduced Availability of Funds Both Demand And Funds 0 0 0 Decreased Loan Demand Increased Availability of Funds Both Demand And Funds 5 0 6 B- 1 SUPPLEMENTAL APPENDIX B: QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES* Consistent with other information on conditions in loan markets, the Survey of Bank Lending Practices for the three months ending November 15, indicated relatively weaker loan demands and a Reflecting declines in greater availability of funds. (See Table 1.) time of the previous survey to rate from 6 per cent at the the prime split rates of 5-1/2 per cent to 5-5/8 per cent in effect when this survey was taken, the majority of respondents participating in the survey noted easier policies regarding interest rates. Respondents, in addition, indicated some easing of nonprice terms and a greater aggressiveness in seeking business from new and existing customers, including those outside of their bank's local service area. Somewhat more widespread availability of credit also was shown as bankers reported they were more willing to offer funds for purposes such as consumer installment loans, mortgage loans for single family housing, term loans, and participations. Weaker loan demands, which were noted at about 40 per cent of the banks in the sample, were indicated to be the major reasons for easier conditions in loan markets. A few respondents commented that businesses have obtained a more comfortable liquidity position from nonbank sources, thus reducing their requirements for bank loans. Nearly 30 per cent of the respondents, nonetheless, expected stronger loan demands in the next quarter. Examination of the responses to the survey by size of bank, as seen in Table 2, shows small differences between banks with deposits of $1 billion or more and those banks with deposits less than $1 billion. Policies at larger banks were somewhat more liberal in extending credit Relatively more of the smaller banks moved to established customers. toward an easier policy regarding interest rates charged on loans to finance companies. Regional differences among banks, shown in Table 3, in general, did not seem striking. * Prepared by Marilyn Barron, Research Assistant, Banking Section, Division of Research and Statistics. NOT FCR QUOTATION OR TABLE 1 PUBLICATION QUARTERLY (STATUS SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. 1/ NOVEMBER 15, 1971 COMPARED TO THREE MONTHS EARLIER) OF POLICY ON (NUMBER OF BANKS & PERCENT OF TOTAL BANKS REPORTING) MUCH STRONGER TOTAL BANKS PCT BANKS PCT MODERATELY STRONGER ESSENTIALLY UNCHANGED MODERATELY WEAKER BANKS BANKS BANKS PCT PCT PCT MUCH WEAKER BANKS PCT STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) COMPARED TC THREE MONTHS AGO 125 100.0 23 18.4 52 41.6 48 ANTICIPATED CEMAKD IN NEXT 3 MONTHS 124 100.0 37 29.8 75 60.5 11 MUCH FIRMER POLICY ANSWERING QUESTION BANKS PCT BANKS PCT MODERATELY FIRMER POLICY BANKS PCT 38.4 8.9 ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY BANKS BANKS PCT PCT 1 0.8 0 0.0 MUCH EASIER POLICY BANKS PCT LENDING TO NCNFINANCIAL BUSINESSES TERMS ANC CONCITIONS: 39 31.2 64.8 5 4.0 1.6 107 85.6 12.8 0 0.0 7 5.6 114 91.2 3.2 0 0.0 0.0 2 1.6 108 87.1 11.3 0 0.0 0.C 0 0.0 105 84.0 20 16.0 0 0.0 100.0 99 71.7 27 21.8 0 0.0 124 100.0 104 83.9 20 16.1 0 0.0 123 100.0 96 78.1 19 15.4 0 0.0 INTEREST RATES CHARGED 125 100.0 0 0.0 0 0.0 COMPENSATING OR 125 100.0 O 0.0 2 125 100.0 0 0.0 124 100.0 C ESTABLISIEC CUSTOMERS 125 100.0 0 NEW CUSTOMERS 124 STANDARDS CF CREDIT WORTHINESS MATURITY CF TERM LCANS REVIEWING CRECIT LOCAL SUPPORTING BALANCES LINES CR LCAN APPLICATIONS SERVICE AREA NONLOCAL SERVICE CUSTOMERS AREA CUSTOMERS 1/ SLRVEY OF LENCING PRACTICES AT AS dF NOVEMBER 15. 