Full text of Economic Quarterly (Federal Reserve Bank of Richmond) : July 1951

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RESERVE BANK/

fRICHMOND

O M £U t
JULY 1951

VISITS PAID TO FIFTH DISTRICT INDUSTRIES
BY EUROPEAN DELEGATIONS, February 19 4 9 - July 1951
COUNTRIES
VISITING

STATES VISITED
Maryland

West Virginia

Virginia

North Carolina South Carolina

L'Kiinr

map above indicates the extent to which
productivity teams of foreign representatives
of labor and management have visited factories,
farms, and other industrial installations through
out the Fifth District. The article on page 3 dis
cusses E C A ’s Technical Assistance Program and
the part played by Fifth District industry as host
to over 1,000 visitors in this unique method of ex
changing industrial know-how.
h e

Also In This Issue

Fifth District Trend Charts______________Page

M o r t g a g e L e n d e r s : Mutual Savings
B a n k s______________________________ Page

Barometer of Business Loans Falling____ Page

Business Conditions & Prospects________Page

Statistical Data_________________________ Page 11

FEDERAL RESERVE BANK OF RICHMOND

if t h

d is t r ic t

r e n d s

ELECTRIC POWER PRODUCTION

CIGARETTE PRODUCTION

Extent of recessionary trend in business activity in this District is
shown in the electric power production to be very moderate indeed.
This moderate reaction has followed the period of nearly two
years when growth in use of electric power has been more rapid
than at any other time in the history of this District.

May adjusted output was up 7% from April and 2 % over a year
ago. Cigarette export market has improved moderately, but is still
well below its level of several years past. Facilities expansion in the
industry projected in Richmond, Virginia, and a new research lab
oratory for Charlotte, North Carolina.

DEPARTMENT STORE OUTSTANDING ORDERS

DEPARTMENT STORE STOCKS

Department stores continue to purchase on a conservative basis
with adjusted outstanding orders in May 12% under April but
still 12% ahead of a year ago. Combination of outstanding orders
and inventories shows a dollar drop of 7% from April compared
with a sales gain of 11 % .

May improvement in department store sales found its reflection in
a drop in store stocks. These fell 2 % , adjusted basis, from April to
May. Inventories continued 21% ahead of a year ago. W ith the ex
ception of a handful of departments, store stocks can only be con
sidered high in relation to current depressed sales.

WHOLESALE

DRUG SALES

WHOLESALE

The independent drug business must be good because drug whole
salers’ sales are running at the highest level in history. Although
sales in May adjusted were 8 % lower than in April, they were still
28% ahead of a year ago and well ahead of all previous records.

PAPER AND PRODUCTS SALES

Wholesalers of paper and paper products have found very little
slackening in their trade levels this spring. The current level of
sales, though in a moderate recessionary trend, are nevertheless 43%
ahead of a year ago.

JULY 1951

MONTHLY REVIEW

Productivity Teams—
An Experiment in International Cooperation
of officials of the United States’ Economic
Cooperation Administration sat down one day in
1948 with British Chancellor of the Exchequer Sir
Stafford Cripp to discuss the problem of economic re
covery in Europe. During the exchange of ideas on
boosting production, reference was made to the high
level of labor productivity in the U. S. and the flood of
goods pouring from its factories.

group

workers, tools, and machines more productive, repre
sentatives of that industry should observe at first-hand
the techniques, management and worker skills utilized
by American factories in turning out shoes.
P R O D U C T IV IT Y
Number
of
Teams

“ One look is worth a lot of description,” remarked
Sir Stafford, “ I wish we could see how your American
factories do it.”

Maryland
37
Virginia
28
West Virginia
8
North Carolina 15
South Carolina 8

“ A ll right,” spoke up E C A Administrator Paul H off
man, “ let’s bring your people over, and we’ll show them
how.”
That was the beginning of a series of pilgrimages
which have brought more than 3,000 workers, techni
cians, union representatives, and management officials
from fifteen Western European countries to the United
States in quest of industrial and agricultural “ know
how.” Grouped into what are called productivity teams,
they have crisscrossed the U. S. under the auspices and
administration of the Technical Assistance Division of
E C A and have studied factory and agricultural organi
zation, administration, production methods, labor-management relations, and, in fact, almost the whole gamut
of American industry in its physical as well as person
nel aspects.
Am ong the 72 teams visiting the Fifth District have
been British groups studying rayon production in V ir
ginia and North Carolina, men’s clothing in Maryland,
and fertilizer plants in Maryland and Virginia. Bel
gium has sent teams to observe coal mines in W est V ir
ginia and foundries in V irginia; Denmark’s hosiery in
dustry has sent representatives to North Carolina mills,
and a Danish team examined power supply facilities in
Maryland and W est Virginia. A French cotton spin
ning and weaving group had a look at South Carolina’s
modern mills; Norwegian teams have been through
shoe factories in Maryland and Virginia and pulp and
paper plants in Virginia, and a Swedish team studied
woodworking practices in North Carolina.
E C A ’s Technical Assistance Program was created
because it was recognized that in helping the warravaged countries of Europe to regain their economic
strength, it would not be enough to replace destroyed
plant and equipment and provide additional tools and
machines of the latest types. M ore important, E uro
pean agriculture and industry needed to make better
use of the men and machines they already had.
It was agreed that in general American industry is
more efficient than European industry— that with a
given amount of labor and capital, its factories and
farms out-produce their European counterparts. In or
der to help, say, the Norwegian shoe industry make its

