Full text of Business Review (Federal Reserve Bank of Philadelphia) : February 1970

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

OF PHILADELPHIA
Headquarters Have Human
Problems
Inflation: Gainers and Losers




BUSINESS REVIEW is p roduced in the D epartm ent of R e se arch. Ronald B. W illiam s is Art D irector. Th e au th ors will
be g lad to receive co m m e n ts on th eir articles.
R e q u e sts fo r additional co p ie s sh o uld be a d d resse d to P u b lic Inform ation, Federal R e serve B an k of P h ilad elp h ia, Philad elp h ia,
P e n n sylvan ia 19101.



Local government and business leaders
throughout the region are disturbed by this loss
of headquarters because of the possible adverse
impact on the area’s tax base and employment

Headquarters Have
Human Problems

The chart sh ow s the rate of increase
or decrease in the num ber of head­
quarters in each area, 1956-1968*.

CHART 1

Per Cent Change

60




40

20

0
-20
-4 0

-6 0
* Data refer to the 750 largest manufacturing and non­
manufacturing corporations in the nation.
Source:

Fortune magazine.

opportunities. One group of businessmen is
particularly dismayed because it has lost income
as the number of large headquarters has de­
clined. The group encompasses suppliers of
Philadelphia’s major business services— banks,

FEDERAL RESERVE BANK OF PHILADELPHIA

1 References to Philadelphia throughout the article
are to the Standard Metropolitan Statistical Area. It in­
cludes the counties of Bucks, Chester, Delaware, Mont­
gomery, and Philadelphia in Pennsylvania; and the
counties of Burlington, Camden, and Gloucester in New
Jersey.
2 A more detailed discussion of Philadelphia’s chang­
ing headquarters climate is found in the following
Business Review articles: “ Headquarters: Centers of
Corporate Control,” May, 1967; “ Philadelphia’s Desire
to Acquire,” September, 1967; and “ Where Corporate
Headquarters Feel at Home,” May, 1968.

BUSINESS REVIEW

P H IL A D E L P H IA ’ S H E A D ­
QUARTERS’ LOSS EXCEEDS
T H A T O F M O ST M AJOR
METROPOLITAN AREAS.

by Elizabeth P. Deutermann
Between 1956 and 1965, Philadelphia lost its
major corporate headquarters at a faster rate
than any of the nation’s other large metropol­
itan areas.1 In addition, assets of corporations
that retained home offices in the Delaware
Valley grew at the slowest rate among the ten
largest urban areas in the country. Nevertheless,
Philadelphia was able over those years to hold
on to its third-place position as a center of
concentration for home-office activity. In spite
of the fact that the region’s relative decline did
slow down a bit during the following three
years, as shown in Chart 1, the Delaware Valley
has now slipped from third to fourth, nationally,
as a center for corporate headquarters.12

FEBRUARY 1970

Previous B u sin ess Review articles pointed
to a decline in corporate headquarters in
the Philadelphia region as one of the com ­
m unity’s haunting econom ic concerns. Un­
fortunately, virtually nothing is known as
to why the D elaw are V alley is losing its
stature as a headquarters center. A nsw ers
are not apparent in available econom ic
data. Challenged by this conundrum, we
took a person al approach to the head­
quarters problem and discovered that . . .

3

TABLE 1
How the Largest Regions Rank as Home Base
for the Nation’s Major Corporations
Standard
Metropolitan
Area
New Y o r k ..............
Chicago ................
Los Angeles . . . .
PH ILAD ELPH IA
San Francisco
Detroit ...................
St. Louis ..............
Pittsburgh .........
Boston ..............
Washington .........

Ranking in Number of Major Headquarters*
1968

1965

1
2
3
4
5
5
7
8
9
10

1
2
6
3
4
7
8
4
9
10

1956
1
2
8
3
6
5
6
4
9
10

Population
Ranking
1968
1
3
2
4
7
5
10
9
6
8

Major headquarters refers to the 750 largest manufacturing and nonmanufac­
turing corporations in the nation.
Source: Fortune magazine and U.S. Bureau of the Census.

RAISING PHILADELPHIA’S STATURE AS A HEADQUARTERS
CENTER: GOAL FOR COMMUNITY ACTION
Community leaders in large metropolitan areas
are aggressively promoting the attractiveness of
their regions as headquarters centers. Phila­
delphians are no exception. For Philadelphia,
however, achieving a goal of growth entails
halting a downtrend in the number of local
headquarters. Headquarters have been lost by
moves from the region. They have been lost by
corporate acquisitions. And because not enough
new headquarters have been born in the area,
nor attracted to it, the loss is a net one.
Local corporate executives have identified
community attributes which detract from their
satisfaction with Philadelphia as a headquarters
location. Concerted community action has some
leverage in turning these detractions into attrac­
tions which should help the region retain its
headquarters base. But community action prob­

4



ably has less leverage in stemming the head­
quarters loss via acquisitions. More importantly,
one may question whether losing home offices
through acquisitions does more harm than good
to the total regional economy.
Consequently, local community leaders are
confronted with the ever-present problem of
action priorities in seeking to elevate Philadel­
phia’s stature as a headquarters complex. Two
courses of action appear to deserve attention.
The first is to rectify identified shortcomings in
the regional environment which executives of
today’s headquarters feel dampen their enthu­
siasm with a Philadelphia location. The second
is to concentrate on creating a business climate
which stimulates the birth of new firms and
home-grown headquarters. These two courses of
action, fortunately, appear to be complementary.

Undoubtedly, many reasons for Philadelphia’s
loss of headquarters are primarily internal to
the corporation. The community has little in­
fluence over these reasons. In numerous cases,
however, there are factors in the regional en­
vironment that strongly influence corporate loca­
tion decisions. Civic leadership can exercise some
control over many of these factors.'1 There is a
basic need for better understanding of what
these environmental factors are.
What attributes of a community are most de­
sirable for the location of headquarters? Which
of the desired attributes are found in the Dela­
ware Valley, and which are missing?
One approach to answers is to talk directly
to executives of Philadelphia’s major head­
quarters who make location decisions.1 If the
3
For a discussion of leverage of local action in regional
economic development, see Bertram W. Zumeta, “What
Attracts Growth Industries?” Business Review, Federal
Reserve Bank of Philadelphia, July, 1964.
1 Obviously, executives of corporations headquartered
outside of Philadelphia may hold different opinions
than those interviewed in this survey. One of the chief
objectives of this study, however, is to uncover factors
that might lead to a continuing loss of Philadelphia’s
remaining headquarters. Furthermore, there is reason to
believe the exclusion of interviews outside the region
presents less of a problem than one might assume. (See
footnote 11.)




Philadelphia has many strengths. Table 2 also
shows how executives interviewed feel Philadel­
phia stacks up, compared to the nation’s other
5 See Elizabeth P. Deutermann, “ Seeding ScienceBased Industry,” Business Review, Federal Reserve Bank
of Philadelphia, May, 1966.
(1In a study of the economy of the Pittsburgh region,
one of the chief locational advantages headquarters
executives pointed to was the existing concentration
of executive offices. See Ira S. Lowry, Portrait of a
Region (Pittsburgh, Pennsylvania: University of Pitts­
burgh Press, 1963), p. 93.
7 For a discussion of the methodology of this survey,
see the Appendix.

FEBRUARY 1970
BUSINESS REVIEW

STARTING WITH FIRST THINGS FIRST

past trend continues, it will be, to a large
degree, a result of these headquarters moving
from the area or merging with companies head­
quartered outside of Philadelphia. In contrast,
if these home offices remain in the region,
there is reason to believe they can contribute to
the birth of new firms (creating headquarters)5*
and serve as an attraction for headquarters seek­
ing new locations."
Twenty-five presidents or board chairmen of
major corporations in the Delaware Valley, who
play the key role in decisionmaking within their
respective firms, were interviewed to see what
they believe are the most important factors in
choosing a headquarters location.7 According to
these executives, availability of quality housing
for top management is the first priority item in
demand. Minimizing the corporation’s total tax
burden is the second major consideration. Third
is the availability and quality of corporate bank­
ing services in the region. Accessible and speedy
air transportation for executives, a local labor
pool of management and professional personnel,
and high-quality law enforcement follow as most
desirable community assets. Table 2 shows 18
factors, in order of relative importance, which
carry the heaviest weight in the eyes of local
executives evaluating a headquarters location.

FEDERAL RESERVE BANK OF PHILADELPHIA

advertising agencies, law firms, auditors and ac­
countants, brokerage houses, public relations
firms, and insurance companies. When a corpora­
tion shifts the location of its home office to
another region, such service industries frequently
lose a major client and a hefty chunk of income.
Industrial and civic leaders in the Delaware
Valley hope that in some way the community
itself may be able to halt Philadelphia’s head­
quarters decline, and perhaps even reverse it.
This is a tall order, but not necessarily an
impossible one.

5

TABLE 2
Factors Influencing the Location of Headquarters—
and How Philadelphia Stacks Up*
Factors Influencing Location Choice
in Order of Relative Importance
1.
2.

3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.

Housing for management and
professional personnel ..........................
Corporate tax burden .................................
Major corporate banking s e r v ic e s ............
Air transportation for p e rso n n e l..............
Local availability of management and
professional personnel ..........................
Community law enforcement ..................
Regional public schools ............................
Space costs .................................................
Community im a g e ........................................
Colleges and universities ..........................
Cultural environment .................................
Regional political environment (SMSA) .
Legal services ...............................................
Availability of other personnel
(supporting office staff) .......................
Local transportation ...................................
Local political e n viro nm en t.......................
Corporate legal structure ..........................
Availability of scientific and
technical p e rso n n e l.................................

