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.conomic
Review
ERAL RESERVE BANK OF ATLANTA
DECEMBER 1984
Sensitive to Rate Changes?
&Ls
FEDERAR RESERVE
OF PHILADELPHIA
Reshaping Balance Sheets
>E REGULATION
The Market Surges Ahead
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President
Robert P. Forrestal
Sr. Vice President and
Director of Research
Sheila L. Tschinkel
Vice President and
Associate Director of Research
B. Frank King
Financial Institutions and Payments
D a v i d D. W h i t e h e a d , R e s e a r c h O f f i c e r
L a r r y D. W a l l
Robert E Goudreau
Macropolicy
Robert E Keleher, Research Officer
M a r y S. R o s e n b a u m
J o s e p h A W h i t t , Jr.
P a m e l a V. W h i g h a m
Regional
Economics
G e n e D. S u l l i v a n , R e s e a r c h O f f i c e r
Charlie Carter
W i l l i a m J. K a h l e y
B o b b i e H. M c C r a c k i n
Joel R
Parker
Visiting Scholars
G e o r g e J. B e n s t o n
U n i v e r s i t y of R o c h e s t e r
G e r a l d P. D w y e r
Emory University
Robert A
Eisenbeis
U n i v e r s i t y of N o r t h C a r o l i n a
John Hekman
U n i v e r s i t y of N o r t h C a r o l i n a
P a u l M. H o r v i t z
U n i v e r s i t y of H o u s t o n
Peter Merrill
Peter Merrill Associates
Communications Officer
Donald E Bedwell
Public Information Director
D u a n e Kline
Publications Coordinator
Cynthia Walsh-Kloss
Graphics
E d d i e W. L e e , Jr.
C h e r y l D. B e r r y
The E c o n o m i c Review seeks to inform the public
about Federal Reserve policies and the economic
environment and, in particular, to narrow the gap
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Contents. PAIS and the Predicasts group.
ISSN 0 7 3 2 - 1 8 1 3
V O L U M E LXIX, N O . 11
Money Market
Account Competition
15
S&L Use of New Powers:
Consumer and Commercial
Loan Expansion
36
Market- Driven Deregulation
of Financial Services.
42
1984 Index
44
Statistical Summary
, FEDERAL RESERVE B A N K O F A T L A N T A 3
Do c o n s u m e r s readily r e s p o n d to d i f f e r e n c e s in
rates paid o n the various money market accounts?
This study looks at the e v i d e n c e for b a n k s a n d
m o n e y market m u t u a l funds.
This article c o m p l e t e s a study of h o w c a u t i o u s l y
thrift institutions have a d o p t e d new p o w e r s that
were d e s i g n e d to i m p r o v e their b a l a n c e sheets.
R e s p o n d i n g to the e v o l u t i o n in f i n a n c i a l intermediation, e n t r e p r e n e u r s have b y p a s s e d d a t e d
legislation, says a former comptroller of the currency.
Larry D. Wall and Harold D. Ford
Consumers appear to be insensitive to short-run changes in rates paid by the
various money market accounts, judging from this study.
Since 1933, c o m p e t i t i o n for consumer deposits
has b e e n l i m i t e d by regulations originally designed t o prevent " r u i n o u s c o m p e t i t i o n " a n d t o
assure a low-cost source of funds for the mortgage
markets. W h e n m o n e y market m u t u a l funds
( h e n c e f o r t h simply " m o n e y funds") that paid
market rates e m e r g e d as major c o m p e t i t o r s for
consumer funds in t h e late 1970s, t h e y a l l o w e d
many consumers t o avoid regulation by transferring money to unregulated investments. This problem grew especially acute as short-term market
rates soared above 10 percent, w h i l e interest
rates o n savings accounts at thrifts a n d banks
w e r e l i m i t e d t o 5.5 percent a n d 5.25 percent,
respectively.
The c o m p e t i t i o n e n g e n d e r e d by m o n e y funds
forced m o m e n t o u s revision in interest rate controls in late 1982 and o p e n e d a n e w era in t h e
c o m p e t i t i o n for consumer deposits. Banks and
thrifts w e r e a l l o w e d t o offer t w o n e w d e p o s i t
accounts t h a t w e r e not subject t o interest rate
controls so long as a m i n i m u m of $2,500 was
m a i n t a i n e d per account: t h e m o n e y market
deposit account ( M M D A ) , w h i c h has l i m i t e d
transaction features, and t h e Super N O W acc o u n t ( a u t h o r i z e d in January 1983), w h i c h permits u n l i m i t e d transactions. These accounts n o t
only enable banks a n d thrifts t o c o m p e t e w i t h
m o n e y funds, but foster c o m p e t i t i o n a m o n g
banks and thrifts on a local a n d national basis.
The authors are, respectively, economist and student
on the financial institutions and payments team.
4
intern
This study explores h o w banks and thrifts have
used their restored p o w e r t o c o m p e t e for funds
during t h e period from S e p t e m b e r 1983 t o
January 1984. W e e x a m i n e pricing of t h e various
m o n e y market-type accounts, and short-run consumer response t o that pricing. By e x a m i n i n g
prices w e also gain insight into h o w bank and
thrift managers view their competition w i t h mutual
funds a n d w i t h other depository institutions in
t h e n a t i o n w i d e a n d local markets. C o n s u m e r
response t o short-run changes in the relative rates
is i m p o r t a n t because of its implications for account pricing The weekly prices set by individual
banks and thrifts increase in significance t o t h e m
if consumers are highly responsive t o short-run
differences in rates. If they are not, then institutions
may be able t o focus m o r e o n long-term pricing
strategies.
O u r analysis b e l o w indicates t h a t interest rates
o n m o n e y funds, M M D A s , and Super N O W s are
highly correlated w i t h each other b u t t h e average
differences in t h e rates paid are statistically
significant. Interest rates paid on M M D A s and
Super N O W s also were found t o differ significantly
d e p e n d i n g on t h e state or SMSA (Standard
M e t r o p o l i t a n Statistical Area) w h e r e t h e bank
was located, m e a n i n g that differences across
geographic markets w e r e greater than those
w i t h i n geographic markets.
Furthermore, w e f i n d that rates paid by individual banks and thrifts on M M D A s a n d Super
N O W s w i t h i n t h e markets w e e x a m i n e d are
significantly different from rates paid by their
c o m p e t i t o r s in t h e same market. Despite these
DECEMBER 1984, E C O N O M I C REVIEW
differences, consumers seem not t o be very
responsive t o t h e level or changes in t h e level of
w e e k l y interest rate differences. Consumers also
show little response to weekly changes in interest
rate differentials a m o n g m o n e y funds. O u r finding of significant interest rate differentials w i t h i n
markets may be e x p l a i n e d by differences in t h e
quality of service p r o v i d e d by t h e various banks
and thrifts. The l i m i t e d short-run consumer responsiveness t o changes in t h e interest rate
differential suggests that t h e cost of transferring
investments between different accounts exceeds
t h e potential gain from m a k i n g t h e transfer, at
least in t h e short run.
Account Features
The first savings vehicle that consumers t u r n e d
t o w h e n rates skyrocketed was t h e money market
mutual fund, w h i c h is a m u t u a l f u n d that invests
in large d e n o m i n a t i o n m o n e y market securities.
These funds generally require an initial investm e n t of at least $1,000 a n d pay dividends equal
t o t h e rates paid on their securities p o r t f o l i o less
a small m a n a g e m e n t fee. T h e rate of return a n d
t h e riskiness of t h e m o n e y funds vary w i t h t h e
sorts of securities in w h i c h t h e y invest. The l o w
risk, low return m o n e y funds only invest in U.S.
Treasury securities, w h i l e those offering higher
risk and returns invest in c o m m e r c i a l paper,
domestic bank certificates of deposit, and Eurodollar certificates of d e p o s i t For t h e purposes of
our analysis, w e f o l l o w Donoghue's Money Fund
Report in d i v i d i n g t h e m o n e y funds i n t o five
categories based o n their i n v e s t m e n t policies:
(1) those investing solely in U.S. Treasury securities; (2) those investing in Treasury securities
plus agency securities (other securities b a c k e d
by t h e U.S. government); (3) t h o s e investing in
Treasury, agency, a n d p r i m e d o m e s t i c securities
such as c o m m e r c i a l paper and bank certificates
of deposit" (4) those investing in Treasury, agency,
domestic prime, and Eurodollar certificates of
deposit; and (5) those investing in everything in
category four plus Yankee dollar certificates of
deposit a n d n o n - p r i m e securities.
In a d d i t i o n t o paying consumers high rates, t h e
m o n e y funds also provide t h e m access t o their
investments. M o s t m u t u a l funds allow check
withdrawals, b u t o f t e n require that t h e check be
w r i t t e n for at least $500. In addition, many
funds enable easy transfers f r o m their m o n e y
funds t o their stock and b o n d mutual funds.
, FEDERAL RESERVE B A N K O F ATLANTA
Congressional concern a b o u t m o n e y funds
was expressed in t h e Garn-St Germain bill, w h i c h
o r d e r e d t h a t M M D A s be " d i r e c t l y equivalent t o
and c o m p e t i t i v e w i t h m o n e y market m u t u a l
f u n d s . . . . " N o regulatory restrictions w e r e placed
on t h e rates paid o n M M D A s w i t h balances of at
least $2,500, and t h e limit will d r o p t o $1,000 o n
January 1, 1985. Consumers c o u l d w r i t e up t o
three checks m o n t h l y o n an M M D A w i t h o u t t h e
reserve r e q u i r e m e n t s i m p o s e d o n other transactions accounts. (Ordinarily, banks a n d thrifts
must m a i n t a i n n o n i n t e r e s t - b e a r i n g a c c o u n t s
called "reserves" at t h e Federal Reserve equal t o
some fraction of their transactions accounts. N o
such requirement exists for m o n e y funds.) Furthermore, M M D A s are insured like other bank deposits.
These accounts have c o m p e t e d very successfully
w i t h m o n e y f u n d s (see Table 1).
Super N O W accounts w e r e a u t h o r i z e d soon
after M M D A s . Super N O W s are identical t o
M M D A s for consumers e x c e p t that transaction
privileges are unrestricted and banks a n d thrifts
T a b l e 1. M M D A a n d M o n e y F u n d Deposits
(in b i l l i o n s of dollars, a v e r a g e s o f d a i l y figures)
MMDAs
M o n e y Funds*
1982
December
42.9
182.2
189.1
277.7
320.5
341.2
356.8
367.3
368.4
366.3
366.9
367.4
372.9
375.9
167.7
159.6
154.0
140.1
135.0
132.9
138.8
139.1
137.6
137.8
138.8
138.2
380.4
386.0
392.5
396.3
394.7
392.9
137.9
142.1
144.8
146.1
146.6
148.8
1983
January
February
March
April
May
June
July
August
September
October
November
December
1984
January
February
March
April
May
June
* General purpose and broker/dealer money market mutual f u n d s
Source: Various issues of the Federal Reserve
Bulletin.
5
must maintain noninterest-bearing reserves equal
t o some fraction of their Super N O W deposits.
These features enhance t h e value of Super N O W
accounts t o consumers b u t make t h e accounts
more costly t o banks and thrifts.
M M DA, Super N O W , and Money Fund
Rates
M o n e y f u n d rates are d e t e r m i n e d by rates of
return t h e y earn on t h e short-term securities in
w h i c h t h e y invest. Differences in m o n e y f u n d
rates reflect differences in risk, m a n a g e m e n t
fees, and maturity. M M D A and Super N O W
rates are heavily i n f l u e n c e d by market rates, but
are ultimately d e t e r m i n e d by banks and thrifts.
The rates on these accounts could be slow t o
adjust t o changes in market interest rates, as has
been t h e case w i t h banks' administration of t h e
prime rate. Alternatively, the rates paid on M M D A s
and Super N O W accounts c o u l d closely track
market rates. Casual observation suggests that
M M D A and Super N O W rates change weekly in
response t o market rates, unlike t h e p r i m e rate
w h i c h may remain u n c h a n g e d for months.
In order t o e x a m i n e h o w closely M M D A a n d
Super N O W rates track m o n e y f u n d rates w e
e x a m i n e d t h e correlation b e t w e e n t h e rates paid
o n t h e d i f f e r e n t types of accounts. ( D a t a on t h e
average interest rate paid on t h e different types
of funds w e r e o b t a i n e d from t h e Bank Rate
Monitor
and Donoghue's
Money Fund Report
for the period September 5,1983 through January 5,
1984.) Tests i n d i c a t e d that t h e interest rates on
t h e various types of accounts all w e r e highly a n d
significantly correlated; that is, increases in t h e
rate paid on o n e t y p e of account are associated
w i t h rate hikes in other accounts (see Table 2).
M M D A and Super N O W rates match changes
in m o n e y f u n d rates d u r i n g our sample period,
T a b l e 2. Correlation Results
I n t e r e s t R a t e s o n D i f f e r e n t T y p e s of F u n d s
Super NOW
MMDA
Super N O W
U.S. T r e a s u r y
Money Funds
U. S. G o v e r n m e n t
Money Funds
Domestic Prime
Money Funds
Domestic Prime
and Eurodollar
Money Funds
D o m e s t i c Prime,
Eurodollar and
Y a n k e e Dollar
Money Funds
.9042*
.0001
U.S.
Treasury
Money Funds
U.S.
Government
Money Funds
Domestic
Prime
Money Funds
Domestic Prime
and Eurodollar
Money Funds
Domestic Prime
Eurodollar, a n d
Y a n k e e Dollar
Money Funds
.9333**
.0001
.9353**
.0001
.9300**
.0001
.9565**
.0001
.9477**
.0001
.8715**
.0001
.8717**
.0001
.8407**
.0001
.9060**
.0001
.8765**
.0001
.9772**
.0001
.9017**
.0001
.9462**
.0001
.9247**
.0001
.9453**
.0001
.9672**
.0001
.9614**
.0001
.9694**
.0001
.9938**
.0001
.9856**
.0001
" S i g n i f i c a n t at the 1 percent level
Source: Federal Reserve Bank of Atlanta
6
DECEMBER 1984, E C O N O M I C REVIEW
,
but t h e level of rates paid for t h e d i f f e r e n t
accounts n e e d not be equal. The rates o n many
banks' a n d thrifts' M M D A s w e r e far in excess of
market rates w h e n t h e accounts w e r e first introduced. M M DA rates have since fallen, however,
and have generally r e m a i n e d b e l o w t h e average
m o n e y f u n d rate. Possible explanations for this
difference are t h a t consumers are w i l l i n g t o
accept a lower rate in exchange for t h e convenience of M M D A s , and that the rate differential
is c o m p e n s a t i o n for t h e greater risk of some
m o n e y funds relative t o government-insured
M M D A s . If t h e rate differential is primarily
compensation for risk, then government-insured
M M D A s should be paying rates c o m p a r a b l e t o
very low-risk m o n e y f u n d s that invest solely in
U.S. Treasury securities. If M M DA rates are
significantly b e l o w those of t h e safest m o n e y
funds, that w o u l d suggest that banks are t a k i n g
advantage of depositors' preference for convenience.
W e e x a m i n e d t h e national average interest
rates paid o n M M D A s and Super N O W accounts, a n d t h e average rate on five categories
of m o n e y funds (U.S. Treasury securities; U.S.
government agency securities; domestic prime;
domestic p r i m e and Eurodollar; and d o m e s t i c
prime, Eurodollar, and Yankee dollar) to determine whether significant differences existed
a m o n g t h e m over t h e same t i m e period. 1 A n
analysis of variance test, a statistical t e c h n i q u e
used t o study t h e variability of data, s h o w e d
that this was the case Pairwise least significant
difference t-tests w e r e used t o c o m p a r e t h e
rates paid o n different accounts d u r i n g our
sample period. The rate on Super N O W accounts at depository institutions was lowest, at
143 basis points, or h u n d r e d t h s of a percent,
less than m o n e y market accounts at depository
institutions. M o n e y funds investing in U.S. Treasury securities paid t h e second lowest rate, 17
basis points b e l o w M M D A s . M o n e y funds t h a t
invested in paper backed by t h e U.S. governm e n t and M M D A s at depository institutions
paid more than t h e Treasury funds, b u t t h e
differences b e t w e e n t h e t w o funds w e r e insign i f i c a n t Domestic p r i m e m o n e y funds paid 16
basis points more than money market accounts;
funds that c o u l d invest in Eurodollars a n d
those that c o u l d invest b o t h in Eurodollars a n d
Yankee dollar certificates of deposits paid app r o x i m a t e l y 24 basis points m o r e than m o n e y
market accounts.
FEDERAL RESERVE B A N K O F A T L A N T A
The lower rates for bank Super N O W s prot>
ably reflected both the reserve requirement on
these deposits and t h e relatively greater check
w r i t i n g privileges given Super N O W accounts.
The higher rates paid o n funds that can invest
in d o m e s t i c p r i m e assets and in Eurodollar a n d
Yankee dollar investments reflected t h e lack of
any g o v e r n m e n t guarantee for these assets. In
contrast, m o n e y market accounts are insured
by an agency of t h e U.S. government, w h i l e
Treasury funds and g o v e r n m e n t f u n d s b o t h
have g o v e r n m e n t backing. This suggests t h a t
rate differences b e t w e e n M M DA and m o n e y
f u n d rates d u r i n g o u r sample p e r i o d w e r e d u e
t o risk differences rather t h a n d e p o s i t o r preference for t h e c o n v e n i e n c e of a local bank or
thrift
Competition Among Banks and Thrifts
In addition t o the competition between types
of accounts, c o m p e t i t i o n exists between similar
accounts at different institutions, and this could
be n a t i o n w i d e or primarily local in scope. The
market for M M D A s a n d Super N O W accounts
c o u l d be n a t i o n w i d e if consumers w e r e w i l l i n g
t o make deposits in geographically distant
institutions. Alternatively, bank and t h r i f t rates
c o u l d look as t h o u g h t h e y w e r e in o n e nationw i d e market if c o m p e t i t i o n b e t w e e n m o n e y
funds and M M D A s was sufficiently intense.
Bank a n d thrift pricing across t h e nation w o u l d
t h e n be based solely o n national m o n e y f u n d
rates rather than local market conditions.