1971. 125 LAPGE BANKS AEPORTIAG IN THE FEDERAL RESERVE QUARTERLY INTEREST RATE SURVEY NOT FOR QUOTATION 1 (CONTINUEO) TABLE OR PUBLICATION ANSWERING QUESTION BANKS PCT MUCH FIRMER POLICY BANKS PCT MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY BANKS PCT BANKS BANKS PCT PCT MUCH EASIER POLICY BANKS PCT FACTCRS RELATING TO APPLICANT 2/ VALUE AS CEPCSITCR OR SOURCE OF COLLATERAL BUSINESS 123 100.0 1 0.8 7 5.7 102 82.9 13 10.6 0 0.0 INTENDED USE OF THE LCAN 125 100.0 1 0.8 3 2.4 116 92.8 5 4.0 0 0.0 INTEREST RATES CHARGED 125 100.0 0 0.0 1 0.8 74 59.2 47 37.6 3 2.4 COMPENSATING OR SUPPORTING BALANCES 125 100.0 0 0.0 2 1.6 119 95.2 4 3.2 0 0.0 ENFORCEMENT OF BALANCE REQUIREMENTS 125 100.0 0 0.0 3 2.4 120 96.0 2 1.6 0 0.0 ESTABLISHING NEW OR LARGER CREDIT 125 100.C 1 0.8 3 2.4 96 76.8 25 20.0 0 0.0 LENDING TO "NCNCAPTIVE" FINANCE COMPANIES TERMS AND CONDITIONS: LINES ANSWERING SQUESTION BANKS WILLINGNESS TO MAKE OTHER PCT CONSIDERABLY LESS WILLING BANKS PCT MODERATELY LESS WILLING ESSENTIALLY UNCHANGED MODERATELY MORE WILLING BANKS PCT BANKS BANKS PCT PCT CONSIDERABLY MORE WILLING BANKS PCT TYPES OF LCANS TERM LOANS TO BUSINESSES 125 100.0 0 0.0 3 2.4 100 80.3 22 17.6 0 O.C CONSUMER 124 100.0 0 0.0 1 0.8 86 69.4 33 26.6 4 3.2 SINGLE FAMILY MORTGAGE LCANS 122 100.0 2 1.6 4 3.3 88 72.2 27 22.1 1 0.8 MULTI-FAMILY MORTGAGE LCANS 121 100.0 1 0.8 5 4.1 110 91.0 5 4.1 0 0.0 ALL OTHER MORTGAGE LOANS 123 100.0 0 0.O 3 2.4 104 84.6 16 13.0 0 0.0 PARTICIPATICN LOANS kITH CORRESPCNCENT BANKS 125 100.0 0 C.O 2 1.6 104 83.2 19 15.2 0 0.0 LCANS TO BROKERS 123 100.0 0 0.0 0 0.0 110 89.4 12 9.8 1 0.8 INSTALMENT LOANS 2/ FOR THESE FACTORS, FIRMER MEANS THE FACTORS WERE CCNSIERED MCRE CREDIT REQUESTS. AND EASIER MEANS THEY WERE LESS IMPORTANT. IMPORTANT IN MAKING DECISIONS FOR APPROVING NOT FOR QUOTATION OR COMPARISON TABLE 2 PUBLICATION OF QUARTERLY CHANGES IN BANK LENDING PRACTICES AT BANKS GROUPED BY SIZE OF TOTAL DEPOSITS 1/ NOVEMBER 15, 1971, COMPARED TO THREE MONTHS EARLIER) (STATUS OF POLICY ON (NUMBER OF BANKS IN EACH COLUMN AS PER CENT OF TOTAL BANKS ANSWERING QUESTION) SIZE TOTAL $1 & CVER UNDER t$ OF BANK MUCH STRONGER $1 & CVER UNDER $1 -- TOTAL DEPOSITS IN BILLIONS MODERATELY STRONGER ESSENTIALLY UNCHANGED MODERATELY WEAKER $I 6 OVER $1 & OVER $S £ OVER UNDER $1 UNDER $1 UNDER $1 MUCH WEAKER $1 E OVER UNDER $I STRENGTH CF DEMANC FOR COMMERCIAL AND INCUSTRIAL LCANS (AFTER ALLOWANCE FOP BANK'S bSLAL SEASONAL VARIATICN) COMPARED TC THREE MONTHS AGO 100 100 0 1 15 21 46 39 37 39 2 0 ANTICIPATED DEMAND 10 100 0 1 30 30 61 60 9 9 0 0 IN NEXT 3 MONTHS TOTAL $1 & OVER LENDING TO NCNFINANCIAL UNDER $1 MODERATELY FIRMER MUCH FIRMER $1 & OVER UNDER $1 $1 & OVER UNDER $1 ESSENTIALLY UNCHANGED MODERATELY BASIER $1 & OVER $1 & OVER UNDER $1 UNDER It MUCH EASIBR $1 & OVER UNDER $I BUSINESSES TERMS AND CCNCITIONS: INTEREST RATES ChARGED 100 100 0 C 0 0 31 31 67 63 2 6 COMPENSATING 1CO 100 C C 0 3 87 84 13 13 0 0 STANCARCS OF CRECIT kCRTHINESS 100 100 0 C b 6 90 91 4 3 0 0 MATURITY OF TERM LOANS ICC 100 0 C C 3 89 86 11 11 0 0 ESTABLIShED CUSTOMERS 100 100 0 0 0 0 78 89 22 11 0 0 NEW CUSTCMERS 100 100 0 C 6 7 73 70 21 23 0 0 ICC 100 0 C 0 0 81 86 19 14 0 0 1CO 100 0 1 10 3 73 82 17 14 0 0 OP SUPPORTING BALANCES REVIEWING CRECIT LINES CR LOCAL SERVICE KOKLOCAL I/ AREA SERVICE LOAN APPLICATIONS CUSTOMERS AREA CUSTOMERS SURVEY OF LENDING PRACTICES AT 54 LARGE BANKS (DEPOSITS OF $1 BILLION CP MOE) AND 71 SMALL BANKS (DEPOSITS NOVEMBER 15, 1971. $1 BILLICK) PEPCRTING IN THE FECERAL RESERVE QUARTERLY INTEREST RATE SURVEY AS CF