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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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 optimal 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. CONFIDENTIAL (FR) December 15, 1978 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Industrial production . . . . . . . . . . . . Capacity utilization . . . . .. . . . . Business inventories . . . * * . . TABLES: Business inventories . . . . . . . . . . . . . . . Inventory/Sales Ratios THE DOMESTIC FINANCIAL ECONOMY Money market certificates . . . . . . * S S S * . S * . * . TABLES: Estimated Money Market Certificate Inflows Monetary Aggregates . . . . . . . . Interest Rates . .... . . INTERNATIONAL DEVELOPMENTS Central bank money stock growth target range ERRATUM: . . . . . . . . . . . . * 10 . . . . .. . .. . APPENDIX: . . Bank Credit Revision Commercial Bank Credit . . Tables: . . . Seasonally Adjusted Bank Credit . . .. . . * . a . . . . A-i A-5 A-6 Senior Loan Officer Opinion Survey on Bank Lending Practices Tables: . . . . . . .. . . . . * 0 a * 0 Senior Loan Officer Opinion-Survey on Bank * * * ...... . Lending Practices . . Comparison of Quarterly Changes in Bank Lending Practices at Banks Grouped bySize of Total * * * * * * ** * .** * . *.. . . Assets B-1 B-3 B-4 SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Industrial production in November is estimated to have increased 0.7 per cent. Gains were widespread, but output of consumer durable goods other than automotive products declined. The advance in total industrial production in November was somewhat stronger than in the two preceding months but close to the average monthly increase over the first ten months of the year. The November index is 7.3 per cent above the level a year earlier. Output of consumer goods rose 0.5 per cent, due to a further sizable increase in the output of automotive products and a fairly strong gain in the production of consumer nondurable goods. Production of home goods, which is nearly one fifth of the consumer goods component of the index, declined in November for the second consecutive month because of cuts in the output of appliances and furniture. Production of business equipment is estimated to have increased 0.7 per cent in November--somewhat more than in the preceding two months, reflecting continued gains in commercial, transit, and farm equipment. Output of construction and busi- ness supplies also advanced sharply last month. Production of materials advanced strongly again in November. Durable goods materials production increased by 0.8 per cent because of continued strength in output of basic metals and parts for equipment and consumer durables. slightly further. Production of nondurable goods materials rose only Output of energy materials advanced 0.9 per cent. Capacity utilization in manufacturing increased by .3 percentage point in November to 85.7 per cent, the highest rate since July 1974. The operating rate in advanced processing industries rose by .4 percentage point to 84.4 per cent, as production of transportation equipment and machinery showed continued gains. Motor vehicle manufacturers were operating near capacity in November and output of aerospace and miscellaneous transportation equipment was at its highest level since October 1969. Capacity utilization for industrial materials rose by .4 percentage point to 87.0 per cent. The utilization rate for durable goods materials increased by .5 percentage point, mainly reflecting gains in basic metals and components for equipment and consumer durables. materials capacity utilization rose by .7 percentage point. Energy The operating rate for nondurable goods materials was little changed. The utilization rate in manufacturing for November was 2.3 percentage points below the 1973 peak value of 88 per cent. In advanced processing industries, the rate was only 1 percentage point below the 1973 high of 85.4, while in primary processing industries and in materials the rates were between 5 and 6 percentage points below their exceptionally high 1973 peak values. The book value of total manufacturing and trade inventories increased at an annual rate of $38.1 billion in October. This rate of accumulation was well above the September rate of $23.2 billion and the third quarter rate of $31.3 