W e d o n o t e x p e c t all institutions in a market
t o pay o n e rate on their accounts. An absence
of any price variation w o u l d indicate either
perfect c o m p e t i t i o n a m o n g institutions w i t h
perfect i n f o r m a t i o n a b o u t t h e f u t u r e or a complete absence of c o m p e t i t i o n . If local markets
are relevant, t h e n w h a t w e expect t o see is less
variability in rates w i t h i n markets than across
markets. Thus w e e x a m i n e d t h e differences in
interest rates paid by banks in various states and
SMSAs t o d e t e r m i n e if account pricing is inf l u e n c e d by local factors.
Data on bank interest rates across t h e country
w e r e o b t a i n e d f r o m a m o n t h l y Federal Reserve
survey of M M D A s a n d Super N O W accounts
a n d w e r e available for t h e period August 1983
t o January 1984. W e c o n d u c t e d an analysis of
variance test o n banks in 143 SMSAs a n d 4 8
states over that same period. W a s h i n g t o n D.C.
7
was i n c l u d e d in our study b u t because of their
l i m i t e d representation in t h e sample, Alaska,
N o r t h Dakota, a n d W y o m i n g w e r e excluded.
The n u m b e r of observations available for analysis ranged f r o m 431 t o 4 5 7 for SMSAs and
573 t o 589 for states. The first set of tests
consisted of separate tests of M M DA rates for
each of t h e six months. The second set consisted
of six m o n t h l y tests of t h e Super N O W rates.
If t h e rates paid in different states a n d SMSAs
are n o t statistically significantly different, that
w o u l d provide strong evidence for the existence
of a n a t i o n w i d e market for t h e bank and thrift
accounts. A finding that the rates are significantly
different w o u l d be consistent w i t h t h e existence
of local markets, but w o u l d not prove their
existence. Differences in t h e level of services
p r o v i d e d by t h e accounts c o u l d also influence
t h e rate paid. W e will check o n e proxy for t h e
level of service, state branching laws, if the rates
are significantly different. Banks located in
states w h e r e statewide branching is p e r m i t t e d
may be providing more convenience than banks
in unit b a n k i n g states. A n o t h e r possibility is
that t h e rates paid on t h e accounts is more a
function of bank size than of geographic region.
Since typical bank size varies by state, a n d t h e
Federal Reserve survey is stratified t o take
account of size differences, w e c o u l d observe
rate differences d u e solely t o size. If bank size
is a factor, t h e n w e should observe states w i t h
very large banks like California and N e w York
consistently paying different rates than states
w i t h small unit banks.
Results of t h e analysis of variance tests indicated statistically significant differences in t h e
rates paid on M M D A s a n d Super N O W s in t h e
various states as w e l l as b e t w e e n SMSAs for all
t h e t i m e periods in question. The Super N O W
rates also were significantly different both across
states a n d SMSAs. These differences w e r e significant at t h e 0.01 level, w h i c h is notably high.
Thus t h e variation of rates w i t h i n states and
SMSAs is less than t h e variation across states
and SMSAs. Furthermore, differences across
8
states and SMSAs are not merely r a n d o m fluctuations b u t are statistically significantly different.
The size of t h e interest rate differentials
b e t w e e n t h e most c o m m o n rate paid on M M A s
and Super N O W accounts varies across states,
b u t t h e spread b e t w e e n t h e highest a n d lowest
rate difference is generally, b u t not always,
small. For M M A s , this differential ranged f r o m
less than 0.4 p e r c e n t t o as m u c h as 1.4 percent;
for Super N O W accounts t h e d i f f e r e n c e was
slightly higher, up t o 2 percent in some cases.
The size of these interest rate differentials
remained consistent over t h e periods studied.
W e a p p l i e d pairwise least significant difference t-tests to interest rate differentials between
states, again i n c l u d i n g W a s h i n g t o n D.C. a n d
excluding Alaska North Dakota and Wyoming. A
group of high-paying states was f o u n d that
o f f e r e d rates that w e r e consistently larger than
those o f f e r e d by low-rate states a n d t h e rate
differences w e r e statistically significant (see
Table 3).
O u r findings are consistent with, b u t d o not
prove t h e existence of, local markets. Branch
b a n k i n g law as a proxy for d i f f e r e n t service
levels a n d size differences also c o u l d explain
t h e variation in interest rates. A comparison of
t h e states in Table 3 w i t h their branch banking
laws reveals no clear trends, as unit banking,
limited branching, a n d statewide branching
states appear in all four columns. Furthermore,
there is no obvious relationship b e t w e e n bank
size and t h e rankings of t h e states in Table 3.
Thus our results remain consistent w i t h t h e
existence of local markets.
The finding that rates vary significantly across
t h e nation does n o t i m p l y that rates w i t h i n
markets s h o w little or no variation. The above
results m e r e l y d e m o n s t r a t e t h a t cross-market
variability in rates exceeds intramarket variability
in rates. Examination of rates paid by different
institutions w i t h i n markets c o u l d reveal significant differences. Therefore, analysis of variance
tests also w e r e c o n d u c t e d on interest rates
DECEMBER 1984, E C O N O M I C
REVIEW
T a b l e 3. S t a t e s with the H i g h e s t a n d L o w e s t Interest Rates
MMDAs
Super NOWS
Lowest
Highest
Lowest
Highest
Colorado
Connecticut
Kansas
Louisiana
Massachusetts
Maine
N o r t h Carolina
Oklahoma
Vermont
Hawaii
Indiana
Iowa
Minnesota
Nevada
S o u t h Dakota
W e s t Virginia
Alabama
Kansas
Louisiana
Mississippi
Oklahoma
R h o d e Island
Utah
Vermont
Arizona
Hawaii
Iowa
Montana
Nevada
Oregon
S o u t h Carolina
South Dakota
Washington
Washington, D.C.
Source: Federal Reserve Bank of A t l a n t a
over t i m e of individual banks within the Chicago,
D e t r o i t Philadelphia, N e w York City, Atlanta,
a n d Nashville markets.
W e chose t h e first four cities because their
rates are regularly featured in t h e national
e d i t i o n of Bank Rate Monitor, b u t e x c l u d e d Los
Angeles, t h e fifth city it features. U n l i k e institutions in t h e other four locations, w h i c h typically d r a w large p r o p o r t i o n s of their deposits
f r o m t h e consumers of that city, Los Angeles
banks t e n d to have extensive statewide branching networks and may derive sizable shares of
their deposits o u t s i d e t h e Los Angeles m a r k e t
W e chose Atlanta and Nashville, our last t w o
cities, t o o b t a i n some i n f o r m a t i o n o n comp e t i t i o n in t h e Southeast N o n e of t h e various
tests using individual bank information revealed
any dramatic differences between Southeastern
markets and t h e other four examined.
The tests of interest rates for individual
banks w e r e analogous t o those p e r f o r m e d o n a
state a n d SMSA level, w i t h o n e exception. The
state and SMSA tests were conducted separately
for every m o n t h , whereas those for t h e individual banks used w e e k l y data over t h e period
S e p t e m b e r 5, 1983 t h r o u g h January 5, 1984.
The tests revealed that bank rate differences
w i t h i n t h e same market are significant, w h i c h
suggests that banks w i t h i n a market f o l l o w
consistently d i f f e r e n t pricing strategies.
Competition Among Categories
of Accounts
Analysis of t h e interest rates paid o n t h e
different types of accounts provides some
, F E D E R A L RESERVE B A N K O F A T L A N T A
i n f o r m a t i o n on potential c o m p e t i t i o n b e t w e e n
t h e d i f f e r e n t accounts. I n f o r m a t i o n o n t h e
degree of actual competition, however, requires
analysis of t h e f l o w of f u n d s into t h e d i f f e r e n t
categories. W e begin this analysis by trying t o
identify t h e primary reasons for changes in
funds invested in t h e d i f f e r e n t categories of
m o n e y m a r k e t - t y p e accounts. M o s t of t h e
o b s e r v e d shifts in funds invested in o n e m o n e y
m a r k e t - t y p e a c c o u n t (such as d o m e s t i c p r i m e
m o n e y funds) c o u l d be c o m i n g from another
m o n e y market-type account (such as M M D A s ) .
In this case, t h e d i f f e r e n t m o n e y m a r k e t - t y p e
accounts primarily are c o m p e t i n g for market
share w i t h other m o n e y m a r k e t - t y p e accounts,
a n d w e should observe a negative correlation
b e t w e e n t h e accounts. A n o t h e r possibility is
that most of t h e o b s e r v e d growth in a particular
m o n e y m a r k e t - t y p e account does n o t involve
other m o n e y market accounts. That is, t h e gains
of o n e t y p e of m o n e y m a r k e t - t y p e a c c o u n t
(such as Super N O W s ) are c o m i n g at t h e
expense of other types of i n v e s t m e n t (such as
investments in stocks or bonds). In this instance
w e may observe an insignificant or even positive
correlation b e t w e e n flows i n t o t h e t w o types of
accounts.
W e e x a m i n e t h e chief source of c o m p e t i t i o n
for individual categories of m o n e y m a r k e t - t y p e
accounts by correlating t h e w e e k l y changes in
m o n e y invested in t h e d i f f e r e n t categories
(Table 4). The negative correlation b e t w e e n
U.S. Treasury a n d U.S. g o v e r n m e n t m o n e y
funds indicates that increases in t h e Treasury
category are associated w i t h decreases in t h e
government category. Such negative correlations
suggest competition for market share A similar,
9
same markets differ significantly, b u t d o shortrun differences influence t h e f l o w of funds into
t h e i n d i v i d u a l accounts? N e i l M u r p h y a n d
Richard Kraas reported earlier this year that
interest rates paid on M M D A s had positive a n d
significant effects on M M DA deposits. 3 They
further n o t e d that, based on w e e k l y d a t a
m o n e y f u n d rates had significant negative
effects on M M D A deposits in t h e o n e bank
t h e y examined. To address this question w e
d e c i d e d first t o e x a m i n e t h e responsiveness of
funds flowing into individual M M D A s and Super
N O W accounts t o t h e rates paid by a bank and
its competitors, and next t o e x a m i n e t h e flow
of funds into m o n e y funds. O u r analysis concentrates on consumer response t o changes in
current interest rates and, hence, has a shortt e r m focus.
statistically significant negative correlation exists
b e t w e e n t h e d o m e s t i c p r i m e a n d Eurodollar
accounts a n d in d o m e s t i c prime, Eurodollar,
and Yankee dollar accounts. The positive correlation between M M D A s and Super N O W accounts indicates that an increase in one account
was associated w i t h an increase in t h e other.
This f i n d i n g suggests that during our sample
period most of t h e m o n e y f l o w i n g into these
accounts came f r o m a third t y p e of i n v e s t m e n t
(such as bank certificates of deposit). The
correlation between M M D A s and Treasury funds
also is significantly positive.
Deposit Sensitivity to Interest Rates
Interest rates paid by banks in different
markets a n d by individual banks w i t h i n t h e
T a b l e 4. Correlation Results
C h a n g e i n L e v e l o f F u n d s i n D i f f e r e n t T y p e s of A c c o u n t s
Super NOW
MMDA
.9908**
.0001
Super NOW
U.S. T r e a s u r y
Money Funds
U.S. G o v e r n m e n t
Money Funds
Domestic Prime
Money Funds
Domestic Prime
and Eurodollar
Money Funds
U.S.
Government
Money Funds
Domestic
Prime
Money Funds
Domestic Prime
and Eurodollar
Money Funds
Domestic Prime
Eurodollar, a n d
Yankee Dollar
Money Funds
.4836*
.0420
-4047
.0957
.4532
.0589
.0283
.9113
.0294
.9078
.4344
.0715
-.3649
.1365
.4263
.0777
.0070
.9781
.0482
.8493
.3361
.1727
-1042
.6809
.1763
.4841
-2098
.4305
.1185
.6395
-2329
.3523
.1046
.6796
.2656
.2867
U.S.
Treasury
Money Funds
-
.9561**
.0001
-
.6905**
.0015
D o m e s t i c Prime,
Eurodollar, a n d
Yankee Dollar
Money Funds
'Significant at the 5 percent level.
" S i g n i f i c a n t at the 1 percent level.
Source: Federal Reserve Bank of Atlanta
10
DECEMBER 1984, E C O N O M I C R E V I E W
M M D A s and Super N O W Accounts
M u r p h y and Kraas looked at M M DA deposits
for a single bank for 32 weeks beginning in
early 1983. Their d e p e n d e n t variable was t h e
log of the bank's M M DA balances; their independ e n t variables w e r e t h e log of t h e bank's
M M DA rate, t h e log of t h e average rate paid o n
mutual funds, and a t i m e variable that increased
by o n e for each successive period. They used
t i m e as a proxy for consumer income. Their
tests w e r e biased against f i n d i n g a significant
interest rate effect because t h e close relationship b e t w e e n M M D A rates a n d m o n e y f u n d
rates causes a statistical p r o b l e m called multicollinearity.
A c c o r d i n g t o M u r p h y a n d Kraas' findings, t h e
f l o w of funds i n t o M M D A deposits at one
institution was positively related t o t h e bank's
M M D A rate, negatively related t o t h e m o n e y
fund rates, and positively related t o the passage
of time, w h i c h indicates that M M D A deposits
are sensitive t o interest rates.
W e tried t o replicate their results by using
our sample of individual banks in six markets
d u r i n g t h e 17 weeks b e t w e e n S e p t e m b e r 5,
1983 and January 5, 1 9 8 4 for M M D A s and
Super N O W accounts. For our study, w e estim a t e d another e q u a t i o n that i n c l u d e d t h e log
of t h e average local market M M D A rate rather
than t h e log of t h e m o n e y f u n d rate as an
i n d e p e n d e n t variable. A total of 108 equations
were estimated: 54 equations regressed M M D A
deposits on t h e bank's M M D A rate, t h e m u t u a l
f u n d average rate, a n d a t i m e variable, w h i l e
t h e other 54 regressed M M D A deposits o n t h e
bank's M M D A rate, t h e average M M D A rate in
t h e local market, a n d a t i m e variable. Of t h e
108 regressions run, t h e M M D A interest rate
paid by t h e individual bank was of t h e correct
sign a n d was significant at t h e 95 percent level
in only 8 equations while the time variable was
significant a n d had t h e correct sign in 59 cases.
The average money f u n d rate variable was significant and of t h e correct sign in o n e instance o u t
of 54 whereas the market rate variable had t h e
p r o p e r sign a n d was significant in 10 cases o u t
of 54. Thus w e are unable t o d u p l i c a t e M u r p h y
and Kraas' results w h e n e m p l o y i n g data f r o m a
later t i m e p e r i o d . U s i n g c o n t e m p o r a n e o u s
w e e k l y data, w e f i n d no response t o interest
rate levels, w h i c h c o u l d indicate that there is
no relationship or w h i c h c o u l d be d u e t o multicollinearity problems.
, FEDERAL RESERVE B A N K O F A T L A N T A
N e x t w e examined weekly changes in M M D A
and Super N O W a c c o u n t balances a n d relative
rates t o d e t e r m i n e h o w sensitive banks' cust o m e r s are t o changes in these rates. Using t h e
same data as above, w e regressed t h e w e e k l y
g r o w t h in M M D A a n d Super N O W deposits on
t h e w e e k l y change in t h e d i f f e r e n c e b e t w e e n
t h e bank or thrift institution's interest rate a n d
t h e average rate for that market a n d o n the
g r o w t h in t h e local M M D A or Super N O W
account market. 4 W e relied o n changes in
interest rate differentials t o measure customers'
sensitivity to changes in t h e relative gain obtainable by d e p o s i t i n g funds in these accounts.
This set of regressions differs f r o m t h e first in
focusing o n w e e k l y changes in deposits a n d in
t h e interest rate differentials rather than on
deposit and interest rate levels. The regressions,
therefore, m o r e clearly reflect w h e t h e r consumers r e s p o n d t o changes in relative interest
rates. Furthermore, t h e y are n o t a f f e c t e d by
multi-collinearity problems.
The results s h o w e d t h a t g r o w t h in t h e local
M M D A or Super N O W a c c o u n t market was significant a n d of t h e correct sign b u t that t h e
interest rate differentials were rarely significant
In this case, of 54 e q u a t i o n s e x a m i n e d for
M M D A s , 4 0 had significant local market growth
effects w h i l e o n l y seven had significant interest
rate d i f f e r e n t i a l effects. O f 45 e q u a t i o n s exa m i n e d for Super N O W s , 28 had significant
local market g r o w t h effects a n d 3 had significant interest rate differential effects.
The statistical e v i d e n c e for M M D A s a n d
Super N O W accounts points t o little short-run
interest rate sensitivity of deposits, given observed rate differentials. O n an i n d i v i d u a l instit u t i o n basis, f e w institutions e x h i b i t e d significant ( t h o u g h quantitatively small) interest rate
effects o n their flows of funds into M M D A s a n d
Super N O W accounts, w h i l e t h e majority of
institutions exhibited nonsignificant and quantitatively small sensitivities. The other variables
e x a m i n e d s h o w e d similar relationships t o deposit flows. This may be a t t r i b u t a b l e t o t h e
stability of individual account rates relative t o
market rates: most of t h e changes in t h e differential w e r e at or b e l o w 0.3 percentage
points, b u t t w o changes in M M D A s w e n t as
high as 0.75 percentage points and t h e change
in o n e Super N O W differential reached 3.25
percentage points. W e d i d not observe any
relationship, however, b e t w e e n t h e change in
t h e differential a n d c o n s u m e r response.
11
Similar relationships emerged for t h e six
individual markets w h e n w e aggregated banks
i n t o their respective markets and e x a m i n e d
t h e c o m b i n e d figures. The f l o w of n e w funds
into M M D A s a n d Super N O W accounts was
regarded as a function of the difference between
t h e local market rate paid o n M M D A s and t h e
average national rate paid o n M M D A s or Super
N O W accounts, and t h e g r o w t h in t h e national
market of M M D A or Super N O W funds. T h e
interest rate sensitivity of deposits in these
accounts a p p e a r e d t o be significant at t h e 90
percent level in o n l y t h e Chicago market, w h i l e
t h e national g r o w t h in deposits of M M D A s a n d
Super N O W s was a significant factor in t h e
Atlanta Chicago, Detroit and N e w York markets.
