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The Second Fifty Years
The Toil and Turmoil of Urban Renewal
1964: The Expansion That Wouldn’t Die

BUSINESS REVIEW

JA N U A RY 1965

r ffW U & l

BUSINESS REVIEW is produced in the Department of Research. David P. Eastburn was primarily responsible
for the article, “The Second Fifty Years,” Evan B. Alderfer for “The Toil and Turmoil of Urban Renewal,” and William D. Schwartz
for "1964: The Expansion That Wouldn't Die.” The authors will be glad to receive comments on their articles.
Digitized forRequests
FRASERfor additional copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania 19101.

This article was written originally as an introduction to a collection of readings on the Federal Reserve
to be released soon. It is published here with the thought that it might also be of interest to readers
of this Annual Report issue of the Business Review as the Federal Reserve begins its second half
century. Inasmuch as it hazards somewhat speculative and impressionistic views of the future, it
should be regarded as reflecting solely the personal opinions of the author and not those of the
Federal Reserve Bank of Philadelphia.

THE SECOND FIFTY
YEARS
The idea of inevitable progress is out of fashion

between innovation and reform— between crea

today, yet the foundation for the concept and

tion of something new and action to cure a

for the tremendous advances actually experi

defect.1

enced by modern society is stronger than ever.

The Federal Reserve was established to remedy

This foundation is a faith in science and tech

certain recognized defects of the financial mecha

nology. With roots in earlier philosophy, the

nism, and in many ways constituted a daring

idea of progress has gained currency with the

departure requiring creative imagination and

development of modern science and technology

experimentation. Subsequently, in the course of

in the past two centuries. During this time so

fifty years, the Federal Reserve put into effect

ciety has gained increasing control over its

many new ideas and techniques in the formula

physical environment, and now, after a quarter-

tion and execution of monetary policy. To say,

century of particularly rapid technological ad

therefore, that the Fed will be functioning in

vance and almost unbroken prosperity, it looks

an environment of innovation is not to detract

ahead to further conquests.

from past accomplishments but to characterize

All this is not to deny problems that lie ahead,
nor to suggest that science and technology are

a dominant influence likely to be at work in
the future.

the universal solvent. But there are grounds for

Modern society is undergoing a process of

believing that the forward motion so apparent

rapid and accelerating change. Thus Max Ways

in things technical will also dominate relations

writes in Fortune magazine of “ The Era of Radi

among people and institutions. What follows is

cal Change.” 2 One business executive character

an attempt to explore some of the ways in which

izes the coming generation of business leaders

the Federal Reserve may be affected.

as “ The Change Seekers.” 3*There is nothing new
about change or innovation. What is new is the

Innovation

pervasive recognition and acceptance of change

The environment in which the Federal Reserve

iTh is distinction and some of the other ideas on innova
tion are drawn from Peter F. Drucker in Landmarks of
Tomorrow (New York: Harper & Brothers, 1959).
2 Max Ways, “The Era of Radical Change,” Fortune, Vol.
LXIX, No. 5 (May, 1964), p. 113.
s Semon E. Knudsen, “The Change Seekers,” Michigan
Business Review, Vol. XVI, No. 5 (November, 1964) pp. 1-4.

System begins its second fifty years is different
in many ways from that in which it began its
first. One of the more subtle differences is that

business re v ie w

as a way of life and faith in innovation as a

innovation may be exciting, but it also can be

way of bringing it about. The word innovation

hazardous. The problem facing any organization

has taken

“ Purposeful

is to weigh the risks involved against the ends

change by means of the systematic inquiry we

to be achieved. This is particularly important

special

meaning:

call scientific method and of the new knowledge

for an institution engaged in public policy, like

gained thereby.” 4

the central bank. With the well-being of the en

Knowledge gained in the process of innovat

tire economy often at stake, the central banker

ing is cumulative, and it is partly for this reason

cannot undertake the risks of innovation lightly.

that the speed of change tends to accelerate.

One kind of risk to be weighed is that of

Innovation is cumulative in another sense— it is

failure. At one extreme, the price of failure to

contagious. A given innovation forces another,

keep pace in an innovating world is obsolescence,

either in competition or adaptation. New ideas,

and ultimately society eliminates the obsolete

new procedures in the business, government, and

institution. But some failures may be the price

financial communities will require the central

of success. Industrial concerns recognize the

banker to innovate, too.

likelihood of failure in the development of new

A current illustration: As commercial banks

products; the laboratory may hit pay dirt only

seek to maintain their position in an environ

once in thousands of attempts. To the central

ment of increasing competition, they have shown

bank, the problem is much more difficult, for

great ingenuity in developing new devices to

failures affect the general public so much more

achieve their goal. Certificates of deposit, capital

directly. And the central banker must answer to

debentures, short-term promissory notes may be

the public for his failures. In his weaker mo

only the beginning. Central bank response to

ments he might wish for a public that is tolerant

such innovation will induce other forms of in

of failure; and perhaps a public constantly ex

novation, and so on in an endless chain of action

posed to constructive innovation and aware of

and response.

the calculated risks involved in them might be

It might appear that the central banker’s ex

inclined to give him the benefit of the doubt.

perience suits him better for the role of con

In the last analysis, however, while remaining

servator rather than innovator. Over the years,

sensitive to the public’s desires, the innovating

as the price level has swung widely from in

central banker will still need a thick skin.5*

flation to deflation, the central banker has seen

Another kind of risk inherent in innovation is

as one of his greatest responsibilities that of

that of success. For if the innovation comes off,

conserving the value of money. This aspect of

the central banker is confronted with a whole

his job seems likely to remain. But this is not

new situation; he has set off a chain of action

the same as preserving the status quo, nor is it

which he will be unable to see in all its rami

inconsistent with an environment of innovation

fications. The risk of success is the risk of

and change. In fact, the best way to conserve

creating a new environment in which new ques

often may be to innovate.

5 The current attempt to provide stimulus for economic
growth while at the same time promoting balance of inter
national payments is a significant experiment involving
innovation in a number of techniques. The risk of failu re failure to achieve growth, or to balance the payments, or to
maintain price stability—is ever present. In case of failure,
the Fed will, of course, have to answer to the public.

Existence in the fast-moving environment of
* Drucker, op. cit., p. 24.

business review

tions will arise for which new answers must be

Central banking is even further removed from
science. To say that it is an art is to imply a

sought.
The question confronting the central banker,

pursuit requiring “ skill and ability, acquired

then, is not whether to innovate or not to in

through patient practice . . . .” 7 And as Hawtrey

novate. The question is how to choose and weigh

said, “ The art of central banking is practical in

the risks involved. Innovation is not experiment

that it teaches how to use a power of influencing

ing for the sake of experimentation but careful

events. It is concerned, not merely with the rela

calculation of new means to achieve given ends.

tion of cause to effect, but with the relation of

In the process of innovating, the central banker

means to end.” 8 (Italics added.) The central

will have to develop and acquire new techniques

banker is not merely standing back observing

and knowledge for making these calculations.

and analyzing; he is in the experiment himself.

Science

possible to state with certainty that under given

If central banking were a science, it would be
Over three decades ago, R. G. Hawtrey made

conditions a certain increase in the discount rate

this intriguing observation: “ If the subject of

will have such-and-such effects. In the present

central banking is classed as an art and not as

state of the art, we can only say that the in

a science, it is not for that reason any the less

crease will tend to have such-and-such effects.

scientific.” 6 In the coming world of scientific

And whereas the economist can introduce an

miracles, is it possible that central banking may

element of controlled conditions into his theory

be transformed from art to science?
When Hawtrey said that central banking can

by the phrase ceteris paribus, the central banker
is very much aware that in practice ceteris can

be scientific, he was stretching the strict mean
ing of the word. Narrowly defined, science in

not be relied on to be paribus.
Much progress undoubtedly will be made in

volves a method— a process— of observation,

coming years toward the ultimate goal of science

classification,

and verification.

— prediction. The central banker will know so

The end is a generalization— a law— that will

much more about the state of the economy and

apply to all cases under the prescribed condi

how it works that he should be more certain of

tions; and from this generalization one is able

the kind of action to take and what to expect

generalization,

to predict. All this is possible in the natural

from it. If he never reaches 100 per cent cer

sciences, and so it is that they have made such

tainty, he will still be better able to narrow down

tremendous strides.

the probabilities.

