Speech

For Release on Delivery STATEMENT By Andrew F. Brimmer Member Board of Governors of the Federal Reserve System Before the Subcommittee on Financial Institutions of the Committee on Banking, Housing and Urban Affairs United States Senate April 7, 1971 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis I am delighted to respond to the invitation to present my views on S. 1201. I will restrict my comments to Section 4 of the bill, which would give to the Board of Governors of the Federal Reserve System authority to establish supplemental reserve requirements against assets for Federal Reserve member banks — in addition to the reserves they are now required to keep against deposit liabilities. I welcome this hearing as an important step in the evolution of reserve requirements as a tool of monetary policy. Supplemental reserve requirements on assets could prove highly beneficial in avoiding unwanted and disproportionate effects of monetary restraint in particular sectors of the economy. These hearings focus public attention on the proposal and serve to stimulate examination and refinements. Hopefully, the result will be its adoption in some form in the near future. How- ever, I think the preferable course of action is not to adopt Section 4 at this juncture. I can see a number of questions which should be resolved before the proposal is put into effect. I also have several specific reservations about some aspects of the present draft: - In its present form, the bill would apply only to Federal Reserve member banks. I believe all insured commercial banks should be covered. - The bill is overly specific with respect to the types of credit flows which should be facilitated. With less detail, the broad objectives of the proposed legislation could still be achieved. Before proceeding with the rest of this testimony, let me express my appreciation to the Chairman of this Subcommittee for taking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -2- note of the fact, when he introduced this bill, that I suggested on April 1, 1970, variable reserve requirements on bank assets should be explored. I am flattered that only a year later the idea is being given a hearing before this Committee of Congress. In the rest of this statement, I will try to accomplish the following tasks: - Provide information on the changing sources and uses of funds raised in capital markets in recent years partly in response to the changing posture of monetary policy. - Show that a significant part of the sharp changes in the availability of commercial bank credit in recent years can be traced to the behavior of roughly 20 multi-national banks (which are an integral part of the Euro-dollar market) and about 60 larger banks which are dominant in their regions. - Demonstrate the strong tendency for commercial banks to prefer loans to business firms over loans to other sectors of the economy -- with the preference for business loans rising progressively as the size of banks increases. - Show that medium-sized national banks make relatively greater use of their legal real estate lending limit, compared to both the smallest and largest institutions. - Show that insured nonmember banks are accounting for an increasing share of the fluctuations in bank credit and the money supply — and consequently are further compli- cating the task of monetary management. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -3- - Show that the Federal Reserve has already made considerable use of differential requirements to soften the effects of policy measures or to encourage banks to modify their borrowing and lending behavior to conform more to the objectives of monetary policy. - Show that variable reserve requirements on bank assets need not place the Federal Reserve in the midst of private decision making and can encourage market forces to dampen undesirable effects of monetary restraint. I believe that this analysis demonstrates the need to broaden the instruments of public policy available to cushion the impact of monetary restraint on particular sectors of the economy. Supplemental reserve requirements on assets may well provide an answer to this problem if they are extended (along with the privilege of borrowing from the Federal Reserve Banks) to insured nonmember banks as well as members. Monetary Policy and Credit Flows in Recent Years The differential impact of monetary policy on particular types of credit flows can be seen clearly in the record for the last few years. It will be recalled that, as a by-product of the policy of severe monetary restraint followed in 1969, a striking change occurred in the pattern of credit flows compared with that for the previous year. In Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -4- 1970, to a considerable extent, such credit flows returned to more traditional channels. Of course, the policy of monetary restraint in 1969 itself was an integral part of the national campaign to check inflation. In the same vein, the policy of moderate easing in credit conditions was part of our national effort to cushion the slowdown in the economy and thereby prevent a large decline in production and an unacceptable rise in unemployment. Thus, in both 1969 and 1970, the pattern of credit flows was a by-product of concerted efforts to attain the nation's economic objectives. To provide perspective on these changing credit flows, statistics are presented in Table 1 (attached^ showing the amount and sources of funds raised in capital markets, by major economic sectors, in 1968, 1969 and 1970. Several highlights should be mentioned. The first thing to note is that a decline in the borrowing activity of the Federal Government! was the cause of the reduction in total fcredit flows in 1969. In both 1968 and 1970, net Federal borrowing accounted for about one-seventh of total funds raised by nonfinancial sectors, and a small net repayment occurred in 1969. For all other nonfinancial sectors, the vtfltme of funds in 1969 expanded substantially from the level in the previous year, despite conditions of severe monetary restraint. Among principal borrowers, business firms (particularly corporate borrowers) recorded the most Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -5- striking gains in both absolute and relative terms. Their heavy borrowing was undertaken partly to finance a sizable expansion in current output and partly to finance a strong investment boom. In contrast, in 1969, the volume of funds raised by State and local governments shrank somewhat, and net borrowing by households rose slightly. In 1970, total funds obtained by nonfinancial sectors (other than the Federal Government"* declined to roughly the same level regis- tered in 1968. But among these sectors, only State and local govern- ments and agricultural businesses increased the volume of funds raised. The gain for State and local units was especially marked; in fact, last year they registered considerable progress toward making up the short-fall in borrowing which occuried during the period of credit stringency in 1969. The largest drop in the amount of funds raised last year occurred among households. A substantial part of the reduced borrowing by house- holds in 1970 centered in home mortgages and consumer credit - both of which in turn reflected the lower rate of spending on home construction and consumer durable goods. Finally, with the moderation of economic activity in 1970 - particularly with the passing of the investment boom which had been so evident in 1969 - net corporate borrowing declined slightly. It will be recalled that the strength of business expendi- tures for plant and equipment in 1969 and the rapid expansion of com- mercial bank loans to business to help finance such outlays were of major concern to the Federal Reserve in that year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -6- The significant changes in the sources of funds supplied to capital markets in the last few years can also be traced in Table 1. In 1969, there was a sharp swing away from financial institutions and toward households and nonfinancial businesses as sources of funds. The reverse was true last year, and the more traditional pattern in the supply of funds was substantially restored. The greatest fluctuations occurred at commercial banks, but changes at other financial institu- tions (especially at savings and loan associations) were also noticeable. In 1969, commercial banks, which bore the brunt of monetary restraint, lost a sizable amount of time deposits, and their lending ability was severely restrained. Last year, reflecting the greater availability of bank reserves, the relative role of commercial banks in supplying funds returned to what it had been in 1968. Also in 1970, the relative posi- tion of savings and loan associations was substantially restored - a reflection of the greatly enhanced flow of savings to them (as well as to mutual savings banks and other financial intermediaries). Of course, the most graphic picture of the impact of monetary policy on credit flows can be seen in the behavior of commercial banks. The figures in Table 2 can be used for this purpose. In 1969, commer- cial banks' liabilities (the key to their lending ability) rose by only two fifths as much as in the preceding year. As already mentioned, the primary reason was a noticeable loss of time deposits - especially negotiable certificate s of deposits in denominations of $100,000 and over (CD's). The latter experience, in turn, was due to the decision Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -7- of supervisory authorities to hold the maximum rates of interest which could be paid on time deposits below sharply rising market yields. In 1970 (and particularly after mid-year when the ceilings were suspended with respect to CD's with maturities of less than 90 days>, interest rates offered by the banks were again competitive with