These results i m p l y low customer interest
rate sensitivity in t h e short run for t h e majority
of institutions in our sample o f f e r i n g M M D A s
and Super N O W accounts. Interest rate differe n t i a l also might be c o m p e n s a t i n g for differences in services p r o v i d e d (for example,
branching and existing customer relationships),
w h i c h w o u l d lead t o a tiering of banks w i t h i n
markets, w i t h banks c o m p e n s a t i n g for l o w e r
rates t h r o u g h better service. A n o t h e r very imp o r t a n t reason consumers may be slow t o shift
funds to take advantage of favorable rates is
transactions costs. For instance, transferring
$ 10,000 t o take advantage of a 0.5 percent rate
difference for o n e w e e k w o u l d gain only 96
cents, w h i c h might easily be negated by t h e
cost a n d t i m e i n v o l v e d in shifting funds. O u r
results d o not, however, d e n y t h e possibility
that persistent interest rate differentials might
affect consumers over a two- or t h r e e - m o n t h
period. O u r sample p e r i o d is t o o short t o test
longer-run responses.
Money Fund Account Deposits
The correlation analysis indicates that some
types of m o n e y funds may c o m p e t e w i t h o n e
another. A l t h o u g h t h e y c o m p e t e mainly on t h e
basis of interest rates paid, differences also
exist in t h e riskiness of m o n e y f u n d accounts
12
because of t h e varying risk levels of t h e funds'
assets. For instance, U.S. Treasury securities are
less risky t h a n U.S. p r i m e and Eurodollar assets,
and so t h e funds that hold these assets differ in
risk Also, t h e rate money funds pay is determined
largely by market interest rates. As a result
differences in interest rates can be a t t r i b u t e d
t o differences in t h e funds' risk, m a n a g e m e n t
fees, a n d maturity.
To test t h e interest rate sensitivity of m o n e y
fund deposits, w e carried out an analysis similar
t o that p e r f o r m e d on M M D A s a n d Super N O W
accounts for t h e p e r i o d S e p t e m b e r 5, 1983
through January 5, 1984. Individual funds within
five d i f f e r e n t categories of m o n e y funds w e r e
examined t o determine consumer substitutions
w i t h i n t h e categories. These regressions w e r e
essentially similar t o those used for t h e f l o w of
M M D A s into individual institutions except that
asset category replaced geographic market. 5
Regressions o n t h e m o n e y funds y i e l d e d
f e w e r significant relationships of t h e correct
sign than d i d t h e M M D A and Super N O W
regressions. Out of 25 individual money fund
regression equations examined, t h r e e s h o w e d
significant relationships b e t w e e n t h e f l o w of
funds i n t o a m o n e y f u n d a c c o u n t and t h e total
f l o w i n t o its category, a n d only t w o had a
significant coefficient o n t h e interest rate differential. As w i t h t h e analysis of M M A s a n d
Super N O W s , f e w money funds within the
d i f f e r e n t f u n d categories s h o w e d significant
interest rate sensitivities to differences between
t h e rate paid on that account a n d t h e average
rate paid on similar accounts. Such results have
implications similar t o those of t h e M M D A and
Super N O W account analysis. T h e largely nonsignificant interest rate effects o n m o n e y funds
i m p l y that m o n e y f u n d customers, like M M D A
a n d Super N O W customers, are not highly
sensitive t o interest rates in t h e very short run.
Conclusion
W e e x a m i n e d t h e interest rates o f f e r e d o n
M M D A s , Super N O W s , a n d m o n e y funds, t h e
DECEMBER 1984, E C O N O M I C
REVIEW
f l o w of funds i n t o t h e d i f f e r e n t accounts, a n d
short-run consumer responses t o interest rate
differentials. The results p r o v i d e insight into
bank a n d t h r i f t managers' perceptions of their
c o m p e t i t i o n a n d into consumers' interest in
t h e d i f f e r e n t accounts.
O u r analysis of t h e interest rates paid on t h e
different types of accounts d u r i n g our sample
p e r i o d suggests t h a t
government-insured
M M D A s pay rates c o m p a r a b l e t o those paid on
m o n e y funds that invest solely in obligations of
t h e U.S. Treasury a n d obligations b a c k e d by
t h e U.S. government. The rates paid o n Super
N O W s are significantly b e l o w all other rates
because t h e special transaction privileges of
t h e a c c o u n t are valuable t o consumers a n d
costly t o provide in terms of check processing
costs a n d reserve requirements.
C o m p a r i s o n of t h e rates paid t h r o u g h o u t t h e
nation by banks and thrifts revealed that significant differences exist across the different states
and SMSAs. This finding is consistent with t h e
t h e o r y that banks a n d thrifts c o m p e t e in geographically separate markets. W e also f o u n d
e v i d e n c e of persistent differences in t h e rates
paid by various banks in t h e same market.
By examining t h e correlation of funds flowing
into d i f f e r e n t types of accounts w e discovered
that t h e changes in M M D A s are positively
correlated w i t h changes in Super N O W s a n d in
m o n e y funds investing solely in Treasury securities. The i m p l i c a t i o n here is that M M D A s ,
Super N O W s , a n d Treasury m o n e y funds are
d r a w i n g most of their n e w m o n e y from other
types of investments (such as stocks and bonds).
O u r f i n d i n g that consumers are n o t responsive t o short-run changes in t h e rates paid by
t h e d i f f e r e n t accounts suggests that bank a n d
t h r i f t managers can focus o n long-term pricing
a n d n e e d not be c o n c e r n e d a b o u t small, shortrun variations in their rates relative t o o t h e r
rates in their markets. O u r results do n o t prove,
however, that consumers are unresponsive t o
persistent variations in interest rates.
(The authors gratefully acknowledge the research assistance
of Felicia Bellows and Linda Harris.)
APPENDIX
T h r o u g h s t a t i s t i c a l a n a l y s i s of t h e f l o w of f u n d s i n t o
M M D A s , S u p e r N O W s , a n d m o n e y f u n d s in d i f f e r e n t
markets, t h i s s t u d y s e e k s to e x a m i n e t h e v a r i o u s
a c c o u n t s ' i n t e r e s t rate s e n s i t i v i t y Data o n t h e f l o w of
f u n d s into M M D A s a n d S u p e r N O W s w e r e t a k e n f r o m
t h e " R e p o r t of Transactions Accounts, O t h e r Deposits,
a n d Vault Cash" filed with the Federal Reserve. Interest
rate d a t a f o r i n d i v i d u a l i n s t i t u t i o n s w e r e o b t a i n e d
f r o m t h e Bank Rate Monitor, e x c e p t f o r A t l a n t a d a t a
w h i c h w e r e o b t a i n e d f r o m t h e Atlanta
Journal.
Donoghue's
Money Fund Report w a s t h e s o u r c e f o r
d a t a o n t h e i n t e r e s t rates a n d f l o w of f u n d s into
mutual f u n d s
O u r s a m p l e f o r a n a l y s i s of M M D A s a n d S u p e r N O W
a c c o u n t s c o n s i s t e d of six i n d i v i d u a l m a r k e t s : Atlanta,
C h i c a g o , D e t r o i t Nashville, N e w Y o r k City, a n d Philad e l p h i a Within these markets w e also examined the
largest i n d i v i d u a l b a n k s a n d S & L s in a n a t t e m p t t o
d e t e r m i n e t h e e f f e c t of i n t e r e s t rates o n t h e f l o w of
f u n d s i n t o M M D A s a n d S u p e r N O W a c c o u n t s at
b a n k s w i t h i n t h e s a m e m a r k e t s T h e n u m b e r of instit u t i o n s e x a m i n e d w i t h i n e a c h m a r k e t is s h o w n in
T a b l e 5.
W e l o o k e d at m o n e y f u n d s in five different c a t e g o r i e s
w h i c h D o n o g h u e c l a s s i f i e s a c c o r d i n g t o t h e t y p e of
a s s e t s in w h i c h t h e f u n d s are a l l o w e d t o i n v e s t T h e
five t y p e s w e r e U.S. T r e a s u r y s e c u r i t i e s funds, U.S.
g o v e r n m e n t s e c u r i t i e s funds, d o m e s t i c p r i m e f u n d s
domestic prime and Eurodollar f u n d s and domestic
prime, Eurodollar, a n d Y a n k e e d o l l a r f u n d s W i t h i n
e a c h of t h e s e c a t e g o r i e s , w e a n a l y z e d d a t a f r o m t h e
five l a r g e s t individual funds.
M o s t of the regressions for b a n k s t h r i f t s a n d m o n e y
f u n d s w e r e r u n for individual b a n k s a n d t h e d a t a f r o m
a c c o u n t s o f f e r e d by d i f f e r e n t i n s t i t u t i o n s w e r e n o t
pooled. W e d i d n o t i n c l u d e q u a l i t y of s e r v i c e o r
service c h a r g e v a r i a b l e s in t h e r e g r e s s i o n s a n d s o
t h e s e v a r i a b l e s will b e r e f l e c t e d in t h e i n t e r e s t rate
c o e f f i c i e n t s t o t h e e x t e n t that t h e y a r e c o r r e l a t e d w i t h
interest r a t e s P o o l i n g t h e d a t a a c r o s s i n s t i t u t i o n s
Digitizedw for
FRASER
ould pose a severe problem, because o n e w o u l d
e x p e c t l e s s e r s e r v i c e a n d h i g h e r s e r v i c e c h a r g e s at
any given institution to be associated with higher
interest r a t e s S o l o n g as t i m e s e r i e s r e g r e s s i o n s are
run f o r individual i n s t i t u t i o n s h o w e v e r , t h e c o r r e l a t i o n
b e t w e e n rate c h a n g e s a n d level of s e r v i c e a n d bet w e e n rate c h a n g e s a n d t h e level of s e r v i c e c h a r g e s
s h o u l d b e m u c h smaller. T h e level of s e r v i c e s o f f e r e d
by a n i n s t i t u t i o n a n d its s e r v i c e c h a r g e s c h a n g e o n l y
s l o w l y t h r o u g h time.
W e f o l l o w e d M u r p h y a n d K r a a s in e x a m i n i n g t h e
r e l a t i o n s h i p b e t w e e n t h e M M D A b a l a n c e of a s i n g l e
b a n k a n d t h e i n t e r e s t rate paid by t h e b a n k o n its
M M D A t h e a v e r a g e rate p a i d o n c o m p e t i n g m o n e y
f u n d s a n d a t i m e variable. In l o g a r i t h m form, t h e
e q u a t i o n e x a m i n e d u s i n g linear r e g r e s s i o n w a s of t h e
form:
1)
log F = a + (b1 * l o g i ) + ( b 2 * log M) + ( b 3 * t) + e
where
F =
i =
M M D A b a l a n c e s for s a m p l e b a n k
rate paid on M M D A b a l a n c e s d u r i n g e a c h
period for sample bank
M = a v e r a g e rate paid o n m o n e y f u n d s d u r i n g
each period
t = time variable to serve as a proxy for e c o n o m i c
variables and
e = a r a n d o m error term.
The same equation also w a s e x a m i n e d using our data
for i n d i v i d u a l b a n k s w i t h i n s p e c i f i c m a r k e t s
The second regression model focused on changes
in d e p o s i t s in M M D A s a n d S u p e r N O W a c c o u n t s
r a t h e r t h a n t h e level of d e p o s i t s in t h e s e a c c o u n t s
T h e d e p e n d e n t v a r i a b l e w a s t h e f l o w of f u n d s i n t o
M M D A s and Super NOW accounts; the independent
v a r i a b l e s w e r e t h e c h a n g e in t h e difference b e t w e e n a n
(cont. next page)
MKA; t = f l o w of f u n d s into all M M D A s
for market j at w e e k t
individual bank's M M DA rate a n d the average M M A
rate for t h e local market a n d the local market g r o w t h
of t h e s e a c c o u n t s T h e regressions t o identify t h e
effect of c h a n g e s in interest rate differentials o n the
f l o w of m o n e y into a n M M D A t o o k t h e form:
d m i j f = c h a n g e in d i f f e r e n c e b e t w e e n the
average rate paid on M M D A s in
market j a n d the national average
2) M M D A j t = a + b 1 * m i j t + b 2 * L M m t + e j t
mi
=
j,t
LMKm
= flow of f u n d s into all M M D A s
in t h e nation at w e e k t
t
<'j,t ~ 'm,t) ~ ( ' j , t - 1 " 'm,t-1>
ej { = a r a n d o m error t e r m
where
MMDAj
t
ij t = average interest rate paid in market j at
week t and
= flow of f u n d s into M M D A j
at w e e k t
imt_1
mi; t = c h a n g e in d i f f e r e n c e b e t w e e n the rate
paid o n M M D A j a n d the a v e r a g e local
market M M D A rate at w e e k t
T h e market regressions for Super N O W s w e r e similar
e x c e p t that M M D A data w e r e replaced with S u p e r
NOW data
The flow of f u n d s into mutual f u n d s w a s e x a m i n e d
by regressing the flow into these accounts o n variables
representing the c h a n g e in t h e d i f f e r e n c e b e t w e n a n
individual m o n e y fund's rate a n d the average rate o n
c o m p a r a b l e m o n e y f u n d s a n d the total g r o w t h in
c o m p a r a b l e m o n e y market a c c o u n t s
ij t = interest rate paid by a c c o u n t j at w e e k t
LMm
t
= flow of f u n d s into all M M D A s in
market m at w e e k t
ej t = a r a n d o m error term, a n d
imt_1
= national average interest rate paid at
time t - 1 .
= average interest rate paid at time t-1
for t h e market m that c o n t a i n s t h e
a c c o u n t j.6
5) M M M F j t = a + b1 * m f i j t + b 2 * F C m t + e j t
T a b l e 5. N u m b e r of B a n k s a n d Thrifts A n a l y z e d
in S e l e c t e d M a r k e t s
mfi
j,t
=
(i
j,t ~ W
~ <'j,t-1 ~ 'm,t-l)
where
N u m b e r of Banks
Market
N u m b e r of Thrifts
M M M F j ^ = flow of funds into money fund
account j at w e e k t
Atlanta
Chicago
Detroit
Nashville
N e w York
Philadelphia
m f i j t = c h a n g e in d i f f e r e n c e b e t w e e n the rate
paid o n m o n e y f u n d j a n d the average
rate paid o n all m o n e y f u n d s investing
in asset c a t e g o r y m at w e e k t 7
F C m t = flow of f u n d s into all m u t u a l f u n d
a c c o u n t s investing in asset c a t e g o r y
m at w e e k t
Source: Federal Reserve Bank of Atlanta
ej t = a r a n d o m error t e r m
The regressions for the Super N O W accounts followed a
similar form:
3) S U P j t = a + b1 *sij t + b 2 * L S m t + e j t
si
j,t
=
('j,t ~ W
i m { „ - j = average interest rate paid at time t-1
for f u n d s investing in t h e asset category m that contains the mutual fund j.8
~ ( ' j , t - 1 ~ ¡ m,t-l)
where
SUPj t = flow of funds into Super N O W account
j at w e e k t
si; t = c h a n g e in d i f f e r e n c e b e t w e e n the rate
paid o n S u p e r N O W j a n d the a v e r a g e
local m a r k e t S u p e r N O W rate at w e e k t
L S m t = flow of f u n d s into all S u p e r N O W
a c c o u n t s in market m at w e e k t
ej i = a r a n d o m error t e r m
i¡ t = interest rate paid by a c c o u n t j at w e e k
J
'
t, a n d
i m t _ - | = average interest rate paid at
time t - 1 for the market m t h a t
c o n t a i n s t h e a c c o u n t j.
C o m p a r a b l e regressions w e r e run for the a g g r e g a t e
of each of the six m a r k e t s for b o t h M M D A s a n d S u p e r
N O W s for t h e p u r p o s e of e x a m i n i n g c o m p e t i t i o n for
M M D A i n v e s t m e n t s across g e o g r a p h i c m a r k e t s T h e
e q u a t i o n for t h e market M M D A t o o k the form:
4) M K A j t = a + b 1 * d m i j ) t + b 2 * L M K m > t + e j t
dmi
j , t = ('it ~ W
~
(i
j.t~1 ~
¡
i j t = w e e k t interest rate paid b y a c c o u n t j at
w e e k t and
m,t-l)
Equations 2, 3, a n d 5 c o u l d be e s t i m a t e d for each
individual type of a c c o u n t a n d by m a r k e t but it w a s
not efficient t o e s t i m a t e e q u a t i o n by equation. F u n d s
not a l l o c a t e d t o o n e m o n e y market a c c o u n t w e r e
allocated t o a n o t h e r a c c o u n t so errors in e s t i m a t i o n
should be contemporaneously correlated Accordingly
rather t h a n e s t i m a t e e a c h e q u a t i o n individually, w e
e s t i m a t e d by g r o u p s of equations. S u c h correlation
a m o n g t h e error t e r m s of the e q u a t i o n s i n d i c a t e d the
n e e d for a statistical t e c h n i q u e that w o u l d c o n s i d e r
s u c h a n effect in any analysis. S e e m i n g l y unrelated
regression was more efficient in this case than ordinary
least s q u a r e s linear regression b e c a u s e it utilizes t h e
c o n t e m p o r a n e o u s c o r r e l a t i o n in t h e e s t i m a t i o n s .
Therefore, this study used seemingly unrelated regression t o e s t i m a t e e q u a t i o n 1 for individual b a n k s w i t h i n
markets, e q u a t i o n 5 for the different types of m o n e y
f u n d accounts, a n d t o e s t i m a t e e q u a t i o n 4 for each
individual m a r k e t B a n k s a n d thrifts w e r e g r o u p e d by
g e o g r a p h i c m a r k e t s (Atlanta, Chicago, a n d so on) a n d
m o n e y f u n d s by D o n o g h u e ' s classification. E q u a t i o n s
w e r e t h e n e s t i m a t e d for individual institutions a n d
funds with these g r o u p s The use of seemingly unrelated
regression did not result in a significant c h a n g e in our
findings
where
NOTES
6
For example, if MMA account j is the First National Bank of Atlanta then
the market m is Atlanta
'For example, the average rate paid on funds investing solely in U.S.
Treasury securities is subtracted from the rate paid by funds investing
solely in Treasury securities, while the average rate on domestic prime
money funds is subtracted from funds that can invest in domestic prime
securities
8
For example, if mutual fund j is restricted to investing in Treasury
securities, then category m refers to mutual funds investing solely in
Treasury securities
' S e e Appendix for a description of mutual fund categories. The MMA and
Super NOW averages are calculated by Bank Rank Monitor. The mutual
fund average rates are from Donoghue's Money Fund Report.
