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) CLASS III - FOMC May 11, 1990 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 Producer prices . . . . . . . . . . . . . . . . . . . . . . Retail sales . . . . . . . . . . . . . . . . . . . . . . . . Tables Recent changes in producer prices . . . . . . . . . . . . . Retail sales . . . . . . . . . . . . . . . . . . . . . . . . THE FINANCIAL ECONOMY Summary of the May 1990 senior loan officer opinion survey . . . . . . . . . . . . on bank lending practices . . .. Tables Senior loan officer opinion survey on bank lending at selected large banks in the United States . . Monetary aggregates . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediate-term business credit . . . . . . . Selected financial market quotations . . . . . . . practices . . . . . . . . . . . . . . . . . . . . SUPPLEMENTAL NOTES DOMESTIC NONFINANCIAL ECONOMY Producer prices The producer price index for finished goods declined 0.3 percent in April. Food prices were down for the second month in row, energy prices fell for a third month, and the rise in the index for finished goods other than food and energy--0.2 percent--was somewhat less than the increases in either of the two previous months. The drop in food prices in April amounted to 0.6 percent and was the result of a second month of steep decline in the prices of fresh vegetables; in the PPI, the index for these items has reversed the freeze-induced runup of the first two months of the year. Among other foods, price increases continued to be widespread, led by another steep hike in the price of pork. In the energy sector, producer prices fell 1.7 percent in April, pulled down by declines for fuel oil and natural gas. By contrast, gasoline prices turned up sharply in April; however, renewed declines for gasoline are anticipated in May in view of the recent weakness in crude oil prices. The PPI for finished goods other than food and energy was held down in April by declines in the prices of cars and trucks. Elsewhere, price changes in April tended to be small or moderate; the main exceptions among consumer goods were the continued upward pressures on prices of health products and some other nondurables. Overall, the April index for finished goods other than food and energy was 4.0 percent above its level of a year ago. At the intermediate stage of processing, prices of materials other -2than food and energy increased 0.1 percent in April; after declining a little in the second half of 1989, these prices have tilted toward a gradual uptrend thus far in 1990. Retail Sales According to the Commerce Department's advance report, total retail sales are estimated to have fallen 0.6 percent in April, as the result of reduced spending at automotive dealers and building material and supply stores. Excluding these categories, spending in the retail control group edged up 0.1 percent in April, following small upward revisions to February and March. The April level of nominal retail control was about 2 percent (annual rate) above the first-quarter average. Among the components of retail control, spending declined in April at general merchandise and apparel stores but firmed at furniture and appliance outlets. Sales at food stores also were up in April after essentially no change in March. The small upward revisions to spending in February and March occurred mainly in sales at apparel outlets, food stores, and gasoline stations. On balance, the April retail sales report was somewhat weaker than assumed in the May Greenbook. However, given the tentative nature of the advance retail sales data, the staff would not be inclined at this point to make major adjustments to our forecast of real consumer spending in the second quarter. -3RECENT CHANGES IN PRODUCER PRICES (Percentage change; based on seasonally adjusted data) 1 Relative importance Dec. 1989 1989 1988 1989 Q3 1990 Q4 Q1 ------ Annual rate----Finished goods Consumer foods Consumer energy Other finished goods Consumer goods Capital equipment 1990 Mar. Apr. -Monthly rate- 100.0 25.9 9.2 64.9 39.5 25.4 4.0 5.7 -3.6 4.3 4.8 3.6 4.9 5.2 9.5 4.2 4.4 3.8 .4 .7 -15.3 3.0 2.3 4.4 5.0 12.4 -5.3 3.6 4.2 2.0 6.7 9.5 24.0 3.3 3.5 3.4 -.2 -.6 -2.4 .3 .2 .4 -.3 -.6 -1.7 .2 .1 .2 Intermediate materials 2 Excluding food and energy 94.9 82.5 5.3 7.2 2.5 .9 -.7 -.7 -.4 -1.0 2.5 1.3 .0 .3 .0 .1 Crude food materials Crude energy Other crude materials 41.9 40.5 17.5 14.2 -9.5 7.5 2.8 17.9 -3.6 -2.2 -7.0 .6 19.2 13.2 -15.3 8.7 1.0 4.3 .3 -4.6 2.0 -.8 -7.8 2.2 1. Changes are from final month of preceding period to final month of period indicated. 2. Excludes materials for food manufacturing and animal feeds. -4RETAIL SALES (Seasonally adjusted percentage change) 1989 1990 1990 Q3 Q4 Q1 Feb. Mar. Apt. 1.6 -.4 2.7 2.4 .0 -.3 -.2 -.6 -.6 Retail control 2 Previous estimate 2 1.2 1.2 2.4 2.3 1.5 1.4 -. 2 -. 4 .1 GAF 3 Previous estimate 1 1.2 1.2 2.4 2.4 2.2 2.2 -.4 -. 7 -. 7 Durable goods stores Previous estimatel 2.5 -3.2 3.7 3.2 -2.1 -2.7 -.7 -.8 -1.6 -5.0 3.6 2.8 4.9 -5.6 1.7 4.5 -. 