billion, but still well below the pace during the first half of the year. In October the ratio of all manufacturing and trade inventories to sales declined to 1.39, the lowest level since December, 1950. -3The book value of retail trade inventories increased at a seasonally adjusted annual rate of $7.6 billion in October. This rate, up sharply from the slight decline in September, was still somewhat below the third quarter $8.5 billion rate of accumulation. The October increase in stocks was accompanied by a substantial pickup in sales (1.3 per cent), and the ratio of all retail inventories to sales edged down to 1.40--low on an historical basis. Retail inventories of durable goods rose at an annual rate of $5.7 billion; this is well above the modest third quarter rate of rise which was tempered by a drop in September. The build-up in durable goods inventories in October were concentrated at retailers of automobiles, where unit stocks were also reported to be up substantially in October. Book value of inventories of nondurable goods rose at an annual rate of $2.0 billion, following $.7 billion rate increase (revised) in September. Stocks at department stores declined for the first time since last February, indicating that some corrections in the overstocked general merchandise sector have been taking place. The book value of wholesale trade inventories rose at a seasonally adjusted annual rate of $18.9 billion, more than twice the downward revised September pace and almost four times the pace recorded for the third quarter as a whole. While the October increase in stocks was robust, it was accom- panied by a sharp pickup in sales (4.2 per cent); as a result the ratio of all wholesale inventories to sales fell to 1.18, somewhat low on an historical basis. Wholesalers' stocks of durable goods increased at an annual rate of $7.3 billion, following the $2.4 billion rate gain in the preceding month. A large increase occurred in stocks merchants of motor vehicles, primarily importers of foreign cars. Nondurable goods whole- salers added to stocks at an annual rate of $11.6 billion, well above the August pace. Inventories held by wholesalers of raw farm products increased at a $4.1 billion annual rate; some of this book value gain probably reflected recent rapid price advances for many foodstuffs. Stocks of the miscellaneous grouping of nondurable-goods establishments, which includes apparel and related goods; rose very sharply in October. BUSINESS INVENTORIES (Change at annual rates in seasonally adjusted book value; billions of dollars) 1977 Manufacturing and trade Manufacturing Trade, total Wholesale Retail Durable Auto Nondurable 1978 QII QIII QIV 28.3 15.7 12.6 2.6 10.0 3.8 2.2 6.2 25.2 10.2 15.0 4.7 10.3 5.1 1.5 5.2 17.8 2.8 14.9 7.5 7.4 3.9 2.8 3.5 QI QII QIII 44.2 16.6 27.6 19.5 8.1 3.9 .9 4.1 44.3 22.8 21.5 11.8 9.8 2.1 .2 7.7 31.3 18.0 13.3 4.8 8.5 2.1 -.2 6.4 Sept.(r) 23.2 14.2 9.0 9.2 -.2 -. 9 -1.2 .7 Oct.(p) 38.1 11.5 26.6 18.9 7.6 5.7 4.9 2.0 r = revised p = preliminary INVENTORY/SALES RATIOS QII Manufacturing and trade Manufacturing Trade, total Wholesale Retail r = revised p = preliminary 1.46 1.60 1.32 1.21 1.43 1977 QIII 1.48 1.61 1.35 1.24 1.45 QIV QII 1.44 1.56 1.33 1.23 1.42 1.46 1.56 1.36 1.27 1.45 I 1.42 1.52 1.31 1.20 1.42 1978 QIII Sept.(r) 1.43 1.54 1.32 1.21 1.43 1.41 1.52 1.31 1.20 1.41 Oct.(p) 1.39 1.50 1.29 1.18 1.40 The Domestic Financial Economy Money market certificate issuance continued strong in November, with sales of over $15 billion (see Table). S&Ls and commercial banks attracted a record volume of money market certificate deposits in November, whereas MSBs experienced a significant slowdown in certificate issuance which may help explain the decline in total deposit growth at MSBs. It should be noted that November figures for commercial banks and MSBs are for a five-week period, compared to four weeks in previous surveys. On a weekly average basis, the pace of commercial bank certificate issuance in November was only slightly stronger than in October, and the decline in certificate sales by MSBs was especially marked. The November slowdown in 6-month certificate sales at savings banks occurred despite an increase in the proportion of MSBs offering the new instrument. As of the end of November an estimated 75 per cent of MSBs offered the