Philadelphia, compared
with other major metro­
politan areas, is . . .
Above
Below
Average
Average
Average
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X

* Based on opinions of presidents or board chairmen of 25 major corporate head­
quarters in the Philadelphia metropolitan area. For details see Appendix.

mean, however, that they believe all large urban
centers place heavy tax burdens on corporations.
Consequently, they consider themselves as well
off in this regard located in the Delaware Valley
as they would be in other regions of similar size.
Philadelphia also satisfactorily meets most
executive needs for air transportation service.
Although many comments were offered with
respect to an unsatisfactory physical plant at
International Airport and an unattractive land­
8 Not included in this study are comparisons of Phila­ scape leading to the airport, the chief plus
delphia with smaller metropolitan areas, which rank
factor for air transportation is the speed with
lower than tenth in population size. Many headquarters
which moved from Philadelphia over the past 20 years
which one can get off and on the ground.
relocated in regions of smaller size. The nine metro­
Interviewees are relatively pleased with the
politan areas compared with Philadelphia were chosen
because, by virtue of size, they have many of the same
quality of public schools in areas of the region
assets and liabilities as the Delaware Valley, they have
the largest concentrations of major headquarters, and
where they, or their headquarters employees, are
they are considered chief competitors for Philadelphia’s
most likely to reside. Costs of commercial space
position as a major headquarters complex.
major metropolitan areas, in supplying these de­
sired attributes.s Two-thirds of the most impor­
tant locational advantages for headquarters are
judged to be satisfactory or better in Philadel­
phia relative to the nine other largest cities listed
in Table 1. These data do not imply, for example,
that chief executives in Philadelphia feel san­
guine about the taxes imposed on them. It does8




are believed definitely comparable to those in
other major urban centers.
The region also is considered to offer betterthan-average opportunities for housing and liv­
ing amenities for executives. We found the
greatest consensus regarding this attribute, which
weighs most heavily in location decisionmaking.
Clearly, the Delaware Valley is judged superior
to other regions in housing quality and quantity,
at comparable costs.
In summary then, top corporate executives
tend to look with satisfaction on Philadelphia
as a headquarters location. Community ameni­
ties which are given greatest consideration in
decisionmaking are rated at least satisfactory
or better compared to regions of similar size.
Nearly all business services which are most
sought after in selecting a location are believed
to measure up to, or excel, those available in
comparable urban areas. Other tangible qualities
desired for headquarters satisfaction, such as
relatively low taxes and space costs, are rated
in Philadelphia as adequate as, or superior to,
those in alternative metropolitan areas.

Where is the problem? At this point we are
somewhat puzzled. If the Philadelphia region is
so satisfactory in meeting needs of corporate
headquarters, why is the community steadily de­
clining as a headquarters center? That is the
riddle we face.
The best clue to unearthing the answer seems
to be evidenced in those factors considered by
executives as: (1 ) important in location deci­
sionmaking, and (2 ) less than satisfactory in
Philadelphia. The last column of Table 2 shows
which factors meet these two tests. Something
is believed lacking in the region’s ability to pro­
vide adequate corporate banking services to
meet requirements of large headquarters. In




addition, there is thought to be an insufficient
supply of high-quality management and pro­
fessional personnel in the area. Philadelphia’s
“ community image,’’ viewed as unfavorable, is
felt to have a damaging effect on top manage­
ment's contentment with a Philadelphia loca­
tion. The same holds for the political
environment, particularly at the local level (city,
county, or township) where headquarters are
housed. Finally, chief executives consider the
Delaware Valley somewhat inadequate as a
source of first-class scientific and technical talent.
Where in these findings is the clue to the
regional riddle? From responses of chief execu­
tives of area headquarters, a common thread
runs through the bill of complaints against
Philadelphia as a utopia for home offices. While
the more tangible attributes of the Delaware
Valley— houses, schools, taxes, space costs—
are considered competitive with other metro­
politan areas, the region is rated as less than
competitive in the human qualities executives
seek in locating home offices.

A common denominator. The six indicated
shortcomings of Philadelphia just noted manifest
a common denominator in the eyes of head­
quarters executives. In each case, those attributes
rated less than competitive with other regions
relate to factors of human quality. These factors
cannot be underemphasized. Corporate decision­
makers clearly consider the human quality of a
community to play a much stronger role in the
location of headquarters than in the location of
production and distribution facilities. Further­
more, psychological costs appear to have greater
weight in locating headquarters than in site selec­
tion for other corporate facilities. That the prob­
lem is human in nature is more obvious in some
instances than in others.

An obvious human problem is the un­
favorable grade Philadelphia received as a
source of management and professional per­
sonnel. Executives recognized the tight labor
market nationally for such employees. But
Philadelphia is still rated as slightly tighter than
other major urban areas for top-notch person­
nel to fill high-level corporate positions. For
such slots, headquarters recruit nationally
wherever qualified personnel can be found.
Based on our probe, the home town is not
where local executives look first— unless they
look within their own companies.
The great majority of presidents and board
chairmen interviewed were critical of the talent
managing Philadelphia’s corporations, other
than theirs. One executive went so far as to
find fault with his own company’s “ lack of
aggressiveness”— an exception to the rule.
Cleverly, another interviewee turned the lack
of management skills in the area into a personal
locational advantage. Because of this short­
coming in other companies, “ the Philadelphia
environment satisfies the egos of our top cor­
porate management.”
The political climate of the Delaware Valley
is not considered so conducive to the location
of corporate headquarters as that of comparable
metropolitan areas. This opinion reflects atti­
tudes of executives toward the specific county,
city, or township in which their headquarters
are situated, plus the state— which, in this
case, means New Jersey or Pennsylvania.
Local political leadership, in contrast to that
at the state level, has a stronger impact on
negative attitudes of executives toward their
location. A community political environment
which is unresponsive to business needs can
strongly influence an executive’s choice of
home-office location. In this investigation, over
three-fifths of the presidents or board chairmen

8




interviewed offered strong, unsolicited criticism
of the political environment which is felt to have
a detrimental impact on corporate operations.
Political leaders are blamed for administra­
tive mismanagement, “ irresponsibility and
shortsightedness,” and held responsible for spe­
cific adverse zoning and tax interpretations
executives personally have experienced. In the
words of one interviewee, “ there is a very
serious need for improvement in businessgovernment cooperation.” A directly germane
criticism of both state and local government
is that “ they [political leaders] try to attract
industry, but won’t try to keep it here.”
Another “ people problem” corporate leaders
point to is a shortage in Philadelphia of topquality scientific and technical personnel.
Availability of these types of workers in a re­
gion is not one of the highest ranking factors
evaluated in headquarters decisionmaking. But
it still is considered of above-average impor­
tance in the ranking game. One reason it places
no higher is— as with management personnel—
that executives recruit nationally wherever they
can find the best brains.9 But, again, in the tight
labor market of recent years, the local market
is believed a less fruitful hunting ground than
most other large urban areas. Three-fifths of the
executives interviewed consider the Delaware
Valley comparatively inadequate in providing
needed scientific and technical personnel.
One case in which human problems are not so
clear-cut is major corporate banking— as con­
trasted with routine depository services. Of the
community attributes most desired, but consid­
ered relatively below average, banking receives
9 One reason headquarters decisionmakers consider
these personnel at all as a location influence is not
necessarily for employment in the headquarters opera­
tion per se, but because top management appears to
prefer R & D operations located close to such office
functions as marketing and sales.




10 See Appendix.

FEBRUARY 1970
BUSINESS REVIEW

munity image” achieved the greatest consensus
for inadequacy.10
What does “ community image” mean? It is
basically the reputation a region has for being
a favorable or unfavorable place in which to
live and do business. The reputation may be
based on facts or folklore. It may be created
by experiences visitors encounter today, or by
experiences encountered years ago. The repu­
tation, however, may linger long after facts
change. But regardless of how the reputation
is created, people are the chief creators.
In assessing Philadelphia’s community im­
age, executives responded in terms of how they
thought nonresident businessmen thought. Nev­
ertheless, this probe of resident businessmen
suggests that they consider that the unfavorable
image is somewhat deserved. When it comes to
the human quality of the region, local execu­
tives expressed dissatisfaction by assigning
inadequate ratings to the attributes discussed
earlier. If resident corporate leaders tend to feel
Philadelphia is not competitive with other major
metropolitan areas in political leadership, bank­
ing, scientific and technical personnel, and qual­
ity corporate management, it would be surprising
if businessmen outside the area held a higher
opinion of the human environment than do the
very people who comprise it. The image, as it is
relevant to commerce and industry, is created,
to a large degree, by contacts with local business­
men. Their expressed dissatisfaction with human
attributes of the community, which they find
otherwise satisfactory for home offices, is bound
to influence adversely the region’s reputation
outside the Delaware Valley.
Furthermore, it is of interest to see how local
executives evaluate certain other attributes of
the area which help outsiders shape their im­