The social sciences are quite different, most

But there is another aspect to central banking

notably in that they deal with people. People

which will ever remain an art— the judgment

have values and goals and are notoriously un

involved in choice of goals. What should be the

cooperative guinea pigs. Partly because of this,

objective of monetary policy— full employment,

the social sciences have made less progress than

stable prices, growth, balance-of-payments equi

the natural sciences toward the ultimate goal of

librium?

What is the proper mixture?

The

science— prediction.
6
R. G. Hawtrey, The Art of Central Banking (London:
Longmans, Green and Co., 1932), p. vi.

7 “Art,” Encyclopedia Britannica, 1962 ed., Vol. 2, p. 440.
s Hawtrey, loc. cit.

business re v ie w

future undoubtedly will bring new techniques

which this will take place will be tremendous

and knowledge for judging the consequences of

strides

pursuing given objectives and for calculating

makers. Important conceptual advances in ag

trade-offs among them, but in the last analysis

gregating data in systematic ways, such as na

the decision cannot be “ scientific.”

tional income accounts and flow of funds, have

information

available

for

policy

Yet Hawtrey’s point is still valid; the art

been made in recent years and further progress

should be pursued as much as possible in a

lies ahead. Promptness of data is much im

scientific way. If central banking cannot become
a science, it almost certainly will approach more

proved, a vital development in view of lags in
monetary policy. In the future, use of computers

closely to one.

may so speed and reduce the burden of data
collection that information on the state of the

Knowledge

economy may be available to decision-makers

As he becomes more scientific, the central banker

almost simultaneously with events giving rise to

will gain more knowledge to plug into his

the data.

method. Some aspects of this broader knowledge

With better information will come improved

have already been suggested, but exploring fur

techniques for implementing policy. Partly be

ther into the nature of it may enable us to

cause this has been an area in which great prog

visualize more clearly where progress may take

ress has already been made, however, further

place. Conant has distinguished between two

advances may be limited for a time. Techniques

types of knowledge: what he calls accumulative

have outrun understanding. This often happens

knowledge in branches of learning such as the

— “ The practical arts at first run ahead of the

natural sciences; and knowledge in such pur

science . . .” 10*But this atomic-age generation has

suits as philosophy, poetry, and the fine arts.9

thoroughly absorbed the lesson that pure theory

Natural scientists build on the work of those

can yield very practical results, and one evi

who have gone before. In the process they learn

dence of this is the fact that R & D has become

more about the nature of the universe; and so

the password to corporate growth. Improved

science progresses. The test Conant suggests

techniques of monetary policy will come, but

would be to bring Galileo or Newton back to

they will come sooner as economists develop a

earth to view the present scene. There is no ques

more complete monetary theory.

tion that they would regard the present state of

In the other area of knowledge— that similar

knowledge as an advance over their own. But

to the creative arts— it may be hard to discern

it might be far otherwise with Dante or Thomas

forward momentum in the same sense. This is

Aquinas.

a much more subjective matter. The recent past

Just as scientists accumulate knowledge as

suggests an illustration. Until the Great Depres

they progress toward a better understanding of

sion, what has been called “ the Spartan doctrine

the universe, central bankers will accumulate

of laissez faire” to some extent influenced think

knowledge of how the economy works and how

io Ibid., p. 36. Although far from perfected, open market
operations, for example, are conducted with considerable
finesse and technical proficiency. Yet economists' knowl
edge of the linkages among the variables affected—reserves,
9
James B. Conant, On Understanding Science (New interest rates, bank portfolios, and the like—is still very
limited.
York: The New American Library, 1951), p. 34.

to influence it. One of the most obvious ways in

business review

ing of many people.11 Purging the economy of

ducible to simple rules. If there ever was a time

excesses, while unpleasant and painful, was seen

when monetary policy could focus on a fixed rate

necessary from time to time. Although this atti

of growth in the money supply, for example, that

tude still exists to some extent, it has been

day seems likely to become increasingly remote.

greatly softened by the tragic experience of the

More importantly, rules, whether simple or

1930’s, and the goal of full employment is a re

complex, will be inappropriate because of the

flection of the humanizing of society’s attitude

rapidity of change. In the past, it has been

toward economic problems. In this sense, goals

change which has forced abandonment of rules.

of monetary policy have become more “ human”

In the future, change could make a rule ob

as well. But to say that this constitutes a forward

solete virtually as soon as adopted. A discre

step is to call forth a subjective ethical judg

tionary posture is not one of capriciousness or

ment. With all the advances that lie ahead, it

expediency, but one that permits adaptation to

may well be impossible to say, fifty years from

change as it takes place.

now, that attitudes, goals and values are any
“ better” than those of today.

The evolution of Federal Reserve policy from
rules to discretion may perhaps take a new turn.
Up to now, it has occurred mainly within the

Discretion

framework of general credit control. The ra

In a world of innovation and change, the cen

tionale has been a philosophy of minimum inter

tral banker of the future will need wide latitude

vention in markets. But over the years society

for the exercise of discretion, freedom to make

has changed its idea of what constitutes inter
vention. The establishment of the Federal Re

new decisions under new conditions.
One entire chapter in the history of monetary

serve itself marked a major intervention, and

policy could tell of the establishment and aban

since that time the public has become more

donment of rules which limited the use of dis

tolerant of— frequently has insisted on— various

cretion. The gold standard and the principle of

forms of intervention. It seems possible, there

self-liquidating commercial paper are perhaps

fore, that the concept of free markets will be

the most outstanding examples. This is not the

viewed in a different light by the time the Fed

place to argue the appropriateness of such rules

eral Reserve is 100 years old. And as a result,

in their time; the point here is rather that such

the future central banker may feel more in

rules will become more and more inappropriate.

clined to devise new instruments and techniques

One reason is the increasing complexity of the

to deal with particular problems in selected sec

economy. Hopefully, with improved knowledge,

tors of the economy.12

economists will be able to construct models that
can explain the behavior of the economy, and

Decision-making

the central banker can formulate decisions more

The human mind is constantly outsmarting it

scientifically on the basis of these models. But

self. It keeps devising solutions that raise new

to be accurate, the models will need to be ex

12 The current “operation twist,” designed to promote
economic growth and at the same time protect the nation’s
balance of payments, is an example of the subtlety with
which instruments can be used to achieve results in differ
ent parts of the economy. By influencing the short and long
segments of the maturity structure in different ways, the
operation assumes a credit market that is certainly less
than completely free and fluid.

tremely complex; they are unlikely to be re11
First Annual Report to the President by Council of
Economic Advisers (Washington: U.S. Government Printing
Office, December, 1946), p. 10.

business re v ie w

problems. One benefit is that society advances in

Since central banking will share the com

the process; but one penalty is that problems

plexities, change, and innovations of society in

soon become too great for any single mind to

the years ahead, it too will be better conceived

solve. And so we live increasingly in an age of

and executed if it is a product of pluralistic

specialization— as the. saying goes, learning more

decision-making. The very existence of a central

and more about less and less.

bank is testimony to the fact that control over

This trend certainly is not going to be re

money and credit cannot be dispersed or decen

versed; tomorrow’s complex problems will re
quire even greater specialization. As the division

tralized. But this is all the more reason why the
process of exercising that control should be a

of knowledge proceeds further and further, prob

group process.

lem-solving will become increasingly a matter

This process has deep roots in the Federal

of team effort. In the sciences, in business,

Reserve System. It was embodied in the original

and in the professions, fewer and fewer break

Federal Reserve Act and, despite some centrali

throughs will be accomplished by individuals,

zation of power since then, remains at the core

more and more by groups. Complexity will re

of the System’s being. So the principle of plural

quire group action for another reason: the risks

istic decision-making is not new to the Federal

of making the grand error are greater if decision

Reserve.

making is overcentralized.

