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RESERVE BANK OF PHILADELPHIA W ho Changed the Rules o f the Game? Another Problem Year for Farmers BUSINESS REVIEW is produced in the Department of Research. Jack C . Rothwell was primarily responsible for the article, "W h o Changed the Rules of the G a m e ?" and J . Allan Irvine for "Another Problem Year for Farmers." The authors will be glad to receive comments on their articles. Requests for additional copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia, Philadelphia I, Pennsylvania. WHO CHANGED THE RULES OF THE GAME? The Evolution and Development of Tools of Federal Reserve Policy Early one morning a ship pulled out of the course of events, events that stimulated central misty, fog-enshrouded harbor. In its hold was bankers to search out ever more adequate and $50 million in gold bullion. Late that same aft finely honed tools to implement their policies. ernoon the central bankers met. They looked over charts and figures, discussed the situ Wars, recessions, depressions, and inflations— ation, then raised the discount rate by one-half these were the forces of change. For as the Brit of one percentage point. In the weeks that ish economist, D. H. Robertson, has written, followed, other interest rates rose. Money and “ . . . a monetary system is like a liver: it doesn’t credit take up very much of our thought when it goes became tighter. It was less easy to borrow. Thus, a few decades ago the tools and tech periods of political and business instability— right, but it attracts a deal of attention when it goes wrong.” 1 niques used to determine how much money and In this article we take a look at the evolution credit should circulate were relatively simple, through time of monetary policy with emphasis in many instances reduced almost to a formula, upon the tools used to implement that policy. as in the example above. We shall look for sources of change— why and As time went on, things changed considerably. For just as a carpenter needs better tools to how new tools evolved, how they developed. As a starter, let’s see why the Federal Reserve build a finer house, so must central bankers System was established in the first place. What have better and more sensitive tools if they are were the immediate events leading to the crea to do a more competent job of adjusting the tion of the Fed, and what bearing did these supply of money and credit to the needs of a events have on the tools given the new System? more complex economy. The “ who” in these changes was actually the 1 D. H. Robertson, Money, (Cambridge: The University Press, 1922) p. 2. 3 business review PA N IC! wave of selling, stock prices might fall and The crises and money panics of the late nine many brokers would be unable to repay the teenth and early twentieth centuries were the New York banks. The New York banks, in turn, immediate seed from which the Federal Re would be unable to meet all of the demands of serve grew. During these periods of crises, bank smaller banks. runs were an everyday affair. Frightened de Then panic would set in. Bank depositors positors queued up by the thousands to withdraw would lose confidence and line the dusty streets deposits from suspect institutions. to withdraw their funds. The result: bank fail The basic problem was a general lack of liquidity— the absence of some ultimate source ures, loss of savings, financial disaster. The ul timate capacity of banks to pay depended upon of credit and currency on which the banking a thin margin of collateral which could not system could draw when it encountered large- readily be converted into cash. There was no scale demands for funds. For the banking sys ultimate source of currency and credit which tem which preceded the Federal Reserve was a could be called upon when nearly everyone hierarchical affair in which almost any disturb wanted currency instead of bank deposits. ance could cause financial trouble. National The crisis of 1907 was the turning point. The banks were required to hold reserves, of course, National Monetary Commission was created and but smaller banks were allowed to keep a large given the task of investigating banking condi proportion of their reserves on deposit with tions, recommending needed changes, and re medium-sized porting to Congress. Following the 1912 report or large banks. Medium-sized banks, in turn, held a sizable proportion of their of the Commission, Congress acted quickly, and reserves with the New York banks. Finally, New the Federal Reserve Act became law on Decem York banks were allowed to use three-quarters ber 23, 1913. of the pyramided reserve funds to expand credit, and they typically loaned them to stock brokers on call. Thus, the ultimate capacity of the banking NATURE OF THE N E W SYSTEM Under the Federal Reserve Act, 12 regional Federal Reserve Banks were set up and a Board system to meet the demands of its depositors was established depended heavily upon the collateral of these banks which became members of the System in Washington. Commercial call loans to brokers. Everything might go rea were required to keep reserves with the System sonably well as long as the call loans could be and the Reserve Banks were given the power to converted into cash with little or no delay. But extend credit to member banks by discounting let the demands for credit and currency pile specified up and panic would begin. this credit banks could obtain currency from short-term commercial paper. With It might start in the smaller towns, say a de the Federal Reserve Bank or could meet drains mand by farmers to be paid in currency for of funds to other banks. This “ discount mech their fall crops. If demands were sufficiently anism” became the first important tool of Fed large, the New York banks would feel the pinch eral Reserve policy. The System could use this and call for repayment of their brokers’ loans. tool to make credit and currency available when Brokers would sell stock to get cash. With a the banking system needed additional funds. 4 business review At first it was thought that the funds made production grew, credit would grow. If produc available by the Federal Reserve Bank came tion were contracting, so would credit. Thus it from the centralized pool of reserves which the was thought that credit would not outgrow pro commercial banks kept with the Fed. But later duction and hence there would be no danger of it was realized that the bulk of these reserves too much credit. The whole thing would be au was legally required and thus could not be tomatic. “ drawn out,” and that the Fed actually created new reserves when it gave credit on its books Gold flow s and discount rate for discounted commercial paper. Gold flows and discount rate administration This, then, was the first tool utilized by the under the so-called “ rules of the game” of the Fed. But what checks were put on the use of classical gold standard (which influenced the this tool to prevent a flood of new money and thinking of most System officials) provided an credit from descending upon the economy as additional safeguard against over-expansion of banks discounted paper to get new money from credit. If too much credit were made available, the Fed? prices would rise (with more money chasing a The answer, or so it was thought at the limited supply of goods) and interest rates time, was provided within the Federal Reserve would fall. When this happened, gold would Act itself. It was thought that the proper quan flow abroad as (a) tity of money and credit could be assured abroad (at lower prices) and foreigners bought (among other ways) by controlling the quality less here, and as (b) Americans invested more of credit extended by the System, and allowing the System to vary the interest or “ discount” abroad (at higher interest rates) and foreigners less here. Thus, gold outflows provided a ready rate charged for discounting commercial paper. signal that too much money was around; under But how was this supposed to work? the “ rules of the game,” central banks should Americans bought more use their tools to make money tighter at home, Q