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OF PHILADELPHIA Karl R. Bopp— Central Banker The Federal R eserve a s a Living Institution: A Prescription for The Future. M A R C H 1970 A BO U T T H IS IS S U E A fter tw elve years as the top execu tive team of the Fed eral R eserve B ank of Phila d e l p h ia , K a r l R . B o p p , P r e s i d e n t , a n d R obert N. H ilkert, F irst V ice President, retired M arch 1, 1970. On that sam e date, David P. Eastburn becam e President and David C. M elnicoff took over the responsi bilities of F irst V ice President. A s the guard is being changed, it is appropriate that tribute be paid to the past and that a renew ed focu s be made on the future. In the first of these tw o articles, David P. Eastburn gives a very personal view of his highly distinguished predeces sor, Mr. Bopp. In the second, he presents a rather im pressionistic view of the Federal Reserve as a living institution and a pre scription for the future. T h ese essays have been selected from M en, M on ey an d P olicy, published in lim ited edition by the Federal Reserve Bank of Philadelphia in honor of Karl R. Bopp. BUSINESS REVIEW is produced in the D epartm ent of Research. R o n ald B. W illia m s is Art Director. The au th ors will be gla d to receive c o m m e n ts on their articles. R e q u e sts fo r ad ditio n al co p ie s sh o u ld be ad d resse d to Pu b lic Inform ation, Federal Reserve B a n k o f Ph iladelphia, Philadelphia, P e n n sylvan ia 19101. the distinction, a student of Karl Bopp. The subject has been at once the most fascinating and most difficult I have ever tackled; the re sults have been the most inconclusive. One reason is that Karl is many persons. As an economist and central banker, Karl has some times been an observer, sometimes a participant, and it is as hard for a biographer to keep the two roles straight as it often must have been for him. Early training inculcated in Karl a lifelong fas cination for central banking. At Missouri he probed deeply into official records to come up with an insightful view of the agencies of Fed eral Reserve policy. In subsequent years he has kept detailed notes on index cards of the day-today unfolding of momentous events in Federal Reserve history, all the while participating in important policymaking decisions. The combi nation of the two personalities— one recording and analyzing with great objectivity, the other debating, deciding, defending, and rationalizing with considerable subjectivity— has made Karl a much more complex person than many of his colleagues. Most of the time it has made for strengths, as I intend to demonstrate; but when the two motivations were at war, it could be divisive. M A R C H 1970 B U S IN E S S REVIEW by David P. Eastburn FEDERAL RESERVE BA N K OF PHILADELPHIA Karl R. Bopp— Central Banker There is a story about Mark Twain to the effect that his wife once tried to break him of pro fanity by swearing in his presence at every opportunity. Twain’s reaction was simply that “ she knew the words but didn’t quite have the tune.” An attempt to summarize Karl Bopp’s beliefs as an economist and central banker is certain to produce the same results. I have been a student of Karl Bopp’s for over a quarter of a century, for a short time in the University of Pennsylvania classroom, and the rest at the Federal Reserve Bank of Philadelphia. During the same period, I have also been, if I can make 3 Similarly, Karl Bopp has been both a deeply emotional and an intensely intellectual man; the two characteristics cannot be disentangled. It is as an intellectual that Karl has had his greatest impact, however, and, I suspect, as he would wish to be judged. All of us who have worked with him have had reason to be awed by— indeed, have on occasion been impaled by— Karl’s brilliantly logical mind. It is a mind intol erant of, although through self-discipline patient with, sloppy thinking. It is a cultivated mind, quite as likely to produce an argument from Aristotle or a verse by T. S. Eliot as a subtlety of Wicksell. O f all his associations, I suspect Karl values most highly his membership in the American Philosophical Society. And it is a scholarly mind. Karl has never felt comfortable with a ghost writer. The list of his own publications, however, is not long; a number of studies emerged in the Missouri days, several more in the 1940’s and 1950’s during the period in research at Philadelphia, practi cally none during his presidency of the Bank. But all are the product of deep and careful thought, many of back-breaking research. Per haps there is, somewhere, a student of central banking who has pored over as many reports, minutes, hearings, and memoranda involving as many central banks as has Karl, but if so I am not aware of his existence; and certainly he has not been a practicing central banker. This is the unique combination— scholarly re search of the major central banks in critical periods, and day-to-day confrontation with cur rent problems of Federal Reserve policy— which has shaped Karl Bopp’s philosophy. It has, above all, given him a strong sense of history. By habit, almost compulsion, Karl tends to ap proach any problem from the direction of his torical experience. The result is a curious blend of assurance and skepticism, confidence, and http://fraser.stlouisfed.org/ 4 Federal Reserve Bank of St. Louis humility. Let me illustrate. In the course of his career, Karl has seen a severe depression, several re cessions of varying intensity, and some periods of inflation. From all this he has emerged, so far as I can tell, with no fixed view about the future course of the American economy. True, he has observed many times that something very different happened after World War I I than after earlier major wars: the economy has not experienced a decline in prices, and this does signify a basic change in the economy and in public policy. But to say that depressions are ruled out henceforth or that the major problem of the future is chronic inflation is to go too far. History demonstrates that nothing— prosperity, inflation, chronic stagnation, dollar scarcity, or dollar glut— is inevitable. This can be a hopeful view: the problems of the moment can’t last forever. Or it can be a pessimistic view: despite all we have learned about how the economy works and how to shape it to our ends, things can happen which we don’t anticipate. Above all it is a humble view. Humility is much in evidence in Karl’s most revealing “Con fessions of a Central Banker.”1 “The simple truth,” he says, “is that no one comprehends enough to be an expert in central banking.” This confession of ignorance apparently reflects an evolution from Karl’s days in academia when, as he describes himself, he was an intellectual grandson of Irving Fisher. Through Fisher’s stu dents, James Harvey Rogers and Harry Gunni son Brown, he learned of the importance of money as a determinant of economic activity. But in the course of time, exposure to the reali ties of policymaking and recognition of the 1 Karl R. Bopp, “Confessions of a Central Banker,” Essays in Monetary Policy in Honor of Elmer Wood, Ed. Pinkney C. Walker (Columbia, Mo.: University of Missouri Press, 1965), p. 12. chaotic state of monetary theory have led him to distrust (although not, he says, without a twinge of conscience) the monetarists’ explana tions of economic behavior and their mechanistic approaches to policy. It is clear from his “Con fessions,” however, that his view of the un satisfactory state of knowledge is not a counsel of despair, but of patience. It is a challenge to research, an invitation to be tolerant of the ideas of others. And despite what appears to be a thorough going agnosticism about the monetary process, Karl is not without foundations on which to build his view of monetary policy. One of the firmest of the foundations is a strong sense of the role of markets. As he has