What coming years may add to it is greater

But these are, in a sense, negative reasons for

efficiency. With all its advantages, the process

pluralistic decision-making. A positive argument

now tends to be slow-moving. Given the high

is simply that it produces better results. “ It

stakes involved, this has its merits; better to

would be hard to overemphasize the importance

move slowly but carefully than quickly but er

of pluralism in helping a society to escape the

ratically. In the future, improved knowledge

cycle of growth and decay. The ever-renewing

should help to speed the process. Differences in

organization (or society) is not one which is

judgment are healthy, but not if produced by

convinced that it enjoys eternal youth. It knows

inadequate knowledge. In addition, it may be

that it is forever growing old and must do some

possible to use new techniques— operations anal

thing about it. It knows that it is always produc

ysis, probabilistic decision rules, simulation, and

ing dead wood and must, for that reason, attend

other techniques yet to be discovered— to arrive

to its seedbeds. The seedlings are new ideas, new

at decisions. With more knowledge and new

ways of doing things, new approaches. If all

techniques, the full potential of the pluralistic

innovations must pass before one central deci

process should be more nearly realized.

sion point, they have just one chance to survive
and a slim one at that. In an organization with

Political environment

many points of initiative and decision, an inno

According to the dictionary, the origin of the

vation stands a better chance of survival; it may

word “ political” is the Greek “ politikos,” mean

be rejected by nine out of ten decision makers

ing “ of the citizens.” The central banker of the

d accepted by the tenth. If it then proves its
, the nine may adopt it later.” 13
■j.

13 John W. Gardner, Self-Renewal: The Individual and the
Innovative Society (New York: Harper & Row, 1964), p. 68.

future need not be a Greek scholar to have a
sense of this broad meaning of the word; he is
likely to be closer to the citizen than ever before.

business re v ie w

The Federal Reserve System from the start

process, the lines between the monetary au

has been constructed to be responsive to the

thorities and other Government officials respon

people. Created by Congress, with its top officers

sible for economic policy may to some extent

appointed by the President and confirmed by

become blurred.

the Senate, it is— despite vestigial evidences of

At the same time, advances in fiscal and debt

private interests— truly a public institution. And

management policies hold much promise for

although its outward form may be altered in

reinforcing monetary policy. As matters now

surface detail over the next fifty years, it cannot

stand, because of its inflexibility fiscal policy

be made any more public in spirit than it is now.

has realized only a fraction of its potential for

But with advances in education and communi

stabilizing the economy. In coming years, the con

cation may come a somewhat different relation

tribution it can make may be more generally ac

ship between the central bank and the public.

cepted and techniques may be developed to make it

The unfortunate tendency throughout history for

more flexible. And so the lines between monetary

money to get out of hand sometimes tended to

policy and other policies of Government, espe

thrust the central bank into a sort of trustee

cially fiscal and debt management policies, also

relationship vis-a-vis the public— in a sense put

may become increasingly blurred. All this will

ting the central bank in the role of protecting

strengthen, not weaken, the hand of the Federal

the public against itself.14

Reserve and the efficacy of monetary policy.

As the level of education and economic liter
acy rises, however, the average citizen will be
come increasingly aware of monetary policy and

In conclusion
How old is fifty? According to life expectancy

what it is trying to do; he will recognize his

tables, not so old as it used to be. Compared

own stake in stable prices as well as full employ

with the 270-year-old Bank of England, the

ment. The relationship between him and the cen

Federal Reserve System is a mere stripling. In

tral bank may be less that between beneficiary

the last analysis, an organization, like any indi

and trustee, more that between informed persons

vidual, is only as old as it feels.

cooperating to achieve common objectives.
This might mean, in turn, a subtle change in

“ Every individual,

organization

or society

must mature, but much depends on how this ma

the Federal Reserve’s position within Govern

turing takes place. A society whose maturing

ment. It is too much to expect that the monetary

consists simply o f acquiring more firmly estab

authorities and other Government officials will

lished ways of doing things is headed for the

always act wisely or see everything eye to eye.

graveyard— even if it learns to do these things

Yet it may not be too utopian a view that a

with greater and greater skill. In the ever-re

better understanding citizenry will produce bet

newing society what matures is a system or

ter public officials. And with a more sophisticated

framework within which continuous innovation,

public as their common denominator, these offi

renewal and rebirth can occur.” 15 In the world

cials may tend more often than not to work in

of rapid change ahead, the challenge is to com

harmony toward their common goals. In the

bine the vigors of youth with the strengths of

14 It has been said that the Federal Reserve is in the
position of the chaperone who is always removing the
punchbowl just as the party is getting good.

maturity.

is Gardner, op. cit., p. 5

THE TOIL AND TURMOIL
OF URBAN RENEWAL
In ancient days, said China’s Lao-Tze in the O th ^ p tu rf B.Cifirnen lived in peaceful rural simplicity.
Then men attained knowledge, wrote books, cW i^ ^ ^ ^ f^ ^ ^ ^ jJ ^ m v en tio n s, anjLjnoved from the
fields into cities. Hence all th)e misery of men^fJ ^

Like the elephant which six blind men of Indo-

and the honking o f impatient motorists. The

stan went to “ see,” urban renewal casts many

city is also where one goes to enjoy Van Cliburn

different images. One person sees it as metro

at the piano, Ormandy on the podium, Fonteyn

politan rejuvenation to make cities more livable.

in the ballet, or Willy Mays in center field. In

Another is impressed by its displacement of

addition to the performing arts a city offers a

people. Still others are struck by its slow prog

cultural smorgasbord of art galleries, libraries,

ress, its diverse objectives, its high cost. Differ

museums, and a variety of educational, scientific,

ences of opinion are inevitable in an undertak

and philosophic organizations affording fruitful

ing with the dimensions and complexities of

opportunities to enrich hours of leisure.

urban renewal.

For millions of citizens, the city is home in

A city is a mass of humanity cooped up in a

the fullest sense of the term— a place to live, to

mass of masonry. The city is where the tumult

work, to play, to go to school. Many city dwellers

is— a clatter and a chatter of multitudes on the

are transfers from farms or villages; more and

sidewalks, a screech of rubber on asphalt, the

more, however, are city born and city bred. They

shriek of a fire engine, the rumble of a subway,

love the city where there is always something

a Fourth-of-July parade, a five-o’clock stampede

going on; they loathe the countryside, dull and

to the suburbs, a shooting in a side-street saloon,

dead. Nocturnal orchestration of crickets and

business re v ie w

peepers would annoy urban sleepers, but not

assembling the parcels of multiple ownership

motor trucks thundering through the streets.

into a sufficiently large tract to justify a restora

Urbanization is a product of our business

tion project.

Almost always such plans are

civilization, our commercial and industrial econ

thwarted by a “ holdout” or two. A second ob

omy. Seventy per cent of the country’s popula

stacle is the discouragingly high cost. Efforts to

tion occupy 1 per cent of the land area. The

assemble land for a renewal project are likely

heaviest concentration is in 219 metropolitan

to touch off speculative inflation of land values;

areas, each of which has as its nucleus a city of

and old buildings, howsoever dilapidated, have

50,000 population or more.

some value which becomes a significant item in

Urban concentration has its advantages but

the cost of new construction.

it also has its vexations. Familiar to everyone

Remedies for these two basic obstacles to pri

are: the traffic congestion in city center brought

vate restoration of slums were sought, therefore,

on by the widespread preference for personalized

in state enabling legislation and the Federal

transportation, the shortage of downtown park

Housing Act of 1949 under which a community

ing space, the decline of mass transit, the smog,

acquires and assembles properties in slums, using

the strain on water supply, the pollution of

the power of eminent domain where necessary.

streams and the expense of sewage disposal, the

Local and Federal governments pay the net cost

exodus of urban population into ticky-tacky

of renewal, which is the difference between the

towns, the influx of minority groups and their

cost of acquiring and clearing slum properties

socio-economic segregation in residential ghettos,
the deterioration of certain commercial, indus

and the income received when the land is sold

trial, and residential areas of the city, the decay

The so-called writedown is not intended to be a

of downtown business districts, shrinkage of the

subsidy to the private redeveloper, who must pay

tax base, skimpage of municipal services, un

a fair value for the cleared land, but is a cost

willingness of suburbs to merge with the city—

of slum clearance. In some states such as Penn

in short, metropolitan muddles, 219 of them.

or leased for public or private redevelopment.

sylvania, there is a modest contribution to the
net cost of renewal.