FEDERAL RESERVE BANK OF PHILADELPHIA

the least harsh criticism. And much of the criti­
cism voiced pertains to the comparatively small
size of banks in the Delaware Valley. Executives
interviewed tend to sympathize with local bank
efforts to merge. However, this question of size
was frequently related to the quality of bank
services, policies, and management. A lack of
expertise “ for my business” and, more specifi­
cally, in handling international transactions were
frequently pointed to as human problems. Some
credit was given for recent improvements in
foreign services, but they still are not viewed
as “ up to par.” The strongest and most fre­
quent complaint was of local bankers’ “ unwill­
ingness” to pool funds to met large corporate
loan demands. Expressions of displeasure with
banking service thus recognized legal con­
straints, but within these constraints the feel­
ing holds that local bankers can be more
cooperative and accommodating in meeting
needs of large headquarters.
Finally, we come to the question of Phila­
delphia’s community image. A community’s
image carries surprising weight in evaluating
the preferred location for headquarters. Ex­
ecutives who make decisions for Philadelphia
home offices view the region’s image as inade­
quate. And they believe this inadequacy has a
damaging effect on corporate operations. The
present image, for example, is something man­
agers feel they must work hard to overcome in
order to recruit qualified employees from out­
side the region. The adverse image also necessi­
tates a great deal of inefficient traveling time.
Furthermore, an executive resents having to
travel to other cities for his own board meet­
ings because fellow board members prefer not
to gather in the Delaware Valley. Of a total of
43 community attributes evaluated for their
local adequacy ( regardless of whether they were
a “ most important” location influence), “ com­

9

age of the region. Local presidents and board
chairmen rate area hotels as the second (behind
“ community image” ) most inadequate regional
asset among 43 choices. Good dining spots for
entertaining rates sixth in inadequacy. In be­
tween second and sixth are the “ people prob­
lems” already discussed. Consequently, area
executives tend to agree that food and shelter
awaiting business visitors to the area are not so
enticing as in other large metropolitan regions.
If the resident executives of Philadelphia’s
large headquarters evaluate human qualities of
the environment, plus bed and bread for visi­
tors, as somewhat less than adequate, there may
be real substance behind the region’s poor rep­
utation. If not, then opinions held by local
executives, if voiced, tend to perpetuate a poor
image anyway.
FEELINGS AND FACTS
As is true in any study of attitudes, we know
that people’s views of the facts frequently do
not coincide with the facts. Attitudes of execu­
tives are no exception. Nevertheless, these sub­
jective attitudes often count more than
objective facts when decisions are made. How
presidents and board chairmen of Philadelphia’s
corporations feel about the region as a desirable
location in which to maintain their home of­
fices can play a major role in whether they
remain in, or leave, the area.
SUMMING UP THE STATUS QUO
From the viewpoint of decisionmaking execu­
tives of headquarters in the Delaware Valley,
the region has many tangible advantages. The
following attributes are judged as competitive
with those of other large metropolitan areas:
good-to-outstanding living arrangements; most
needed business services; a supply of supporting
office workers; and measurable costs of doing
business, as reflected in the tax burden and

10




space costs. An overall air of satisfaction with
the region as a home-office location seems to
endure at the same time that the region con­
tinues to lose major headquarters.
This part of our investigation leads us to
conclude that the apparent cloud of satisfaction
has holes in it— holes made by people. The
more obvious pattern of relative advantage, or
competitiveness, of the region as a headquarters
center is incomplete. Executives interviewed
do not have a high opinion of the abilities of
their counterparts in other local home offices.
Top management and professional personnel do
not measure up to those available in com­
parable metropolitan areas, nor do scientific
and technical personnel. Similarly, interviewees
do not hold a high opinion of political leaders
of the region and their attitudes, especially as
they concern problems of commerce and indus­
try. Expressed shortcomings in human qualities
of the environment are reflected in the com­
munity image. The chief tangible assets of the
Delaware Valley for headquarters are not be­
lieved to be matched with vital human induce­
ments most highly desired by executives for a
satisfactory headquarters location.11
NATIONAL CHALLENGE TO A
HEADQUARTERS COMPLEX REMAINS
Executives of Philadelphia’s major headquar­
ters believe that rectifying specified shortcom­
ings in the community can make Philadelphia
a more attractive location for home offices. If
these shortcomings can be turned into regional
assets, perhaps the Delaware Valley will im­
prove its prospects of retaining the headquarters1
11 In footnote 4, we noted that if corporate executives
outside the region had been included in this study, re­
sponses may have altered our findings. The only other
known survey relating directly to our findings did in­
clude 400 top policymakers located outside, as well as
inside, the Delaware Valley. In unanticipated agreement,
they viewed Philadelphia as unfavorable for industrial

The chart sh ow s the stepped-up n a­
tional m erger m ovem ent in m an ufac­
turing and mining industries betw een
1949 and 1968.
Number of Firms Acquired
2,500 2,000
1,500
1,000 500
n

1 1 1 1 1 II

1 t 1 1 1 1 1 1 1 1 LL L

1949 195119531955 1957 1959 1961 1963 1965 19671969

Source: Bureau of Economics, Federal Trade Commis­
sion.

If two corporations in the Delaware Valley*
location with respect to the impact of “governmental
and community attitudes.” See “ The Impact of LaborManagement Climate on Facility Location Decisions in
the Greater Philadelphia Area,” (Report of the South­
eastern Pennsylvania Economic Development Corpora­
tion, May, 1967).




BUSINESS REVIEW

CHART 2

T H E IN C R E A S E IN M ERGERS
ELIM INATES EXISTING
H EAD Q U ARTERS.

merge, only one headquarters survives. If a
corporation outside of the region acquires a
local firm, another home office disappears from
Philadelphia. The national increase in mergers
is a significant threat to the number of area
headquarters.
In the past few years, most of Philadelphia’s
major corporations were directly approached
with merger offers. Some accepted, and their
home offices in the region closed shop. A num­
ber of corporate executives interviewed, who
remain headquartered in Philadelphia, reported
that merger offers came as frequently as once a
week. Although offers were rejected, 64 per
cent of these decisionmakers did give considera­
tion to the offers to merge.
Corporate presidents or board chairmen
pointed to two main reasons for rejecting mer­
ger offers. One was that “ the price wasn’t
right.” Some executives explicitly said that if
the stock market had been booming when an
offer came, they definitely would have sold.
But the other major reason for not merging has
little to do with the national economy or the
economics of the firm. The reason can be
summarized as “ family considerations.” Family
tradition, family pride, and family refusal to
relocate outside of Philadelphia— which a mer­
ger might necessitate— loomed large in decisions
of Philadelphia’s corporate leaders who contem­
plated, and rejected, offers to merge.
But how about executives of Philadelphia
headquarters who did accept merger offers and
elected to become subsidiaries of corporations
headquartered outside of the region? Why did
they accept? They based their decisions on the
same considerations that the still-headquartered
executives did in rejecting a merger. Top man­
agement of companies which were acquired
believed a merger was in the best interest of
the family, and that the price was right.

FEDERAL RESERVE BANK OF PHILADELPHIA

it now has. This statement is obviously, but of
necessity, cautious.
The reason for caution is that Philadelphia’s
stature as a headquarters complex depends on
factors other than just keeping today’s cor­
porate executives happy in their community
environment. Business and civic leaders who
are trying to halt the decline in home offices
not only have local problems with which to
contend, but national ones as well.
A nationwide challenge to arresting the de­
cline in Philadelphia headquarters is the
stepped-up pace of mergers in today’s economy,
as shown in Chart 2. Any merger automatically
kills off a headquarters operation some place.

11

These were general reasons given for merging
by executives of 13 local subsidiaries included
in our survey.12 The subsidiaries were once
Philadelphia-headquartered firms. Between 1951
and 1967 they were acquired by corporations
whose home offices are outside the metropolitan
area. The firms in the survey, therefore, no
longer have a local headquarters but do have
the main subsidiary office and other operating
facilities within the Delaware Valley.
In all 13 interviews with chief executives
of subsidiaries, the best interest of the family,
which owned the formerly-headquartered cor­
poration, was given as a prime consideration in
choosing to become a subsidiary of another
corporation. In some cases, executives said the
family was anxious to dump a dying firm. Most
of the firms, however, were not at death’s door.
The reason for merging, which was noted with
greatest frequency, was for tax-free diversifica­
tion for “ the family.” The Philadelphia firm,
previously, had concentrated its output in one
major product line to the point where speedy
diversification was essential to remain, or again
become, profitable. The family owning the com­
pany, or the bank managing the family trust,
concluded that the quickest way to diversify
and avoid the distant death knell was to sell to
a larger and more diversified corporation.
Members of the family-held corporation, or
executors of estates, were the key decision­
makers in selling all 13 firms.
The majority of companies, which did not
feel ready for burial, were most anxious to
obtain financing for expansion— not available
to them as closely-held family concerns. The
merger opened new financing channels through
the larger, better-known, or more profitable
parent company. Additional benefits said to
12 For details, see the Appendix.

12




have resulted from the merger were needed
managerial expertise and accessibility to research
and development resources provided by the
acquirer.
COMMUNITY RESPONSE IN QUESTION
Philadelphia’s civic leaders who are seriously
disturbed at the loss of home offices to the
region tend to “ blame” the loss on acquisitions.
Some local action already has been planned to
try to prevent “ outsiders” from acquiring firms
headquartered in Philadelphia. No doubt
mergers are a source of disappearing headquar­
ters. But whether the costs to the regional
economy of a disappearing home office, via
acquisition by a non-Philadelphia corporation,
outweigh benefits resulting from the newly con­
stituted subsidiary has not been previously ex­
plored.13 If the answer is not clear-cut, perhaps
there is a better alternative to maintaining the
region’s headquarters complex than in trying to
halt acquisitions of Philadelphia firms by cor­
porations whose home offices are out of the
area.
Probing cost experience. There is evidence of
some acquisition cost to the local economy in the
experience of the 13 subsidiaries surveyed. One
cost appears to be a regional “ brain drain.” In
the case of headquarters which are closed fol­
lowing acquisitions, top-management talent is
forced out of the local office as headquarters func­
tions are cut back, abolished, or relocated. Exec­
utives caught in this squeeze tend to look to the
13 There are many difficulties involved in assessing the
economic impact on a region of acquisitions. No research
is known to exist which has tackled the problem in
depth. Findings reported in this article are based on
interviews with top executives of local firms which were
once headquartered in Philadelphia and are now sub­
sidiaries as a result of acquisitions. Obviously, no one
knows what the experience of these firms would have
been had they not been acquired.