uality of credit thereby adding to business stability. The original Act limited Federal Reserve dis How to tighten credit? Raise the rate charged counts to short-term paper “ issued or drawn banks when they discount their commercial for agricultural, industrial, or commercial pur paper. A higher discount rate would discourage poses.” In other words, the Fed should provide bank new credit through the discount mechanism to banks. This would help to limit the amount of borrowing from the Federal Reserve banks but only on the basis of their short-term bank credit available and raise its price. With loans made to finance current production— less money pursuing domestic goods, some steam goods in process. It was thought that this would would be taken out of the boom and pressure assure that not too much money and credit on prices would be eased. would be created. In short, it was hoped that the new Federal Since the Fed made funds available only on Reserve System could put an end to the money the collateral of productive loans, it was argued crises of the nineteenth and early twentieth that each new grant of credit by the Fed would centuries and could provide a measure of eco match the needs of the production process. If nomic stability. The main tools for the task: 5 business review discount accommodation and the discount rate. In May of 1920, John Wanamaker’s in New The beauty of the tools (in theory at least) York cut retail prices 20 per cent. By August was their automaticity— provision of the proper of 1921 wholesale commodity prices had plunged quantity of credit by controlling its quality and 40 per cent. Unemployment leaped to 4 % mil by adjusting discount rates to gold movements. lion in 1921. Farmers were especially hurt as Unfortunately, that stability was not to be they had used extraordinarily high wartime forthcoming. And just as economic instability earnings to buy and bid up prices of agricul was a motivating factor behind the creation of tural land and thus were faced with huge mort the Federal Reserve System, it was an important force behind the further development of ideas prices. and tools. The new instability was the inflation-deflation cycle associated with . . . gage debts in a period of declining commodity War, inflation, deflation: these conditions set the stage for a fundamental reappraisal of Sys tem goals, guides, and tools. And this reap praisal was to bring important changes. The W A R A N D ITS AFTERMATH direction of change: a growing dissatisfaction Hardly had the System begun functioning effec with passive implementation of monetary policy tively when the guns heard in Europe caught based on automatic guides. But why a new the United States in the turmoil of World War emphasis on discretion and action? I and the System’s efforts were turned in the direction of wartime financing. After the war the almost inevitable inflation The new em phasis The reasons were at least two in number. First came, described by System officials at the time of all, there was widespread dissatisfaction with as “ characterized by an unprecedented orgy of the cycle of inflation and deflation that the coun extravagance, a mania for speculation, over try had just gone through,2 and dissatisfaction extended business in nearly all lines and in with the past invites re-evaluation. every section of the country, and general de A second reason for the new emphasis upon moralization of the agencies of production and discretion was simply that the old guides to distribution.” The war was financed in large policy— gold flows and qualitative discount ad measure by creating money, and the money had ministration— were becoming increasingly ob come home to roost. solete. The international gold standard was no At first the System declined to take restric longer in operation. Indeed, the United States tive action, working instead to keep credit read was the only major country still maintaining ily available and interest rates low so as to fa gold payments. So how could gold be a guide cilitate Treasury handling of the large war debt. to policy? Not until May of 1920 did the System embark upon a thorough-going policy of restraint. But With regard to the gold standard, the 1923 Annual Report noted that: unfortunately this very month marked the end Under the present conditions, with gold of the postwar boom and the beginning of one embargoes in force in most foreign of the sharpest and most severe price declines in history. 6 2 The hearings in 1 2 before the Joint Commission of Agricul 91 tural Inquiry provide a pungent example of this dissatisfaction. business review countries and the United States practi Reserve Bank was signed by a farmer, this cally the only free gold market of the didn’t mean that the new funds so obtained by world, the movement of gold to this the commercial bank would be used to make country does not reflect the relative po additional “ productive” sition of the money markets nor does business. The funds might be used to finance the movement give rise to corrective speculation, say, in stocks. Thus, money might influences, working through exchanges, grow at a faster rate than production. loans to farmers or money rates, and price levels, which In short, since System officials were dissat tend to reverse the flow. The significance isfied with the past record of instability and which movements in the reserve ratios since they could no longer rely on the automatic formerly possessed rested upon the fact guides of the past, the System began to move that they were the visible indicators of away from the era of rules and automatic ad the operation of the nicely adjusted justment. In the 1923 Annual Report, the Fed mechanism eral Reserve Board had this to say: of international finance. With this mechanism now inoperative, In its ultimate analysis credit adminis the ratios have lost much of their value tration is not a matter of mechanical rules, but is and must be a matter of as administrative guides. Moreover, the old “ real bills” or “ commercial judgment — of judgment concerning loan” theory of discount administration was each specific credit situation at the par questioned for logical consistency: ticular moment of time when it has There are no automatic devices or de tectors for determining, when credit is arisen or is developing . . . the Federal granted by a Federal Reserve Bank in primarily to information concerning the response Reserve Board must look for guidance demand, state of industry and trade and the state whether the occasion of the rediscount of credit. Changes in the volume of was an extension of credit by the mem bank credit in use are the outcome of ber bank for nonproductive use. Paper changes in the volume of business. A offered by a member bank when it re proper and effective credit policy, con to a rediscount discounts with a Federal Reserve Bank sidered in its broader aspects must, may disclose the purpose for which the therefore, be based on that wide vari loan evidenced by that paper was made, ety but it does not disclose what use is to brought together, throw light on the be made of the proceeds of the redis changes taking place in the business count. A farmer’s note may be offered situation and their relation to current for rediscount by a member bank when of economic facts which, when banking and credit trends. in fact the need for rediscounting has Two words summed up the new attitude: dis arisen because of extensions of credit cretion and action. These two words were in by the member bank for speculative use. sharp contrast to those which best described In other words, just because a note redis earlier policy. It was now discretion and action counted by a commercial bank at a Federal instead of automatic and passive. Of course 7 business review there was no sharp break with the past. Some bank within and without the System still clung to amount of funds which the banking system had check which reduced the aggregate “ the real bills doctrine.” available to lend and to invest. Yet the new emphasis had indeed arrived, and Here, then, was a new technique the Fed it carried through to the tools