How urban renewal got started

Subsequent amendments to the Act raised the

Urban renewal had its legal origin in the enact

sights and broadened the horizon. In addition

ment of state enabling laws, some of which date

to slum clearance, provision was made for con

back to 1944. Almost every city has its areas of

servation and rehabilitation of areas that do not

rundown residential properties that have degen

require demolition. Furthermore, provision was

erated into unsightly and unsanitary “ shanty

made for assistance to hospitals and urban col

towns”

unfit for human habitation. Once a

leges and universities to achieve needed expan

neighborhood reaches that stage of degeneration

sion and to cope with blight encroaching on

and decay, the contagion may spread further.

their doorsteps. Above all was the realization of

Blight often begets more blight, and private enter

the need for Federal aid to revitalize the eco

prise may be powerless to rebuild.

nomic base and taxable resources of cities. Slums

Obstacles to restoration by private enterprise

are not confined to residential areas of cities.

are basically twofold. First is the difficulty of

There are also commercial, industrial, educa

business re v ie w

tional, and recreational “ slums.” Thus the con

proved by the Urban Renewal Administration,

cept of slum clearance was broadened to make

Federal assistance is made available in a loan

Federal aid available to cities in need of com

and grant contract in which the local agency

prehensive urban renewal.

bears one-third of the net project cost and the
Urban Renewal Administration, two-thirds. For

How urban renewal works

cities of 50,000 population or less, the cost-shar

Urban renewal works best when there is compe

ing is one-fourth local and three-fourths Federal.

tent leadership at the local level, and the wider
the degree of local participation the greater the

Larger cities may also qualify for three-fourths
Federal matching funds if they absorb certain

success. The Federal role is largely one of fi

planning costs.

nancial and technical assistance.

The Housing Act of 1961 permits the Federal

To qualify for Federal aid, a locality must
establish a so-called Workable Program

Housing Administration and the Federal Na

for

tional Mortgage Association (Fannie Mae) to

Community Improvement. Such a Program must

join in a program of mortgage insurance and

have the following basic elements:

purchase to make more moderate rentals possi

1. Codes and ordinances establishing ade

ble. Long-term loans below market interest rates

quate building standards of health and safety.

can be made to nonprofit organizations and co

2. Detailed neighborhood analysis to identify

operatives, limited dividend corporations, and

the nature and extent of the area in need of

certain public agencies to build housing for

restoration.

people of moderate incomes. To facilitate the

3. Formulation of a comprehensive plan for
the community’s future development.
4. Administrative organization with authority
and responsibility for coordinating and carrying
out a Community Program.
5. Evidence of adequate financial resources

most reasonable rents or carrying charges, FHA
waives its usual */£ per cent insurance premiums
and insures loans for as long as 40 years.
Actual operations usually begin with acqui
sition of properties. In most instances, titles to
the parcels are obtained by negotiation with the

to support the local share of an urban renewal

owners, and court condemnation proceedings

program.

are used only as a last resort. In all cases, local

6. Provision of housing to meet the needs of
families displaced by the renewal project.
7. Assurance that the entire community is
fully informed and is given an opportunity to
participate in the development and execution of
the program.

agencies are expected to assist displaced people
and businesses to find suitable relocations. The
relocation, of course, is seldom satisfactory in all
respects to the family or business relocated.
Removal of structures and clearing the land
is generally done under contract with a private

Depending upon state-enabling statutes, the

contractor who, in some instances, may lay out

local public agency may be a department of the

the streets and other improvements. Meanwhile

city government or a special agency appointed

the city installs the necessary public facilities.

by the mayor with, or, as in Philadelphia, with

When the land is ready for development it is

out the approval of City Council, After the local

publicly advertised and new construction takes

public agency’s plans are completed and ap

place in accordance with the established plan.

business review

PARTICIPATION IN URBAN RENEWAL PROGRAM, JUNE 30, 19641

Where urban renewal works

California. In some communities the need for

The Federal Urban Renewal program is nation

renewal may arise from the nature of its indus

wide. An indication of its scope is the growing

tries; in others it may be overcrowding or ob

number of communities participating. From 31

solescence and over-age of private and public

communities with renewal projects at the end

facilities.

of the Urban Renewal Administration’s first

Urban renewal is taking place not only in

fiscal year in 1950, the number has grown to

most parts of the country but also in all kinds

743 as of 1964 at midyear. The 743 localities

of communities. Large cities were among the

participating are distributed among 42 of the

first to take advantage of Federal assistance to

50 states, the District of Columbia, the Common

replace their blight-stricken residential and in

wealth of Puerto Rico, and the Virgin Islands.

dustrial areas with modernized construction.

Moreover, five of the eight states without lo

Subsequently, communities of medium and small

calities participating in urban renewal have en

size followed, as shown in the chart. By 1964,

abling legislation, as shown in the map.

over half of the localities participating in urban

Pennsylvania, with renewal projects in 85

renewal were in communities of less than 25,000

localities, and New York in 66, are in the fore

population. Of course, well over half of the

front of urban renewal. Other states with rela

country’s communities under 25,000 population

tively large numbers of communities engaged in

are still untouched by urban renewal, though

renewal are New Jersey, Michigan, Georgia, and

many of them have blighted areas.

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LOCALITIES PARTICIPATING IN URBAN RENEWAL
PROGRAM BY POPULATION SIZE
GROUP, FISCAL YEAR 1953-19 5 8-1 96 4

Congressional authorization of $4 billion for

NUMBER OF LOCALITIES

sition and redevelopment, approximately 129,000

urban renewal grants had been utilized, almost
30,000 acres of land had been slated for acqui

743

structures had been demolished, and 157,000
families had been relocated from blighted areas
undergoing renovation. Of the families relocated,
46 per cent, according to reports of participat
ing agencies, went into standard private rental
housing, about 21 per cent into standard sales
housing, and about 25 per cent into public hous
ing. The remainder— approximately 8 per cent—
FISCAL YEAR

Source: Urban Renewal Admihistration.

relocated themselves into quarters that did not
conform with minimum standards of safety and
sanitation. The latter did not avail themselves

How urban renewal has grown

of the relocation services offered by the local

Over 1,300 urban renewal projects had been

agencies established for that purpose.

started as of mid-1963. The chart, “ Urban Re

Substantial progress has also been made in

newal Projects by Status,” gives an over-all pic

the expanding conservation program focusing

ture of the growth of urban renewal since its

on rehabilitation of urban properties capable

inception, showing progress in the successive

of restoration without demolition. Most cities

stages— planning, execution, and completion of

have some forlorn-looking properties, unhinged,

projects. It is not surprising to see the large gap be

unpointed, unpainted, and covered with the silt

tween planning and execution in the early years

of time. Such buildings, too desolate for habita

because of the long lead time required for all the

tion but too good for condemnation, can be

detail work of planning that must be done before

prime material for urban renewal’s salvage pro

wrecking crews can begin demolition, and also

gram. Over 45,000 structures and 107,000 dwell-

because of the scale of development. In 1958,
for the first time, the number of projects under
sledge hammer and trowel exceeded those in the

URBAN RENEWAL PROJECTS BY STATUS,
1950-1963
NUMBER OF PROJECTS

paper-work and blueprint stage. Now project
completions are mounting. By the end of fiscal

I UU ~

1963, over 100 projects had been completed,

600-

and numerous others were nearing that stage.

500-

□
I

I ,

I PLANNING

EXKUTION
|CLOSED-OUT (FINAL FEDERAL GRANT PAYMENT MADE)

With many renewal projects in many com
munities still in various stages of advancement,
it is difficult to comprehend the over-all ac
complishments of the Urban Renewal Program,
but it may be helpful to cite some benchmarks
of progress. Through June, 1963, most of the

FISCAL YEAR END

Source: Urban Renewal Administration.

business review

ing units have been selected for restoration and

to the cooperative efforts of numerous organiza

by June, 1963, work had been completed on

tions and civic-minded individuals in both public

more than 17,000 structures, including more

and private life. Not content to wait for Federal

than 25,000 dwellings.

aid,

local

businessmen

organized

themselves

into a Citizens Council on City Planning. The

Urban renewal in Philadelphia

Redevelopment Authority was created by City

Philadelphia is frequently cited, by unbiased

Council in 1945, and the same year, Pennsyl

outsiders, as a model of urban renewal. If the

vania passed the Urban Renewal Law. A new

city deserves the tribute it may be a Toynbeean

City Charter broadened the legal base for re

example of stimulus and response, for the city

newal activities. Comprehensive over-all plan

was in dire need of revitalization when urban

ning began with the formation of the City Plan

renewal was begun.

ning Commission. Among other participating

For many years, historic old Philadelphia

agencies were the Housing Authority, Parking

just drifted with the times until it had little dis

Authority, Passenger Service Improvement Cor

tinction other than being old and historic. Then

poration, Industrial Development Corporation,

came the great depression of the thirties and the

the Greater Philadelphia Movement, and the Old

neglect of the war years. At the end of World

Philadelphia Development Corporation.