come to distrust rules of thumb and formulae, he has become im pressed by the complex workings of markets. This has led him, on the one hand, to advocate a great deal of discretion in the execution of policy. For example, he has always shrunk from quantifying instructions to the manager of the Open Market Account. Close observation of the money market has convinced him that the best person to determine the tactics of policy is the man on the scene, in the thick of the market. As a participant in determining the strategy of policy, Karl has tended to be brief and concise in his presentations before the Open Market Committee and has avoided the semantic exer cises that sometimes characterize Committee discussions. On the other hand, his view of markets has convinced him of the fallibility of money man agers who attempt to usurp markets’ functions. Selective credit controls have always been dis tasteful, both on philosophical and practical grounds. Voluntary credit restraint has smacked of the real-bills fallacy. As Reserve Bank Presi dent, Karl has resisted pressures to lecture commercial bankers about credit restraint, not only because his natural modesty has made it difficult to do this, but also because he has not been willing to superimpose his judgments as a central banker on theirs as commercial bank ers. He has preferred to let monetary policy speak for itself through the marketplace. As a non-interventionist, Karl has been pretty much in the mainstream of Federal Reserve tra dition. But in a number of other respects he has been an individualist. Three examples come to mind, one having to do with objectives of policy, a second with instruments, and a third with agencies. All are illustrative of his broad, his torical approach to policy problems. Some years ago, as Karl examined the various objectives of monetary policy over time, he saw clearly the conflicts that often exist.23 This was * before the term “ trade-off” became commonly used to describe the problem. More recently he has taken exception to the conventional wisdom of including economic growth as an objective of monetary policy. His position has been that monetary policy has relatively little to do with the germinal elements of growth; that an ap propriate policy will produce maximum sustain able use of available resources and this, in itself, is a large contribution to growth. As to the instruments of policy, his views have been influenced strongly by an intensive analysis of operations of the German Reichsbank from its foundation until World War I .8 Despite the facts that the Reichsbank had no informa tion on the volume of reserves, could not achieve a given level of reserves, and dealt with a bank ing system whose reserve ratio varied consider ably over time, it nevertheless achieved its basic 2 Karl R. Bopp, “Central Banking Objectives, Guides, and Measures,” T h e Journal of Finance, Vol. IX, No. 1 (M arch 1 9 54) pp. 12-22. 3 Karl R. Bopp, “Die Tatigkeit der Reichsbank von 1876 bis 1914,” published in Germany only, Weltwirtschaftliches Archiv, 1954. objective. While he has not advocated that the Federal Reserve System actually try to do with out reserve requirements as an instrument of policy, still, Karl has concluded that the ulti mate power of the central bank lies in its ability to create and destroy money and reserves, at times supplying more liquidity and at other times less liquidity than commercial banks wish to hold. A fixed reserve ratio is not an essential ingredient of monetary policy. Finally, Karl for years has been puzzling over the proper relationship of the Federal Reserve and Government. And although he is still rather tentative in his conclusions, he has arrived at a general position that may seem heretical to staunch defenders of “independence.” Because he has become convinced that monetary policy must be part of a coordinated economic policy of Government, he believes that in the rare event of an irreconcilable conflict, the central bank must give way; the central banker must resign. Furthermore, in such a situation, the Govern ment, perhaps by joint resolution of Congress, should give clear directions to the central bank as to how to proceed. Karl has arrived at this view not only because such an arrangement is an orderly way to fix responsibility, but also be cause “ independence,” carried to its logical ex treme, is undemocratic. And while such a position runs the risk that the people may be “wrong,” this is likely only in the short run; we must have faith that the democratic process will work in the long run. Finally, his position 6 means that the central bank must earn its “in dependence.” Only by demonstrating that it is right most of the time can it build the public support which enables it to persuade Govern ment to its way of thinking. W ith that support, the central banker’s power of resignation be comes a potent instrument indeed. >v * * * * * * How to evaluate the contribution of a man? In some cases it may be primarily by written works, in others by policy actions. In the case of Karl Bopp, neither criterion is determining. His contribution, I believe, lies primarily in the impact of these ideas and his personality on people with whom he has worked. In the policy area, he has not been one to dominate deliber ations. But he has spoken up at crucial times with an authority that has brought fresh insight to the discussion. Above all, his influence on staff— and here I speak with particular knowl edge and feeling— has been profound. He has transmitted a philosophy of freedom in the pur suit of ideas to all of us who have worked with him. And he has made us all aware that mone tary policy— as well as everything else of any importance, for that matter— is a human pro cess. Perhaps the most fitting way to summarize is to relate part of a conversation between us not long before Karl’s retirement. In a reflective mood, he wondered whether, after all, perhaps he should have remained in teaching. My reply was that he has never left it. The Federal Reserve as a Living Institution: A Prescription for the Future by David P. Eastburn To one who has been part of an organization for any length of time, observing and sharing its successes and failures, its manic and depres sive moods, its victories and defeats, a question of enduring fascination is what keeps the thing alive and well. What are the ingredients of a living institution? The Federal Reserve is now well into its sec ond half century. It is a mere adolescent com pared with the Bank of England, but has been around considerably longer than most central banks. In this time it has established a record and developed a personality which I propose to examine here— rather impressionistically, and, of course, non-objectively— as a sort of case example of a living institution. In search of guidance, one tends to look for a general theory of the rise and fall of institu tions. Many writers, in fact, have touched on various aspects of the problem. Bernstein has detected a kind of life cycle in regulatory com missions in the United States.1 Kenneth Boulding has distinguished three ages of an institution, with varying effects upon what he calls its legi timacy.2 John Gardner has offered much inspira1 According to his analysis, the typical progression is from gestation, a phase stimulated by public pressure for reform; to youth, a chaotic period of conflict and enthusiasm; to maturity, a stage of high professionalism with policies and procedures well-established and ad hered to; and finally to old age, a condition of passive conservatism and inefficiency. Marver H. Bernstein, Reg ulating Business by Independent Commission (Prince ton: Princeton University Press, 1 9 5 5 ), pp. 74-102. 