2 -.2 -2.9 -2.7 .4 2.2 2.2 1.9 1.3 1.1 -. 5 Total sales Previous estimate 1 Automotive dealers Furniture and appliances Other durable goods Nondurable goods stores Previous estimatel Apparel Food General merchandise 4 Gasoline stations Other nondurables 5 Memo: Motor vehicle salesO Autos Light trucks .7 .3 1.1 1.2 .0 -. 0 1.5 1.2 1.8 -1.9 1.7 .4 1.2 1.8 1.5 1.0 .9 1.6 3.0 2.5 2.6 2.1 1.4 2.4 1.4 .1 -1.2 -1.9 1.1 -. 2 -.3 .7 .4 -1.0 .0 15.9 10.8 5.1 13.0 8.7 4.3 14.2 9.7 4.5 13.7 9.5 4.2 13.8 9.5 4.3 -. 7 14.1 9.5 4.6 1. Based on incomplete sample counts approximately one month ago. 2. Total retail sales less building material and supply stores and automotive dealers, except auto and home supply stores. 3. General merchandise, apparel, furniture, and appliance stores. 4. General merchandise excludes mail order nonstores; mail order sales are also excluded in the GAF grouping. 5. Includes sales at eating and drinking places, drug and proprietary stores. 6. Millions of units at an annual rate; BEA seasonals. -5THE FINANCIAL ECONOMY Summary of the May 1990 Senior Loan Officer Opinion Survey on Bank Lending Practices The May 1990 Senior Loan Officer Opinion Survey on Bank Lending Practices focused on two episodes of weakness in non-merger-related business lending by commercial banks: the year 1989 as a whole and the early months of 1990. The survey also examined recent changes in the willingness of respondent banks to extend non-merger-related C&I loans to middle-market firms and to small businesses and to provide permanent financing to commercial real estate projects. In addition, the usual questions were asked regarding changes in banks' willingness to lend to households. The responses indicate that the weakness in the growth of non-mergerrelated business loans in both episodes owed primarily to reduced demand from customers, but it also reflected tightened lending policies of respondent banks. Respondents indicated that since the end of 1989 they have attempted to tighten the availability of business loans to middlemarket firms and to small businesses mainly because of a less favorableeconomic outlook and a deterioration in their loan portfolios. The latter situation likely also reflects the economic situation as well as current or anticipated capital pressures. Respondents also mentioned industry-specific problems and regulatory pressures. In general, respondents with assets of less than $10 billion exhibited more restraint with respect to business lending than very large banks. Both medium-sized and very large respondents (assets of $10 billion or more) reported a considerable reduction since last year in their willingness to make commercial real estate loans. Survey respondents are, by industry standards, large banks, which control about -6one-third of industry assets, and their responses may not be fully representative of the industry as a whole. C&I Loan Growth in 1989. Growth of C&I loans (other than those identifiable as merger-related) is estimated to have virtually ceased in 1989. 1 About one-half of survey respondents indicated that their own C&I lending, net of merger-related loans, also weakened last year. They attributed this weakening mainly to reduced lending to middle-market and large firms, with relatively little contribution from small businesses. 2 Most commonly they ascribed the weaker loan growth to customers' reduced funding needs, but almost as frequently they cited more stringent credit standards or tighter lending terms or both. Several banks mentioned that weaker loan growth last year also owed to their customers' increased reliance on commercial paper; a few banks indicated that C&I loan growth was damped last year by customers' greater reliance on bonds. C&I Loan Growth in Early 1990. Although non-merger-related C&I loans at all banks showed no growth on balance last year, they are estimated to have expanded during the final two quarters. This measure of business credit weakened after the turn of the year, however. About 40 percent of respondent banks indicated that the growth of C&I loans other than those made to finance mergers and acquisitions slowed at their banks during the first four months of 1990 relative to the last quarter of 1989. Most of the remaining banks saw no change in this measure of C&I loan growth over the 1. Merger-related loans include those made to finance leveraged buyouts, other mergers and acquisitions, and defensive restructurings--such as equity and debt buybacks--related to mergers and acquisitions. 