market yields - which were declining sharply - and the banks gained funds. The figures in Table 2 also show the sharp changes in uses of commercial bank funds in recent years. In 1969, total bank credit expanded by less than half the amount recorded the previous year. How- ever, the rise in bank loans in 1969 was about as large as that recorded the year before. To meet this private demand for credit, the banks liquidated a sizable amount of U.S. Government securities and switched the funds into loans. In 1970, the growth in bank credit was nearly double that recorded in the preceding year. But the overwhelming proportion of the banks' funds went into investments, and only a modest growth occurred in bank loans. Finally, in 1969, commercial banks pulled in a record amount of Euro-dollars through their foreign branches in an effort to offset the loss of domestic time deposits. Last year, they employed a substantial portion of their enlarged resources to repay liabilities to their foreign branches. Banking Structure and the Behavior of Bank Credit Flows About a year ago, I devised a framework of analysis which allows one to study the lending behavior of commercial banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -8- according to the character of their business. <l>The framework was constructed by recasting data for selected groups of large banks which report to the Federal Reserve on a weekly basis. Given the purpose of these hearings, it might be helpful to summarize here developments at these groups of banks during the last few years. The results of the regrouping are shown in Tables 3 and 4. In this schema, I identified 20 banks as "Multi-National Banks11 and another 60 banks as "Major Regional Banks." Those banks classed as multi-national banks were picked on the basis of their size, volume of business loans, importance in the Federal Funds market in partic- ular and the money market in general, the volume of their foreign lending, and the extent of their participation in the Euro-dollar market. Similar criteria were used to classify major regional banks, but greater stress was given to domestic activities and the relative importance of these banks in their own area of the country. The remaining 250 weekly reporting banks were designated "Large Local Banks. The experience of these groups of banks with deposits flows has differed considerably. In 1968, the multi-national banks lagged (1)The approach was first described in "The Banking Structure and Monetary Management," which I presented before the San Francisco Bond Club, April 1, 1970. (2)It should be remembered that the smallest banks in this group have total deposits of at least $100 million. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -9- somewhat behind the other two groups in the expansion of deposits. However, in 1969, both the multi-national banks and major regional banks experienced deposit outflows that were relatively much more severe than those recorded by the large local banks. Yet, similar relative changes were recorded in earning asset holdings, both unadjusted and adjusted for loan sales, at all groups of banks. This similarity in total asset performance in the face of markedly different deposit flows reflected greater flexibility among the largest banks in developing alternative sources of lendable funds. The two larger groups of banks relied much more heavily on domestic nondeposit sources and siphoned substantially larger volumes of funds from the Euro-dollar market. The multi-national banks were particularly heavy borrowers in the Euro-dollar market. The affiliates of multi-national and major regional banks also sold a considerably larger volume of commercial paper - and in turn purchased larger quantities of loans - than did the large local banks. General changes in the composition of asset portfolios were somewhat more similar at these three groups of banks. However, data in Table 3 do indicate that the multi-national banks made relatively larger reductions in their security holdings than did the other two bank groups. At the same time, after adjustment for loan sales, growth in total loans and in business loans was considerably stronger at the multi-national banks than at either the major regional or large local Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -10- banks in 1969. The pattern of deposit and credit flows at these three groups of banks in 1970 differed considerably from that recorded in 1969. Referring again to Tables 3 and 4, it will be noted that the multi- national banks gained a substantial volume of new deposits during the year. This growth, measured in both absolute and relative terms, was considerably stronger than that which occurred at the major regional banks, and it was somewhat stronger than that recorded by the large local banks. Yet, growth in earning assets at the multi-national banks was only slightly above that recorded by the major regional banks and was considerably less than that which occurred at the large local banks. The explanation for the failure of earning asset developments at the three groups of banks to match more closely changes in deposits at these banks is that the multi-national banks decided to use a large portion of their incoming deposit funds to reduce nondeposit liabil- ities. The large local banks, on the other hand, channeled only a small portion of their relatively large inflow of deposits to the repayment of nondeposit liabilities while there was virtually no net change at major regional banks. A fairly diverse pattern of change in credit expansion pan also be seen in the statistical data for the three groups of banks. It appears that loan demands, particularly business loan demands, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis •Il- ea sed markedly at both the multi-national and major regional banks during 1970. Multi-national banks recorded a slight drop in their total loans, adjusted for loan sales, and a somewhat larger decrease in their business loans. The major regional banks had a modest rise in total loans (adjusted) and no net change in loans to business. In contrast, growth in total loans at the large local banks was somewhat stronger in 1970 than in 1969. In fact, the 1970 advance in their business loans was nearly as large as the relatively sharp advance recorded in 1969. All three groups of banks made net additions to their investment portfolios during 1970. However, growth at the multi- national banks was substantially stronger than at the other groups of banks. The above analysis provides useful insight into the relative impact that changes in monetary and credit conditions have on dif- ferent categories of banks and into the ways in which these different groups of institutions have adjusted to the shifting deposit and loan circumstances. I find information of this kind especially helpful in understanding how shifts in monetary policy or other exogenous developments work their way through the banking system and how the results of these developments alter the course of general economic conditions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -12- Asset Preferences of Commercial Banks It is widely recognized that commercial banks channel a major share of their lendable funds into loans to business firms. However, the extent to which this is true is less widely appreciated. To cast more light on the role of business loans in bank lending, the composi- tion of earning assets fliotal loans and investments) of all insured com- mercial banks, as of June, 1966, and June, 1970, was examined in consid- erable detail. The results are shown in Tables 5 through 12, and in Charts A through C.^xhere is no need to discuss here the detailed findings. However, several points should be made, for they throw considerable light on the asset preferences of commercial banks. The first comments are based on the banks1structure of earnings assets in June, 1970, and they apply to all classes of banks: all insured banks combined; all Federal Reserve member banks; national banks; and insured nonmember banks. Charts A through C might be particularly helpful in following the discussion. Chart A refers to all insured banks; Chart B to Federal Reserve member banks, and Chart C to insured nonmember banks. The following generalizations seem to hold true (3)In this part of the analysis, the 13,000-odd insured commercial banks were grouped by deposit size, and 22 asset categories were identified separately. For each individual bank, the ratio of a particular asset category to the bank's total earning assets was cal- culated. These ratios for individual banks were then averaged to obtain ratios for each size group of banks. All insured banks were further subdivided into three classes: all Federal Reserve member banks; national banks; and insured nonmember banks. Data were obtained from the Call Reports for June 1966 and June 1970. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -13- for each group of banks: - Small banks hold a larger proportion of their earning assets in securities than do larger banks: the ratio of total investments (mainly U.S. Government and State and local issues) to total earning assets declines continually as the size group of banks increases. While there are minor differences among various classes of banks, the ratio generally drops from about 40 per cent for the smallest banks to about 15 per cent for the largest. Holdings of U.S. Treasury securities become a progressively smaller proportion of total earning assets - and of total investments held - as the size of banks increase. - Holdings of State and local government securities, expressed as a percentage of total earning assets, is generally higher at medium size banks than at either the smallest or largest size group. The ratio of total loans (including Federal funds sold) to total earning assets rises continually as the size of banks increases. Again, while there are some differences among bank classes, the ratio is generally about 60 per cent for the smallest size group and rises to about 75 per cent at the largest size group. Of the various categories of loans, business loans display the closest - and clearest - association with size of bank. The relative importance of such loans compared with total earning assets climbs progressively and in tandem as the size of banks advances. The ratio of business loans to total earning assets rises from about 8 per cent at the smallest size group to about 25 to 30 per cent at the largest. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -14- - A similar pattern - although less dramatic - is evident in the case of loans to financial institutions (banks, nonbank financial institutions and brokers and dealers^ and in loans to other investors for carrying securities. These "financial" loans rise from about 1 per cent at the smallest banks to about 8 per cent at the largest lenders. - Loans to farmers as a percentage of total earning assets decline as the size of bank increases - from around 17 per cent to 1 per cent. Real estate loans expressed as a proportion of total earning assets are generally highest at the medium size banks and lowest at both the smallest and largest size groups of banks. In general, such loans at the largest banks amount to about 15 per cent of total earning assets. In contrast, at medium size banks, the ratio was about 20 per cent. - A similar "rainbow-shaped" distribution of loans to individuals, with respect to size of bank, can be observed. Still further insights into the lending behavior of commercial banks can be gotten from an analysis of the changes in the composition of their assets, by size of bank, between June, 1966, and June, 1970. The following generalizations are applicable for all classes of banks: During these four years, total investments declined as a percentage of total earning assets at all size groups (and in all classes'* of banks. The extent of the decline was fairly uniform - ranging, in almost all instances, between 2 and 3 percentage points. In this period, U.S. Treasury issues declined - and other securities Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -15- increased - in relative importance at all size groups of banks. Total loans increased in relative importance during these years. With respect to business loans, there was little if any change in relative importance - except at the very largest banks, where such loans climbed a few percentage points in relation to total earning assets. Real estate loans decreased at the smallest size group of banks and increased at the largest size groups - when expressed as a proportion of total earning assets. However, in both cases, the changes were quite moderate - about 1 or 2 percentage points. No general pattern of change in relative importance of other loan categories is discernible. The changes which did occur in particular size groups were quite small. One other aspect of the analysis of commercial bank asset preferences may be of particular interest to this Committee. This concerns the extent to which national banks are using their statutory potential to make real estate loans. Under Section 24 of the Federal Reserve Act, a national bank's total real estate loans are limited to an amount equal to its total capital and surplus or 70 per cent of its time and savings deposits - whichever is the greater. Thus, one can readily compare the national bank's actual holdings of real estate loans with their statutory lending potential. The 70 per cent time and savings deposits criterion was used in the present analysis, and the results are shown in Table 13 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -16- and Chart D. (4) Several of the findings should be mentioned: - The very largest and very smallest size groups of banks appear to make less use of their real estate lending than do banks in the medium size range. Thus, the pattern of use is approximately the same as that observed with respect to real estate loans as a proportion of the banks1 total earning assets. The relative use of real estate lending potential by all except the very largest size group of banks declined between 1966 and 1970. At the largest banks, use of the potential rose significantly. As a result of these changes, in 1970 the use of lending potential by the largest group of banks was higher than that for the three smallest size classes. Banks in the three intermediate size groups, however, continued to make the most intensive use of their lending potential. On the basis of the evidence yielded by this analysis of commercial banks1 asset preferences, I reach the following conclusions: the attraction of loans to business is so strong that one should ordi- narily expect banks to respond to the fullest extent possible to the demand for credit by business firms. Experience indicates, moreover, that in a period of severe monetary restraint, other sectors of the econ- omy are likely to obtain proportionately less — while the business sector obtains proportionately more — of a given supply of commercial bank funds. (4)The calculations were made using the same statistical procedures described above for the analysis of the banks1 asset composition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -17- Slnce the Federal Reserve must channel through the banking system whatever additions to bank reserves it finds consistent with overall monetary policy objectives, this suggests that the lending behavior of commercial banks must be a matter of prime concern. In my judgment, the Federal Reserve needs a better set of tools with which to assure that the banks1 lending behavior reinforces the basic aims ©f monetary management. Growing Importance of Banks Outside the Federal Reserve System I stressed at the outset that the authority to set supplemental reserve requirements on assets should not be restricted to member banks of the Federal Reserve System. Instead, it should also apply to insured commercial banks that are not members of the System. There are at least two reasons why this should be the case. The first one is the need to avoid aggravating the already serious problem of attrition in Federal Reserve membership. Between 1960 and 1970, the number of member banks shrank by 414 (6 per cent) to 5,803, while the number of all insured commercial banks expanded by 338 (2 1/2 per cent). The number of insured banks that are not members of the Federal Reserve System rose by 749 (11 per cent) to 7,675. Among Federal Reserve member banks, the number of national banks increased by 95 to 4,637. In contrast, the number of State-chartered member banks (which are members by choice) dropped by 509 (30 per cent) to 1,166. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -18- Reflecting these trends, a significant change occurred in the structure of the banking system during the last decade as far as membership in the Federal Reserve System is concerned. In 1960, member banks constituted 47 per cent of the total number of insured commercial banks, and they held 84 per cent of total deposits and of total loans and investments. By 1970, they represented 43 per cent of the banks, and the ratio for both deposits and loans had dropped to 80 per cent. Moreover, during the last decade, insured nonmember banks accounted for one-quarter of the rise in total deposits and in total loans and invest- ments - although they held only one-sixth of the total in each category in 1960. To a considerable extent, the attrition in Federal Reserve membership can be traced to the reluctance of many of the smaller State- chartered banks to carry the already existing burden of required reserves. In fact, all of the relative decline in the proportion of banks that are members of the Federal Reserve System was among State-chartered insti- tutions. State members declined from 13 per cent to 9 per cent of all insured commercial banks, between 1960 and 1970, while national banks remained unchanged at 34 per cent. This already difficult situation should not be made worse by restricting the application of supplemental reserve requirements only to Federal Reserve member banks. The second reason for covering insured nonmember banks is their growing impact on total bank credit and the money supply. The Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -19- magnitude of this impact can be seen clearly in Tables 14, 15, and 16. Table 14 shows the level of the total money supply and its components as of December for each year from 1960 to 1970. Table 15 shows (a) Federal Reserve member bank and nonmember bank demand deposits as a percentage of demand deposits included in the total money supply and (b) the distribution of changes in these items for each year 1960-1970. These data indicate that, in all years except 1970, the proportion of the change in the demand deposit component of the money supply accounted for by nonmember banks was greater than the proportion of total demand deposits accounted for by these banks. From these data it would appear that, on average, nonmember banks have an impact on the change in the money supply which is greater than the relative share of money supply deposits held at these institutions. In Table 16, total bank credit and selected components outstanding at each class of bank are shown for each year 1960-1970. These data tell the same kind of story sketched above in the case of the money supply. Nonmember banks are providing a rising share of the credit extended by insured commercial banks, and they are responsible for an increasing proportion of the fluctuations in the volume of such credit outstanding. Their impact on the market for particular types of bank loans (for example, real estate loans> in a given year can be especially noticeable. Thus, the lending behavior of commercial banks outside the Federal Reserve System is already complicating the