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. June 17, CONFIDENTIAL (FR) CLASS II - FOMC SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System 1977 TABLE OF CONTENTS THE DOMESTIC NONFINANCIAL ECONOMY Page Private housing starts..,...W..... ... ..................... Single family starts ......................................... Multifamily starts ............................................ 1 1 1 Tctal residential building permits............................ Industrial production................................... Capacity utilization in manufacturing,........................ Capacity utilization in materials............................. I 2 4 4 Personal income............................................. Retail trade inventories......... ........................... Manufacturing and trade..................................... . 4 6 6 TABLES: Private housing starts and residential building permits....................... Industrial production ...... Personal income............ .................... .................. ................. ................................ . 2 3 5 THE DOMESTIC FINANCIAL ECONOMY TABLE: Interest rates ....................................................... 7 APPENDICES: Bank credit revision.............................. Changes in bank lending practices. ....... A-i .......................... B-I SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Private housing starts edged up 1.6 per cent in May to a seasonally adjusted annual rate of 1.93 million units; the May pace was 10 per cent above the advanced average for both the first quarter of 1977 and the fourth quarter of last year. Single family starts in May increased 2 per cent to 1.46 million units--only slightly below the highest monthly figure posted (March 1977) since the series has been reported. at 458 thousand units, Multifamily starts, ere virtually unchanged from an upward revised April rate, thus continuing 5 per cent above the first quarter average. Regionally, strong increases in housing starts ere registered in the Northeast and North Central states--19 and 11 per cent, respectively. In both cases the increase more than offset declines recorded a month earlier. In the South and the West, starts continued to decline, but the declines were less than 5 per cent in each area. Total residential building permits were up 3 per cent in May, attaining the second highest level of the current housing upswing. Single family permits increased 4 per cent, while multifamily edged up 1 per cent. - 2 PRIVATE HOUSING STARTS AND RESIDENTIAL BUILDING PERMITS Mar.(r) Apr. (r) May (Thousands of units, SAAR) STARTS Per cent change from April May 1977 1976 2,089 1,899 1,929 + 2 +34 1,503 586 1,433 466 1,461 468 + 2 -- +34 +36 202 510 814 563 188 480 763 468 223 531 728 447 +19 +11 - 5 - 5 447 +27 446 +22 1,712 1,563 1,606 + 3 +39 1,208 504 1,030 533 1,070 536 + 4 + 1 +33 +53 Northeast North Central 217 402 178 385 199 380 +12 - 1 441 +33 South 545 541 550 + 2 -41 West 548 449 477 +6 440 275 252 242 - 4 - 2 1 - family 2 - or more - family Northeast North Central South West PERMITS 1 - family 2 - or more - family MEMO: Mobile home shipments NOTE: r = revised, p = preliminary--means change is less than 1 per cent. Industrial production in May increased by an estimated 1.1 per cent, following gains of 0.8 per cent and 1.5 per cent in April and March, respectively. Increases in output in May were widespread among products and materials, but auto production edged off for the second successive month. At a level of 137.8 per cent of the 1967 average, industrial production in May was 3.5 per cent above the level in February, and also in December, and 6.3 per cent higher than a year earlier. -3 - Output of both durable and nondurable consumer goods increased further in May. Auto assemblies--at a9.2 million unit annual rate--declined 1.4 per cent from the April index level, but production of other consumer durable goods, particularly home goods, increased sharply. Production of business equipment increased by 1.8 per cent, following a gain of 1.6 per cent now indicated for April; business equipment output in May was 4.3 per cent above that in February, and also in