IF LESS THAN TABLE 2 NOT FOR QUOTATION OR PUBLICATION (CGhTINUED) SIZE NUMBER ANSWERING QUESTION StI OVER FACTORS RELATING TO UNDER $t 100 100 INTENDED USE OF 100 100 TC TERMS $1 & OVER UNDER $1 TOTAL DEPOSITS IN BILLIONS -MODERATELY ESSENTIALLY MODERATELY EASIER FIRMER UNCHANGED POLICY POLICY POLICY $1 & OVER UNDER s$ l$ & OVER UNDER $I $1 & OVER UNDER $1 MUCH EASIER POLICY t$1 OVER UNDER $1 APPLICANT 2/ VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS LENDIGl OF BANK MUCH FIRMER POLICY THE LCAN "NCNCAPTIVE" FINANCE COMPANIES ANC CONCITIONS: INTEREST RATES CHARGED COMPENSATING GR ENFCRCEMENT OF SUPPORTING BALANCES BALANCE REQUIREMENTS ESTABLISHING NEW OR LARGER CREDIT LINES NUMBER ANSWERING CUESTION $1 & OVER WILLINGNESS TC MAKE TERM LOANS TO LCANS CTHER MERTGAGE PARTICIPATICN LOANS COPRESPONCENT BANKS 2/ $l 0 OVER $1 & OVER UNOER $1 UNDER St MODERATELY MORE WILLING $1 E OVER UNDER $l 100 FAMILY MORTGAGE LCANS LOANS TO EROKERS UNDER $1 ESSENTIALLY UNCHANGED 100 BUSINESSES 100 MULTI-FAMILY MORTGACE LCANS ALL l$ L OVER MODERATELY LESS WILLING CTHER TYPES OF LOANS CONSUMER INSTALMENT SINGLE UNDER $I CONSIDERABLY LESS WILLING 1CO LOANS 100 WITH 100 100 1C0 100 FOR THESE FACTORS. FIRMER MEANS THE FACTORS WERE CONSIDERED MORE CREDIT RECUESTS. AND EASIER MEANS THEY WERE LESS IMPORTANT. IMPORTAnT IN MAKING DECISIONS FOR AOPPPVING CONSIDERABLY MORE WILLING $1 & OVER UNOER $1 NOT FOR QUOTATION OR TABLE 3 PUBLICATION QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. COMPARED TO THREE MONTHS EARLIER NOVEMBER 15, 1971 STATUS OF POLICY ON (NUMBER OF BANKS) ALL OSTS NEW YORK BOSTON TOTAL CITY CUTSIDE PHILADEL. CLEVELAND RICHMOND ST. ATLAN- CHICTA AGC LOUIS 1/ MINNEAPOLIS KANS. CITY DALLAS SAN FRAN STRENGTH OF DERAND FCR CCMPERCIAL AND INCUSTRIAL LCANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATIONI COMPARED TC 3 MONTHS AGO 125 1 23 52 48 1 PUCH STPCRGER NOCERATELY STRONGER ESSENTIALLY UNCHANGED MODEPATELY WEAKER MUCH WEAKER ANTICIPATED CEMAND NEXT THREE MONTPS 0 1 3 4 0 0 5 6 9 0 0 0 3 6 0 0 5 3 3 0 0 3 1 2 0 C 2 5 4 0 0 2 5 5 0 1 1 4 4 0 0 5 5 4 1 0 0 6 3 0 0 1 1 1 0 c 1 5 3 0 0 1 5 3 0 0 1 6 6 0 0 2 5 1 0 0 4 15 1 C 0 1 7 1 C 0 3 8 0 0 0 3 3 0 0 0 2 8 I C 0 3 8 1 0 1 4 5 0 0 0 8 5 2 0 0 4 4 1 0 0 1 0 1 0 0 3 6 0 0 0 1 7 1 0 0 2 9 2 0 C 0 1 6 1 C C 8 12 C 0 0 5 4 C C 0 0 1 5 0 0 0 4 6 1 C 0 3 0 O C 6 4 0 0 0 6 8 I 0 0 2 5 2 0 C 0 3 0 C 0 1 8 0 0 0 3 6 0 0 0 4 9 0 C 0 8 C C C 0 15 5 0 C C 7 2 O C 0 8 3 0 0 0 6 0 0 10 1 0 0 0 11 1 0 0 0 7 3 0 C 1 12 2 0 0 0 7 2 0 0 0 1 7 1 C C 0 9 0 0 0 0 12 1 0 124 1 37 75 11 0 MUCH STRCNGE9 MOCERATELY STRONGER ESSENTIALLY UNCHANGED MODERATELY WEAKER MUCH WEAKER LENDING TO NONFINANCIAL BUSINESSES TERMS ANC CONOITIONS INTEREST RATES CFARGEG 125 MUCH FIPMER POLICY MCOERATELY FIRMER POLICY ESSENTIALLY UKCHANGEL POLICY MOCERATE Ly tASIER PCLICY MUCH EASIER POLICY PUCH FIRMER POLICY NODERATELY FIRMER POLICY ESSENTIALLY UNCHANGEG PCLICY MGCERATELY EASIER PCLICY MUCH EASIER POLICY OF LENDING PRACTICES NGVEMBER 15, 1971. 0 3 8 C 9 125 COMPENSATING BALANCES 1/ SURVEY AS CF O 0 39 81 5 AT 0 2 167 16 O 125 LARGE BANKS REPORTINC IN 0 0 THE FEDERAL RESERVE QUARTERLY INTEREST 0 9 P 0 FATE SUPVEY NOT FOR QUOTATION OR TABLE 3 (COMTINUEDI PUBLICATION ALL DSTS NEW YORK BOSTOTAL CITY CLTSIDE TON PHILAGEL. CLEVE- RICHMONO LAND ATLANTA CHICAGO ST. LOUIS MINNEAPOLES KANS. CITY DALLAS SAN FRAN LENDIKG TO NCNFINANCIAL BUSINESSES TERMS AMB CCNDITIONS STANDARCS CF CREDIT WCRTHINESS MUCH FIRMER POLICY MODERATELY FIRMER PCLICY ESSENTIALLY UNCHANCEC PCLICY MODERATELY EASIER POLICY MUCH EASIER POLICY MATURITY OF TERM LCANS MUCH FIRMER POLICY MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGEC POLICY MOOERATELY EASIER POLICY MUCH EASIER POLICY 125 0 7 114 4 0 0 C 7 1 C 0 0 2C C CG 0 C 9 0 0 0 11 0 C 0 2 4 0 0 0 0 10 1 0 0 0 11 1 0 0 1 8 1 0 0 1 14 0 0 0 1 8 0 0 0 0 3 0 0 C 1 8 0 0 0 0 9 0 0 0 1 12 0 0 C C 6 2 0 0 C 18 2 C C 0 9 0 C 0 C 9 2 0 0 5 1 O 0 0 9 2 O 0 0 11 1 0 0 1 8 1 0 0 0 15 0 0 0 1 5 3 0 0 0 3 0 0 0 0 7 2 0 0 0 8 0 0 0 0 13 0 0 C O 7 1 O C O 19 2 0 0 0 9 0 0 0 0 9 2 0 0 0 6 0 0 0 0 7 4 0 0 0 10 2 0 0 0 9 1 0 0 0 11 4 0 0 0 7 2 0 0 0 3 0 0 0 0 8 1 0 0 0 9 0 0 0 0 10 3 0 C 0 6 2 0 C 0 16 4 0 0 0 8 1 0 0 0 8 3 0 0 1 5 0 0 C 0 8 3 0 0 1 9 2 0 0 2 6 2 0 0 10 3 0 0 0 6 3 C 0 1 1 1 0 C 0 6 3 0 0 0 7 1 0 0 1 9 3 0 C 0 7 1 0 0 C 18 2 C 6 0 0 9 2 0 0 0 6 0 0 0 0 7 4 0 0 0 10 2 0 0 0 9 1 0 0 0 12 3 0 0 0 6 3 0 0 0 3 0 0 C 0 7 2 0 0 8 0 0 0 11 2 0 124 C 2 108 14 0 REVIEWING CREDIT LINES CR LCANS ESTABLISIEC CUSTOMERS MUCH FIRMER POLICY MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER PCLICY MUCH EASIER POLICY MUCH FIRMER POLICY MCDERATELY FIRMER POLICY ESSENTIALLY UNCHANCEC PCLICY MODERATELY EASIER POLICY MUCh EASIER POLICY SERVICE C 0 105 20 C -4 124 NEW CUSTOMERS LOCAL 125 AREA CUSTOMERS MUCH FIRMER POLICY MOCERATELY FIRMER POLICY ESSENTIALLY UNCHANCEL PCLICY MODERATELY EASIER POLICY MUCH EASIER PCLICY 0 8 89 27 0 2 124 0 0 104 2G 0 0 9 0 0 NOT FOR QUOTATION OR PUBLICATION TABLE ALL DSTS LENlING TO BUSINESSES REVIEWING BOSTON NEW YORK TCTAL CITY CLTSIDE 3 (CONTINUED) PHILADEL. CLEVE- RICHMOND LAND ST. ATLAN- CHICLOUIS AGO TA MINNEAPOLIS KANS. CITY DALLAS SAN FRAN NCNFINANCIAL CREDIT LINES NONLOCAL SERVICE CR LCANS AREA CUST MUCH FIRWER POLICY MCOERATELY FIRMER POLICY POLICY ESSENTIALLY UNCHANC-E MOCERATELY EASIER PCLICY MUCH EASIER POLICY FACTCRS RELATINC 123 1 7 96 19 O 0 0 6 2 O 0 0 18 1 0 0 0 8 0 0 0 0 10 1 0 0 2 4 0 0 0 0 7 4 0 0 1 11 0 0 1 1 8 0 0 0 2 11 2 0 0 0 6 3 0 0 0 2 1 0 0 0 8 1 0 0 0 6 2 0 0 1 9 3 0 0 0 6 1 0 C 0 17 2 0 0 0 8 0 0 0 0 9 2 0 0 0 5 1 0 0 0 8 3 0 0 0 10 2 0 1 1 8 0 0 0 1 13 1 0 0 2 7 0 0 0 1 2 0 0 0 2 6 1 0 0 0 9 0 0 0 0 11 2 0 0 0 8 0 0 0 0 2C 0 0 0 0 9 0 0 0 0 11 0 0 0 0 6 0 0 0 0 11 0 0 0 10 2 0 1 0 q 0 0 0 2 12 1 0 0 0 8 1 0 0 0 3 0 0 0 0 9 0 0 0 0 8 1 0 0 1 12 0 0 0 0 6 1 1 C 0 14 6 0 0 0 0 7 4 0 0 0 3 3 0 0 0 6 5 0 0 0 6 6 0 0 0 8 2 0 0 0 9 5 1 0 1 2 5 1 0 1 2 0 0 0 4 5 0 0 0 7 2 0 0 0 8 5 6 TO APPLICANT 2/ VALUE AS CEPCSITCR OR SOURCE OF CCLLATERAL BUSINESS MUCH FIRMER POLICY MOOERATELY FIRMER PCLICY ESSENTIALLY UNCHANGED PCLICt MObERATELY EASIER POLICY MUCM EASIER POLICY INTENDEC USE CF LOAN MUCH FIRMER POLICY MOCERATELY FIRMER POLICY ESSENTIALLY UNCHANGEC POLICY MODERATELY EASIER POLICY MUCH EASIER POLICY 123 1 7 102 13 0 125 1 3 116 5 0 LENDING TC "NCNCAPTIVE" FINANCE COMPANIES TERMS ANC CONDITICNS INTEREST RATES CHARGED MUCH FIRMER POLICY MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGEt PCLICY MOCERATELY EASIER PCLICY MUCH EASIER POLICY 125 0 1 74 47 3 7 2 0 2/ FOR THESE FACTOkS, FIRMER MEANS THE FACTORS WERE CONSICERED CREDIT REQUESTS. ANb EASIcR MEANS THEY WERE LESS IMPORTANT. VCRE IMPORTANT IN MAKING OECISIONS FOR APPRnVINS NOT FCR QUOTATION TABLE OR PUBLICATION ALL DSIS NEW YORK BOSTON TOTAL CITY OUTSIDE 3 (CONTINUED) PHILADEL. CLEVE- RICHLAND MOND ATLAN- CHICTA AGO ST. LOUIS MINNFAPOLIS KANS. CITY DALLAS SAN FRAN LENDING IC "NCNCAPTIVE" FINANCE COMPANIES TERMS AND CONDITIONS: SIZE OF COMPENSATING BALANCES MUCH FIRMER POLICY MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MCOERATELY EASIER POLICY MUCH EASIER POLICY ENFORCEMENT CF BALANCE REQUIREMENT 0 2 119 4 0 0 C 8 O 0 0 0 20 0 0 0 0 9 0 0 0 O 11 0 0 0 0 6 0 0 0 0 10 1 0 0 0 11 1 0 0 1 9 0 0 0 1 13 1 0 0 0 9 0 