2. About one-quarter of respondents experienced a pickup in non mergerrelated loan growth last year. By far the most important source of this strength was middle market firms. -7period. With respect to the size of customer, many more banks cited middle- market or large firms as borrowers whose loan growth had slowed than cited small businesses. The major reason that respondent banks gave for the slower loan growth of their large and middle market customers was reduced funding needs. Other reasons respondents gave for large firms included their customers' greater reliance on commercial paper and the respondents more stringent credit standards for approving these loans or the tighter rate or nonrate terms placed on them. For middle-market firms, respondents cited more stringent credit standards and tighter loan terms to be almost as important a factor in explaining the weaker loan growth as reduced demand; for small business, they most frequently cited tighter credit standards as the reason for weaker loan growth. Recent Changes in Willingness to Lend to Middle Market and Smaller Firms. More than one-half of the respondent banks indicated that since late 1989 they had tightened their credit standards for lending both to middlemarket firms and to small businesses. 4 Banks with assets below $10 billion showed much more inclination to tighten than did very large banks; about one out of ten respondents indicated that its loan policies had tightened "considerably." The primary reason given for tightening credit availability to middle-market and small firms was a less-favorable economic outlook. The second most frequently given reason was a deterioration in the 3. In part, this difference may reflect the composition of respondents' business loan portfolios, almost one-half of which respondents reported to consist of loans to large customers, about one-third to middle-market customers, and the rest to small businesses. 4. For purposes of this survey, "small businesses" were defined as firms with annual sales of $50 million to $250 million; a number of banks used their own definitions, however. Many of these had lower limits, in the $5 to $10 million area, and some had an upper limit below $250 million. -8quality of banks' loan portfolios, which likely also reflected concern about the economic situation as well as current or anticipated capital pressures. Other reasons frequently cited for tightening were regulatory pressures and industry-specific problems. Relatively few banks explicitly listed pressure on their capital positions as a reason for restraint, but those that did considered this factor to be among the most important. Banks reported that, besides tightening their standards for determining which loan applicants qualify for credit, they have recently tightened terms on loans they are currently willing to make. With respect to middle-market customers, more than one-half of the respondents indicated that they had moved to make loan covenants more stringent since late 1989 and a similar number reported that they had tightened collateral requirements; they gave comparable responses with respect to small-business customers. About 30 percent of banks indicated that since late 1989 they had reduced the size of credit lines they were making available to middle-market firms. As for pricing, banks on balance reported that spreads of loan rates over baselending rates had increased in the past six months, for middle-market and small-business lending. That many banks reported lower spreads, however, perhaps reflected the higher credit standards they had put in place or the lower demand experienced during the period examined. The evidence for tighter lending terms, as with that for more stringent credit standards, is stronger at medium-sized than at very large banks. Lending for Commercial Real Estate. Respondents reported considerable tightening of standards since late 1989 with respect to commercial real -9estate lending (excluding construction and land development loans). 5 About 80 percent of respondents tightened their standards for lending on commercial offices in the past six months, a large share "considerably." The evidence of tighter standards for industrial structures and other commercial real estate over the past six months is only slightly less strong. Both medium-sized and very large banks have exhibited similar restraint with respect to lending for commercial real estate since late last year. Willingness to Lend to Households. As in recent surveys, respondent banks on balance had become a bit more willing to extend consumer installment credit in the three months ending with the survey date. As in the February survey, however, there was little evidence of an increase in banks' willingness to extend the broader category of consumer credit that includes loans made under home equity lines. 5. As reported in the January 1990 Senior Loan Officer Opinion Survey, 80 percent of respondents had become less willing to make construction and land acquisition and development loans during the second half of 1989. -10SENIOR LOAN OFFICER OPINION SURVEY ON BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE UNITED STATES (Status of policy as of May 1990) (Number of banks and percent of banks answering question) (By volume of total domestic assets, in $ billions, as of December 31, 1989)1 1. What is the rough percentage distribution of C&I loans on your bank's books among large corporate firms, middle market firms, and small businesses? (The middle market has been categorized as consisting of firms with annual sales of between $50 and $250 million; in answering this question, refer either to this definition or to any other that may be employed at your bank. Please indicate the definition used if it is other than the one suggested. "Large" borrowers would then be those larger than middle market customers and " small" borrowers those that are smaller. Percentages should add to 100.) 