money market certificate, of which about 63 per cent were paying ceiling rates. The proportion of commercial banks offering money market certificates continued to increase to 77 per cent, 83 per cent of which were paying ceiling rates at the end of the month. Table 1 Estimated Money Market Certificate Inflows i June Commercial Banks 4.9 S&Ls MSBs All Institutions 1/ 2/ 8.6 July Inflows ($ billions):October August September November Money Market Certificates Outstanding As of the End of November: Per Cent of Total 2/ Deposits Outstanding $ billions 3.4 2.3 1.9 5.8 19.7 6.0 3.1 4.0 7.4 32.3 1.9 1.5 1.1 1.9 10.8 11.3 6.9 13.9 15.1 62.8 Commercial bank and MSB certificate inflows through the last Wednesday of the month. Per cent of small-denomination time and savings deposits for commercial banks. III - 8 MONETARY AGGREGATES (Seasonally adjusted)1/ Nov. '77 to 1978 Major monetary aggregates 1. M-1 (currency plus demand deposits) 2. M-1+ (M-1 plus savings deposits at CBs and checkable deposits at 3. M-2 4. M-3 thrift institutions) (M-1 plus time & savings deposits at CBs, other than large CDs) (M-2 plus all deposits at thrift institutions) Sept. Oct. Nov.p Nov. '78 p QI QII QIII 6.2 9.9 7.6 14.1 3.7 -4.6 7.3 4.9 6.9 5.3 12.2 1.8 -7.1 4.9 6.9 7.9 8.9 12.5 7.0 4.3 8.1 7.7 7.8 10.1 14.0 10.0 6.8 9.2 Bank time and savings deposits 12.1 10.1 9.5 13.8 7.9 23.7 12.8 5. Total 6. Other than large negotiable CDs at weekly reporting banks (interest bearing component of M-2) 7.3 6.4 10.0 11.8 9.1 10.7 8.7 1.1 -10.7 -1.6 9.7 1.3 1.6 2.6 7. Savings deposits -8.6 1.5 -2.9 2.5 8.7 2.4 1.8 Individuals 2/ 8. -3.9 16.0 -39.5 16.2 0.0 -15.5 2.6 Other 3/ 9. 28.1 15.4 13.6 17.7 17.3 11.4 10.5 10. Time deposits Small time 4/ 3.6 6.8 8.5 11.9 23.5 4.7 8.4 28.5 17.3 32.7 16.4 8.1 67.8 Large time 4/ 26.9 12. 13. Time and savings deposits subject to rate ceilings (7+11) 3.0 3.8 4.4 10.7 9.4 -3.9 4.3 Deposits at nonbank thrift institutions 5/ 10.6 10.3 13.4 15.8 11.6 7.6 8.8 14. Total 11.4 11.6 14.6 16.9 12.8 7.9 9.0 15. Savings and loan associations 6.8 8.6 11.2 11.3 7.1 3.9 5.8 16. Mutual savings banks n.a. n.a. 6.8 20.9 13.6 17.4 16.6 17. Credit unions Average monthly changes, billions of dollars MEMORANDA: 1.1 0.5 3.8 1.3 1.5 1.1 -1.2 18. Total U.S. Govt. deposits6/ 4.1 13.1 0.8 3.2 2.8 3.1 4.6 19. Total large time deposits 7/ 1.1 -1.7 5.1 1.0 1.2 0.7 20. Nondeposit sources of funds 8/ 1.7 p--preliminary. n.a.--not available. 1/ Quarterly growth rates are computed on a quarterly average basis. 2/ Savings deposits held by individuals and nonprofit organizations. 3/ Savings deposits of business, government, and others, not seasonally adjusted. 4/ Small time deposits are time deposits in denominations less than $100,000. Large time deposits are time deposits in denominations of $100,000 and above excluding negotiable CDs at weekly reporting banks. 5/ Growth rates computed from monthly levels based on average of current and preceding end-of-month data. 6/ Includes Treasury demand deposits at commercial banks and Federal Reserve Banks and Treasury note balances. All large time certificates, negotiable and nonnegotiable, at all CBs. 7/ Nondeposit borrowings of commercial banks from nonbank sources include Federal funds purchased and security RPs plus other liabilities for borrowed money (including borrowings from the Federal Reserve), Eurodollar borrowings, and loans sold, less interbank borrowings. -9INTEREST RATES (One day quotes--in per cent) 1978 Highs Lows Nov. 20 Dec. 14 Short-term Rates Federal funds (wkly. avg.) 3-month Treasury bills (bid) Comm. paper (90-119 days) Bankers' acceptances Euro-dollars CDs (NYC) 90 days Most often quoted new 6-month Treasury bills (bid) Comm. paper (4-6 mos.) CDs (NYC) 180 days Most often quoted new 1-year Treasury bills (bid) 9.87(12/6) 6.58(1/11) 9.12(11/28) 10.31(11/16) 10.70(11/1) 8.21 10.22 10.33 11.00 8.90 10.30 12.06(11/14) 6.09(4/24) 6.63(1/6) 6.70(1/6) 7.00(2/8) 10.38(12/13) 6.65(1/4) 10.25(11/15) 10.38(12/1: 9.48(11/8) 10.41(11/15) 6.43(1/4) 6.66(1/5) 8.91 10.30 9.20 10.36 10.75(12/13) 6.85(1/4) 10.72(11/15) 10.75(12/1: 9.38(11/9) 6.53(1/4) 10.25(12/13) 5.45(12/8) 7.05(1/4) 3.55(3/3) 9.32(10/31) 9.00(10/31) 8.90(10/31) 7.38(1/4) 7.71(1/5) 8.00(1/5) 8.85 8.72 8.69 9.20 9.12(12/13) 9.88(12/13) 9.30(12/14) 8.28(1/3) 9.00 9.35(12/14) 9.09(1/3) 8.61(3/24) 8.48(1/6) 