ACQUISITIONS OF FIRMS HEADQUARTERED
IN PHILADELPHIA ARE FOLLOWED BY A
SHIFT IN HOME OFFICE FUNCTIONS TO
HEADQUARTERS OUTSIDE THE REGION.
R ESP O N SIB ILIT IE S FOR:
Financial Decisions
Acquisition Programs

............ ...................I
m m

Personnel Policies
New Product Development
Expansion Planning
Marketing and Advertising




}Z Z= Z3
0

- T5™ !

1

30

50

40

i _ J ------ 1------ 1-----60

70

80

90

100

Percentage of Firms Shifting Functions Out of
the Area
Source: Survey of the Federal Reserve Bank of Philadel­
phia, 1969. See Appendix.

FEBRUARY 1970
BUSINESS REVIEW
FEDERAL RESERVE BANK OF PHILADELPHIA

planning and decisionmaking is now carried
out at the parent headquarters, not in the
Delaware Valley. Prior to the merger, profes­
sional personnel were employed in the local
home office to perform these financial functions.
Similarly, acquisition planning and performance
was the function of Philadelphia executives
prior to the merger. In 77 per cent of the
cases, this headquarters activity shifted out of
the region when the merger was consummated.
Over half of the local subsidiaries lost responsi­
bility for personnel and salary policies to a
nonregional headquarters following acquisi­
tions.
Less than half, or 46 per cent, of the sub­
sidiaries were stripped of responsibility for
planning for expansion and for development of
new products in the post-merger period. The
majority of the subsidiaries, consequently, still
retain management personnel to perform these

national market for the best professional op­
portunities. If these opportunities are not found
in the Delaware Valley, executives may leave
the region. Some may move to the home office
of the new parent firm, which in the surveyed
group is not in the Philadelphia area.
Among subsidiaries in this study, 69 per cent
of the executives interviewed reported a reduc­
tion in managerial and/or research and
development personnel at the top and middlemanagement levels following mergers. Types of
personnel phased out as a result of the loss of
the home office is indicated by the headquarters
functions which were shifted away from the
Philadelphia metropolitan area. Our findings, as
shown in Chart 3, suggest that local employees
responsible for high-level corporate decisions
lost responsibilities after acquisitions.
For example, in 92 per cent— or all but one
— of the subsidiaries surveyed, major financial

13

functions. However, one would expect some
reduction in top personnel to perform these
activities since final decisions on expansion and
new products depend on financial decisions
made by executives at the parent headquarters
outside Philadelphia.
As such home-office responsibilities are re­
duced or phased out following an acquisition,
so too are the executives performing them. If
they move from the region, the quality of the
local labor force is weakened. This is what is
meant by a brain drain. Many secondary effects
on the economy follow this movement. Payrolls
and the tax base are reduced. Upper-income
familities out-migrate with the breadwinners.
This is the start of a detrimental rippling im­
pact on area retail sales and services which can
become far-reaching.
Another cost to the region of losing execu­
tives, as a result of acquisitions, is believed to
be a decline in business support of civic and
cultural activities. Local folklore holds that not
only does the loss of management personnel to
the region have an adverse impact on these
activities, but that headquartered corporations
are more civic-minded per se than are subsidi­
aries. This study, however, did not find a
decline in community involvement to be a seri­
ous cost consideration stemming from the loss
of headquarters via merger.
Top executives of subsidiary offices in
Philadelphia were questioned as to their firms’
participation in specific civic and cultural activi­
ties in both the pre-merger and post-merger
periods. Such activities included different types
of support of area colleges and universities;
participation in the Greater Philadelphia Cham­
ber of Commerce; contributions to the United
Fund; personal and financial support of cultural
activities; and participation in nonprofit develop­
ment corporations and other similar urban affairs.

14




Based on interviews with resident managers
of subsidiaries, civic and cultural activities ex­
perienced a very slight cutback in support from
a few firms in the post-merger period while
some activities, in contrast, received increased
involvement following acquisitions. Over onehalf of the subsidiaries, however, reported no
change in their participation in any community
activities. And today, two-thirds of the firms
are not actively involved in any specific civic
endeavor. The majority of companies reporting
“ no change” indicated no change from nothing
to nothing. As Philadelphia-based headquarters,
they made virtually no active contribution to the
civic and cultural life of the community. As sub­
sidiaries, their contribution is largely unchanged.
Some interviewees tended to be apologetic
for their lack of civic participation. The ma­
jority of executives, however, expressed the
opinion that the degree of business involvement
in community affairs was not strongly influenced
by whether the firm was a headquarters or a
subsidiary. The viewpoint of respondents is
that geographical location and type of industry
has a greater impact on community involvement
of business than corporate structure. If a firm
is located in the core city, it is more likely to
be active in civic affairs than if it is located in
a suburban area where commuting time to cen­
ter city is a very high cost. Executives also
stated that if they could expect their companies
to be direct beneficiaries of civic and cultural
improvements, they would be more active.
All but one of the subsidiaries included in
this survey are in manufacturing as opposed to
service industries. Their top executives claim
that if they were operating such services as
hotels, banks, transportation facilities, or retail
outlets, their concern with urban affairs would
be greatly enhanced. Opinions also reflect the
fact that all of the subsidiaries, but one, are

located outside of center-city Philadelphia. Of
these, half are in suburban communities of the
metropolitan area and half are in outlying areas
of the city. Downtown meetings necessary for
active participation in civic and cultural affairs
of the community are not conveniently accessi­
ble to offices of executives.
The cost to the region of acquisitions most
frequently noted is a substantial loss of income
to local business services. Twelve out of 13
types of business which receive income from
supplying headquarters’ needs lost clients after
an acquisition, as shown in Chart 4. When
firms were headquartered in Philadelphia, prime
suppliers of 88 per cent of their service needs
were located in the region.14 Following acquisi­
tions, the subsidiaries discontinued buying from
many of these Philadelphia industries. Post­
merger, local industries were prime suppliers
for only 53 per cent of the services required by
the reorganized subsidiaries. The region’s loss of
headquarters was followed by a shift in buying
of business services to other parts of the country.
Some industries were harder hit than others
after acquisitions. Philadelphia insurance com­
panies lost the largest number of clients when
locally headquartered corporations merged.
Eighty-three per cent of the merged companies
shifted the bulk of their insurance purchases
to companies outside of the metropolitan area,
as shown in Chart 4. Fifty per cent or more of
the acquired firms, which had previously pur­
chased services primarily from local public re­
lations firms, brokerage houses, auditors and
accountants, banks, and advertising agencies,
switched to other firms outside the Delaware
Valley after they became subsidiaries.1

11 If a local service industry received over 50 per cent
of the firm’s budget for that service, the industry was
considered a “prime supplier.”




The benefit side of the ledger. There is reason,
however, to question the damage done to the
total regional economy because of mergers. It is
very possible that companies which have been a
drag on the local economy may be greater assets
to the area if they are acquired, even though
headquarters may be lost in the process. If better
management, new capital investment, and greater
national competitiveness result from acquisi­
tions, local economic benefits may far outweigh
the cost of fewer corporate headquarters.
In the survey of subsidiaries, today’s operat­
ing executives unanimously agreed that merging
was the only hope for growth. For four of the 13
companies, the stated choice facing the firm was
either be acquired or die. On the basis of in­
formation provided by interviewees, all of the
acquisitions were followed by growth, or at
least stabilization, of subsidiary operations in
the Delaware Valley.
All subsidiaries were able to improve, mod­
ernize, expand, or develop new products as a
result of financial resources made available by
the acquiring corporation, not available prior
to the merger. Eighty-five per cent of the sub­
sidiary executives said that local production be­
came more competitive in the national market as
a result of improved management assistance and
R & D expertise provided by the parent company.
Data to back up these claims are not easy to
come by. Survey results show, however, that
both assets and sales of the Philadelphia sub­
sidiaries increased following acquisitions in 92
per cent of the cases. Employment within the
Delaware Valley increased at 69 per cent of the
subsidiaries in the post-merger period. The
remaining companies which reported a decline
in regional employment attributed the drop to
long-overdue modernization programs which
substituted capital for labor. All subsidiaries,

CHART 4
FOLLOW ING ACQUISITIONS AND THE LOSS
OF AREA HEADQUARTERS, PHILADELPHIA
BUSINESS SERVICES LOST BUYERS.
Percentage of com panies shifting local purch ases to firms
out of the region in the post-m erger period, 1951-1968.
LOCAL IN D U STRY
Insurance
Public Relations
Brokerage
Auditing and Accounting
Banking
Advertising
Legal Services
R&D Consulting
Executive Recruiting
Management Consulting
Office Supplies
Printing
Machine Rental and Repair
0