December, and almost 11 per cent higher than a year earlier. Output of construction supplies also continued to advance strongly last month. Production of materials increased 1.2 per cent in May. Durable goods materials output rose sharply, particularly iron and steel. Production of nondurable goods materials increased moderately. INDUSTRIAL PRODUCTION (Seasonally Adjusted) Indexes, 1967=100 Feb. 1977 Mar. Apr. May (P) (e) Per cent changes Month Year QIV to ago ago QI I Total 133.2 135.2 136.3 137.8 1.1 6.3 1.3 Products, total 133.9 135.1 135.9 137.2 1.0 6.4 1.7 Final products Consumer goods Durable goods Nondurable goods Business equipment 131.8 141.0 146.1 138.9 143.1 133.3 143.0 152.3 139.1 144.4 134.0 143.0 152.4 139.5 146.7 135.2 143.6 152.8 140.0 149.3 .9 .4 .3 .4 1.8 6.2 4.5 6.7 3.6 10.9 1.7 1.5 2.1 1.2 2.4 Intermediate products Construction supplies 141.8 135.7 141.9 136.4 143.0 137.8 144.8 139.6 1.3 1.3 7.3 6.6 2.0 .7 132.4 135.4 136.8 138.5 1.2 6.0 .8 Materials p--preliminary e--estimated Lmated -4Capacity utilization in manufacturing is estimated to have increased 0.9 percentage point in May to 83.3 per cent. Utilization rates in the primary processing and advanced processing sectors of manufacturing are estimated to have increased by about the same amount. Large gains in steel production were an important element in the increase in primary processing utilization rates. Moderate gains were widespread throughout the rest of the primary processing sector, with the exception of the petroleum industry, in which production moved down slightly from a high level of operations in April. Increases in production of equipment other than motor vehicles contributed significantly to the rise of advanced processing utilization rates. Capacity utilization in materials increased an estimated 0.8 percentage point in May to 83.1 per cent. Gains were most pronounced amongst durable goods materials, with the jump in steel production contributing largely to this rise. Utilization rates for nondurable goods materials and energy materials moved up by small amounts. Personal income rose at a slower rate in May than in April, as declines in transfer payments and farm proprietors' income offset somewhat continued strong growth of wages and salaries. Wage and salary disbursements rose at a 11.2 per cent annual rate in May--little changed from the rate in April and the first quarter. Payroll gains were most rapid in manufacturing--particularly in the durable goods sector in which May gains in employment and hours were concentrated. -5 The May decline in - transfer payments reflects the one-time speedup in April of the payment of veterans' life insurance dividends. Farm proprietors' income declined for the second consecutive month in May, after increasing steadily since last fall. sharply last month, Rental income rose reflecting the return to a more normal level following the large April losses from flood damage. PERSONAL INCOME (Per cent change from preceding comparable period at a compound annual rate; based on seasonally adjusted data) 1976 QI QII 1977 QIII QIV QI Mar.1/Apr.1/ May 1/ 7.3 9.2 10.7 11.2 12.4 11.4 18.3 18.2 9.0 9.6 Current dollars Total personal income Nonagricultural income Wage & salary disbursements Private Manufacturing Government Nonwage income Transfer payments Dividends 10.1 12.6 9.5 7.8 7.6 8.3 12.6 9.4 7.8 10.7 11.8 17.9 11.5 11.2 14.1 18.0 10.1 10.9 8.2 5.7 10.5 8.6 13.4 15.8 21.0 26.6 12.6 10.7 12.2 16.1 7.2 7.1 6.7 11.5 6.2 6.0 7.2 7.1 7.2 14.1 9.3 -2.3 6.3 10.9 10.7 9.0 14.6 13.2 18.7 20.7 5.2 2.0 4.7 -16.8 11.7 16.7 12.1 28.6 -1.1 16.0 9.5 _I/ Per cent change at annual rate, not compounded. 