2
See Robert Rogowski, "Pricing the Money Market Deposit and SuperNow Accounts in 1983," Journal ot Bank Research, vol. 15 (Summer
1984), pp. 72-81 for a further discussion of account pricing policies
3
NeilB. Murphy and Richard H. Kraas,"Measuring the Interest Sensitivity of
Money Market Accounts" Magazine ot Bank Administration, voL 60 (May
1984), pp. 70-74
http://fraser.stlouisfed.org/
"See the Appendix f o r a more detailed discussion of the statistical analysis
Federal Reserve Bank of St. Louis
<
1
1
S&L Use of New Powers:
Consumer and Commercial
Loan Expansion
Robert E. Goudreau
S & L s in Texas, Maine, a n d F l o r i d a w h o s e p o w e r s w e r e b r o a d e n e d c o m p a r a t i v e l y early,
have e x p a n d e d t h e i r c o n s u m e r l e n d i n g m o d e r a t e l y , b u t have d i v e r s i f i e d into c o m m e r c i a l
l e n d i n g a l m o s t negligibly. Their e x p e r i e n c e mirrors t h a t of thrift i n s t i t u t i o n s n a t i o n w i d e .
From the early 1970s to the early 1980s, legislation
was enacted b o t h at t h e state and national levels
to broaden the powers w i e l d e d by thrift institutions. This article, w h i c h completes a study that
began in t h e O c t o b e r issue of this Review,
measures the pace of expansion into new powers
and the speed w i t h which S&Ls have a d o p t e d
consumer and c o m m e r c i a l loan powers
authorized by these statutes. Data on NI N O W
(noninterest-earning negotiable order of withdrawal) accounts also are included because of
the close relationship of these accounts to commercial loans. This investigation should shed
light on the success of various state and federal
laws in p r o m p t i n g diversification as well as on
t h e roles played by an austere, recessionary
e c o n o m y that d e m a n d e d survivalist tactics and a
The author is a senior economic
institutions and payments team.
analyst on the
, FEDERAL RESERVE B A N K O F A T L A N T A
financial
favorable, expansionary e c o n o m y that offered
increased flexibility and improved profit opportunities. 1 Over a decade has passed since t h e
earliest legislation, and so association management has had t i m e to plan more thoroughly, hire
or train the requisite staffs, purchase the necessary
e q u i p m e n t , d e v e l o p applications software, and
devise marketing strategies before c o m m i t t i n g
heavily to consumer or commercial lending.
Have post-recession economic conditions and
t h e passage of t i m e facilitated associations' expansion into c o n s u m e r a n d commercial lending?
After summarizing its c o m p a n i o n piece, this
study reviews the relevant consumer loan, commercial loan, and N I N O W account provisions of
those federal and state statutes designed to
lessen thrift vulnerability to t h e real estate cycle
and interest-rate risk exposure. The empirical
w o r k that follows is organized into t w o parts, t h e
15
first of w h i c h analyzes t h e pace at w h i c h S&Ls
used their n e w powers. This analysis was accomplished by reviewing t h e b o o k i n g of c o n s u m e r
loans, c o m m e r c i a l loans, and N I N O W accounts
by t h r e e size categories of differently chartered
S&Ls in Texas, Maine, Florida, and t h e nation.
Bookings for consumer loans, c o m m e r c i a l loans,
and NI N O W accounts are c o m p u t e d as a percent
of total institutions and as a percent of total
assets. The groupings by size cover S&Ls w i t h
total assets greater than $ 5 0 0 million, those w i t h
assets f r o m m o r e than $ 1 0 0 million t o $ 5 0 0
million, and thrifts w i t h $ 1 0 0 m i l l i o n or less. The
four years covered e n d w i t h June 30, f r o m 1 9 8 0
to 1983. Also i n c l u d e d in this segment is a
capsule v i e w of c o n s u m e r loan, c o m m e r c i a l
loan, a n d N I N O W account g r o w t h as of June 30,
1983 f o r t h e nation's S&Ls, regardless of t h e i r s i z e
or charter.
The second empirical p o r t i o n of this study is a
national analysis of state a n d federally chartered
S&L ratios for mortgage loan, c o n s u m e r loan, a n d
c o m m e r c i a l loan extensions, each as a percent of
total loan extensions for 1981 and 1982 yearover-year changes. The recent m o m e n t u m of
associations' growth in consumer and commercial
lending, or alternatively their c o n t i n u e d reliance
o n mortgage lending, is measured by t h e June
30, 1 9 8 3 over D e c e m b e r 31, 1982 data for the
same loan allocation ratios. Standard statistical
t w o - s a m p l e t tests w e r e calculated for all of t h e
allocation ratios m e n t i o n e d t o determine whether
state-chartered a n d federal-chartered S&Ls' behavior d i f f e r e d significantly.
Summary of Part One
I n the October issue of this Review w e examined
h o w state-chartered savings and loan associations
in Texas, Maine, Florida, a n d t h e U n i t e d States
used e x p a n d e d powers c o m p a r e d w i t h their
respective federally chartered counterparts. 2 For
the period 1980 through 1983, t h e study analyzed
balance sheet ratios (for example, total loans,
mortgage loans, c o n s u m e r loans, c o m m e r c i a l
loans, liquid investments, and i n v e s t m e n t in
service corporations), each as a percent of total
assets, and N O W accounts a n d N I N O W accounts, each as a percent of total liabilities. 3 The
purpose was t o ascertain w h e t h e r state- and
federal-chartered S&Ls in t h e various geographical groupings e v i d e n c e d significantly d i f f e r e n t
16
balance sheet behavior. The technique e m p l o y e d
was t h e standard statistical t w o - s a m p l e t test. 4
Three state legislative acts that granted respective
state-chartered thrifts liberalized powers w e r e
c o n s i d e r e d — a 1972 Texas law, a 1975 M a i n e
statute, a n d 1 9 8 0 Florida legislation. W e also
l o o k e d at t h e federal laws t h a t e x p a n d e d powers
for f e d e r a l - c h a r t e r e d t h r i f t s n a t i o n w i d e — t h e
1 9 8 0 Depository Institutions Deregulation and
M o n e t a r y C o n t r o l Act and t h e 1982 Garn-St
Germain Depository Institutions Act. 5 (Table 1 of
that article detailed t h e powers granted u n d e r
these state and federal laws.)
All these laws w e r e designed t o enhance
thrifts' viability by a l l o w i n g t h e m t o m a t c h maturities o n assets a n d liabilities more closely,
t h e r e b y reducing interest-rate risk exposure a n d
stabilizing earnings and profits. For decades
thrifts had garnered funds f r o m low-yielding,
short-term savings deposits w h i c h t h e y lent on
higher-yielding, long-term mortgages that typically
w e r e held in an institution's loan portfolio. The
sharp rise in interest rates in 1 9 7 7 a n d their
persistence at m a r k e d l y higher levels p r o m p t e d
dramatic growth in nonbank money market mutual
f u n d accounts o f f e r i n g market interest rates,
virtually instant liquidity, a n d eventually free b u t
limited check-writing privileges.
As a c o n s e q u e n c e of this t r e m e n d o u s growth,
regulated, relatively l o w - y i e l d i n g savings began
t o f l o w o u t of d e p o s i t o r y institutions at a drastic
clip. To help redirect savings t o d e p o s i t o r y
institutions, regulatory agencies o n June 1 , 1 9 7 8
i n t r o d u c e d t h e six-month money market time
deposit. The account's variable interest rate
ceiling m o v e d w i t h changes in t h e average yield
o n n e w issues of six-month Treasury bills; t h e
m i n i m u m required deposit was $ 10,000. Although
t h e six-month m o n e y market t i m e d e p o s i t attracted a considerable a m o u n t of savings, a large
p r o p o r t i o n came f r o m t h e offering institution's
o w n lower-yielding t i m e and savings deposits.
This initial shift t o high-yield, short-term savings
i n d u c e d a s u b s e q u e n t explosion in thrifts' cost of
funds. Thus, t o w a r d t h e turn of t h e decade, t h e
thrift industry encountered a higher, more volatile
cost o f f u n d s a n d o n l y sluggishly increasing yields
o n total assets, consisting mostly of mortgage
holdings. That is, t h e industry's liability powers
had b e e n e x p a n d e d in an e n v i r o n m e n t of higher
and m o r e volatile interest rates w h i l e its asset
powers generally had not been broadened—a
c o m b i n a t i o n that spelled serious t r o u b l e for
thrift profitability. Indeed, m o u n t i n g losses in t h e
DECEMBER 1984, E C O N O M I C R E V I E W
1980-82 period threatened the very existence of
the industry. 6
Potentially, state and federal statutes passed in
t h e 1970s and early 1980s could transform thrifts
to resemble commercial banks more closely.
Such a change w o u l d increase bank-thrift competition, w h i c h in turn w o u l d have a notable
effect on antitrust decisions and on both business
and individual consumers of financial services. 7
M o r e bank, thrift, or bank-thrift mergers could be
p e r m i t t e d if market shares of both types of
depository institutions were considered in merger
applications. 8 And heightened competition would
benefit financial services purchasers because
commercial banks and thrifts likely w o u l d provide
a w i d e r array of services at lower prices, presumably w i t h the same or higher quality.
The results of our O c t o b e r study suggest that
the most p r o n o u n c e d balance sheet difference
between state- and federal-chartered associations
on a statewide basis occurred w h e n a large
n u m b e r of S&Ls chose t o begin their existence as
state-chartered organizations or convert to state
charters. Supposedly, these thrifts i n t e n d e d to
take advantage of e x p a n d e d powers offered by
individual statutes, such as those in Texas and
Florida 9 An additional f i n d i n g was that increased
liquidity, decreased mortgage holdings, and slow
expansion in consumer and commercial loan
holdings generally characterized state- and federalchartered S&Ls across t h e nation.
The most striking evidence was provided by
n e w Florida-chartered associations, t h e vast
majority of w h i c h came into existence after
1979. These relatively unrestrained " d e novo"
institutions sought sharply higher liquidity and
reduced holdings of mortgages; however, they
expanded consumer and commercial loan portfolios only modestly. Overall, as of June 1983 the
nation's federal-chartered S&Ls were comparatively more specialized in total loans and mortgage
loans as a percent of assets. State-chartered
associations held a relatively greater concentration
in consumer loans, commercial loans, liquid
investments, investment in service corporations,
and N I N O W accounts. Judging by t h e asset
ratios most relevant t o broadened powers (consumer loans, commercial loans, liquid investments, and investment in service corporations),
neither group of S&Ls even approached the
various ceilings i m p o s e d by state and federal
statutes. Associations' cool responses were attributable to high start-up costs, lack of expertise,
sluggish national e c o n o m i c activity, sharply di-
, FEDERAL RESERVE B A N K O F A T L A N T A
minished earnings, and intense competition from
other financial services entities. Managerial inertia
likely was another major limiting factor.
Principal Points of Legislation
Consumer Loan Powers. Federal-chartered thrifts
were authorized t o extend consumer loans u p to
20 percent of total assets as of M a r c h 3 1 , 1 9 8 0
under provisions of the Depository Institutions
D e r e g u l a t i o n and M o n e t a r y C o n t r o l Act (or
D I D M C A ) ; the Garn-St Germain Act increased
this authorization to 30 percent of total assets
effective O c t o b e r 15, 1982. 1 0 Texas statutes
allowed state-chartered thrifts to make consumer
loans essentially free of any percent-of-assets
limitation beginning August 3, 1972; the October
1, 1975 Maine law allowed state-chartered thrifts
to grant consumer loans up to 10 percent of total
deposits, with an additional maximum 10 percent
extension of consumer loans under p r u d e n t loan
rules. 11 As of July 1,1980, Florida-chartered thrifts
could begin granting consumer loans of any type
or a m o u n t with t h e proviso that at least 60
percent of a thrift's " n o n l i q u i d " assets be placed
in real estate-related loans or interests. 12
Commercial Loan Powers. Garn-St Germain
e m p o w e r e d thrifts to make non-real estate commercial loans, direct or participating, up to 5
percent of assets (7.5 percent for savings banks)
prior to January 1, 1984 and thereafter up to 10
percent. 1 3 As of August 1972, Texas-chartered
thrifts could make commercial loans w i t h essentially no percent-of-assets ceiling. M a i n e chartered thrifts, as of O c t o b e r 1975, could
participate w i t h M a i n e banks in commercial
loans up to 10 percent of total deposits and
make commercial loans under p r u d e n t loan
rules up to 10 percent of deposits. 1 4 That state's
law stipulated that an additional allowance up to
10 percent for making direct or participating
commercial loans was to be d e t e r m i n e d by the
state superintendent of banking; in 1981 t h e
d e p a r t m e n t granted the additional 10 percent.
As of July 1980, Florida-chartered thrifts could
grant commercial loans of any type or a m o u n t if
60 percent of an institution's n o n l i q u i d assets
were in real estate-related loans or interests. 15
N I N O W Account Powers. D I D M C A authorized
thrifts to accept N I N O W accounts from individuals; t h e Garn-St Germain Act e x p a n d e d that
authority to include customers or organizations
that had established a "business, corporate,
commercial or agricultural loan relationship" with
17
the institution. Texas' general parity provisions
allowed institutions to accept NI N O W accounts
from individuals upon the enactment of DIDMCA.
General parity provisions in Texas, Maine, and
Florida e m p o w e r e d thrifts chartered in those
states to undertake any activity p e r m i t t e d for
federal-chartered institutions. In 1981, Texas
statutes granted thrifts NI N O W powers for business accounts w i t h o u t imposing a loan relationship requirement. The M a i n e law's general parity
provisions authorized thrifts to accept NI N O W
accounts from individuals in 1980. Legislators in
1981 granted Maine- chartered thrifts the authority
to accept NI N O W accounts from business customers w h o had established a commercial loan
relationship; the loan requirement was eliminated
in 1983. Finally, the 1980 Florida law allowed
NI N O W account acceptance from business customers w i t h o u t requiring any loan relationship.
Expansion of Consumer Loans,
Commercial Loans, and NI N O W Accounts
Texas. Eight years after the passage of powerbroadening statutes, Texas-chartered associations
still had not expanded their holdings of consumer
loans substantially (see Table 1). As of June 30,
1980 consumer loans as a percent of total assets
stood at just 1.1 percent for state-chartered
associations w i t h over $500 million in assets, and
2 percent and 2.5 percent for those w i t h assets of
over S100 million to 5500 million and S100
million or less, respectively. However, with t h e
exception of five of the 200 smallest associations,
all Texas-chartered S&Ls had b o o k e d some consumer loans. As of t h e same date, federalchartered associations in Texas had respective
holdings of 0.8 percent, 1.7 percent, and 2.3
percent of assets in consumer loans for associations
with over $500 million, over $100 million to
$500 million, and $100 million or less in assets.
These three percentages were basically the same
as the respective proportions recorded for their
Texas-chartered counterparts. All federal-chartered
S&Ls in the Lone Star State had b o o k e d some
consumer loans by June 1980.
In t h e commercial lending field, t h e largest
Texas-chartered associations held a meager 0.1
percent of assets, the middle category held 1 percent and the smallest institutions had 0.6 percent
These percentages are tiny considering that liberalized commercial lending powers had been
available for about eight years under Texas statute
18
However, despite the meagerness of commercial
loans in relation to total assets, slightly over 80
percent of the large Texas-chartered S&Ls possessed some commercial loans and approximately
40 to 45 percent of the t w o other groups had
b o o k e d some commercial loans. Finally, since
legislation authorizing thrifts to accept N I N O W
accounts from individuals had been approved
only a f e w months earlier, these accounts were
virtually absent from the books of both state- and
federal-chartered associations in Texas.
B y j u n e 3 0 , 1 9 8 1 , the large, mid-size, and small
Texas-chartered S&Ls exhibited a marked rise in
consumer loans as a percent of assets, w i t h
respective shares of 4.3 percent, 5.9 percent,
and 5.7 percent. Furthermore, Texas' federally
chartered S&Ls displayed noticeable gains in
consumer lending, posting respective rises to 7.8
percent of assets, 3.4 percent, and 4.1 percent.
Despite the eight-year availability of expanded
consumer lending powers and a generally prosperous, occasionally booming, energy productionbased economy, apparently it was not until after
mid-year 1980 that Texas-chartered S&Ls finally
d e c i d e d to enlarge consumer loan holdings. An
increased sense of competition with Texas' federalchartered S&Ls, w h i c h shortly before had been
granted broadened powers and began to use
them, helped provide considerable impetus for
expansion. Additionally, heightened awareness
of the industry's interest-rate risk exposure and
lackluster profit potential may have occasioned
some consumer loan growth. 1 6 Advances in this
area offered t h e path of least resistance because
associations already had been e m p o w e r e d (exclusive of t h e five state and federal laws cited) to
make certain consumer loans, such as loans for
home i m p r o v e m e n t and education and loans on
savings accounts. An institution could achieve
further gains in consumer loans w i t h little more
than its existing expertise, applications software,
and customer base. In many cases, loan expansion
required only a relaxation of credit standards or
stepped-up marketing efforts.
From June 1981 to June 1983, consumer loans
f o r t h e differently chartered S& Ls in the Lone Star
State remained at roughly the same percent of
assets levels. Further S&L diversification into
short-term, higher-yielding consumer loans failed
to c o m e about, possibly because Texas was hurt
by an oil glut and the sluggish general e c o n o m y
of the 1981-83 period.
M i n i m a l or no commercial loan growth was
registered for all size categories of differently
DECEMBER 1984, E C O N O M I C
REVIEW
I
chartered S&Ls in Texas f r o m 1 9 8 0 t o 1983.
Large federally chartered associations held no
c o m m e r c i a l loans over t h e entire period, w h i l e
similarly chartered small- a n d mid-size S&Ls
increased c o m m e r c i a l loans ever so slightly, f r o m
zero to 0.2 and 0.1 percent of assets, respectively.
T e x a s - c h a r t e r e d S&Ls, w h i c h h a d b e e n empowered t o enlarge their commercial loan holdings
since 1972, e x p a n d e d t h e m o n l y fractionally.