of Federal Re could use to inject or withdraw funds from the serve policy. For during the period of transi economy. And most important, the Fed could tion toward discretion and action an important do so at its own initiative. It didn’t have to finding had been made, which was to provide depend upon banks to come in and borrow as much of the wherewithal to implement the new attitude. That finding was the discovery of the it did with discount policy. It didn’t have to wait for banks to react to a change in the dis monetary impact of open market operations. count rate. Open m arket operations as a tool of credit policy ing ideas of action, initiative, and judgment. Where System policy called for action, the new Open market operations simply mean the pur tool provided the wherewithal for prompt, de chase and sale of securities by the Federal Re cisive action. Where policy called for discretion serve System in the “ open” market. The Federal and initiative Reserve Act gave the System legislative author formulas of yesteryear) the new tool provided ity to engage in these operations and the Sys the wherewithal to invoke that initiative— to tem did so on numerous occasions in its early change the funds available to lend and invest history. Until the early twenties, however, the at its own discretion and judgment instead of The new tool fit in perfectly with the evolv (as opposed to the automatic Federal Reserve Banks bought or sold securi at the judgment of the banking system. Thus ties primarily: in its 1923 Annual Report the Board recognized (a) with an eye toward pro viding earnings (the securities purchased gave that: the banks an interest income), (b) to facilitate The difference between discount opera Treasury financing, or (c) to provide the col tions and open market operations is lateral to back Federal Reserve Bank notes, a that the initiative in rediscounting lies type of currency no longer issued by the Fed. with the member banks, while in the Then in the early twenties a curious thing purchase and sale of securities the ini happened. System officials began to notice that tiative may be taken by the Reserve the purchase and sale of Government securities Banks. had interesting effects on credit conditions. Pur Moreover the Board directed: chases by the System seemed to ease credit while That the time, manner, character, and sales tended to make credit less available. volume of open market investments pur The explanation of this phenomenon was sim chased by Federal Reserve Banks be ply that, when the Fed purchased securities, it governed with primary regard to the paid for them with newly created funds which, accommodation of commerce and busi when deposited in the banking system, made ness and to the effect of such purchases more money available to lend and to invest. or sales on the general credit situation. When it sold securities, it generally received a No longer would open market operations be 8 business review primarily for income. They now reflected an led to the use of new guides and new tools with active and positive credit policy. which to affect the quantity of money and credit. The Federal Reserve in the early 1920’s also Yet this was by no means to be the end of the be evolutionary process. There were other disturb tween open market operations and discount pol ances to come. One of the most important: the icy. Most important— they learned to coordinate Great Depression of the 1930’s. discovered many important relationships the two tools to achieve maximum effectiveness. Now that Federal Reserve officials had THE GREAT DEPRESSION come to understand open market op The Depression of the 1930’s was one of the erations, their control instruments could most severe and prolonged of all time. It was be employed with more initiative, pre marked by bread lines and shanty towns. Its cision, and effectiveness. They could emblems were the blue eagle and the C.C.C. use discount rates alone, open market Its despair was the breeding ground for polit operations alone, or the two together in ical agitation, even violent revolution. varying degrees, depending on condi The economic statistics of the Great Depres tions and the results desired. For ex sion were morbid reminders of human despair. ample, if they wanted merely to offset By 1933, one of the worst years of the depres gold or currency or to take only mildly sion, total spending as measured by gross na restrictive or easing action, they might tional product was one-third less than in 1929. leave discount rates unchanged and rely solely on sales or purchases in the open And unemployment, the most important indi cation of human misery, reached almost 13 mil market . . . lion by 1933. One out of every four persons in if the Federal Reserve wished to restrict credit, it would usu ally begin by selling Government se the labor force was out of a job. What could the Federal Reserve System do member about it? At first, the hands of System officials banks more deeply into debt at the Re were pretty much tied. One problem was gold curities, which would force serve Banks. This alone would lead the reserves and collateral requirements. The Sys banks to lend less liberally and market tem was still required to back its notes and de rates of interest would rise. The Reserve posits with gold and eligible commercial paper, Banks would then decide whether, and and since gold was flowing out and the volume how much, to add to the restrictive of eligible paper was declining (with the slow pressure by raising discount rates.3 down in production), the System could not act Thus disturbances in the economic liver stim ulated Federal Reserve officials to reappraise monetary policy. First, the money panics of the nineteenth and early twentieth centuries had aggressively to push currency and credit into the banking system. More than this was involved, however. Some System officials given us the Fed and its original tools. Now considered the war and postwar inflation-deflation cycle and inevitable to purge the economy of the depression necessary the extravagances of the new-era pros 3 Lester V. Chandler, Benjamin Strong, Central Banker (Washington: The Brookings Institution), pp. 236-237. perity. This feeling was accompanied 9 business review by an unwillingness to do anything that among other things, to refuse credit accommo might involve a return of what were dations to offending member banks. considered the artificial conditions of Then came the Securities Exchange Act of that period. For a time there was both 1934 which gave the System its first “ selective” a return to traditional theories and control of credit, selective in the sense the con principles and a hesitance to devise or trol would not affect the total amount of credit employ new techniques of monetary put to use in the economy as a whole, but which management. These developments are illustrated in the caution with which could change the amount of credit put to use the Reserve officials pressed for exten in a particular sector of the economy— in this case, for the purchase and carrying of securities sion of the discount facilities of the listed on national exchanges. (See the table de System and the collateral provisions scribing Federal Reserve tools in more detail.) for Federal Reserve notes.4 The stock market was singled out for a very Nevertheless, the legislative mills began to important reason. It was thought that much of grind as the Depression worsened, and the Sys the panic and perhaps some of the roots of the tem emerged with major changes in its box of Depression lay in the speculative binge that tools. carried stock prices to the inflated highs of Legislation affecting System tools Reserve officials had been disturbed about the 1929. Many times during the twenties Federal Among the first of many bills passed affecting rapid rise in stock prices and the volume of System tools was the Glass-Stegall Act of 1932 credit which was helping to push stock prices which gave the System power in exceptional up. (It was possible to buy a stock costing $100 circumstances to extend credit without requir by putting up say, $10 of your own