0 0 0 3 0 0 0 0 9 0 0 0 0 9 0 0 0 0 12 1 0 C 0 8 0 0 0 0 2C 0 0 O 0 9 C 0 0 0 11 0 0 0 0 6 0 0 0 0 11 0 0 0 12 0 0 1 9 0 0 1 13 1 0 0 1 8 0 0 0 3 0 0 0 9 0 0 0 9 0 0 0 12 1 0 0 0 5 3 0 0 0 17 3 0 0 0 8 1 0 0 0 9 2 0 0 0 5 1 0 0 0 9 2 0 0 1 9 2 0 1 0 8 1 0 0 2 9 4 0 0 0 7 2 0 0 0 2 1 0 0 0 7 2 0 0 0 9 0 0 0 0 9 4 0 C C 6 2 0 0 0 ie 4 O 0 O 8 1 0 0 0 8 3 0 0 0 4 2 0 0 0 10 1 0 0 C 10 2 0 0 0 10 0 0 0 0 14 1 0 0 1 6 2 0 0 0 3 0 0 0 1 5 3 0 0 0 5 4 0 1 11 1 0 C 0 8 0 C 0 0 O 0 5 1 0 0 0 6 5 0 O 0 1 5 3 1 0 0 10 5 C 0 0 7 2 C C 0 3 C 0 0 0 7 2 0 0 0 5 4 C 125 MUCH FIRMER POLICY MOCERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY MUCH EASIER PGLICY ESTABLISHING NEW OR CREDIT LINES 125 0 3 120 2 0 LARGER MUCH FIRMER POLICY MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY MUCH EASIER POLICY 125 1 3 96 25 0 WILLINGNESS TC MAKE OTHER TYPES OF LCAhS TERM LCANS IC BUSINESSES CONSIDERABLY LESS hILLING MODERATELY LESS WILLING ESSENTIALLY UNCHANGED MODERATELY MORE MILLING CONSIDERABLY MORE WILLING CONSUMER INSTALMENT LCANS CCNSIGERABLY LESS wILLING MODERATELY LESS WILLING ESSENTIALLY UNCHANGEC MODERATELY MORE WILLING CCNSIDERABLY MORE WILLING 125 0 3 100 22 0 124 0 1 86 33 4 0 15 3 1 0 0 7 1 0 0 8 2 1 8 3 1 0 7 5 1 NOT FOR QUOTATION OR TABLE PUBLICATION ALL DSTS WILLINGNESS TC MAKE TYPES OF LOANS CONSIOERABLY LESS WILLING MODERATELY LESS WILLING ESSENTIALLY UNCHANGEC MODEPATELY MORE WILLING CONSIDERABLY MORE WILLING MULTIFAMILY MORTGAGE LOANS CONSICERAELY LESS WILLING MODERATELY LESS WILLING ESSENTIALLY UNCHANGEG MOOERATELY MORE WILLING CONSIDERABLY MORE WILLING ALL OTHER MORTGAGE LOANS CONSICERALY LESS WILLING MODERATELY LESS WILLING ESSENTIALLY UNCHANGEC MODERATELY MORE WILLING CONSIDERABLY MORE WILLING PARTICIPATION LOANS WITH CORRESPONDENT BANKS CONSIDERABLY LESS WILLING MOOERATELY LESS WILLING ESSENTIALLY UNCHANGEC MODERATELY MORE WILLING CONSIDERABLY MORE WILLING TO BROKERS CGNSIOERAELY LESS WILLING MOOEPATELY LESS WILLING ESSENTIALLY UNCIANGEC MODERATELY MORE WILLING CONSIDERABLY MORE WILLING NUMBER OF BANKS NEW YORK TOTAL CITY OUTSIDE (CONTINUED) PHILADEL. CLEVELAND RICHMONO ST. ATLAN- CHICAGO LOUIS TA MINNEAPOLIS KANS. CITY DALLAS SAN FRAN OTHER SINGLE FAMILY MORTGAGE LOANS LOANS BOSTON 3 122 2 4 88 27 1 6 2 0 0 0 16 2 0 0 0 7 1 0 0 0 9 1 0 0 0 4 2 0 0 0 4 7 0 0 0 9 3 0 1 0 7 1 0 0 0 8 7 0 1 1 6 1 0 0 0 3 0 0 0 1 8 0 0 0 1 8 0 0 0 1 9 2 1 C 0 7 1 0 0 0 17 1 0 0 0 8 0 0 0 0 9 1 0 0 0 6 0 0 0 0 10 1 0 0 0 12 0 0 1 0 8 0 0 0 0 12 2 0 0 2 7 0 0 0 0 3 0 0 0 1 8 0 0 0 I 8 0 0 0 I 12 0 0 C C 7 1 0 0 0 16 3 0 O 0 8 0 0 0 0 8 3 0 0 0 5 1 0 0 0 8 3 0 0 0 11 1 0 0 0 9 0 0 0 0 12 3 0 2 5 2 0 0 0 3 0 0 0 1 6 2 0 a 0 9 0 0 0 0 13 0 0 C 0 6 2 0 0 1 16 3 0 0 1 8 0 0 O 0 8 3 0 0 0 4 2 0 0 0 11 0 0 0 0 11 1 0 0 0 9 1 0 O 0 12 3 0 0 0 7 2 0 0 0 3 0 0 0 1 6 2 0 0 0 6 3 0 0 0 13 0 0 C 0 6 2 0 0 0 17 3 0 0 0 6 3 0 0 0 11 C 0 0 0 6 0 0 0 0 10 1 0 0 0 11 1 0 0 0 9 1 0 0 0 13 0 1 0 0 7 2 0 0 0 3 0 0 C 0 0 6 0 8 0 " 8 1 0 0 0 121 1 5 110 5 0 123 0 3 104 16 0 0 125 O 2 104 19 0 123 0 0 110 12 1 125 0 12 1 0 CONFIDENTIAL (FR) SUPPLEMENTAL APPENDIX C SURVEY OF STATE AND LOCAL LONG-TERM BORROWING REALIZATIONS: THIRD QUARTER, 1971* State and local governments, on balance, realized all but 6 per cent of the $6.2 billion of long-term borrowing planned for the third quarUniverse estimates projected from the FRB-Census ter of 1971 (Table 1). Survey of State and Local Long-term Borrowing Realizations1/ indicate that some governments borrowed $1.3 billion above original planned levels while other units--in most reported instances only temporarily--abandoned about the same amount of long-term tax-exempt