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(0 0) <D _Q E <1) H—’ a 0 CO Business Review cd j= _Q_ 0 The Move to Municipals Danger: Labor Negotiations Ahead SPDF 'Smiles on Our Beginnings’ ~o cd CL H— o js : c cd CD 0 > i_ 0 (f) 0 a : "cd l. 0 “O 0 LL 1 J V___ The Move to Municipals . . . Banks bought a large volume of municipals in the past five years. Now they’re fighting to regain liquidity, and municipals are being knocked down. Danger: Labor Negotiations Ahead . . . Charts indicate 1967 will be a critical year for labor relations. SPDF ‘Smiles on Our Beginnings’ . . . SPDF really spells HELP to new ventures and established firms in need of risk capital. BUSINESS REVIEW is produced in the Department of Research. Donald R. Hulmes prepared the layout and art work. 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, Digitized Philadelphia, for FRASER Pennsylvania 19101. In the great business boom of the 1960’s, commercial bankers have become silent partners in a wid ening array of public undertakings. Bank financing has helped build schools, hospitals, highways, and a host of other projects undertaken by state and local governments. The tax-exempt municipal bonds bankers have collected in return have provided profitable investments in a period in which in terest rates bankers pay for money (and other costs of doing business) have risen at a fast clip. Now, however, with production in the economy pressing against capacity and with industry scrambling for raw materials, plant, and equipment, banking’s more traditional customer— the businessman— is knocking on the door with increasing frequency. Intensifying pressures for business loans have some interesting implications for . . . THE MOVE TO MUNICIPALS by Jack C In 1960 commercial bankers had a little over 71/ 2 cents out of every deposit dollar invested in municipal securities. During the next four-anda-half years they put over 23 cents out of each new dollar into state and local government securi ties, a sum big enough to purchase over 50 per cent of the net volume of municipals issued an CHART 1 BANK HOLDINGS OF U.S. GOVERNMENT SECU RITIES HAVE DECLINED AS A PROPORTION OF TOTAL DEPOSITS WHILE MUNICIPAL AND OTHER SECURITIES HAVE RISEN AT A RAPID CLIP Per Cent nually. By mid-1965 the nation’s bankers, scan ning their balance sheets, could boast a municipal portfolio which accounted for almost 12 cents out of every dollar of deposits. Meanwhile, holdings of Federal Government securities declined. By mid-1965 banks held S o u rce: Federal Reserve Bulletin, all commercial banks. around 18 cents out of every deposit dollar in Governments, down from almost 27 cents at the secure U.S. Government and other public de end of 1960. This shift in the security portfolio of commer posits. In this article we take a look at the dimensions cial banks raises some important questions. Typi of the move to municipals. What forces are re cally, in periods of monetary restraint, bankers sponsible for the aggressiveness with which com sell Governments to meet burgeoning loan de mercial bankers have accumulated municipals? mands from business and other borrowers. Now, Which banks have been most aggressive in the with municipals looming much larger in secu market? Does bank demand for municipals vary rity portfolios, some of the pressures generated by substantially by geographic area and size of rising loan demand may well be brought to bear bank? Have maturities lengthened as portfolios on the municipal portfolio. This is especially true have swelled? The answers to these and other questions may since a large portion of the Government securi ties portfolio at many banks is “ pledged” to assume increasing importance in coming months, 3 business review Table 1 THE MOVE TO MUNICIPALS APPEARS TO HAVE BEEN INFLUENCED BY TH E SIZE OF TIME DEPOSIT FLOWS AND TH E STRENGTH OF LOAN DEMAND 12 Federal Reserve D istricts ranked according to change in tim e deposits relative to total deposits, 1960-1965 Change in loans relative to change in deposits Change in m unicipals relative to change in deposits especially if business continues brisk and loan interest rates were rising. As a result of these and demand strong. other forces, bank costs soared. To keep profit margins from falling, bankers had to put reserves Why the shift to municipals? and deposit dollars to work, preferably in higher- Banking’s romance with municipals in the half yielding assets. If loan demand failed to keep decade 1961-1965 was sparked by several devel pace with the flow of bank funds then other assets opments. First of all, Federal Reserve policy over