1 He points out that institutions build up legitimacy “just by sticking around,” but that the function may be nonlinear. “W hen things are new, they have the special legitimacy of babies, young people, or the new fashion. At a certain point they become middle-aged or oldfashioned and legitimacy declines sharply. Then as time goes on further they become antiques and legitimacy in creases once again.” Kenneth E . Boulding, ‘*1116 Legiti macy of Central Banks,” Fundamental Reappraisal of the Discount Mechanism (Washington, D. C .: Board of Governors of the Federal Reserve System, July 1969), pp. 4-5. tional insight on se lf-ren ew a l.C . Northcote Parkinson has analyzed the decline of organiza tions, a phenomenon which he attributes to a disease— “injelititis.” 3 These observations are 4 helpful but, as far as I am aware, the definitive work on growth and decline of organizations remains to be written. Observation of the Federal Reserve System leads me to believe that three factors go far to explain its past and, more importantly, could have a profound influence on its future. These are: (1 ) the values it holds; (2 ) the profes sionalism of its personnel; and (3 ) the nature of the decisionmaking process. VALUES Proposition 1: The Federal Reserve System will be strong and effective in the long run to the extent that the values which govern its actions are in accord with the values held by the society which it serves. 3 John W . Gardner, Self-Renewal: the Individual and the Innovative Society (N ew York: Harper & Row, 1963). 4 This is “the disease of induced inferiority” caused by the fusing of incompetence and jealousy to produce a new substance, “inielitance.” An infected individual can spread the disease to an entire organization, system atically eliminating all people of ability. The first phase of the disease is characterized by a too-low standard of achievement; the second by smugness as these aims are achieved; and the third by apathy. Cases of recovery are rare, but occasionally an organization recovers because some individuals have developed a natural immunity. “They conceal their ability under a mask of imbecile good humor. The result is that the operatives assigned to the task of ability-elimination fail (through stupid ity) to recognize ability when they see it. An individual of merit penetrates the outer defenses and begins to make his way toward the top. He wanders on, babbling about golf and giggling feebly, losing documents and forgetting names, and looking just like everyone else. Only when he has reached high rank does he suddenly throw off the mask and appear like the demon king among a crowd of pantomime fairies. W ith shrill screams of dismay the high executives find ability right there in the midst of them. It is too late by then to do anything about it. The damage has been done, the dis ease is in retreat, and full recovery is possible over the next ten years.” C. Northcote Parkinson, Parkinson’s Law (Boston: Houghton Mifflin Co., 1 9 5 7 ), p. 82. http://fraser.stlouisfed.org/ 8 Federal Reserve Bank of St. Louis Although the concept of values often carries with it ethical connotations, and although moral purpose may be essential to the strength of an organization,5 it is not necessary for my thesis * to go this route. By values I have in mind sim ply the “norms or principles which people apply in decision-making, that is, the criteria they use in choosing which of alternative courses of action to follow.”5 In a very broad sense, however, the basic value, or criterion, governing decisions of Fed eral Reserve authorities does have strong ethical connotations. The fundamental mission of the Fed is to promote the fullest sustained realiza tion of the nation’s economic potential. A sim ilar goal, of course, is held by most individuals in American society. For better or worse, the typical American spends a great proportion of his working and “leisure” hours striving to “make it”— trying to put his talents and re sources to the best possible use as he sees it. The fact that the Fed’s objective is in close conformity with a basic value also held by society lends great strength to the Federal Re serve’s position in society— its legitimacy, as Boulding would say. A critical question for the future, however, is whether this materialistic view of human endeavor will continue to apply. From the time of the Greeks, philosophers have held out as the highest achievement of Man his self-realization, the fullest development of his potential. Even in this context, the Fed’s basic value is in gen 5 Chester Barnard, in his classic study of the functions of the executive, for example, maintains that: “Organi zations endure . . . in proportion to the breadth of the morality by which they are governed. This is only to say that foresight, long purposes, high ideals, are the basis for the persistence of cooperation.” Chester I. Bar nard, T h e Vunctions of the Executive (Cambridge, Mass.: Harvard University Press, 1 9 5 8 ), p. 282. * Philip E. Jacob, “Values Measured for Local Leader ship,” Wharton Quarterly, Vol. Ill, No. 4 (Summer 1969), p. 31. Freedom, however, must be put in a relative context, relative to other values. This, in fact, is what society has been doing, especially since the 1930’s. Society has tolerated, indeed de manded, increasing intervention by public au thorities in markets in order to get greater security, justice, and other values. There is no evidence to indicate that this trend will not continue. TOp. cit., p. 91. M A R C H 1970 economic concerns to humanistic-social concerns, how will the Fed respond? It is dangerous, of course, to extrapolate a short-run movement into a long-run trend, but it is clear that some such shift has been in the making. The legiti macy of the Federal Reserve System may well hinge importantly on how its officials react. Economic policies carried out by the Federal A second question for the future flows from this thought: how much weight will the Federal Reserve give to the value of freedom in trying to achieve new objectives? The very creation of the Federal Reserve System was an act of inter vention, a departure from laissez-faire resisted by conservative elements at the time. Neverthe less, the philosophy under which the System has operated for the most part since has stressed freedom of the market place, and the tradition of minimum intervention in markets served the Fed well for many years. B U S IN E S S REVIEW Reserve will have very great social impacts as they always have. Decisions in trading off unem ployment against price increases do not simply involve statistics expressed in a Phillips curve, but impacts on human lives. The social costs of unemployment among Negro teenagers, for ex ample, must be weighed against those of infla tion for pensioners. Federal Reserve authorities know this— they are not bloodless computers— but they may have to give more consideration to this kind of calculation in the future than in the past. Moreover, the Fed traditionally has resisted pressures to deal with specific problems in specific parts of the economy. Would it be wise, for example, to devise some way of chan neling Federal Reserve funds into the ghetto? The role which the Fed is to play in our society in the future may well depend on responses to and anticipation of pressures like this. FEDERAL RESERVE B A N K OF PHILADELPH IA eral conformity to society’s; but, as and if society changes— perhaps as and if the “new generation” carries its less materialistic view of life with it into later years— it is possible that the relationship will become less strong. This raises an obvious corollary to Proposi tion 1: namely, that the Federal Reserve’s val ues must change as society’s values change. Barnard has made the point that an organiza tion disintegrates if it fails to achieve its pur poses; but it destroys itself if it does achieve them.7 What it must do is constantly seek new goals. These, in the case of the Federal Reserve, should be new goals which society is seeking. In the past, the Federal Reserve System has succeeded, and succeeded remarkably well in view