9.82 9.25(11/17) 9.24(11/17) 9.12(12/1: 9.88(12/1: 9.30 9.35 6.45(12/14) 5.58(3/16) 6.11(11/16) 6.45 9.68(11/22) 8.99 9.79(12/1) 10.35 11.38 9.25 CDs (NYC) Most often quoted new Prime municipal note 10.04(11/15) 5.20(11/17) 10.25(12/1: 5.45(12/8 Intermediate- and Long-term Treasury (constant maturity) 3-year 7-year 20-year Corporate Seasoned Aaa Baa Aaa Utility New Issue Recently offered Municipal Bond Buyer index Mortgage--average yields in FNMA auction 10.40(12/11) 9.13(1/9) 10.27(11/13) 8.96 8.88 10.40(12/1! APPENDIX A* BANK CREDIT REVISION The commercial bank credit figures used in this month's analysis of financial developments reflect revisions based on the June 30, 1978 Call Report. This appendix explains the effects of these revisions on previous estimates of loans and investments. According to the June Call Report data, growth in commercial bank credit was considerably larger over the first half of 1978 than the partially estimated data had indicated. The seasonally adjusted annual rate of growth in total loans and investments over that period was 14.0 per cent or 2.3 percentage points above the estimated 11.7 per cent as shown in Table I. The new higher level for total bank credit reflected upward revisions in all major credit components. The level of the total bank credit series was raised $9.8 billion as of June 30, 1978, and the level of the total loan series was raised $6.6 billion as shown in Table II. These were unusually large revisions and were exceeded only by those in June and December 1976. Levels of U.S. Treasury securities and "other securites" were increased by $1.8 billion and $1.5 billion respectively--also substantial revisions and in the case of Treasury securities, larger than any previous benchmark revisions. Revisions in the original monthly estimates reflect three sources of error, as discussed below. 1. Nonmember bank credit estimates. Data from the June Call Report suggest that total credit at nonmember banks (including loans to domestic commercial banks) increased between December 31, 1977 and June 28, 1978 by $9.5 billion more than previously estimated.1/ Loans were $7.0 billion higher. By historical standards, these revisions are very large (only those for June 1976 were larger) and they indicate comparatively much stronger growth at nonmember banks than might be suggested by the nonmembers' share of outstanding bank credit in December 1977. Estimates of U.S. Treasury security holdings were raised $0.9 * 1/ Prepared by Edward R. Fry, Senior Economist and Mary Jane Harrrington Economist, Banking Section, Division of Research and Statistics. Initial estimates for nonmember banks are for the last-Wednesday of each month. These estimates are based on data reported weekly by the smaller member banks, using the ratios aerived from Call Reports that relate nonmember amounts to the amounts reported by smaller member banks. Previous estimates reflected Call Report relationships as of December 31, 1977, and data reported weekly for member banks. A-2 billion and those for "other securities", $1.6 billion--a near-record change. Nonmember estimates were revised for earlier months back through January 1978--i.e., to the previous Call Report benchmark. Also, the revised levels were carried forward from June 1978 into the current monthly estimates. Revisions of levels for recent months, however, had little effect on changes in bank credit for those months. 2. Estimates of domestic interbank loans. Most banks that report weekly data currently include interbank loans in their total loans figures, so it is necessary to subtract estimates of interbank loans from reported total loans in order to derive the desired measure of loans to the nonbank public. Estimation errors in these interbank estimates--based on current weekly data from member banks and Call Report blowups representing nonmembers--frequently are large. based on the June 30, 1978 benchmark, interbank loans estimated previously for June 28 were raised $3.3 billion. This error was about the same as that for June 1977, and it was considerably larger than that of any other Call period. Interbank loans at small member banks declined substantially between December 31, 1977 and June 30, 1978, and those at insured nonmember banks also declined somewhat. However, loans at noninsured banks--largely