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FEDERAL RESERVE BANK OF RICHMOND

MONTHLY
REVIEW
Federal Regulation of Bank Holding
Companies— /
Consumer Spending Patterns
District Personal Income—1967
The Fifth D istrict




Federal Regulation of Bank Holding
Traditionally, the banking structure of the United
States has been characterized by the existence of
large numbers of single-office (unit) banks. Be­
ginning about 1900, however, branch banking became
increasingly important, and bank “ chains” emerged
in many areas where branching was prohibited or
limited by state law. In that period, the term “ chain”
was used in a broad sense to describe two different
ownership patterns for bringing two or more banks
under common ownership or control— ownership of
stock in two or more banks by an individual or a
small group of individuals, on the one hand, and
ownership by a corporation on the other. Later,
corporations owning the stock of one or more banks
came to be known as “ bank holding companies,” and
the affiliated banks owned by such a company were
sometimes referred to as a bank group. Hence, to­
day a distinction is made between “ chain banking”
and “ group banking.”
Although branch banking has from its inception
been closely regulated, Federal regulation of bank
holding companies came about as a by-product of the
major bank reform and regulatory legislation of
1933. The present restrictions on expansion of bank
holding company systems were not imposed until
1956. There are still no Federal laws restricting
the growth of bank chains through stock acquisitions
by individuals.
Notwithstanding the constraints on bank holding
company acquisitions resulting from the Bank H old­
ing Company A ct of 1956, regulated bank holding
companies have grown rapidly in recent years, as re­
gards both numbers of such companies and numbers
of banks in holding company groups.
Moreover,
recent months have witnessed a new development
which is receiving much attention in the banking
press— the creation of large numbers of so-called
“ one-bank holding companies.” These are holding
companies which own only one commercial bank and
which may or may not be engaged in other financial
and nonfinancial activities, either directly or through
subsidiaries. Under present law, one-bank holding
companies are not subject to regulation by Federal
banking agencies.

2




Against this background of growth and change,
Part I of this article reviews the events which led
to the Bank Holding Company A ct of 1956. Part II,
to appear in the November Monthly Review, dis­
cusses the principal provisions of that A ct (including
the significant 1966 amendments) and analyzes some
of the more important recent trends in bank holding
company growth.
Holding Company Growth in the 1920-1933 Period
The bank holding company first became a significant
factor in United States banking in the 1920’s, a
decade characterized by numerous important changes
both in banking structure and in bank operations.
LT to 1921 the number of banks steadily increased
p
until in that year there were some 31,000 institutions,
the highest number ever reached in the history of the
nation’s banking. Many of these banks were small,
undercapitalized institutions that were ill-equipped
to adjust to a rapidly changing economic environ­
ment. Over the remainder of the decade, large num­
bers, especially those serving rural areas of the South
and the Midwest, were severely affected by the pro­
longed agricultural depression of the period and
were forced to suspend operations.
Total bank
failures in the eight-year period between January 1,
1921 and January 1, 1929 numbered more than 5,000.
In the dynamic business context of the 1920’s, the
existence of numerous banks of doubtful strength
and stability provided fertile ground for a consolida­
tion movement in banking to take root. The Comp­
troller of the Currency in particular found the move­
ment desirable and publicly advocated liberalization
of banking laws to permit growth of larger, stronger,
and more diversified banks. In any event, by the
middle of the decade the movement toward branch
banking and chain banking was gaining momentum.
Then, starting about 1926, holding company banking
began to expand rapidly, especially in some of the
Midwestern states which had experienced large num­
bers of bank failures.
The several uses of the holding company device as
applied to banking in this period, as well as the ex­
pansion of holding company groups, was detailed in

N O N B A N K IN G AFFILIATES

Companies-I

OF N A T IO N A L

BANKS,

T yp e s o f A f f ilia t e d
C o rp o ra tio n s

19 32

Num ber

S e c u ritie s

192

R e a lty

155

B a n k b u ild in g

the 1927 Annual Report of the Federal Reserve
Board, which noted:

51

S a fe d e p o s it

44
37

L iq u id a tin g
. . . [bank holding] companies have been organized
in increasing numbers to operate extensively in the
field of banking, not simply as investment agencies
but specifically in individual instances to acquire con­
trol of corporately independent banking institutions,
through stock ownership, and to exercise this cen­
tralized control in effecting bank mergers; in ex­
tending identical or virtually single corporate control
over companies operating as subsidiaries in special
fields of banking; in building up branch systems in
States which permit branch banking; and in build­
ing up . . . chain systems embracing in individual
instances banking institutions operating under na­
tional and State charters in several States.

M o r tg a g e le n d in g

35

A g r ic u lt u r a l lo a n

35

P e rso n a l lo a n

27

In v e s tm e n t tru s ts

17

B u ild in g a n d lo a n

16

In s u ra n c e a g e n c ie s

15

F in a n c e a n d a c c e p ta n c e

7

T itle c o m p a n ie s

7

F o re ig n b a n k s

6

J o in t sto ck la n d b a n k s

6

T itle a n d m o r tg a g e c o m p a n ie s

3

for their own account or as agents for nonbank
lenders, and the stock and securities operations of
bank affiliates had fueled the inflation of securities
prices which culminated in the 1929 collapse.