Fifth District

TEAM

V IS IT S TO

Number
of
Visits

F IF T H

Number Number
of Coun- of Indus
ries Rep- tries Repsented
sented

61
46
31
44

12
8

20
202

D IS T R IC T

Number of
Persons

17
14
5
7
5

352
303
92
138
131

1,016

5
8

The factories and farms of the Fifth District have
been the classrooms for many of the lessons learned by
technical assistance groups. A s shown in the accom
panying table, 72 productivity teams from 14 European
countries have visited facilities in the Fifth District
during the past two years. Many members of these
teams have indicated that the fundamental ideas and
objectives of the Technical Assistance Program are be
ing grasped and taken back to Europe for discussion,
application and further dissemination. In point is a
statement by a member of a French productivity team,
here to study handling and stevedoring in American
ports. This man, a docker back in his native France,
remarked while inspecting port facilities in Newport
News, “ Oh yes, the equipment you have is fine— a big
help, and we could use it. But,” (with a characteristic
Gallic shrug) “ it isn’t the whole story; some of it is in
the mind— here in your country there’s a different at
titude, something that gets more work done.”
This emphasis upon the importance of intangible fac
tors in productivity has received increasing recognition.
Technical assistance does not consist solely of supplying
technical know-how and making heavy capital outlays;
an important part of the problem deals with attitudes
and ways of doing business. The point has been made
by R. M. Bissell, Jr., in the April 1951 Foreign Affairs:
“ It will not require enormous sums of money— even of
European capital— to achieve vaster increases in pro
duction. But it will require a profound shift in social
attitudes, attuning them to the mid-twentieth century.”
The Selection of Productivity Teams
The French team above referred to was composed of
interesting and interested individuals, an earnest, hard
working group. O f the 14 members from nine Metro
politan French ports and two French Africa ports, eight
represented managements of eight different firms, one
was a union representative, and five were w orkers: two
dockers, a chief of foremen, a foreman, and a crane op
erator. A ll had been subjected to a careful selection

i3 y

FEDERAL RESERVE BANK OF RICHMOND

eon or dinner— is borne entirely by the host company.
In many cases companies have cooperated with civic
groups, labor unions, and individual workers in en
abling the visiting teams to see how Americans live,
what their houses are like, and how they spend their
non-working hours.
W hen expenses are mentioned, it should be under
stood that Uncle Sam does not pick up the tab for the
entire cost of productivity team visits. E C A pays only
the dollar costs involved: transportation within the
United States and a per diem per team member which
varies, depending on the region visited, from $6 to $12.
All other costs (non-dollar expenses) are the obliga
tion of the countries involved and include the expense
of a pre-sailing review' of the team’s industry, visits to
representative plants in the team’s own country when
time permits, and the costs of ocean transportation.
Another substantial expense borne by the foreign
countries arises when returning teams compile detailed
reports which are distributed widely in the country of
origin and other participating countries. Such reports
are extremely important because they tie in directly with
one of the most difficult problems of the T A program—
the application of ideas and knowledge gained from visits
to American industries to those sectors of the foreign
economy with the greatest need for technical improve
ment and in which added technical know-how will do
the most good for the economy as a whole.

Netherlands Enamelware Productivity Team members
watch an operation in a plumbing fixtures plant in Balti
more. Courtesy EC A.

process and a thorough screening before their mem
bership was finally approved.
The decision to send this team to the United States
originated with the trade associations of this French in
dustry. After invitations for team membership had been
sent to all companies in the industry, and selections
made, the team project passed through a series of re
views and approvals by the French Productivity Center
(a body supervised by a board representing manage
ment, labor, and various ministries), the EC A mission
in France, and E C A in Washington.
The French Port Handling and Stevedoring Team
landed in New Y ork on May 21, 1951 for a five-week
study-tour. Its itinerary was worked out by the project
manager assigned by E C A to accompany this team
while it was in this country. Am ong the difficult tasks
of this individual is the selection of plants and installa
tions engaged in work similar to that of the team mem
bers’ companies. W hen this French team visited a lead
ing port in the Fifth District, some time was spent in
showing the piers and equipment used for loading ships
with coal. “ V ery interesting,” remarked one of the
team, “ but we do not export coal; we are more con
cerned with seeing facilities for discharging coal and
other cargo from ships.”
After consulting trade associations within the par
ticular industry and checking with labor advisers to get
their views on plants most suitable for inclusion in the
itinerary, the project manager gets on the telephone and
contacts the individual companies chosen. Rarely does
he get a refusal, and most of the companies go out of
their way to make certain that the team will have a
worth-while visit and to make the members feel as wel
come as possible. The expense of taking a team through
a plant— and more often than not, of giving it a lunch

T h e A p p lication o f Ideas
Although one of the requirements imposed upon pro
ductivity teams is to hand in an extensive report of what
they have seen and what they have learned, the wide
spread dissemination of that report and, more impor
tant, the implementation of the lessons learned are some
thing else again.

United Kingdom Cotton Team inspects a picker machine
in a North Carolina cotton mill. Courtesy ECA.

-in

MONTHLY REVIEW

JULY 1951

A significant point with respect to the productivity
team visits to the Fifth District is the fact that they
have not been concentrated merely in plants of the three
or four leading industries. On the contrary, factories,
mills, warehouses, and other facilities representing 22
different industries have been requested to open their
doors to foreign teams. This is a compliment to the
widespread high level of technical efficiency in the in
dustrial structure of the District.

The British apparently are cognizant of the problem.
A t its final briefing meeting before leaving England,
the British Hosiery and Knitwear Productivity Team
was told, “ . . . once you get back the prime purpose that
you have after the preparation of your Report is to see
that the dissemination of the knowledge you get, the
spread of 'know-how’ is carried out to the nth degree.”
Such a goal is not easily accomplished— take, for e x
ample, the case of a worker who had been a member of
a French team visiting this country. Upon his return
he gave one lecture to a group of workers’ delegates
in his plant which evoked a very lively and controver
sial discussion— including charges by the Communist
delegates that the “ American imperialists” had let him
see only what they wanted to show him on the team’s
trip and implied that he was in the pay of the Am eri
cans. After this one meeting, the worker went back to
his old job where he had no further opportunities to
apply what he had learned.
There have been, of course, more favorable experi
ences. A survey of the results of another French team’s
trip to this country pointed out that one of the worker
representatives was freed from his job for extended
periods in order that he might wander around his plant
talking to employees about productivity as he had seen
it in the United States.
Many companies that have been hosts to productivity
teams are in the dark as to what information and ideas
were gained by the groups, what use they were being
put to in foreign industries, and what the nature is of
follow-up programs after the teams have returned home.
Generally, these companies realize that some time will
have to elapse before tangible results appear, but in the
interim, and as information becomes available, they
would welcome knowledge of the more immediate re
sults of the time they spent in conducting teams through
their plants.
Careful Choice of Host Plants
As indicated earlier, the selection of individual com
panies for the itineraries of productivity teams is not a
haphazard choice. Most of the companies included in
the totals shown in the accompanying table were se
lected because they achieved high productivity and could
show visiting teams something out of the ordinary in
technique, planning, or equipment.
Illustrative of the above is the very effective organi
zation of labor-management relations which has caused
many teams to visit one of this District’s leading com
panies. Another firm in the District was asked to co
operate in the program because it had devised a highly
efficient method of handling and distributing raw ma
terials within its factory. One of our small local manu
facturing firms was told by the Technical Division of
E C A that it had been requested to show its plant to a
foreign team because its production methods for a cer
tain product were among the most advanced in this
nation-wide industry.