U.S. branches of foreign commercial banks-increased rather than following the trend at other banks. These diverse changes resulted in an increase in the ratio of interbank loans at nonmember banks to those at small member banks from 130 per cent in December to 162 per cent in June--a record high for this blowup ratio. While this ratio is extremely volatile, revised loan estimates after June assume that nonmember interbank loans will continue high relative to small member bank loans. Available monthly reports for U.S. branches of foreign banks indicate that interbank loans continued to increase through the third quarter. Because of their extreme volatility, interbank loans are difficult to estimate and these estimates are frequently a major source of error in bank credit estimates. However, in this case, revisions in interbank loans paralleled those for total loans, so the upward revision in loans excluding interbank, the concept used in the bank credit series, was considerably smaller than the revisions in total loans. 3. "Window-dressing" estimates. When the last Wednesday current reporting date differs from the Call Report date, as usually happens, an estimate of the difference in levels between these two dates is included in the initial bank credit estimates for the June 30 and December 31 Call dates. The change between the Wednesday and Call dates is termed "window dressing," and, frequently in the past, estimates of this change have contributed substantially to benchmark revisions. In June 1978, the actual change in total bank credit between June 28 and June 30 was $9.2 billion--$3.7 billion above the estimated "windowdresing." The source of error in the total loans estimate was $2.9 A-3 billion with all loan categories showing upward revisions. "Windowdressing" was also underestimated $0.9 billion for U.S. Treasury securirities but slighly overestimated for "other securities." The volume of "window-dressing" in the June 1978 period was much larger than in any previous June period. "Window-dressing" errors affect only the June levels and changes involving June levels--e.g., since the "window-dressing" correction raised June but not subsequent months, estimated increases in bank credit were lowered for July and the third quarter by a corresponding amount. The combined effects of errors in nonmember bank credit, interbank loans, and "window-dressing" resulted in a somewhat smoother growth pattern around mid-year--a 13.7 per cent annual rate in total credit in June compared with the previous estimate of 6.0 per cent and 11.0 per cent in July compared with an estimated 16.7 per cent. Taking account of both revisions in nomember bank and "window-dressing" estimates, the net effects on major loan categories varied considerably. Business loans was the only category to show a downward revision--$1.4 billion lower than the estimated June 30 level, reducing the first-half growth rate from 18.0 per cent to 16.7 per cent. Business loan estimates also were reduced by the previous December 1977 benchmark adjustment, but historically, revisions have generally been upward. Real estate loans were $1.5 billion higher on the June Call than previously estimated--close to the average correction of other recent benchmarks. The level of security loans was increased by $0.9 billion as of June 30 on the revised basis, reflecting almost entirely a "window-dressing" error. These loans increased $2.5 billion between June 28 and June 30. While a financing on June 30 and a reduction in System repurchase agreements (apparently resulting in a temporary increase in bank financing of security portfolios of dealers) were taken into account, the total effect was underestimated. Agricultural loans and loans to nonbank financial institutions were revised upward by $0.5 billion and $0.3 billion respectively. Consumer loans (not shown on tables) accounted for a substantial part of bank loan growth in 1978. This series is a component of the Consumer Credit series and the 1978 data for consumer loans reflect not only benchmark revisions to the June 30 levels but also a major revision in Consumer Credit statistics. As of June 30, 1978, seasonally adjusted consumer loans in the bank series were increased from $128.5 billion to $153.5 billion. This increase reflects the combined effects of the benchmark