task of monetary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -20- management. Hopefully, the situation will not be made more complicated by the continued exemption of nonmember banks from the requirement to carry reserves fixed by the Federal Reserve - while supplemental reserves on assets are applied to member banks. Instead, it would be preferable that all insured commercial banks be required to carry reserves - both on deposits and on assets - set by the Federal Reserve on the basis of overall requirements of monetary management. At the same time, as the Federal Reserve Board has recommended for several years, nonmember banks should be given the privilege of borrowing at Federal Reserve Banks. Reserve Requirements in Historical Perspective At this juncture^ I would like to digress briefly to stress a few points that are frequently overlooked in discussions of the appropriate role of required reserves in the banking system. Unfortunately, even today the fact that such reserves are useful purely as instruments of monetary management is not fully understood — and the possibility of extending this function further is comprehended even less. In the United States, several historical experiences with required reserves are quite instructive. It will be recalled that the National Banking Act of 1863 for the first time established legal reserve requirements for Federally-chartered banks. The basic assumption was that required reserves would provide liquidity for both bank notes and deposits. National banks in central reserve and reserve cities had to maintain reserves equal to 25 per cent of outstanding notes and deposits, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -21- and for banks in other cities (country banks) the ratio was 15 per cent. The requirement for notes was dropped in 1874. The notion that reserves were assumed to provide liquidity for individual banks was evidenced by the form in which required reserves could be held: for banks, in central reserve cities, vault cash; for reserve city banks, half in vault cash and half in deposits in central reserve or reserve city banks; for country banks, two-fifths in vault cash and three-fifths in deposits in reserve city or central reserve city banks. The record of American economic history shows quite clearly that the system of required reserves established under the National Banking Act failed to meet the liquidity goal each time it was tested. The reason for the failure (the impossibility of an individual bank being able to liquidate enough assets to meet withdrawals during periods of crisis) was understood by only a few observers. Perhaps that fact explains why the concept of "pooling" reserves was carried over into the Federal Reserve Act in 1913. While a few innovations were made in the administration of required reserves, the idea that they were needed as a source of liquidity persisted until the mid-19301 s. By an amendment to the Federal Reserve Act in May, 1933 (referred to as the Thomas Amendment), authority was given for the first time to vary reserve requirements for member banks. However, the authority was subject to the proclamation of an emergency by the President (which was never done in this connection), and the authority was never used. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -22- In the Banking Act of 1935, the discretionary authority was given to the Federal Reserve Board directly. This step represented a clear recognition of the role of required reserves as a tool of monetary control -- which could be used to influence directly the rate of expansion of aggregate bank credit. The Board has made considerable use of this authority since it was first employed in August, 1936. In my opinion, the next step in the evolution of the reserve requirement tool should be to make it more useful in cushioning the impact of shifts in bank credit flows on particular sectors of the economy. The suggestion that the Board have authority to set supple- mental reserve requirements on bank assets represents such an innovation. Evolution of Reserve Requirements in Recent Years The suggestion that one of the traditional instruments of monetary policy be reordered to influence the cost and availability of credit in particular economic sectors is not especially startling. As a matter of fact, the Federal Reserve Board has shown considerable flexibility in the use of reserve requirements in the last few years. For the most part, this has involved tailoring changes in such requirements to differentiate the impact by size of bank — as implied by deposit size. For example, in July, 1966, the requirement on time deposits over $5 million was raised from 4 per cent to 5 per cent — and kept at 4 per cent on deposits Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 23 - below that amount. In September of the same year, the percentage was raised further to 6 per cent on the $5 million and over category; again no change was made for amounts below that figure. In March, 1967, in two 1/2 percentage point steps, reserve requirements were cut from 4 per cent to 3 per cent on savings deposits and on time deposits under $5 million. The requirement was left at 6 per cent on time deposits over $5 million. In January, 1968, the Federal Reserve Board also began to differentiate reserve requirements on demand deposits. At that time, the requirement was raised from 16-1/2 per cent to 17 per cent on deposits over $5 million at Reserve City banks, while the requirement on amounts below this figure was left unchanged. At country banks, the corresponding increase was from 12 per cent to 12-1/2 per cent for demand deposits over $5 million, while it remained at 12 per cent on amounts below that cutoff. In April, 1969, a 1/2 percentage point increase was made effective at all member banks and on all demand deposits while maintaining the 1/2 percentage point differential on demand deposits above and below $5 million. Undoubtedly the most imaginative use of reserve requirements in recent years has been their application to Euro-dollar borrowings by American banks. In October, 1969, the Board established a marginal reserve requirement of 10 per cent on Euro-dollar borrowings in excess of amounts outstanding in a base period — the four weeks ending May 28, 1969 — and on foreign branch loans to U.S. residents in excess of base- period amounts. (Banks that did not have outstanding borrowings were Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 24 - given minimum reserve-free bases equal to a specified percentage of deposits.) The Board also provided that the reserve-free bases be subject to automatic downward adjustment to the extent that borrowings fell below the base-period levels, thereby creating some incentives for banks to avoid precipitate reduction in Euro-dollar borrowings at times, such as the present, when interest differentials favor repayment of those borrowings. In the same vein, the Federal Reserve Board published for comment a proposal to apply reserve requirements to commercial paper when offered by a bank-related corporation and when the proceeds are used to supply funds to the member bank. The Board put this issue aside for a time in early 1970, because of a desire to avoid exerting additional restrain t on money and credit markets. However, the question was opened again last summer, and reserve requirements were applied to bank-related commercial paper in October, 1970. Demand deposit requirement percentages were applied to paper with initial maturities of less than 30 days, and time deposit requirements were applied to paper with longer maturities. This action was announced a month in advance of the effective date, and banks were able to shift most of their commercial paper funds into the time deposit requirement category. In this action, the Board lowered reserve requirements on time deposits over $5 million one percentage point to 5 per cent and established the new commercial paper requirement at the same level. In November, 1970, following significant reductions by some banks in outstanding Euro-dollar borrowings, and in reserve-free bases, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 25 - the Board increased from 10 per cent to 20 per cent the rate of reserve requirement on borrowings in excess of reserve-free bases, thereby giving the banks an added inducement to preserve their reserve-free bases against a time of future need. At that time, the Board also applied the automatic downward adjustment to banks that operated under a minimum base equal to 3 per cent of deposits. On January 15, 1971, the Board amended its regulations to permit banks to count toward maintenance of their reserve-free bases any funds invested by foreign branches in Export-Import Bank securities offered under a program announced by that institution. At that time, the Board postponed for banks using a minimum base the application of the. automatic downward adjustment of their bases. Last week, a further amendment was made to the Board's regulations which extended to direct Treasury securities the same privilege previously accorded the Export- Import Bank issues. Extending the Range of Reserve Requirements It was against this emerging background that I first suggested in February, 1970, that consideration might be given to applying a supplemental reserve requirement on loans extended by U.S. banks to foreign borrowers as a replacement for the present voluntary foreign credit restraint program. At the time, I emphasized that such a market-oriented approach would be superior to one based on ceilings fixed by administrative decision —and at the same time it would offer meaningful protection to our balance of payments• Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -26- In April last year, I went on to suggest that thought might also be given to the possibility of adopting such a requirement for domestic purposes as well. The objective