money ing eligible paper. The word “ exceptional,” how and borrowing the rest). By October, 1929, ever, was an indication that the old “ commer loans to brokers had risen above $8.5 billion, cial loan theory,” though dealt a blow to the more than two-and-a-half times their level three logical chin, was still stirring. years earlier. Other legislation was aimed at curbing some Yet despite their concern with the stock mar of the speculative excesses typical of the twen ket, System officials were often hesitant to use ties— excesses such as those that had contrib their general controls to decrease over-all avail uted to the stock market crash. ability of credit (which might be needed by The Banking Act of 1933 empowered the System to prevent undue use of “ bank credit industry in general) just to keep some of this credit from spilling over into one sector. for the speculative carrying of or trading in This was the environment giving rise to the securities, real estate or commodities or for any development of the Fed’s first “ selective” tool. other purpose inconsistent with the maintenance The Board was empowered to prescribe mini of sound credit conditions.” To put teeth in this mum margin requirements (the amount of cash provision the Act authorized the Reserve Banks, 4 Kar! R. Bopp, "Three Decades of Federal Reserve Policy," Board of Governors of the Federal Reserve System, 1947) No. 8, p. 13. Postwar Economic Studies, (Washington: 10 relative to borrowed funds) for purchasing or carrying securities or selling them short. Later, as will be discussed, the Board was given ad business review ditional selective controls when conditions in yet spent itself when the roar of guns was heard dicated the desirability of checking the amount once more in Europe. It was the eve of the of credit flowing into one or more other sec bloodiest conflict of them all: World War II. tors of the economy. Finally, in the Banking Act of 1935, the Fed W A R A N D ITS AFTERMATH eral Reserve Banks were allowed to “ make ad When national borders are threatened, all ob vances to any member bank on its time or jectives become secondary to that of defense. demand notes . . . which are secured to the World War II was certainly no exception to satisfaction of such Federal Reserve Bank” but this general rule, and as part of the national of 1 per cent. As a re effort, the money and credit-creating powers sult, the Board of Governors issued a regulation of the Federal Reserve System were placed at the which made all sound assets of member banks disposal of the Treasury. An important objec at a penalty rate of ^ a potential basis of advances by the Federal tive of war finance was to see that as much war Reserve Banks. This regulation marked, for all borrowing as possible should tap savings. Yet no practical purposes, the demise of “ the commer bond would go unbought for lack of funds. The cial loan theory.” System stood ready to create additional money if The 1935 Act also gave the System an im it were needed to finance the war effort. This portant new tool which it had asked for (but decision was to have an important influence on had not received) as far back as 1916. It em the System’s bag of tools— especially on its se powered the Board of Governors to change re lective controls and on the postwar development serve requirements within specified limits and of open market operations. thus increase or decrease the volume of bank support. If, for example, a certain class of banks P e ggin g the Governm ent securities m arket was allowed to reduce required reserves held To carry out the war policy the Treasury and with the Fed from, say, 12 to 10 per cent of the Fed agreed in March of 1942 that the then- deposits which a given volume of reserves would their net demand deposits, these banks could existing pattern of interest rates on Govern then expand loans, investments, and deposits ment securities would be maintained. This would immediately. assure funds at relatively low rates and it would In summary, then, the Great Depression re mean that potential buyers of securities would sulted in significant changes in Federal Reserve not delay their purchases, hoping to gain by tools. Reserve Banks could now lend to member waiting for interest rates to rise. banks on any sound banking asset. Reserve re It also meant, however, that the Fed would quirements could be changed within specified have to provide funds needed to purchase any limits. And, finally, the System was given its securities that others were unwilling to take at first “ selective” tool— the authority to set stock prevailing rates. For to peg a price (and an margin requirements. interest rate is a price) one must be willing to Thus another period of business instability buy all that the market rejects. Thus the Fed had brought change. Still, however, there was lost effective control over the money supply. (Continued on Page 14) more to come. The Great Depression had not 11 F E D E R A L R E SE R V E T O O L S : W H O , W H A T , W H E N , W H E R E , W H Y , A N D H O W DISCOUNT OPEN MARKET OPERATIONS POLICY Discount Rate C H A N G E IN RESERVE REQUIREMENTS SELECTIVE INSTRUMENTS Member Bank Borrowing -------------------------------------------------------------------------------------------------------------------------------------I. W hat is it? Rate charged member banks for borrowing from the Federal Reserve Bank. Mainly purchases and sales of Government securities. Change in percentage of deposits which member banks are required to hold as reserves. Instruments designed to influence the amount of credit put to use in a particular sector of the econ omy. A t present, only margin requirements are in effect. Margin requirements: set minimum required down payments tor purchasing or carrying of securities listed on national exchanges. Consumer credit controls: set minimum down pay ments and maximum periods of repayment ap plied to consumer credit. Real estate credit controls: set minimum down payments and maximum periods of repayment for credit extended to finance new construction. Federal Open Market Committee. Board of Governors. Board of Governors. Federal Reserve Rules and practices involved in borrowing. Rules are not changed flexibly as a tool of policy but have an important bearing on use and impact of borrowing. Federal Reserve Federal Reserve ♦ Who _> § ,E 2. Who has the authority? Board of Directors of each FRB establishes rate subject to re view and determination by Board of Governors. Rules of Board of Governors (Reg. A ) administered by each Federal Reserve Bank. ' 3. Who takes the initiative? Federal Reserve Member bank 4. Limits to use ■ "S “ Lower limit, zero; no upper limit. Lower limit, zero; upper limit provided by tradition against borrowing, administration of discount window and total expan sion of reserve credit permitted by gold certificate reserve ratio. Y* ’Limit of purchases: lower, zero; upper, gold certifi cate reserve ratio. Sales: lower, zero; upper, size of portfolio. Demand deposits: Reserve City banks Country banks Reserve City banks Country banks Time deposits: - 10-22% - 7-14% ) u o / ) 3~ Stock Margin Requirements: lower limit, zero; upper limiL 1 per cent. 00 Consumer Credit: the power to change the mini mum down payments and maximum periods of repayment was not limited, but was left to the dis cretion of the Board of Governors. Real Estate Credit: power to change requirements was in some cases limited by statute. Changes can be small but are not easily reversed over short periods; for this reason, experimental "probing" action is more appropriate for open market operations, with later "confirma tion" through change in discount rate. With borrowing at the initiative of the banks, reserves can be - supplied in precise amounts and for periods needed by individ ual banks. The most subtle instrument of all; volume can be large or small; operations easily reversible. The least subtle instrument; a large volume of de posits is affected by small change in requirements; not easily reversible. Flexibility is limited by trade practices and ad ministrative problems. Makes over-all policy more flexible, however, by enabling the Federal Reserve to influence credit in one area of the economy without restricting credit in others. 