10

20 30 40

50 60 70 80

90 100

Percentage of Companies Shifting Purchases
Away from Philadelphia
Source: Survey of the Federal Reserve Bank of Philadel­
phia, 1969. See Appendix.

but one, made capital investments in the metro­
politan area after the acquisition.
Almost two-thirds of the subsidiaries, post­
merger, invested in new plants or in major
expansions or modernization of existing facili­
ties in Philadelphia. In only two cases were
physical facilities actually closed in the area
after the merger. In the first case, the personnel
in the core city headquarters moved to the
suburban plant. In the second case, three obso­
lete factories were closed, and these operations

16




were consolidated under one roof in a new
suburban location.
Two faces of Janus. This look at some of the
costs and benefits of acquisitions of firms head­
quartered in Philadelphia, by corporations out­
side of the region, only scratches the surface. But
that surface needs some scratching. Since most
major metropolitan areas are losing corporate
headquarters through the merger process, it is
important to recognize that the regional eco­

Nevertheless, legitimate reasons were noted for
Philadelphia’s community leaders to be con­
cerned with the decline in local headquarters.
But is the concern focused on the major prob­
lem? Some headquarters have moved from the
region because the grass was greener elsewhere.
Others have been lost in the merger process.
And this loss is a hard battle for Philadelphia
civic leaders to fight. A serious question for the
community is why the loss of headquarters has
been a net one, which reduced Philadelphia’s
stature as a headquarters complex. Home offices
today may be gone tomorrow, but the area’s
stature as a headquarters center can only slip
if the loss is not replenished by new head­
quarters coming on stream.
This is exactly what has not been happening
in the Philadelphia metropolitan area. The local
economy has not been generating enough new
headquarters to offset its losses. Of the 32
locally headquartered corporations and subsidi­
aries included in this survey which were
founded in Philadelphia, the average year of
birth was 1882. The most recent birth was
1947— but that was a real standout. Prior to
that one, the most recently formed corporation
dates to 1929.
The average year of founding of all head­
quarters in the study, which make up the re­
gion’s home-office complex today, is 1879.
Corporations which were headquartered in the
area prior to acquisition (after 1950) have
birth dates averaging around the year 1889.
Apparently, Philadelphia’s headquarters complex




FEBRUARY 1970

FIRM FOUNDATION FOR A
HEADQUARTERS COMPLEX
In exploring the decline of Philadelphia as a
headquarters center, two underlying reasons
have been probed in depth. First, factors in the
community environment which may influence
existing headquarters to move were pointed out
by local corporate executives. If identified
shortcomings can be turned into assets, the
region’s present headquarters complex should
have stronger reasons for remaining intact.
Rectifying observed shortcomings in human
qualities of the environment might even have
some influence in attracting headquarters onthe-move to the Delaware Valley. But this pop­
ular panacea of attraction is highly over­
rated. Certainly in Philadelphia, efforts to at­
tract new offices have not been very successful.
In this study, of the 38 companies surveyed,
only six were born outside the region. These
six were not attracted here in the usual sense
of the term. A more typical example of an out­
side firm relocating its headquarters in Phila­
delphia is the case of the Philadelphia resident
who bought a New York firm and moved it
here. It is an atypical case when corporate
management of a firm surveys alternative com­
munities for headquarters relocation and settles
on Philadelphia.
15 A check of all manufacturing companies in the
Philadelphia SM SA which have no headquarters outside
of the region shows 73 per cent were founded prior to
1929. See the Appendix for a description of the universe
from which the sample of interviewees was drawn.

BUSINESS REVIEW

A RETURN TO THE CHALLENGE AT HOME

is a result of a boom in entrepreneurship which
preceded the 1929 depression.15 With few new
major corporations postdating the depression,
Philadelphia’s net headquarters loss is under­
standable. The Delaware Valley needs to grow
its own home offices if a continuing net loss in
headquarters is to be arrested.

FEDERAL RESERVE BANK OF PHILADELPHIA

nomic impact need not be all bad. There are two
sides to the coin. If local firms become more com­
petitive nationally as a result of a merger, bene­
fits to the Philadelphia economy may far
outweigh the loss of headquarters.

17

A second major force behind the region’s
headquarters decline is the national increase in
acquisition activity. How effective community
action can be in mitigating the local impact of
this national trend is questionable. As pointed
out, there are reasons to challenge whether such
a goal is in the best interest of the regional
economy as a whole. It seems highly probable
that the Delaware Valley will continue to lose
home offices through acquisitions by corpora­
tions headquartered outside the area.
Holding on to today’s headquarters complex
is an important thumb-in-the-dyke objective to
maintain Philadelphia’s home-office strength.
But it is still just a holding operation. A further
loss in headquarters by acquisition appears very
probable. The most likely chance Philadelphia
has of preventing a further net loss is by grow­
ing its own headquarters at home through a
resurgence in human enterprise.
Philadelphia’s “ concerned community” can­
not form new firms to create local headquarters.
But it can make conditions in the community
more amenable to a corporate baby boom. For

example, new venture-capital corporations,
which recently have appeared on the local scene,
are a response to a vital need. Turning Phila­
delphia’s shortcomings in human qualities into
regional assets can make the area a more attrac­
tive climate for business generation and healthy
growth. Incubator facilities which provide man­
agement assistance, such as those available at
the Regional Development Laboratory in West
Philadelphia, can aid new businesses in getting
off the ground.
Philadelphia’s civic and business leadership
can go a long way to improve the area’s climate
for new-firm formations and concomitant head­
quarters generation. Unfortunately, leadership
cannot force new entrepreneurs to step forth.
Human venturesomeness is a fundamental
necessity for new-business enterprise. An entre­
preneurial renaissance, of the pre-depression
variety, is essential if the community’s net loss
of headquarters is to turn into a net gain in the
future. Generating home offices within the
region is basic to a firm foundation for a major
headquarters complex in Philadelphia.

Methodology Of This Investigation
And The Meaning Of The Findings
Findings reported in this article are based on
data collected through personal, in-depth inter­
views with key executives of 38 business firms
in the Philadelphia area. These 38 were respon­
dents in a sample of 40 firms selected from a
universe of all firms (manufacturing and non­
manufacturing ) in the Philadelphia eight-county
area (SM SA) which: (a) are listed by Dun
and Bradstreet as having a corporate headquar­
ters office or a headquarters office of a subsidiary




located in the SMSA; (b ) have a net worth of
$1,000,000 or more; and (c) are classified in
two-digit SIC groups which have an aggregate
employment of 10,000 persons or more. The
universe may be described as those business
firms in industry groups upon whom the eco­
nomic health of the region most heavily depends
and who have made headquarters location deci­
sions relating to the Philadelphia area.
Within this segment of the business com-




FEBRUARY 1970
BUSINESS REVIEW

quarters and the sub-sample of 13 firms with
subsidiary headquarters located in the area to
be representative of all such firms in these two
respective groups.
The 25 headquarters included in the survey
equal 4.4 per cent of all corporations headquar­
tered in the area and employ 50.6 per cent of
all people employed by corporations having
headquarters in the region. The 13 subsidiaries
included in the survey equal 26 per cent of
all subsidiaries with their main office in the
area. They employ 93 per cent of all persons
employed by subsidiaries with main offices in
the region.
Data used for the article were obtained
through personal interviews, ranging between
one and a half and three hours, with the presi­
dent or chairman of the board of each head­
quartered corporation, or in the case of
subsidiaries, with the top local executive. To
insure comparability, each person interviewed
in the headquarters sub-sample and in the sub­
sidiary sub-sample was asked the same ques­
tions by the same interviewer. However,
interviews were open-ended. Executives ex­
pressed themselves freely and at length.
The first part of this article draws heavily on
a section of the headquarters questionnaire in
which executives were first asked to select and
rank, in order of relative importance, the ten
attributes in a community which would weigh
most heavily in the selection of a location for
their headquarters. Interviewees had 45 attri­
butes (plus an option of “ other” ) from which
to choose. They were then asked to rate every
attribute, whether most important to them or
not, as superior, satisfactory, or inadequate in
the Philadelphia SMSA, in terms of their own
needs, relative to the nine other largest metro­
politan areas in the nation. These adjectives
used for rating are treated synonymously, in the

FEDERAL RESERVE BANK OF PHILADELPHIA

munity, four separate sub-groups of firms were
identified, for subsequent sampling.
Sub-group (A ) consisted of all 13 firms in
the region which employ 10,000 persons or
more. The total number of employees reflects
the number of people employed by firms whose
corporate or subsidiary headquarters are
located in the SMSA, without respect to the
number of employees who actually work in
the area. Of chief executives of the 13 firms
included in the sample, one refused to be inter­
viewed. Findings reported in the text, then,
include all headquarters and subsidiaries in the
region, except one, which employ 10,000 per­
sons or more.
Sub-group ( B ) consisted of ten two-digit
SIC groups in which firm employment ranged
between 3,000 and 9,999. The firm in each SIC
group with the largest number of employees
was selected for inclusion in the study. Eight
of these firms have corporate headquarters,
and two have their subsidiary’s main office in
the Philadelphia area.
Sub-group ( C ) consisted of all remaining
companies (employing fewer than 3,000 peo­
ple) in the universe which have their corporate
headquarters in the area. Seven of these were
selected for inclusion in the study by using sys­
tematic sampling procedures. One, however, did
not respond to the interview.
Sub-group (D ) consisted of all remaining
firms in the universe which have the main of­
fice of the subsidiary located in the area. Ten
of these were selected for inclusion in the
study by the same sampling procedures used
with sub-group (C ).
Taken together, we assume the sample of 40
firms to be representative of all large firms with
corporate or subsidiary headquarters offices
located in the Philadelphia SMSA. We assume
the sub-sample of 27 firms with corporate head­