From June 1 9 8 0 to June 1983, t h e largest Texaschartered associations raised c o m m e r c i a l loans
slightly f r o m 0.1 percent of assets t o 0.3 percent;
mid-size S&L holdings i n c h e d up f r o m 1 percent
to 1.1 percent; a n d small S&Ls' c o m m e r c i a l loans
e d g e d f o r w a r d f r o m 0.6 percent t o 0.8 percent of
assets. Also during this period, o n l y a m o d e s t rise
was registered in t h e p r o p o r t i o n of associations,
either state or federal, reporting c o m m e r c i a l
loans o n their books. But c o m m e r c i a l loanrelated N I N O W a c c o u n t bookings grew, part i c u l a r l y for T e x a s - c h a r t e r e d associations. Alt h o u g h their c o m m e r c i a l loan portfolios as a
p e r c e n t of assets w e r e m i n o r , Texas' statechartered S&Ls held comparatively m o r e in
c o m m e r c i a l loans than their federal counterparts. 17 Furthermore, in 1981 Texas-chartered
associations received authority to accept N I N O W
accounts f r o m business customers w i t h o u t any
loan relationship requirement. Their relatively
larger c o m m e r c i a l loan holdings a n d n e w account acceptance powers appear t o be responsible for t h e greater p r e v a l e n c e of N I N O W
a c c o u n t b o o k i n g s at T e x a s - c h a r t e r e d associations in 1983.
Maine. A l t h o u g h t h e p o p u l a t i o n of S&Ls in
M a i n e is m o d e s t and c o n f i n e d t o t h e small a n d
mid-size institutions, t h e state's experience is
useful for c o r r o b o r a t i n g that of Texas (see Table
2). Like Texas-chartered associations, Mainechartered S&Ls had possessed b r o a d e n e d consumer a n d c o m m e r c i a l lending powers for many
years b u t had not m a d e use of t h e m . After
a p p r o x i m a t e l y five years of e x p a n d e d abilities,
M a i n e S&Ls w i t h assets of over $ 1 0 0 million t o
$500 million held 1.3 percent of their assets in
consumer loans and 0.3 percent in c o m m e r c i a l
loans; those w i t h assets of $ 1 0 0 m i l l i o n or less
held 2.2 percent in consumer loans a n d none in
c o m m e r c i a l loans. By June 1980, small federally
chartered S&Ls h e l d 2.8 percent in consumer
loans a n d zero in c o m m e r c i a l loans. There w e r e
no mid-size federal-chartered S&Ls in M a i n e
f r o m June 1 9 8 0 t o June 1983.
FEDERAL RESERVE B A N K O F A T L A N T A
As in Texas, Maine's state- and federal-chartered
S&Ls increased c o n s u m e r loans significantly by
June 1981. Presumably, t h e rises w e r e caused by
an increased sense of competition between stateand federally chartered associations, an enhanced
awareness of t h e industry's severe interest-rate
risk exposure a n d d o u r profit potential, a n d t h e
relative facility of enlarging certain types of consumer loan holdings. From June 1981 t o June
1983, consumer loans as a p o r t i o n of assets
generally r e m a i n e d static A M a i n e e c o n o m y that
relies heavily on cyclical industries such as tourism
and forest products d a m p e n e d consumer loan
growth. C o m m e r c i a l loans e x p a n d e d very little
from 1980 to 1983, mirroring the Texas experience.
Florida. Even t h o u g h e x p a n d e d powers had
been available to Texas- a n d M a i n e - c h a r t e r e d
S&Ls for many years, Florida-chartered associations'
holdings of c o n s u m e r and c o m m e r c i a l loans by
all three size categories w e r e o n l y m o d e r a t e l y
lower than those states' associations o n June 30,
1 9 8 0 (see Table 3). Large- a n d mid-size Floridachartered associations, respectively, held 1 a n d
0.8 percent of assets in consumer loans and zero
a n d 0.1 percent in c o m m e r c i a l loans. Small state
S&Ls held 1.9 percent in consumer loans and
zero in c o m m e r c i a l loans. The Sunshine State's
large and mid-size federal-chartered associations
by June 1 9 8 0 a l l o t t e d respective shares of 0.6
and 0.9 percent of assets t o consumer loans,
w h i l e its small federal S&Ls allocated 2.1 percent
of theirassets t o c o n s u m e r loans. All t h r e e groups
of federal-chartered S& Ls registered zero in commercial loans. Despite t h e small or nonexistent
figures posted for commercial loans as a proportion
of assets—the a m o u n t of c o m m e r c i a l loans in
most instances was t o o small t o register even 0.1
percent of assets—between 25 and 50 p e r c e n t
of t h e t w o larger size state- a n d federal-chartered
S&Ls in Florida had b o o k e d s o m e c o m m e r c i a l
loans by June 1980. Florida's small state- a n d
federal-chartered S&Ls paid little a t t e n t i o n t o
c o m m e r c i a l loans. N I N O W account bookings
w e r e nonexistent on June 30, 1980; acceptance
of these accounts f r o m individuals had been app r o v e d o n l y a f e w m o n t h s earlier for federally
chartered thrifts.
By June 1981, c o n s u m e r loans had g r o w n as a
percent of assets for all size categories of Florida's
state a n d federal S& Ls, but not as a b r u p t l y as t h e
June 1 9 8 0 t o June 1981 consumer loan expansions for associations in Texas a n d Maine.
Several factors a p p a r e n t l y c o n t r i b u t e d t o t h e
19
Table4.UnitedStatesS&L Involvement in Consumer Loans, Commercial Loans,
and NINOW* Accounts by Size Category and Charter
June 30, 1980
June 30, 1981
T o t a l Assets > $ 5 0 0 million
Total N u m b e r of S&Ls (F)=2
<S)=6
T o t a l Assets > $ 5 0 0 million
Total N u m b e r of S & L s (F)=2
(S)=6
S u m of Total Assets (F)=$2.1 billion
(S)=$9.9 billion
Asset/ Liability
Category
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
S u m of Total Assets ( F ) = $ 2.1 billion
( S ) = $ 1 1 . 9 billion
N u m b e r of S&Ls
Involved
Asset/Liability
Category
P e r c e n t of
Institutions
P e r c e n t of T<
Assets
7.8
4.3
C o n s u m e r Loans
(F)
(S)
2
6
100.0
100.0
0.8
1.1
C o n s u m e r Loans
(F)
(S)
2
6
100.0
100.0
C o m m e r c i a l Loans
(F)
(S)
0
5
0.0
83.3
0.0
0.1
C o m m e r c i a l Loans
(F)
(S)
0
4
0.0
66.7
0.0
0.0**
NINOW Accounts
(F)
(S)
0
0
0.0
0.0
0.0
0.0
NINOW Accounts
<F)
(S)
0
1
0.0
16.7
0.0
0.0**
T o t a l Assets > $ 1 0 0 million to $ 5 0 0 million
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 million
Total N u m b e r of S&Ls ( F ) = 1 8
(S)=40
Total N u m b e r of S&Ls (F)=21
(S)=43
S u m of Total Assets (F)=$3.6 billion
(S)=$7.1 billion
C o n s u m e r Loans
(F)
(S)
18
40
100.0
100.0
Commercial Loans
(F)
(S)
5
16
27.8
40.0
NINOW Accounts
(F)
(S)
0
0
0.0
0.0
C o n s u m e r Loans
(F)
(S)
21
43
100.0
100.0
0.0**
1.0
Commercial Loans
(F)
(S)
4
20
19.0
46.5
0.0**
0.7
0.0
0.0
NINOW Accounts
(F)
(S)
0
11
0.0
25.6
0.0
0.1
T o t a l Assets < $ 1 0 0 million
Total N u m b e r of S & L s (F)= 4 5
(S)=197
S u m of Total Assets (F)=$2.1 billion
(S)=$7.6 billion
S u m of Total Assets (F)=$2.0 billion
(S)=$7.8 billion
4.1
5.7
2.3
2.5
Consumer Loans
(F)
(S)
44
197
97.8
100.0
6.3
45.5
0.0**
0.6
Commercial Loans
(F)
(S)
3
64
6.7
32.5
0.0**
0.6
0.0
0.5
0.0
0.0**
NINOW Accounts
(F)
(S)
1
44
2.2
22.3
0.0**
0.4
Consumer Loans
(F)
(S)
48
195
100.0
97.5
C o m m e r c i a l Loans
(F)
(S)
3
91
NINOW Accounts
(F)
(S)
0
1
3.4
5.9
1.7
2.0
T o t a l Assets < $ 1 0 0 million
Total N u m b e r of S & L s ( F ) = 4 8
(S)=200
S u m of Total Assets (F)=$4.2 billion
(S)=$8.3 billion
June 30, 1 9 8 3
June 30, 1982
T o t a l Assets > $ 5 0 0 million
T o t a l Assets > $ 5 0 0 million
Total N u m b e r of S & L s ( F ) = 3
(S)=7
2.9 billion
S u m of Total Assets (F)=
(S)==$13.8 billion
Asset/Liability
Category
Total N u m b e r of S&Ls <F)= 3
(S)=13
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
Asset/Liability
Category
S u m of Total Assets (F)==$ 3.4 billion
(S)==$19.3 billion
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
Consumer Loans
(F)
(S)
3
7
100.0
100.0
6.7
4.1
Consumer Loans
(F)
(S)
3
13
100.0
100.0
5.7
4.4
Commercial Loans
(F)
(S)
0
5
0.0
71.4
0.0
0.2
Commercial Loans
<F)
(S)
0
6
0.0
80.0
0.0
0.3
NINOW Accounts
(F)
<S)
0
5
0.0
71.4
0.0
0.5
NINOW Accounts
<F)
(S)
0
13
0.0
100.0
0.0
1.1
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 million
T o t a l Assets > $ 1 0 0 million to $ 5 0 0 million
Total N u m b e r of S&Ls (F)=21
(S)=50
Total N u m b e r of S & L s ( F ) = 2 4
(S)=66
S u m of Total Assets ( F ) = $ 4.3 billion
(S)=$10.7 billion
S u m of Total Assets ( F ) = $ 5.1 billion
( S ) = $ 1 3 . 3 billion
C o n s u m e r Loans
(F)
(S)
21
50
100.0
100.0
2.8
6.0
Consumer Loans
(F)
(S)
24
66
100.0
100.0
2.9
6.8
C o m m e r c i a l Loans
(F)
(S)
8
28
38.1
56.0
0.1
0.6
Commercial Loans
(F)
(S)
12
33
50.0
50.0
0.2
1.1
NINOW Accounts
(F)
(S)
3
31
14.3
62.0
0.0'
0.7
NINOW Accounts
(F)
(S)
15
46
62.5
69.7
0.2
0.2
T o t a l Assets < $ 1 0 0 million
T o t a l Assets < $ 1 0 0 million
Total N u m b e r of S & L s (F)= 3 8
(S)=184
Total N u m b e r of S & L s (F)= 2 7
(S)=134
S u m of Total Assets (F)=$1.7 billion
(S)=$7.0 billion
S u m of Total Assets (F)=$1.3 billion
(S)=$5.5 billion
Consumer Loans
<F)
(S)
36
174
94.7
94.6
4.2
6.0
Consumer Loans
(F)
(S)
27
132
100.0
98.5
4.3
6.4
Commercial Loans
(F)
(S)
4
59
10.5
32.1
0.0"
0.5
C o m m e r c i a l Loans
<F)
(S)
6
40
22.2
29.9
0.1
0.8
NINOW Accounts
(F)
(S)
2
74
5.3
40.2
0.0**
0.5
NINOW Accounts
(F)
(S)
8
81
29.6
60.4
0.0**
0.5
(F) - F e d e r a l - c h a r t e r e d
(S) - S t a t e - c h a r t e r e d
* A s of J a n u a r y 1 9 8 1 T e x a s l a w a l l o w e d d e m a n d d e p o s i t a c c e p t a n c e w i t h o u t r e g a r d t o a r e q u i s i t e l o a n r e l a t i o n s h i p . T h e O c t o b e r 1 9 8 2 G a r n - S t G e r m a i n
Act a l l o w e d d e m a n d d e p o s i t a c c e p t a n c e f r o m c u s t o m e r s w h o had e s t a b l i s h e d a loan relationship with the institution. Thus, s o m e d e m a n d d e p o s i t s m a y
a p p e a r in t h e N I N O W c a t e g o r y . G e n e r a l p a r i t y p r o v i s i o n s of T e x a s l a w apply.
* * T o o s m a l l t o r e g i s t e r a s 0.1
percent.
Source: Federal Reserve Board
Database.
Table 2. Maine S&L Involvement in Consumer Loans Commercial Loans,
and NINOW* Accounts by Size Category and Charter
June 30, 1981
June 30, 1980
T o t a l Assets > $ 1 0 0 million to $ 5 0 0 million
Total Assets > $ 1 0 0 million to $ 5 0 0 million
Total N u m b e r of S&Ls ( F ) = 0
(S)=2
Total N u m b e r of S&Ls ( F ) = 0
(S)=2
N u m b e r of S & L s
Involved
Asset/Liability
Category
C o n s u m e r Loans
C o m m e r c i a l Loans
NINOW Accounts
S u m of Total Assets (F)=$0.0 billion
(S)=$0.2 billion
IS
P e r c e n t of T o t a l
Assets
100.0
1.3
0
2
0
1
i§
P e r c e n t of
Institutions
50.0
0.3
0
2
100.0
0.3
T o t a l Assets < $ 1 0 0 million
Total N u m b e r of S & L s (F)=8
(S)=9
S u m of Total Assets (F)=$0.0 billion
(S)=$0.2 billion
Asset/Liability
Category
C o n s u m e r Loans
N u m b e r of S & L s
Involved
0
(F)
2
(S)
S u m of Total Assets (F)=$0.3 billion
( S ) = $ 0 . 2 billion
(F)
(S)
100.0
C o m m e r c i a l Loans
(F)
(S)
0.0
0.0
NINOW Accounts
(F)
(S)
22.2
1
(B
100.0
0.0*
Total N u m b e r of S & L s (F)=8
(S)=9
50.0
0.0"
0
2
100.0
0.3
S u m of Total Assets (F)=$0.2 billion
(S)=$0.2 billion
Consumer Loans
(F)
(S)
0.0
100.0
Commercial Loans
(F)
(S)
22.2
0.0
NINOW Accounts
(F)
(S)
22.2
2.2
0.0
0.1
100.0
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 million
Total N u m b e r of S & L s ( F ) = 0
(S)=1
Total N u m b e r of S&Ls ( F ) = 0
<S)=1
S u m of Total Assets (F)=$0.0 billion
(S)=$0.2 billion
N u m b e r of S & L s
Involved
4.2
4.7
0.0
0.0
0.0"
0.0
0.0
0.1
June 30, 1983
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 million
Commercial Loans
5.5
2.8
June 30, 1 9 8 2
Consumer Loans
100.0
T o t a l Assets < $ 1 0 0 million
C o n s u m e r Loans
Asset/Liability
Category
P e r c e n t of T o t a l
Assets
0
Commercial Loans
NINOW Accounts
P e r c e n t of
Institutions
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
100.0
5.4
100.0
0.0**
N u m b e r of S&Ls
Involved
Asset/ Liability
Category
Consumer Loans
Commercial Loans
S u m of Total Assets (F)=$0.0 billion
(S)=$0.2 billion
i§
0
(F)
(S)
1
1
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
100.0
5.1
100.0
0.1
0
IO O
IßN
substantial consumer loan g r o w t h in Texas and
M a i n e f r o m 1 9 8 0 t o 1981. These i n c l u d e d a
h e i g h t e n e d sense of c o m p e t i t i o n created by t h e
recent e n a c t m e n t of b o t h state and federal laws
affecting thrift institutions, keener cognizance
of the industry's excessive interest-rate risk exposure a n d sagging profit potential, a n d t h e
relative ease of increasing certain types of consumer loans. Even though management at Florida's
state- and federal-chartered S&Ls was i n f l u e n c e d
by these factors, t h e relative profitability of
lending in t h e state's real estate market c o u l d
have t e m p e r e d t h e pace of diversification by
Florida's S&Ls. Commercial loan expansion during
this 1 9 8 0 t o 1981 p e r i o d generally was insignificant.
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U n l i k e Texas a n d Maine, Florida associations'
holdings of consumer loans did not stay level from
June 1981 t o June 1983. Instead t h e y grew
gradually, b u t to 1983 levels that w e r e lower
than those for Texas a n d Maine. Again, t h e
c o n t i n u e d profitability of Florida's real estate
sector, even during t h e 1981-82 recession,
probably was responsible in part for this gradual
but slower growth. Also, Florida-chartered associations' preference for greatly increased liquidity a c c o u n t e d partly for their comparatively
slower g r o w t h in consumer loans from 1981 t o
1983 vis-a-vis Texas- and Maine-chartered S&Ls.
(Liquid investments averaged 26.2 percent of
assets for Florida-chartered associations d u r i n g
this two-year p e r i o d c o m p a r e d w i t h 10.9 percent for Texas-chartered S&Ls and 12.5 for
M a i n e - c h a r t e r e d institutions.)
In brief, as of
June 30, 1983 Florida's differently sized statechartered S&Ls held between 2.8 and 4.1 percent
of assets in c o n s u m e r loans, w h i l e Texaschartered associations retained b e t w e e n 4.4 a n d
6.8 percent a n d M a i n e - c h a r t e r e d associations
b e t w e e n 5.1 a n d 7 percent in consumer loans.
Florida's federal-chartered S&Ls m a i n t a i n e d a
relatively smaller 1.7 t o 2.5 percent of assets in
consumer loans, c o m p a r e d w i t h 2.9 t o 5.7
percent for Texas' federal associations a n d 5.5
percent for those in Maine.
It is interesting to n o t e that c o m m e r c i a l loans
comprised 1.4 percent of assets for large Floridachartered S&Ls o n June 30, 1983 and 2.8
percent for mid-size state-chartered associations.