After

lengthy proceedings this subcommittee concluded that




1

L ife o r c a s u a lty in s u ra n c e

But between the Board’s 1927 report and enact­
ment of the first holding company legislation in 1933,
largely as a result of the general economic collapse
which began in 1929, concern over bank groups
shifted from the branch and chain banking aspects
of their activities to their diversification into non­
banking businesses. By 1932, according to a Fed­
eral Reserve study, almost one half of the known
holding companies had corporate affiliates engaged
in various types of nonbanking activities. Some had
as many as 14. Am ong the principal types of af­
filiates were securities and investment companies,
insurance companies, and real estate companies.
Am ong the numerous other types of affiliates were
building and loan associations, land banks, restau­
rants, and even a municipal heating plant.
However, entry by bank holding companies into
the securities business, either directly or through af­
filiated corporations, was brought to an abrupt halt
by the crisis of 1929-1933 and by the accompanying
wave of sentiment for banking reform. In January
1931, a subcommittee of the Senate Banking and
Currency Committee began an extensive investigation
into the extent to which stock market loans by banks,

In v e s tm e n t houses

1

M is c e lla n e o u s
T o ta l

45
700

such activities had played a major part in the
speculative excesses of the 1920’s.
In the course of the subcommittee’s hearings,
Governor Eugene Meyer of the Federal Reserve
Board introduced the accompanying table showing
the number of nonbanking affiliates of national banks
as of 1932. Data for state banks were apparently
not available although it appears likely that state
bank affiliates exceeded national bank affiliates by
a wide margin.
In 1932, the Federal Reserve Board submitted to
the Senate Banking and Currency Committee the
following recommendations for remedial legislation:
W ith respect to affiliates the Board believes that
important reforms to be accomplished at the present
time are the granting of power to the supervisory
authorities to obtain reports and to make examina­
tions of all affiliates of member banks and the
prescribing of limitations on the loans that a m em ­
ber bank may make to its affiliates. The Board
realizes that many evils have developed through the
operation of affiliates connected with member banks,
particularly affiliates dealing in securities. The at­
tached memorandum contains a draft of a provision
for the separation of such affiliates after a lapse of
three years.

3

The 1933 Legislation A s an ou tgrow th of the
extensive Congressional investigations and hearings
from 1931 through the first part of 1933, the Bank­
ing A ct of 1933 was passed. The Senate Report on
the bill made the following comparisons between bank
holding companies and bank affiliates generally:
There seems to be no doubt anywhere that a large
factor in the overdevelopment of security loans, and
in the dangerous use of the resources of bank de­
positors for the purpose of m aking speculative profits
and incurring the danger of hazardous losses, has
been furnished by perversions of the national bank­
ing and State banking laws. . . .
(a) The greatest of such dangers is seen in the
growth of “bank affiliates” which devote themselves
in many cases to perilous underwriting operations,
stock speculation, and m aintaining a market for the
banks’ own stock often largely with the resources of
the parent bank. . . .

* *

*

Closely allied in many points of similarity w ith the
affiliate system is the plan of group banking in
operation in some parts of the United States, work­
ing, in a few cases, on a large scale. In this system
a holding company is organized under State law and
proceeds to buy a majority of the stock of a series
of banks, operating them thereafter through the hold­
ing company. . . . The difference between this plan
and the affiliate system itself is that in the one banks
are owned by a State-organized holding company,
while in the other State-organized companies (af­
filiates) are owned by a national bank’s stockholders,
or in some cases directly by trust companies, under
some form of law which amounts to ownership by
the parent bank itself. The evils of indirect control
are similar in the two cases, and they may lead
to similar abuses, as is seen when it is noted that
holding companies also usually control companies or­
ganized for security financing. However, such com­
panies have in some parts of the United States be­
come well rooted, and the difficulty of eliminating
or abolishing them in any effective way is similar
to the difficulty of eliminating or abolishing the af­
filiates of city banks. . . .

ing for a permit, holding companies were required
to agree to a number of conditions including (1 ) main­
taining reserves of marketable assets of specified
amounts, (2 ) permitting examinations of their own
affairs and those of all other banks and other or­
ganizations controlled by them, (3 ) terminating all
connections with all securities companies, and (4 )
declaring dividends only out of actual net earnings.
Furthermore, the Federal Reserve A ct was amended
to restrict extensions of credit by national and state
member banks to their affiliates, including bank hold­
ing companies, and investments in, or advances
against, stocks and obligations of their affiliates.
Separation of the securities business from banking
was accomplished by three sections of the 1933 legis­
lation which provided, respectively, that no member
bank could be affiliated with any organization
principally engaged in the sale or distribution of se­
curities, that no securities company and no other
organization except an institution subject to examina­
tion and regulation under state or Federal law could
receive deposits subject to check, and that no of­
ficer or director of any member bank could be at
the same time an officer, director, or manager of any
securities company.
Thus, the regulatory approach to bank holding
companies adopted in 1933 left holding companies
free to acquire banks both within and beyond the
borders of the states where their principal banking
operations were located without any requirement of
prior approval by Federal bank supervisory au­
thorities, and to combine the management of these
banks with any nonbank business activities except
the securities business.