19

text, with above average, average, and below
average, respectively.
Table A shows the 18 factors most fre­
quently chosen as most important in location
decisionmaking. The table records the number
of times each factor was ranked as one of the
ten prime considerations. As shown in Table A,
there was wide variation in relative weights

executives assigned to locational factors. Inter­
estingly, the table indicates that many attributes
which tend to rank high in plant location
choices, such as proximity to markets and sup­
pliers, labor-management relations, wage rates,
labor productivity, and transportation for ma­
teriel, are relatively unimportant in decision­
making for locating headquarters offices. The

TABLE A
Factors Influencing the Location of Headquarters
Philadelphia was judged to
compare with other major
Number of
Factors Influencing Location
metropolitan areas as:
Respondents
Choice in Order of Relative Placing
Factor
Seriously or
Importance
Satis­
in the Top Ten Superior
Somewhat
factory
Inadequate
1. Housing for management
and professional
p e rso n n e l........................
2. Corporate tax burden . . .
3. Major corporate banking
services ..........................
4. Air transportation for
p e rso n n e l........................
5. Local availability of management and professional p e rso n n e l............
6. Community law enforcement ...............................
7. Regional public schools . .
8. Space c o s t s ........................
9. Community image ............
10. Colleges and universities .
11. Cultural environment . . . .
12. Regional political
environment (SMSA) . .
13. Legal services ...................
14. Availability of other
personnel (supporting
office staff) ...................
15. Local transportation . . . .
16. Local political environment
17. Corporate legal stru cture .
18. Availability of scientif c
and technical personnel

20




19
16

19
2

6
18

0
5

14

7

9

9

13

1

18

6

12

3

11

11

12
11
10
9
8
8

14
8
7
0
13
11

9
14
16
6
8
10

2
3
2
19
4
4

8
8

0
12

12
10

13
3

7
7
7
6

8
10
1
2

15
14
9
21

2
1
15
2

6

4

6

15

TA B LE

B

Extent to Which Community Attributes Were Judged Inadequate
by 25 Interviewees
Community
Attribute

Rated as
Inadequate
by:

Community image .............. . . .
H o t e ls ..................................... . . .
Local political environment . . . .
Availability of scientific
and technical personnel . . . .
Regional political
environment (SMSA) . . . . . .
D in in g ..................................... . . .
Proximity to other area
headquarters ................... . . .
Highways (for personnel
use) ................................... . . .
Availability of management
personnel .......................... . . .
International transportation . . .
Banking: major corporate
s e r v ic e s .............................. . . .
Executive recruiters ............ .. .
Public relations services . . . . .
Advertising services ............ .. .
Brokerage services .............. . . .
Zoning ................................... . .
State political environment .
Labor p rod uctivity................ . . .
Proximity to m a r k e ts ......... . . .
Air transportation
(for personnel) ................ . .




19
17
15
15
13
12
12
11
11
10
9
9
8
8
7
6
6
6
6
6

Community
Attribute

Rated as
Inadequate
by:

Taxes ........................................
Labor-management relations
Cultural e n v iro n m e n t............ .
Colleges and universities . . . .
Regional public schools . . . .
Corporate legal services . . .
Space requirements ............ .
Rail transportation
(for p e rs o n n e l)...................
Proximity to suppliers .........
Law enforcement ...................
Space costs ............................
Availability of supporting
office staff ..........................
Corporate legal structure . .
C o st-o f-livin g ..........................
Recreation ...............................
Transportation for materiel .
Fire protection .......................
Proximity to other units
of co rp o ratio n .....................
Local tra n sp o rtatio n ..............
Housing for management . .
Salary le v e ls ............................
Banking: routine
depository s e r v ic e s ............
Regional private schools . . . .

.
.
.

5
4
4
4
3
3
3
3
2
2
2

.

2
2
2
2
2
1
1
1
0
0
0
0

FEBRUARY 1970
BUSINESS REVIEW

executives gave attributes in Philadelphia rela­
tive to other regions, ratings of superior, satis­
factory, and inadequate are referred to as above
average, average, and below average, respec­
tively. The rating receiving the most responses
for each attribute was arbitrarily assigned that
overall rating. When a tie score for the most
checks occurred, if satisfactory plus superior

FEDERAL RESERVE BANK OF PHILADELPHIA

cutoff point of 18 out of 45 factors was arbi­
trarily set by any factor receiving a larger
number of “ relative importance” checks than
one would expect if checks were evenly dis­
tributed between the 45 options— in which case
each factor would have received 5.6 checks.
Table 2 in the text was developed from raw
data in Table A. In summarizing the ratings

21

was less than satisfactory plus inadequate then
“ inadequate” or “ below average” received the
summary evaluation in Table 2 of the article.
Since the first part of the text dealt at length
with community attributes executive decision­
makers of corporate headquarters felt were less
than satisfactory, Table B contains all 43 attri­
butes amenable to rating, in declining order of
relative dissatisfaction. ( “ Blue laws” and “ fam­

22




ily ties of top management,” included on the
questionnaire, were not rated as superior, satis­
factory, or inadequate.) The table also shows the
frequency with which executives judged each
attribute to be comparatively inadequate in the
Delaware Valley for their specific needs. In 25
interviews, the maximum number of “ inade­
quate” responses any attribute could receive
is 25.

FEBRUARY 1970



EXPECTED VS. UNEXPECTED INFLATION
What people believe about the course of future
events influences their present actions. Expecta­
tions about future inflation are no exception.
If people, looking ahead, expect inflation, they
may be able to adjust their present earning, pur­
chasing, lending, and borrowing activities. By
doing so, they may overcome the expected de­
preciation in the value of money. This process,
recently dubbed “ inflationary psychology,” con­
tinues until people have reason to foresee or
expect a stable price level.
One example of inflationary psychology in
operation would be that of a lender who in­
cludes in his loan charges the expected or an­
ticipated rate of price inflation. His reason for
doing so is obvious. Suppose you loan $1,000
to a friend for one year, and you expect the
price level to rise by 10 per cent during that
period. What rate of interest would be appro­
priate if you wanted to earn a real return (in
terms of constant purchasing power) of 5 per
cent? Answer: about 15 per cent. This mone­
tary return would allow you a real return of 5

BUSINESS REVIEW

by W. Lee Hoskins

FEDERAL RESERVE BANK OF PHILADELPHIA

Inflation: Gainers and
Losers

How much is inflation costing you? When the
cash register rings, the Pavlovian response of
most Americans is “ plenty.” This reaction, re­
inforced by news media, civic leaders, and
street-corner philosophers, may not be wholly
warranted, for the burden of rising prices, like
almost everything else, is not distributed equally
among us. In fact, a sizeable number of Ameri­
cans may actually gain from inflation.

23

per cent, and you would avoid a loss of wealth,
but perhaps not of a friend. If, however, in
making the loan, you underestimated the rise
in prices, the return you would receive would
be insufficient to compensate fully for the re­
duced purchasing power of the repaid loan plus
interest, and you would have joined ranks with
inflation losers. Your failure to foresee accu­
rately the rate of inflation would result in a
redistribution of your wealth from you to your
friend. Your friend would be an inflation gainer
because he does not repay as much in terms of
purchasing power as he borrowed.
Not all people are equally able to make the
necessary adjustments in their earning, purchas­
ing, lending, and borrowing activities to com­
pensate for inflation they see on the horizon.
Even if they were, that would not be the end
of the story, for it is because inflation is incor­
rectly foreseen that gains and losses are often
incurred. All people do not have equal ability
or luck at predicting future events or doing some­
thing about it. Consequently, inflations in the
United States have not been fully anticipated by
all, and wealth redistribution has occurred. One
key to this redistribution is the relationship
between debtors and creditors.
THE ADVANTAGE OF DEBT
The reason wealth is taken from some and
bestowed on others by unforeseen inflation
stems from the fact that there are two kinds
of assets, monetary and real, linking debtors
and creditors. Monetary assets include bonds,
certificates of deposit, promissory notes, ac­
counts receivable, and other legal contracts that
promise a fixed, number of dollars. Of course,
for every monetary asset there is a monetary lia­
bility. For instance, to the landlord a lease
represents a monetary asset, while to the tenant

24




it is a monetary liability— a promise to pay a
fixed number of dollars. In return for this prom­
ise to pay, the tenant receives a real asset—
living space. People may issue monetary liabili­
ties in order to finance purchases of real assets
(cars, houses, inventories, and factories) or for
consumption.
The crucial difference between the two is that
a real asset is a claim to a fixed amount of goods
or services whose money value is tied to infla­
tion, while a monetary asset represents a claim
to a fixed number of dollars regardless of infla­
tion.1 During an unexpected inflation, the dollar
value of a real asset increases as prices rise,
leaving its real value in terms of purchasing
power unchanged; while the amount of dollars
in a monetary asset ( savings certificate) remains
constant, and its real value falls. An investor
holding a monetary asset loses purchasing power
or wealth. (See Table 1.) The person who holds
a monetary liability (in other words, who is in
debt) during an unexpected inflation gains un­
expectedly because he repays his debt in dollars
that are worth less in terms of purchasing
power.
1 The market value of the asset may vary but the
number of dollars it promises to return remains fixed.
Corporate and Government bonds are good examples of
this type of monetary asset. A share of common stock
represents ownership in an equity composed of both real
and monetary assets. The extent to which the share price
changes as a result of an unanticipated inflation depends
on the relative holdings of these assets. Suppose a hypo­
thetical firm has $200 million of monetary assets con­
sisting of cash on hand, loans to other firms, Government
securities, and accounts receivable. It also has $800 mil­
lion in monetary liabilities (bonds, loans, and accounts
payable). The firm is a net monetary debtor to the tune
of $600 million. If 30 million shares of stock were out­
standing, each would bear a debt of $20. Suppose the
stock sold for $40. Then each share would represent a
claim for real goods of $60 (the $40 received for the
share plus $20 borrowed by the firm) and a 10 per cent
rise in the price level would increase the equity of a
shareholder by 15 per cent (1 0 per cent of $60 represents
a 15 per cent rise in a $40 equity), unless other people
anticipated the inflation and previously bid up the share
price of the stock.