had to be sought. The “ other asset” which caught much of the period was directed at stimulating the eye of bankers in increasing numbers was an economy operating at considerably less than the municipal bond. For a bank in the 48 per preferred capacity. This meant that bank reserves cent tax bracket, the tax-exempt yield of munic grew and banks had ample funds to lend and ipals looked good compared with the after-tax invest. Meanwhile, hank time deposits were growing yield of Governments and even though less liquid than Governments, municipals were considered rapidly (much faster than demand deposits) and a suitable outlet for time deposits. Table 1 shows business review how bank municipal portfolios were affected by Reserve District ranked at the top of the heap, loan and time deposit experience (among other pumping over 33 cents out of every deposit factors) in the 1961-1965 period. dollar into municipals during the 1961-1965 But, as already noted, the current financial en vironment is far different from that which pre period. Boston was next, followed by New York, and Philadelphia in that order. vailed earlier in the business expansion. The de mand for credit is exceptionally strong and bank Big vs. small banks ers are under pressure to make loans. Since some Medium- and larger-size banks have been leaders of the loan pressure may be brought to bear on in the move to municipals. Indeed, Chart 2 shows the municipal portfolio, the characteristics of that smaller banks, those with $5 million and that portfolio have become of considerable in under in deposits, actually reduced their hold terest. The question “ Who owns what for how ings of municipals on balance in the early to mid-sixties. Chart 2 also shows a regular stair long?” is both relevant and timely. step pattern in acquisition of municipals by Geography of the move to municipals medium and larger banks. As size increased, so As can be seen in Table 2 below, banks in the did the allocation of funds to municipals. Banks Northeastern sector of the nation have been the with $10-to-$25 million in deposits put around heaviest investors in municipal securities, while 19 cents out of each deposit dollar in municipals banks in the South and Mid-west were further while banks with $100 million and over in de down the list. Banks in the Cleveland Federal posits used almost 25 cents out of every deposit dollar to purchase municipals. Table 2 In the Third Federal Reserve District (also BANKS IN TH E NORTHEASTERN SECTOR OF TH E NATION PUT MORE OUT OF EACH DEPOSIT DOLLAR INTO MUNICIPALS THAN DID BANKS IN OTHER AREAS DURING THE PERIOD 1960-1965 Federal Reserve D istrict Per Cent of Each Deposit D ollar Going into M unicipals D ecem ber 1960-June 1965 shown in Chart 2 ), the pattern differed from that in the nation as a whole. Middle-sized banks in the Philadelphia district put more into munici pals than did the larger banks. How many years to maturity? Data available from bank examination reports C le v e la n d 3 3 .2 B oston 3 0 .9 for the past three years suggest that bankers have been adding to municipal holdings both at the N e w Y o rk 2 9 .4 P h ila d e lp h ia 2 4 .1 short and long end of the maturity scale. Securi S t. 2 3 .4 ties maturing within one year amounted to al Louis D alla s 2 1 .9 C h icag o 2 0 .2 K an sas C ity A tla n ta 1 9 .4 1965, up 3 per cent from 1963, and bonds ma 1 8 .7 San M in n e a p o lis 1 8 .7 1 8 .2 turing in over ten years accounted for a little R ic h m o n d 1 7 .5 F rancisco S o u rce: Board of Governors of the Federal Reserve S ystem , all com mercial banks. most 20 per cent of the municipal portfolio in over 25 per cent of total municipal holdings, up slightly from 1963. The maturity breakdown is shown in Table 3. Behavior of the nation’s largest banks, how- 5 business review CHART 2 MEDIUM- AND LARGER-SIZE BANKS HAVE BEEN LEADERS IN TH E MOVE TO MUNICIPALS DURING TH E 1960-65 PERIOD, PUTTING MORE FUNDS INTO TAX-EXEMPTS BOTH . . . . . . in dollar amount. (Change in holdings of municipal . . . and as a percent of each additional deposit dollar. (Change in municipals securities classified by size of banks, December 1960-June 1965) as a percent of change in deposits, December 1960-June 1965) Billions of Dollars Per Cent JZZL 2-5 5-10 10-25 Deposit Size (Millions of Dollars) oc i aa i aa j _ 25-100 100 and over oiiuci x i 2- 5 5-10 10-25 _ .. ....... , .. . Deposit Size (Millions of Dollars) 25-100 100 and over * Decline in holdings of municipals. ever, differs signifi The pattern in the Third District differs from that in the nation, with middle-size banks adding more