Florida's small state-chartered associations held
only 0.4 percent of their assets in c o m m e r c i a l
loans o n that date. This is t h e first consistent
pattern t o emerge o n a statewide basis in
support of t h e supposition that larger associations are better able t o subsidize f r o m various
profit-generating activities t h e high start-up
costs associated w i t h establishing a commercial
23
Ni
•t»
Table4.UnitedStatesS&L Involvement in Consumer Loans, Commercial Loans,
and NINOW* Accounts by Size Category and Charter
June 30, 1981
June 30, 1980
T o t a l Assets > $ 5 0 0 million
T o t a l Assets > $ 5 0 0 million
Total N u m b e r of S & L s (F)= 2 4
(S)= 4
Asset/Liability
Category
Total N u m b e r of S&Ls ( F ) = 3 1
(S)= 5
S u m of Total Assets (F)=$26.1 billion
(S)=$ 6.1 billion
1.6
1.9
Commercial Loans
(F)
(S)
17
2
54.8
40.0
0.0**
0.7
NINOW Accounts
(F)
<S)
2
1
6.5
20.0
0.0**
0.1
0.0
0.0
12
1
50.0
25.0
NINOW Accounts
(F)
(S)
0
0
0.0
0.0
Asset/Liability
Category
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 million
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 m i l l i o n
S u m of Total Assets (F)==$13.4 billion
(S)==$ 1.2 billion
Consumer Loans
(F)
(S)
53
4
100.0
100.0
Commercial Loans
(F)
(S)
17
2
32.1
50.0
NINOW Accounts
(F)
(S)
0
0
0.0
0.0
Total N u m b e r of S&Ls ( F ) = 4 6
(S)= 3
S u m of Total Assets ( F ) = $ 1 1 . 4 billion
( S ) = $ 0.9 billion
0.9
0.8
Consumer Loans
(F)
(S)
46
3
100.0
100.0
1.4
3.0
0.0**
0.1
C o m m e r c i a l Loans
(F)
(S)
19
1
41.3
33.3
0.0'
0.0'
0.0
0.0
NINOW Accounts
(F)
(S)
1
0
2.2
0.0
o.o0.0
T o t a l A s s e t s < $ 1 0 0 million
T o t a l Assets < $ 1 0 0 million
100.0
100.0
0.0**
0.0**
(F)
(S)
NINOW Accounts
31
5
C o n s u m e r Loans
Commercial Loans
C o m m e r c i a l Loans
<F)
(S)
0.6
1.0
100.0
75.0
C o n s u m e r Loans
P e r c e n t of T o t a l
Assets
P e r c e n t of T o t a l
Assets
24
3
Total N u m b e r of S & L s ( F ) = 3 0
(S)= 8
P e r c e n t of
Institutions
P e r c e n t of
Institutions
(F)
(S)
Total N u m b e r of S&Ls ( F ) = 5 3
(S)= 4
N u m b e r of S&Ls
Involved
N u m b e r of S & L s
Involved
Consumer Loans
S u m of Total A s s e t s ( F ) = $ 3 3 . 2 billion
( S ) = $ 7.5 billion
Total N u m b e r of S & L s ( F ) = 2 8
(S)=19
S u m of Total Assets (F)=$1.5 billion
(S)=$0.2 billion
(F)
(S)
30
7
100.0
87.5
(F)
2
(S)
0
(F)
(S)
0
0
•no .in 1 qfl?
(F)
(S)
28
15
100.0
Commercial Loans
(F)
(S)
1
3
3.6
15.8
0.0*
NINOW Accounts
(F)
(S)
4
14.3
31.6
0.0**
2.1
1.9
Consumer Loans
6.7
0.0*
0.0
0.0
0.0
0.0
0.0
0.0
S u m of Total Assets (F)=$1.5 billion
(S)=$0.4 billion
6
i n n a n 1 SR3
78.9
2.3
2.4
0.2
0.2
J u n e 30,
1
June 30, 1983
982
T o t a l Assets > $ 5 0 0 million
T o t a l Assets > $ 5 0 0 million
Total N u m b e r of S&Ls ( F ) = 3 2
(S)= 4
Asset/ Liability
Category
; (F)=31
<S)= 5
S u m of Total Assets (F)=$34.4 billion
( S ) = $ 6.6 billion
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
(F)
(S)
31
5
100.0
100.0
2.5
3.4
Asset/Liability
Category
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
1.9
2.5
Consumer Loans
S u m of Total Assets (F)==$39.8 billion
(Sy-=$ 8.0 billion
C o n s u m e r Loans
(F)
(S)
32
4
100.0
100.0
(F)
(S)
15
2
46.9
50.0
0.0"
0.3
Commercial Loans
Commercial Loans
(F)
(S)
15
2
48.4
40.0
0.0**
1.4
<F)
(S)
4
2
12.5
50.0
0.0**
0.3
NINOW Accounts
NI N O W A c c o u n t s
(F)
(S)
14
3
45.2
60.0
0.0**
1.4
T o t a l Assets > $ 1 0 0 million to $ 5 0 0 million
T o t a l Assets > $ 1 0 0 million t o $ 5 0 0 million
Total N u m b e r of S & L s ( F ) = 3 7
(S)= 3
Total N u m b e r of S & L s ( F ) = 3 0
(S)= 6
S u m of Total
(S)=$1.0 billion
1.6
3.1
Consumer Loans
(F)
(S)
30
6
100.0
100.0
1.7
2.8
27.0
66.7
0.0**
0.5
C o m m e r c i a l Loans
(F)
(S)
12
4
40.0
66.7
0.1
2.8
16.2
66.7
0.0**
0.1
NINOW Accounts
<F)
(S)
15
5
50.0
83.3
0.1
0.3
C o n s u m e r Loans
(F)
(S)
37
3
100.0
100.0
C o m m e r c i a l Loans
(F)
(S)
10
2
NINOW Accounts
(F)
(S)
6
2
T o t a l Assets < $ 1 0 0 million
T o t a l Assets < $ 1 0 0 million
Total N u m b e r of S&Ls ( F ) = 2 4
(S)=21
S u m of Total Assets (F)=$7.8 billion
(S)=$1.7 billion
Total N u m b e r of S&Ls ( F ) = 1 9
(S)=22
S u m of Total Assets (F)=$1.2 billion
(S)=$0.6 billion
Sum of Total A s s e t s (F)=$1.0 billion
(S)=$0.8 billion
2.3
4.2
Consumer Loans
(F)
(S)
19
21
100.0
95.5
2.5
4.1
4.2
33.3
0.0**
0.5
Commercial Loans
(F)
(S)
3
7
15.8
31.8
0.0
0.4
33.3
81.0
0.0**
0.8
NINOW Accounts
(F)
(S)
9
20
47.4
90.9
0.1
1.1
C o n s u m e r Loans
(F)
(S)
24
20
100.0
95.2
Commercial Loans
(F)
(S)
1
7
NINOW Accounts
(F)
(S)
8
17
(F) - F e d e r a l - c h a r t e r e d
(S) - S t a t e - c h a r t e r e d
*The October 1982
Gam-St Germain Act allowed d e m a n d deposit acceptance from customers w h o had established a loan relationship with
i n s t i t u t i o n . T h u s , s o m e d e m a n d d e p o s i t s m a y a p p e a r in t h e N I N O W c a t e g o r y . G e n e r a l p a r i t y p r o v i s i o n s of F l o r i d a l a w apply.
* * T o o s m a l l t o r e g i s t e r a s 0.1
percent.
Source: Federal Reserve Board Database.
Digitized
N3 for FRASER
U1
the
to
ff*
Table 4. United States S&L Involvement in Consumer Loans, Commercial Loans,
and NINOW* Accounts by Size Category and Charter
June 30, 1 9 8 0
June 30, 1981
T o t a l Assets > $ 5 0 0 million
Total Assets > $ 5 0 0 million
Total N u m b e r of S & L s ( F ) = 1 2 5
(S)= 7 0
Asset/Liability
Category
Total N u m b e r of S&Ls ( F ) = 1 4 8
(S)= 77
Sum of Total Assets ( F ) = $ 1 4 3 . 7 billion
( S ) = $ 1 0 2 . 4 billion
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
Asset/Liability
Category
S u m of Total Assets ( F ) = $ 1 7 4 . 1 billion
( S ) = $ 123.1 billion
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
3.1
2.5
C o n s u m e r Loans
(F)
(S)
125
69
100.0
98.6
0.8
1.2
Consumer Loans
(F)
(S)
148
77
100.0
100.0
C o m m e r c i a l Loans
(F)
(S)
58
35
46.4
50.0
0.5
0.2
Commercial Loans
(F)
(S)
61
31
41.2
40.3
0.0"
0.2
NINOW Accounts
(F)
(S)
2
6
1.6
8.6
0.0**
0.0**
NINOW Accounts
(F)
(S)
8
8
5.4
10.4
0.0"
0.0**
T o t a l Assets > $ 1 0 0 million to $ 5 0 0 million
T o t a l Assets > $ 1 0 0 million to $ 5 0 0 million
Total N u m b e r of S & L s ( F ) = 6 1 6
(S)=397
Total N u m b e r of S & L s ( F ) = 6 2 2
(S)=425
S u m of Total Assets ( R = $ 1 3 0 3 billion
( S ) = $ 75.8 billion
S u m of Total Assets ( F ) = $ 132.0 billion
( S ) = $ 83.4 billion
2.6
2.8
Consumer Loans
(F)
(S)
608
395
98.7
99.5
1.2
1.2
C o n s u m e r Loans
(F)
(S)
621
425
99.8
100.0
C o m m e r c i a l Loans
(F)
(S)
148
93
24.0
23.4
0.1
0.2
C o m m e r c i a l Loans
(F)
(S)
141
96
22.7
22.6
0.0**
0.2
NINOW Accounts
(F)
(S)
3
54
0.5
13.6
0.0**
0.1
NINOW Accounts
<F)
(S)
13
56
2.1
13.2
0.0**
0.1
T o t a l Assets < $ 1 0 0 million
T o t a l Assets < $ 1 0 0 million
Total N u m b e r of S & L s ( F ) = 1 2 5 3
(S)=1502
Total N u m b e r of S&Ls ( F ) = 1 1 8 4
(S)=1458
S u m of Total Assets (F)=$53.8 billion
(S)=$52.4 billion
S u m of Total Assets (F)=$52.7 billion
( S ) = $ 5 1 . 4 billion
Consumer Loans
(F)
(S)
1228
1436
98.0
97.6
1.8
1.7
C o n s u m e r Loans
(F)
(S)
1166
1439
98.5
98.7
2.7
3.1
Commercial Loans
(F)
(S)
88
239
7.0
15.9
0.0**
0.1
C o m m e r c i a l Loans
(F)
(S)
87
201
7.3
13.8
0.0**
0.1
NINOW Accounts
(F)
(S)
3
85
0.2
5.7
0.0**
0.1
NINOW Accounts
(F)
(S)
24
131
2.0
9.0
0.0**
0.1
June
30,
1982
j u n e JU,
Total Assets > $ 5 0 0 million
T o t a l N u m b e r of S & L s ( F ) = 1 7 3
(S)= 7 9
Asset/Liability
Category
13ÖJ
Total Assets > $ 5 0 0 million
S u m of T o t a l A s s e t s (F)== $ 2 4 9 . 4 b i l l i o n
(S) = $ 1 2 9 . 0 b i l l i o n
Total N u m b e r of S & L s ( F ) = 2 0 2
(S)= 8 9
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
P e r c e n t of T o t a l
Assets
2.6
2.5
Consumer Loans
Asset/ Liability
Category
S u m of T o t a l A s s e t s ( F ) = $ 3 1 5 . 1 b i l l i o n
(S)=$ 147.9 billion
N u m b e r of S&Ls
Involved
P e r c e n t of
Institutions
Percent of Total
Assets
(F)
(S)
202
89
100.0
100.0
3.0
2.8
Consumer Loans
(F)
(S)
173
79
100.0
100.0
Commercial Loans
<F)
(S)
64
34
37.0
43.0
0.0**
0.1
Commercial Loans
(F)
(S)
100
39
49.5
43.8
0.2
0.2
NINOW Accounts
<F)
(S)
24
14
13.9
17.7
0.0**
0.1
NINOW Accounts
(F)
(S)
79
31
39.1
34.8
0.1
0.2
Total Assets > $ 1 0 0 million to $ 5 0 0 million
Total Assets > $ 1 0 0 million to $ 5 0 0 million
T o t a l N u m b e r of S & L s ( F ) = 5 9 2
(S)=389
T o t a l N u m b e r of S & L s ( F ) = 5 7 5
(S)=397
S u m of T o t a l A s s e t s ( F ) = $ 1 2 6 . 2 b i l l i o n
(S)=$ 78.6 billion
S u m of T o t a l A s s e t s ( F ) = $ 1 2 6 . 1 b i l l i o n
(S)=$
8 1 . 6 billion
Consumer Loans
(F)
(S)
591
389
99.8
100.0
2.6
2.9
Consumer Loans
(F)
(S)
574
396
99.8
99.7
2.7
3.0
Commercial Loans
(F)
(S)
135
101
22.8
26.0
0.1
0.2
Commercial Loans
(F)
(S)
177
121
30.8
30.5
0.2
0.3
NINOW Accounts
(F)
(S)
47
84
7.9
21.6
0.0**
0.1
NINOW Accounts
(F)
(S)
175
149
30.4
37.5
0.1
0.4
Total Assets < $ 1 0 0 million
Total N u m b e r of S & L s ( F ) = 1 0 3 4
(S)=1302
Total Assets < $ 1 0 0 million
S u m of T o t a l A s s e t s ( F ) = $ 4 7 . 1 b i l l i o n
( S ) = $ 4 5 . 7 billion
Total N u m b e r of S & L s ( F ) = 8 5 0
(S)=1081
S u m of T o t a l A s s e t s ( F ) = $ 4 0 . 1 b i l l i o n
(S)=$40.7 billion
Consumer Loans
(F)
(S)
1006
1268
97.3
97.4
2.7
3.2
Consumer Loans
(F)
(S)
839
1066
98.7
98.6
2.9
3.4
Commercial Loans
(F)
(S)
96
185
9.3
14.2
0.1
0.1
Commercial Loans
(F)
(S)
111
194
13.1
17.9
0.1
0.3
NINOW Accounts
<F)
(S)
43
190
4.2
14,6
0.0**
0.2
NINOW Accounts
(F)
(S)
126
287
14,8
26.5
0.0'
0.2
(F) -
Federal-chartered
(S) - S t a t e - c h a r t e r e d
*The October
1982
Garn-St Germain Act allowed d e m a n d deposit acceptance from customers w h o
had established a loan relationship with
institution. T h u s , s o m e d e m a n d d e p o s i t s m a y a p p e a r in t h e N I N O W c a t e g o r y . G e n e r a l p a r i t y p r o v i s i o n s of s t a t e l a w s
* * T o o s m a l l t o r e g i s t e r a s 0.1
percent.
Source: Federal Reserve Board Database.
apply.
the
/
Table 5. Savings and Loan Associations - United States
Consumer Loans, Commercial Loans, and NI NOW* Accounts
June 30, 1983
Consumer Loans
Commercial Loans
NINOW Accounts
Number
Offering*
Percent of
Associations
Dollar Value of
Accounts as a Percent
of Associations' Assets
3166
742
847
99.1
23.2
26.5
3.3
.02
0.2
* M a y i n c l u d e s o m e d e m a n d d e p o s i t s r e s u l t i n g f r o m e n a c t m e n t of a 1 9 8 1 T e x a s law, a 1 9 7 5 M a i n e
law, a n d t h e 1 9 8 2 G a m - S t G e r m a i n A c t
* * T o t a l n u m b e r of a s s o c i a t i o n s = 3 , 1 9 4
Source: Federal Reserve Board Database.
loan department. Accordingly, b e t w e e n twofifths and two-thirds of the large and mid-size
Florida-chartered S&Ls had booked some commercial loans by June 1983; small Floridachartered associations exhibited less interest
in commercial lending. N I N O W account bookings, though, were considerable for all size
categories of state and federal S&Ls.
United States. Nationwide, on June 30, 1980
consumer loans as a percent of assets for stateand federal-chartered associations were close
to the proportions cited for Texas, Maine, and
Florida (see Table 4). O n that date the nation's
large and mid-size state-chartered S&Ls retained
1.2 percent of assets in consumer loans, and
small state-chartered associations held 1.7
percent the differently sized federally chartered
S&Ls had d e v o t e d similar proportions of assets
to consumer loans. W i t h i n the next 12 months,
consumer loans as a portion of assets rose for
both state and federal associations nationwide,
but this expansion was modest compared with
those for Texas and Maine. As in these states,
though, consumer loans as a portion of the
various S&Ls' assets remained about t h e same
over the next t w o years. This flat 1981-83
growth for the U n i t e d States was attributable
to the national recession that prevailed during
most of that period.
It is important to note that, for t h e differently
sized federally chartered S&Ls n a t i o n w i d e ,
commercial loans as a portion of assets remained
the same or rose very slightly from June 1982 to
28
June 1983. Under Carn-St Germain, non-real
estate commercial lending powers were available to federal associations during most of this
time, and so it would seem that federal-chartered
S&Ls hesitated to enter the commercial lending
arena Also, state-chartered associations' commercial loan growth was scant from 1980 to
1983. By June 1983, however, commercial
loans had been b o o k e d at 30 to 50 percent of
t h e nation's large and mid-size associations.
The nation's small S&Ls, like small associations
in Texas, Maine, and Florida were comparatively
less interested in placing commercial loans on
their books. Commercial loan-related N I N O W
account bookings nationwide for associations
of different sizes and charters were about the
same as their respective bookings of commercial
loans.
W i t h o u t regard to size category or charter,
Table 5 displays for June 30, 1983 the number
of associations booking consumer loans, commercial loans, and N I N O W accounts as a percent of total U.S. associations and total assets.
T h e t a b l e d e p i c t s c o n c i s e l y t h e e x t e n t to
w h i c h the nation's savings and loan industry
has expanded consumer and commercial loan
portfolios, as well as holdings of N I N O W accounts. Clearly, S&Ls have not diversified greatly
into consumer lending, and particularly not
into commercial lending. Accordingly, N I N O W
account bookings were limited. Specifically, of
t h e 3,194 state and federal associations in
existence on June 30, 1983, fully 99.1 percent
DECEMBER 1984, E C O N O M I C
REVIEW
had some consumer loans on their books;
however, these short-term, higher yielding loans
accounted for only 3.3 percent of their total
assets. Also as of that date, commercial loans
had been b o o k e d by 23.2 percent of all associations nationwide, but accounted for a p u n y
0.2 percent of their total assets. Commercial
loan-related NI N O W accounts had been booked
by 26.5 percent of all institutions and equaled
0.2 percent of total assets, proportions not dissimilar t o t h e figures recorded for commercial
loans.