1. large firms )-20% Banks All Respondents $10.0 and Over Under $10.0 21-40% Pet 17 2 15 Banks 29.3 7.1 50.0 Pet Banks Pet 9 5 4 32.8 32.1 33.3 19 9 10 41-80% 41-60% Banks Pet 11 10 1 15.5 17.9 13.3 Over 804 --Banks Pet 19.0 35.7 3.3 2 2 0 ean pet* 3.4 7.1 0 48.2 54.6 27.9 Total Banks 58 28 30 middle market firms ii. 21-40% 0-20% ------------- Banks All Respondents $10.0 and Over Under $10.0 iii. Pet 10 8 2 Banks 17.2 28.6 6.7 41-60% ----------------------- Pet 20 12 B Banks 34.5 42.9 26.7 61-80% Pot 22 8 14 Over 80% ---- Banks 37.9 28.6 46.7 Pet 4 0 4 --- Banks 6.9 0 13.3 Pet 2 0 2 3.4 0 6.7 Mean Total pot* Banks 35.5 31.8 47.3 58 28 30 small firms 0-20% ------------Banks Pot All Respondents $10.0 and Over Under $10.0 37 21 63.8 75.0 16 53.3 21-40% ---------- Banks Pet 15 6 9 41-60% --------------- 61-80% --------------- Over 80% ------------- Mean Total Banks Banks Banks pet* Banks 25.9 21.4 30.0 Pet 3 1 2 5.2 3.6 6.7 Pet 2 0 2 3.4 0 6.7 Pet 1 0 1 1.7 0 3.3 16.2 13.5 24.9 58 28 30 Apart from lending estimated to have been for purposes of financing merger-related activities, C&I loans nationwide showed little if any growth in 1989. At your bank, how did growth of C&I loans in 1989--other than those made to finance (Merger-related loans include those merger-related activities--compare with growth of such non merger-related loans in 19887 made to finance leveraged buyouts, other mergers and acquisitions, and defensive restructurings--such as equity and debt buybacks--related to mergers and acquisitions.) 2. Much Much weaker ---------Banks Pet -----. -.--- All Respondents $10.0 and Over Under $10.0 1 0 1 1.8 0.0 3.3 Weaker -------Banks Pet Same -------Banks Pet Stronger --------Banks Pet .- .- -. -----. ---. -. - ---. - ---. .---- 28 14 14 49.1 51.9 46.7 16 9 7 28.1 33.3 23.3 10 4 6 17.5 14.8 20.0 stronger ------Banks Pet .----. -.--- 2 0 2 3.5 0.0. 6.7 Total Banks .- .- 57 27 30 1 As of December 31,1989, 28 respondents had domestic assets of $10.0 billion or more; combined assets of these banks totalled $721 billion, compared to $938 billion for the entire panel of 60 banks, and $2.91 trillion for all domestically chartered federally insured commercial banks. * Weighted by volume of commercial and industrial loans to domestic addressees as of April 18, 1990. Note: In questions 3, 4, 6 and 8 "mean" refers to average rank, with 1 most important, 2 next most important and so on. -11- 3. If growth of non merger-related C&I loans at your bank was weaker last year than in 1988 (answer i. or ii. a. which category of borrower mainly accounted for the weakness? rank.) (If more than one was an important source of weakness, pleasi Large firms Middle market firms Banks Mean Banks Mean 21 12 9 All Respondents $10.0 and Over Under $10.0 1.4 1.3 1.4 to question 2.): Small businesses ------Banks Mean 8 3 5 1.3 1.2 1.4 22 9 13 Total Banks 1.B 2.3 1.4 29 14 15 b. did the weaker loan growth mainly reflect: (If more than one was important, please rank.) i. reduced (non merger-related) funding needs of your customers? ii. greater reliance of your customers on commercial paper? iii. greater reliance of your customers on junk bonds? iv. greater reliance of your customers on investment-grade bonds? v. reclassifications of Cal loans into real estate loans for reporting purposes consequent upon their collateralization by real estate? vi. more stringent credit standards at your bank for approving (non merger-related) CII loans and/or tighter rate and non rate terms on these loans? Reduced funding needs of customers ------- Banks Mean 19 9 10 All Respondents $10.0 and Over Under $10.0 Greater reliance on junk bonds Greater reliance on cosm. paper Greater Reclassifireliance cation of CAI loans on inv. to RE grade bonds -------- ------- Banks Mean Banks Mean 12 7 5 1.2 1.1 1.3 3 2 1 1.8 1.9 1.8 ------ - - --.------------------ Total Banks Mean Banks Mean Banks Mean 2 2 0 2.3 2.5 2.0 More stringent credit standards/ terms 2 1 1 2.5 2.5 0 2.5 2.0 3.0 15 6 9 1.5 1.5 1.4 Banks 28 14 14 4. If growth of non merger-related Ctl loans at your bank strengthened in 1989 (answer iv. or v. to question 2), did it mainly involve (ifmore than one applies, please rank by importance.) Midd le market Small businesses filr:ms ----------- ----- ----- ----------Banks Mean Banks Mean Banks Mean Large firms 5 2 3 All Respondents $10.0 and Over Under $10.0 1.8 1.5 2.0 13 4 9 1.4 1.3 1.4 7 1 6 1.9 3.0 1.7 Total Banks 13 4 9 5. At your bank, how has growth in non merger-related C&I lending thus far in 1990 compared with growth in the last quarter of 1989? (In answering, please refer to the underlying or trend movements in these loans, making allowance for normal seasonal swings.) Much Weaker weaker Same Stronger ----------- ----------- ----------- Banks pot All Respondents 4 7.3 $10.0 and Over Under $10.0 0 4 0.0 13.8 ------- - ------ Banks Pct Banks Pet 36.4 24 43.6 13 50.0 7 24.1 10 14 38.5 48.3 20 - -. --. -. -- -. -. ---.