to m unicipal holdings than larger banks. banks) and m ain Per Cent of Total Deposits cantly from the pic tained almost 29 per ture for all banks. The cent of their portfolio larger in the “ one-year-and- institutions, those with $500 mil under” lion and over in de around 20 per cent for posits, reduced hold all large banks). ings of municipals in all but the longest ma turity sector (over 10 years to maturity). Under 1 1-2 2-5 5-10 10-25 25-100 (vs. 100 and over Conclusions Deposit Size (Millions of Dollars) *Decline in holdings of municipals. Source: Board of Governors of the Federal Reserve System, all commercial banks. M unicipal securities provided an attractive outlet for bank funds In this sector, the big bankers added to their sector S o u rce: Board of Governors of System , all commercial banks. the Federal holdings, pushing the longer municipals up from almost 29 per cent of R eserve during the early and mid-sixties. With re the total portfolio in 1963 to 33 per cent in 1965. serves readily available, costs rising and loan demand less pressing than now, sound-quality Large banks in the Philadelphia Federal Re tax exempts appeared a logical choice for com serve District (also shown in Table 3) added mercial bank investment. As a result, banks substantially more both to the longer and shorter allocated an increasing portion of each deposit end of their municipal portfolio than did large dollar to municipals, often to bonds of longer banks in the nation as a whole. However, even maturity. with large additions to the “ over-ten-year” ma In making this decision, many bankers took turity sector, Philadelphia banks had only 26 per cent of their portfolio in the longest sector a calculated risk, the risk that loan demand in the future could be accommodated by attracting (compared to 33 per cent for all of the larger new deposits, by internal amortization of exist- business review Table 3 TH E MATURITY OF MUNICIPAL BOND PORTFOLIOS VARIES SIGNIFICANTLY ACCORDING TO SIZE OF BANK All n a tio n a l b an k s a d d e d to m u n ic ip a l h o ld in g s a t b o th th e long an d s h o rt end o f th e m a tu r ity s p e c tru m . . . M a tu rity Percent of Total Portfolio in 1963 P ercent of Total Portfolio in 1965 Change, 1963 to 1965 1 yr. and u n d e r 1 6 .4 5 1 9 .5 8 + 3 .1 3 1 -5 y e a rs 3 1 .6 6 2 9 .3 3 - 2 .3 3 5 -1 0 y e a rs 2 7 .8 9 2 6 .0 6 - 1 .8 3 O v e r 1 0 y e a rs 2 4 .0 0 2 5 .4 7 + 1 .4 7 . . . n a tio n a l b an k s w ith $ 5 0 0 m illio n and o v e r in d e p o s its m a tu ritie s on b a la n c e . . . M aturity 1 yr. and u n d e r 1 -5 y e a rs Percent of Total Portfolio in 1963 2 1 .0 4 2 6 .9 6 added m u n ic ip a ls o f lo n g e r P ercent of Total Portfolio in 1965 Change, 1963 to 1965 1 9 .8 6 - 1 .1 8 - 1 .5 0 1 .5 5 + 4 .2 3 5 - l d y e a rs 2 3 .2 2 2 5 .4 6 2 1 .6 7 O v e r 1 0 y e a rs 2 8 .7 8 3 3 .0 1 . . . n a tio n a l b an k s w ith $ 5 0 0 m illio n and o ve r in d e p o s its in th e Third District a d d e d s u b s ta n tia lly m o re to m u n ic ip a l h o ld in g s b o th at th e long- an d s h o rt-en d o f th e list c o m p a re d to larg e b an k s in th e n a tio n . M a tu rity Percent of Total Portfolio in 1963 P ercent of Total Portfolio in 1965 Change, 1963 to 1965 1 yr. and u n d e r 1 8 .7 6 2 8 .9 5 + 1 0 .1 9 1 -5 y e a rs 2 9 .2 6 1 8 .3 9 -1 0 .8 7 5 -1 0 y e a rs 3 5 .8 8 1 6 .1 0 2 6 .6 3 2 6 .0 1 + O v e r 1 0 y e a rs 9 .2 5 9 .9 1 S o u r ce: Board of Governors o f the Federal System , all national banks, book value of municipals. ing credits, and by other means. Yet, as events ations have assumed an added dimension. Not unfolded, loan demand has run ahead of pro only has the structure of bank assets changed, jections at many hanks and municipals have liability items for many banks have been altered as well. The large volume of negotiable CD’s now outstanding is a case in point. been sold, often at discounts from purchase price. Today, as in years gone by, the banker must weigh the chance of gain against requirements for liquidity. The need for liquidity is as old as the Italian “ bench” bankers and as young as “ computerized” accounting. Yet in today’s environment liquidity consider The implications of these shifts are plain for all to see. A premium has been placed on liquid ity and this premium is especially important during a period of rapid business expansion and monetary restraint. 7 DANGER: LABOR NEGOTIATIONS AHEAD MAN-DAYS IDLE BECAUSE OF WORK STOPPAGES ■ NUMBER OF WORKERS INVOLVED IN CONTRACT EXPIRATIONS* Millions 1 960 1961 1962 1963 1964 1965 1966 1967 "Agreements covering 5,000 or more; based on agreements known to be in effect on Jan. 1 on every year except 1967. 