W h a t d o these results tell us? O n a national
basis, w e found that consumer loans comprised
b e t w e e n 0.8 and 1.8 percent of assets for the
three size categories of associations on June
30, 1980, only a few months after passage of
DIDMCA. A year later notable rises in consumer
loans—to b e t w e e n 2.5 and 3.1 percent of
assets—occurred, principally because of the
factors m e n t i o n e d earlier. The first was an
apparent increased sense of c o m p e t i t i o n between state- and federal-chartered associations
engendered by DIDMCA's expanded consumer
l o a n p o w e r s f o r f e d e r a l S&Ls. S&Ls' s e v e r e
profit squeeze, the second factor, likely prompted
gains in consumer loans by elevating management awareness of the industry's excessive
interest-rate risk exposure and its d i m profit
outlook. And third, consumer loan advances
provided t h e path of least resistance toward
diversification.
Over the next t w o years, however, consumer
loans nationwide remained at essentially t h e
same level. This leveling off was ascribed to
recessionary conditions that dampened employment, personal income, and consumer confidence. Furthermore, S&Ls wanting to gain a
f o o t h o l d in t h e potentially profitable automobile loan business were hampered by a
spate of below-market rate loans offered by
U.S. automakers whose sales were flagging
during the July 1981-November 1982 recession.
Summary. The absence of substantial consumer loan diversification for Texas- and Mainechartered associations by 1980 is pertinent.
State legislators had e x p a n d e d consumer loan
powers for Texas' state-chartered thrifts in
August 1972 and for Maine's in October 1975.
Nonetheless, by June 1980 the consumer loan
portfolios of state-chartered S&Ls in both states
were basically t h e same relative size as those
for their federally chartered counterparts and
FEDERAL RESERVE B A N K O F A T L A N T A
for associations generally in Florida and the
U n i t e d States. However, 12 months later, and
15 months following passage of D I D M C A ,
consumer loans as a p r o p o r t i o n of assets at
associations in Texas j u m p e d from 0.8 to 2.5
percent in June 1980 to 3.4 to 7.8 percent, and
for S&Ls in M a i n e they rose t o 4.2 to 5.5
percent of assets from 1.3 to 2.8 percent. Since
these were the first notable gains in consumer
loan portfolios for Texas- and Maine-chartered
associations despite many years of statutory
availability and an expansionary economic climate throughout virtually all of the latter 1970s,
w e can presume that the experience for Texas
and M a i n e mirrored the nation's. That is, they
were motivated by t h e same three factors that
brought about t h e 1980-1981 rises in loans to
consumers: enhanced rivalry, keener awareness
of the industry's vulnerability, and the facility
of expanding certain types of consumer loans.
In Florida, S&L consumer loan portfolios in
June 1980 accounted for approximately the
same portion of assets as in Texas, Maine, and
the U n i t e d States. During the next year, consumer loans in Florida, unlike those in the other
three geographical areas, grew only moderately
even though broadened consumer loan powers
were then fully available to Florida's state and
federal associations. W h i l e S&L managers in
Florida also were influenced by the three factors
that seemed to spur consumer loan growth
elsewhere, t h e relative profitability and safety
of extending mortgages in that state's real
estate market during 1980-81 may have tempered interest in stepping up consumer lending.
Over the ensuing t w o years, consumer loans
at Florida S&Ls rose gradually, but their levels
still were b e l o w those for Texas and Maine. If
w e assume that Florida's S&Ls sought to diversify
through consumer lending, their loan growth
from 1981 to 1983, as o p p o s e d to t h e generally
flat growth for Texas, Maine, and the nation, resulted
largely f r o m t h e interaction of several, sometimes opposing, factors. Advances in consumer
loans can be ascribed to Florida's ability to
weather recessions better than most other
states. The comparatively lower 1983 percentof-assets levels for Florida S&Ls owes both to
t h e c o n t i n u e d profitability of the Florida real
estate market despite the national recession,
and to the dramatically higher liquidity positions
sought by Florida-chartered associations. Finally,
S&Ls in Florida that wished to participate actively
in the a u t o m o b i l e loan field were constrained
29
by t h e subsidized auto loan rates t e n d e r e d by
U.S. manufacturers during the 1981-82 recession,
as w e r e Texas a n d M a i n e associations.
The proposition that larger S&Ls are m o r e
likely t o diversify into c o n s u m e r l e n d i n g and,
particularly, c o m m e r c i a l lending because t h e y
can absorb m o r e easily t h e high costs of startup, marketing, a n d t h e loan losses associated
w i t h increased credit-rate risk seems a plausible
one. Provided profitability is adequate, larger
associations can subsidize the expenses related
t o training their e m p l o y e e s in specialized lending, hiring p e o p l e w h o already c o m m a n d t h e
skills needed, purchasing equipment, modifying
applications software, and boosting marketing
efforts t o tap or e x p a n d their current customer
base.
C o n s u m e r loan percent-of-assets figures for
differently sized a n d chartered associations in
Texas, Maine, Florida, and t h e U n i t e d States
revealed that small associations maintained
consumer loans that w e r e p r o p o r t i o n a t e l y t h e
same as those of larger associations. Perhaps
most of t h e consumer loans being o f f e r e d
t h e n can be c o n s i d e r e d " b a s i c " p r o d u c t s ,
consisting chiefly of loans o n savings accounts,
h o m e i m p r o v e m e n t loans, a n d educational
loans, all of w h i c h S&Ls had been t e n d e r i n g
prior t o 1980. Hence, start-up costs may have
been irrelevant in the expansion process through
1983. 1 8 W h e n S&Ls as a group diversify into
a u t o m o b i l e loans, personal loans, and credit
card operations, t h e increased training, hiring,
e q u i p m e n t , software, and marketing expenses,
along w i t h loan losses, may b e c o m e decisive. At
that p o i n t consumer loan expansion by larger
associations might b e c o m e measurably greater
than expansion by smaller S&Ls.
The only p e r c e p t i b l e pattern s u p p o r t i n g t h e
supposition that larger S&Ls are better able t o
diversify into c o m m e r c i a l l e n d i n g than small
associations emerges from t h e June 1983 data
for Florida Larger Florida-chartered associations
held 1.4 and 2.8 percent of assets a n d small
associations m a i n t a i n e d a m o d e s t 0.4 p e r c e n t
Comparable data for Florida's federal-chartered
S&Ls a n d differently chartered S&Ls in Texas,
Maine, and t h e U n i t e d States f o r m e d no such
pattern. Less conclusive commercial loan booking data for Texas, Maine, Florida, and t h e
U n i t e d States indicate less interest in b o o k i n g
such loans by small-size associations. Consequently, t h e overall e v i d e n c e that larger
S&Ls diversify m o r e aggressively in c o m m e r c i a l
30
lending is insufficient Indeed, commercial loan
powers w e r e used sparsely by various associations in all three states s t u d i e d a n d in t h e
nation.
M o r e significantly, our study indicated that
Texas- and Maine-chartered associations, which
by June 1983 had possessed broadened powers
for 11 and 8 years, respectively, essentially d i d
not use their commercial loan powers. Although
S&Ls eventually are likely t o increase c o m m e r cial loan holdings t o reduce interest-rate risk
exposure a n d enhance earnings, t h e industry's
unfamiliarity w i t h the complexities of commercial lending rule o u t such loans as basic prod u c t s . ( O n t h e other hand, it seems logical that
w i t h their traditional consumer or individual
orientation and their previous experience w i t h
e x t e n d i n g certain types of consumer loans,
S&Ls w o u l d regard consumer loans as a basic
industry product and a t t e m p t t o make advances
in t h e m . ) T h u s S&Ls as a group p r o b a b l y w i l l
diversify very slowly into the intensely competitive field of c o m m e r c i a l l e n d i n g because of t h e
extraordinary costs involved. But it seems likely
that larger, m o r e profitable S&Ls will emerge as
t h e industry's c o m m e r c i a l loan pioneers, for
these institutions seem better able to absorb
the substantial expenses associated w i t h establishing a profitable commercial loan department
High c o m m e r c i a l l e n d i n g start-up costs are
related primarily t o staffing needs. To acquire
t h e requisite level of expertise, d e p a r t m e n t s
either must hire e m p l o y e e s w i t h extensive
c o m m e r c i a l loan e x p e r i e n c e — o f t e n at salaries
that have b e e n b i d up m a r k e d l y — o r c o n d u c t
intricate training programs. The personnel of a
successful c o m m e r c i a l loan d e p a r t m e n t must
be well-versed in loan documentation (verifying
the b o r r o w e r s legal status and perfecting security interests in collateral), loan administration,
disbursement of advances, and financial statem e n t analysis. C o m m e r c i a l loan officers also
must have a solid understanding of t h e businesses t o w h i c h t h e y lend, particularly in accounts receivable a n d cash flow.
A n d finally, aside f r o m lack of experience
a n d p r o h i b i t i v e start-up costs, c o m p e t i t i o n will
be a p r o m i n e n t factor l i m i t i n g associations'
commercial loan expansions. W i n n i n g profitable
a n d d e m a n d i n g (in terms of ancillary services
offered) commercial loan customers away from
sophisticated commercial bankers should prove
e x t r e m e l y difficult for S&Ls i n e x p e r i e n c e d in
and narrowly associated w i t h commercial lendDECEMBER 1984, E C O N O M I C R E V I E W
Table 6. Allocation of Total Loan Extensions United States
Mortgage Loans*
Consumer Loans*
Commercial Loans*
1981
1982
1.01(F)
.91 (S)
-01(F)
,07(S)
.00(F)
.02 (S)
.96(F)
.97(S)
.04(F)
.04(S)
.00(F)
.00(S)
June 1983/Dec. 1982
.93(F)
.94(S)
.07(F)
.05(S)
.00(F)
.01 (S)
F - Federal charter
S - State charter
"Ratios are calculated by dividing mortgage loan, c o n s u m e r loan, a n d commercial loan extensions each as a percent ot total loan
extensions for a particular period.
I Ratios for 1981 a n d 1982 w e r e obtained by computing D e c e m b e r 31 over-the-preceding-December 31 balance sheet d a t a
The sum of mortgage loan, c o n s u m e r loan, a n d commercial loan ratios for a particular c o l u m n may not equal o n e because of rounding.
Source: Federal Reserve Board Database.
ing. Consequently, t h e p o o l of c o m m e r c i a l
loan accounts that S&Ls can tap is likely t o
consist of smaller businesses that either are
recently established or seek more personalized
service, w h i c h associations intent on securing a
f o o t h o l d in c o m m e r c i a l lending might provide.
Allocation Ratios for Mortgage,
Consumer, and Commercial Loans
The ratios displayed in Table 6 illustrate t h e
recent m o m e n t u m of g r o w t h in consumer a n d
c o m m e r c i a l loans for t h e nation's state- and
federal-chartered associations, as well as a
different view of the pace of expansion. Alternatively, t h e table indicates t h e degree t o w h i c h
S&Ls have c o n t i n u e d t o rely o n mortgage
holdings. The ratios are c o m p u t e d by d i v i d i n g
mortgage loan, consumer loan, and commercial
loan extensions each as a percent of total loan
extensions.
The data for 1981 indicate that federal-chartered
associations e m p h a s i z e d mortgage loans, w h i l e
state-chartered S&Ls relied relatively less on
mortgages and t h e y e x p a n d e d consumer loans
noticeably. In 1982, a distinct pattern for b o t h
federal a n d state associations began t o emerge,
w i t h mortgage loan extensions c o m p r i s i n g 9 6 - 9 7
percent of total extensions for t h e differently
chartered S&Ls, and consumer a n d c o m m e r c i a l
, FEDERAL RESERVE B A N K O F A T L A N T A
loans encompassing 4 percent a n d zero percent
of total extensions, respectively.
The June 1983 over D e c e m b e r 1982 ratios,
w h i c h measure t h e recent m o m e n t u m of consumer and c o m m e r c i a l loan expansion, cover a
six-month period of post-recession e c o n o m i c
growth that was more c o n d u c i v e to increased
S&L diversification than w e r e the p r e c e d i n g
years. Furthermore, by the first half of 1 9 8 3
federal-chartered associations as a group already
had a b o u t three years t o plan for a substantial
expansion in consumer loan holdings. Nonreal estate c o m m e r c i a l loan powers granted by
t h e O c t o b e r 1982 Carn-St Germain Act also
w e r e fully available t o federal associations.
The June 1 9 8 3 over D e c e m b e r 1982 ratios
show a clear pattern for t h e recent m o m e n t u m
of consumer a n d c o m m e r c i a l loan expansion,
particularly in relation to the 1982 ratios. Federala n d state-chartered S&Ls c o n t i n u e d t o rely
heavily on mortgage lending, posting mortgage
loan extension ratios of 93 a n d 94 percent,
respectively, d o w n f r o m t h e 96-97 percent
recorded for 1982. Respective consumer loan
extension ratios w e r e 7 and 5 percent for
federal- a n d state-chartered S&Ls, c o m p a r e d
w i t h 4 percent logged for 1982. C o m m e r c i a l
loan extension ratios w e r e zero for federal
S&Ls, w h i c h recently had b e e n e m p o w e r e d to
make non-real estate c o m m e r c i a l loans, a n d 1
percent for state associations.
31
Two-samp le t tests were calculated t o determ i n e w h e t h e r statistically significant divergent
loan extension behavior was manifest b e t w e e n
federal- a n d state-chartered associations. O f
interest here is t h e proposition that federal
associations, w h i c h comprise a b o u t half of t h e
nation's S&Ls, w o u l d take advantage of t h e
greatly expanded consumer loan powers granted
u n d e r D I D M C A in 1 9 8 0 and non-real estate
c o m m e r c i a l loan powers p r o v i d e d by t h e GarnSt Germain Act in 1982. The t w o - s a m p l e t tests
compare the loan extension behavior of federalchartered S&Ls w i t h that for s t a t e c h a r t e r e d
S&Ls, of w h i c h only those in Texas, Maine, a n d
Florida received broad and explicit consumer
and commercial loan powers under state laws.19
All of the t w o - s a m p l e t tests calculated w e r e
insignificant, indicating that t h e loan allocation
behavior of federally chartered S&Ls was essentially t h e same as that for state associations.
Therefore, t h e nation's federal S&Ls d i d n o t
avail themselves more heartily of the consumer
loan powers granted u n d e r D I D M C A than d i d
state-chartered thrifts. Insignificant two-sample t
tests for t h e June 1983 over D e c e m b e r 1982
c o m m e r c i a l loan allocation ratios indicated
that federally chartered S&Ls as a w h o l e d i d n o t
take advantage of t h e non-real estate c o m m e r cial loan powers given t o t h e m by t h e Garn-St
Germain A c t Moreover, insignificant two-sample
t tests for t h e mortgage loan ratios suggest that
mortgage lending, t h e industry's traditional
activity, was being e m p h a s i z e d a b o u t equally
by the differently chartered associations; mortgage loan extensions w e r e taking 93 to 94
cents of every dollar in loan extensions for t h e
nation's S&Ls d u r i n g 1983's first half.
The slow diversification into consumer and
c o m m e r c i a l loans t h r o u g h June 1983 indicates
that S&Ls c o n t i n u e d t o rely in great measure on
mortgage lending, for w h i c h t h e y already possessed vast experience. However, associations
as a group have chosen consumer lending as
t h e principal area for diversification, a n d have
not e x p a n d e d significantly into c o m m e r c i a l
lending. Finally, o n e must r e m e m b e r that t h e
mere granting of b r o a d e n e d powers certainly
will not of itself p r o m p t diversification. Before
such expansion occurs S&L m a n a g e m e n t must
a d o p t a more v e n t u r e s o m e attitude, acquire
profits t o absorb start-up costs, a n d d e v o t e
t i m e t o o b t a i n t h e specialized expertise a n d t o
f i n d qualified loan applicants.
32
Summary and Conclusions
Through June 1983, t h e overall pace of S&L
diversification in Texas, Maine, Florida, a n d the
United States has been moderate for consumer
loans and languid for c o m m e r c i a l loans. Texasand M a i n e - c h a r t e r e d associations, w h i c h had
possessed these expanded powers for a number
of years, manifested a similarly restrained pace
of expansion in consumer a n d c o m m e r c i a l
lending. O n l y m o d e r a t e l y higher consumer
loan gains w e r e posted for Texas- a n d Mainechartered S&Ls, w h i l e their c o m m e r c i a l loan
growth was basically as lackluster as other associations'.
A chief factor that i n d u c e d advances in
short-term, h i g h e r - y i e l d i n g c o n s u m e r loans
appears t o be t h e h e i g h t e n e d sense of c o m p e t i t i o n b e t w e e n state-and f e d e r a l - c h a r t e r e d
associations b r o u g h t a b o u t by t h e e x p a n d e d
powers granted in state and federal statutes.
After t h e 1 9 8 0 liberalization of consumer loan
powers for federal S&Ls through D I D M C A , a
rise in consumer loans as a p o r t i o n of assets
was easy t o discern for state a n d federal S&Ls in
Texas, Maine, and t h e nation in t h e 1980-81
period. The increase in Florida was less notable
at that time, possibly because of t h e c o n t i n u e d
relative profitability of mortgage l e n d i n g in that
state's real estate market. These advances also
may have reflected an e n h a n c e d awareness of
the industry's severe interest-rate risk exposure
and discouraging profit outlook, and t h e relative
ease of e x p a n d i n g certain types of consumer
loans that associations had been e m p o w e r e d
t o make for some time. From June 1981 t o June
1983, consumer loan g r o w t h generally leveled
off, largely because of s l u m p i n g e m p l o y m e n t ,
personal income, and consumer c o n f i d e n c e
resulting f r o m t h e July 1 9 8 1 - N o v e m b e r 1982
recession.
From June 1 9 8 0 t o June 1983, c o m m e r c i a l
loan holdings at state-chartered S&Ls w e r e
quite sparse in Texas, Maine, a n d t h e U n i t e d
States. H o w e v e r , large and mid-size Floridachartered S&Ls m a i n t a i n e d c o m m e r c i a l loan
portfolios that comprised, respectively, 1.4
and 2.8 percent of assets. Federal-chartered
S&L holdings w e r e unsurprisingly minuscule
because non-real estate commercial loan powers
had been granted only shortly before 1983 in
t h e Garn-St Germain A c t It is especially notew o r t h y that t h e d i f f e r e n t size categories of
associations chartered in Texas and Maine reDECEMBER 1984, E C O N O M I C
REVIEW
tained respective c o m m e r c i a l loan portfolios
ranging b e t w e e n 0.3 and 1.1 percent a n d 0.1
a n d 0.2 p e r c e n t of assets as of J u n e 1 9 8 3 .