voting the stock of any Federal Reserve member

Events Leading to 1956 Legislation A fte r 1933
the unregulated expansion of certain powerful bank
holding companies by both methods described above
led directly to enactment of the Bank Holding Com­
pany Act of 1956. Growth was particularly notable
in the W est and in a few Midwestern states where
branch banking was prohibited or sharply limited.
An outstanding example in this period was Transamerica Corporation, which by the end of 1946 had
acquired 41 banks operating a total of 619 banking
offices in Arizona, California, Nevada, Oregon, and
Washington. By that date, Transamerica banks ac­
counted for more than 40% of all banking offices

bank that they controlled.

and over 38% of all commercial bank deposits in

The Banking A ct of 1933 provided for complete
separation of ownership and control of member banks
on the one hand and securities affiliates on the other.
Except for the securities business, however, the Act
stopped short of requiring separation of ownership
and control of banks and nonbank businesses. Rather,
control over bank holding company activities was
sought through requiring holding companies to obtain
permits from the Federal Reserve Board before
Before granting such a

permit the Board was required to consider the fi­

the five states.

nancial condition of the applicant holding company,

December 31, 1946 the Transamerica group acquired

Between December 31, 1933 and

the general character of its management, and the

126 banks and established 74 new branches in the

probable effect of granting the permit on the affairs

five-state area.

of the member bank or banks concerned.

a wide variety of nonbank businesses with aggregate

4




In apply­

Moreover, it owned and operated

resources of over $275 million. These businesses
included real estate, insurance, the manufacture of
diesel engines, and the buying, processing, and sell­
ing of fish and seafood.
Largely as a consequence of the rapid expansion
of bank ownership by holding companies within non­
branching or limited branching states as well as
across state lines, and the large-scale diversification
into nonbank business activities by Transamerica and
certain other holding companies after 1933, legisla­
tion calling for closer regulation of bank holding
companies was introduced in every Congress from
1946 through 1956. In 1952 the Board of G ov­
ernors of the Federal Reserve System submitted to
the House Committee on Banking and Currency a
letter setting forth the following conclusions based on
the Board’s experience administering the holding
company provisions of the Banking A ct of 1933:
The Board believes that the principal problems in
the bank holding company field arise from two
circumstances: (1) the unrestricted ability of a bank
holding company corporation to add to the number
of its banking units, thus m aking possible the con­
centration of a large portion of the commercial
banking facilities in a particular area under single
control and management; and (2) the combination
under single control of both banks and nonbanking
enterprises, thus permitting departure from the
principle that banking institutions should not engage
in business wholly unrelated to banking because of
the incompatibility between the business of banking
which involves the lending of other people’s money
and other types of business enterprises.

The Board also submitted data indicating that as
of December 31, 1950 there were 28 nonbank hold­
ing company groups owning 367 banks located in 28
states and the District of Columbia with aggregate
deposits of $13.6 billion. Among the nonbanking
activities of 20 of these 28 groups were life insurance,
home financing, automobile insurance, fire and
marine insurance, real estate, commercial fishing and
fish processing, manufacturing, and investment func­
tions of various kinds. Total resources reported for
nonbanking activities by the 20 holding company
groups amounted to almost $500 million.
Extensive Congressional hearings on proposed
holding company bills were held in 1952, 1953, 1955,
and 1956. In the course of Senate hearings in 1953,
Governor Robertson of the Board of Governors made
the following statement:
For many years, as you know, almost from the
beginning of banking in this country, banks have
been prohibited from engaging in other business.
Banks are using depositors’ funds and not their
own funds. Consequently, the risks in which they
invest funds are different from the risks which are
undertaken by any other business. The types of
management called for in the two institutions— that




is, a banking and a nonbanking institution— are
very different.
A different type of attitude is required. In one
you are safeguarding depositors’ funds, and so in
the other you are justified taking greater calculated
risks.
Therefore, we think the two ought to be separated.
In addition, there is always the possibility that if
a company controls both, it can use the bank for
the indirect benefit of the nonbanking business.