9.4 -6- The book value of retail trade inventories rose at a $7.6 billion annual rate in April--substantially slower than the $18.2 billion annual rate rise in March and $12.0 billion rate increase in the first quarter. On net, all of the April accumulation was at non- durables retailers--particularly general merchandise stores. Durable goods sellers actually reduced their stocks by about $.4 billion; excluding autos, however, durable stocks were up $.5 billion in the month. Manufacturing and trade inventories were accumulated in April in book value terms at a $35.6 billion annual rate, slightly more than the $32.8 billion first quarter gain. The ratio of in- ventories to sales for all manufacturing and trade in April edged up to 1.45 from 1.43 in March. The Domestic Financial Economy No textual addendums to the Greenbook were required, but the usual updating of interest rate developments is contained in the table on page 7. ERRATA Part I: Page I-2, line 10: change "April" to "March". Page I-16, line 14: change "smaller to" to "similar to". Part II: Page II-15, line 16: change "nonresidential" to "residential". Page 111-16, line 18: change "sales of FNMA" to "sales to FNMA". - 7 - INTEREST RATES (One day quotes--in per cent) 1977 1977 Highs Lows May 16 June 16 5.45(5/25) 4.47(1/5) 5.34(5/18) 5.37(5/15) 5.17(5/20) 4.39(1/3) 4.63(1/10) 4.66(1/3) 4.99 5.38 4.88(1/5) 5.81 5.02 5.40 5.39 5.69 5.44(5/25) 4.50(1/5) 5.13(5/11) 5.35(6/15) 5.40(5/19) 5.63(6/1) 4.54(1/3) 4.63(1/7) 5.24 5.50 5.22 5.50 5.72(6/1) 4.65(1/5) 5.50(5/11) 5.63(6/15) 5.62(5/19) 4.66(1/3) 5.45 5.43 6.00(5/25) 3.10(5/27) 5.00(1/5) 5.72(5/11) 2.65(1/7) 3.10(5/13) 5.88(6/15) 3.05(6/10) Short-Term Rates Federal funds (wkly. avg.) 3-month Treasury bills (bid) Comm. paper (90-119 days) Bankers' acceptances Euro-dollars CD's (NYC) 90 days Most often quoted new 6-month Treasury bills (bid) Comm. paper (4-6 mos.) CD's (NYC) 100 days iost often quoted new 1-year Treasury bills (bid) CD's (NYC) Most often quoted new Prime municipals Intermediate- 5.50(6/10) 5.63(5/23) 6.19(5/24) 5.40 and Long-Term Treasury (constant maturity) 3-year 7-year 20-year Corporate Seasoned Aaa 3aa Aaa Utility New Issue Recently Offered 6.68(5/20) 7.35(5/11) 7.80(5/11) 5.73(1/3) 6.50(1/3) 7.20(1/3) 6.52 7.24 7.73 6.36 7.02 7.64 8.13(3/14) 9.18(2/25) 8.34(5/18) 8.33(5/4) 7.87(1/5) 8.89(6/15) 7.90(1/5) 7.95(1/5) 8.08 8.99 8.32(5/13) 8.32(5/13) 7.93(6/15) Municipal 3ond Buyer Index 5.93(2/2) 5.55(6/16) 5.82(5/12) 5.55 Mortgage--average yield in FNMA auction 8.79(5/31) 5.46(1/12) 8.74 8.77(6/13) 8.89(6/15) 8.01p(6 /17) 8.08p(6/17) A-1 APPENDIX A* BANK CREDIT REVISION The commercial bank credit figures used in this month's analysis of financial developments reflect revisions based on the December 31, 1976 Call Report. This Appendix explains the effects of the revision on previous estimates of loans and investments. December Call Report data indicated that growth in commercial bank credit was considerably larger over the second half of 1976 than the previous partially estimated data had indicated. The seasonally adjusted annual rate of growth in total loans and investments over that period was 2.6 percentage points higher than estimated--9.3 per cent after revision compared with 6.7 per cent before revision--as shown on Table 1. The new, higher level for total bank credit reflected a sharp upward revision in total loans and a moderate upward revision in holdings of U.S. Treasury securities offset in part by a downward revision in "other" securities. The level of the total bank credit series was raised by $9.5 billion as of December 1976, and the level of the total loan series was raised by $10.8 billion as shown in Table II. The latter was somewhat larger than any previous dollar revision in the loan series and the total bank credit revision was larger than any other except for that in June 1976. The level of U.S. Treasury securities was raised $0.4 billion--close to the average amount of revision in recent years. But the level of "other securities" was reduced $1.7 billion--a somewhat larger dollar change than usual and also one of the few downward revisions in this item. The revisions reflect three sources of error in the original monthly estimates, as discussed below. 1. Nonmember bank credit estimates. The December Call Report suggested that total credit expansion at nonmember banks between June 30 and the December 29, 1 76 last-Wednesday reporting date was $4.5 billion *Prepared by Edward R. Fry, Senior Economist, and Mary Jane Harrington, Economist, Banking Section, Division of Research and Statistics. A-2 1/ more than previously estimated.