offerings. Due to some nonresponse, no information is available concerning the results of an additional $.3 billion of previously reported borrowing anticipations. In all, State and local governments borrowed $5.9 billion in long-term markets during the July through September period of which $5.8 billion was accounted for by the survey. Results compiled from survey returns indicate that the net effect of downward interest rate movements (borrowing above originally scheduled amounts offset by shortfalls from borrowing plans) was to stimulate almost $550 million in long-term borrowing above previously planned levels; this of course contrasts with the strong negative impact on borrowing that had been caused by high interest rates in previous years. Most of the delayed or cancelled borrowing could be accounted for by units which were faced with administrative or legal delays. Future borrowing plans, as adjusted to universe levels from survey results,2/ show an estimated $6.2 billion of long-term offerings for the fourth quarter, about the same as had been planned for the third quarter. Although long-term borrowing anticipations for the first half of 1972 amount to $8.6 billion, they are expected to increase as the time horizon shortens, assuming that this sector continues to evaluate market conditions favorably. 1/ The Governments Division of the U.S. Bureau of the Census is responsible for the polling of respondents. Their expertise has consistently produced fine reporting results with a response rate of 82 per cent for this quarter. The survey accounted for all but $300 million of previously reported anticipations and for 98 per cent of actual long-term borrowing during the quarter. 2/ These anticipations data were collected in the survey of borrowing plans as of June 30, 1971 and were modified by results from the third quarter realizations survey. * Prepared by Paul Schneiderman, Economist, Capital Markets Section, Division of Research and Statistics. Table 1 LONG-TERM BORROWING ANTICIPATIONS AND REALIZATIONS OF STATE AND LOCAL GOVERNMENTS 3rd Quarter, 1971 Anticipations States and state colleges Billions of dollars Borrowed as Borrowed above planned plans Shortfalls from borrowing plans Per cent Borrowing/ Anticipations .4 .3 100 .2 .2 .2 80 2.1 1.5 .5 .4 95 Special districts .6 .5 -. 1 83 School districts .9 .5 2.1 1.7 .5 Cities And towns Counties Totals NOTE: */ 1/ 2/ Totls / 6.2- */ .1 2/ 4.5- 2/ 1.3- .4 67 1.3 94 Totals may not add due to rounding. Less than $100 million. Of this total, the behavior of units having $.3 billion in anticipations could not be accounted for by this survey because of non-response. The survey accounted for $5.8 billion of the $5.9 billion of known long-term borrowing that was undertaken during June-September 1971. CONFIDENTIAL (FR) C - 3 Shortfalls from Planned Borrowing State and local governments elected to postpone to future periods a little more than $900 million and cancel another $400 million of planned long-term borrowing during the third quarter. Total shortfalls were one-half as large as those for the previous quarter. The bulk of the long-term borrowing suspensions during the third quarter--$850 million--were accounted for by units which indicated administrative or legal problems were an inhibiting factor at the time (Table 2). This amount is about in line with the average effect such delays have had upon borrowing plans in each of the last four quarters. Delays in the scheduling of the projects themselves--and not delays in the arranging of financing--appear to be the cause for more than one-half of all such shortfalls. Actually, problems