- -----. ----- .---- Banks Pet 6 10.9 2 7.7 4 13.8 Much stronger ---------Banks Pet 1 1 0 Total Banks 1.8 55 3.8 0.0 26 29 -12- 6. If non merger-related C&I loan growth has weakened at your bank since late last year: (answer i. or ii. to question 5): a. which category of borrower mainly accounted for the weakness? (If more than one was an important source of weakness, please rank.) Large firms Middle market firms Small businesses Banks Mean Banks Mean Total Banks Mean All Respondents $10.0 and Over Under $10.0 15 8 7 1.6 1.5 1.7 19 9 10 1.2 1.1 1.2 9 3 6 Banks 1.6 1.3 1.7 24 12 12 b. if CSI loan growth was weaker at large firms, did this reflect: (If more than one was important, please rank.) 1. reduced (non merger-related) funding needs of these customers? ii. greater reliance of these customers on coamercial paper? ill. greater reliance of these customers on junk bonds? iv. greater reliance of these customers on investment-grade bonds? v. reclassifications of C&I loans into real estate loans for reporting purposes consequent upon their collateralization by real estate? vi. more stringent credit standards at your bank for approving (non merger-related) CUI loans and/or tighter rate and non rate terms on loans to these customers? Reduced funding needs of customers All Respondents $10.0 and Over Under $10.0 Greater ReclassifiGreater Greater reliance on cation of reliance on reliance on inv. grade CI loans comm. paper junk bonds bonds to RE More stringent credit standards/ terms ----- ----- ---------- --------- ---------- ------ --------- Total Banks Mean Banks Mean Banks Mean Banks Mean Banks Mean Banks Mean Banks 6 3 3 1 0 1 1 1 0 1 1 0 6 4 2 12 6 6 1.2 1.3 1.0 1.5 1.3 1.7 2.0 0 2.0 2.0 2.0 0 3.0 3.0 0 1.7 1.3 2.5 15 8 7 c. If C&I loan growth was weaker at middle market firms, did this reflect: (If more than one was important, please rank.) I. reduced (non merger-related) funding needs of these customers? ii. greater reliance of these customers on commercial paper? iii. greater reliance of these customers on junk bonds? iv. greater reliance of these customers on investment-grade bonds? v. reclassifications of C&I loans into real estate loans for reporting purposes consequent upon their collateraliration by real estate? vi. more stringent credit standards at your bank for approving (non merger-related) CLI loans and/or tighter rate and non rate terms on loans to these customers? Reduced funding needs of customers - -----------Banks Mean All Respondents $10.0 and 0ver Under $10.0 15 7 8 1.2 1.3 1.1 More Greater Reclassifi- stringent Greater Greater reliance on cation of credit reliance on reliance on inv. grade C&I loans standards/ coam. paper junk bonds bonds to RE terms -------------------------------------------------------Total Banks Mean Banks Mean Banks Mean Banks Mean Banks Mean Banks 3 2 1 2.0 2.0 2.0 . 0 0 0 0 0 0 2 1 1 1.5 1.0 2.0 2 1 1 2.0 2.0 2.0 13 6 7 1.6 1.5 1.7 20 10 10 -13- d. if CtI loan growth was weaker at small businesses, did this reflect: (If more than one was important, please rank.) i. reduced funding needs of these customers? ii. greater reliance of these customers on other funding sources? iii. reclassifications of C&I loans into real estate loans for reporting purposes consequent upon their collateralization by real estate? iv. more stringent credit standards at your bank for approving C&I loans and/or tighter rate and non rate terms on loans to these customers? More Reduced funding needs of Customers Greater Reclassifireliance on cation of C&I loans other sources to RE --------- ------- Banks Mean Banks Mean Banks Mean 5 1 4 0 0 0 All Respondents $10.0 and Over Under $10.0 1.2 1.0 1.3 0 0 0 0 0 0 stringent credit standards/ terms Total Banks Banks Mean 0 0 0 8 4 4 1.3 1.3 1.3 10 4 6 7. Since late last year, how have your bank's credit standards for approving loan applications from C&I loan customers changed: (Please report changes in enforcement of existing standards as changes in standards.) a. for middle market firms Tightened considerably --------- Banks Tightened somewhat ---------- Pot Banks Pet All Respondents $10.0 and Over 6 10.3 4 14.3 28 48.3 9 32.1 Under $10.0 2 19 6.7 63.3 Basically Eased somewhat unchanged --------Banks Pot Banks Pet 23 39.7 14 50.0 9 30.0 1 1 0 1.7 3.6 0.0 Eased considerably -------- Total Banks Pot Banks 0 0 0 0.0 0.0 0.0 58 28 30 b. for small businesses Tightened considerably Basically unchanged -------I--- ----------- ----------Banks Pot Banks Pot Banks Pot All Respondents $10.0 and Over Under $10.0 6 10.5 5 18.5 1 3.3 Tightened somewhat 25 43.9 8 29.6 17 56.7 25 14 11 43.9 51.9 36.7 Eased somewhat ----------Banks Pot 1 0 1 1.8 0.0 3.3 Eased considerably ----------- Total Banks Pet Banks O 0 0 0.0 0.0 0.0 57 27 30 B.a. If your bank's credit standards for approving loan applications from middle market firms have been tightened since late last year (answers i. or ii. to