- Loans (including domestic interbank loans) were $4.3 billion higher and holdings of U.S. Treasury securities were $0.8 billion higher while holdings of "other" securities were $0.7 billion lower. Nonmember estimates were revised for earlier months back through July 1976--i.e., back to the previous Call Report benchmark. In addition, the revised levels were carried forward from December 1976 into current monthly estimates. These revisions of levels for current months, however, had little effect on changes in bank credit over recent months. The $4.3 billion estimating error in loans (including interbank) at nonmember banks was about the same as the average of such errors over the five previous Calls. 2. Estimates of domestic interbank loans. The bank credit series measure credit extended to the nonbank public. Estimates of tal bank domestic interbank loans are deducted from total loans and credit for this purpose based on data from several sources.The December Call indicated that interbank loan estimates were too high. Reduction of these estimates by about $1.7 billion as of December 3 resulted in further upward revision of total loans and total bank credit by this amount. This revision in interbank loan estimates was relatively large by historical standards. 3. "Window-dressing" estimates. When the last-Wednesday current reporting date differs from the Call Report date, as usually happens, an estimate of the difierence in levels between these two dates must be made and incorporated in bank credit estimates in anticipation of the Call Report benchmarks that become available with a lag. The estimated change in bank credit between these dates is termed "window-dressing. Between December 2) and the December 31, 1976 Call, the actual change in 1/ Initial estimates for nonmember banks are based on data reported weekly by the smaller member banks, using ratios that relate nonmember amounts to the amounts reported by smaller member banks in the most recently available mid-year or end-of-year Call Report. Previous estimates reflected Call Report relationships as of June 30, 1976. Data for large member banks are reported weekly. 2/ Domestic interbank loans, including Federal funds transactions with banks, are estimated on the basis of data reported each Wednesday by member banks. Nonmember estimates rely on data reported by small member banks and Call Report ratios of nonmember to small member interbank loans. A-3 total bank credit appears to have been $7.4 billion--$3.4 billion higher than estimated. This error in estimating "window-dressing" re- quired a relatively large $4.9 billion upward revision for total loans which was partially offset by a $1.5 billion reduction in estimated "window-dressing" for investments. Among loan categories, the principal changes were upward revisions of $0.8 billion in business loans, $2.9 billion in security loans, and $1.5 billion in "other" loans. The unusually large security loan error reflected technical adjustments associated with heavy runoffs of System repurchase agreements in the last two days of December which resulted in unanticipated bank financing of security portfolios. The downward revision of window-dressing esti- mates for bank investments resulted when the Call Report indicated little change in security holdings between December 29 and December 31. Increases in investments, especially in 'other' securities, had been estimated on the basis of average changes for past periods. "Window-dressing" errors affect only the December levels and monthly changes involving December and January--i.e., the larger increase in loans in December was followed by a correspondingly smaller increase in January. Changes in other months were not affected by this factor. There is an additional source of error that may be involved in original monthly estimates but which cannot be measured directly in the case of the December 31, 1976 Call. Errors in the original reported member bank data which are incorporated directly into the credit series or, as in the case of small banks which affect estimates for nonmember banks, can only be determined when the last-Wednesday reporting date coincides with a Call date. Information on past available dates has indicated that such reporting errors, in some cases, have been substantial. Among