associated with the financing of the projects directly caused only slightly more than $30 million of capital outlay cutbacks, with financial substitutes supporting projects not postponed or cancelled. Respondents indicated plans to reinitiate over 72 per cent of the long-term borrowing that was suspended during the quarter because of legal or administrative delays in projects or their financing. Actual or anticipated interest rate movements were responsible for only a small part of the failure to realize borrowing plans during the third quarter. At $180 million, postponements and cancellations induced by interest rate considerations were well below the $480 million average of the last four quarters. The nearly one percentage point drop in interest costs over the third quarter induced some governmental units to carry out borrowing as planned and to accelerate other plans when practical. Of the units that did report borrowing setbacks induced by interest rates, interest rate ceilings, yields evaluated as too high, and expectations that yields would decline further accounted for 7, 4, and 2.5 per cent of all shortfalls, respectively. Reports of postponements or delays in capital projects because of borrowing shortfalls so induced were insignificant, as the bulk of long-term borrowing deficits was absorbed by financing out of liquid assets or by short-term borrowing. Over 80 per cent of such alternative financing is scheduled to be replaced by long-term funding during the next year. The survey indicated a small amount of long-term borrowing suspended because authorization for such issues was not forthcoming. A continuation o authorization difficulties is expected to be reported in future quarters given the high rate of rejections of bond proposals included on the November election ballots. Table 2 SHORTFALLS FROM BORROWING PLANS 3rd Quarter, 1971 (In millions of dollars) Interest rates too high Authorization not obtained Administrative and legal delays Interest rate ceiling States and state colleges 10 195 -- 10 20 45 280 21 Counties 43 135 -- -- 5 -- 183 14 Cities and towns 17 249 -- 31 5 69 371 28 Special districts 16 29 41 -- 2 6 94 7 School districts 4 243 53 14 -- 104 418 31 851 1/ 94 55 32 224 1,346 100 63 7 4 2 17 100 Total Per cent NOTE: 1/ 90 7 Interest rates expected to fall Totals may not add due to rounding. Of this total, $404 million represents delays not necessarily related to financing. Other Total Memo: Per Cent CONFIDENTIAL (FR) C -5 School districts, among types of units, fared poorly in their realization of long-term borrowing plans, even under favorable market conditions. This probably occurred because of their dependence on the property tax--voters have been reluctant to approve bonds, elected officials hesitant about proposing issues, and units may have reached their bonding limits. While the State and local sector experienced total shortfalls equal to roughly one-fifth of anticipations, the rate for school districts was twice as high. School districts accounted for only 15 per cent of reported anticipations, but experienced 37 per cent of interest rate induced shortfalls. Additionally, the impact of suspended long-term borrowing plans was more severe for school districts; these units absorbed more than 70 per cent of all capital outlay cutbacks while at the same time experienced 30 per cent of total State and local long-term borrowing shortfalls. Such impacts may result from these districts relatively small borrowings, irregular use of the capital markets, relative lack of liquidity and overall tight operating budgets. Borrowing Above Originally