of the narrow charge given it by Con gress, in updating its objectives. Indeed, had the Fed been content with a literal interpreta tion of its original assignment to provide an elastic currency, etc., it would not be important enough to bother about today. Response to changing needs may not always have been as prompt, full, and voluntary as everyone might like, new objectives may not always have been achieved effectively, but on the whole I do believe the Fed has renewed itself over the years by broadening its objectives and values. Two questions, however, arise about the fu ture. One I have already suggested: if the public at large is shifting its emphasis from materialistic- 9 In this environment the Fed will find itself facing a dilemma: its stated philosophy is non interventionist; its practice is increasingly inter ventionist. A review of history indicates that Federal Reserve authorities almost invariably resort to unorthodox “gimmicks” when crises arise and pressures become intense.8 This be havior might be excused as necessary in rare and difficult circumstances, but I would guess that the Fed will be confronted more often, not just in crises, with the need to innovate via special types of controls. Banks, much more innovative than ever before anyway, have been further stimulated by Reguation Q to explore new sources of funds. As the Fed, attempting to restrain the expansion of money and credit, closes one loophole after another, banks prompt ly discover new ones. What to do about this schizophrenia? If my prediction is correct, the Federal Reserve will have to reconsider its philosophy of noninter vention in markets. This, I believe, would bring philosophy into conformity with practice and make possible a rational and consistent approach to regulation rather than one of ad hoc loophole plugging. And it would bring philosophy more nearly into the mainstream of what society now wants. The public demands an increasingly high performance of the economy and of public policymakers responsible for the economy. It is less tolerant of unemployment and alert to the slightest tendency toward recession. At the same time, it is increasingly concerned about inflation. It is more interested in how things are distributed— unemployment among disad-* * Some of these devices include "direct action" in the late 1920’s, margin requirements, moral suasion, Regula tions W and X, "Operation Twist,” the September 1, 1966, letter from the Federal Reserve to member banks. David P. Eastbum, "Uneven Impacts of Monetary Pol icy: W hat to Do About Them?” Business Review, Fed eral Reserve Bank of Philadelphia, January 1967, p. 21. http://fraser.stlouisfed.org/ 10 Federal Reserve Bank of St. Louis vantaged groups, tax avoidance by the wealthy, the impact of tight money on housing. All of this has greatly reduced margins of error for policymakers. Their response has been to try to “fine tune” the economy, not only by making small changes as promptly as possible to influence overall aggregates, but by dealing in specific ways with specific parts of the econ omy. The public at large has no interest in fine tuning per se, but the influence of its many growing and conflicting demands— and this, I believe, is an irreversible influence— is to force policymakers to fine tune. Many experts believe that fine tuning is be yond our capability, and certainly much of the 1960’s provides ample evidence to support this view. Therefore, they maintain attention should be directed to making markets more efficient by removing impediments to competition. For ex ample, rather than imposing a ceiling on interest rates on time and savings deposits and devising special techniques for channeling funds into mortgage markets, efforts should be devoted to removing usury ceilings, liberalizing restrictions on competition among various kinds of institu tions in various kinds of markets, and the like. What economist, brought up in the competi tive tradition, could argue against such a course? The only problem is that the likelihood of suc cess is low. Vested interests are so entrenched that results are bound to be slow and incom plete. Much as we all would like markets to be free (at least in the abstract), the likelihood is that many serious impediments will remain. Meanwhile, the public continues to exert pres sure which forces policymakers to fine tune. It may be that public officials, including those at the Federal Reserve, cannot deliver what the public wants. Attempts to intervene in markets, efforts to fine tune, may fail because of human * Boulding suggests that legitimacy of central banks might be fostered “by preserving a certain air of charis matic obscurity about their operations. Their officers might even take to wearing gowns and robes and their public pronouncements might be couched in even more mysterious and impressive language than they now use." Op. cit., p. 20. He suggests, however, that in the long run an important source of legitimacy is payoff; an insti tution must provide good terms of trade with those who are related to it. (p . 3 ) M A R C H 1970 B U S IN E S S REVIEW supinely adopt inflation as an objective simply because society is ill-informed about its evils. The Fed must try to influence society’s choice of values as well as adapt to them. The problem of overcoming inflation should be easier as the public becomes increasingly sophisticated. In some respects, however, the Fed may find communications more difficult. It may not be so hard to enunciate and gain society’s accep tance of the basic values governing the Fed’s policies, but at a more technical level the criteria for action will be hard to explain and sell. Nor are prospects for success enhanced by history. The Federal Reserve all too frequently has tended to devise simplistic rationales for policy, develop a vested interest in them, and nurture them long past the period of whatever validity they may have had. The terms “productive credit,” “pegs,” “bills only” perhaps recall a few instances. Confronted by an increasingly sophisticated public, the Fed may find the best course is to admit unashamedly that it has, as yet, no ade quate theory of how monetary policy works. I say unashamedly because, although Federal Re serve economists should have been working much harder and longer on the problem than they have, no one else has an adequate theory either. If the Fed assumes a posture of humble agnosticism, it is likely to come out better ip the long run. And it should feel perfectly at home with such a posture in today’s relativist world distrustful of the old absolute values. A third corollary which flows from this is that the Federal Reserve must at all times be alert to society’s changing values. Riesman, Glazer, and Denney, in their in fluential study, The Lonely Crowd, drew the distinction between “inner-directed” and “otherdirected” personalities. An inner-directed per son is governed by absolute values and tradi- FEDERAL RESERVE B A N K OF PHILADELPH IA frailty. Perhaps the only evidence that can be brought to bear on this is history. I believe his tory shows that public policy can perform and has performed at ever-higher levels of compe tency. There is no reason to believe we have reached the ultimate. Today’s fine tuning be comes tomorrow’s orthodoxy. The public, of course, should be made aware of the limited state of the art at any given time so that it does not demand the utterly impos sible. This thought suggests a second corollary to Proposition 1: the Federal Reserve’s values should be clearly made known to and under stood by society. Some kinds of institutions, like the church, may thrive for centuries on values which their constituents are asked to accept on faith. For most institutions, however, mystique, charisma, and ritual, although powerful forces for legiti macy over a short period, prove to be weak reeds in the end.9 Federal Reserve authorities undoubtedly have