Then in 1955, the most comprehensive set of data
on bank holding companies assembled up to that
time was compiled by the House Banking and Cur­
rency Committee. This information revealed that if
a definition of “ bank holding company” were adopted
based on control of 25% or more of the stock of
each of two or more banks by a single corporation,
business trust, association, or similar organization,
such a definition would cover 46 holding companies
located in 32 states and the District of Columbia.
Collectively, these embraced 391 banks with 627
branches and $14.3 billion in deposits. Further,
however, if the definition were expanded to include
all corporations, business trusts, associations, or
similar organizations controlling 2 5% or more of the
stock of a single bank, then the total would have
risen to 163 companies located in 42 states and the
District of Columbia, owning 541 banks with 899
branches and $25.9 billion in deposits.
Meanwhile, on June 24, 1948 a proceeding under
the Federal antitrust laws had been instituted against
Transamerica Corporation, charging systematic and
continuous acquisitions of stocks of independent
banks in five Western states, with effects that might
be anticompetitive or monopolistic. After lengthy
hearings, divestiture of 46 acquired banks located in
four states was ordered. However, on appeal, the
order was set aside on the ground of failure of
proof, and the Supreme Court declined to review the
case. The Court did rule, nevertheless, that ac­
quisitions of commercial bank stocks by holding
companies are subject to attack on antitrust grounds.
Moreover, Transamerica’s 1953 victory in the
courts contributed to the drive to bring bank holding
company expansion under Federal regulation. Just
three years later, after two decades of controversy,
the Bank Holding Company A ct of 1956 was passed,
requiring all bank holding companies meeting the
statutory definition to register with the Board of
Governors.

This legislation, to be discussed in the

next issue of the Monthly Review, placed new re­
strictions on registered companies and invested the
Board of Governors with extensive regulatory and
supervisory authority over such companies.
William F. Upshaiv

5

BILLIO N S OF
DOLLARS
1947
1967

1947

1967

Food, tobacco, and alcoholic beverages

56.1

1 1 8 .6

3 4 .9

24.1

Clothing, accessories, and jew elry

2 2 .8

5 0 .7

14.2

10 .3

2.2

8.5

1.4

1.7

Housing

15 .7

7 0 .9

9 .7

14.4

Household operation

2 4 .0

6 9 .9

14.9

1 4 .2

M edical care expenses

6 .9

3 4 .0

4 .3

6 .9

Personal business

5 .4

2 6 .7

3 .4

5 .4

15.2

63 .5

9 .4

12.9

Recreation

9.2

3 0 .6

5 .8

6.2

Private education and research

1.2

7.9

0.8

1.6

Religious and w e lfa re activities

2 .0

6.9

1.2

1.4

Foreign travel and other, net

0 .0

4 .0

0 .0

0 .8

1 6 0 .7

4 9 2 .2

1 0 0 .0

1 0 0 .0

PERSONAL C O N S U M P T IO N EXPENDITURES
BY TYPE OF PRODUCT

□

PERCENTAGE OF
EXPENDITURES

In 1967 the consumer emptied his pocketbook of more than $492 billion on

various goods and services.
200% since 1947.

This figure represents an increase of more than

The largest outlays have been for nondurable commodities,

but their share of total consumer expenditures declined from 56% to 44% over
the 20-year period.

Consumer demand for services has grown to where it

comprised 41% of spendings in 1967, as compared with about 31% In 1947.
Part of this gain was the result of the faster rise in the prices of services as
compared with consumer goods.

Personal care

Purchases of durable goods remained fairly

stable at about 15% of total expenditures.

Q The decline in spending for non­

durables relative to total expenditures can in large part be traced to changes
in consumer acquisitions of food, alcohol, and tobacco.

Although the dollar

allocation for these items more than doubled between 1947 and 1967, their
portion of the consumer's dollar declined from 34.9% to 24.1%.

This pattern

also holds true for purchases of clothing, accessaries, and jewelry.

Q] Housing,

medical care, personal business, and transportation are now requiring signif­
icantly larger portions of the consumer's expenditures.

Housing costs rose to

nearly $71 billion, accounting for almost 5% more of total spending than 20
years ago.

Transportation expenses rose from 9.4% to nearly 13% of total

expenditures.

The greatest changes in this category have been in the kinds of

vehicles used.

Nearly 93% of transportation costs in 1967 were for the purchase

and upkeep of automobiles.
expenses were for his car.

In 1947, 81% of the consumer's transportation
For purchased intercity transportation, the airlines

have registered phenomenal growth since 1947, and have increased 25% in the
past year.

Spendings on intercity railw ay transportation have dropped 61% in

the past 20 years. □ Medical care expenses rose from nearly $7 billion in 1947
to $34 billion in 1967, an increase from 4.3% to 6.9% of total consumer spending.

Transportation

Increases were found in all medical areas, most notably in outlays for private
hospitals and sanitariums.

The personal business section grew from 3.4% to

5.4% of total expenditures while the 1967 dollar outlays reached nearly $27
billion.

□ The remaining six categories, expressed as percentages of total ex­

penditures, have fluctuated less than 1% from the 1947 division.

In spite of the

seemingly small changes, some interesting developments have occurred. Q In the
aftermath of World W ar II there was very little foreign travel to and from the
United States. Net foreign travel in 1947 totaled a mere $5 million. Twenty years
later, however, it reached more than $4 billion.

Q The 1947 division of per­

sonal consumption expenditures allotted 0.8% of the total for costs of private edu­
cation and research.