2. However, in the remaining months of 1966 and in 1967 a 1. In recent years the number of man-days lost because of strikes has been rather steady. large number of workers will be involved in contract expira tions . . . UNION CONTRACT ..EXPIRATION CALENDAR, OCT. 1966-DEC. 1967 ilajor Contracts Expiring Electrical, Communications NUMBER OF WORKERS INVOLVED" Month Thousands 0 ,2 0 0 400 600 ” y m~ r....n ----------1-------- 1---------1 UNEMPLOYMENT RATE m m m m AVERAGE HOURS— MANUFACTURING Hours_________ "■ Communications SEASONALLY ADJUSTED Apparel *V yT^ Communications Trucking Rubber Construction. Apparel TMMSM 9 Food 38 - L f > 0 Autoworkers 4. Negotiations come at a tim e when the labor market is par Machinery a ticularly tight, as reflected both in low unemployment rates. ------- 1------1------- 1------- 1--------1--------1-----1961 1962 1963 1964 1965 1966 1960 "Revision 5. . . . and in high work hours. ♦ a — jv ... ........ 'Agreements covering 5,000 or more. — .....,... ■ ............ '.u.. 3, . . . across a wide spectrum of industries. PER CAPITA REAL INCOME UNIT LABOR COSTS— MANUFACTURING WHOLESALE PRICES IN MAJOR MANUFACTURING COUNTRIES Index (1 9 5 8 = 100) WHOLESALE PRICES OF MANUFACTURES Index (1 9 5 7 -5 9 = 100) Whether these generally favorable conditions will continue in 1967 wilt be dependent in large measure on the outcome of prospective labor negotiations. 6. So fa r during the '60's, unit labor costs have remained remarkably stable . . . 8. During the past five years, real income per capita has risen markedly . «1 f Source: U.N. 9. . . . and the U.S. has maintained a strong competitive position in world markets. OUR BEGINNINGS’ by D. Russell Connor Bankers Association that a number of businesses Few of us can translate the Latin inscription “ Annuit Coeptis,” even though we see it every were anxious to locate in the state, but could not day. It’s printed on U.S. currency as part of the qualify for credit from conventional lenders. Great Seal of the United States, and means, “ He Some needed equity capital rather than credit, smiles on our beginnings.” To the beginning some needed loans for longer terms than banks businessman, urgently in need of risk capital to customarily were willing to grant, some had un start a new venture, this might seem a classic of unwitting irony. Rebuffed by investors and lend attractive balance sheets. In short, they were credit risks that banks would not accept. Despite ers, unable to secure governmental aid, he would this, some were judged sound prospects for the tell you that much of the time money just laughs at him. But not all of the time. Today, in the Greater future, offering opportunity to Maine to diversify its industrial base and increase employment. Could anything be done? Philadelphia area, new enterprises short on risk capital can get long-term loans from private spread risk over several lenders. This idea was A pool of bank funds was first proposed, to sources. Financing is available from utilities, quickly abandoned— an unsound loan is not manufacturers, mercantile firms, refineries, and made safer by sharing, and supervisory authori other established concerns, as well as from con ties would take a dim view of such loans. Finally ventional sources. These companies have a mutual it was decided to create a completely new corpor interest in assisting new businesses— enlightened ation to provide this kind of risk financing. Stock self-interest. Their means are skill and effort as would be sold to private companies whose long well as money. Their focus is Bucks, Chester, term success depended on the prosperity of the community. They were to understand that divi Delaware, Montgomery, and Philadelphia coun ties. Their tool is SPDF, called by some the “ pal without a vowel,” the Southeastern Pennsylvania Development Fund. dends might never be paid; their return would be indirect.