Regional President Speech

SUMMARY AND PROJECTIONS Lecture 5 of the 1943 Seminar Philadelphia Chapter A. I* B. Karl R. Bopp Midday Club Friday, December 3, 1943 8:00 P.M. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Introduction Thtee-fold task - difficult 1. Summarize 2. Practical implications 3« Projections of things to come Distribution of charts to facilitate discussion A • .'j o ri*1» I. Cas and Ralph^agree on high'deposit level 1. Historical evidence! - Chart I 2. Prospects of post-war national income National income Deposits 194-0 $78 1946 135 (1942 $) + 75% + 60% 3. Analytical evidence - how deposits were created — possibility of a reversal A. Loans - Ralph says no if bankers are progressive and forward-looking. Illustrate progressive banking with current ratio B. Government securities (1) Total - little prospect of rapid or early decline (2) Changed ownership: banks as residual owners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 2 - (a) Government agencies— + $1 billion a year (b) Insurance companies— + 1^-2 billion (at the outside) Total $2-2- billion (c) Corporations and individuals - probably decline II. Implications of permanently high deposit level for individual banks 1. Number of banks 2. Some advisers say equal maturity distribu­ tion to 10 years Why have unit banks? Tailor-made policy 3* Others say keep increase liquid A. Negative attitude: prepare for the worst B. Expectation of rise in rates REAL QUESTIONS A. How fast and far must rates rise to justify delay? B. What is prospect they will do so? your judgment Re A - discuss Chart II Digitized for FRASER Shorter rates must rise. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis C. No intention of keeping funds idle permanently. Have intended not to for 10 years. D. Chart II assumes worst conditions. I.e., decline in price E. If present level is maintained - Chart III. Weak and strong spots in market F. Resulting price history - Chart IV Job of individual banker To shape policy against this background A. Meeting like this can point out background only (1) Higher total deposit structure (2) Higher yield on long-term securities and its implications (3) Suggest method of approach for individual banker (a) Analyze position of com­ munity in post-war world. m Lan ce or payments racxor (b) Deposit structure Why we conducted survey Results will reach you next week in Monthly Review Digitized for FRASER (c) Prospects for loans http://fraser.stlouisfed.org/ (d) Investment policy Federal Reserve Bank of St. Louis u - - B Predictions of things to come - 7-league boots I. Answers divulged only by Burning Bush 1. The duration of the war in Europe and the Far East 2. Governmental policy with respect to re­ negotiation and cancellation of contracts, including rapidity of settlement 3* Governmental policy with respect to stock piles 4* Governmental policy v;ith respect to Government-owned plants and facilities 5. Governmental policy with respect to demobilization 6. The tax structure II. Reasonably certain 1. The total deposits will be far higher than before the war. 2. Federal Reserve will have larger amounts of short-term Government securities. 3. Taxes are bound to be on a permanently higher level. Total, say, $15-20 billion a year (interest charges #4-6 billion; armed forces 5-6 bil.) In the 1930 *s expenditures never over $8 billion. In the 1920*& not over $4 billion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 5 - 4-. Prices probably will be higher than in the 1930»s. 5. Large deferred demand in tne post-war period. 6. Controls will continue for a time. III. Economic possibilities of our grandchildren 1. Invention irreversible movement A. Industry 3 per cent a year B. Agriculture 1.2 per cent a year C. Variations among industries 2. Can it continue? - Ellsworth quotation 3. The new discovery - latent abilities 4. Options in 1983 A. Equivalent of U times our real income B. Born too soon? C. No pioblems then? D. The function of the economist in that era Summary IV. A principle of sound living - Watkins quotation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Karl R. Bopp (1943, December 2). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19431203_karl_r_bopp

@misc{wtfs_regional_speeche_19431203_karl_r_bopp,
  author = {Karl R. Bopp},
  title = {Regional President Speech},
  year = {1943},
  month = {Dec},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19431203_karl_r_bopp},
  note = {Retrieved via When the Fed Speaks corpus}
}