A Successful Selling Job
Foreign groups have apparently found it well worth
their time to inspect the industry of the Fifth District—
and have also found it to be a particularly pleasant part
of their visit to this country. One of the project man
agers who has taken teams all over the country recently
summed it up as fo llo w s: “ I can’t say enough in appre
ciation of the warm and sincere welcome that the teams
I’ve been with received from the people in your Dis
trict. Believe me, it makes a lot of difference to the suc
cess of this program, and I know that for a fact from
the favorable comments I get from team members every
time we swing through your region.”
If the good-will created by this program and the suc
cess it has had in “ selling” America to Europeans could
be measured in dollars and compared with the expendi
tures made, there is little doubt that the “ profits” would
appear tremendous. Aside from the fundamental objec
tives of increasing production and enabling Western
Europe to devote part of its energies to rearmament
without sacrificing post-war gains in standards of liv
ing, the T A program is widely accepted as one of the
most successful advertising and selling jobs ever done.
The T A program has encountered formidable oppo
sition from Communists who have tried to label pro
ductivity as a “ speed-up for higher profits and lower
purchasing power for the worker.” Difficulties have also
arisen from long-standing traditions and attitudes inimi
cal to progressive ideas and changes on the part of both
labor and management. European workers have been
prone to regard productivity gains as potential sources
of unemployment— that to increase output per man-hour
might be to work themselves out of a job. Many con
tinental employers have traditionally divorced their in
terests from those of their workers, and they have found
it difficult to accept the compatability of high wages and
high profits.
However, the ideas behind the T A program and its
objectives are so sound and desirable to both the United
States and W estern Europe that successful results are
mounting and definite inroads are being made on atti
tudes and production methods that have hitherto checked
production gains and higher standards of living. A pro
gram of this nature needs time to register its full im
pact, but it is sowing the seeds of better living for Eu
ropean workers, and a crop will be harvested if it is not
destroyed by the feet of marching armies— or if the
United States does not withdraw its support of the pro
gram prematurely.
45 y

FEDERAL RESERVE BANK OF RICHMOND

Mortgage Lenders—The Mutual Savings Banks
Recent developments in the field of credit have served to focus attention on the lending activities, not only
of commercial banks, but other lending institutions as well. This is the third in a series of articles designed to
review briefly characteristic operations of leading lenders outside the commercial banking field.

savings banks are currently among the more
important long-term credit providers and savings

tury to provide a place where the then new wage earn
ing class could deposit small savings. Consequently,
deposits are generally restricted to savings accounts of
depositaries in the United States. Their mortgages total
individuals and nonprofit institutions. Time deposits
three-fourths as much as Federal Reserve member
of businesses, which cannot be classified as savings ac
banks’ holdings and equal 60% of the combined mort
counts
in the true sense, are in general not accepted, al
gage portfolio of all insured commercial banks. In 1950
though permitted by law in some states, including M ary
these banks recorded more than $1 billion of non-farm
land. Some savings banks (including two in Maryland)
mortgages of $20,000 or less— 7% of the total. More
regularly accept demand deposits; most issue demand
than one-third of the time deposits of all American banks
instruments such as officers’ checks. The total of these
are held by mutual savings banks. Extent of their fi
demand obligations is about 0.1% of total deposits of
nancial activities is particularly impressive when it is
recalled that nearly all of the 530 mutual savings banks
mutual savings banks in the United States.
A s most of the funds of
are located in New England
savings banks are invested
and the Middle Atlantic
in fairly non-liquid assets,
States; almost t w o - t h ir d s
SELECTED ASSETS, U: S. MUTUAL'£AVfNGS BANKS 4
(in line with historically
are located in two states—
proven deposit s t a b i l i t y ) ,
M a s s a c h u s e tts and New
£’v ..
York.
and as s u b s ta n tia l w it h
jiyV.V.;;
Since February, when the
drawals by individual de
positors might cause serious
last wave of scare buying by
consumers subsided, mutual
disturbance to their invest
savings bank deposits have
ment schedules, most sav
shown a consistent rise, re
ings banks prescribe a maxi
suming the growth which
mum that any person may
MORTGAGE LOANS
has been typical of these in
deposit. In some states this
f ONLY i
stitutions since 1942. Data
maximum is prescribed by
for May 31 show deposits at
law. Maryland law does not
M
I-,
..i ..
I9-J4
1946 .Vj
:)l&$ . 1 9 4 ?
an all time high of $20,234
limit the size of accounts,
: SOURCE 'kw> or rtut, i?«o - i»«9, *Hntu*L hcivrt or] rcoinii. oercsir i^uRA ^ce
million, up $72 million dur
and each bank makes and
£1*0 OF'MOfltH, APRIL 1990 • »miL
ttONTHLY BULLETIN i;M AT'L « » * , • W/T »A«<QS BANK*
ing the month. Mortgage
enforces its own rules. It
loans are at a record peak
should be noted that legal
of $8,761 million and have been growing at an increas
or policy restrictions on the amounts which may be de
ing rate despite credit restrictions. Below-par prices
posited do not prevent a depositor from opening an ac
have slowed up their sales of Governments; 60% of the
count in the name of another member of his family or
increase in mortgages during April and May was met
establishing an account with more than one bank.
by reduced cash holdings and increased deposits.
Savings deposits are evidenced by entries on pass

u tu al

ills

In the Fifth District mutual savings bank activity is
concentrated in Maryland, where nine banks, eight of
which are located in Baltimore, are chartered. Despite
their small number, savings banks account for a con
siderable part of total banking activity in the District.
Their savings deposits are considerably larger than time
deposits of all member banks in Maryland and a third
as large as the total time deposits of all member banks
in the Fifth District. The eighth largest bank in the
Fifth District is a mutual savings bank located in Balti
more, and this bank, third oldest mutual savings bank
in the United States, has been in operation for a cen
tury and a third.
A s the name implies, mutual savings banks are co
operative institutions wholly owned by the depositors.
Most of them were organized during the nineteenth cen