By 1967, this percentage allocation grew to 1.6%. The $6.9

billion contribution for religious and w elfare activities is nearly 3V2 times its dollar
provision of 1947, even though the percentage of total spending only increased
from 1.2% to 1.4%. This trend was apparent also in outlays for recreation and
personal care.

Household operation, on the other hand, had a reduction in its

percentage of total allocations from 14.9% in 1947 to 14.2% last year.




Total personal consumption expenditures

N o te :

J

D e ta ils w ill n o t n e c e s s a rily a d d to th e to ta ls
be ca u se o f r o u n d in g .

Ca i ir/*A.

II

Q

Ammarro

J

Total Personal
Income

Personal
Income

($ Million)

(Dollars)

625,068

3,159

United States
Fifth District

50,866

4,123

Maryland

12,595

3,421

North Carolina

12,267

2,439

South Carolina

5,752

2,213

12,719

2,804

4,197

2,334

District of Columbia

Virginia
West Virginia
W

i

District Developments A s the accom pan yin g
chart shows, all of the Fifth District states made
significant gains in total personal income. Virginia
scored the greatest gain with an increase of 8.8% ,
reaching $12.7 billion in 1967. W est Virginia had
the smallest gain, 6.7% , but this was very close to
the 7.1% increase for the nation. The remaining
Fifth District states all had percentage gains greater
than the national increase. Increases in per capita
income for all Fifth District states were in line with
the national gain of 6.1% . Maryland had the
smallest increase, while South Carolina and W est
Virginia led the District with increases of 7.4% each.
The District of Columbia had the largest per capita
income in the District and in the nation, $4,123,
significantly outstripping the national average of
$3,159.
Sources of District Income The largest co n ­
tributor to District income was wages and salaries
paid to Federal and state and local government em­
ployees (see table). W ith a total of $10.9 billion
paid, this category represented 21.4% of total per­




PERSONAL

INCOME

1967

®

Changes in total personal income and in per capita
personal income are among the most meaningful
measures of economic growth. Total personal in­
come is the sum of the income received by individual
persons from all sources, including welfare payments,
before income taxes and other direct taxes are paid.
In the Fifth District personal income rose to a new
high during 1967, reaching $50.9 billion, while in
the nation it rose to $625.1 billion. These rep­
resented gains of 8.1% for the District and 7.1%
for the nation. Per capita income in the District
rose to $2,757 during 1967, a jump of 6.9% over
1966. Nationally, per capita income rose to $3,159,
a gain of 6.1% over the 1966 level.

8

DISTRICT

2,757

3,336

FIFTH

sonal income in the District and 30.1% of total wages
and salaries. A major reason for the large increase

C H A N G E S IN IN C O M E A N D

P O P U LA TIO N

1966-1967

United States

Fifth District

District of Columbia

Maryland

North Carolina

South Carolina

Virginia

West Virginia

-2

0
Q

2
4
6
8
Per Cent Change
Population

10

|H Total Personal Income
B

Per Capita Personal Income

Source: U. S. Department of Commerce.

in wage and salary payments to government em­
ployees was the rapid expansion in defense spending.
It affected the 1967 income distribution through
three major income components: military payrolls,
Federal civilian payrolls, and factory payrolls in defense-oriented industries.
Significant gains were also made in wages and
salaries paid in the manufacturing, trade, and serv­
ices industries within the District. Manufacturing
was second only to Government as a source of wage
and salary income in the Fifth District, although the
percentage growth in manufacturing wages and
salaries was less than the growth in total wages and
salaries. Wholesale and retail trade, another im­
portant source of wages and salary income, recorded
an 8 % increase over the 1966 figure. In the rapidly
growing services sector, the increase was 11.5% over
1966 wages and salaries.
Farm wage and salary income decreased in all

District states except W est Virginia where it re­
mained unchanged. Declines ranged from 6.7% in
North Carolina to 3.8% in South Carolina. A s was
the case in 1966, District farm wages have continued
to increase but the decline in 1967 can be attributed
to a decrease in the number of farm workers, par­
ticularly hired workers.
Proprietors’ income, property income, and transfer
payments all made significant gains in the District.
Proprietors’ income, defined as the earnings of selfemployed people and owners of unincorporated en­
terprises, grew by $204 million, or 4.9% , with a
little more than half of that amount coming from
non-farm activities and the remainder arising from
farming. This gain far exceeded the increase for the
nation as a whole. Property income, which includes
dividends, rents, and interest, also grew significantly.
W ith an absolute increase of $372 million and a per­
centage increase of 6.4% , the District scored as well

FIFTH DISTRICT IN C O M E BY MAJOR SOURCES 1 9 6 6 -1 9 6 7
Distribution of
Total
Amount
Personal
Source_____________________________ 1966________ 1967__________ Change, 1966-1967________Income
$ Million