6. How is it coor dinated with other instruments? Generally to "confirm" prior action in open market operations; (e.g. by selling Government securities the F.R. can bring about higher rates on Treasury bills and then follow with an increase in the discount rate; also, by restrictive open market operations the F.R. can tighten reserve positions, forcing more banks to borrow from the Reserve Banks and hence making the discount rate more "effective"). Acts as a safety valve; if other instruments unduly tighten re serves of individual banks, they may resort to the discount window. Pressure on the discount window will depend partly on coordi nation of discount rate and open market operations (e.g. if the discount rate is significantly below rates on Treasury bills for an extended period, banks will tend to obtain reserves by^ discounting rather than selling bills). Used in conjunction with discount rate and mem ber bank borrowing (as explained under those headings); also may smooth effects of changes in reserve requirements. Often may require use of other instruments to smooth the effects of changes. In relation to the general instruments, selective instruments generally reinforce, compensate, or at certain times serve as a partial substitute. 7. Administrative problems? None Administration of discount window requires close observation of nature and purpose of borrowing by individual banks; prob lem of determining eligibility of paper for rediscount arises only occasionally. ^ Execution of open market operations requires the trading desk to be in intimate contact with the money and Government securities markets. Because changes in requirements^ apply to large groups of banks, the impact on individual banks must be studied carefully in advance; also, changes impose some burdens on member banks in calcu lating their positions. Administrative difficulties are much greater than for general instruments. The difficulties include problems of determining the value of collateral, recognition of trade practices, and policing ac tions of a large number of lenders to enforce regulations. 8. What is its psychological impact? Varies. May be taken as reflecting a major policy decision by the monetary authorities; or may be merely a technical adjust ment of discount rate to market rates. Because bank rate is so important in other countries, a change in the discount rate takes on additional symbolic significance at times of balance of payments difficulties. Tradition against continued indebtedness means that rising volume of borrowing has increasing tightening effect through banker psychology. * Unless operations are very large scale, likely to have little effect because it receives relatively little publicity. May be considerable. Often used for major policy actions for dramatic effects; all affected banks necessarily made aware of the action in computa tion of required reserves. Impact on individuals is likely to be greater than that of general instruments because individuals are made aware of regulations in the process of borrowing or buying the listed articles. 9\ How does it affect bank reserves? Determines the price for borrowing reserves. Borrowing increases reserves; repayment decreases reserves. re- No effect on total reserves; changes the amount of deposits which a given amount of reserves will sup port. A reduction in requirements frees reserves for expansion of deposits; increases in require ments have been used principally to mop up excess reserves. No effect. Borrowing member banks. Borrowing member banks. Money market banks and Government securities dealers. All in particular class of member banks whose re quirements are changed (Reserve City or Country). Borrowers and lenders in the selected credit con trol area. Primarily through the complex of short-term rates ip which the discount rate plays a pivotal role; a change in the discount rate influences the method by which banks adjust reserves and hence affects other rates (e.g. a rise in the discount rate above the Treasury bill rate induces banks to sell bills rather than borrow, thus tending to raise the bill ra te). By shifting indebtedness from bank to bank; because of relucThrough the normal flow of funds among banks tance to be in debt except for short periods, borrowing banks*' M and regions (e.g. the additional reserves from F.R. sell securities to repay the Federal Reserve; this reduces repurchases spread from money market centers to serves of other banks (assuming the F.R. does not increase ^ither parts of the country) and through the corntotal reserves by other means) and forces them to borrow. plex of rates in the money and Government securi ties markets. 5. Can it be used flexibly? < • <J <0 a c w Purchases increase ''Serves. reserves; sales decrease v -C *■ 10. Where is the w immediate impact? 11. How does the effect spread? £ 12. How does it affect credit? Although each of the tools has its unique impact, it works through YheSupply, cost and availability of bank reserves and the level and pattern of interest rates. In turn, this has an effect, at the margin, on the supply, cost and availability of money and credit. And, finally, this influences the flow of expenditures and the pace of economic activity. _ Changes the distribution of credit among differ ent sectors of the economy. business review would be a greater supply on the market) ( Continued from Page 11) This arrangement, of course, had great in flationary potential. As additional money is created the public holds additional purchasing power which can be used to bid up prices of and yields would rise. Rising yields and inter est rates would increase Government interest expense. Falling prices would mean that the hundreds of thousands of investors in marketable Gov scarce goods. Yet during the war, prices were held rela ernment securities would sustain capital losses. tively stable. Rationing and price controls went And it was feared at the time that such capital into effect. Moreover, the Fed was given an ad losses might mean real economic trouble. How? ditional selective tool at the outset of the war— The possibility of capital losses might bring a the power to set minimum down payments and wave of selling by investors who hoped to min maximum time-payment periods on a wide range imize losses. This would mean further capital of consumer goods. losses Despite these measures war finance was to have an important impact in the postwar pe riod. and increases in yields and interest rates. Heavy capital losses and rising interest rates, in turn, could disrupt the lending-investing proc ess and demoralize the securities markets. Who Afterm ath wants to lend or invest when his investment Between July 1, 1941 and June 30, 1946 the might fall precipitously Federal Government raised $383 billion. Forty- higher interest rates might be just around the six per cent of this amount came from taxes and corner? And what business wants to borrow in value and when 54 per cent was obtained by borrowing. Over for capital investment in such an uncertain 40 of this 54 per cent came from the banking market? system. As Finally, a result, the money supply increased if the lending-investment process should break down, plants would not be built, enormously. From $36.6 billion in 1939, the houses would not be constructed. The workers money supply soared to $103.5 billion in 1945. who built houses and plants would be out of a Then when wartime price controls and rationing job, without income, and unable to buy goods. were relaxed a flood of purchasing power de A drying-up of purchasing power could mean scended upon a relatively limited supply of depression. goods, and prices began to rise. This chain of events could have happened. At first, the Fed found it difficult to exercise Again, it might not have happened. At any rate, the kind of monetary restraint necessary to the Fed had to consider the possibility in de control the inflation. Once again the problems ciding whether to support the Government se of managing a huge Federal debt influenced curities market. The Fed and the Treasury de the cided the risks were too great. Fed to subordinate other objectives that of facilitating Treasury finance. to If the Of course, the Fed did take some anti-inflation Fed should try to mop up some of the excess measures. When forced to buy some securities liquidity by selling Government securities, the in order to maintain the rate structure, it might prices of these securities would fall (as there sell others. It also raised reserve requirements. 