correction and a conceptual change that incorporates loans previously classified as "all other" into the consumer loan category. This conceptual change A-4 involves the elimination of a previous arbitrary adjustment that was designed to remove certain credit used by housenolds for business or other nonconsumer purposes. After this change, consumer loans in the Consumer Credit series correspond to "other loans to individuals" on the Call Report. The substantial change in level, however, affected current changes and annual rates only moderately. Consumer loans increased at an annual rate of 20.5 per cent over the first half of 1978 compared with an estimated rate of 18.2 per cent. Table 1 Commercial Bank Credit11/ 2/ Comparison of Old and Revised Rates of Growth(Seasonally adjusted changes at annual percentage rates) Total loans 3/ U.S. Treasury and investmentssecurities Old Revised Old Other securities 3/ Total loans- Old Revised Old 9.6 6.1 7.8 14.1 2.1 17.1 -12.0 5.3 6.7 8.8 7.1 8.5 9.0 Revised Revised 3/ Business loans- Real estate Old Revised Old Revised 16.2 18.0 16.7 17.0 18.7 12.3 15.4 14.0 12.7 19.1 11.7 16.3 19.0 11.0 15.3 17.4 10.3 16.1 17.2 17.1 17.2 19.3 17.6 15.0 5.9 15.5 15.4 5.9 16.5 12.9 11.6 23.6 12.3 10.5 22.5 14.9 16.8 15.9 16.3 17.4 17.2 1978 1st half 11.7 14.0 5.9 1st qtr. 2nd qtr. 3rd qtr.p/ 9.7 13.5 10.7 10.6 17.0 8.7 11.7 -8.5 January February March 13.6 7.9 7.4 14.4 8.5 8.5 8.8 33.6 -41.2 11.3 36.0 -39.8 10.6 5.3 12.2 2.3 6.8 April May June 18.5 15.6 6.0 19.9 16.6 13.7 25.1 -6.1 16.1 27.5 4.9 28.2 15.0 5.9 -0.7 17.2 7.4 0.7 18.3 21.2 6.2 19.4 22.1 14.8 17.5 32.8 6.0 15.3 30.7 5.4 15.0 19.4 16.5 15.6 21.9 19.6 July p/ August p/ September P/ 16.7 5.2 11.0 5.1 9.7 15.9 -32.5 -8.7 4.8 -32.2 -8.6 5.2 11.0 10.2 5.8 10.9 10.1 19.6 9.4 12.5 13.2 9.2 12.3 10.8 12.3 9.5 10.3 11.3 9.1 16.9 18.5 15.2 17.4 19.0 15.7 -24.9 -24.7 14.8 15.3 10.5 10.6 16.2 16.7 October p/ 1/ 2/ 9.9 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 June 30, 1978 Call Report benchmark. Includes outstanding amounts of loans reported as sold outright by 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 Credit 2/ Comparison of Old and Revised Levels(In billions of dollars) 3/ U.S. Treasury Total loans securities and investments- S/ Q /I Other securities T Total Sloans- Business loans- Real estate Old Revised Old Revised Old Revised Old Revised 96.5 99.4 96.1 159.4 159.4 160.1 159.6 159.9 160.8 629.7 632.8 641.0 629.9 633.0 641.7 206.4 208.4 212.5 206.3 208.1 212.0 178.8 181.3 183.7 179.0 181.6 184.2 97.6 97.1 98.4 98.3 97.9 100.2 162.1 162.9 162.8 163.1 164.1 164.2 650.8 662.3 665.7 652.1 664.1 672.3 215.6 221.5 222.6 214.7 220.2 221.2 186.0 189.0 191.6 186.6 190.0 193.1 945.3 949.3 957.0 99.7 97.0 96.3 100.6 97.9 97.2 163.5 165.0 166.4 165.0 166.5 167.9 676.6 681.9 689.0 679.7 684.9 691.9 224.6 226.9 228.7 223.1 225.2 226.9 194.3 197.3 199.8 195.9 199.0 201.6 964.8 94.3 95.2 167.4 168.9 697.5 700.7 230.7 228.9 202.5 204.4 Old Revised Old January February March 885.4 891.2 896.7 886.0 892.3 898.6 96.3 99.0 95.6 April May June 910.5 922.3 926.9 913.5 926.1 936.7 July p/ August p/ September p/ 939.8 943.9 951.7 October p/ 959.2 Revised 1978 I/ 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 June 30, 1978 Call Report benchmark. Includes outstanding amounts of loans reported as sold outright by 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. APPENDIX B* SENIOR LOAN OFFICER OPINION SURVEY ON BANK LENDING PRACTICES* Of the 121 respondents to the mid-November survey, just under one-half reported that business loan demand had strengthened over the previous three months, a slight decline from the August survey entirely accounted for by medium-size banks (those with assets under $5 billion.) Although the proportion of reporting banks expecting a further strengthening of loan demand in the three months following the survey--about one-half--was unchanged from the previous survey, the number of medium-size respondents expecting loan demand to diminish over this period increased slightly. At the time of the November survey, the prime rate continued to be under upward pressure after it had already been raised in a series of steps by 1-3/4 percentage points since the mid-August survey. Respondents--in particular, the large banks with deposits over $5 billion--reported that this