books and withdrawal notice ranging from one week to
six months may be required. Maryland law permits
banks to require ninety days’ notice. In practice with
drawal notices are waived and deposits may be with
drawn on demand.
Depositors, as the sole owners of savings banks, are
subject to risks of ownership, and share in all earnings
of the business. Consequently, these banks pay divi
dends (o r interest) which are not determined in ad
vance, but depend on the earnings of the bank during
the period. Like other dividend-paying institutions,
savings banks try to maintain a set rate. Although the
depositors have full claim on the earnings of mutual
savings banks, interest-dividends do not necessarily ex
ceed interest rates paid by other types of savings insti
tutions, although they average about twice that paid on

i 6 1*

JULY 1951

MONTHLY REVIEW

tual savings banks. W ider membership is discouraged
by the fact that the mutuals feel that the insurance
premium is relatively high in the light of their long
safety record. Independent insurance systems are main
tained by some states (although not by Maryland).
Many banks carry no deposit insurance, though cur
rently all but three Maryland mutual savings banks are
insured by FD IC .
Only thirty mutual savings banks (none in M ary
land) have joined the Federal Home Loan Bank Sys
tem, which offers the privilege of borrowing from the
Federal Home Loan Banks and of rediscounting resi
dential mortgages. Similarly, membership in the Fed
eral Reserve System has not appealed to many mutual
savings banks; only three— two in W isconsin and one
in Indiana— are currently members.

savings accounts in commercial banks. Savings banks
usually make substantial transfers to a “ guarantee fund”
or surplus; conservative investment policies lead to rela
tively low yields on assets. In recent years dividends
have averaged slightly less than 2 % , although some
banks pay appreciably more.
Since mutual savings banks have no paid-in capital,
they build up substantial guarantee funds to serve as a
cushion against withdrawals and asset deterioration. In
Maryland the guarantee fund must be increased by at
least
of 1% of deposits annually to a minimum level
of 3% of deposits. Dividends may be paid only out of
net incom e; the guarantee fund may not be drawn on
for dividend payments. A t year end 1950 this fund
equaled 4.8% of deposits; undivided surplus amounted
to 7.0% of deposits.
Although depositors own mutual savings banks, they
have no voice in the management which, in most states
is vested in a self-perpetuating board of trustees or di
rectors. Original trustees are selected by the organ
izers of the banks. W hen a vacancy occurs, the remain
ing trustees select a successor. Most states (not includ
ing Maryland) prohibit trustees from receiving sal
aries or fees for attendance at board meetings.

Loans and Investm ents

Mutual savings banks’ investments are usually pre
scribed by law. Some states permit more discretion
than others as to bank investments, but “ legal lists”
usually include the follow in g: first mortgages on im
proved real estate; U. S. Government bonds; bonds of
states, municipalities and other political subdivisions;
certain high grade bonds of railroads and public utili
ties ; and in certain instances, bonds of strong industrial
corporations.
Maryland law permits savings banks considerably
more freedom in their choice of investments than do
most states. The only statutory restrictions are that no
loans may be made to officers, employees, or directors,
and that investments must be “ on good security” at the
discretion of the directors of the bank.
In addition to the legal restrictions on their iirvestments, mutual savings banks are subject to supervision
by state banking departments. Examinations are made
at intervals prescribed by the statutes of the various
states.
In Maryland, the bank commissioner is charged with
seeing that “ sound banking practices” are followed, and
the savings banks are required to submit to the com
missioner at year end a detailed list of all investments.
In addition, a more abbreviated statement of condition
is required at midyear. Examinations are conducted
twice each year.
Mutual savings banks are eligible for membership in
the FD IC , the Federal Home Loan Bank System, and
the Federal Reserve System, providing specific state
laws do not prohibit such membership. (Membership
is not prohibited by Maryland statute.) A t the end of
1950, 194 mutual savings banks with $15.9 billion in
assets were members of the FD IC . These 194 banks
represent approximately 70% of the assets of all mu

More than a third of the assets of mutual savings
banks are held in mortgage loans. A t year end 1950
they held more than $8 billion of real estate loans as
compared with holdings of $16.1 billion by life insur
ance companies, $10.5 billion by Federal Reserve mem
ber banks, and $2.9 billion by insured nonmember com
mercial banks.
The shortage of mortgages, coupled with wartime
Government borrowing and a substantial increase in
savings accounts, led mutual savings banks to make
heavy purchases of Government securities during the
Second W orld W ar. Despite their sales of Govern
ments in the postwar period such securities are still the
most important type of asset held. A t year end 1950
almost half of their assets (4 8 .5 % ) were in Govern
ment securities, as compared with 36.2% of total as
sets of Federal Reserve member banks.
A n interesting difference between savings and com
mercial banks is seen in the maturities distribution of
their Governments portfolios. Commercial banks, in
terested in maintaining a liquid position to meet pos
sible withdrawals of demand deposits, hold compara
tively few long-term Government securities, and more
short-term maturities. Savings banks, on the other hand,
do not anticipate large withdrawals at any one tim e;
they do not need to maintain as liquid a position as
commercial banks, because of the nature of their de
posits. Their holdings of Government securities are
heavily concentrated in longer maturities. A t year end
1950, over 80% of the Government securities held by
commercial banks were due or callable in five years,
while less than 10% of those held by mutual savings
banks were due or callable within five years.
Next to mortgages and Government securities in im
portance are “ Other Securities” , representing a sub
stantial portion of savings banks’ assets. A t year end
1950 all mutual savings banks in the United States held
10.5% of their assets in non-Government securities.
Non-mortgage loans are of only minor importance, ac
counting for 0.6% of total assets at year end 1950. On
the same date cash assets amounted to 3.5% of the total.

4 7 y

(Continued on page 1 1 )

FEDERAL RESERVE BANK OF RICHMOND

Barometer of Business Loans Falling
h e organization and beginning operation of the V o l
untary Credit Restraint Program has focused the

attention of Fifth District bankers and businessmen on
the current course of business loans in the District and
in the nation.
The main barometer of business loans— the so-called
“ commercial, industrial, and agricultural loans” of
weekly reporting member banks— has been falling fair
ly rapidly in the Fifth District and much more slowly
in the United States since its high mark in mid-April.
In mid-June, “ business” loans of 51 weekly reporting
member banks in the Fifth District totaled $575.6 mil
lion, which represents a decline of $29.1 million, or
4.8% , since mid-April. By contrast, there was a de
cline of only $177 million, or 0.9% , in such loans of all
weekly reporting member banks in the United States.

through this new window at the falling barometer of
business loans reveals several interesting facets of the
recent drop.
1. The decline in business loans is definitely sea
sonal in character; loan contraction, both in the
District and in the United States, is attributable
to a continued seasonal decrease in loans to com
modity dealers and to processors of agricultural
products. Fifth District loans in this category
shrank $13 million in the eleven-week period
ended June 13, compared with a net decline of
$19 million in total commercial, industrial, and
agricultural loans of all weekly reporting member
banks in this District. Similarly, in the United
States, there was a cumulative decrease of almost
$600 million during this same eleven-week period
in loans to commodity dealers and processors of
agricultural products.