Planned Levels Early authorizations, firming of project plans, and favorable interest rate movements accounted for the bulk of the $1.3 billion in long-term borrowing that exceeded previously scheduled levels for the July through September period (Table 3). According to survey responses, the sizable decline in municipal yields, most of which occurred following announcement of the administration's new economic policy, accounted for over one-half of the long-term borrowing accelerations. The favorable interest rate movements may also have had some influence on the speeding up of authorizations and project plans. Alternative Means of Finance Where borrowing shortfalls did occur, many governments, desiring to maintain their planned capital expenditures, relied upon other financing means (Table 4). As has typically been the case, short-term borrowing was resorted to most often, and, although slightly below the average use of this expedient over the last four quarters,the $309 million of short-term borrowing could perhaps account for a substantial amount of the net change in State and local short-term debt outstanding in the recent quarter. The magnitudes of use of existing liquid assets and reduction of other cash outlays do not differ markedly from those in previous periods. Their relatively limited role as an alternative source of funds for capital projects reflects the generally tight budget positions of the governments involved. Long-term Borrowing Anticipations State and local governments reported long-term borrowing anticipations of $6.2 billion for the fourth quarter. It now appears Table 3 BORROWING ABOVE PREVIOUSLY PLANNED LEVELS 3rd Quarter, 1971 (In millions of dollars) Memo: Per cent Authorized sooner than expected Project plans ready early Interest Rates expected to rise Interest rates declined Other States and state colleges 47 92 2 239 61 441 34 Counties 36 100 1 70 31 238 19 Cities and towns 41 31 / 170-' 173- 54 469 37 Special districts -- -- stricts School Total Per cent NOTE: 1/ Total 25 -- 3 44 3 -- 47 8 84 7 1,276 100 26 3 150 242 198 529 157 11.8 19.0 15.5 41.5 12.3 100.0 Totals may not add due to rounding. The bulk of this amount, $167 million under each category, large metropolitan city. is accounted for by the report of one CONFIDENTIAL (FR) C - 7 unlikely that these plans will be completely realized as staff estimates for long-term municipal issues through December now total only $5.5 billion. half of 1972 indicate $4.9 billion Preliminary anticipations for the first in the authorized category and another $3.7 billion of borrowings already scheduled though not yet authorized. More accurate estimates for the first and second quarters of 1972 will be available after the semi-annual anticipations survey to be conducted as of the end of December. Table 4 ALTERNATIVE MEANS OF FINANCING LONG-TERM BORROWING SHORTFALLS 3rd Quarter, 1971 Millions of dollars Per cent Short-term borrowing 309 41 Use of liquid assets 131 18 Postpone other cash outlays 145 19 Money not needed and other 1/ 169 22 754 100 Total MEMO : Capital outlay cutbacks 106 1/ Does not include $457 million reported as delay becuse of problems inherent in the projects themselves, but does reflect long-term borrowing units hoped to accomplish before the inception of the project. 

Federal Reserve (1971, December 13). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19711214_part1

@misc{wtfs_greenbook_19711214_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1971},
  month = {Dec},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19711214_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}