question 7.a) what were the main reasons? (Please rank.) Pressures on bank's capital position All Respondents $10.0 and Over Under $10.0 Deterioration in quality of loan portfol Less favorable economic outlook Industry specific problems Regulatory pressures Increased attractiveness of other assets Other ----------- ---------- ---------- ----------- ---------- ----------- ----------- Total Banks Mean Banks Mean Banks Mean Banks Mean Banks Mean Banks Mean Banks Mean Banks 1 1 0 3 1 2 6 4 2 1.5 1.5 1.5 19 10 9 1.8 1.8 1.8 25 10 15 1.5 1.7 1.3 14 7 7 2.5 2.6 2.4 15 6 9 2.6 3.2 2.2 3.0 3.0 0 1.3 1.0 1.5 34 13 21 -14- 8.b. If your bank's credit standards for approving loan applications from small businesses have been tightened since late last year (answers i. or ii. to question 7.b) what were the main reasons? (Please rank.) Pressures on bank"s capital position Deterioration in quality of loan portfol Less favorable economic outlook - Banks Mean All Respondents $10.0 and Over Under $10.0 5 3 2 1.6 1.7 1.5 ------ --------- Banks Mean Banks Mean 16 9 7 1.6 1.7 1.6 21 10 11 Industry specific problems 1.5 1.8 1.2 Banks Mean 12 7 5 2.2 2.4 1.8 Regulatory pressures Increased attractiveness of other assets -------- ---------- --------- Total Banks Mean Banks Mean Banks Mean 9 5 4 1 1 0 2 0 2 2.7 3.0 2.3 3.0 3.0 0 Other 1.5 0 1.5 Banks 34 13 21 9. With respect to CSI loan applications from middle market firms that your bank currently is willing to approve, please indicate how terms have changed since late last year with respect to: a. maximum size of credit lines Decreased considerably Decreased somewhat Basically Increased unchanged somewhat Increased considerably ----Total Banks Pet All Respondents $10.0 and Over 3 3 5.2 10.7 Under $10.0 0 0.0 Banks Pot 14 24.1 4 14.3 10 33.3 Banks Pet Banks Pet Banks Pet Banks 39 67.2 2 3.4 0 0.0 58 20 19 71.4 63.3 1 1 3.6 3.3 0 0 0.0 0.0 28 30 b. spreads of loan rates over base rates Increased considerably Decreased Increased somewhat ------- Banks All Respondents $10.0 and Over Under $10.0 2 1 1 Pot Banks Basically unchanged Decreased somewhat ------- Pet Banks considerably ------ -- Pet Banks Pot Banks ---- Total Pot Banks 3.4 16 27.6 29 50.0 11 19.0 0 0.0 58 3.6 3.3 4 12 14.3 40.0 17 12 60.7 40.0 6 5 21.4 16.7 0 0 0.0 0.0 28 30 c. loan covenants Tightened considerebly --------- Banks Eased Tightened somewhat ---------- Pet Banks All Respondents 2 3.4 $10.0 and Over Under $10.0 1 3.6 1 3.3 31 13 18 Pot 53.4 46.4 60.0 Basically Eased considerab- unchanged somewhat -----------Banks Pot Banks Pet ly ---Banks Pet Total Banks 25 43.1 0 0.0 0 0.0 58 14 50.0 0 0.0 0 0.0 28 11 36.7 0 0.0 0 0.0 30 d. collateralization requirements Tightened considerably --------Banks Pot All Respondents $10.0 and Over Under $10.0 4 3 1 6.9 10.7 3.3 Tightened somewhat --------Banks Pet 27 11 16 46.6 39.3 53.3 Basically unchanged Eased somewhat Eased considerably ---------- --------- ---------- Total Pot Banks Pet Banks Pet Banks Banks 27 46.6 0 0.0 0 0.0 14 50.0 0 0.0 0 0.0 13 43.3 - -- - -. -. --- 0 0.0 0 .--. -- - -- .- .-- -- . 0.0 .-- -- 58 28 30 -15- 10. With respect to C&I loan applications from small businesses that your bank currently is willing to approve please indicate how terms have changed since late last year with respect to: a. maximum size of credit lines Decreased Increased considerab- Decreased Basically Increased considerably somewhat unchanged somewhat ly ----------- ----------- ----------- ----------- ----------- Total Banks Pet Banks Pet Banks Pet Banks Pet Banks Pot Banks All Respondents $10.0 and Over 0 0 0.0 0.0 3 2 5.4 7.7 50 22 89.3 84.6 3 2 5.4 7.7 0 0 0.0 0.0 56 26 Under $10.0 0 0.0 1 3.3 28 93.3 1 3.3 0 0.0 30 b. spreads of loan rates over base rates Increased considerab- Increased ly somewhat Banks Pct Banks Pet Banks Pot Banks Pot All Respondents 2 3.6 9 $10.0 and Over Under $10.0 1 1 3.8 3.3 1 8 16.1 Basically unchanged Baks Pt Banks Pet 38 3.8 : 21 26.7 17 Decreased Decreased considerabsomewhat ly Banks ot Bank P Banks Pet Banks Pot Totankl Banks 67.9 7 12.5 0 0.0 56 80.8 3 11.5 0 0.0 26 56.7 4 13.3 0 0.0 30 c. loan covenants Tightened considerably Banks ------------------ Pet Eased Tightened somewhat Banks Pet Basically unchanged Banks Pet Eased considerab- somewhat ---- r---- Banks ly Total Pot Banks Pot Banks --- ----- ----- ----- ----- ----- All Respondents 2 3.6 22 39.3 32 57.1 $10.0 and Over 1 3.8 8 30.8 17 65.4 Under $10.0 1 3.3 14 46.7 15 50.0 0 0 0 0.0 0.0 0.0 0 0 0 0.0 0.0 0.0 56 26 30 d. collateralization requirements Tightened considerably Basically unchanged Eased somewhat Eased considerably ----------- ----------- ----------- ----------- ----------- Total Banks Banks Banks Banks Pet $10.0 and Over 4 2 7.1 7.7 Under $10.0 2 6.7 All Respondents Tightened somewhat Banks Pet Pet Banks Pet Pet 25 44.6 27 48.2 0 0.0 0 0.0 56 8 17 30.8 56.7 16 61.5 11 36.7- 0 0 0.0 0.0 0 0 0.0 0.0 26 30 11. Apart from construction and land development loans, since late last year, how have your bank's credit standards changed for approving applications for nonfarm nonresidential