of the supplemental reserve on domestic loans would be to raise the cost of bank lending by reducing the marginal rate of return to the bank making the loan — and thereby dampen the expansion of bank loans. The basic purpose of the supplemental reserve would not be simply to levy new reserve requirements on the banking system. If it were thought that its adoption would raise the average level of reserves required beyond what the Board thought was necessary for general stabilization purposes, the regular reserve requirements applicable to deposits of Federal Reserve member banks (and hopefully to nonmember banks in the future) could be reduced. In suggesting that this possibility be explored, I am convinced that the Federal Reserve needs a better means of influencing the availability of credit in different sectors of the economy. At the same time, I am keenly aware of the desirability of assuring that the instrument used would minimize interference with normal business decisions and the economic forces of the market place. The banking community — within whatever outer limits of credit expansion the central bank considers are consistent with stabilization policy — can best allocate financial resources among individual borrowers. Therefore, banks should be assured as much freedom of choice as the basic objectives of maintaining a balanced economy would permit. Since, during a period of inflation, the object would continue to be to restrain the growth of bank lending, rather than to burden the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 27 - amount of lending achieved by some date in the past, the reserves might apply otily to the amount of lending above some determined volume. That is, the cash reserves would constitute marginal, rather than average, required reserves. The approach might be varied so that a cash reserve requirement might be applied against whatever new loans the bank might extend rather than apply a marginal reserve against the amount of loans above the amount outstanding on a particular date. Under either variant of this approach, the percentage reserve requirement would be set on the basis of the Federal Reserve's determina- tion of the degree of influence to be applied, for domestic stabilization reasons, against unchecked bank loan expansion. The restraint would be levied in proportion to the lending. The approach would not require immediate asset adjustments by each bank; instead it would leave the decision to individual banks to adapt their lending to the circumstances at the time. The loans that would be subject to the supplemental reserve requirement could be defined in a way that would take account of any set of priorities that might be established from time to time. For example: if the objective of public policy were to give priority to loans to meet the credit needs of State and local governments, it could be achieved through a lower reserve ratio against State and local security holdings than the ratio applied to other assets. Loans to acquire homes could be encouraged — if public policy calls for giving housing a high priority — by setting the requirement very Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 28 - low, or perhaps at zero. In contrast, if policy called for substantial restraint on consumer credit or on loans to business, the reserve ratio applicable to such loans could be set quite high. In fact, any array of loan priorities could be adopted and the reserve requirement scaled accordingly -- depending on the changing needs of public policy. Under ordinary circumstances, however, if there were no need to pursue a policy of monetary restraint -- and consequently no need to be concerned about the side-effects of such a policy course less differentiation among types of assets would be necessary. In fact, if there were no need to counteract any adverse by-products of monetary restraint, no supplemental reserve requirements would need to be established. If already employed, they would not have to be changed. Such a supplemental cash reserve requirement system sketched above would have the effect of cushioning the impact of monetary policy on particular sectors of the economy. However, it would do so without any direct interference by the Federal Reserve in the detailed lending decisions of individual banks. The new reserve requirement, which probably would be much smaller than the reserves now required against deposit liabilities, would not necessarily pose insurmountable problems for overall monetary policy. While there would be an impact on the required reserves of commercial banks, if the Federal Reserve wished, this could be offset by an appropriate reduction in reserve requirements on deposits or by open market operations. While the technical aspects of open market operations might become more complex, I believe such difficulties could be overcome. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 29 - Another question that would be raised if supplemental reserve requirements were employed concerns larger corporations which have access to credit in many markets. If bank loans were the only forms of credit so restrained, these corporations could well do their borrowing elsewhere, displacing other borrowers. Consequently, it is necessary to assess the degree to which such shifts from banks to other credit markets could impair the objective of assuring that credit is available for high-priority needs. But having cited several questions, I remain confident that answers to problems such as these can be found if enough effort is devoted to solving theip. Last year, when I urged the consideration of the supplemental reserve requirement against assets, I stressed that it be viewed as a long-run approach. I emphasized that time would be needed to explore its ramifications — aside from the fact that the Federal Reserve Board does not now have the authority to apply reserve requirements to domestic loans of member banks. Moreover, to avoid adding further to the already existing inequities between nonmember and member banks of the Federal Reserve System, I urged that all commercial banks be made subject to the new provision. As I indicated above, I still believe that this step should be taken. It might be recalled that, for several years, the Board has urged in its Annual Report that legislation be passed which would permit the establishment of a system of graduated reserve requirements on deposits, while extending the coverage to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 30 - nonmember banks -- who would also be given access to the Federal Reserve Banks1 discount window. Now that Congress is weighing the modification of reserve requirements, I hope consideration will be given to extending them to nonmember banks. I also hope that these hearings are the first step in a process that will lead, within a year or so, to further broadening of the scope of reserve requirements to include the option to impose variable requirements on particular types of bank loans or investments. In the meantime, its probable impact on our banking system must be careftally assessed. I believe such an assessment will provide answers to the questions that have been raised about this proposal -- and thus hasten progress toward a better monetary policy -- a goal we all seek, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Amount and^Curces of Funds Raised in Capi t i; Table 1. Markets by Major Sectors, 1968, 1969, and 1970 (Amounts in billions of dollars) 1968 1969 1970 Per cent Per cent Per cent Sector Amount of total Amount of total Amount of total Total funds raised by nonfinancial sectors 96.9 100.0 90.4 100.0 95.4 100.0 U.S. Government ^ 13.4 13.8 - 3.6 - 4.0 12.7 13.3 Public debt securities 10.3 10.6 - 1.3 - 1.4 12.8 13.4 Budget Agency issues 3.1 3.2 - 2.4 - 2.6 - 0.1 - 0.1 All other nonfinancial sectors 83.5 86.2 94.1 104.0 82.7 86.7 Distribution among sectors 83.5 100.0 94.1 100.0 82.7 100.0 State and local governments 9.9 11.9 8.5 9.0 12.2 14.8 Households 31.8 38.1 32.2 34.2 21.3 25.8 Nonfinancial business 38.8 46.4 49.7 52.9 46.3 56.0 Corporate 30.3 36.3 39.1 41.6 37.9 45.8 Nonfarm noncorporate 5.8 6.9 7.4 7.9 5.1 6.2 Farm 2.7 3.2 3.2 3.4 3.3 4.0 Foreign 3.0 3.6 3.7 3.9 2.8 3.4 Sources of funds advanced 96.9 100.0 90.4 100.0 95.4 100.0 Federal Reserve System 3.7 3.8 4.2 4.7 5.0 5.2 U.S. Gove rnmen t 4.7 4.9 2.7 3.0 4.5 4.7 Direct 4.9 5.1 2.5 2.8 3.3 3.5 Credit agencies (net"> - 0.2 - 0.2 0.2 0.2 1.2 1.2 Funds advanced 3.2 3.3 9.0 9.9 8.8 9.2 Less funds raised in credit market 3.5 3.6 8.8 9.7 7.6 8.0 Commercial banks, net (2) 39.5 40.8 12.2 13.5 31.1 32.6 Funds advanced 39.7 41.0 16.5 18.3 29.3 30.7 Less funds raised in credit market 0.2 0.2 4.3 4.8 - 1.8 - 1.9 Private nonbank finance 34.2 35.3 30.4 33.7 37.3 39.1 Savings institutions, net 14.6 15.1 10.4 11.5 14.9 15.6 Insurance 22.0 22.7 21.8 24.2 23.3 24.4 Finance, N.E.C., net - 2.4 - 2.5 - 1.8 - 2.0 - 0.9 - 0.9 Private domestic nonfinancial 12.3 12.7 39.5 43.7 7.5 7.9 Business 7.* 7.6 13.8 15.3 1.9 2.0 State and Local gov't., gen. 0.4 0.4 6.1 6.7 - 2.7 - 2.8 Households 5.8 6.0 18.0 19.9 7.0 7.3 Less net security credit 1.4 1.4 - 1.6 - 1.8 - 1.2 - 1.3 Foreign 2.5 2.6 1.3 1.4 10.0 10.5 Digitized f(oIr" F) RASEExRc ludes sponsored credit agencies. (2) Includes unconsolidated bank affiliates. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 2. Sources and Uses of Fundsf^ Commercial Banks, 1968 1969, and 1970 t (Amounts in billions of dollars) 1968 1969 1970 Per cent Per cent Per cent Source or Use Amount of total Amount of total Amount of total Net acquisition of financial assets 44.0 100.0 19.7 100.0 41.9 100.0 Total bank credit 39.7 90.2 16.5 83.8 29.3 69.9 Credit Market instruments 38.4 87.3 17.7 89.9 27.5 65.6 U.S. Gov't. securities 3.4 7.7 - 9.5 - 48.2 8.2 19.6 Direct 2.2 5.0 - 9.3 - 47.2 5.2 12.4 Agency issues 1.1 2.5 1.1 5.6 3.7 8.8 Loan participation certifs. 