increase in the nominal cost of credit was paralleled by substantial tightening in standards of creditworthiness and other non-price loan terms. One quarter of the respondents indicated that their bank had stiffened their criteria to qualify for the prime rate in the previous three months, considerably more than the 10 per cent of respondents who had done so as of mid-August. There was a similar but less dramatic increase in the number of banks establishing firmer terms to quality for spreads above prime. A movement toward greater firmness when determining the availability of credit for new customers, which was already apparent in previous surveys, began by November to be applied to established customers as well. Both large and medium-size banks shared in this policy. In the past year more than 40 per cent of all respondents have become more stringent when reviewing credit applications from new customers. Compensating balances were firmed by over one quarter of respondents, somewhat more than had reported tightening in the previous survey. Tightening was more pronounced among the large banks. Similarly, a notable increase in the proportion of banks less willing to make fixedrate loans was accounted for primarily by large banks. Large banks have become somewhat less liquid in recent months--although their liquidity positions have been generally less affected over the current expansion than those of other banks, which had indicated some tightening of lending terms in preceding surveys. * Prepared by Thomas F. Brady, Banking Section, Division of Research and Statistics. B-2 There were notable increases in the number of respondents reporting less willingness to extend several other types of credit. Reluctance to lend was particularly evident for secured construction loans and real estate loans secured by both residential and nonresidential properties. Overall, one-third of the respondents had become less willing to make loans of these types in the three months ending in November--about twice what was reported in August--while the number of banks reporting less willingness to make instalment loans to individuals rose from one in twenty to about one in five. There were also notable increases in the number of banks less willing to make commercial and industrial loans and participation loans with correspondent banks. B-3 TABLE 1 PAGE 1 SENIOR LOAN OFFICER OPINION SURVEY ON BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. (STATUS OF POLICY ON NOVEMBER 15, 1978 COMPARED TO THREE MONTHS EARLIER) (NUMBER OF BANKS & PERCENT OF TOTAL BANKS ANSWERING QUESTION) LOAN DEMAND MUCH STRONGER STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS ALLOWANCE FOR BANKS USUAL SEASONAL VARIATION): MODERATELY STRONGER ESSENTIALLY UNCHANGED MODERATELY EASIER MUCH EASIER PCT TOTAL BANKS ANSWERING (AFTER 1. COMPARED TO THREE 2. ANTICIPATED DEMAND I ' T E F - S T STANDARDS OF R MONTHS EARLIER A T CREDIT BANKS PCT 52 43.0 57 47.2 9 7.5 1 0.9 121 55 45.5 51 42.2 10 8.3 0 0.0 121 E L MUCH FIRMER P 0 I C Y BANKS Tn QUALIFY FOR SPREAD ABOVE PRIME RATE 0 FIXED RATE LOANS: IUNDER ONE YEAR) (ONE YEAR AVAILABILITY 0 N P R I C E N REVIEWING CREDIT LINES APPLICATIONS FOR: 7. ESTABLISHED 8. NEW CUSTOMERS 9. LOCAL 10. CR LONGER] T E R M S BANKS PCT BANKS 28 24.0 88 75.3 0 0.0 0 0.0 117 5 4.2 34 28.4 78 65.0 3 2.5 0 0.0 120 AREA CUSTOMERS COMOENSATING BALANCE REQUIREMENTS COMMERCIAL 12. LOANS INDUSTRIAL & BANKS PCT PCT BANKS 0.9 74 61.2 37 30.6 8 6.7 121 0 0.0 8 6.7 57 47.2 38 31.5 18 14.9 121 TO MAKE OTHER SECURED CONSTRUCTION SECURED REAL ESTATE LOANS TYoS PCT MODERATELY EASIER BANKS PCT MUCH EASIER PCT BANKS 0 PCT 0.0 BANKS 12 10.0 107 PCT 88.5 BANKS 2 PCT 1.7 BANKS 0 PCT 0.0 121 9 7.5 32 26.5 80 66.2 0 0.0 0 0.0 121 1 0.9 15 12.5 102 85.0 2 1.7 0 0.0 120 13 10.9 25 20.9 81 67.5 1 0.9 0 0.0 120 2 1.7 31 25.7 85 70.3 3 2.5 0 0.0 L21 1 0.9 17 14.1 100 82.7 3 2.5 0 0.0 121 DVLPMNT BANKS PCT MODERATELY GREATER BANKS ESSENTIALLY UNCHANGED MODERATELY LESS PCT PCT BANKS PCT BANKS 0 0.0 4 3.4 76 62.9 33 27.3 0 0.0 3 2.5 82 68.4 27 O 0.0 0 0.0 81 69.3 25 0 0.0 2 1.7 83 68.6 0 0.0 2 1.7 108 90.0 MUCH LESS BANKS PCT 8 6.7 121 22.5 B 6.7 120 21.4 11 9.5 117 32 26.5 4 3.4 121 9 7.5 1 0.9 120 LOANS: 14. 