14 business review Short-term rates were allowed to rise some. in our rate of growth. This is the paramount Regulation W was restored. Moreover, the Fed economic problem we face today. was given another selective tool in 1950— the imum payment periods for credit on purchases G RO W TH, THE BALANCE OF PAYMENTS, A N D FEDERAL RESERVE TOOLS of residential real estate. But all this was not Simply put, the United States balance-of-pay- enough to contain inflation. ments deficit results from the fact that we are power to set minimum down payments and max Then came the Korean War; when fighting paying out more to foreigners than we are re broke out the risks of recession were virtually ceiving from them. To finance the difference, eliminated and the pressures of inflation greatly we have been transferring gold and dollars to increased. So in March 1951, the Fed and the foreigners. Treasury reached an accord. Gradually, secur At the same time that we have been having ities prices were allowed to fall and interest these payments difficulties, we have also had rates to rise. Open market operations would he problems connected with our domestic economic directed toward supplying and absorbing re growth: serves, not toward supporting the prices of Gov fast enough to utilize our labor and capital re ernment securities. Thus ended an important sources. But how does the Federal Reserve System fit postwar episode— an episode which, as we shall our economy has not been growing see shortly, left a legacy which was to influence into this dual problem of payments deficit and the use of one of the Fed’s most important tools insufficient growth? — its open market operations. In summary, then, war and postwar develop on the availability of credit and thus the level Since the System has a great deal of influence ments had led to experiments with new tools of of interest rates, it is in a position to influence selective credit control in the area of real-estate both international flows of funds and domestic and consumer goods (tools which subsequently production were as conditions flows of funds across international borders, for changed). And the experience of the Govern example, are often especially sensitive to dif ment securities support program was to be par ferences in international interest rates. Domes tially responsible for self-imposed restraint in tic production and employment, in turn, can the use of open market operations as a tool of be stimulated or damped by credit availability Federal Reserve policy. Once more the hag of and interest rates. withdrawn by Congress tools had undergone a thorough reappraisal in the light of changed conditions. and employment. Some kinds of But while greater credit availability and loiver interest rates might be a spur to domestic Still, however, the story was incomplete. As growth, such conditions might cause short-term the decade of the 1950’s drew to a close, a new funds to flow abroad in search of higher in de-stabilizing force appeared on the horizon, terest rates (other things remaining the same). one which was to have yet another important Thus it is conceivable that a monetary policy effect on the evolution and development of appropriate to growth might be inappropriate monetary tools. That force: a deficit in the bal from the standpoint of our balance of payments, ance of payments compounded by a slowdown at least in the short run. 15 business review Given this environment, we might expect some ing reserves without creating direct development or modification of the tools of Fed pressure on short-term rates. Also, such eral Reserve policy. This has indeed been the purchases, by having a moderating in case. fluence on long-term interest rates rel O perations in the longer-end of the m arket the effect of facilitating the flow of ative to short-term rates, might have One result of the funds through the capital and mortgage and markets, thereby encouraging the prog growth problem has been a re-thinking of op balance-of-payments ress of recovery. In other words, the Committee was adapting erating policies with regard to open market operations. open market operations to a new environment, As already mentioned, the period of the pegs to supply funds so as to have minimum impact was to have an important impact on open mar on short-term interest rates (thus ease the im ket operations in the later postwar period. Par pact on our balance-of-payments problem) and tially as a reaction to the inflation which accom at the same time to facilitate panied the postwar pegging of the Government longer-term credit markets (thus spur domestic securities market, and after careful analysis of growth in output and employment). financing in how best to assure a smoothly functioning mar ket for Government securities the Federal Open Sw aps Market Committee agreed upon the following The Federal Reserve has also taken other ac policy announced in March, 1953: tions and developed other tools aimed broadly operations at mitigating temporary developments which for the System account should be con Under present conditions, might adversely affect our balance-of-payments fined to the short end of the market position thus providing time for other forces (not including correction of disorderly to take effect that would correct the basic pay markets). ments problem. One of these new tools is the Thus was inaugurated the so-called “ bills only so-called “ swap” arrangements. Basically the “ swaps” are agreements between policy” of the Federal Reserve System. But in February 1961, contrary to the policy the Federal Reserve and foreign central banks set in 1953, the Federal Open Market Committee (plus the Bank for International Settlements) authorized the purchase of intermediate- and which provide for reciprocal “ lines of credit.” longer-term U.S. Government securities having The Bank of England, for example, will allow maturities up to 10 years. The maturity limita the Fed to draw around 180 million pounds. The tion was later removed. The Board of Governors Fed, in turn, will allow the Bank of England to in the Annual Report for 1961 explained this draw 500 million dollars. The foreign currencies may be used for di action in the following terms: . . . the purchasing of securities in the rect operations in the exchange markets but, intermediate- areas, more typically, the Fed draws foreign currencies shorter-term to purchase dollars a foreign central bank has areas, offered the possibility of supply acquired (as a result of international commer as 16 contrasted and with longer-term the business review cial and financial transactions) and which are cles of inflation and deflation, when there is in excess of those the central bank would or depression, war, and problems of growth and dinarily hold. These dollars would thus be ab balance of payments. For if men are too timid, sorbed and could not be used to purchase gold too bogged in inertia, then we must continue to during the period the swap is in effect. It has suffer from problems that might yield to new worked out in numerous instances that natural tools and techniques or to new uses of old tools. forces have operated to absorb the dollars by As one observer has put it: the time the swap matured, so that a transfer The Federal Reserve System that exists of gold was avoided entirely. today is very different, except in its In a sense, the swap arrangements represent external structural features, from the a first line of defense against short-term develop System that began operations in the ments which could cause gold drains and spec early months