War II, Philadelphia no longer looked like a

With so many organizations, one might sup

first-class city. It was shabby, jaded, and frowzy.

pose there would have been overlapping of au

In numerous residential areas row houses had

thority and working at cross purposes. On the

degenerated into slums, ancient watermains were

contrary, all groups worked together and with

breaking and flooding streets, trash was col

the reform administration that came into City

lected in horse-drawn open vehicles and hauled

Hall in 1952, thoroughly dedicated to lift Phila

to a dump in the south end of town where it

delphia out of the doldrums. The new adminis

was burned. The city’s rivers were clogged with

tration appointed an able Development Coordina

industrial waste, silt, and sewage. Even center

tor, enlarged the authority of the Planning Com

city was afflicted with blight. Ancient structures

mission, and broadened the scope of renewal not

abounded, and vacant spaces once occupied by

only to clear slums but also to blot out the blight

buildings left rubble and ugly emptiness between

in central city right under the nose of William

unsightly party walls.

Penn atop City Hall.

Like the earlier out-migration of elite citizens

The crowbar and spade work in center city

to the green countryside, stores moved to the

began when the Pennsylvania Railroad removed

suburbs and industries deserted the city, with

its old Broad Street Station and the mile-long

consequent shrinkage of the urban tax base. As

elevated tracks familiarly known as “ the Chinese

in other cities, the growing preference for com

Wall.” That opened the way for construction of

muting by private automobiles caused great

the ne\y Penn Center, consisting of a nine-build

congestion and left public transit facilities with

ing complex of modern offices, transit and bus

falling revenues in the face of rising costs.

terminals, hotels, shops, restaurants, underground

The origin of urban renewal in Philadelphia
and its sustaining motivation may be attributed

concourses,

sunken

gardens,

and

pedestrian

malls. This better-than-SlOO million inner-city

business re v ie w

improvement now nearing completion has given

open space. Morton is an example of this type

the city an entirely new image, justifiably re

of public housing. The other was greater effort

ferred to as a renaissance— but it is only the

in salvaging substandard housing capable of re

heart of the new birth.
East of Washington Square and not far from

habilitation. In the Haddington area the Phila
delphia Housing Authority bought old houses,

refurbished Independence Hall with its new Mall

rehabilitated them for public housing, and turned

and other historic Philadelphia buildings is the

them over to needy families. Mill Creek in West

Society Hill redevelopment. Society Hill has
nothing to do with High Society, nor is it on a

Philadelphia, Whitman in South Philadelphia,

hill. It was named for an early commercial

ples of conservation and rehabilitation under

group known as the Society of Free Traders.

the Redevelopment Authority program.

and Nicetown in North Philadelphia are exam

Here substantial progress has already been made

Eastwick in southwestern Philadelphia is the

in converting several hundred old residences,

city’s largest single project. In terms of acreage,

long neglected, into town houses with retention

it is the biggest renewal project in the country.

of their Colonial architecture. Overlooking the

Eastwick was formerly a 2,500-acre seedy and

restored Colonial houses are three multistory

weedy wasteland with residential structures un

apartment towers built on the site of the old

fit for human occupation. Renewal plans there

Dock Street produce market, which is now

called

housed in the new Food Distribution Center on

houses originally built are occupied or sold.

South Broad Street. Both the new and renovated

Owing to the huge size of the project and some

for

integrated

development.

The

new

units in Society-Hill offer atmosphere and amen

unforeseen obstacles, progress has not come up

ities designed to make urban living appealing.

to earlier expectations, but occupants are again

In Philadelphia, as elsewhere, slum clearance

moving into new homes as they reach comple

was the original objective of redevelopment and

tion.

it has been a continuing objective, though the

Thus far, slum clearance in Philadelphia has

methods of procedure have changed with experi

already removed 8,500 blighted structures and

ence. With the typical American penchant for

more are slated to go, under the more than 50

getting things done, the bulldozer technique of

renewal projects in various stages of progress.

slum clearance was used at the outset. That was

The City Planning Commission has among its

the method used in the early 1950’s but the re

objectives under study an eight-block-long Mar

sults were disappointing because the people dis

ket East project extending from City Hall to

lodged from the old slums just moved to the

Independence Mall. This is to consist of a huge

edges of the area, creating new slums. The

terminal linking rail and rubber transportation

frustrating experience pointed up the fact that

media, providing parking facilities and pedes

slum dwellers were low-income people who just

trian concourses lined with shops. The under

could not afford the new residences.

lying purpose of the Market East project is to

Progress toward the solution took two dif

bring shoppers back to town to stores that can

ferent approaches. One was new public hous

compete with the elegant shops that have sprung

ing on cleared sites scattered in small groups

up in the suburbs.

throughout the area, with ample provision for

A major urban renewal development is Uni

business review

versity City in West Philadelphia. There, five

severest critics maintain that urban renewal is

institutions: University of Pennsylvania, Drexel

a failure and should close shop.

Institute of Technology, Presbyterian Hospital,

Probably the most serious of these indictments

College of Pharmacy and Science, and Philadel

is the removal of people and businesses prepara

phia General Hospital have gone together to

tory to slum clearance by exercise of the power

form

of eminent domain.

the West

Philadelphia

Corporation

Though

upheld by the

create a comprehensive educational, science and

courts, the process is criticized as an arbitrary

research center. For at least a quarter of a cen

infringement upon the rights of the dispossessed

tury these institutions have been hampered in

families. In answer to the charge, the Urban

their growth by seriously blighted conditions in

Renewal Administration points out that as a

their immediate surroundings. The Philadelphia

prerequisite for Federal assistance a local agency

Redevelopment Authority has been able to take

must provide decent, safe, and sanitary housing

advantage of the grant-in-aid credits created by

for dispossessed families, and provision is made

the University of Pennsylvania’s property acqui

for follow-up of all those required to move. Of

sition program, and with city and Federal con

families being moved currently in Philadelphia,

tributions has energized a redevelopment effort

for example, 96 per cent are successfully relo

of far-reaching potentialities. The Science Cen

cated to safe and sanitary housing. Some inevita

ter, involving expenditures of $80 million over

bly relocate without seeking assistance of the

the next eight to 10 years, is estimated to create

relocation office. A prominent builder operating

5,000 new jobs and to increase educational,
medical, and research activities of inestimable

in a number of urban areas points out that
virtually the only direction that slum evacuees

value to metropolitan Philadelphia and to the

can move is up.

state.

Slum clearance is the most vulnerable spot
of urban renewal and there is where the sharp

Urban renewal’s sidewalk superintendents

est shafts are hurled. The reason for the dis

Urban renewal has recently encountered a spate

appointing progress in slum clearance is the in

of criticism from

sidewalk superintendents—

ability of the private housing industry to build

professional and amateur. Urban renewal is

houses that low-income families can afford. The

criticized for its architecture, its overemphasis

Housing Act offers financial aid in making up

upon bricks and mortar, its failure to eliminate

part of the difference between the cost and re

slums, its bulldozer tactics and displacement of

use value of sites, commonly called the land

people, its snailpaced progress and alleged lack

write-down. But the value of land is only a small

of clearly defined objectives.
It is asserted that urban renewal legislation is
ill-conceived, that the central administration is

fraction of the monthly rent or purchase price.
Newly built housing, therefore, is seldom within
the means of the lowest income groups.

too paper-bound, that local agencies formulate

Some progress toward a solution of this basic

their petitions to Washington more in terms of

difficulty has been made under the Mitchell-Lama

money than ideas, that city planners are “ blue

program in New York City. The essence of that

sky,” that slum dwellers get pushed around, and

program is a 50-year municipal loan up to 90

that blight grows faster than its eradication. The

per cent of development costs at low rate of in

business re v ie w

terest plus a 50 per cent tax abatement for a

complex capitalizing on the city’s vast lakescape.

fixed number of years. Under such a plan it is

In like manner, St. Louis is making the best

possible to replace slums with satisfactory hous

of its Mississippi River waterfront formerly

ing for low-income families.
An entirely different program inaugurated by

dominated by weatherbeaten warehouses. A 630foot Gateway Arch, symbolic of westward ex

the Ford Foundation concentrates on renewal

pansion also symbolizes the city’s urban mod

of urban people— the families who live in the

ernization.