* Financial institutions would be in vited to participate; their membership would en As Maine goes . . . tail commitments to lend a small percentage of their resources to the new corporation at going SPDF is three years old this month. Its genealogy is similarly brief. It goes back only to 1949, and north to New England. In that year Maine’s De velopment Commission reported to the Maine 10 * D evelopm ent credit corporations in som e states are required to pay divid end s; others are not. S P D F is not required to pay dividends, bu t intends to do so when conditions warrant. business review rates of interest. In turn the corporation would for the purpose of doing business within make loans to applicant businesses at slightly this Commonwealth . . . are authorized to higher rates of interest. Maine’s legislature passed a special act ena acquire . . . or dispose of . . . the capital bling the formation of a Development Credit Cor poration— which has since become a generic term Twenty-five shareholders, consisting of 24 blue- for similar corporations— in 1949; the Corpora tion made its first loan in 1950. Following Maine’s stock of a corporation . . .” chip companies and one individual, all active in the Greater Philadelphia area, have purchased $975,000 of SPDF’s authorized capital stock of lead and benefitting from Yankee ingenuity, a $1.5 million. The companies include public utili total of 21 states now have kindred corporations: ties, manufacturers, department stores, super all six New England states, the three Middle market chains, oil refineries, real estate firms, a Atlantic states, Maryland, four southern Atlantic baking company and a shipping company. Phila Coast states (excepting Georgia), and Arkansas, delphia Electric Company is the largest share Kansas, Kentucky, Mississippi, South Dakota, holder, $500,000. The unsold shares are available Washington, and Wisconsin. Additional states for purchase by area firms. have enacted enabling legislation, but as yet do Purposes: “ To . . . develop and advance the not have development credit corporations in being. business All the states with operational DCC’s have one each, save Pennsylvania. It has three. The fare . . .; to encourage and assist in the location of new business . . . , to rehabilitate first was chartered in 1962, has jurisdiction in nine western counties around Pittsburgh. Two existing business . . . , and to assist in ex pansion of all kinds of business activity others completing coverage of the Commonwealth which will tend to provide . . . maximum were chartered simultaneously in September, opportunities for employment; to cooper prosperity and economic wel 1963. One, with headquarters in Harrisburg, ate with other organizations (with similar operates in the 53 counties between the western purposes) ; Pennsylvania corporation’s area and the five- credit to approved and deserving appli county domain of SPDF. cants for the . . . development and conduct and to furnish money and of all kinds of business activity in the vari The law and its implementation ous regions of the Commonwealth, thereby Public Law 1647, enacted by Pennsylvania’s establishing a source of capital and credit General Assembly December 1, 1959, as amend not otherwise readily available therefor.” ed, is tailor-made to the purposes and functions Although a broad range of activities are auth of development credit corporations. Here are orized, SPDF’s efforts to date have been oriented selected excerpts of its provisions, and their im toward helping existing firms that are short of plementation by SPDF: operating funds, and assisting new enterprises Capital, Participation: “ The capital stock to get started, rather than enticing “ gypsy” com of a (development credit) corporation shall panies into its five-county area. It couldn’t care be not less than $100,000 to be evidenced less about corporate kidnapping. Companies now by 10,000 shares having a par value of $10 on SPDF’s books run alphabetically from an each.” “ All business corporations organized abattoir to a wax manufacturer; no “ Z” as yet, 11 business review but William Zucker, president of SPDF and its longer periods. Interest charged by SPDF is two ally, SPEDCO, can claim to fill that void.* As to to three percentage points higher than the near its other purposes, SPDF cooperates regularly prime rate it pays to lending banks. This spread state, and Federal developmental is to compensate for the kinds of risks taken, and agencies, and with private conventional lenders. with local, provides operational income. SPDF lost money General Powers and Lending Agreements: in its first two years, but in the first nine months “ To borrow money and otherwise incur of its third year it made a cash profit on opera indebtedness . . tions of $23,000. otherwise assist to lend money . . . or financially any person, Largest loan now outstanding is for $500,000; firm, corporation (et cetera) ; and to pur an “ average” loan is for $100,000. None of chase, or otherwise acquire, and to sell, or SPDF’s loans usurps the prerogative of financial otherwise dispose of, real and personal institutions to make direct loans. The law makes property. . .” “ Any financial institution this quite clear, stating, “ Before a (development