of the First World War. ulative movements of funds abroad. Moreover, But for its ability to grow and adjust the swaps represent an important step in devel in pace with the shifting needs of the oping tools to fit changing situations. community it serves, the Federal Re From this brief discussion, then, we see that serve would have found itself as out the pattern of the past is repeated in the present. dated as was the National Banking Sys Once more economic instability has been ac tem which it largely replaced. Doubtless, companied by a reappraisal of the tools of also, it would before now have suffered Federal Reserve policy. To cope with the prob the same fate as its predecessors in the lems of inadequate growth and balance-ofpayments deficit the Fed has adapted old tools United States. Capacity for adaptation, to the current environment— flexible open mar ways sure, has turned out to be a basic ket operations in all maturity areas, for example — and has developed subsidiary tools such as characteristic of the Federal Reserve System. Its capacity for change and the swap agreements. Economic jaundice has adaptation is the cardinal virtue from prompted a great deal of innovation in the mon which the other virtues of the System etary system. chiefly derive.5 adaptation that is seldom quick but al In an important sense, then, it is natural for C O N CLU SIO N S change to be a stimulus to action. It is only We all, to a certain extent, distrust change. One when this stimulus evokes an inadequate re reason may be that change almost inevitably sponse that man’s nations, his institutions, and brings uncertainty. And the human being is even his culture can crumble. So it was in Rome one to avoid uncertainty with its ominous over when the Empire could not generate the in tones of insecurity. ternal momentum to push back the barbarians; It is to the credit of men and institutions, how in Germany when public policy was inadequate ever, that they do respond to changed condi to deal with dissatisfactions unleashed by the tions, that they do seek new answers and new Great Depression. In the final analysis, much of ways of doing things when the course of events ________________ goes badly— when there are money panics, cy 'HR 5 C. R. Whittlesey, Lectures on Monetary Management (Bombay: Uni versity of Bombay, I960), p. 3. 17 business review the history of central banking in the United as the challenge in the cumulative process of States has been molded by challenge and re moving ahead. Not one, not the other, but both sponse. And the response has been as important have changed the rules of the game. ANOTHER PROBLEM YEAR FOR FARMERS Once again agriculture qualifies as an area of A m iserable grow ing season the economy of the Philadelphia Federal Re As was the case in 1962, drought was the main serve District that must be described as some culprit in the growing season now ending; how thing less than satisfactory. Local farmers have ever, late spring and early fall frosts created experienced a poor growing season for the sec additional problems and damaged crops in many ond straight year. Production costs for both parts of our area. Unlike 1962, this year’s crop and livestock farmers have continued to drought affected fewer entire counties, conse increase, but income from sales of farm prod quently disaster status for farmers was neither ucts has failed to rise proportionately. so widespread nor so publicized as the severity County farm agents in leading agricultural of local situations might indicate. The spottiness areas of Pennsylvania, New Jersey, and Dela of season-long drought conditions along with ware have described to us what they saw of temporary relief experienced in a number of production, harvesting, and marketing problems areas seems to have resulted in crop yields rang in the 1963 season. What follows is based on ing all the way from excellent to near failure. their appraisal of the over-all farm situation and on estimates of crop conditions issued for W ide variation in field crops this tri-state area by the United States Depart Field crops present a mixed picture. The ex ment of Agriculture. tremely cold winter of 1962-1963 was hard on 18 business review fall-planted grains, particularly because snow vegetables were high in quality, and yields were cover was so light. Spring-planted oats, on the up to or better than average. Where drought other hand, was an excellent crop, with record conditions prevailed, crops grown for both the yields reported in Pennsylvania. Soybeans also fresh market and for processing were smaller are said to be looking good, although they have and frequently lacked quality. Plant disease matured more slowly than usual in the dry problems were not too severe this year, although weather. Potatoes have been small but high in tomatoes were a possible exception. This crop quality and will make a good crop this year. was somewhat of a problem from the very be Hay appears to have suffered most severely ginning, with a late spring frost having ne from the drought in just about all our south cessitated much replanting. Later, as the drought eastern counties. Elsewhere, yields have ranged intensified, dry rot resulted in widespread losses from fair to good. Although total production on unirrigated acreages. has exceeded last year’s short crop, this season’s Market prices of fresh vegetables showed con yield will be far below average. Corn, another siderable fluctuation over the season and in crop counted on heavily by our dairymen, is some areas there were reports of persistent weak requiring a longer-than-normal growing season ness. Contract prices from processors seem to because of the drought. Some of it already has have been something less than satisfactory from been hit by frost and further damage is feared. the grower’s standpoint. Conditions varied con Much corn planted for grain must be cut for siderably, however, by crop and by locality. In silage and, being prematurely harvested, will one important tomato area, farmers bemoaned lose some of its food value. a cut of SI.50 a ton in the contract price but at the same time they were rejoicing because the Tobacco hit by frost processor was accepting every basket of stand Killing frost in late September caught unhar ard quality that could be delivered. vested tobacco in Pennsylvania but did not af fect the bulk of the crop hanging in drying Berry crops were hurt sheds. The damage estimate applies to about 15 The small fruits generally were damaged more per cent of the total acreage of tobacco. The by drought and other unfavorable weather con early crop is said to be high in quality, although ditions than orchard fruits. Strawberries seem plants are somewhat smaller than usual be to have come through much better than either cause of the drought. This portion could use a blueberries or cranberries. Some winter kill of lot of warm, dry weather for proper curing. A blueberry bushes was reported and fruit sub smaller planted acreage in 1963 plus the frost sequently was damaged by late spring frosts. damage will result in a crop appreciably smaller In our New Jersey bogs, cranberries, too, suf than a year ago and below the 1957-1961 average. fered permanent damage from last winter’s low temperatures. Latest estimates indicate a very short cranberry crop— down about one-fourth Irrigation saved vegetables from 1962 and nearly one-fifth below the 1957- Wherever fields were irrigated— and in our area 1961 average. Although a short crop is expected this means much of southern New Jersey— in Massachusetts, above-average production in 19 business review important areas of the Midwest and far West Feeder cattle operations on reduced scale may tend to weaken prices this fall. Farmers producing finished cattle for market Fruit grow ers are optimistic meet a reduced feed supply. Finished cattle Orchard fruits have been less affected by the prices, although fairly strong, have not been drought than probably any other crop. Peaches high enough to justify increasing the size of and early apples were somewhat smaller than the feed bill. Under these circumstances, feeder are said to have scaled down their operations to usual but quality was high and the fruit brought cattle seem to be moving to market at some good prices in markets that were lightly supplied. Late apples are said to be sizing and coloring what lighter weights. As replacement stock are nicely and quality seems excellent. Our apple crop prices, the near-future trend of feeding opera will be smaller this year but light crops also are tions is tied closely to the feed situation. not to be had at what might be called bargain expected in some nearby competing areas so there should be less pressure on prices of packaged Overproduction still plagues poultrymen fruit. Processing demand is expected to be fairly Poultrymen have seen many years that were strong since it is reported that the carryover of worse— but also some that were better than last season’s apple products is not heavy. 