0.2 0.5 - 1.3 - 6.6 - 0.7 - 1.7 State and local obligations 8.6 19.5 0.4 2.0 11.2 26.7 Corporate bonds 0.3 0.7 - 0.1 - 0.5 0.5 1.2 Home mortgages 3.5 8.0 3.0 15.2 0.9 2.1 Other mortgages 3.2 7.3 2.3 11.7 1.0 2.4 Consumer credit 4.9 11.1 3.3 16.8 1.9 4.5 Bank loans, N.E.C. 15.7 35.7 17.8 90.4 0.6 1.4 Open market paper - 1.1 - 2.5 0.5 2.5 3.2 7.6 Security credit 1.3 3.0 - 1.1 - 5.6 1.8 4.3 Loans to affiliate banks 0.6 3.0 - 0.1 - 0.2 - -- Vault cash and member bank reserves 2.0 4.5 0.4 2.0 2.2 5.3 Miscellaneous assets 2.3 5.2 2.2 11.2 10.5 25.1 Net increase in liabilities 42.2 100.0 18.0 100.0 39.8 100.0 Demand deposits, net 13.3 31.5 5.2 28.9 6.4 16.1 U.S. Government - 0.2 - 0.5 -k * 2.7 6.8 Other 13.5 32.0 5.2 28.9 3.7 9.3 Time deposits 20.6 48.8 - 9.7 - 53.9 38.0 95.5 Large negotiable CD's 3.1 7.3 - 12.6 - 70.0 15.2 38.2 Other 17.4 41.2 2.9 16.1 22.9 57.3 Federal Reserve float 0.9 2.1 0.1 0.6 0.7 1.8 Borrowing at Federal Reserve Banks * * * 0.2 0.5 Loans from affiliates 0.6 3.3 - 0.1 - 0.3 Bank security issues 0.2 4.7 0.1 0.6 * *4 Commercial paper issues 4.2 23.3 - 1.9 - 4.8 Profit tax liabilities - 0.1 - 0.2 0.1 0.6 0.1 0.3 Miscellaneous liabilities 7.3 17.3 17.4 96.7 - 3.7 - 9.3 Liabilities to foreign branches 1.8 4.3 7.0 38.9 - 6.1 - 15.3 Other 5.5 13.0 10.4 57.8 2.4 6.0 Discrepancy 0.5 0.3 - 0.1 Current surplus 2.9 3.1 3.0 Plant and equipment 1.0 1.1 NOTE: Data show combined statement for commercial banks and affiliates. Digitized for FRASER http://fraser.stlouis*f edN.oorgt / available Federal Reserve Bank of St. Louis Table 3 CHANGES IN MAJOR BALANCE SHEET ITEMS, WEEKLY REPORTING BANKS 1968, 1969 and 1970 1/ (In billions of dollars, not seasonally adjusted) 20-Multl- 60 Major Re- 250 Large Total Nat11 Banks gional Banks 5/ Local Banks 1968 1969 1970 1968 1969 1970 1968 1969 1970 1968 1969 1970 Total loans and investments, gross 23.0 2.6 21.8 10.9 1.7 5.7 6.2 -0.1 4.9 5.8 1.0 11.2 Total loan sales n.a. 4.0 -1.0 n.a. 2.8 -0.3 n.a. 0.8 -0.5 n.a. 0.4 -0.3 Total loans and investments, adjusted for loan sales 23.0 6.6 20.8 10.9 4.5 5.4 6.2 0.7 4.4 5.8 1.4 10.9 U.S. Treasury 0.9 -5.8 4.4 0.9 -2.2 2.6 0.1 -1.7 0.8 -- -2.0 1.0 Other securities 5.4 -3.1 8.3 2.8 -2.7 3.3 1.2 -0.4 1.9 1.4 3.1 Total loans, gross 16.7 11.6 9.1 7.3 6.6 -0.3 4.9 2.1 2.2 4.5 2.9 7.1 Total loans, adjusted for loan sales 16.7 15.6 8.1 7.3 9.4 -0.6 4.9 2.9 1.7 4.5 3.3 6.9 Business loans 7.3 7.2 0.9 4.2 4.3 -1.8 1.6 1.6 0.3 1.5 1.3 2.4 Business loan sales n.a. 2.9 -0.7 n.a. 2.1 -0.2 n.a. 0.4 -0.3 n.a. 0.3 -0.2 Business loans, adjusted „ for loan sales 7.3 10.1 0.2 4.2 6.4 -2.0 1.6 2.0 1.5 1.6 2.2 Real estate 3.1 2.1 -- 0.9 1.1 -0.6 1.1 0.4 -0.2 1.1 0.6 0.8 Consumer installment 2.2 1.7 1.5 0.5 0.3 0.3 0.7 0.4 0.1 1.0 1.0 1.0 Total deposits 2/ 14.2 -15.6 29.9 4.0 -9.1 12.9 4.6 -4.5 5.7 5.6 -2.0 11.3 Total demand deposits _2/ 4.8 0.4 6.8 1.0 1.0 2.5 1.6 -0.5 0.9 2.1 -0.1 3.5 Total time and savings deposits 9.4 -16.0 23.0 3.0 -10.1 10.4 2.9 -4.0 4.7 3.5 -1.9 7 o 9 Large CD's 3/ 3.1 -12.4 14.8 0.5 -7.2 7.7 1.4 -3.4 3.6 1.2 -1.8 3.5 Borrowings from major domestic sources 4/ 3.7 10.1 -0.1 2.2 4.4 -0.5 1.3 3.4 0.3 0.2 2.3 0.1 Other liabilities 4c 9 9.3 -4.7 4.1 7.4 -4.7 0.5 1.2 -0.3 0.3 0.7 0.3 Euro-dollar liabilities _5/ 2.7 7.5 -5.0 2.6 6.7 -4.2 0.1 0.6 -0.6 — 0.3 -0.3 Loans and security reserves and total capital account 1.8 1.8 1.6 0.9 0.7 0.3 0.4 0.5 0.3 0.4 0.7 1.0 MEMO: Commercial paper _6/ n.a. 4.3 -2.0 n.a. 2.4 -0.7 n.a. 1.3 -0.8 n.a. 0.6 -0.5 1/ Changes for 1970 are from December 24, 1969, to December 23, 1970. Comparable dates were used to compute 1969 and 1968 changes. 2/ Less cash items in the process of collection. 3/ Negotiable time certificates of deposit in denomination of $100,000 or more. 4/ Largely borrowing in the Federal funds market and from Federal Reserve Banks. _5/ Bank liabilities to foreign branches. 6/ Issued by a bank holding company or other bank affiliate. 7/ These banks were selected on the basis of a number of criteria including size, volume of business loans, relative ~~ participation m Federal Funds market, Euro-dollar market and commercial paper market. Digitized f—o8r/ F RAT aSh rEe eR s s a m m al e le ,c r ri a t n e d r ia e a a ch s r t e h g os io e n li o s f te t d h e in c o f u o n o t t ry n o w te a s 7 gi ty v e e r n e u r s e e p d r e t s o e n s t e a l t e i c o t n. these 60 banks. However, these banks, in general, http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 4 CHANGES IN MAJOR BALANCE SHEET ITEMS, WEEKLY REPORTING BANKS 1968, 1969 and 1970 JL/ (In per cent, not seasonally adjusted) 20-Mult i- 60 Major 250 Large Total Nat'l Banks —' gional Banks — Local Banks 1968 1969 1970 1968 1969 1970 1968 1969 1970 1968 1969 1970 Total loans and investments, gross 10.9 1.1 9.2 11.1 1.6 5.1 12.3 -0.1 8.6 9.3 1.4 16.1 Total loan sales n.a. n.a. -25.9 n.a. n.a. -9.4 n.a. n.a. -65.7 n.a n.a. Total loans and investments, adjusted for loan sales 10.9 2.8 8.6 11.1 4.2 4.8 12.3 1.2 7.7 9.3 2.1 15.6 U.S. Treasury 3.2 -20 c 1 19.0 7.8 -18.1 27.0 1.3 -24.1 15.0 -0.4 -19.5 12.0 Other securities 16.3 -8.0 23.1 19.7 -16.0 23.4 14.7 -4.6 20.2 12.9 0.3 24.9 Total loans, gross 11.1 6.9 5.1 10.0 8.2 -0.3 14.0 5.3 5.3 10.7 6.3 14.5 Total loans, adjusted for loan sales 11.1 9.4 4.4 10.0 11.7 -0.6 14.0 7.2 4o 0 10.7 7.2 13.9 Business loans 11.1 9.9 1.1 11.2 10.2 -4.0 11.2 10.0 1.8 10.9 8.9 15.1 Business loans sales n.a. n 0 a. -24.8 n.a. n c a. -10.0 n.a. n.a. -65.5 n.a. n.a. -71.7 Business loans, adjusted for loan sales 11.1 13.8 0.2 11.2 15.3 -4.2 11.2 12.7 0.2 10.9 10.9 13.5 Real estate 10.8 6.7 0.1 8.3 8.8 -4.4 17.0 6.0 -2.3 9.8 5.0 6.3 Consumer installment 13.6 9.3 7.2 9.4 6.0 5.4 16.6 8.1 2.1 14.6 12.2 11.4 Total deposits 2/ 7.0 -7.2 14.9 4.4 -9.7 15.2 9.2 -8.3 11.4 9.0 -2.9 17.2 Total demand deposits 2/ 4.8 0.4 6.6 2.4 2.3 5.4 6.5 -lo 9 3.5 6.9 -0.2 10.7 Total time and savings deposits 9.1 -14.3 24.0 6.3 -20.4 26.3 12.1 -14.7 20.5 11.1 -5.4 23.7 Large CDfs 3/ 15.5 -53.3 135.1 4.7 -59.1 156.0 27.5 -53.1 119.2 33.5 -37.9 116.6^^ Borrowings from major domestic sources 4/ 48.8 88.7 -0.7 52.7 70.2 -4.9 61.7 95.1 4.4 15.9 148.7 2.1 Other liabilities 38.8 56.2 -17.4 45.9 56.2 -22.7 29.2 56.4 -10.4 15.6 29.2 10.8 Euro-dollar liabilities 5/ 63.0 107.1 -36.1 63.0 98.0 -33.2 -- 600.0 -62.0 -- — -67.1 Loan and security reserves and total capital account 7.7 7.4 6.0 8.4 5.5 2.4 7.6 8.6 5.2 6.7 9.6 12.1 MEMO: Commercial paper 6/ n.a. n.a. -45.3 n.a. n.a. -31.7 n.a. n.a. -59.4 n.a. n.a. -56.8 1/ Changes for 1970 from Dec. 24, 1969, to Dec. 23, 1970. Comparable dates were used to compute 1969 and 1968 changes. _2/ Less cash items in the process of collection _3/ Negotiable time certificates of deposit in denomination of $100,000 or more. 4/ Largely borrowing in the Federal funds market and from Federal Reserve Banks. _5/ Bank liabilities to foreign branches. 6/ Issued by a bank holding company or other bank affiliate. 7/ These banks were selected on the basis of a number of criteria including size, volume of business loans, relative participation in Federal Funds market, Euro-dollar market and commercial paper market. 8/ For definition see Table 1. NOTE- Figures may not sum exactly due to rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 3. , Ratios of Selected Assets to Total Earning Assets — All Insured Commercial Banks, by Size Groups June 1970 (In per cent) Sizi a Group — ' Total Deposit: 5 0 Ln thousand: s of dollars) Item (as per cent of Under 5,000- 10,000- 25,000- 50,000- 100,000- 500,000- Over total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1 ,000,000 U.S. Treasury securities 25 20 17 14 14 12 9 8 All other securities 15 19 21 21 21 19 17 16 Total loans 60 61 63 65 65 69 74 75 Real estate loans 15 18 19 20 20 19 16 14 Nonre s identia1 7 8 7 8 8 8 6 5 Residential 8 10 12 12 12 11 10 Loans to financial institutions and investors in securities 1 1 1 2 3 4 7 10 Agricultural loans 18 11 6 2 1 1 1 1 Business loans 8 10 13 16 18 22 28 36 Loans to individuals 13 16 19 20 19 19 16 11 Government agency securities 7 5 4 4 3 2 1 1 Municipal securities 7 13 16 17 17 17 15 14 Corporate and other securities 1 1 1 1 1 1 1 1 Trading account securities — — -- -- -- -- 1 1 Federal funds sold 4 4 4 3 3 2 4 2 Total loans less Federal funds sale 56 58 59 62 63 66 70 74 Residential, Government guarantee 1 1 1 2 2 2 3 3 All other residential 7 10 11 11 10 9 7 6 Loans to commercial banks -- — _ — 1 W Loans to other financial institutions 1 1 1 1 1 2 5 6 Loans to brokers and dealers -- — -- _ _ 1 2 Other loans for carrying „ securities 1 1 1 1 1 1 1 Number of banks (Total: 13,483) 4,792 3,432 3,170 1,106 480 394 62 47 Average size (Total: 31,245) 2,835 7,087 15,095 33,516 67,048 199,139 683,654 3,093 ,814 1/ Ratios are average of ratios for individual banks. Loan transfers between banks and their affiliates are not reflected in the data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 6 . Ratios of Selected Assets to Total Earning Assets — All Insured Commercial Banks, by Size Groups June 19 66 (In per cent) Size i Group—Tot :al Deposits ! (i* l thousands of dollars) 1 Item (as per cent of Under 5,000- 10,000-- 25,000- 50,000- 100,000- 500,000- Over total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1,000,000 U.S. Treasury securities 32 26 23 21 19 17 13 12 All other securities 12 16 17 17 17 16 15 14 Total loans 56 58 60 62 64 67 72 75 Real estate loans 16 19 20 20 20 17 15 13 Nonresidential 7 7 7 7 7 7 5 4 Residential 9 12 12 12 12 10 10 9 Loans to financial institutions and investors in securities 1 1 2 3 4 5 9 14 Agricultural loans 17 9 4 2 1 1 1 1 Business loans 8 11 13 16 19 21 27 33 Loans to individuals 14 17 19 20 18 19 17 11 Government agency securities 5 4 3 3 3 2 1 1 Municipal securities 7 12 13 14 14 14 14 12 Corporate and other securities 1 1 1 -- -- — -- -- Trading account securities na na na na na na na na Federal funds sold -- -- 1 1 1 1 1 1 Total loans less Federal funds sale 56 57 59 61 