PERSONAL INCOME
W A G E S A N D SALARIES
FARMS
M IN IN G
CONTRACT CONSTRUCTION
MANUFACTURING
TRADE
FINANCE, INSURANCE,
AND REAL ESTATE
TRANSPORTATION, COMMUNICATION,
AND PUBLIC UTILITIES
SERVICES
GOVERNMENT
Federal, civilian
Federal, military
State & local
OTHER INDUSTRY

$ Million

47,076
33,453

36,145

187
445
1,994
9,073
4,750

177
463
2,038
9,593
5,131

1,247

1,357

2,262
3,613
9,812
4,169
2,371
3,274
69

2,396
4,030
10,887
4,499
2,713
3,675
73

$ Million

50,866

Per Cent

3,790
2,692
-

Per Cent

8.1

Wages
and
Salaries
Per Cent

100.0

8.0

71.1

100.0

5.3
4.0
2.2
5.7
8.0

0.3
0.9
4.0
18.9
10.1

0.5
1.3
5.6
26.5
14.2

110

8.8

2.7

3.8

134
417
1,075
330
342
401
4

5.9
11.5
11.0
7.9
14.4
12.2
5.8

4.7
7.9
21.4
8.8
5.3
7.2
0.1

6.6
11.1
30.1
12.4
7.5
10.2
0.2

10
18
44
520
381

-

OTHER LABOR IN C O M E

1,551

1,737

186

12.0

3.4

PROPRIETORS' IN C O M E

4,205

4,409

204

4.9

8.7

1,058
3,146

1,153
3,255

95
109

9.0
3.5

2.3
6.4

PROPERTY IN C O M E

5,803

6,175

372

6.4

12.1

TRANSFER PAYM ENTS

3,545

4,102

557

15.7

8.1

LESS:
C O N T R IB U T IO N S
FOR S O C IA L INSU R AN C E

1,482

1,703

221

14.9

3.3

FARM
NONFARM

Details may not add to totals due to rounding.
Source:

U. S. Department of Commerce.




9

as the nation, which registered an increase of 6.5% .
Government transfer payments recorded the largest
percentage increase of any of the components of
total personal income in the District, 15.7%. For
the nation as a whole, the increase was 17.8%. These
payments consist of unemployment compensation,
social security benefits, and veterans’ pensions.

trict, manufacturing wages and salaries have sub­
sequently risen, and in 1967 income from this source
accounted for almost one-fifth of total personal in­

Incom e by States A ll D istrict states had gains
in the major sources of personal income. Wages
and salaries, representing 71.1% of total personal in­
come in the District, was the highest in Virginia with
a total of $9,348 million. Virginia was also the leader
in wages and salaries paid in 1966. Maryland was
in second place with $9,261 million, followed by
North Carolina, South Carolina, West Virginia, and
the District of Columbia. O f the District states,
North Carolina scored the greatest percentage gain
over 1966, with a rise of 9.1% .
The government, both Federal and state and local,
is one of the largest employers in the District. This
is especially true in Maryland and Virginia where
many workers are employed in the nation’s capital.
North Carolina made the greatest gain in wages and
salaries paid to government workers — a rise of
13.7%.

Virginia followed with a gain of 12.9%.

W ages and salaries of District military personnel
had the greatest percentage increase among all gov­
ernment workers with a rise of 14.4%.

State and

local government employees had an increase of 12.2%.
A s factory employment has increased in the Dis-

C H A N G E S IN IN C O M E BY M A J O R SOURCES
1966-1967
Total Personal Income

come in the District. W ith many new jobs becom­
ing available, North Carolina led the other District
states with manufacturing wages and salaries reach­
ing $3,151 million— a 7.1% increase over 1966. In­
creases for the other District states ranged from
6.1% for Virginia to 2.8% for W est Virginia.

Wages and Salaries

Proprietors' Income

Property Income

Transfer

Payments

Other Labor

Income

0
g
Source:

United States

5

10
Per Cent Change
B

Fifth District

U. S. Department of Commerce.

15

Sum m ary A s can be seen in the charts and table,
1967 was another banner year for personal income
and per capita income in the Fifth District. Rela­
tively speaking, District states made significant gains
in many of the major components of personal income
and exceeded gains for the nation as a whole in some
categories during the period 1966-1967. Looking
ahead to 1968, indications are that this pattern
w'ill continue.
Priscilla A . Gowen