yielded to the temptation to lean on them many times in the past, but chances of getting away with this are fast dis appearing, if not already gone. The public is too sophisticated. As the Fed confronts its sophisticated con stituents, it may well find the going easier in some respects, more difficult in others. Up to a point, a more knowledgeable public should be more sympathetic with what the Federal Re serve is trying to do. Inflation is a good exam ple. Proposition 1 should not be interpreted to mean that Federal Reserve authorities should* 11 1) how confident we can be that all of the bar riers to true human life will be overcome, and 2) the awareness that God has given this task of breaking down barriers to us. The visitor would be sure that the students were guilty of colossal pride and that they had left Christian ity far behind for a new humanism.11 tion. An other-directed person sees things in more relative terms and is influenced more by his peers. If the Federal Reserve is to maintain values in conformity with those held by society, it will need to be more other-directed than in the past. This is not just a matter of information, but of attitude. Other-direction fosters an attitude of openness to change, of flexibility. And it is a matter of involvement. As the economy becomes more and more complex, the Fed is increasingly tempted to withdraw into its specialty of monetary policy. Good argu ments can be made for this course, but the institution will be stronger, I believe, if it is involved in other matters as well. Obviously, there must be limits. Not only could the Fed become over-committed and its efficiency im paired, but excessive involvement could produce severe conflicts of values and objectives, con fusion, and a general weakening of purpose. On balance, however, the greater danger is that the Fed will become aloof. Such activities as bank supervision and truth in lending, troublesome though they may be, help to give it a sense of what is really going on, insights into the way other institutions really work, and how people are thinking. A fourth corollary to Proposition 1 is that the Federal Reserve should have confidence in its values, and its ability to establish them.10 In a recent convention of people concerned about social welfare, one speaker remarked on the attitude of young people toward theology. If someone holding to the more traditional theology should attend an experimental liturgy on a campus, he would probably be horrified. The songs, the readings, dialogues, prayers, and homily would make as their chief emphasis: Today’s young people are a remarkable lot, but in at least one important sense they are simply carrying on — in their own distinctive style, of course — what has been a trend over recent decades. In the realm of economics, at least, society has been less and less willing to subject itself to “economic laws” and “market forces” which appear to make the individual a helpless pawn. Not so long ago everyone believed that periodic recessions were inevit able; indeed, good for what ails us. But the Great Depression effectively destroyed the no tion that widespread unemployment may be good medicine, and experience in the 1950’s and 1960’s has raised hopes that even mild recessions may not be inevitable. Society has been coming to believe it is master of its own destiny, and as the “new generation” takes over, this belief is likely to be intensified. The Federal Reserve is not yet old enough to be preoccupied with its past heritage, but it is entering the dangerous age. Moreover, one can detect at times a latent persecution com plex that, if permitted to develop, could prove debilitating. Sensitive to the fact that mone tary policy must frequently frustrate people’s plans and desires, Federal Reserve officials have been known to refer somewhat plaintively to their lack of popularity. They have said, for example, that the Fed is often in the position of the chaperone who removes the punchbowl just when the party is getting good. Also, in an 14 C. R. Whittlesey has argued elsewhere in this vol ume that for monetary policy to be effective it must be believed in. My point is complementary to his: the Federal Reserve must believe in its policy. 1 Catherine L. Gunsalus, “A Theological and Campus 1 Perspective on Changing Values,” a talk given before the National Conference on Social Welfare, New York City, May 28, 1969, p. 6. http://fraser.stlouisfed.org/ 12 Federal Reserve Bank of St. Louis 1 Albert L. Kraus has adopted Noam Chomsky’s term, 2 PROFESSIONALISM Proposition 2: The Federal Reserve will be strong and effective in the long run to the extent that it fosters professionalism in its personnel. It is not enough for the Federal Reserve to want what society wants; it must have the technical competence to make good on those wants. the New Mandarins, in describing Federal Reserve offi cials. Like the original governors of China, he says, they belong to a ‘‘secular priesthood” that is aloof from the people they serve. N ew York Times, April 9, 1969, p. 59. “ Bernstein concluded his study of independent regu latory commissions with this warning: “. . . the theory upon which the independence of the commission is based represents a serious danger to the growth of politi cal democracy in the United States. The dogma of inde pendence encourages support of the naive notion of escape from politics and substitution of the voice of the expert for the voice of the people.” Op. cit., p. 293. M A R C H 1970 B U S IN E S S REVIEW people as expressed through the political proc ess. Mr. Dooley’s comment that the Supreme Court watches the election returns, despite its note of cynicism, has real meaning for the Fed. The Federal Reserve is responsible to Congress which, in turn, is responsible to the people; and as the people express their wishes in elections, these wishes must influence Federal Reserve actions. It is true that history demonstrates abundantly the abuses to which Government can subject money, and that the fathers of the Federal Reserve had this history clearly in mind when they made the Fed independent of the Executive Branch of Government. But they did not make the Federal Reserve independent of Govern ment, and officials of the Federal Reserve System are very much aware of this. They are less in clined to stress their “ independence” than are many businessmen and bankers. Nevertheless, the danger of becoming aloof is ever present.13 It will be particularly important to guard against this tendency as the Federal Reserve becomes increasingly professionalized. FEDERAL RESERVE B A N K OF PHILADELPH IA understandable desire to have the public make a proper assessment of credit and blame for public policy, the Fed sometimes tends to under play the extent of its powers. And, finally, there is the attrition in mem bership in the Federal Reserve System, a prob lem which makes no impression on many econ omists but which, I believe, is a cancer eating at the morale of the System. The problem is not— at least yet— one of a central bank losing control of the financial aggregates necessary to implement its policy, but one of an organization losing support of a major part of the com munity. The Federal Reserve does not exist to serve commercial banks, and a good economic case can be made that membership is unnecessary. Nevertheless, membership has been an impor tant aspect of the System for over half a cen tury, and its decline inevitably has a deterio rating effect within the Fed and on its image in the community— not the least of which is the political community. The Federal Reserve does, after all, live in a political world, and, like any public body, needs a strong, concerned, grass-roots support if it is itself to remain vital. The time is overdue to move vigorously and decisively to deal with the inequities created by present requirements for membership. Success in this effort would do much