63 66 71 74 Residential, Government guarantee 1 1 2 2 3 3 4 4 All other residential 8 10 11 10 9 7 6 5 Loans to commercial banks — — — 1 1 Loans to other financial institutions 1 1 2 2 4 6 8 Loans to brokers and dealers — -- -- -- 1 1 1 3 Other loans for carrying securitie s -- 1 1 1 1 1 1 2 Number of banks (Total: 13,555) 6,697 3,127 2,282 726 329 304 53 37 Average size (Total: 23,391) 2,539 6,793 14,847 33,124 66,128 190,031 610,693 2, ,945,526 1/ Ratios are average of ratios for individual banks. Loan transfers between banks and their affiliates are not reflected in the data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 7 Ratios of Selected Assets to Total Earning Assets 2J Federal Reserve Member Banks, by Size Groups June 1970 (In per cent) Size Gr oup—Total Deposits (in th lousands of dollars) Item (as per cent of Under 5,000- 10,000- 25,000- 50,000- 100,000- 500,000 Over total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1, 000,000 U.S. Treasury securities 25 19 17 14 14 12 9 8 All other securities 15 19 20 21 21 19 17 17 Total loans 61 62 63 65 65 69 74 75 Real estate loans 14 17 19 21 21 18 16 14 Nonresidential 5 6 7 7 8 8 6 5 Residential 9 10 12 13 13 10 10 9 Loans to financial institutions and investors in securities 1 1 1 2 2 4 7 10 Agricultural loans 17 12 6 3 1 1 — 1 Business loans 8 10 12 16 19 22 28 36 Loans to individuals 15 17 19 20 19 18 16 11 Government agency securities 6 5 4 4 3 2 1 1 Municipal securities 8 13 16 17 17 17 15 14 Corporate and other securities 1 1 1 1 1 1 1 1 Trading account securities — — — — — — 1 1 Federal funds sold 5 4 4 3 2 2 4 2 Total loans less Federal funds sale 56 58 59 62 63 66 70 74 Residential, Government guarantee 1 1 1 2 2 2 3 3 All other residential 8 10 11 12 10 8 7 6 Loans to commercial banks — — — — — — 1 1 Loans to other financial _ __ _ __ institutions 1 1 1 3 5 6 Loans to brokers and dealers — — — — — 1 2 Other loans for carrying __ __ securities 1 1 1 1 1 Number of banks (Total: 5,805) 1,165 1,457 1, 697 723 332 327 57 47 Average size (Total: 57,950) 3,108 7,108 15, 137 33 ,275 66,519 201,207 691,032 1,018, 913 1/ Ratios are average of ratios for individual banks. Loan transfer between banks and their affiliates are not reflected in the data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 8 Ratios of Selected Assets to Total Earning Assets 1/ Federal Reserve Member Banks, by Size Groups June 1966 (In per cent) Size Gro up--Total Deposits (in tho usands of dollars) Item (as per cent of Under 5,000- 10,000- 25,000- 50,000- 100,000- 500,000- Over^ total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1,000^) U.S. Treasury securities 30 26 23 21 20 17 13 '12 All other securities 12 16 17 16 16 16 15 14 Total loans 58 58 60 62 64 67 72 75 Real estate loans 14 18 20 20 19 17 15 13 Nonresidential 5 7 7 7 7 7 5 4 Residential 9 12 13 13 12 10 10 9 Loans to financial institutions and investors in securities 1 1 1 3 4 6 9 13 Agricultural loans 16 10 5 2 2 1 1 1 Business loans 9 11 13 16 19 21 27 33 Loans to individuals 16 17 19 19 18 19 17 11 Government agency securities 4 4 3 3 2 1 1 1 Municipal securities 7 12 13 14 14 14 14 12 Corporate and other securities 1 1 1 Trading account securities na na na na na na na na Federal funds sold 1 1 1 1 1 1 1 ^ Total loans less Federal funds sale 58 58 59 61 63 66 71 74 Residential, Government guarantee 1 1 2 2 3 3 4 4 All other residential 8 11 11 10 9 7 6 5 Loans to commercial banks 1 1 Loans to other financial institutions 1 2 2 4 6 8 Loans to brokers and dealers 1 1 1 3 Other loans for carrying securities 1 1 1 1 2 Number of banks (Total: 6,194) 2,089 1,593 1,398 502 255 268 52 37 Average size (Total: 42,326) 2.858 6,770 14,926 3 3,024 66,073 188,260 ( 509,221 2,9 45,526 1/ Ratios are average of ratios for individual banks. Loan transfers between banks and their affiliates are not reflected in the data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 9 Ratios of Selected Assets to Total Earning Assets 1/ All National Banks, by Size Groups June 1970 (In per cent) Size : Group—Toit al Deposit s (it i thousands of dollars ) Item (as per cent of Under 5,000- 10,000-- 25,000- 50,000- 100,000- 500,000- Over total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1, ,000,000 U.S. Treasury securities 24 19 16 14 14 12 9 8 All other securities 14 19 20 21 20 19 17 17 Total loans 61 63 63 64 66 69 74 75 Real estate loans 13 16 18 20 20 18 15 14 Nonresidential 5 6 6 7 8 7 6 4 Residential 8 10 12 13 12 10 9 10 Loans to financial institutions and investors in securities 1 1 1 2 3 4 7 8 Agricultural loans 17 11 6 3 2 2 5 1 Business loans 8 11 13 16 19 22 30 33 Loans to individuals 16 18 20 20 20 18 16 13 Government agency securities 6 5 4 4 3 2 1 1 Municipal securities 8 13 16 17 17 16 14 14 Corporate and other securities 1 1 1 1 1 1 1 1 Trading account securities 0 0 0 0 0 0 1 1 Federal funds sold 5 5 4 3 2 3 3 2 Total loans less Federal funds sale 56 58 59 62 63 67 71 72 Residential, Government guarantee 1 1 1 2 2 2 3 4 All other residential 8 9 11 11 10 8 6 6 Loans to commercial banks 0 0 0 0 0 0 0 1 Loans to other financial institutions 1 0 1 1 1 3 5 5 Loans to brokers and dealers 0 0 0 0 0 0 1 1 Other loans for carrying securities 0 1 1 1 1 1 1 1 Number of banks (Total: 4,638) 886 1,172 1,395 593 271 246 46 29 Average size (Total: 53,468) 3,118 7,099 15,036 33,076 66,247 197,330 691,629 3,379, 351 1/ Ratios are average of ratios for individual banks. Loan transfers between banks and their affiliates are not reflected in the data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 10 Ratios of Selected Assets to Total Earning Assets^ All National Banks, by Size Groups June 1966 (In per cent) Size Group—Tots il Deposits (in thousands c >f dollars) Item (as per cent of Under 5,000- 10,000- 25,000- 50,000- 100,000- 500,000- Over total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1,000,000 U.S. Treasury securities 29 25 22 21 20 17 13 11 All other securities 12 16 17 17 16 17 15 15 Total loans 59 59 60 62 64 67 72 73 Real estate loans 14 18 19 19 19 16 14 13 Nonresidential 5 6 7 7 7 7 5 4 Residential 9 12 12 12 12 10 9 9 Loans to financial institutions and investors in securities 1 1 1 3 4 6 9 11 Agricultural loans 15 9 5 2 2 1 1 2 Business loans 10 11 14 16 19 22 28 34 Loans to individuals 18 18 19 19 18 19 17 12 Government agency securities 5 4 3 3 2 1 1 2 Municipal securities 7 11 13 14 14 14 13 14 Corporate and other securities 1 1 1 -- -- -- Trading account securities na na na na na na na na Federal funds sold -- 1 1 1 1 1 1 1 Total loans less Federal funds sale 59 58 60 61 63 66 71 73 Residential, Government guarantee 1 1 2 2 3 3 3 4 All other residential 8 10 11 10 9 6 6 5 Loans to commercial banks -- -- -- -- -- 1 1 Loans to other financial _ _ institutions I 2 2 4 6 7 Loans to brokers and dealers -- -- -- 1 1 2 Other loans for carrying securities 1 i 1 1 1 1 1 1 Number of banks (Total: 4,811) 1,596 1,256 1,115 389 193 191 40 21 Average size (Total: 38,327) 2,854 6,769 14,840 32,937 65,659 187,947 598,663 3,379,351 1/ Ratios are average of ratios for individual banks. Loan transfers between banks and their affiliates are not reflected in the data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 11 Ratios of Selected Assets to Total Earning Assets—' Insured Commercial Banks not members of the Federal Reserve System June 1970 (In per cent) Size Group—Total Deposits (in thousands of dollars) Item (as per cent of Under 5,000- 10,000-- 25,000- 50,000- 100,000- 500,000 Over total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 1,000,000 1,000,000 U.S. Treasury securities 25 20 17 14 13 12 11 _ _ All other securities 15 18 21 21 22 20 16 - - Total loans 60 61 62 65 65 68 73 - - Real estate loans 15 19 19 20 21 23 24 - _ Nonresidential 7 9 8 8 9 9 11 _ - Residential 8 10 11 11 12 14 14 - - Loans to financial institutions and investors in securities 1 1 2 2 3 3 4 AgricuItural loans 18 11 5 2 1 1 1 - - Business loans 8 10 13 17 18 19 22 - - Loans to individuals 13 16 18 20 19 19 19 -- „ Government agency securities 8 5 5 4 3 4 2 Municipal securities 7 14 16 16 17 16 13 Corporate and other securities — — 1 — 1 1 1 Trading account securities -- -- -- — - - _ _ Federal funds sold 4 3 3 3 3 2 2 Total loans less Federal funds sale 56 57 58 62 62 66 71 Residential, Government guarantee 1 1 1 1 2 3 3 - _ All other residential 7 9 10 10 10 11 10 _ _ Loans to commercial banks -- — — 1 Loans to other financial institutions 1 1 1 1 1 1 3 Loans to brokers and dealers -- - - - - Other loans for carrying securities «• — 1 1 1 1 1 Number of banks (Total: 7,678) 3,627 1,975 1,473 383 148 67 5 0 Average size (Total:11,054) 2,748 7,072 15,048 33,971 68,233 189,044 599,546 -- 1/ Ratios are average of ratios for individual banks. Loan transfers between banks and their affiliates are not reflected in the data. NOTE: Five banks with deposits greater than $500 million and no banks greater than $1 billion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 12. Ratios of Selected Assets to Total Earning Assets!