1963 to date. Their main problem seems to be making the proper adjustments to market con Feed shortage acute for dairym en ditions. Egg prices hit a few low spots but Our dairymen are having an especially hard were fairly well maintained over much of the time. For many, the situation has gone from season. The market for poultry meat showed a bad in 1962 to worse in 1963. In last year’s mixed trend. Heavy birds continued in light drought situation, the dairy farmer had at least demand, but broilers fared somewhat better. something in the way of a feed carryover to Early in the year broiler prices were very low, fall back on. This year he started with a deficit although they recovered considerably at mid instead. Along with another inadequate hay season, when quotations for a time ran above crop, much corn must be harvested before reach year-ago levels. A continuing trend among poul ing maturity to avoid frost damage. Not only trymen has been the elimination of small opera will feed value as corn silage be reduced, but tors. This has been especially true in the case corn for grain may be very short again this of those who raise broilers. year. Thus, the feed bill for the coming winter promises to be larger than ever. Production costs still rising Faced with this situation, a dairyman must The results of this season’s drought are clearly cull his herds more severely— he cannot afford evident in the increased cost of production so to keep other than his top producers. And in many of our farmers have had to face. Top all probability he may have to delay purchases billing must go to the heavy out-of-pocket ex of replacement stock until the feed situation im pense of the dairyman who has such a large proves. It now looks as though the trend toward quantity of feed to purchase. Vegetable growers building up herds and barn modernization may who were so fortunate as to have irrigation, be interrupted for quite a while. discovered that these systems could be costly 20 business review to operate in a year of persistent rainfall de the dairyman, who until last year had been one ficiency. The upward trend of farm wage rates of the most liberal spenders, understandably has continued this year with further advances re made a further sharp cutback in his program ported for both experienced workers and mi of capital improvements. grant harvest hands. Taxes are the remaining major factor in this year’s increased costs, as Financial status a little worse expanding Two bad years in succession have offered our urban developments brought with them the need for improved facilities. farmers little opportunity to increase their work ing capital or to reduce their outstanding in Capital spending off debtedness. Farm cash income in Pennsylvania, For the second year in a row the necessity for New Jersey, and Delaware has shown consid “ belt tightening” seems likely to limit outlays erable fluctuation since early spring. Over the for major pieces of farm machinery, farm mod first seven months as a whole, receipts from farm ernization, and purchases of new acreages to marketings were up about 2 per cent from a increase the efficiency of farming operations. To year earlier. And taking into account the far be sure, there are exceptions, one especially from satisfactory growing season experienced worthy of note being the outlays made by some by so many, this small increase is perhaps a broiler growers in Delaware, where new poultry better showing than might have been expected. houses are going up and others are being mod It should be remembered, however, that 1962 ernized. Some fruit growers, too, report they was one of the poorer years from the income are spending more for equipment and storage capacity than in several other recent years. But standpoint in each of these states making up the Philadelphia Federal Reserve District. UNIFORM COMMERCIAL CODE— REVISED DIGEST OF SECURED TRANSACTIONS Several years ago the General Council of this Bank de vised a two page Digest of Secured Transactions under Article 9 of the Uniform Commercial Code which con densed its rules in a functional manner. The Pennsylvania Legislature recently amended its statute to conform to the amended 1962 Official Text of the Code, which in cludes a few changes in Article 9. The Digest has now been revised to reflect these changes, and it has been distributed to Pennsylvania banks within the Third Federal Reserve District. It may also be useful in other states which have adopted the Code and in states where it is being studied for adoption. Copies may be obtained by writing to the Bank and Public Relations Department of this Bank. 21 F O R THE R E C O R D • BILLIONS • • $ MEMBER BANKS 3RD E.R.D. BANKING s (20 CITIES) r\ ? V j V n 1 a \ / J /a A A CHECK PAYMENTS 4| 1 / 1/ \ \! > l 1 1 ! -' -1 ^ ' " ' ' d e p o s it s k LOANS ^ INVESTMENTS l 2 YEARS AGO YEAR AGO 2 YEARS AGO AUGUST 1963 Third Federal Reserve District United States Per cent change Per cent change YEAR AGO Factory* AUGUST 1963 Department Storet Employ ment Payrolls Sales Stocks Check Payments Per cent change Aug. 1963 from Per cent change Aug. 1963 from Per cent change Aug. 1963 from Per cent change Aug. 1963 from Per cent change Aug. 1963 from mo. ago mo. ago mo. ago mo. ago mo. ago SUM M ARY Aug. 1963 from 8 mos. 1963 from year ago Aug. 1963 from year ago mo. ago year ago + 2 mo. ago + LOCAL CHANGES + 5 + 1 8 mos. 1963 from year ago M AN UFACTU RIN G Electric power consumed........... + 5 Man-hours, to tal*....................... + 1 0 Employment, to tal......................... W a g e income*............................. + 1 + 8 - 1 0 + 2 + 4 - 2 - 1 + 1 1 + 1 C O N S T R U C T IO N ” ....................... + 3 - 8 - 8 - 2 + 12 +33 + 9 +56 + 15 + 7 TRADE*” Department store sales................ Department store stocks.............. + 3 0 0 + 4 - 1 + 9 + 4 + 4 0 - B A N K IN G (All member banks) Deposits........................................ Loans............................................. Investments.................................... U.S. Govt, securities.................. O ther.......................................... Check payments............................ + 1 + 2 i - year ago 1 year ago year ago 0 Lancaster............ + 1 Philadelphia........ 0 - 0 + 4 - — 8 + 12 1 + 7 + 9 + 2 - 1 + 3 + 2 - year ago + 4 + 9 + 1 + 2 + 1 + 3 + 8 COAL PR O D U C T IO N ..................... +65 year ago 1 + 1 + 2 - i - 6 + 3 i - 5 + 7 Reading.............. + 2 + 1 + 1 + 7 + 9 + 12 + 3 - 3 - 2 + 7 - 2 0 0 - 1 + 3 - 6t + + + + + 5 7 4 2 19 7f + n 6 8 5 1 19 9t 2 0 - 1 - 3 + 2 - 5 + 7 + 1 1 + 3 - 6 +23 + 6 + 7 + 1 1 + 4 - 3 +23 + 7 + 2t 0 0 0 + 2 + + + + + + - ’ Production workers only. ’ ’ Value of contracts. ’ ’ ’ Adjusted for seasonal variation. Trenton .............. + 3 - 4 + 4 - 3 + 5 + 9 - 1 + 6 - 8 0 + 4 + 3 + 1 - 2 + 8 + 5 +22 1 Wilkes-Barre. . . . + 1 + 1 -17 0 - 5 0 + 2 + 4 + 10 - 2 + 9 - 8 + 4 Wilmington......... - 2 + 5 - 5 + 8 - 6 - 7 - 2 + 1 - 5 + 7 PRICES Consumer...................................... Scranton............ ot 0 1 t20 Cities ^Philadelphia York................... + 3 - 3 + 3 0 + 9 + 7 + 1 + 1 - 5 0 ’ Not restricted to corporate limits of cities but covers areas of one or more counties. fAdjusted for seasonal variation.
@FedFRASER