the major loan categories, business loans were $0.7 billion higher on December 31, 1976 than had been previously estimated. As noted above, the error was largely in "window-dressing' rather than in the nonmember estimates. Real estate loans were $0.4 billion higher. Compared with other recent periods, these were relatively small errors for the two series. Security loans were $2.9 billion higher than estimated--again largely a "window'dressing" error as indicated above. Revisions in agricultural loans and in loans to nonbank financial institutions were negligible. Consumer loans, which accounted for a substantial portion of total loan growth in 1976, have not yet been revised to the December benchmark. This series is a component of the consumer credit series for which adjustments are in process. In the bank credit series, A-4 benchmark correction for consumer loans is reflected in the "all other" loan category until the consumer credit series are revised. All other loans were raised [$6.9]billion as of December 31 based on the new Call Report data. Indications are that about $4.0 billion of this increase The consumer in the level of all other loans will be in consumer loans. credit series were last benchmarked in December 1975, so this revision Accordingly, it is anticipated will be spread over the entire year 1976. raised substantially for the will be at banks loan growth that consumer year 176--from the current 8.2 per cent to above 12-1/2 per cent. Thus, the consumer component of bank loans, which previously had been considered one of the most important categories of loan growth in 1976, will assume even greater importance. Over the January-May 1977 period, the higher nonmember bank estimating ratios established from the December Call Report were used to derive revised estimates for nonmember banks. Accordingly, the estimated level of the commercial bank credit series was raised in all of these months. However, because the temporary one-month window-dressing revisions raised the December level more than for subsequent months, growth rates between December and subsequent months have been reduced. For example, the first quarter growth rate in total bank credit has been reduced to an annual rate of 9.5 per cent from the earlier estimated rate of 11.5 per cent. While changes from December are smaller, the temporary window-dressing effect does not affect levels for other months nor the underlying trend of bank credit. All data subsequent to December 1976 are subject to further revision when the June 1977 Call Report becomes available. Table I COMMERCIAL BANK CREDIT1/ COMPARISON OF OLD AND REVISED RATES OF GROWTH-2 / (Seasonally adjusted changes at annual percentage rates) Total Loans &/ US Treasury Other Securities Old Revised Total, LoansOld Revised Business3 Loans Old Revised Real Estate Old Revised 7.0 4.7 7.0 11.2 7.2 9.3 9.7 0.8 7.5 6.6 6.2 8.5 4.6 3.9 8.7 9.3 10.1 6.5 2.7 7.7 13.7 9-.7 12.0 9.6 9.9 22.5 3.5 2.3 6.1 8.3 2.2 2.6 10.0 10.2 23.9 25.9 -2.1 0.5 13.1 9.1 9.9 8.1 11.8 12.6 2.2 8.4 5.8 12.1 9.6 1.7 4.1 -21.5 9.7 32.3 7.6 -13.8 13.5 -7.6 11.1 11.5 8.6 27.9 -19.0 30.9 -8.8 -6.3 12.7 23.9 4.2 5.6 8.8 17.9 5.9 -0.7 6.5 7.9 10.8 19.9 7.9' 13.0 6.2 4.8 9.3 7.5 18.3 14.0 -3.3 6.8 17.7 14.7 3.3 10.8 9.1 9.0 10.6 9.3 6.7 11.7 8.3 10.7 10.6 8.9 14.5 10.7 13.9 3.7 14.7 16.0 9.4 13.5 4.9 9.7 12.5 14.5 8.6 9.9 11.1 12.3 3.3 9.2 11.8 13.6. 9.7 12.0 13.5 13.3 Investments- Securities Old Revised Old Revised 6.7 9.3 4.6 5.5 5.5 7.2 -1.3 7.9 11.2 10.6 7.3 8.6 22.0 1977--1st quarter p / 11.5 9.5 1976--July August 1976--2nd half 3rd quarter 4th quarter 1976--year September October November December 1977--January, February- MarchE April 1/ 2/ 10.0 14.0 -9.9 57.4 23.8 -9.3 -4.9 57.0 24.8 -9.3 10.8 10.8 2.5 3.3 8.2 6.6 4.1 3.3 21.9 22.0 -6.4 -16.8 -4.0 5.6 -8.0 28.2 4.9 5.6 -8.8 28.3 14.4 8.0 5.9 12.1 12.8 12.6 14.1 Last-Wednesday-of-month series except for June and December which are adjusted to the last business day of the month. Date revised to reflect adjustment to December 31, 1976 Call Report benchmarks. Includes outstanding amounts of loans reported as sold outright to banks to their own foreign branches, nonconsolidated nonbank affiliates