/ Insured Commercial Banks, not Members of the Federal Reserve System, by Size Gioup June 1966 (In per cent) Size Grc )up--Total Deposits (in the jusands of dollars) Item (as per cent of Under 5,000- 10,000- 25,000- 50,000- 100,000- total earning assets) 5,000 10,000 25,000 50,000 100,000 500,000 U.S. Treasury securities 33 26 24 21 19 19 All other securities 12 17 17 17 17 15 Total loans 55 57 59 62 64 65 Real estate loans 16 20 20 20 20 20 Nonresidential 8 8 8 8 8 8 Residential 8 11 12 12 12 13 Loans to financial institutions and investors in securities 4 2 2 3 4 4 Agricultural loans 18 9 3 1 1 1 Business loans 7 10 13 16 19 19 Loans to individuals 13 16 19 21 19 19 Government agency securities 5 4 3 3 3 2 Municipal securities 6 12 13 13 13 12 Corporate and other securities -- — 1 — 1 1 Trading account securities -- — -- — -- Federal funds sold -- __ 1 1 1 Total loans less Federal funds sale 55 57 59 61 63 64 Residential, Government guarantee 1 1 1 2 2 4 All other residential 8 10 11 10 10 9 Loans to commercial banks -- -- -- -- - - Loans to other financial „ institutions 1 1 2 2 3 Loans to brokers and dealers — -- 1 1 Other loans for carrying securities 1 1 1 1 1 Number of banks (Total: 7,360) 4,608 1,534 884 224 74 36 Average size (Total: 7,365) 2,395 6,817 14,723 33,350 66,318 203,218 1/ Ratios are average of ratios for individual banks. Loan transfers between banks "" and their affiliates are not reflected in the data. 2/ Data not provided to comply with nondisclosure requirements. NOTE: Only one bank with deposits greater than $500 million and no banks with deposits greater than $1 bill Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 13. Use of Legal, Real Estate Lending Potential By Various Size Groups of National Banks June 1966 and June 1970 Size Group---Total De posits (in thousai ids of dol lars) Under 5,000- 10,000- 25,000- 50,000- 100,000- 500,000- Over Item 5,000 10,000 25,000 50,000 100,000 500,000 1 billion 1 billion 1 9 6 6 ($ thoii sands) (1) 70% of total time and savings deposits 1,506 3,075 6,169 4,726 4,553 11,730 7,394 25,109 (2) Total real estate loans 663 1,543 3,236 2,484 2,434 5,985 3,502 7,367 (3) Nonresidential 234 533 1,121 896 940 2,426 1,226 2,276 (4) Residential 429 1,010 2,115 1,588 1,494 3,558 2,276 7,091 Use of Potential (In per cent) (5) Total real estate loans 44 50 53 53 54 51 47 37 (6) Nonresidential 16 17 18 19 21 21 17 9 (7) Residential 29 33 34 34 33 30 31 28 Number of banks (Total: 4,811) 1,596 1,256 1,115 389 193 191 40 21 Average size (Total: 38,327) 2,854 6,769 14,840 32,937 65,659 187,194 598,663 3,291,781 1 9 7 .0 ($ thoii sands) (8) 707o of total time and savings deposits 1,023 3,282 8,558 7,883 7,077 17,047 9,516 30,440 (9) Total real estate loans 391 1,364 3,928 3,965 3,649 8,787 4,699 13,856 (10) Nonresidential 138 487 1,378 1,393 1,449 3,525 1,817 3,589 (11) Residential 253 876 2,550 2,572 2,200 5,213 2,882 10,267 Use of Potential (In per cent) (12) Total real estate loans 38 42 46 50 52 51 49 46 (13) Nonresidential 14 15 16 18 21 21 19 12 (14) Residential 25 27 30 33 31 31 30 34 Number of banks (Total: 4,638) 886 1,172 1,395 593 271 246 46 29 Average size (Total: 53,468) 3,118 7,099 15,036 33,076 66,247 197,330 691,629 3,379,351 NOTE: Items (1) through (4) data are averages for banks in each group. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 14 Money Supply and Components 1960 - 1970 (Not seasonally adjusted, in billions of dollars) Total Member Bank Nonmember Bank - , Currency Period Money Supply Demand Deposits Demand Deposits— and Coin December Average: 1960 145.5 95.1 20.8 29.6 1961 150.1 98.2 21.7 30.2 1962 152.3 98.4 22.7 31.2 1963 157.9 100.6 24.2 33.1 1964 165.3 104.4 25.9 35.0 1965 173.1 107.9 28.1 37.1 1966 176.9 108.7 29.1 39.1 1967 188.6 116.1 31.3 41.2 1968 203.4 124.3 34.8 44.3 1969 209.8 125.3 37.6 46.9 1970 221.1 131.6 39.5 50.0 1/ Includes small amounts of deposits at Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 15 Member and Nonmember Demand Deposits as a Per Cent of Total Money Supply Deposits 1/ Dollar Change in Member Per Cent of Demand Deposit and Nonmember Demand Deposits Component of the Money as a Per Cent of Dollar Change Supply, Accounted for by: in Total Money Supply Deposits Member Nonmember Member Nonmember banks banks banks banks Last month of year 1960 82.1 17.9 133.3 2/ 1961 81.9 18.1 77.5 22.5 1962 81.3 18.7 16.7 83.3 1963 80.6 19.4 59.5 40.5 1964 80.1 19.9 69.1 30.9 1965 79.3 20.7 61.4 38.6 1966 79.0 21.0 44.4 55.5 1967 78.8 21.2 77.1 22.9 1968 78.1 21.9 70.1 29.9 1969 76.9 23.1 26.3 73.7 1970 76.9 23.1 76.8 23.2 1/ Based on not seasonally adjusted last-month of year data. 2/ Not definable because total deposits declined and nonmember deposits increased. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 16.a Total Bank Credit and Selected Components (Not Seasonally Adjusted, in Billions of Dollars) Total Loan s and Inv estments U.S. Governin ent Se<j urities All All Non- All All Non- Commercial Member Member Commercial Member Member Banks Banks Banks Banks Banks Banks 1960 198.9 164.7 4.2 61.0 49.1 11.9 1961 214.4 178.6 35.8 66.6 54.1 12.5 1962 233.3 193.3 40.0 66.4 53.0 13.4 1963 250.6 206.7 43.9 63.4 49.3 14.1 1964 273.9 225.2 48.7 63.0 48.7 14.3 1965 301.8 247.7 54.1 59.5 45.0 14.5 1966 317.9 260.5 57.4 56.2 41.9 14.3 1967 354.5 288.9 65.6 62.5 47.0 15.5 1968 393.4 318.4 75.0 64.5 47.9 16.6 1969 410.5 328.0 82.5 54.7 39.8 14.9 1970 442.4 352.3 90.1 61.2 45.1 16.1 Per Cent of Credit Item Accounted for by : 1960 83 17 80 20 1961 83 17 81 19 1962 83 17 80 20 1963 82 18 78 22 1964 82 18 77 23 1965 82 18 76 24 1966 82 18 75 25 1967 81 19 75 25 1968 81 19 74 26 1969 80 20 73 27 1970 80 20 74 26 Dollar Change in Member and Nonmember Credit Item as a Per Cent of Total Change in Credit Item 1960 80 20 347 -247 1961 90 10 89 11 1962 77 23 55 45 1963 79 21 123 -23 1964 86 14 150 -50 1965 81 19 106 -6 1966 80 20 94 6 1967 78 22 81 19 1968 76 24 45 55 1969 56 44 81 19 1970 76 24 82 18 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 16.b Total Bank Credit and Selected Components (contfd) (Not Seasonally Adjusted, in Billions of Dollars) Other Securities Total Loans (Net) All All Non- All All Non- Commercial Member Member Commercial Member Member Banks Banks Banks Banks Banks Banks 1960 20.9 16.6 4.3 116.7 99.0 17.7 1961 23.9 19.3 4.6 123.9 105.2 18.7 1962 29.3 24.1 5.2 137.5 116.2 21.3 1963 35.1 29.1 6.0 152.4 128.3 24.1 1964 38.8 32.1 6.7 172.1 144.4 27.7 1965 44.9 36.8 8.1 197.4 165.9 31.5 1966 48.8 39.0 9.8 213.0 179.6 33.4 1967 61.5 49.3 12.2 230.5 192.6 37.9 1968 71.5 56.9 14.6 257.4 213.6 43.8 1969 71.3 54.8 16.5 284.5 233.4 51.1 1970 85.7 66.2 19.5 295.5 241.0 54.5 Per Cent of Credit Item Accounted for by: 1960 79 21 85 15 1961 81 19 85 15 1962 82 18 85 15 1963 83 17 84 16 1964 83 17 84 16 1965 82 18 84 16 1966 80 20 84 16 1967 80 20 84 16 1968 80 20 83 17 1969 77 23 82 18 1970 77 23 82 18 Dollar Change in Member and Nonmember Credit Item as a Per Cent of Total Change in Credit Item 1960 75 25 69 31 1961 90 10 92 8 1962 89 11 8i 19 1963 86 14 61 39 1964 81 19 88 12 1965 77 23 85 15 1966 56 44 88 12 1967 81 19 92 8 1968 76 24 78 22 1969 1050 -950 73 27 1970 79 21 60 40 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table Total Bank Credit and Sg^jcted Components (cont fd) 1 ' (Not Seasonally Adjusted, m Billions of Dollars) Business Loans Real Estate Loans All All Non- All All Non- Commercial Member Member Commercial Member Member Banks Banks Banks Banks Banks Banks 1960 43.1 39.3 3.8 28.7 22.5 6.2 1961 45.2 40.9 4.3 30.3 24.0 6.3 1962 48.7 43.8 4.9 34.3 27.2 7.1 1963 52.9 47.4 5.5 39.1 31.0 8.1 1964 60.2 53.7 6.5 43.7 34.6 9.1 1965 71.4 64.0 7.4 49.3 39.0 10.3 1966 80.6 72.6 8.0 54.0 42.4 11.6 1967 88.5 79.3 9.2 58.5 45.5 13.0 1968 98.4 87.8 10.6 65.1 50.5 14.6 1969 108.8 96.1 12.7 70.5 53.2 17.3 1970 111.7 N.A. N.A. 72.1 N.A. N.A. Per Cent of Credit Item Accounted for by: 1960 91 9 78 22 1961 91 9 79 21 1962 90 10 79 21 1963 90 10 79 21 1964 89 11 79 21 1965 90 10 79 21 1966 90 10 79 21 1967 90 10 78 22 1968 89 11 78 22 1969 88 22 75 25 1970 N.A. N.A. N.A. N.A. Dollar Change in Member and Nonmember Credit Item as a Per Cent of Total Change in Credit Item 1960 86 14 50 50 1961 73 27 94 6 1962 83 17 70 30 1963 86 14 78 22 1964 86 14 80 20 1965 92 8 79 21 1966 93 7 72 28 1967 85 15 69 31 1968 86 14 76 24 1969 80 20 50 50 1970 N.A. N.A. N.A. N.A Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table 16.d Total Bank Credit and Selected Components (cont'd) (Not Seasonally Adjusted, in Billions of Dollars) AIL Other Loans All All Non- Commercial Member Member Banks Banks Banks 1960 44.9 37.2 7.6 1961 48.4 40.3 8.1 1962 54.5 45.2 9.3 1963 60.4 49.9 10.5 1964 68.2 56.1 12.1 1965 76.7 62.9 13.8 1966 78.4 64.6 13.8 1967 83.5 67.8 15.7 1968 93.9 75.3 18.6 1969 105.2 84.1 21.1 1970 111.7 N.A. N.A. Per Cent of Credit Item Accounted for by: I960 83 7 1961 83 17 1962 83 17 1963 83 7 1964 82 18 1965 82 18 1966 82 18 1967 82 18 1968 80 20 1969 80 20 1970 N.A. N.A. Dollar Change in Member and Nonmember Credit Item as a Per Cent of Total Change in Credit Item 1960 56 44 1961 100 -- 19 62 80 20 1963 80 20 1964 79 21 1965 80 20 1966 100 -- 1967 63 27 1968 72 28 1969 78 22 1970 N.A. N.A. N.A. Not Available 1970 is Preliminary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CHART A RATIO OF SELECTED ASSETS TO TOTAL EARNING ASSETS1 All Insured Commercial Banks, by Size Group June, 1970 1/ Total earning assets consist of total loans and investments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CHART B RATIO OF SELECTED ASSETS TO TOTAL EARNING ASSETS1 Federal Reserve Member Banks, by Size Group June, 1970 1/ Total earning assets consist of total loans and investments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CHART C RATIO OF SELECTED ASSETS TO TOTAL EARNING ASSETS1 Insured Commercial Banks, not Members of the Federal Reserve^Sgstem, by Size Group 1/ Total earning assets consist of total loans and investments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CHART D USE OF LEGAL REAL ESTATE LENDING POTENTIAL BY NATIONAL BANKS,1 BY SIZE OF GROUP 1/ Under S ection 24 of the Federal Reserve Act, a national bank's total real estate loans are limited to an amount equal to its total capital and surplus or 70 per cent of its time and savings deposits—which ever is the greater. The time and savings deposits criterion was used in the present analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Andrew F. Brimmer (1971, April 6). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_19710407_brimmer

@misc{wtfs_speech_19710407_brimmer,
  author = {Andrew F. Brimmer},
  title = {Speech},
  year = {1971},
  month = {Apr},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_19710407_brimmer},
  note = {Retrieved via When the Fed Speaks corpus}
}