“ gray areas” of cities. Grants have been made

San Francisco’s Golden Gateway apartment-

to 41 slum schools as focal points for projects

town-house project and the half-billion-dollar Cen
tury City in Los Angeles are among the outstand
ing renewal developments on the West Coast.

designed to improve the educational and em
ployment opportunities of disadvantaged groups.
The underlying basis of the experiment is the

In all of these cities as well as in Baltimore,

conviction that social planning must accompany

Norfolk, Nashville, Minneapolis, and many oth

physical planning.

ers the stamp of urban renewal is the vastly

The problems of substandard housing, health,

improved appearance of their downtown busi

and sanitation, school drop-outs, unemployment

ness districts. Gone are the solid rows of ancient

and crime are all so closely related to each other

buildings with dirty faces. The new center-city

and of such tremendous magnitude that now,

look sports more open space, more glass, more

for the first time, a Federal Anti-Poverty Pro

class.

gram has been devised to deal with them in a
comprehensive manner.

One of the best ways to strengthen the eco
nomic base of a city is to spruce it up with mod
ern architecture, utilizing new building mate

Urban renewaPs accomplishments

rials and new ideas as reflected in the handiwork

Urban renewal has instilled new life in Ameri

of numerous urban-renewal re-creations. This

can cities from coast to coast. In the heart of

stimulates new private investment, attracts new

Boston, which was as bad as if not worse off

industries, keeps some of the older ones that are

than Philadelphia, a multi-million-dollar Gov

flirting with the idea of moving elsewhere. An

ernment center of Federal, state, and private of

old-line Philadelphia firm of considerable size

fice buildings is replacing a 60-acre slumdom.

and prestige that had been “ looking around”

An insurance building resembling a tall boat

joined the renaissance with a magnificent struc

in drydock is the eye-catcher of Hartford’s Con

ture of its own. Urban renewal has far-reaching

stitution Plaza built on reclaimed land alongside

generative effects.
In reply to a critic bemoaning urban re

the Connecticut River.
One of the most amazing transformations is

newal’s burden on the city treasury, William

Pittsburgh’s Golden Triangle— a family of sleek

Rafsky, a leader in the Philadelphia program,

skyscrapers

what formerly looked

points out that “ civic improvement programs

like the junkyard of a steel mill at the source

have resulted in an increase in assessments, re

of the Ohio River.

versing a trend of declining real-estate values”

occupying

Cleveland’s Erieview Plaza Building is the
showpiece of a quarter-billion-dollar renewal

and that “ they have made possible civic serv
ices with no recent tax increase.”

business re v ie w

Urban renewal adds immeasurably to the

the worst aspects of urban living are now being

amenities of urban living in such developments

remedied with Federally aided renewal efforts

as Lincoln Center, the Golden Triangle, and the

planned and executed by local agencies. Much

Golden Gate. With the continuing concentration

of the criticism of urban renewal is based upon

of population in metropolitan areas there is a

mistakes made in the early years of the program,

growing need for more cultural facilities. More

and urban renewal frequently gets blamed for

over, the variety and quality of such facilities

things outside its jurisdiction— such as prop

play an important role in attracting industries

erty condemnation for construction of highways

with large complements of scientific and research

and other improvements. This is not to say that
urban renewal has achieved perfection, but the

personnel.
In former generations, cities took great pride

program is making a commendable contribution

in citing their rates of population growth from

toward better urban living. “ In our urban areas,”

one Census enumeration to another. They seemed

said President Johnson, “ the central problem

to be oblivious to the accumulation of problems

today is to protect and restore man’s satisfaction

generated by the very process of growth until

in belonging to a community where he can find

conditions became intolerably acute. Some of

security and significance.”

NEW RELEASE
Forecasts for 1965. The Department of Research has com
piled and analyzed a number of predictions made by business
men, economists, and Government officials. This compilation
includes a summary of forecasts for the economy as a whole
and particular sectors of the economy. The more important
indicators are presented in chart form.
Copies of this release are available on request from Bank
and Public Relations, Federal Reserve Bank of Philadelphia.

1964: THE
EXPANSION
THAT
WOULDN’T DIE
Bears got burned in ’64. They watched the busi

A statistical profile of 1964 makes very pleas

ness expansion celebrate its third birthday early

ant viewing. Americans produced $623 billion

in the year and decided its death was imminent;

of goods and services, an increase of 7 per cent

peacetime expansions typically ran about 30 to

over 1963. The consumer price index rose a

36 months, they said, settling in for the cold

modest one per cent, while the wholesale price

downswing. But the present business expansion

index continued steady around 1957-59 levels.

has not fit into the mold of past business up

Business capital spending rose to almost $45

swings. Instead of slowing down in 1964, the

billion and seems destined for an annual rate of

economy gained momentum, and most observers

$48 billion in the first three months of this year.

predict this momentum will continue in 1965.
Indeed, the economy seems to have strength
ened its underpinnings in the year just ended.

Expansion of productive facilities has increased
demand for workers in many industries, provid
ing an additional stimulus to growth.

Especially significant was the rise in output ac

Two major problems remained unsolved how

companied by relatively stable prices. The econ

ever— unemployment and imbalance in our inter

omy was also strengthened by an intangible:

national accounts. Unemployment declined to

confidence. It was a confidence born of positive

about 5 per cent of the labor force at year’s end.

expectations and bred in moderation. The man-

Lowering this figure in 1965 will be particularly

in-the-street was confident prosperity could be

difficult because young persons entering the labor

sustained; confident his job was secure. The

force are expected to number approximately

businessman was confident demand for his prod

500,000 more than in recent years.

uct would continue strong; he produced record

On the balance-of-payments front, some prog

quantities of goods, but maintained relatively

ress was made in the past year. The deficit on regu

low inventory-sales ratios. Consumers bought

lar transactions is expected to decline from the

large quantities of almost everything; but their

$3.3 billion recorded in 1963, due in part to pros

eyes did not grow dangerously larger than their

perity abroad and stable domestic prices, both of

pocketbooks.

which stimulated exports of American products.

business review

Passage of the Interest Equalization Tax on

while strengthening our international accounts.

foreign securities also contributed to the improve

The Federal Reserve’s policies have been carried

ment in our payments position.

out in such a way as to help maintain short-term

Public policy in ’64: taxes, money and
credit

abroad, while letting long-term rates stay rela
tively low and encouraging the flow of funds

In the year just ended, Congress took a historic

through the mortgage and capital markets as a

interest rates reasonably competitive with those

step toward using fiscal policy as an economic

spur to domestic business. These policies are

tool when it authorized a two-stage reduction in

popularly called “ Operation Twist.”

personal and corporate tax rates. Designed to

The actual behavior of interest rates and in

stimulate further growth and employment, this

vestment flows in the year just ended came en

cut increased private spending power when, if

couragingly close to matching the policy objec

a normal postwar business cycle had been in

tives of the Fed. Long-term interest rates fluctu

operation, private demand might have weakened.

ated within a narrow range. Rates on long-term

The increased spending which seems to have

Government securities, for example, started the

stemmed from the tax cut helped sustain the

year at around 4.15 per cent, rose modestly to

expansion last year.
Further fiscal innovation may be in the offing

4.15 per cent level at year’s end. State and local

in 1965. In his State of the Union message,

Government securities also closed out the year

President Johnson said: “ Congress can reinforce
this confidence [in the economy] by insuring

at lower rates than in January, as did many cor
porate issues.

about 4.20 in the spring, then settled near the

that its procedures permit rapid action on tem

Meanwhile, new corporate security offerings

porary income tax cuts. And special funds for

from December 1963 to December 1964 exceeded

job-creating public programs should be made

those of the like year-earlier period, as did

available for immediate use if recession threat

business loans at commercial banks and mortgage

ens.” This Executive request for discretionary

credit extended. Latest data further suggest that

fiscal authority was coupled with announcement

state and local governments issued a larger vol

of the President’ s intention to ask Congress to

ume of securities in 1964 than in 1963. The

eliminate certain excise taxes to stimulate fur

money supply also rose— by about 4 per cent in

ther growth and employment. In addition to

1964 compared to a 3.3 per cent annual rate

spurring domestic activity, fiscal policy, it is

since February 1961.