10




T h e Fifth
Several notable changes have occurred over the
last three years in the sources of personal income
among Fifth District states. (See also “ Fifth Dis­
trict Personal Income— 1967” , page 8, this R eview .)
This article uses recently published Department of
Commerce data to determine the relative importance
of various income sources and the average annual
rates of growth in these sources from 1965 to 1967
in order to highlight the important changes. For
details, see table, page 12.
The District rate of increase in the wage and
salary component of personal income was higher
than in the total U. S. on an annual average basis
since 1965. The District rate was boosted by North
and South Carolina and Virginia, in which the wage
and salary component grew more rapidly than the
District average.
The highest annual rate of growth in any major
part of wages and salaries occurred in the govern­
ment sector for the District. It was also the largest
contributor to total District personal income in 1967,
within the wage and salary category. Again, the
Carolinas and Virginia derived the principal benefit
of the government sector growth.
A further breakdown of the government sector
indicates that the largest growth since 1965 was
recorded in military payrolls in all District states,
and that the District at large increased more in this
area than the U. S. average increase. Federal
civilian payrolls are important in the District. They
comprise a share of personal income higher than the
U. S. average in Maryland, D. C., Virginia, and
South Carolina. They also grew at a higher rate
than the national average in Virginia, W est Virginia,
and the Carolinas.
Rates of growth higher than the U. S. average
were registered by the Fifth District in mining,
manufacturing, wholesale and retail trade, and
services. In mining, Maryland’s activity declined,
but substantial growth occurred in North Carolina
and to a smaller extent in South Carolina in phos­
phate mining. Coal mining remains significant in
Virginia and W est Virginia.
Manufacturing payrolls advanced in all District



District

M

states, and at rates higher than the national average
in North and South Carolina. The Fifth District
experienced rates of growth above those of the U. S.
in both durable and nondurable lines, but as of 1967,
durable manufacturing was of more importance than
nondurables only in Maryland and W est Virginia.
The most substantial increases in durable manu­
facturing payrolls for the District were in North and
South Carolina.
Maryland, North Carolina, and South Carolina
experienced greater growth in wholesale and retail
trade payrolls than either the District or national
averages. Payrolls from service industries have been
on the increase in both the nation and the District,
surpassed in each case in growth only by govern­
ment, among the major wage and salary sectors.
Maryland and South Carolina outpaced the District
in the services category, and services accounted for
the highest growth among major sectors in M ary­
land and D. C.
Outside the wage and salary area, nonfarm pro­
prietors’ income in all District states except D. C.
and Virginia advanced more rapidly than in the U. S.
A lso of considerable interest in the proprietary in­
come category is the income of farmers. In 1967,
the contribution to total personal income made by
farm income was the same, on the average, in the
Fifth District as in the nation at large. However,
while the importance of the farm income component
has declined nationally since 1965, it has increased in
the District at large and in the states of Maryland,
North Carolina, and South Carolina. Moreover, it
did not decline in any Fifth District state. On the
other hand, farm wages paid, in the wage and salary
category, did decline throughout the District.
Transfer payments which do not result from the
production of goods and services have advanced
rapidly in the District and in the nation. In 1967
they comprised larger shares of total personal income
in D. C. and W est Virginia than in other District
states or the nation. Also, they have grown more
rapidly in Maryland, D. C., and Virginia than in
the nation at large.
William H . Wallace

11

ANALYSIS OF SOURCES OF PERSONAL INCOME, 1965-67
United States and Fifth District States
A verage Annual Rate of Growth,, 1965-67

Per Cent of Personal Income, 1967
U .S .

D. C.

Va.

W. Va.

N. C.

S .C .

U .S .

5th
Dist.

Md.

D. C.

W . V a.

N. C.

100.0

100.0

100.0

100.0

100.0

100.0

100.0

8.0

8.8

8.5

6.1

8.9

6.7

10.0

10.2

67.1

W age and salary disbursements

Md.

100.0

PERSO N A L INCOM E

5th
Dist.

71.1

73.5

66.0

73.5

66.8

68.8

71.1

8.6

9.4

9.1

5.1

9.5

6.7

11.0

11.1

-0 .2

5.9 -

8.7

Farm

0.4

0.3

0.2

*

0.3

0.2

0.7

0.4

Mining
Coal mining
Crude petroleum and natural gas
Mining and quarrying, except fuel

0.7
0.2
0.3
0.2

0.9
0.7
*
0.1

0.1
*
*
0.1

*
*
*
*

0.6
0.5
*
0.1

8.1
7.5
0.4
0.2

0.2
*
*
0.2

0.2
*
*
0.2

-

3.7
5.1
4.0
2.4

4.5 - 1 5 . 0
5.3
0.0
0.0
0.0
- 1 7 .1
2.3

V a.

S. C.

2.3 - 1 3 . 0

0.0 -

6.5 -

6.5 -

0.0
0.0
0.0
0.0

6.0
7.9
0.0 0.0

4.4
4.8
3.0
6.1

18.3
0.0
0.0
18.3

6.1
0.0
0.0
6.1

3.9

4.0

4.5

2.0

4.2

4.2

3.7

4.2

7.2

7.2

5.0 -

4.3

2.2

16.9

11.8

14.3

Manufacturing
Durables
Nondurable:

21.5
13.5
7.9

18.9
7.7
11.1

15.8
9.5
6.4

2.3
0.3
2.0

15.2
6.4
8.8

20.9
13.2
7.8

25.7
8.2
17.5

27.2
6.3
20.9

7.7
8.4
6.6

8.2
8.9
7.6

7.2
7.6
6.6

5.7
6.1
5.7

7.5
7.4
7.6

4.5
4.2
4.9

10.2
12.8
9.0

8.7
15.2
6.9

W holesale and retail trade

Contract construction

11.0

10.1

11.6

6.7

10.1

8.8

10.5

8.8

7.9

9.2

10.3

3.5

7.8

7.6

10.5

10.9

Finance, insurance, and real estate
Banking
Other finance, insurance, and real estate