Changes in Commercial, Industrial, and Agricultural Loans
By Industry and Purpose
Selected Banks in Fifth District and United States1
March 28-June 13, 1951
(Amounts in millions of dollars)
ll-weelc period ended
June 13
5th
Dist. U. S.
Net change in commercial, industrial, and
agricultural loans ____________________ — 19
Classified by business of borrower:
Manufacturing and mining ___________
Food, liquor, and tobacco _____________
8extiles, apparel, and leather _________
Metals and metal products ___________
Petroleum, coal, chemicals, and rubber
Other manufacturing and mining __
Trade— wholesale and retail ____________
Commodity dealers ________ _____ ________
Sales finance companies ________________
Public utilities and transportation _____
Other business _________________________
Unclassified 2 ____________________________
Classified by purpose of loan;
Defense contracts _______________________
Defense supporting activities3 _________
Plant and equipment ________________
All other ______________________________
Non-defense activities __________________
Inventory and working capital ---------Plant and equipment _________________
Retirement of non-bank debt -----------All other ______________________________
Unclassified2 ____________________________

— 9
— 6
— 2

—
—
+
—
+
+
+

1
1
1

o
7
5

2
— 12

n.a.
n.a.
n.a.
— 14
— 14

+ 2

— 0
— 2
— 7

4-week pe
riod ended
June 13
5th
Dist. u. s .

-117

-18

— 148

+ 146
-219
h 90
-189
- 41
- 45
- 54
-377
+ 34
+ 107
+ 38
-119

- 5
- 2
- 2
+ o
- 1
- 0
- 2
- 3
- 0
+ 1
+ 1

+ 86
— 95
+ 36
+ 111
+ 5
+ 29
— 52
— 131
— 35
+ 40
+ 20
— 76

+ 191
n.a.
n.a.
n.a.
-129
-161
+ 91
- 13
- 46
-179

2. For all reporting banks in the United States, this
seasonal decline in commodity and processors’
loans (primarily for inventories and working
capital purposes) has been partly offset— and
more than offset in the week ended June 13— by
an upsurge in defense loans. However, for Fifth
District reporting banks, this upsurge has been
negligible thus far. Reporting banks in the United
States which classified loans registered a $191
million increase in defense loans in the elevenweek period ended June 13, while banks in the
Fifth District classifying loans reported an in
crease in defense loans of only $2 million.

-1 0

b
-

1
2
2
0
-1 1
-1 0

+ 1
- 0
- 2
-1 0

3. The data on all reporting banks in the United
States indicate substantial increases in loans to
textile, apparel, and leather manufacturing com
panies during the eleven-week period ended June
13. In contrast, a slight decline was registered in
the Fifth District.

+ 76
+ 89
+ 69
+ 20
— 233
— 239
+ 30
+ 4
— 28
— 80

4. Loans to wholesale and retail trade expanded
through mid-May, both in the District and in the
United States, but then receded through midJune. The increase in these loans in the earlier
part of the reporting period (A pril 4 to M ay 9 )
was attributed by the Board of Governors of the
Federal Reserve System to “ the delivery of mer
chandise ordered on an expanded scale during the
abnormally high sales period which ended before
Easter and intense sales promotions by manu
facturers.”

1. Reports classifying business loans by industry and purpose from
large banks accounting for approximately 65-75% of the total dol
lar volume of such loans.
2. Change in commercial, industrial, and agricultural loans for
weekly reporting member banks not classifying loans.
3. Classification of loans for defense supporting activities was not
used prior to May 10, 1951.

A t the request of the Voluntary Credit Restraint
Committee, the Federal Reserve Banks recently have
started to collect additional detailed data weekly on the
business loans of selected member banks accounting for
a large proportion of these loans. The Board of G ov
ernors of the Federal Reserve System has labeled these
data, which show a breakdown of business loans by in
dustry and purpose, a “ new window” on the lending
operations of commercial banks. Although the data
collected thus far are necessarily fragmentary, a look

5. Similarly, loans to sales finance companies in
creased from early April through mid-May, but
subsequently declined through mid-June. Again,
the Board of Governors attributed the early in
crease in part to a rise in holdings of wholesale
and automotive paper and in part to a rise in
other types of business loans of finance companies.

i8 y

JULY 1951

MONTHLY REVIEW

W ith regard to the demand for business credit to add
to plant and equipment, the latest joint survey by the
Department of Commerce and the S. E. C. points out
that business outlays on new plant and equipment this
year may exceed the record $24 billion level previously
estimated. Banks will be called upon increasingly to fi
nance this industry expansion program. However, the
Voluntary Credit Restraint Committee has already
called for postponement of these loans if not defense or
defense supporting.

The Board noted that: “ Like all other lenders,
sales finance companies have been asked by the
Federal Reserve Board to abide by the principles
of the Voluntary Credit Restraint Program.”
6. Loans to public utilities, including transportation,
have shown a steady rise nationally since early
April, but have remained at approximately the
same level in the Fifth District.
As noted in the June R eview , several factors have
added to the seasonal downturn in the business loan
barometer, including the recent developments in the
Government securities market, the increase in reserve
requirements earlier in the year, and the newly operat
ing Voluntary Credit Restraint Program. However, a
number of factors in the current outlook, operating in
an opposite direction, indicate a rising barometer of
business loans in the last half of 1951. O f major im
portance are the scheduled speed-up in the defense pro
gram and the corollary growing demand for business
credit to add to plant and equipment which will serve
to reinforce the normal seasonal upturn in business
loans accompanying fall marketing and the usual fall
upturn in business activity.