hoped, may also help our balance of payments

Steady long-term interest rates and sizable

by creating an expanding economy with desir

money and credit flows were accompanied in

able investment opportunities for American and

1964 by a gradual firming in short-term interest

foreign businessmen.

rates after mid-year and then by a sizable jump

Monetary policy, too, must be shaped with an

in these rates following the Fed’s November

eye not only on domestic activity, but also on

hike in the discount rate (to 4 from

the balance of payments. On the monetary scene,

cen t). The Board of Governors’ official press

1964 was characterized by the Federal Reserve’s

release said this about the discount rate move:

continuing efforts to stimulate expansion at home

The actions were taken following a rise in

per

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official and market rates in London, where an
increase in the bank rate from 5 to 7 per cent
was announced by the Bank of England today.
They also follow recent advances in rates on the
European Continent.
The Federal Reserve actions were aimed at
countering possible capital outflows that might
be prompted by any widening spread between
interest rates in this country and the higher
rates abroad . . .
Despite the subsequent rise in short rates, the
longer end of the market remained relatively
stable, as already mentioned, and the “ yield
curve” at year’s end bore notable resemblance
to a firm but flat posturepedic mattress.

LOCAL BUSINESS INDICATORS
THIRD FEDERAL RESERVE DISTRICT
PER CENT CHANGE 1963 TO 1964
Em ploym ent (1 2 areas)**
Factory payrolls**
Total production w orker m an-hours**
Electric power consum ed by m anufacturers**
Anthracite coal o utput*
Construction contracts
Residential*
Nonresidential*
Public works and utilities*
Car loadings (Philadelphia region— 52
weeks)
Retail sales, total (excluding national
chains)*
D epartm ent store sales*
Automobile registrations (4 8 counties,
eastern Pennsylvania)**
Bank debits (2 0 cities)*

+
+
-

1.0
1.0
3 .0

+ 8 .0
-1 0 .1
+ 6 .0
- 8 .8
+ 3 1 .9
- 7 .5
-

4 .2

unavailable
for District
+ 10.1
+

6 .5
3 .4

•First eleven months
••First ten months

THE THIRD DISTRICT IN 1964
Business
For the Third Federal Reserve District, 1964

trict’s economic position has improved largely

was a more prosperous year than its predeces

because of the continuing growth of the national

sor. While the District’s growth failed to match

economy. Generally, the District gains momen

that of the nation, there was improvement. Un

tum only after the national economy has em

employment in the District’s metropolitan areas

barked on its upward climb.

was down considerably from 1963, as shown in

District business indicators rose on balance

the accompanying table. The Philadelphia Met

during 1964 led by nonresidential construction

ropolitan Area was removed from the Labor

which rose almost 32 per cent. Residential con

Department’s list of areas of substantial unem

struction contracts and those of public works and

ployment for the first time in four years. But

utilities declined, but the dollar value of all con

several areas continued to show higher unem

struction contracts rose.

ployment than the national average. The Dis-

Department store sales for the first eleven
months rose more than 10 per cent. Automobile

UNEMPLOYMENT IN MAJOR LABOR MARKET
AREAS
THIRD FEDERAL RESERVE DISTRICT
Per Cent of
Labor Force
Unemployed
1.5
3 .0
6 .0
9 .0
1 2 .0

Number of Areas
November
1962

November
1963

1
6
2
3
1
13

2
5
4
2
0
13

to 2 .9
to 5 .9
to 8 .9
to 11 .9
or more
Total

November
1964
2
6
5
0
0
13

registrations were off somewhat from last year,
partially attributable to last-quarter work stop
pages at automobile makers’ plants.
In the manufacturing area, electric power
consumption rose, as did employment and fac
tory payrolls. Total production worker man
hours fell slightly, however. Anthracite coal out
put declined 10 per cent, compared with a 15
per cent increase in 1963.

business review

THIRD DISTRICT BANKING
(millions of dollars)

Reserve City Banks
Loans
Investments
Deposits
Country Banks
Loans
Investments
Deposits

D ecem ber
28, 1962

Decem ber
2 0 , 19 6 3

Change
in 19 6 3

Decem ber
30, 1964

Change
in 1 9 6 4

$2,584
1,037
4,263

$2,794
1,058
4,312

+210
+ 21
+ 49

$3,090
1,057
4,730

+296
1
+418

3,507
2,710
6,446

3,813
2,777
6,765

+306
+ 67
+319

4,081
2,794
7,097

+268
+ 17
+332

Banking

Reserve bank operations

Net loans of Third District reserve city banks

During the year 1964, 112 member banks, about

increased more than 10 per cent in 1964. Net

27 per cent of the total number, borrowed from

loans at country banks rose almost 7 per cent.

the Reserve Bank. The average daily balance

District country banks added securities to their

extended to member banks declined to $5.9 mil

portfolios in the year just ended; reserve city

lion in 1964 from $7.4 million in 1963.

banks liquidated securities on balance.

Collection of checks showed an increase over

Deposits at reserve city banks increased a

1963. In all, more than 244 million checks were

healthy 10 per cent while deposits at country
banks rose about 5 per cent during the year.

cleared, with an aggregate face amount of almost
$73 billion. Transfers of funds and the dollar

Loan deposit ratios at District reserve city banks

amount of currency counted increased over last

remained almost constant at 65 per cent. Loan

year, while coins counted slumped sharply. Some

deposit ratios at country banks rose slightly to

$14.5 billion in marketable securities were de

58 per cent.

livered or redeemed.

DIRECTORS AND OFFICERS

At the election held in the fall of 1964, two new directors were elected by mem
ber banks to serve fo r three-year term s beginning January 1, 1965. Lloyd W.
Kuhn, President of the Bendersville National Bank, Bendersville, Pennsyl
vania, was elected as a Class A director by member banks in Electoral Group
3. He succeeds Eugene T. Gramley. Banks in Group 1 elected Bayard L. Eng
land, Chairman of the Board, Atlantic City Electric Company, Atlantic City,
New Jersey as a Class B director to succeed Frank R. Palmer.
The Board of Governors of the Federal Reserve System redesignated Walter
E. Hoadley as Chairman of the Board of Directors and Federal Reserve Agent
for the year 1965. Willis J. Winn was reappointed as a Class C director fo r an
additional three-year term , and was designated as Deputy Chairman of the
Board of Directors fo r the year 1965. D. Robert Yarnall, Jr., President, YarnallWaring Company, Philadelphia, Pennsylvania was appointed as a Class C
director fo r the unexpired portion of a term which ends December 31, 1965. He
succeeds David C. Bevan, who resigned effective December 31, 1964.
The Board of Directors of this Bank reappointed William L. Day, Chairman,
The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsyl
vania, to serve as the member of the Federal Advisory Council to represent the
Third Federal Reserve District during 1965.
Two officers resigned during 1964 to accept positions in commercial banking.
John R. Bunting, Vice President, became associated on June 1 with The First
Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania, as
Vice President and Economist. Harold E. Ikeler, Jr. accepted an official appoint
ment on August 17 as Auditor of Girard Trust Bank, Philadelphia, Pennsyl
vania.
David C. Melnicoff returned to the Bank following a number of years in
private industry and was appointed Vice President on June 1, succeeding Mr.
Bunting. Effective January 1, 1965, three promotions occurred on the official
staff. Jack P. Besse (Assistant Cashier) and William A. James (Personnel
Officer) became Assistant Vice Presidents; and Lawrence C. Murdoch, Jr.
(Business Economist) became Assistant Vice President and Assistant Secre
tary. Also effective January 1, 1965, two members of the Bank staff were pro
moted to officer positions. Thomas K. Desch (Bank Examiner-nonofficial)
became Examining Officer, and A. Lamont Magee (Assistant General Auditornonofficial) became Assistant General Auditor with official status.