of the bank's holding company (if not a bank) and nonconsolidated nonbank subsidiaries of holding companies. Table II 1/ SEASONALLY ADJUSTED BANK CREDITCOMPARISON OF OLD AND REVISED LEVELS-2/ (In billions of dollars) Total Loans &/US Treasury Investments -Securities Old Revised Old Revised 1976--July August September October November December 1977--January-/ February/ MarchE April £ 1/ 2/ 3/ / Other Securities Old Revised Total3/ LoansOld Revised Business3/ Loans - / Old Revised Real Estate Old Revised 754.7 760.0 763.7 755.9 762.0 766.8 93.0 95.5 94.4 93.2 95.6 94.9 146.1 146.5 147.5 146.1 146.4 147.2 515.6 518.0 521.8 516.6 520.0 524.7 175.8 175.8 176.9 175.6 175.6 176.6 143.2 143.9 145.2 143.2 144.0 145.4 771.4 777.6 778.7 775.4 782.6 788.2 93.8 94.7 96.9 94.4 95.4 97.3 148.0 150.7 149.9 147.6 150.3 148.2 529.6 532.2 531.9 533.4 536.9 542.7 179.6 181.7 181.2 179.2 181.4 181.9 146.3 147.4 148.7 146.4 147.7 149.0 784.5 794.0 801.1 790.6 800.3 807.0 96.1 100.7 102.7 96.9 101.5 103.6 149.4 150.1 149.1 148.8 149.5 148.4 539.0 543.2 549.3 544.9 549.3 555.0 182.5 184.0 185.7 182.4 183.8 185.6 149.9 151.4 153.1 150.5 152.1 153.7 810.4 816.4 101.9 102.8 152.6 151.9 555.9 561.7 187.6 187.7 154.8 155.5 __ Last-Wednesday-of-month series except for June and December which are adjusted to the last business day of the month. Data revised to reflect adjustment to December 31, 1976 Call Report benchmarks. Includes outstanding amounts of loans reported as sold outright to banks to their own foreign branches, nonconsolidated nonbank affiliates of the bank's holding company (if not a bank), and nonconsolidated nonbank subsidiaries of holding companies. B-1 APPENDIX B* CHANGES IN BANK LENDING PRACTICES The mid-May Lending Practices Survey shows that for the first time since August 1974, a majority of respondents perceived that businessloan demand was stronger than at the time of the preceding survey. The national pattern of moderate strengthening appears to be uniform across all regions-except in New York City, where only one of eight responding In addition to being fairly widespread banks indicated stronger loan demand. regionally, increased loan demand has been experienced by both the larger and the smaller banks in the sample, with somewhat more of the strength coming at banks with less than $1 billion in deposits. Further, the responding bankers as a group were even more optimistic than they were in mid-February about the prospects for business loan demand in the near future. With regard to the terms of lending, almost two-thirds of the bankers reported unchanged interest rate policy, with somewhat over half of the rest reporting moderately firmer policy. The May survey also indicated a continuation of earlier trends toward moderately easier policies regarding compensating balances and the negotiation of term loans to business, and toward an increased willingness to make various types of loans other than short-term business loans. The breakdowns for business loan demand show that over one-half of the respondents reported that demand in mid-May was moderately stronger than in mid-February, and virtually all other respondents reported that demand was essentially unchanged. Slightly over two-thirds were anticipating moderately stronger business loan demand over the next three months, with most of the This forecast is more optimistic remainder anticipating unchanged demand. than in mid-February, when somewhat less than three-fifths anticipated stronger demand. About two-thirds of the bankers reported unchanged interest rate policy; and of the remainder, slightly more banks reported moderately firmer policy than reported moderately easier policy. It is interesting to note that this survey was taken at a time of rising market rates, and on May 13, just before the survey was taken, to 6 1/2 per cent. the prime rate increased from 6 1/4 per cent With regard to other changes in lending practices, over four-fifths of the respondents reported that policy regarding compensating balances was unchanged, with most of the others reporting moderately easier policy. Thus, the trend toward easier balance requirements, noted in the responses to Similarly, earlier