3.2
0.8
2.3

2.7
0.6
2.0

3.2
0.6
2.6

2.4
0.5
1.9

2.7
0.7
2.0

1.7
0.5
1.1

2.6
0.7
1.9

2.3
0.5
1.8

8.6
9.2
8.4

8.4
10.3
7.8

8.5
8.8
8.5

4.6
3.3
5.0

8.0
10.2
7.3

6.1
7.2
3.3

9.8
13.0
8.7

10.0
13.7
8.9

Transportation, communications, & public utilities
Railroads
Highw ay freight and warehousing
Other transportation
Com munications and public utilities

5.0
0.9
1.1
1.1
1.9

4.7
0.9
1.1
0.8
1.8

5.1
0.9
1.0
1.1
2.1

3.3
0.4
0.1
0.9
1.9

5.1
1.3
1.0
1.1
1.7

6.4
2.1
1.1
0.4
2.9

4.3
0.5
1.8
0.5
1.5

3.4
0.6
0.8
0.4
1.5

7.0
1.4
7.0
11.9
7.2

6.9
0.7 8.2
10.4
8.2

1.9
6.2
1.3 - 1 0 . 6
8.2 - 8.7
6.4
3.5
8.9
4.3

7.2
3.2 6.4
12.2
7.7

3.7
0.6
7.4
6.5
5.9

9.6
2.4
9.5
19.3
9.7

9.4
1.4
10.9
15.5
10.8

Services
Hotels and other lodging places
Personal services and private households
Business and repair services
Amusement and recreation
Professional, social, and related services

8.0
0.4
1.3
1.7
0.5
4.1

7.9
0.4
1.8
1.6
0.3
3.9

9.6
0.3
1.5
2.8
0.5
4.4

13.4
0.6
2.0
1.7
0.3
8.8

7.7
0.5
1.8
1.6
0.2
3.7

5.6
0.3
1.0
0.7
0.3
3.2

6.4
0.3
2.0
0.8
0.2
3.0

6.7
0.3
2.2
1.0
0.2
3.0

9.9
8.1
5.2
11.8
7.3
11.4

11.0
9.8
5.9
16.6
10.2
11.5

13.8
8.7
7.1
2.5
7.5 - 1.5
24.2
6.6
11.1
6.1
11.1
12.7

10.2
11.1
6.7
10.3
9.2
12.4

6.6
8.0
3.7
15.5
4.4
5.2

10.2
14.9
6.6
11.7
13.4
12.1

11.5
15.5
6.1
18.9
11.8
12.8

13.2
3.4
2.1
7.7

21.4
8.8
5.3
7.2

23.3
12.0
3.9
7.4

35.3
25.9
4.7
4.7

27.4
12.0
8.2
7.2

10.9
2.1
0.5
8.4

14.7
2.2
4.9
7.6

17.9
4.1
7.0
6.9

11.5
8.9
16.3
11.5

11.7
7.4
19.7
12.0

10.0
6.6
19.7
11.2

5.0
2.3
14.4
13.0

13.3
9.9
19.7
12.7

11.4
9.8
12.5
11.7

14.5
11.3
20.7
11.8

15.8
12.8
21.0
12.7

Government
Federal, civilian
Federal, military
State and local
Other industries

0.1

0.1

0.1

0.6

0.1

*

0.1

0.1

7.1

7.6

10.9

5.4

7.4

0.0

8.7

8.0

Other labor income

3.7

3.4

3.3

2.0

3.1

4.2

3.7

3.9

11.4

11.5

11.4

8.4

11.5

8.2

13.2

12.2

Proprietors' income
Farm
Nonfarm

9.7

8.7

3.9
*

7.4
1.6

7.7
0.7

12.0
5.0

4.6

0.0

3.3

5.9

7.8

7.7

6.1

1.0

0.0

0.0

0.0

8.3

9.9

3.9

5.8

7.0

7.0

3.7
6.8

3.0
1.4

5.7

2.3
6.4

7.5
0.8
6.7

10.4

2.3
7.4

4.5

5.6

5.1

0.0

4.4

6.3

7.4

6.6

14.4

12.1

12.4

17.4

12.1

12.3

11.3

10.3

7.8

7.7

7.1

6.7

8.8

6.2

7.6

8.5

8.3

8.1

6.8

13.9

7.2

12.2

7.5

7.6

13.8

13.3

14.3

13.9

14.3

10.7

12.6

13.2

3.3 -

3.3 -

3.5 -

3.2 -

3.3

23.2

22.4

20.6

11.2

22.4

24.3

25.8

26.2

Property income
Transfer payments
Less:

personal contributions for social insurance

* Less than 0.1%.
Source:

12

U. S. Department of Commerce.




-

3.3 -

3.4 -

3.2 -

-


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102