In addition, the current rate of defense spending is
scheduled to increase sharply by year-end, with re
sultant increased demand for bank credit; recent legis
lation also permits a broadening of commercial bank
participation in the V -loan program.
Although cutbacks in production of civilian goods,
the growing impact of Government controls, and ad
herence to the Voluntary Credit Restraint Program un
doubtedly will act as brakes, there is a distinct possi
bility of a rise in business loans by year-end— with its
well-known influence on the money supply and, hence,
on the old, but ever new, problem of inflation.

Business Conditions and Prospects
levels in the major industries of the Distrist continue to show mixed trends. The cotton

part of which is a belated seasonal move. Total ex
penditures, as represented by bank debits, were at the
same level in May as in April and 17% ahead of a year
ago.

r o d u c t io n

textile industry recovered moderately in May from the
April level, despite continuing strikes in numerous
mills. Bituminous coal output dropped sharply from
lack of demand. Lumber and furniture industries are
experiencing a considerable letdown. Rayon and syn
thetic mills, on the other hand, are still running at ca
pacity levels, and shipyards and aircraft factories are
expanding output in vigorous fashion. The full-fash
ioned hosiery industry is continuing production on a
nearly full time basis, while the seamless branch of the
industry is running about half time.
Employment levels in the Fifth Federal Reserve Dis
trict continue to move upward despite some setback in
the manufacturing segment. Largely responsible for
this rising trend are Governments, transportation equip
ment industries, and construction. The construction in
dustry continues as a strong element in the District’s
economy, with industrial, military facilities and public
works more than offsetting a recessionary trend in resi
dential building.
Trade levels in soft goods lines continued to rise
through May, whereas the hard lines continued to show
weakness, although furniture stores showed a better than
seasonal improvement. Wholesale trade volumes are
improving slightly and all lines, except electrical goods,
show substantial gains over a year ago.
The trend of bank loans is moderately downward,

Construction
Total construction contract awards in May were
nearly five times larger than in April, after adjustment
for normal seasonal variation, and nearly six times
larger than in May a year ago. These figures were
greatly augmented during the month of May by the
awarding of a $600 million contract for the Savannah
River Atom ic Energy Plant. Even if this $600 million
were eliminated from the total contract awards in May,
there would still have been a 12% gain over a year ago.
Commercial construction adjusted (due to substantial
curtailment through controls) dropped 55% in May
from April though this level was 63% below May 1950.
Industrial construction, due to the afore-mentioned
Atom ic Energy contract, was 29 times larger in May
than April and 56 times larger than a year ago.
Residential construction continued its down trend
with sizeable declines in multiple structures as well as in
one- and two-family houses. Public works and utilities
gained 13% more than seasonal from April to May and
were 42% higher than a year ago. The rising con
struction level has contributed substantially to the tight
labor market in important areas of the District. There
is some question whether industrial construction can
continue throughout the year at present levels, because

19y

FEDERAL RESERVE BANK OF RICHMOND

of shortages of materials. Industrial concerns show no
lack of willingness to erect new facilities or expand old
ones. “ Peace fears” may temporarily moderate expan
sion plans but can hardly alter the underlying factors
which have promoted this construction.
Trade
District department store sales rose super-seasonally
2 % from April to May and stood 4 % ahead of a year
ago. From January to June, total sales were 7% above
the same period in 1950— or just about the average
price increase. Soft goods lines accounted for most of
the rise, though furniture and floor coverings, televi
sion, etc., also exceeded last year’s figures, while the
chief offset was in major household appliances. Indi
cations in late June are that much the same trend has
continued in soft goods with practically all of the hard
goods turning easier.
Interestingly, the heavy inventory accumulation of de
partment stores is mainly in the home furnishings de
partments, though some soft goods departments also
have inventory accumulation. These are mainly in
women’s and children’s shoes, corsets and brassieres,
woolen dress goods, and cotton wash goods. Most other
departments have what might be termed rather full in
ventories.
Furniture stores in the District improved their sales
from April to May by 7 % , after seasonal adjustment,
but the totals were 6 % smaller than a year ago. This
loss can probably be accounted for by reduced sales of
m ajor household appliances rather than furniture, since
department stores indicated an improved level of fur
niture sales.
Sales of household appliance stores rose 8 % from
April to May, or less than the normal seasonal im
provement. Sales of these stores in May were 24%
below a year ago. This performance adds further evi
dence to the statement that the furniture stores sales’
drop from a year ago was caused by household ap
pliances.
Wholesalers’ sales in paper, automotive supplies, and
drugs during May were moderately smaller than in
April, after seasonal correction. A ll other lines show
moderate gains. W ith the exception of electrical goods,
all lines of wholesale trade are running at very high
levels and well in excess of a year ago.

Textiles
Improvement was shown in the cotton textile indus
try during May despite the fact that numerous strikes
were still under way. Cotton consumption in May ex
ceeded the normal seasonal change from April by 9%
and stood at a level 14% ahead of a year ago. Even
though May consumption is 7% under the adjusted peak
established in December, it remains at a very high level.
Indications are that the June level will not be materially
different from that of May, though moderate reduction
may occur in July and August, not from the lack of
business but for lack of raw cotton. New orders should
begin to accumulate this month and a high level of mill
operations may well occur in the fall and winter. It is
interesting to note that the export market in both cotton
manufactures and semi-manufactures has risen very sub
stantially thus far this year.
Furniture
Latest information on the furniture industry is for
April when shipments were at a very high level, though
moderately below the previous month. New orders (ad
justed), however, declined 45% from March to a level
24% under a year ago and unfilled backlog (adjusted)
declined 22% in A pril from March though still 15%
ahead of a year ago. The figures seem to indicate that
shipments of the industry will point downward for the
next few months. The Summer Merchandise Mart in
Chicago has been a quiet affair saleswise, and the re
tailers’ inventory positions are clearly the cause. In the
Fifth District, furniture store inventories in May ad
justed, though 5% lower than in April, were neverthe
less 24% ahead of a year ago, while store sales were 6 %
under a year ago. Even assuming that the furniture
business increased 4 or 5% from a year ago during
May, inventory is still high. Furniture factories have
made some moderate price reductions at the Chicago
Marts for promotional purposes, but no general price
reduction has been made.
For the remainder of the year, it appears reasonable
to suggest fuller production in the soft goods industries
resulting from a rise in the trade level of the country as
a whole. The trade recession between January and May
has been what stock market analysts would term “ a
technical reaction.” This decline has apparently bal
anced out the December-January rise with a resulting
level commensurate with the change in the disposable
income of the American people. The future income
level should continue to rise and, in turn, create a ris
ing level of retail trade.

i 10 ^

JULY 1951

MONTHLY REVIEW

Mortgage Lenders —The Mutual Savings Banks
Continued from page 7

Interesting divergencies exist between the assets dis
tribution of Maryland mutual savings banks and the
distribution of assets held by savings banks in the en
tire United States. Despite the lack of legal restrictions
on investments in Maryland, data reported indicate a
relatively conservative policy. M ore than two-thirds of
total assets of Maryland mutual savings banks were in
Government securities at year end 1950 as contrasted
with the national average of slightly less than half of
assets. Holdings of non-government securities were
about the same in Maryland as in the country as a
whole.