to increase the Fed’s confidence in its ability to solve its problems. A final corollary to Proposition 1 is that the Federal Reserve must be responsive to the public through the political process. Officials of the Federal Reserve System are surrounded by certain safeguards designed to insulate them from the influence of party poli tics.12 Yet it is clear that, as public servants, they must be involved in politics in the broad sense; they must respond to the wishes of the 13 Congress long ago assigned to the Federal Reserve System various tasks of a highly tech nical nature which Congress felt it could not, and should not, undertake in detail itself. One of the advantages claimed for the regulatory commission approach always has been that it provides a means by which technical skill and expertise can be brought to bear on specific matters. The need for professional know-how is receiving even more attention today as the “knowledge explosion” grapples with the prob lems of an increasingly complex society. The Federal Reserve demands professionals of many kinds in many fields— law, personnel, management, accounting, computer technique, to name only a few. In its conduct of monetary policy, it requires professionals in the field of economics, especially monetary economics. A number of years ago, Fed personnel enjoyed outstanding reputations among professional economists; for a decade or so their standing seemed to deteriorate, but more recently it has improved. The Fed’s research organizations have always been unsurpassed at intelligence gathering, but deficient at basic research. This gap is being slowly remedied. The greater number of economists among top decision makers undoubtedly has contributed to the pro fessionalization of the institution. There are limits to professionalism, however, and this suggests a corollary to Proposition 2: professionalism must be balanced with other values. Gardner indicates that one symptom of stag nation is that “how-to” becomes more impor tant than “what to do” ; technique supersedes purpose.14 One can detect this symptom at times in the Federal Reserve. In open market opera tions, for example, technique in some respects 1 Op. cit., p. 47. 4 http://fraser.stlouisfed.org/ 14 Federal Reserve Bank of St. Louis becomes so sophisticated that there is danger of losing sight of the objective. Some critics have complained that the finesse of defensive operations gets in the way of an effective monetary policy. This kind of thing happens because profes sionalism so often means specialization. The professional becomes intellectually involved in problems; he probes deeper and deeper, often passing the point of diminishing returns. Ac cordingly, any institution like the Fed must have its generalists, men with broad backgrounds who can see the big picture. If the professional can be both specialist and philosopher, so much the better, but this often is asking too much. This is one reason, undoubtedly, why Karl Bopp, himself an economist, has spoken of the need for some non-economists in top decision making positions of the Federal Reserve organi zation. Another may be that the Fed must live and deal with many non-professionals. Reserve Banks must, for example, exist in their local communities. As their staffs become increasingly professional, as they pursue their interest in national monetary policy, there is a danger that they will lose touch, interest, and prestige in their communities. If properly balanced, however, professionals can bring to the Fed the necessary characteristics for vitality— a creative attitude, a joy in playing with ideas regardless of the outcome— that lead to innovation. But an organization heavily com posed of professionals must encourage freedom of thought, the heretical idea, and possess a decisionmaking machinery which gives a true sense of participation. This leads to my last proposition. DECISIONMAKING Proposition 3: The Federal Reserve System will be strong and effective in the long run to the extent that decisions are made by a pluralistic process. John LeCarre, author of spy novels and former member of British intelligence, once made this revealing comment about espionage: All our societies, even the American one, is administered by an extraordinarily lugubrious apparatus and the very development of events is controlled and paced by a pleasant human slowness and reluctance to take decisions. . . . Now an efficient intelligence service moves at 20 times that pace and is frequently outrun ning the decisive capacity of the people who should be controlling it. . . . frequently there is a short-time desirability to produce a revolu tion in a country X, but if it went through all the committe stages of bumbledom it is quite possible that one would reach a different decision.1 15 * 1 Only this, he says, prevents us from moving from one international catastrophe to another. It might be a backhanded compliment to the Federal Reserve System to say that only its complex decisionmaking machinery prevents it from moving from one monetary disaster to another. For there is no question that decision making in the Fed— with the Reserve Banks and boards of directors, the Federal Open Mar ket Committee, the Board of Governors, and staff all in the act in one way or another— is complex. The dangers of multiple direction of an or ganization are fairly obvious. They include inconsistency of policy, delay, compromise, ad herence to status quo, dissipation of enthusiasm and vitality, and general inefficiency.16 It is not clear to me, however, that such results are inevitable. And even if there is a tendency in this direction, the disadvantages should be weighed against the advantages. “ New York Times, January 28, 1969, p. 46. “ Bernstein has observed all of these in regulatory agencies. Op. cit., pp. 172-174. The main advantage of the pluralistic process is that decisions are more carefully considered. Each individual brings to bear on the common problem his own set of information, his own particular insights and interests.17 As our society becomes increasingly complex, indeed, there is a serious question whether any other process will work.18 Major decisions today require so much technical information, so many different kinds of expertise, that no one individual can be entrusted to make them. Finally, it often may be the case that the pluralistic process not only produces sounder decisions but more innovative ones.19 All this suggests a corollary to Proposition 3: the Federal Reserve should take maximum ad vantage of its federal structure. The fact that the Federal Reserve System resembles the United States Government in some important respects is no accident. The same fears of concentrated power induced the authors of both systems to build in a separation of powers and a federal structure. In both cases, however, the trend has been toward centraliza tion, and a vital question for the future is how much further this trend can go without produc ing serious weakening.20 1 Charles E. Lindblom makes essentially this argu 1 ment for what he calls "partisan mutual adjustment.” T h e Intelligence of Democracy (N ew York: The Free Press, 1 9 65). “ Philip E. Slater and Warren G. Bennis have con cluded that because of growing complexity, "democracy is inevitable.” T h e Temporary Society (N ew York: Harper & Row, 1 9 68). 1 John Gardner has written: “In an organization with 9 many points of initiative and decision, an innovation stands a better chance of survival; it may be rejected by nine out of ten decision-makers and accepted by the tenth. If it then proves its worth, the nine may adopt it later.” Op. cit., p. 68. 