surveys, continues--although at a somewhat abated pace. maturity the when negotiating policy accommodative a more trend toward the of term loans continues. There has been a significant shift toward greater *Prepared by John T. Scott, Economist, Research and Statistics. Banking Section, Division of B-2 willingness to make all types of loans surveyed, with the exception of multi-family mortgage loans, where bankers are still cautious. Bankers generally reported that standards of credit-worthiness were essentially unchanged. However, it should be noted that while significant proportions of the respondents have at times reported higher standards of credit-worthiness, reports of lower standards have been rare. As was the case in May and November of 1976 and in February 1977, moderately easier policy with regard to establishing new or larger credit lines with finance companies was reported by about one-tenth of the banks. These proportions have been the highest since February 1974, when about one-sixth of the respondents reported moderately easier policy. NOT FOR QUOTATION OR PUBLICATION TABLE 1 QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. 1/ (STATUS OF POLICY ON MAY 15, 1977 COMPARED TO THREE MONTHS EARLIER) (NUMBER OF BANKS & PERCENT OF TuTAL BANKS REPORTING) MUCH STRONGER TOTAL tBANKS STRENGTH OF DEMAND FOR COMMERCIAL INDUSTRIAL LOANS (AFTER PCT BANKS PCT MODERATELY STRONGER ESSENTIALLY UNCHANGED MODERATELY WEAKER BANKS BANKS BANKS PCT PCT PCT MULH WEAKER BANKS PCT ANL ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) COMPARED TO THREE MONTHS AGO ANTICIPATED OMAND IN NEXT 3 MONTHS 121 100.0 61 50.4 57 47.1 0 0.0 120 100.0 81 67.5 36 30.0 0 0.0 MUCH FIRMER POLICY ANSWERING QUESTION BANKS PCT BANKS PCT MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY BANKS BANKS BANKS PCT PCT PCT LENDING 10 NUNFINANCIAL BUSINESSES TERMS AND CONDITIONS: INTLRES1 RATES CHARGED 100.0 COMPENSATING OK SUPPORTING BALANCES 100.0 STANDAkDS OF CREDIT WORTHINESS MATURITY OF TERM LOANS REVIEWING CREDI1 ESTABLISHED 63.6 15.7 2.5 81.8 14.9 100.0 2.5 95.0 2.5 100.0 1.7 79.3 100.0 0.0 90.9 100.0 2.5 86.8 100.0 0.0 93.4 100.0 4.1 89.3 16.5 LINES OR LOAN APPLICATIONS CUSTOMERS NEW CUSTOMERS LOCAL 20.7 StRVICE AREA CUSTOMLRS NONLOCAL SERVICE AREA CUSTOMERS 1/ SURVEY OF LENDING PRACTICES AT 121 LARGE BANKS REPORTING IN AS OF MAY 15, 1977. THE FEDEKAL RESERVE QUARTERLY INTEREST RATE SURVEY MUCH EASIER POLICY BANKS PCT NOT FOR QUOTATION OR PUBLICATION TABLE 1 ANSWERING QUESTION BANKS PCT .NUED) i MUCH FIRMER POLICY bANKS PCT MODERATELY FIRMER POLICY ESSENTIALLY UNCHANGED POLICY MODERATELY EASIER POLICY BANKS BANKS BANKS PCT PCT PCT MUCH EASIER POLICY BANKS PCT FACTORS RELATING TO APPLICANT 2/ VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS 121 100.0 106 87.7 INTENDED USE OF THE LOAN 121 100.0 116 95.8 INTEREST RATES CHARGED 121 100.0 108 89.3 2.5 COMPENSATING OR SUPPORTING BALANCES 121 100.0 115 95.1 4.1 ENFORCEMENT OF BALANCE REQUIREMENTS 121 100.0 116 95.8 1.7 ESTABLISHING NEW OR LARGER CREDIT LINES 121 100.0 104 86.0 10.7 LENDING TO "NONCAPTIVE" FINANCE COMPANIES TERMS AND CONDITIONS: ANSWERING QUESTION BANKS PCT CONSIDERABLY LE-SS WILLING BANKS PCT MODERATELY LESS WILLING BANKS PCT ESSENTIALLY UNCHANGED MODERATELY MORE WILLING BANKS BANKS PCT PCT WILLINGNESS TO MAKE OTHER TYPES OF LOANS 121 100.0 66.9 28.9 CONSUMER INSTALMENT LOANS 120 100.0 73.4 23.3 SINGLE FAMILY MORTGAGE LOANS 120 100.0 74.1 19.2 MULTI-FAMILY MORTGAGE LOANS 119 100.0 93.3 4.2 ALL OTHER MORTGAGE LOANS 120 100.0 86.6 11.7 PARTICIPATION LOANS WITH CORRESPONDENT BANKS 121 100.0 103 85.2 14.0 LOANS TO BROKERS 121 100.0 96 .79.4 14.0 TERM LOANS 2/ TO BUSINESSES FOR THESE FACTORS, FIRMER MEANS THE FACIORS WiRE CONSIOtRED MORE IMPORTANT IN MAKING DECISIONS FOK APPROVING CREDIT REQUESTS, AND FASIER MEANS THEY WERE LESS IMPORTANT. CONSIDERABLY MORE WILLING BANKS PCT 

Federal Reserve (1977, June 20). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19770621_part2

@misc{wtfs_greenbook_19770621_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1977},
  month = {Jun},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19770621_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}