Maryland mutual savings banks have been relatively
less active mortgage lenders than their counterparts in
other states. A t year end 1950 mortgages accounted for
less than 14% of the assets of Maryland mutual savings
banks as compared with more than 35% for all mutual
savings banks.
Non-mortgage loans are relatively more important in
Maryland, accounting for three times the share of total
assets represented by these loans at all mutual savings
banks. “ Other assets” account for twice as large a share
of total assets in Maryland as in the United States,
while cash assets are about the same as for all mutual
savings banks.

D E B IT S TO I N D IV ID U A L AC C O U N T S

51 R E P O R T IN G M E M B E R B A N K S — 5TH D IS T R IC T
(000 omitted)

(000 omitted)

Dist. of Columbia
Washington
Maryland
Baltimore
Cumberland
Frederick
Hagerstown

May
1951

May
1950

5 Months
1951

5 Months
1950

$1,059,355

$ 915,581

$ 5,288,769

$ 4,016,931

1,265,547
24,925

6,157,577
122,495
159,120

4,909,827
104,957
84,934
131,122

32,031

1,109,017
22,419
18,665
27,104

South Carolina
Asheville
Charlotte
Durham
Greensboro
Kinston
Raleigh
Wilmington
Wilson
W inston-Salem

59,543
326,330
98,518
100,554
15,421
147,510
42,755
14,835
159,525

49,978
257,193
83,806
83,431
12,204
138,256
32,698
12,185
135,411

294,666
1,692,747
486,684
506,987
79,109
778,126
207,404
91,944
814,504

239,749
1,303,732
391,551
394,253
62,267
671,997
159,505
69,479
660,438

South Carolina
Charleston
Columbia
Greenville
Spartanburg

76,451
128,618
106,391
61,189

60,548
103,732
85,179
47,294

369,894
622,182
557,110
334,823

301,108
505,175
422,449
239,569

Virginia
Charlottesville
Danville
Lynchburg
Newport News
Norfolk
Portsmouth
Richmond
Roanoke

27,492
25,460
44,581
44,709
216,333
24,357
545,818
117,214

23,706
22,052
37,679
28,946
213,551
20,745
483,271
95,981

133,449
148,133
232,904
207,500
1,057,249
123,949
2,677,409
560,086

114,683
116,867
187,832
140,158
1,046,468
101,852
2,341,260
460,653

West Virginia
Bluefield
Charleston
Clarksburg
Huntington
Parkersburg

45,061
159,615
35,035
67,888
32,127

42,665
128,964
29,793
59,039
25,066

233,941
754,288
173,378
333,050
150,501

192,072
606,946
140,386
276,789
122,770

District Totals

$5,127,198

$4,406,159

$25,451,198

$20,517,779

22,010

101,220

June 13,
1951

Change in Amount from
May 16,
June 14,
1951
1950

Total Loans ___________________ $1,179,511**
575,557
Business & Agricultural
Real Estate Loans --------------- ... 240,564
377,610
All Other L oan s_____________
Total Security Holdings ---------- 1,571,206
118,895
U . S. Treasury Bills ------------0
U . S. Treasury Certificates —
U. S. Treasury Notes ---------367,675
920,045
U . S. Treasury Bonds ----------Other Bonds, Stocks & Secur., 164,591
Cash Items in Process of Col. — 266,537
225,734*
Due from Banks --------------------74,447
Currency and Coin ___________
544,078
Reserve with F. R. Banks ....
55,969
Other Assets ---------------------------Total Assets ___________________ $3,917,482

— 16,788
— 18,107
— 686
+ 2,074
— 34,313
— 7,064
— 7,698
— 19,715
+
164
— 2,045
+58,292
+ 4,639
+25,625
+ 1,157
+36,567

+233,814
+153,817
+ 10,766
+ 72,187
— 179,989
+ 37,316
— 126,697
+ 93,185
— 192,109
+
8,316
+ 15,193
+ 54,657
+
6,577
+ 81,416
+
861
+212,529

Total Demand Deposits ---------- 3,033,540
Deposits of Individuals -------- 2,291,207
93,195
Deposits of U. S. Govt----------178,182
Deposits of State & Loc. Gov.
418,929*
Deposits of Banks ----------------52,027
Certified & Officers’ Checks—
608,066
Total Time Deposits ___________
551,942
Deposits of Individuals -------56,124
Other Time Deposits -----------1,800
Liabilities for Borrowed Money
25,940
All Other Liabilities --------------248,136
Capital Accounts --------------------Total Liabilities ------------------- $3,917,482

+49,328
+ 69,133
— 37,118
+ 7,006
+13,305
— 2,998
—
412
— 1,012
+
600
— 12,400
— 1,540
+ 1,591
+ 36,567

+202,927
+ 135,707
+ 17,043
+ 15,037
+ 28,393
+
6,747
— 10,305
— 19,781
+
9,476
+
825
+
5,319
+ 13,763
+212,529

* Net figures, reciprocal balances being eliminated.
** Less losses for bad debts.

i li Y

FEDERAL RESERVE BANK OF RICHMOND

S E L E C T E D F IF T H D IS T R IC T B U SIN E S S IN D E X E S
AVERAGE

1935-39 = 100— S E A S O N A L L Y

D A IL Y

May
1951
Automobile Registration1 ------------------------------------------------Bank Debits ______________________________________________
Bituminous Coal Production ------------ -------------------------------Construction Contracts Awarded ------------------------------------Business Failures— No. ----------------------------------------------------Cigarette Production -------------------------------------------------------Cotton Spindle Hours ___________________________________
Department Store Sales _________________________________
Electric Power Production ______________________________
Employment— Manufacturing Industries1 ----------------------Furniture Manufacturers: Shipments ---------------------------Life Insurance Sales ____________________________________

430
134
2773
45
249
162
331

289

AD JU STE D

Apr.
1951

M ar.
1951

May
1950

213
430
176
558
62
233
149
326
332
150
339
281

217
432
145
502
70

225
366
158
484

220

244
148
318
299
139
320
299

166
297
337
154
349
290

102

% Change—-Latest Month
Prev. Mo.
Year Ago
—

2
0

+ 17
— 15
+473
— 56
+
2
+
9
+
4
+ 12
+
7
+ 14
— 3

— 24
+ 397
— 27
+
7
+
9
+
2
— 1
— 3
— 3
+
3

1 Not seasonally adjusted.

Back figures available on request.