TABLE t
The Change from 1958 to 1968 in Monetary Value of Selected Assets in
Unadjusted Dollars and in Dollars of 1957-1959 Purchasing Power
Percentage Change in Value
Unadjusted $
1957-59 $

Asset
Cash ......................................................................
Bonds:
U.S. Treasury* ...............................................
N.Y. C it y * * ......................................................
Preferred Stock A v e ra g e ...................................
Common Stock Averages:
Industrials ......................................................
Public Utilities ...............................................
New York City B a n k s ...................................

—

- 2 3 .7

-1 9 .9
- 2 1 .4
- 2 3 .2

-3 5 .3
- 3 6 .4
- 3 7 .9

+ 91.7
+ 61.0
+ 104.3

+ 55.0
+ 30.2
+ 65.2

The table shows changes in the value of various types of investments for the
period 1958-1968. These changes are shown unadjusted for price level changes
and in dollars of 1957-1959 purchasing power. An indication of the change in
value that may be attributed to inflation is found by comparing the unadjusted
change in value and the change in dollars of 1957-1959 purchasing power. Mone­
tary assets (cash, bonds, and preferred stock) have all suffered declines in value
ranging from approximately 23.7 per cent to 37.9 per cent in terms of 1957-1959
dollars. For example, holding $100 in cash for the ten year period would have
resulted in a 23.7 per cent loss in purchasing power. The common stock averages
have all realized an increase in value. However, the increase is considerably less
when inflation is taken into account.
* U.S. Treasury 3 -l/4 s, 6/15 /78-83
** N.Y. City 4-1/4s, 3/1 /81

Most families have real assets, monetary as­
sets, and debts (monetary liabilities). The rela­
tive holdings of these items during periods of
unanticipated increases in the price level deter­
mine whether or not a given family gains or
loses from inflation. If a family holds more
monetary liabilities than monetary assets, it
gains. Conversely, if monetary assets exceed
debts, the family loses. (See box.) So, being
in debt can have advantages during periods of
unexpected inflation. This statement does not
mean that saving makes no sense. Savings held
in nonmonetary form do not lose value. More­
over, savings held in monetary form may lose
value only when inflation is unanticipated. If in­
flation were accurately anticipated, adjustments
could be made so that savings held in monetary




asset form (except cash) would make sense as
well.
TAKING ACCOUNT OF INCOME
A family’s status as a net monetary debtor or
creditor is not all that determines whether
inflation robs it or blesses it. Income also
fits into the picture. Let’s focus first on
income from certain pension plans, insurance
policies, and other types of programs which
promise to pay a fixed number of dollars per
year. These promises to pay are monetary assets
to the pensioner, and the amount they pay is
unaffected by a rise in the price level.2 People
2 Social Security payments do not appear to fall in
this category. As prices climbed during the 1960’s,
Congress periodically raised the allowable monthly pay­
ments.

CALCULATING GAINS
AND LOSSES
The redistribution of wealth accompanying an
unanticipated inflation can be better understood
by tracing through some relatively simple ex­
amples. Suppose a hypothetical balance sheet
for an individual before an unanticipated infla­
tion is:
Balance Sheet— Inflation Gainer
Market Value before Unanticipated Inflation

Assets
Cash
House

$

Equity + Liabilities

500
40,000

Mortgage $40,000
Equity
500

$40,500

$40,500

If a particularly severe inflation occurs and the
price level doubles, this individual would be
in an enviable position indeed! Let’s look at
his new balance sheet:
Balance Sheet— Inflation Gainer
Market Value after Unanticipated Inflation

Assets
Cash
House

Equity + Liabilities

500
80,000

Mortgage $40,000
Equity
40,500

$80,500

$80,500

$

The dollar value of his house rises with the
price level, since it is a real asset. (The extent
of the rise may vary depending on how the
inflation is introduced into the economy and
on other factors affecting the housing market).
His $40,000 debt, a monetary liability incurred
in purchasing the house, remains an obligation
to repay $40,000. Equity has increased from
$500 to $40,500 which, in terms of pre-inflation

26




dollars, is a $19,750 increase in wealth. The
increase in wealth is found by dividing the post­
inflation equity, $40,500, by the new price
level, which in this case is 2 ( the old price level,
taken as 1, plus the percentage increase in the
price level), and subtracting from the result
the original equity of $500.
Where did the gain come from? It came from
the wealth of the creditor who lent $40,000 to
finance the purchase of the house, but who
failed to foresee that the price level would
double. Some $20,000 was gained at the expense
of the creditor; however, the value of the $500
cash dropped $250, leaving a net wealth gain
in terms of constant purchasing power of
$19,750. If the lender had foreseen the infla­
tion, he would have made adjustments in the
amount to be repaid or in the interest charge
upon granting the loan.
Losses result from holding more monetary
assets than monetary liabilities. Let’s suppose
this is the balance sheet of the lender who
loaned the money for the house before the
unanticipated inflation:
Balance Sheet— Inflation Loser
Market Value before Unanticipated Inflation

Assets
Cash
$ 500
Mortgage
Held
40,000
$40,500

Equity + Liabilities
Debt
Equity

$40,500
$40,500

Now, if the price level were to double, the
balance sheet would be unchanged.

$40,500

Debt
Equity

$40,500
$40,500

Since no real assets were held, equity did not
increase. But, because of the higher price level,
the $40,500 equity will not purchase as much
holding such assets are said to be on “ fixed
incomes;” hence, they suffer a loss from unan­
ticipated inflation. However, the person on a
“ fixed income” may hold other monetary assets
and liabilities as well. And it is the relative
holdings of all of these that determine whether
or not a person’s wealth expands, shrinks, or
is unaffected when the price level climbs unex­
pectedly.
Undoubtedly, the most important source of
income for most families is wage and salary
earnings. Unforeseen inflation can have an im­
pact upon this type of income too. For exam­
ple, a wage contract promising to deliver a
specified number of hours of labor for a fixed
number of dollars may cause the laborer to
lose, for such a contract represents a monetary
asset to him. Moreover, wages are bid up
faster in some sectors than others because of the
manner in which the inflation is introduced
and transmitted through the economy. Conse­
quently, some redistribution does occur. But
generally, wages and salaries simply reflect what
we receive in return for the sale of real assets
(hours of labor), and as such are usually bid
up during an inflation. For example, during the
current period of rising prices, average hourly




pre-inflation dollars or

^ $40,500 ^

— $40,500.

The lender lost $20,000 to the borrower, plus
$250 as a result of holding $500 in cash.
Additional balance sheet examples can be
found in Armen A. Alchian and William R.
Allen, University Economics, 2nd Edition (Bel­
mont, California: Wadsworth Publishing Com­
pany, Inc. 1967), Chapter 32.
earnings increased at a faster pace than con­
sumer prices, as indicated in the chart. From
1965 through 1969, average hourly earnings
soared 24 per cent while the Consumer Price
Index jumped only 16 per cent. Of course, some
of the increases in wage rates may have been
caused by workers as they anticipated some

DURING THE 6 0 S , AVER­
AGE H O U R L Y E A R N IN G S
ROSE FASTER TH A N THE
CONSUMER PRICE INDEX.
Per Cent Increase
A verage H o urly E a rn in g s of
Non-Supervisory, Private, Non| Agricultural Workers
Consumer Price Index
h
___ 1(1957-59 Base)

6-I

""I

'j.i.iiHltt
rill
I960 1961 1962 196319641965196619671968 1969

FEBRUARY 1970

Equity + Liabilities

BUSINESS REVIEW

Assets
Cash
$ 500
Mortgage
Held
40,000

in goods and services as it would have before
the inflation. The loss in wealth is $20,250 in