real estate loans used to finance: (Please report changes in enforcement of existing standards as changes in standards.) a. commercial office buildings Tightened considerably Eased considerably ----------- ----------- ----------- ----------- ----------- Total Banks Pet Banks Pct Banks Pot Banks Pet Banks Pet Banks Tightened somewhat All Respondents $10.0 and Over 22 37.9 9 32.1 24 12 43.1 46.4 Under $10.0 13 43.3 12 40.0 Basically unchanged 11 19.0 6 21.4 5 16.7 Eased somewhat 0 0 0.0 0.0 0 0.0 0 0 0 0.0 0.0 0.0 58 28 30 -------- -16- b. industrial structures Tightened considerab- Tightened Basically ly somewhat unchanged -------- ------------ -Banks Pot Banks Pot Banks Pat All Respondents $10.0 and Over Under $10.0 12 9 3 20.7 32.1 10.0 31 13 1B 53.4 46.4 60.0 15 4 9 25.9 21.4 30.0 Eased Eased considerabsomewhat ly -To ta---Total Banks Pot Banks Pot Banks 0 0 0 0.0 0.0 0.0 0 0 0 0.0 0.0 0.0 58 28 30 c. other nonfarm nonresidential purposes Tightened considerab- Tightened ly somewhat ------- - - ---Banks Pet Banks Pat All Respondents $10.0 and Over Under $10.0 15 7 8 25.9 25.0 26.7 30 14 16 51.7 50.0 53.3 Basically unchanged Banks 13 7 6 Pot 22.4 25.0 20.0 Eased somewhat ---------Banks Pet 0 0 0 0.0 0.0 0.0 Eased considerably -- - - ----Total Banks Pot Banks 0 0 0 0.0 0.0 0.0 58 28 30 12.a. Please indicate your bank's willingness to make general purpose loans to individuals now as opposed to three months ago. "Loans to individuals" here include standard consumer installment loans plus loans taken down under home equity lines of credit. Somewhat Somewhat About Less Much Less Much More More Unchanged ----------- ----------- ---------- ----------- ---------Banks Pot Banks Pot Banks Pot Banks Pot Banks Pot All Respondents 0 0.0 7 12.3 44 77.2 $10.0 and Over Under $10.0 0 0 0.0 0.0 3 4 22 22 81.5 73.3 11.1 13.3 Total Banks 6 2 10.5 7.4 0 0 0.0 0.0 57 27 4 13.3 0 0.0 30 2.b. Please indicate your bank's willingness to make consumer installment loans now as opposed to three months ago? Somewhat Much More More ---------- --------- Banks All Respondents $10.0 and Over Under $10.9 1 0 1 Pot Banks 1.8 0.0 3.3 5 2 3 Pot 8.9 7.7 10.0 About Somewhat Unchanged Less --------- --------Banks Pot Banks Pot 48 23 85.7 88.5 25 83.3 2 1 1 3.6 3.8 3.3 Much Less ------- Banks 0 0 0 Pet 0.0 0.0 0.0 Total Banks 56 26 30 -17MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted) __ 1989 19891 W4 1990 Q1 1990 Feb I ----------1. 2. 3. Ml M2 13 0.6 4.5 3.3 ----------- 1990 Mar 1990 Apr p Growth 04 89Apr 90p _ _ Percent change at annual rates-------------------.. 5.1 7.0 1.8 4.8 6.0 2.8 10.0 8.7 4.6 5.1 5.0 0.8 3.4 2.0 1.2 4.9 5.3 2.4 Levels bil. $ Apr 90p Percent change at annual rates--------- Selected components 4. 5. 6. H1-A Currency Demand deposits 7. Other checkable deposits 8. N2 minus MI2 9. 10. 11. 12. 13. 14. 15. 16. Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares Commercial banks 3 Savings deposits plus MMDAs Small time deposits Thrift institutions 3 Savings deposits plus MMDAs Small time deposits 0.4 2.5 4.2 11.8 2.1 0.5 515.5 4.8 -2.8 4.0 1.1 10.3 -0.9 10.7 12.5 9.5 -3.9 8.9 -6.4 230.1 277.8 1.0 9.8 5.9 6.7 10.5 8.7 291.6 7.7 6.4 8.2 5.0 1.6 2464.6 -12.8 28.6 10.4 -11.8 -31.2 78.6 -9.2 29.7 7.5 -1.7 19.0 29.1 10.9 10.4 11.3 18.8 8.5 9.3 7.8 24.1 9.8 12.2 7.5 1.8 8.0 10.3 5.6 -0.7 8.4 7.4 9.4 324.8 1097.3 555.9 541.4 -0.2 -0.9 -1.7 -2.9 2.4 -3.1 961.1 -9.3 5.8 1.9 -2.5 2.8 -4.3 7.8 -9.0 6.1 0.2 5.0 -7.9 358.5 602.6 17. M3 minus M24 -1.5 -17.1 -9.6 -11.0 -16.5 -1.8 796.9 18. 19. 20. 21. 4.2 9.9 -7.8 -6.7 2.7 -28.8 -8.2 -1.5 -24.7 -10.2 -5.7 -22.0 -11.8 -7.5 -23.2 -11.3 -34. Z 538.9 395.9 143.0 3.2 10.2 -40.2 -38.0 5.8 44.6 -64.8 19.7 -24.1 -35.1 15.9 -5.2 1.7 106.8 92.5 69.8 22. 23. Large time deposits s At commercial banks, net institutions At thrift Institution-only money market mutual fund shares Term RPs, NSA Term Eurodollars, NSA 17.1 -16.1 -22.0 -49.2 -39.6 -2.7 ---- Average monthly change in billions of dollars---MEMORANDA: at commercial 24. Managed liabilities banks 125+261 25. Large time deposits, gross 26. Nondeposit funds Net due to related foreign institutions 7 Other 28. 29. U.S. government deposits at commercial bankst 5.9 2.6 3.3 4.5 1.4 3.1 1.9 -2.3 4.2 6.9 -2.1 9.0 -0.2 -3.3 3.1 -5.2 -2.0 -3.2 720.2 455.3 264.9 0.2 3.1 -1.2 4.3 3.3 1.0 3.7 5.3 2.6 0.5 -0.5 -2.7 16.7 248.2 -0.3 -0.6 -0.6 -2.4 1.4 2.0 21.2 27. Amounts shown are from fourth quarter to fourth quarter. Nontransactions M2 is seasonally adjusted as a whole. tommercial bark savings deposits excluding MMDAs grew during March and April at rates of 10 institutions, savings deposits excluding MMDAs grew percent and 1.9 percent, respectively. At thrift during March and April at rates of -3.2 percent and 4.3 percent, respectively. 4. The non-MZ component of M3 is seasonally adjusted as a whole. institutions. 5. Net of large denomination time deposits held by money market mutual funds and thrift 6. Dollar amounts shown under memoranda are calculated on an end-nonth-of-quarter basis. 