W H O LESALE TRADE

B U IL D IN G P E R M IT F IG U R E S

Sales in
May 1951
compared with
May
Apr.
1950
1951

LIN ES

Auto supplies (9) ______
Electrical goods (4) ------Hardware (13) --------------Industrial supplies (5) __
Drugs and sundries (13) ..
Dry goods (15) __________
Groceries (47) ___________
Paper and products (4) ..
Tobacco and products ( 8 )
Miscellaneous (94) ______
District Totals (212) __

— 9
+
7
+
6
+ 66
+14
— 2
+ 12
+ 49
+ 32
— 3
+
5

Stocks on
May 31, 1951
compared with
May 31 Apr. 30
1950
1951
+

—

+
+
+
—
+

1
8
8
4
io

May
1951
Maryland
Baltimore
$ 6,949,930
Cumberland
53,550
Frederick
277,095
Hagerstown
202,415
Salisbury
152,066

May
1950

5 Months
1951

5 Months
1950

$ 6,722,420
250,395
91,075
113,710
218,325

$ 35,071,145
377,485
810,635
845,600
874,544

$ 39,639,140
591,790
1,229,950
774,580
633,917

Virginia
Danville
519,797
Lynchburg
287,558
Newport News 100,393
Norfolk
750,275
Petersburg
769,614
Portsmouth
237,405
Richmond
1,440,548
Roanoke
1,104,546

275,943
362,415
84,423
1,357,845
221,228
296,125
2,721,868
1,333,156

1,245,722
1,852,928
697,529
9,375,708
1,557,108
3,669,515
8,519,252
7,857,898

1,476,352
1,611,595
878,266
6,597,205
1,738,695
1,462,909
9,628,571
8,847,507

388,178
151,880
1,044,042

721,071
297,050
615,102

2,232,436
464,490
3,510,594

7,616,313
778,273
2,566,296

North Carolina
Asheville
661,388
Charlotte
1,183,284
Durham
362,079
Greensboro
807,482
High Point
299,325
Raleigh
1,529,305
Rocky Mount
179,980
Salisbury
152,246
Winston-Salem 1,079,220

191,073
2,447,346
696,900
1,230,595
490,941
1,040,750
177,509
197,258
1,195,330

3,421,188
10,547,411
2,601,503
3,731,096
1,544,714
6,181,525
1,424,186
691,591
5,184,424

1,940,296
11,688,060
9,005,287
4,994,286
1,728,572
8,045,641
2,249,886
1,640,346
4,942,571

+ 2

South Carolina
Charleston
Columbia
Greenville
Spartanburg

214,873
740,125
3,244,670
164,050

595,245
980,733
667,400
1,188,241

802,459
5,170,452
6,122,229
526,240

1,479,183
5,373,796
3,131,929
1,702,947

+ 12
7
— 8

Dist. of Columbia
Washington
6,633,774
District Totals $31,681,093

6,282,038
$33,063,510

30,181,998
$157,093,605

29,041,183
$173,035,342

+ 2

+ 5
+

+ 31

+ 20

+ 13
+ 32
+ 19

— 13
-- 5
11

+ 24
+ 35
+ 30

Number of reporting firms in parentheses.
Source: Department of Commerce.

West Virginia
Charleston
Clarksburg
Huntington

R E T A IL F U R N IT U R E SALES
Percentage comparison of sales
in periods named with sales in
same periods in 1950
May 1951
5 Mos. 1951
STATES
Maryland (7) ________ ________________ ____+
Dist. of Col. (7) _____________________ ____—
Virginia (18) ---------------- --------------------------—
West Virginia (10 ___________________ ____•—
North Carolina (16) __________________ ____—
South Carolina ( 6 ) __________________ ____—
District (64) _________________ ____—
—

2
2
10
2
14
20
5

+ 120
— 4
— 5
—

IN D IV ID U AL CITIES
Baltimore, Md. (7) __________________ ____+
2
Washington, D. C. (7) ______________ ____— 2
Richmond, Va. ( 6 ) __________________ ____— 11
Charleston, W . Va. (3) _____________ ____■
— 5
Charlotte, N . C. (3) _________________ ____— 16

—

— 17

Number of reporting firms in parentheses.

ADDITION TO PAR LIST

D E P A R T M E N T ST O R E O P E R A T IO N S
(Figures show percentage change)
Rich.
Sales, May ’51 vs. May ’50 .------ + 4
Sales, 5 Mos. ’51 vs. 5 Mos. ’50 + 1 2
+ 34
Stocks, May 31, ’51 vs. ’50
Orders outstanding,
May 31, ’51 vs. ’50 _____....... + 3 4
Current receivables May 1
28
collected in May ’51
Instalment receivables May 1
13
collected in May ’51 _____
Md.
Sales, May ’51 vs. May ’50 ------ + 9
Sales, 5 Mos. ’51 vs. 5 Mos. ’50 + 1 0

+10
+ 10

+25

+ 30

- 2

D.C.
+ 3
+ 9

The Port City Bank, North Charleston, South
Carolina, a nonmember bank located in the terri
tory served by the Richmond Head Office, has
agreed to remit at par, effective June 29, 1951, for
checks drawn on it when received from the Fed
eral Reserve Bank. The combined A .B .A . transit
number-routing symbol of the bank is 67'502-

Other District
Cities Total
b 4
+ 2
- 9
+ 8
-23
+ 19

Wash.
b 3
- 9
-23

Balt.

Va. W .V a. N.C.
+ 3 + 2 — 3
+ 11 + 1 2 + 4

+ 14

513

S.C.
+ 6
+ 8

•I

12 Y

Full text of Economic Quarterly (Federal Reserve Bank of Richmond) : July 1951

FRASER