DIRECTORS AS OF JANUARY 1P1965

Group

Term expires
December 31
CLASS A
BENJAMIN F. SAWIN
Vice Chairman of Board and Chairman of Executive Committee,
Provident National Bank
Philadelphia, Pennsylvania

CHARLES R. SHARBAUGH
President, Cambria County National Bank of Carrolltown,
Carrolltown, Pennsylvania

LLOYD W. KUHN
President, The Bendersville National Bank
Bendersville, Pennsylvania

1965

1966

1967

CLASS B
1

BAYARD L. ENGLAND
Chairman, Atlantic City Electric Company
Atlantic City, New Jersey

1967

RALPH K. GOTTSHALL
Chairman of Board and President,
Atlas Chemical Industries, Inc.,
Wilmington, Delaware

1965

LEONARD P. POOL
President, Air Products and Chemicals, Inc.,
Allentown, Pennsylvania

1966

CLASS C
WALTER E. HOADLEY, Chairman
Vice President and Treasurer,
Arm strong Cork Company
Lancaster, Pennsylvania

1966

WILLIS J. WINN, Deputy Chairman
Dean, Wharton School of Finance and Commerce,
University of Pennsylvania
Philadelphia, Pennsylvania

1967

D. ROBERT YARNALL, JR.
President, Yarnall-Waring Company
Philadelphia, Pennsylvania

1965

OFFICERS AS OF JANUARY 1P1965

KARL R. BOPP
President

ROBERT N. HILKERT
First Vice President
HUGH BARRIE
Vice President
JOSEPH R. CAMPBELL
Vice President
NORMAN G. DASH
Vice President
DAVID P. EASTBURN
Vice President
MURDOCH K. GOODWIN
Vice President, General Counsel
and Assistant Secretary
DAVID C. MELNICOFF
Vice President
HARRY W. ROEDER
Vice President
JAMES V. VERGARI
Vice President and Cashier
RICHARD G. WILGUS
Vice President and Secretary
EVAN B. ALDERFER
Economic Adviser
CLAY J. ANDERSON
Economic Adviser
EDWARD A. AFF
Assistant Vice President
JACK P. BESSE
Assistant Vice President
JOSEPH M. CASE
Assistant Vice President
RALPH E. HAAS
Assistant Vice President

WILLIAM A. JAMES
Assistant Vice President
WARREN R. MOLL
Assistant Vice President
LAWRENCE C. MURDOCH, JR.
Assistant Vice President
and Assistant Secretary
HENRY J. NELSON
Assistant Vice President
KENNETH M. SNADER
Assistant Vice President
RUSSELL P. SUDDERS
Assistant Vice President
J. C. ROTHWELL, JR.
Economist
BERTRAM W. ZUMETA
Economist
JAMES P. GIACOBELLO
Chief Examining Officer
THOMAS K. DESCH
Examining Officer
WILLIAM L. ENSOR
Examining Officer
JACK H. JAMES
Examining Officer
LEONARD E. MARKFORD
Examining Officer
JAMES A. AGNEW, JR.
Assistant Cashier
FRED A. MURRAY
Director of Plant

G. WILLIAM METZ
General Auditor
A. LAMONT MAGEE
Assistant General Auditor
26

STATEMENT OF CONDITION
F ED ER A L R E SE R V E BAN K OF P H ILA D ELPH IA
End of year
(000’s omitted in dollar figures)

1964

ASSETS
Gold certificate reserves:
Gold certificate account.............................................
$ 759,801
Redemption fu n d —Federal Reserve
..............notes
85,890
Total gold certificate reserves................................
Federal Reserve notes of other Federal Reserve
Banks........................................................................
Other cash.......................................................................
Loans and securities:
Discounts and advances............................................
United States Government securities......................
Total loans and securities.......................................
Uncollected cash item s..................................................
Bank prem ises................................................................
All other assets...............................................................
Total assets...............................................................
LIABILITIES
Federal Reserve notes...................................................
Deposits:
Member bank reserve accounts...............................
United States Government........................................
Foreign..........................................................................
Other deposits.............................................................
Total deposits...........................................................
Deferred availability cash item s...................................
All other liabilities...........................................................
Total liabilities..........................................................
CAPITAL ACCOUNTS
Capital paid in ..............................................................
S urplus..........................................................................
Total liabilities and capital accounts.....................
Ratio of gold certificate reserves to deposit and
Federal Reserve note liabilities com bined...............

$ 845,691

1963

727,618
79,072

806,690

51,395
4,523

35,360
6,406

2,135
2,002,859
$2,004,994
492,199
2,741
30,267
$3,431,810

2,826
1,830,795
$1,833,621
453,604
3,012
22,143
$3,160,836

$2,077,102

$1,917,598

783,819
74,653
12,320
6,586
$ 877,378

767,443
32,367
9,280
6,145
$ 815,235

384,021
35,081
$3,373,582

340,893
4,241
$3,077,967

29,114
29,114

27,623
55,246

$3,431,810

$3,160,836

28.6%

29.5%

EARNINGS AND EXPENSES

FEDERAL RESERVE BANK OF PHILADELPHIA
(000’s om itted)

1964

1963

Earnings from :
United States Government securities...............................
Other sources.......................................................................

$71,095
600

$61,406
420

Total current earnings.....................................................

$71,695

$61,826

Assessment for expenses of Board of Governors...........

8,577
891
483

8,926
551
435

Total net expenses...........................................................

$ 9,951

$ 9,912

Current net earnings..............................................................

61,744

51,914

Additions to current net earnings:
Profit on sales of U.S. Government securities (n e t).......
All o th e r.................................................................................

33
32

18
38

Net expenses:
Operating expenses*...........................................................
Cost of Federal Reserve currency.....................................

Total additions..................................................................

Deductions from current net earnings:
Miscellaneous non-operating expenses............................
Total deductions...............................................................

1
$

3
$

Net additions...........................................................................

Net earnings before payments to U.S. Treasury................

$61,808

$51,967

Dividends paid.........................................................................
Paid to U.S. Treasury (interest on Federal Reserve notes)

$ 1,716
86,224

$ 1,638
48,852

Transferred to or deducted from (—) Surplus....................

$ 26,132

$ 1,477

* After deducting reimbursable or recoverable expenses.

VOLUME OF OPERATIONS
F ED ER A L R E SE R V E B AN K OF P H ILA D ELPH IA
1964

1963

1962

Number of pieces (000's om itted)
Collections:
Ordinary checks*................................................
Government checks (paper and card ).............
Postal money orders (card)...............................
Non-cash item s...................................................
Food stamp coupons..........................................
Clearing operations in connection with direct
sendings and wire and group clearing plans**.
Transfers of fu n d s .................................................
Currency counted...................................................
Coins counted.........................................................
Discounts and advances to member banks.......
Depositary receipts for withheld taxes................
Postal receipts (rem ittances)...............................
Fiscal agency activities:
Marketable securities delivered or redeemed.
Savings bond transactions—
(Federal Reserve Bank and agents)
Issues (including reissues)............................
Redemptions....................................................
Coupons redeemed (Government and agencies)

244,500
28,700
17,200
863
3,572

215,700
28,800
15,200
835
3,699

196,700
27,300
14,100
734
506

702
193
269,600
136,800
1
606
309

704
178
274,100
346,700
1
586
308

682
163
264,300
444,400
1
566
310

539

421

439

8,759
6,334
1,141

8,436
6,311
1,163

7,699
6,856
1,221

$ 68,600
6,259
261
185
5

$ 66,200
6,165
254
164
1

41,031
123,253
1,935
44
1,192
2,605
888

39,031
108,662
1,844
52
485
2,406
872

13,745

12,807

444
344
175

396
468
158

Dollar amounts (000,000’s omitted)
Collections:
Ordinary checks.................................................. $ 72,735
6,097
Government checks (paper and card ).............
Postal money orders (card)...............................
247
Non-cash item s...................................................
239
Food stamp coupons..........................................
5
Clearing operations in connection with direct
44,770
sendings and wire and group clearing plans**.
134,480
Transfers of fu n d s .................................................
1,987
Currency counted...................................................
21
Coins counted.........................................................
863
Discounts and advances to member banks.......
2,522
Depositary receipts for withheld taxes...............
Postal receipts (rem ittances)...............................
931
Fiscal agency activities:
14,486
Marketable securities delivered or redeemed.
Savings bond transactions—
(Federal Reserve Bank and agents)
444
Issues (including reissues)............................
346
Redemptions....................................................
146
Coupons redeemed (Government and agencies)
* Checks handled in sealed packages counted as units.
** Debit and credit items.