is hereby empowered to make a lending credit) corporation formed hereunder may pro agreement with a (development credit) vide any loan or assistance, it shall be necessary As of July 31, 1966, SPDF had approved 41 of his inability to obtain the desired financial loans totaling more than $4.4 million; of these, assistance from the financial institutions in the corporation.” for the applicant to provide satisfactory evidence 33 were outstanding, in aggregate just over $3.3 region.” SPDF loans are available for purchase million. A majority of the four new and 29 estab by financial institutions; as a matter of fact, lished firms aided by SPDF loans are manufactur some loans initially turned down by banks have ers; about half are in Philadelphia, the balance later been accepted by the same banks, based on scattered through Bucks, Chester, Delaware, and Montgomery counties. Choice of location for new factors discovered by SPDF’s loan committee. Sources of SPDF’s loan funds are its capital companies is strictly up to the entrepreneur; SPDF doesn’t assign sites, is concerned with re funds and lending agreements with 26 commer cial banks, five savings banks, one investment gional development, not local ambitions. SPDF’s loans have terms ranging up to 15 bank, and one insurance company, all with offices in the five counties. Banks having lending agree years currently, although it may lend money for ments with SPDF represent less than two-thirds of the banks in the area, but these are by far the * S P E D C O — Southeastern Pennsylvania E con om ic D e velopm ent Corporation— is a kind o f godfather to S P D F , although its predecessor by only one month. It is a non profit organization mainly devoted to investigation and research designed to help business activity in the five southeastern counties o f Pennsylvania. Its incorporators were the chief executive officers of two area public utilities and three Philadelphia banks. Fruits o f its research are made available at no charge to local indus try, as are other kinds of planning, engineering, and technical assistance. O ne o f its studies, an intensive analysis o f Philadelphia’s apparel industry, led to the formation of a third affiliated institution, the S P D F R ealty Corp. This firm, a wholly ow ned subsidiary of the Fund, conducts the realty affairs o f S P D F -S P E D C O . 12FRASER Digitized for larger banks, holding about 97 per cent of all area bank deposits. Lending agreements now in force with participating banks give SPDF lines of credit of about $6.7 million. Since its approved loans are now $4.4 million, SPDF would appear to be two-thirds loaned up, barring repayments. To widen this gap, SPDF may next solicit lend ing agreements with savings and loans and addi tional insurance companies, with which it is em powered to conclude such agreements. business review Case history work space, technical advice, special equipment Businesses seeking SPDF’s aid have varied back and other services to inventors at modest fees. grounds, but all share a common characteristic: Its raison d’etre is to assist in the development a dual lack of capital and bank-worthy credit. A of new products that will eventually produce jobs brief sketch of how SPDF helped one such enter (for their manufacture) and aid the economy. prise is illustrative, if not typical, of its assist SPEDCO-SPDF also suggested other avenues to ance to others. private risk capital; encouraged, the partners A new firm was formed in the spring of 1965 by an engineer and a marketing expert, both eventually obtained initial equity capital from private investors. former employes of a major electronics manu Today, less than a year later, the new company facturer. The basis for their coming together and is operational, has booked some orders, and is striking out on their own was an idea, a “ machine about ready to leave its nest— the Laboratory— that could read.” The engineer was confident he and seek its own facilities in the Greater Phila could perfect, and his partner certain he could delphia area. SPDF has proffered it a loan, sub sell, a unit capable of pattern and character recog ject to certain conditions, to assist it further. nition, and direct feed of data from source docu ments into computer systems. Such a device would Critics and credits eliminate input errors, so costly to correct, and Its few critics find it difficult to fault SPDF . . . have other advantages. so far. It has won recognition as a private enter But the two would-be entrepreneurs lacked capital, certainly the $1,000,000 they estimated it would take to: (1 ), plot the market