7. Consists of borrowing from other than commercial banks in the form of federal funds purchased, securities for borrowed money (including borrowing from the sold under agreements to repurchase, and other liabilities Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits and note balances at commercial banks. p - preliminary 1. 2. 3. -18COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 1988:Q4 to 1989:Q4 1. Total loans and securities 1. Total loans and securities 2. --- 1989 Q4 1990 01 ------------------- Feb. Mar. Apr.p Levels bil.$ April p Commercial Bank Credit - -------------------- at banks 7.2 6.9 6.8 8.4 9.2 4.1 2632.8 Securities 3.9 9.6 16.8 20.0 13.8 7.8 603.0 3. U.S. government securities 9.7 16.9 24.6 29.2 19.5 10.3 422.5 4. Other securities -6.9 -5.5 -. 2 -. 7 .7 2.0 180.5 8.1 6.1 3.9 5.0 7.8 3.0 2029.8 6.8 3.0 .6 -2.1 9.6 7.1 646.6 2.2.9 11.2 10.1 13.3 9.7 6.8 778.8 -4.4 377.8 5. Total loans 6. Business loans 7. Real estate loans 8. Consumer loans 6.3 6.4 3.7 3.2 1.0 9. Security loans 3.8 -1.0 -18.2 15.3 -60.5 -25.5 36.9 .0. Other loans .6 -1.9 -5.0 -3.2 23.1 -5.6 189.7 *--11. 12. Short- and Intermediate-Term Business Credit---------- Business loans net of bankers acceptances ~ Loans at foreign branches Sum of lines 11 & 12 14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 & 14 16. Bankers acceptances: 17. related '" 21.0 5.9 24.5 4.4 -3.2 9.0 -47.0 -21.7 6.8 5.5 638.3 21.8 -4.9 8.1 .9 43.7 55.7 148.9 -3.9 14.3 15.5 809.0 -31.3 -28.6 n.a. 32.8 12.5 n.a. 831.5 6.9 660.2 U.S. trade 6.1 Line 15 plus bankers acceptances: U.S. trade related 3,6 18. Finance company loans to business 19. Total short- and intermediate- 3 s -9.1 -18.6 5.3 3.4 6.2 4.7 .9 5.1 n.a. 260.3 3 5.4 3.7 -3.5 10.6 n.a. 1091.8 s -4.9 term business credit (sum of lines 17 & 18) 1. Average of Wednesdays. --- 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Based on average of data for current and preceding ends of month. 4. Consists of acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 5. March data. 6. Finance company data for March will not be released to the public until Friday, May 11, 1990. p--preliminary. n.a.--not available -191 -- -- - -- SELECTED FINANCIAL MARKET QUOTATIONS (percent) - - - -- -- - -- -- - -- -- - -- -- - -- -- - - - -- - -- -- - -- -- - -- -- - -- -- - -- - 1987 1989 19 90 -------- Change from: ""'""-----------------------Dec Mar 89 Dec 89 FOMC FOMC 2 March Oct 16 lows Mar 27 highs May 10 highs lows Mar 27 ------------------------ -------" ' - - ~'"'~"------------ -- -- Short-term rates Federal funds 3 7.59 9.85 8.45 8.27 8.21 -1.64 -0.24 -0.06 Treasury bills 4 3-month 6-month 1-year 6.93 7.58 7.74 9.09 9.11 9.05 7.53 7.29 7.71 7.72 7.73 -1.38 -1.39 -1.32 0.18 0.43 7.11 7.90 7.86 7.76 -0.19 -0.14 -0.03 Commercial paper 1-month 3-month 7.94 8.65 10.05 10.15 8.51 8.22 8.35 8.31 8.26 8.26 -1.79 -1.89 -0.25 0.04 -0.09 7.92 8.90 9.12 10.07 10.32 10.08 8.52 8.22 8.01 8.31 8.35 8.53 8.25 8.35 8.50 -1.82 -1.97 -1.58 -0.27 0.13 0.49 -0.06 0.00 -0.03 Eurodollar deposits 5 1-month 3-month 8.00 9.06 10.19 10.50 8.38 8.25 8.31 8.38 8.25 8.38 -1.94 -2.12 -0.13 0.13 -0.06 0.00 Bank prime rate 9.25 11.50 10.50 10.00 10.00 -1.50 -0.50 0.00 U.S. Treasury (constant maturity) 3-year 9.88 9.52 9.53 10-year 10.23 9.31 30-year 10.24 7.69 7.77 7.83 8.60 8.52 8.48 8.73 8.82 8.81 -1.15 -0.71 -0.50 1.04 1.05 0.98 0.13 0.30 0.33 Municipal revenue (Bond Buyer) Large negotiable CDs 1-month 3-month 6-month 0.62 -0.05 4 Intermediate- and long-term rates 9.59 7.95 7.28 7.54 7.66 -0.29 0.38 0.12 Corporate--A utility recently offered 11.50 10.47 9.29 9.84 10.14 -0.33 0.85 0.30 Bome mortgage rates S&L fixed-rate S&L ARM, 1-yr. 11.58 8.45 11.22 9.31 9.69 8.34 10.26 8.56 10.67 8.62 -0.55 -0.69 0.98 0.28 0.41 0.06 1989 Record highs Date Lows Jan 3 1990 FOMC Mar 27 May 10 Percent change from: Record highs 1989 lows FOMC Mar 27 27.69 21.40 14.31 14.43 20.84 0.06 0.39 -3.58 -1.43 -0.03 Stock prices Dow-Jones Industrial 2810.15 199.34 NYSE Composite 397.03 AMEX Composite 485.73 NASDAQ (OTC) 3523.47 Wilshire 1/2/90 2144.64 2736.94 2738.51 154.98 187.40 188.14 10/9/89 10/10/89 305.24 361.88 348.92 378.56 439.50 433.20 10/9/89 10/9/89 2718.59 3286.05 3285.07 -2.55 -5.62 -12.12 -10.81 -6.77 -- -- - - - -- - -- -- - -- -- - -- -- - -- -- - -- -- - -- -- - -- -- - -- -- - -- -- - -- -- - -- - I/ One-day quotes except as noted. 2/ Last business day prior to stock market decline on Monday Oct. 19, 1987. 3/ Average for two-week reserve maintenance period closest to date shown. Last observation is average to date for the maintenance period ending May 16, 1990. 4/ Secondary market. 5/ Bid rates for Eurodollar deposits at 11 a.m. London time. 6/ Based on one-day Thursday quotes and futures market index changes. 7/ Quotes for week ending Friday closest to date shown. 

Federal Reserve (1990, May 14). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19900515_part3

@misc{wtfs_greenbook_19900515_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1990},
  month = {May},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19900515_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}