1-4 FAMILY MULTI-FAMILY RESIDENTIAL 16. COMMERCIAL INDUSTRIAL 17. INSTALLMENT COMMERCIAL CF LOANS: E LAND 15. RESIDENTIAL & ESSENTIALLY UNCHANGED BANKS MUCH LESS 1 CONSIDERABLY GREATER 13. MODERATELY LESS PCT FOR: TO FINANCE COMPANIES WILLINGNESS BANKS 0.9 MODERATELY FIRMER PCT PCT 1 MUCH FIRMER BANKS ESSENTIALLY UNCHANGED BANKS MUCH EASIER 0.9 MODERATELY GREATER PCT MODERATELY EASIER PCT BANKS NONLOCAL SERVICE AREA CUSTOMERS 11. ESSENTIALLY UNCHANGED OR LOAN CUSTOMERS SERVICE MODERATELY FIRMER 1 CONSIDERABLY GREATER CREDIT A N BANKS 4.2 4. LONG-TERM PCT 1.7 PRIME 6. BANKS 5 WORTHINESS: TO MAKE PCT 2 QUALIFY FOR SHORT-TERM BANKS 3 MONTHS TO 5. PCT IN NEXT 3. WILLINGNESS BANKS LOANS TO PROPERTIES PROPERTY PROPERTY INDIVIDUALS AND INDUSTRIAL LOANS OF: IB. 1-5 YEARS MATUPITY 0 0.0 3 2.5 100 82.7 14 11.6 4 3.4 121 19. OVER YEARS MATURITY 0 0.0 1 0.9 86 71.1 26 21.5 8 6.7 121 20. LOANS TO FINANCE COMPANIES 0 0.0 0 0.0 96 79.4 21 17.4 4 3.4 121 21. LOANS TO SECURITIES 0 0.0 0 0.0 97 80.2 17 14.1 7 5.8 121 22. PARTICIPATION CORRESPONDENT 0 0.0 8 6.7 99 81.9 12 10.0 2 1.7 121 5 LOANS BANKS BROKERS WITH & DEALERS B-4 PAGE TABLE 2 COMPARISON OF QUARTERLY CHANGES IN BANK LENDING PRACTICES AT BANKS GROUPED BY SIZE OF TOTAL DOMESTIC ASSETS (STATUS OF POLICY ON NOVEMBER 15, 1978 COMPARED TO THREE MONTHS EARLIER) (NUMBER OF BANKS ANSWERING EACH QUESTION AS PERCENT OF TOTAL NUMBER OF BANKS ANSWERING QUESTION) SIZE OF BANK -L O A N D E M A N D MUCH STRONGER STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANKS USUAL SEASONAL VARIATION): 1. COMPARED TO 2. ANTICIPATED DEMAND IN NEXT THREE MONTHS $5 & OVER EARLIER 3 MONTHS UNDER $5 $5 & OVER RATE STANDARDS OF CREDIT 3. TO 4. TO P PRIME QUALIFY FOR 5. SHORT-TERM 6. LONG-TERM (UNDER A V A I N 0 N PP I CREDIT AN UNDER $5 $5 & OVER UNDER $5 40 38 49 0 9 0 1 100 100 57 43 33 44 O 10 0 0 100 Eoo $5 & OVER OR LONGER) ESSENTIALLY UNCHANGED MODERATELY FIRMER UNDER $5 1 4 LOAN UNDER $5 MODERATELY EASIER MUCH EASIER TOTAL $5 OVER & 20 24 UNDER $5 25 29 UNDER $5 UNDER $5 $5 & OVER UNDER $5 15 & OVER UNDER $5 $5 & OVER UNDER $5 80 74 O 0 0 0 100 100 57 67 14 0 0 0 100 100 ESSENTIALLY UNCHANGED MODERATELY GREATER $5 & OVER $5 & OVER $5 & OVER UNDER $5 MODERATELY LESS S5 & OVER CONSIDERABLY LESS UNDER $5 $5 6 OVER UNDER $5 TOTAL $5 UNDER £ OVER $5 O 1 0 1 43 65 38 29 19 4 100 100 0 0 10 6 29 51 33 31 29 12 100 100 MUCH FIRMER L A B I L I T Y C E TERMS OR $5 & OVER 57 5 ONE YEAR) REVIEWING CREDIT LINES APPLICATIONS FOR: UNDER $5 1 0 RATE FIXED RATE LOANS: (ONE YEAR $5 & OVER 3 $5 & OVER SPREAD ABOVE PRIME TO MAKE UNDER $5 TOTAL MUCH WEAKER 5 CONSIDERABLY GREATER WILLINGNESS $5 & OVER BILLIONS LICY WORTHINESS: QUALIFY FOR UNDER $5 IN ASSETS MODERATELY WEAKER 10 _MUCH FIRMER INTEREST TOTAL DOMESTIC ESSENTIALLY UNCHANGED MODERATELY STRONGER $5 & OVER ESSENTIALLY UNCHANGED MODERATELY FIRMER UNDER $5 $5 & OVER UNDER $5 $5 & OVER UNDER $5 MODERATELY EASIER $5 & OVER UNDER $5 MUCH EASIER $5 & OVER TOTAL UNDER $5 $5 & OVER UNDER $5 7. ESTABLISHED CUSTOMERS 0 0 10 10 90 88 0 2 O 0 100 100 8. NEW CUSTOMERS 5 8 24 27 71 65 0 0 0 0 100 100 9. LOCAL SERVICE O 1 5 14 95 83 0 2 O 0 100 100 10 11 5 24 85 64 0 1 0 0 100 100 10. AREA CUSTOMERS AREA CUSTOMERS NONLOCAL SERVICE COMPENSATING BALANCE 11. COMMERCIAL & 12. LOANS TO REQUIREMENTS INDUSTRIAL FOR: LOANS FINANCE COMPANIES 0 2 29 10 1 0 0 100 100 0 1 19 10 1 0 0 100 100 CONSIDERABLY GREATER WILLINGNESS TO OF LOANS: 13. $5 C OVER MAKE OTHER TYPES SECURED CONSTRUCTION & LAND DVLPMNT 3 UNDER $5 MODERATELY GREATER $5 & OVER ESSENTIALLY UNCHANGED UNDER 5S 4 $5 & OVER 76 UNDER $5 60 MODERATELY LESS I5 & OVER 24 UNDER $5 CONSIDERABLY LESS & $5 OVER 28 UNDER $5 8 SECURED REAL ESTATE LOANS: 14. 1-4 FAMILY RESIDENTIAL 15. MULTI-FAMILY 16. COMMERCIAL 17. RESIDENTIAL & INDUSTRIAL INSTALLMENT LOANS COMMERCIAL PROPERTIES TO PROPERTY PROPERTY INDIVIDUALS 0 0 0 0 AND INDUSTRIAL LOANS OF: 18. 1-5 YEARS MATURITY 0 0 4 19. OVER 0 O 8 0 0 4 BROKERS & DEALERS 0 5 6 WITH 0 5 YEARS MATURITY 20. LOANS TO FINANCE 21. LOANS TO SECURITIES 22. PARTICIPATION LOANS CORRESPONDENT BANKS COMPANIES TOTAL & $5 OVER UNDER $5 100 100 

Federal Reserve (1978, December 18). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19781219_part2

@misc{wtfs_greenbook_19781219_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1978},
  month = {Dec},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19781219_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}