scientifi prise active in a field— community economic de velopment— that many have come to regard, cally; (2 ), establish the gross design of the ma perhaps resignedly, as the exclusive province of government. It is an example of private endeavor chine; and (3 ), to create, capitalize, and get working harmoniously with governmental agen operational a manufactory for their product. They began to seek risk capital from established cies, more the exception than the rule on the American scene. SPDF has persuaded bankers to lenders in Philadelphia, and were turned away time and again: no credit standing. lend, if indirectly, not only on the presence of financial collateral, but on the promise inherent Through private sources, the partners learned in human collateral— talents, ambitions, ideas. of SPEDCO and SPDF— could they help? Officers SPDF has elicited from its investors, whose cor of those organizations investigated the two men porate purpose is to make money, funds for which personally and professionally, and responded yes, it says candidly there will be no direct return they could. One suggestion was that the partners begin operations in the Southeastern Pennsyl soon. On the other hand SPDF has begun to show a monetary profit itself, dispelling fears that it vania Regional Development Laboratory, in West was a kind of altruistic anti-poverty program for Philadelphia. The Laboratory is a non-profit ailing businesses. And in the course of so doing, venture sponsored jointly by SPEDCO, the Area it has helped create, or cause to be retained, some Redevolpment Administration (since supplanted 3,000 jobs in its five-county purview. by the Economic Development Administration), and the West Philadelphia Corporation. It offers far is limited to a period of uninterrupted and There is this, however. SPDF’s lifespan thus 13 business review unparalleled prosperity. Should the five-and-a- too costly to continue. Not so, say its supporters; half year upswing reach an apex then turn down, should a recession set in, then the efforts of what will happen to SPDF and its customers? Southeastern Pennsylvania Development Fund Critics say that then its marginal borrowers may become more vital than ever, and it would be fail, and SPDF will become a social experiment financial, as well as social, folly to let it expire. 14FRASER Digitized for FOR THE RECORD SUM M ARY Third Federal Reserve District United States Per cent change Per cent change 7 July 1966 from mo. ago year ago mo. ago Manufacturing 7 July 1966 from mos. 1966 from year ago year ago • • • mos. 1966 from year ago LOCAL CHA N G ES Metropolitan Statistical Areas* MANUFACTURING — 5 Electric power consumed - 3 Man-hours, total* .......... — 2 Employment, total ............ - 1 2 CONSTRUCTION** .............. COAL PRODUCTION .......... +26 -20 4 7 + 9 + 5 + 4 + 9 + 19 — 1 0 3 + + + + 7 3 - + 9 + 8 +12 0 -1 0 +13 +25f ........................... ........................... Of ‘ Production workers only “ Value of contracts “ ‘ Adjusted for seasonal variation + 2f + 2f Check Payments** Total Deposits*** Per cent change July 1966 from Per cent change July 1966 from Per cent change July 1966 from Per cent change July 1966 from mo. ago Wilmington ...... - — 2 -2 2 0 + 3 + 7 + 2 - + 8 + 13 + 8 + 13 0 - 9 +12 + 13 0 — 8 + 12 + 15 PRICES Wholesale Consumer Payrolls year ago mo. ago year ago mo. ago year ago mo. ago 0 3 - + 3 + 65 + 84 - 7 0 — 2 + 9 + 8 + 12 + 10 3 Atlantic City .... 1 1 — 1 + 1 — 9 0 + 11 + 2 + 16t + 2 + 6 + 11 Employment + 1 0 + 3 + 3 year ago + 10 BANKING (All member banks) Deposits ............................... - 1 Loans ...................................... 0 Investments ....................... 0 U.S. Govt, securities .... - 1 Other .................................... + 1 Check payments*** ........ + l l t Banking + 4 + 3 fl5 SMSA’s ^Philadelphia Trenton ............ - 1 - 2 + 3 -36 - 6 0 Altoona - 1 + 11 0 + 11 - 1 + 7 + 3 + 9 Harrisburg ........ + 1 + 5 + 4 + 14 — 1 + 6 0 +10 Johnstown ........ + 1 + 3 + 4 + 2 — 4 + 9 0 + 7 Lancaster .......... 0 + 7 - 4 + 12 + 3 + 14 + 2 +11 Lehigh Valley .. — 1 + 2 - 2 + 7 + 2 + 6 0 + 6 0 + 4 - 1 + 8 + 6 + 18 0 + 10 2 + 1 — 7 + 5 + 3 + 6 -4 5 -3 9 ............ Philadelphia ...... Reading ............ - Scranton .......... - 1 - 1 + 3 - 2 + 9 + 6 + 4 + 1 +11 Wilkes-Barre .... 0 + 9 + 1 +19 + 2 + 12 0 + 6 York .................. 0 + 4 — 2 +12 + 2 +24 + 1 + 5 ‘ Not restricted to corporate limits of cities but covers areas of one or more counties. “ All commercial banks. Adjusted for seasonal variation. “ ‘ Member banks only. Last Wednesday of the month.
@FedFRASER