20 Alexis de Tocqueville detected the weakness of cen tralization almost a century and a half ago: "Centraliza tion imparts without difficulty an admirable regularity to the routine of business; provides skillfully Tor the The Federal Reserve System has always been stronger for the fact that contributions to policy are made by many people from all parts of the country, not just in Washington. As formulation of monetary policy becomes increasingly diffi cult, as standards expected of the Fed become ever higher, as the System becomes involved in more and more activities of a complex nature outside of monetary policy per se, the Federal Reserve will need to rely increasingly on these contributions. This is not just a matter of decentralization of work. The Board of Governors, for example, recently has passed on to the Reserve Banks some responsibilities in the field of bank super vision. More of this could be done. But a truly federal system requires that the sub-units con tribute to the overall goal as a matter of right, not merely at the pleasure of the central unit. There is no real federalism unless “ local man agement derives its power and function from structural necessity.”21 Not only does increasing complexity of the economy and the financial system enhance the unique role of the regional Reserve Banks as administrative units of the System and as centers details of the social police; represses small disorders and petty misdemeanors; maintains society in a status quo alike secure from improvement and decline; and perpet uates a drowsy regularity in the conduct of affairs, which the heads or the administration are wont to call good order and public tranquillity; in short, it excels in prevention, but not in action. Its force deserts it, when society is to be profoundly moved, or accelerated in its course; and if once the co-operation of private citizens is necessary to the furtherance of its measures, the secret of its impotence is disclosed.” Democracy in America (N ew York: The New American Library, 1 9 5 6 ), p. 67. “ Peter F. Drucker, T h e N ew Society (N ew York: Harper & Brothers, 1 9 4 9 ), p. 275. http://fraser.stlouisfed.org/ 16 Federal Reserve Bank of St. Louis of information, but it calls for continued par ticipation of the Banks in the formulation of monetary policy. Because the Reserve Bank presidents serve on the Open Market Committee as a matter of statutory responsibility, they are much more effective than if they were to par ticipate simply as advisers to the Board of Governors. * * • * ■ * • * ■ * * As a prescription for a vigorous, long life, the foregoing propositions undoubtedly overlook many important ingredients; yet they are, I believe, the essential ones. Perhaps the most hopeful thing about them is that they require nothing radically new, but basically a continua tion of what the Federal Reserve has been doing. The Fed has changed its values over the years. It has been developing an increasingly professional attitude toward its task. And it does follow a pluralistic approach in making decisions. What is needed is to be more prompt and sensitive in changing its values, to broaden and deepen its professionals’ knowledge of the economic process, and to make even greater use of its federal structure. All this, of course, is harder to do than it sounds. Many trade-offs must be made along the way. To become too professionalized runs a risk of losing touch with society’s values. A decision making apparatus that permits too-long delibera tion over too many views cannot adapt promptly as these values change. But the path to the good life is strewn with hard choices. The Fed has made many wrong ones along the way, but if it can better its percentage of right ones, it can look forward to a long and useful existence. THE FED IN PRINT Current Sources on Business and Banking Most Federal Reserve Banks publish reviews which vary considerably in outlook and fields of interest. Some of them treat subjects of regional importance; others are directed to questions of a monetary and fiscal nature; still others discuss more general matters in the public and business areas. W e in Philadelphia compile an index of these articles and produce a cumu lative edition of it every two years. For an up-to-date look at current concerns of our researchers around the country, however, we are including in this issue of the Business Re view certain topics from the year 1969 to pro vide an indication of the scope of the activity. In future issues we expect to cover the studies quarterly. This will enable us to incorporate all articles put out in the preceding quarter. The Reviews themselves are available from the individual issuing bank only, upon request to the Publications Department of that Bank. Addresses of Federal Reserve Banks will be found on page 21. D O RIS ZIMMERMANN, Librarian ACCEPTANCES During inflation— Cleve Feb 69 AEROSPACE Slowdown impact— Atlanta May 69 A G RIBU SIN ESS Farm size trend— Chic May 69 BALANCE OF PAYM ENTS Buy American (technical sup)— Bost July 69 And Eurodollars— Bost May 69 BANK C O M PETITIO N Structure of deposits— Atlanta July 69 And non-bank competition— Phila Oct 69 And holding companies— Bost Jan 69 Free checking accounts— Bost Sept 69 BANK C RED IT CARDS In Second District— N.Y. Jan 69 District and U.S.— Kansas July 69 Johnston pamphlet available— San Fran Nov 69 BANK D EP O SITS 1961-67 changing structure— Rich Jan 69 Expansion 1961-68— San Fran May 69 Government Funds— Cleve June 69 Changes 1958-68— Dallas Nov 69 BANK EARNINGS Cost analysis— Atlanta July 69 1960-67 and mergers— Cleve March 69 BANK H O LD IN G COMPANIES And public policy— Bost Jan 69 Absentee ownership— Atlanta Aug 69 Changing— Cleve April 69 BANK LOANS— BU SIN ESS In 1960’s— Kansas June 69 BANK LOANS— FARM Farm finance 1966— Kansas June 69 BANK M ERG ERS And competition— Phila Oct 69 BANK P O R T FO LIO Governments and municipals— Dallas March 69 BANK RESERV ES One week settlement— Atlanta Dec 69 BANK SU PERV ISIO N Fed and commercial banks— Phila May 69 BONDS, MUNICIPAL 1960-68 Cleve Sept 69 BRANCH BANKING State laws and holding companies— Bost Jan 69 Changing 1959— Rich July 69 BUDGET Restraint and inflation— St. Louis March 69 And economic activity— Kansas July 69 Family and cost of living— San Fran June 69 BUSINESS IN D ICA TO RS Monetary and financial variables— Rich July 69 Heavy industry cycles— Cleve Aug 69 CENTRAL BANKS By Alfred Hayes— N.Y. Feb 69 C ERTIFIC A TES OF D E P O SIT Rates 1961-68— Cleve Feb 69 Liquidity instrument— Kansas Dec 69 CHECK COLLECTION S And float (technical note)— Chic Sept 69 CHECK CRED IT Plans U.S. and District— Kansas July 69 COAL Resources— Kansas Feb 69 COMMERCIAL PAPER Since 1966— Rich March 69 Rates 1961-68— Cleve Feb 69 COM PENSATORY BALANCES Corporate treasurers and deposits— Phila March 69 CONGENERICS Holding companies and related activities— Bost Jan 69 CONSUMER C RED IT Act July 1, 1969: What is Truth?— Dallas April 69 Growth since World War I I — Rich March 69 18 CORPORATE FINANCE During the boom— San Fran Sept 69 DEBT MANAGEMENT 1960’s— San Fran Jan 69 DEMAND D EPO SITS Ownership— Chic March 69 DISCOUNT O PERA TIO N S Collateral requirements— Phila Nov 69 D ISIN TERM ED IA TIO N And inflation— St. Louis March 69 ECONOMIC STA BILIZA TIO N Budget restraint— St. Louis March 69 And monetary policy— St. Louis April 69 And Federal Reserve 1933-68— St. Louis July 69 EURODOLLAR Bost May 69 Chic June 69 Growth and decay of Eurobonds— N.Y. Aug 69 Bond market— Rich Nov 69 EVEN KEEL Fed policy 1933-68— St. Louis July 69 EXPO RTS Developing countries— Kansas July 69 Regional pattern— Atlanta March 69; Aug 69 FARM MECHANIZATION Large size farm trend— Chic May 69 FARM POPULATION And metropolitan areas— St. Louis Jan 69 FEDERAL FUNDS M ARKET Banks in— Kansas Nov 69 FEDERAL RESER V E— C R ED IT CON TROL Monetary theory and practice 1965-68— Cleve Jan 69 And inflation— N.Y. Feb 69 Inflation problems of 1966-69— Phila July 69 Limits of monetary policy— Rich May 69 1966 crunch— St. Louis Sept 69 Inflation control— St. Louis Aug 69 Money supply as guide— St. Louis June 69 Actions 1933-1968— St. Louis July 69 M A R C H 1970 B U S IN E S S REVIEW INFLATIO N (Cont’d) Causes— St. Louis Aug 69 And unemployment— Atlanta Feb 69 And monetary policy— N.Y. Feb 69; March 69 And Federal Reserve curbs— Phila April 69 And tight money— Phila July 69 And interest rates ( Kim brel)— Atlanta Nov 69 Effects on individuals— St. Louis Nov 69 INSURANCE COMPANIES Future— Phila July 69 IN TER EST RA TES Instability— St. Louis May 69 1961-68— Cleve Feb 69 1960-69 long term— N.Y. April 69 Regional differentials— Rich March 69 IRON AND ST E E L IN D U STRY Regional trade— Cleve Oct 69 JO IN T VEN TURES Progenies 1960-68— Cleve July 69 LANCASTER COUN TY Industry and farms and tourists— Phila June 69 LIV ESTO C K IN D U STRY Cattle feeding— Dallas July 69 LUMBER IN D U STRY Prices— San Fran March 69 M EG ALO PO LIS Midwest— Chic Dec 69 M ETRO PO LITA N AREAS Deposits in— Kansas May 69 M INERALS Resources iron, vanadium, etc.