FEDERAL RESERVE BANK OF PHILADELPHIA

Balance Sheet— Inflation Loser
Market Value after Unanticipated Inflation

27

but not all of the inflation. It is not clear, there­
fore, that even unanticipated inflation robs the
average working man of his wage.
When income is taken into account, the prob­
lem of calculating gains and losses becomes more
complicated, but the principle remains the same:
The gainer is the guy who owes more money
than is owed to him during an unforeseen infla­
tion.
REDISTRIBUTION ON WHAT BASIS?
The household sector of the economy has been,
by far, the leading net monetary creditor since
World War II, while the Federal Government
has been in the enviable position of the number
one net monetary debtor. (See Table 2.) The
nonfinancial corporate sector also has been a net
monetary debtor but to a much smaller degree
than the Federal Government. To the extent that
the household sector holds monetary debts and
liabilities of the Federal Government, unantici­
pated inflation results in a gain for the Govern­
ment and a loss to the household sector. This
transfer of wealth is often called an inflation tax.
But this does not end the process, because the
Government ( which belongs to all of u s) passes
its gain along to someone. The gain in the cor­
porate sector goes only to net debtor firms. And

since people own business firms, they ultimately
realize most of the fruits, be they bitter or sweet,
that corporations receive from an unexpected rise
in the price level.
More importantly, however, both the busi­
ness and household sectors are composed of
monetary creditor and debtor units, and it is
the unexpected price level increases which cause
redistribution of wealth and income within
these groups that many people find objection­
able about inflation. Redistribution of wealth
and income on some criterion which is in ac­
cordance with our concept of fairness or equity
is commonplace— witness the numerous subsidy
and aid programs, not to mention that allegedly
great equalizer, the progressive income tax.
When inflation redistributes wealth, however,
no consideration is given to individual circum­
stances, such as poverty, health, or number of
dependents. Unanticipated inflation, unlike
Robin Hood, takes from some and gives to
others, be they poor, rich, young, or old. As a
consequence, redistribution may not be on the
basis of social goals or objectives.
Aside from its lack of social conscience, infla­
tion has another trait which is reason for
further concern. Use of money as a medium of
exchange is an integral part of a high-output,

TABLE 2
Estimated Net Debtor and Creditor Status (in Billions of Dollars)
of Household, Corporate Business, and Government Sectors, 1945-1967*
Sector

1945
4-213.8
4.2

1952
+ 237.9
- 26.7

Year

1959
1967
Households
+ 306.4
+ 505.0
Corporate Business
- 96.5
- 42.0
(nonfinancial)
-2 2 1 .8
U.S. Government
-1 9 3 .1
-2 0 8 .1
-2 3 4 .9
* Positive sign indicates net creditor and negative sign indicates net debtor.

28




specialized, and complex economy. Money
makes possible the efficient flow of goods and
services by eliminating the costly barter system.
However, inflation makes the use of money
more costly, and if severe enough, may cause a
reduction in the real output of goods and ser­
vices. People and business firms, in attempting to
economize on the use of money, may resort to
practices which tend to reduce specialization.
They may spend time and effort searching out
exchanges of goods and avoiding organized
markets (for example, business firms inte­
grating vertically to bypass supplier’s and dis­
tributor’s markets). Such actions would slash
productivity in the economy. In a sense, society
would be a loser.
ANTICIPATING INFLATION— HOW MUCH,
FOR HOW LONG, AND AT WHAT COST
While there is little evidence that today’s
economy is coming apart at the seams, there are
unmistakable signs that people, after experi­
encing four years of soaring prices, have come
to expect future price increases. In order to pro­
tect themselves against the wealth-robbing ef­
fects of inflation, many people have acted upon
their expectations. Consequently, we have high
interest rates, built-in wage increases in some
industries, reduced holdings of money balances
by corporations and individuals, and wealth
losses by those of us unfortunate enough to have
had more money owed to us than we owed
during these years.
Two considerable problems face the prospec­
tive anticipator of inflation. First, he must be
able to estimate not only the amount or degree
of inflation, but also its duration. That estima­
tion is tough to make because the range of
possible combinations of amounts and dura­
tion is infinite. For example, will prices




rise 4 per cent for the next 20 years and then
stabilize, or will they rise 6 per cent next year
and then fall for several years? Even the best
guru has trouble here. A correct answer would
require an accurate forecast of future Govern­
ment monetary and fiscal decisions in addition
to any major event or disaster that would affect
the physical stock of goods and services avail­
able. Instead of making crystal-ball estimates,
many people simply negotiate contracts with
escalator clauses tied to the cost of living or
acquire assets with an equity “ kicker” (such as
convertible bonds). Increased use of such
clauses and kickers in recent years is a rough
gauge of how uncertain people are about the
degree of expected inflation.
But an accurate estimate of expected changes
in the price level is only the first obstacle to be
overcome in anticipating inflation. The second
and perhaps even more difficult problem centers
on the ability of an individual to alter his asset
and liability holdings to avoid being hurt by
the coming inflation. For example, a person may
not be able to reduce his holdings of monetary
assets if they are of the nonnegotiable type,
such as certain pension plans and insurance
policies. Furthermore, he may not be able to
contract enough debt to offset his holdings of
monetary assets. In either case, even though the
individual foresees the inflation, he is unable to
forestall a loss in the purchasing power of his
wealth when inflation occurs. Closely associated
with this problem is that of the cost entailed in
altering the form in which wealth is held. The
cost of altering asset holdings depends upon
the types of assets held; consequently, the cost
of anticipating inflation differs among indi­
viduals holding different sets of assets.
Anticipating inflation for fun or profit is no
easy matter. In addition, it is an expensive

game to play because of the time and energy
spent in calculating likely price level changes
and attempting to alter the form in which
wealth is held. If the costs and uncertainties
entailed in anticipating inflation are added to
those inefficiencies and inequities associated

NOW AVAILABLE:
FILM STRIP ON
TRUTH IN LENDING
FOR CONSUMERS

30




with inflation itself, it is easy to understand the
merit of a stable price level. Price stability
insures that gainers and losers will be deter­
mined on traditional values of thrift, hard work,
and enterprise, rather than on the ability to
anticipate and respond to price level changes.

A film strip on Regulation Z, Truth in Lending,
for showing to groups of consumers has been
developed by the Board of Governors of the
Federal Reserve System.
The 20-minute presentation is designed for a
Dukane projector which uses 35mm film and
plays a 33 RPM record synchronized to the
film. Copies of the film strip can be purchased
from the Board of Governors of the Federal
Reserve System, Washington, D.C. 20551, for
$10.00. It is also available to groups in the
Third Federal Reserve District without cost
except for return postage.
Groups in the Third District may direct re­
quests for loan of the film to Truth in Lending,
Federal Reserve Bank of Philadelphia, Phila­
delphia, Pennsylvania 19101. These requests
should provide for several alternate presenta­
tion dates. Others not in the Pennsylvania, New
Jersey, or Delaware area should direct requests
to their nearest Federal Reserve Bank or branch.

FOR THE RECORD...

SU M M A R Y

Third Federal
Reserve District

United States

Per cent change

Per cent change

Dec. 1969
from
mo.
ago

year
ago

12
mos.
1969
from
year
ago

Dec. 1969
from
mo.
ago

year
ago

Manufacturing

12
mos.
1969
from
year
ago

LO CA L
CH A N G ES
Standard
Metropolitan
Statistical
Areas*

MANUFACTURING
Production ..................
Electric power consumed
Man-hours, total* . . .
Employment, total . . . .
Wage income* ............
CONSTRUCTION" ........
COAL PRODUCTION . . .

0
0
+ 1
+ 3
0

+
+
+

0
1
6
15
3

0
- 3
+ 7
- 8
+ 2

3

+ i

+ 4

+ 5
+ 4
- 1
0
- 2
- 2t

- 1
+ 10
- 9
-1 6
- 4
+ io t

Payrolls

Check
Payments* •

Total
Deposits* ••

Per cent
change
Dec. 1969
from

Per cent
change
Dec. 1969
from

Per cent
change
Dec. 1969
from

Per cent
change
Dec. 1969
from

mo.
ago

Wilmington ..

+ 19
- 6

+ 15
+ 1

+ 9
0

+ 4
+ 11
0
- 9
+ 8
+181

+ 6
+ 3
0
- 1
0
+ 1

- 1
+ 10
-1 0
-1 7
- 3
+ 9

+• 3
+ 12
- 2
-1 1
+ 6
+ 15

+ 5t

0
+ 1

+ 5
+ 6

+ 4
+ 5

0

+ 6*

•Production workers only
••Value of contracts
•••Adjusted for seasonal variation




0

mo.
ago

year
ago

mo.
ago

+ i

-

-

1 15 SMSA's
^Philadelphia

0

+ 1

year
ago

year
ago

mo.
ago

8

+ 14

+n

+ 4

+ 17

+ i

+ 5

+ 2

-

1

+ 17

+ 6

+ 13

i

+ 2

Altoona ........

+ 1

+ 4

0

+ 8

+ 4

+ 7

+ 3

+ 7

Harrisburg . . .

+ 1

+ 2

+ 5

+ 13

+ 4

+ 16

+ 3

+ 8

Johnstown . . .

0

+ 8

+ 1

+ 20

+ 11

+

+
+

1

+ 12

2

+ 12

+
+

0

+ 3 - 2
+ 2 - 2
+ 6 - 5
+ 10 - 2
+ 11 + 18

+ 3 + 12
+ 2 + 12
+ 1 - 7
+ 8 - 1
+ 1 + 6
+ 15 + 14
+ 2 -2 0

Lancaster . . .

0

Lehigh Valley.

0

Philadelphia .

0

Reading ........
Scranton . . . .

Y o rk ..............

3
0

-

1

2
0

-

0

+

Wilkes-Barre .
0*

year
ago

0

Trenton ........

PRICES
Wholesale ....................
Consumer ....................

Employ­
ment

Atlantic C ity ..

BANKING
(All member banks)
Deposits ......................
Loans ...........................
Investments ................
U.S. Govt, securities. .
Other .........................
Check payments*•• . ..

Banking

3
0

+
+
+

1
3
1

+
-

1
3
1
1

1
3

+ 12

3

+
+
+
+

6
8
6
2
7

+ 20

0

+ 5

•Not restricted to corporate limits of cities but covers areas of one or
more counties.
••All commercial banks. Adjusted for seasonal variation.
•••Member banks only. Last Wednesday of the month.