— Kansas Feb 69 M O BILE HOM ES Survey— Kansas May 69 $2 billion industry— San Fran June 69 M ODELS (ST A T IST IC S) Reverse causation— St. Louis Aug 69 Federal Reserve policy 1933-68— St. Louis July 69 FEDERAL RESERVE B A N K OF PHILADELPH IA FEDERA L RE SE R V E — C RED IT CONTROL (Cont’d) Survey 1919-1969— St. Louis Nov 69 FEDERA L R ESER V E— FO REIG N EXCHANGE Coombs report— N.Y. March 69 F E R T IL IZ E R IN D U STRY A survey— Dallas Feb 69 FISCA L P O LIC Y And inflation— N.Y. March 69 And unemployment— Phila Jan 69 And expenditures— St. Louis May 69 FLOAT Check collection (technical note)— Chic Sept 69 FO REIG N EXCHANGE Par value system— Kansas Sept 69 Rates (crawling peg)— St. Louis Feb 69 Flexible— St. Louis June 69 FO REIG N TRA DE Boom— San Fran July 69 G O V T. AGENCY SE C U R ITIE S 1961-68 rates— Cleve Feb 69 In the financial markets— San Fran May 69 And the budget— Chic Dec 69 G O V T. SE C U R IT IE S Repurchase— Cleve Nov 69 GRANTS-IN-AID A survey— Rich June 69 Revenue sharing— San Fran Dec 69 G R O SS NATIONAL PRODUCT And money supply— St. Louis Aug 69 HOUSIN G Demographic influences— Kansas Nov 69 INCOM E, PERSONAL Effect on saving— Rich April 69 IN D U STRIA L PRODUCTIO N IN D EX For 12th District— San Fran Feb 69 IN FLA TIO N Cause and cure— San Fran June 69 And interest 1961-68— Cleve Feb 69 Real growth and prices— St. Louis June 69 19 M ONETARY PO LIC Y And inflation— N.Y. March 69 Theory and chronology 1965-68— Cleve Jan 69 1919-69 Influence on economic activity— St. Louis Nov 69 And inflation— Rich Nov 69 And free reserves— Bost Nov 69 MONEY SUPPLY Components— Bost March 69 Theory and chronology— N.Y. June 69 Controversy— Atlanta June 69 Measure of money and credit— Chic July 69 As indicator— Rich July 69 Money stock analysis— St. Louis Oct 69 And fiscal policy— Phila Dec 69 Stock and base— St. Louis Oct 69 MUNICIPAL FINANCE Industrial development bonds— Phila March 69 Bonds, 1960-68— Cleve Sept 69 Local expenditures— Rich Dec 69 NEGROES Jobs in Boston core— Bost Jan 69 Suburban jobs— Phila Oct 69 Black capitalism— Phila May 69 OPEN MARKET O PERA TIO N S Objectives 1933-68— St. Louis July 69 OPERATIO N T W IST Decade of— San Fran Jan 69 O W NERSH IP OF D E P O SITS 1961-67 changing structure— Rich Jan 69 PAPER IN D U STRY 4th District— Cleve April 69 PRICE CONTROL World War I I — St. Louis Sept 69 PRICES— STA BILIZ A TIO N Federal Reserve impact 1933-68— St. Louis July 69 REGIONAL AN A LYSIS Exports— Atlanta Aug 69 20 REGULATION Q 1961-68 effect on yields— Cleve Feb 69 Credit crunch— St. Louis Sept 69 REGULATIO N Z Truth-in-Lending Act— Dallas April 69 What is it— Phila June 69 RURAL DEVELOPM ENT Appalachia— Phila Nov 69 SAVINGS BONDS As investment— San Fran Sept 69 SAVIN GS, PERSONAL Changes from income shift— Rich April 69 SELEC TIV E C RED IT CON TROLS No substitute for monetary (Francis)— St. Louis Dec 69 SILV ER End of era— San Fran May 69 SPECIAL DRAW IN G R IG H TS Revise system— Chic Feb 69 Reform system— Cleve Feb 69 STOCK MARKET Profile of— Cleve Nov 69 T E X T IL E IN D USTRY Survey— Rich Sept 69 UNEMPLOYMENT And long term employment U.S.— Rich June 69 VALUE-ADDED TA X Evaluation— Phila June 69 V ELO C ITY Garvy book available— N.Y. Nov 69 W AGES Take-home pay— Chic May 69 W ATER SUPPLY Adequacy— Dallas Oct 69 WOMEN— EM PLOYM ENT In banks— Phila July 69 Charts— Phila Sept 69 FEDERAL RESERVE BANKS (Alphabetically by Cities) Federal Reserve Bank of Atlanta Federal Reserve Station Atlanta, Georgia 30303 Federal Reserve Bank of Boston 30 Pearl Street Boston, Massachusetts 02106 Federal Reserve Bank of Chicago Box 834 Chicago, Illinois 60690 Federal Reserve Bank of Cleveland P.O. Box 6387 Cleveland, Ohio 44101 Federal Reserve Bank of Dallas Station K Dallas, Texas 75222 Federal Reserve Bank of Kansas City Federal Reserve P. O. Station Kansas City, Missouri 64106 Federal Reserve Bank of Minneapolis Minneapolis, Minnesota 55440 Federal Reserve Bank of New York Federal Reserve P. O. Station New York, New York 10045 Federal Reserve Bank of Philadelphia 925 Chestnut Street Philadelphia, Pennsylvania 19101 Federal Reserve Bank of Richmond Richmond, Virginia 23213 Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, Missouri 63166 Federal Reserve Bank of San Francisco San Francisco, California 94120 Mail will be expedited by use of these addresses. N O W A V A IL A B L E : G U ID E T O IN T E R P R E T IN G FE D ER A L RESERVE REPO RTS A 43-page b ook let entitled, “Guide to Interpreting Federal R e serve R ep o rts,” has been prepared in the R esearch D epartm ent of the Fed eral R eserve Bank of Philadelphia. This booklet is de signed to aid readers in understanding significant financial and econom ic developm ents as reflected in two Federal Reserve reports w hich receiv e wide circu lation— the W eekly Condition Report of Large C om m ercial Banks and the Consolidated S ta te m ent of A ll Fed eral R eserve Banks. Copies of the b ook let are available upon request to the Public Inform ation D epartm ent of the Federal Reserve Bank of Phila delphia, Philadelphia, Pennsylvania 19101. FOR THE R E C O R D ... INDEX BILLIONS $ AGO AGO 1970 Third Federal Reserve District United States Per cent change SU M M ARY MEMBER BANKS. 3RD. F.R.B. Per cent change Jan. 1970 from mo. ago year ago 12 mos. 1969 from year ago Jan. 1970 from mo. ago year ago Manufacturing 12 mos. 1969 from year ago Employ ment Standard Metropolitan Statistical Areas* - 3 - 2 - 1 - 2 +26 -1 4 + 5 - 2 - 2 + 4 +48 - 8 2 0 Total Deposits* * * Per cent change Jan. 1970 from Per cent change Jan. 1970 from Per cent change Jan. 1970 from year ago mo. ago mo. ago + - mo. ago Wilmington .. - i 1 year ago 6 - 2 6 6 + 3 - 3 0 Altoona ...... year ago year ago mo. ago + 3 + 7 + 12 - 0 Trenton ...... - + 6 - 7 + 3 Harrisburg ... 0 1 + 3 0 - + 2 - - 4 + 8 1 + 4 - 5 +31 - 4 0 + 2 + 2 + 2 - 3 + 5 3 + 11 + 8 + 19 +30 +46 Johnstown ... - 7 4 2 3 0 + 8t - 2 + 8 -1 0 -1 8 - 4 + 12t - 7 3 2 4 1 0 - 2 + 8 -1 0 -1 8 - 3 + 9 - 2 + 4 - 2 + 14 + 2 + 9 - Lancaster ... - 1 + 1 - 2 + 10 + 9 +22 -1 5 - 3 Lehigh Valley. - 1 0 - 2 + 9 + 4 + 4 - 2 - 7 Philadelphia - 3 - 2 + 3 + 10 + 12 - 9 - 1 0 + 1 + 2 + 12 + 9 - 1 + 3 . R e a d in g ...... 1 - 0 4 + 9 + + It ’ Production workers only “ Value of contracts ‘ “ Adjusted for seasonal variation + 6t 1 0 + 5 + 6 t l 5 SM S A ’s ^Philadelphia Scranton . . . . - 1 - 1 - 1 + 3 + 13 + 2 - 2 + 2 Wilkes-Barre . PRICES Wholesale ................ Consumer ................ Check Payments** Atlantic C ity.. BANKING (All member banks) Deposits ................. Loans ..................... Investments ............. U.S. Govt, securities.. Other ................... Check payments*** ... Payrolls Per cent change Jan. 1970 from LOCAL CHANGES MANUFACTURING Production .............. Electric power consumed Man-hours, total* ... Employment, total . . . . Wage income* ......... CONSTRUCTION** ...... COAL PRODUCTION . . . Banking - 1 + 2 + 1 + 8 + 10 + 6 - 2 -2 1 Y o r k ........... - 2 + 2 - 2 + 10 -1 2 + 11 -1 4 - 6 ‘ 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.
@FedFRASER