These w e r e slight gains, indeed, considering
t h e a p p r o x i m a t e l y eleven years t h e y had b e e n
available for Texas-chartered S&Ls and eight
years for M a i n e - c h a r t e r e d associations.
O u r study considered t h e proposition that
larger S&Ls are m o r e likely t o diversify i n t o
consumer and c o m m e r c i a l loans because of
their comparative ability t o absorb high startup costs, increased marketing expenses, a n d
t h e loan losses related t o greater credit-rate
risk. But c o n s u m e r loan data revealed that
holdings of consumer loans were proportionately
t h e same for large a n d small S&Ls. This may be
attributable t o t h e fact that consumer loans are
a basic product of the industry; S&Ls, historically
consumer-oriented, have previous experience
in certain forms of consumer lending.
C o m m e r c i a l loan data that w e used t o w e i g h
t h e supposition of larger S&Ls' advantages
p r o v e d inconclusive. Evidence for Floridachartered S&Ls revealed that larger associations
retained as a p o r t i o n of assets comparatively
greater c o m m e r c i a l loan portfolios than small
S&Ls, b u t data for Texas- a n d M a i n e - c h a r t e r e d
associations d i d not. Classifying c o m m e r c i a l
loans as a nonbasic p r o d u c t of t h e S&L industry
seems plausible as t h e y entail extraordinary
expenses, p r i m a r i l y for hiring e x p e r i e n c e d
c o m m e r c i a l loan officers a n d technicians and
for training other employees. Thus far these
costs a p p a r e n t l y have p r e c l u d e d S&Ls as a
group f r o m entering t h e field of c o m m e r c i a l
lending, particularly during the profit-depressed
1980-83 period. Additionally, luring sophisticated c o m m e r c i a l loan customers away from
highly experienced commercial bankers promises t o be e x t r e m e l y difficult. In t h e near term,
therefore, S&L commercial loan customers likely
will be smaller business entities, those either
newly f o r m e d or seeking m o r e personalized,
lower cost service from S&Ls.
, FEDERAL RESERVE B A N K O F A T L A N T A
The recent m o m e n t u m of consumer a n d
c o m m e r c i a l loan expansion for the nation's
s t a t e a n d federal-chartered S&Ls indicates
that mortgage loans remain t h e mainstay of the
industry, garnering 93 t o 94 cents of every
dollar in loans e x t e n d e d d u r i n g t h e postrecession December 1982 t o June 1983 period.
C o n s u m e r loan extensions a c c o u n t e d for 5 t o 7
cents of every dollar lent d u r i n g that period, up
modestly f r o m 4 cents for 1982. C o m m e r c i a l
loan extensions were essentially zero. (Federalchartered associations as a group e x t e n d e d no
c o m m e r c i a l loans and s t a t e c h a r t e r e d S&Ls
allocated only o n e cent of every loan dollar t o
c o m m e r c i a l loans.) The capsule v i e w of S&L
consumer a n d c o m m e r c i a l loans as of June
1983 revealed that t h e nation's S&Ls as a group
held 3.3 percent of assets in consumer loans
and a paltry 0.2 percent in c o m m e r c i a l loans.
The findings of this study, like those of its
predecessor in t h e O c t o b e r Review, suggest
that savings and loan associations cannot yet
be considered full competitors w i t h commercial
banks, although some associations are competing
aggressively in certain geographic markets. The
results further i m p l y that consumers have not
yet b e n e f i t e d substantially—in terms of price,
quantity, or quality of services o f f e r e d — f r o m
t h e generally m o d e s t advance in c o m p e t i t i o n
b e t w e e n S&Ls and c o m m e r c i a l banks. Finally,
it is clear that S&Ls must reduce their vulnerability to t h e real estate cycle a n d lessen their
excessive interest-rate risk exposure. However,
t h e industry's future diversification likely will
be c o n c e n t r a t e d in t h e consumer lending area
because of S&Ls' familiarity w i t h such l e n d i n g
and their established customer base. The high
start-up costs of c o m m e r c i a l lending departments are quite likely t o c r i m p c o m m e r c i a l
loan g r o w t h for t h e nation's savings and loan
associations.
ISherley Wilson contributed
valuable research assistance to this article.)
33
NOTES
'January was the peak for the 1980 recession and July was the trough.
The nation's most recent recession included a July 1981 peak and a
November 1982 trough.
2
Robert E Goudreau, "S&L Use of New Powers: A Comparative Study of
State- and Federal-Chartered Associations," Economic Review (Federal
Reserve Bank of Atlanta), vol. 69 (October 1984), pp. 18-33.
••Mortgage loans include FHA-VA mortgages, conventional mortgages,
mortgage-backed securities, and mortgage participations. Consumer
loans include loans on savings accounts home improvement loans
education loans automobile loans and other closed-end consumer
loans, credit cards and other open-end consumer loans and mobile home
loans to consumers (retail mobile home loans). Commercial loans include
unsecured construction loans; mobile home loans to dealers t o finance
inventory(wholesale mobile home loans); loans to business development
corporations; loans for alteration, repair, or improvement of other than
one-to-four unit residential property, chattels loans other than those
reported as wholesale mobile home loans to commercial borrowers;
loans secured by securities: and other miscellaneous loans
4
For an explanation, refer to SAS (Statistical Analysis System) Institute,
Inc., SAS Users Guide or Ronald L Iman and W. J. Conover, Modern
Business Statistics (New York, 1983), pp. 276-302.
5
Refer to Texas Savings and Loan Act. Article 852a. Vernon's Texas Civil
Statutes: Maine Bureau of Banking, L a w s Regulations and Bulletin
Maine Revised Statutes Annotated, Title 9B. Financial Institutions Laws
1975. Chapter 500; and Florida Savings Association Act Chapter 665.
Savings. Savings and Loan, and Building and Loan Associations, FS.
1981.
For these states, subsequent and less major statutes that further
broadened powers for respective state-chartered thrifts also were
approved, and general parity provisions included in these state statutes
authorized the undertaking by Texas-. Maine-, or Florida-chartered thrifts
of any activity permitted for federal-chartered institutions
Refer to Depository Institutions Deregulation and Monetary Control
Act of 1980, Public Law 96-221. March 31, 1980 and Garn-St Germain
Depository Institutions Act of 1982, Public Law 97-320, October 15.
1982.
"Net income for FSLIC-insured associations dropped from $3.6 billion in
1979 to $0.8 billion for 1 9 8 0 Losses of $4.6 and $4.3 billion were
recorded for 1981 and 1982, respectively. 1983's net income was $ 2 0
billion.
'For a discussion of how mergers and acquisitions that result in fewer
financial institutions can lead to increased competition, see David D.
Whitehead and Jan Luytjes"Can Interstate Banking Increase Competitive
Market Performance? An Empirical Test" Economic Review (Federal
Reserve Bank of Atlanta), vol. 69 (January 1984), pp. 4-10. In this study,
evidence was presented to support the hypothesis that increased links
(meeting points) between competing firms that operate in geographically
dispersed markets actually may stimulate competition. Whitehead and
Luytjes stated that, in addition to the increased competition presumably
fostered by increased links between multi-market firms in various
markets the lack of scale economies found in the banking industry can
make even relatively small competitiors influential in given markets. See
George J. Benston, Gerald A Hanweck. and David B Humphrey. "Operating Costs in Commercial Banking," Economic Review {Federal Reserve
Bank of Atlanta), vol. 67 (November 1982). pp. 6-21 The authors found
that costs per account for banks larger than $50 million in deposits
increased as bank size increased, while costs declined with size for
banks with less than $25 million in deposits
8
ln the 1963 Philadelphia National Bank-Girard Trust Corn Exchange
Bank merger, the Supreme Court established commercial banking as an
industry offering a unique product, a line of commerce separate and
distinct from that produced by any other suppliers of financial services In
1974. the Supreme Court remanded the Marine Bancorporation (Washington State) and Connecticut National Bank cases back to District
Courts for further adjudication. The Court reaffirmed the single line of
commerce rule and rejected the expansion of the line of commerce
concept to include potential competition from savings and loan associations and mutual savings banks More recently, District Courts in
1980 considered the impact of thrifts in cases involving commercial bank
mergers. Merger of The First State Bank of Central Jersey and the First
National Bank of South Jersey was approved and included banking
alternatives namely thrifts in determining the resultant competitiveness
of post-merger markets. The same rationale applied t o the 1980 Utah
34
merger of the Zions First National Bank and The First National Bank of
Logan. See Douglas V Austin. "The Legal and Legislative History of the
Line of Commerce in Banking," Economic Review (Federal Reserve Bank
of Atlanta), vol. 67 (April 1982), pp. 12-19
The 1982 Garn-St Germain Act authorized emergency acquisitions of
thrifts by commercial banks See Garn-St Germain Depository Institutions
Act of 1982: Public Law 97-320; Title 1; Sections 116, 123, and 141;
October 15, 1982. Also see Constance Dunham, "Thrift Institutions and
Commercial Bank Mergers" New England Economic Review (Federal
Reserve Bank of Boston) (November/December 1982), pp. 45-62
' F r o m 1972 to 1983, about 90 associations received Texas charters
through either de novo formations or conversions On June 3 0 , 1 9 8 3 , 2 1 3
Texas- chartered S&Ls were extant. Prior to 1980. 9 Florida-chartered
S&Ls were in existence. By June 1983. 19 more state-chartered associations began operations in Florida either by de novo formations or
conversions
l0
The 20 percent and 30 percent of total assets limitations apply to the
aggregate of consumer loans commercial paper, and corporate debt
securities
" T h e maximum 10 percent allowance under prudent loan rules applies to a
combination of consumer and commercial loans In 1981. the maximum
percentage authorized for consumer loans made by Maine-chartered
thrifts was 20 percent of total deposits, provided consumer and commercial loans combined do not exceed 40 percent of total deposits
''Requirement reduced to 50 percent of a thrifts "nonliquid" assets as of
July 1. 1982.
'•>The Garn-St Germain Act authorized federal-chartered thrifts to grant
commercial real estate loans up to 4 0 percent of total assets. DIDMCA
initially allowed for the extension of commercial real estate loans up to 20
percent of a thrift's assets. To the extent that S&Ls hold commercial real
estate loans on their books as mortgages or mortgage participations
these loans will not be considered commercial loans as defined by this
study. Unsecured construction loans on commercial real estate are
classified as commercial loans
l4
The maximum 10 percent allowance under prudent loan rules applies t o a
combination of consumer and commercial loans
15
Requirement reduced to 50 percent of a thrift's "nonliquid" assets as of
July 1, 1982.
l6
The interest-rate spread (yield on assets less cost of funds) for FSLICinsured associations declined from 1979's 1.16 percentage points to
0.42 for 1980. Negative spreads of 0.76 and0.41 percentage points were
logged for 1981 and 1982, respectively. The spread was 1.18 percentage
points during the first six months of 1983.
" S e e Robert E Goudreau, "S&L Use of New Powers: A Comparative Study
of State- and Federal-Chartered Associations" Economic Review (Federal
Reserve Bank of Atlanta), vol. 69 (October 1984), pp. 25-27.
'"See George J. Benston, Gerald A. Hanweck, and David B. Humphrey,
"Operating Costs in Commercial Banking," Economic Review (Federal
Reserve Bank of Atlanta), voL 67 (November 1982), pp. 6-21. The authors
found that costs for producing outputs such as deposits or loans
processed (basic operations with which banks have great familiarity) at
banks larger than $ 5 0 million in deposits increased as bank size
increased, while costs declined with size for banks with less than $ 2 5
million in deposits However, commercial loans can be construed as
nonbasic S&L products for which substantial (absolute) expenditures
must be made to establish an effective commercial loan department and
the purported economies of scale for such nonbasic loans may favor
larger associations.
,9
Total assets for Texas-chartered associations on June 30, 1980 were
$24 6 billion and for Maine-chartered S&Ls $0.5 billion. Total assets for
the nation's state-chartered associations were $230.6 billion. The Texas
and Maine proportion was 10.9 percent. Total assets on June 3 0 , 1 9 8 3 for
Texas-chartered S&Ls were $38.1 billion, for Maine-chartered institutions
$0.4 billion, and for Florida- chartered associations $10.4 billion The
nation's total was $270.1 billion. The Texas, Maine, and Florida portion
was 18.1 percent
Provided federal-chartered S&Ls use their new powers, the likelihood
of registering significant t statistics is decreased by the increased use of
broadened consumer and commercial loan powers by Texas-, Maine-,
and Florida-chartered S&Ls Greater balance sheet diversification in
consumer loans was evident for only Texas-chartered associations from
June 1980 to June 1983. For commercial loans increased balance sheet
diversification was manifest for Texas- and Florida-chartered S&Ls. See
DECEMBER 1984, E C O N O M I C R E V I E W
Robert E. Goudreau, "S&L Use of New Powers: A Comparative Study of
State- and Federal-Chartered Associations," Economic Review (Federal
Reserve Bank of Atlanta), vol. 69 (October 1984), pp. 25-27
Texas-chartered associations accounted for an average 12.5 percent
of total assets for the nation s state-chartered associations from June
1980 to June 1983. This proportional representation may have had a
moderate influence on national consumer loan allocation data and the
resultant two-sample t test results.
Texas- and Florida-chartered S&Ls combined accounted for 18 percent
of total assets for the nation's state-chartered associations on June 30.
1983. Although this 18 percent figure is noteworthy, commercial loan
allocations were inconsequential for the December 1982 to June 1983
period. Hence, even if the two-sample t tests for this period were
significant, any related statements regarding commercial loan expansion
would provide scant additional insight into important divergent behavional
patterns between state- and federat-chartered S&Ls.
REFERENCES
Baker, Robert. "Florida S&Ls' Use of Expanded Powers,' Economic Review
(Federal Reserve Bank of Atlanta), vol. 67 (July 1982), pp. 7-15
Crockett John and Thomas A King. "The Contribution of New Asset Powers
to S&L Earnings: A Comparison of Federal- and State-Chartered Associations in Texas," Research Working Paper No. 110 (July 1 982), The
Office of Policy and Economic Research, Federal Home Loan Bank
Board.
Dunham, Constance. "Mutual Savings Banks: Are They Now or Will They
Ever Be Commercial Banks?" New England Economic
ftewew(Federal
Reserve Bank of Boston) (May/June 1982), pp. 51-72.
, FEDERAL RESERVE B A N K O F ATLANTA
Dunham, Constance R. and Margaret Guerin-Calvert How Quickly Can
Thrifts Move into Commercial Lending 9 New England
Economic
Review (Federal Reserve Bank of Boston) (November/December
1983), pp. 42-54.
Eisenbeis, Robert A "New Investment Powers for S&Ls: Diversification or
Specialization?" Economic Re view (Federal Reserve Bank of Atlanta),
vol. 68 (July 1983), pp. 53-62.
McCall, Alan A and Manferd O. Peterson. "Changing Regulation in Retail
Banking Services: The Evidence from Maine,' Journal ot Retail Banking.
vol. 2 (September 1980), pp. 46-55.
35
Market-Driven Deregulation
of Financial Services
John Heimann
T h e m a r k e t p l a c e is t h e a c t u a l d e r e g u l a t o r of t o d a y ' s f i n a n c i a l s e r v i c e s industry,
f o r m e r C o m p t r o l l e r J o h n H e i m a n n said in a r e c e n t s p e e c h t o A t l a n t a F e d d i r e c t o r s
C o n g r e s s h e said, m u s t a d d r e s s t h e n e w reality by c r e a t i n g l e g i s l a t i o n to r e s o l v e
s u c h p r e s s i n g i s s u e s as t h e p r o p e r role of d e p o s i t i n s u r a n c e .
I
•
Financial intermediation and the role of financial
intermediaries is an arcane s u b j e c t The U.S.
financial intermediary system makes little sense
to today's objective observer who, if given t h e
power, probably w o u l d structure a quite different
system. In order t o understand, if not rationalize,
what has evolved, w e must look to t h e past
First, however, w e should consider an assortm e n t of current facts about the system. M i d l a n d
Bank of Britain owns 57 percent of Crocker Bank
in California, and has made an offer to increase
its ownership to 100 p e r c e n t M i d l a n d also owns
60 percent of one of t h e great London merchant
banking firms, Samuel M o n t a g u e and Company;
t h e other 40 percent is o w n e d by t h e Aetna Life
Insurance C o m p a n y of Hartford, C o n n e c t i c u t
Heimann, a former comptroller
of the currency, is now vice
chairman of Merrill Lynch Capital Markets in New York.
36
American Express owns Fireman's Fund, as well
as American Express International Banking Company, w h i c h purchased Trade Bank & Trust of
Geneva.
In addition, American Express owns Shearson,
w h i c h bought the great American investment
banking house, Lehman Brothers, and it owns
Investors Diversified Services. Citicorp, the largest
commercial bank in the U n i t e d States and the
fourth largest thrift institution, is buying one of
t h e largest brokers in t h e U n i t e d Kingdom, Vicars
de Costa, w h i c h in turn is buying another U.K.
brokerage firm. Prudential, t h e life insurance
company, n o w owns Bache Halsey Stuart. The
Mercantile House, a British c o m p a n y engaged in
a variety of financial services, owns Oppenheimer
and Company, a N e w York investment brokerage
firm. Societe General, one of t h e t o p three
French banks, just purchased a prominent finance
DECEMBER 1984, E C O N O M I C
REVIEW
c o m p a n y in Thailand, a n d a California furniture
store recently secured a charter for a national
bank. W h a t is h a p p e n i n g in this t u m u l t u o u s
w o r l d of financial services?
M o d e r n financial legislation in t h e U n i t e d
States dates back t o t h e early 1930s, f o l l o w i n g
u p o n a p e r i o d of financial trauma. Congress
d e c i d e d t o d i v i d e up t h e turf of t h e financial
services industry in its a t t e m p t t o assure that t h e
1920s' crisis w o u l d n o t recur. It i m p l e m e n t e d
price restrictions t o p r o t e c t bankers f r o m t h e m selves by l i m i t i n g t h e a m o u n t of interest paid o n
deposits. Congress also strengthened geographic
restrictions; i n t r o d u c e d limits on t h e products
and services that commercial banks could provide;
and formalized t h e structure of t h e thrift industry.
In effect, Congress carved up t h e financial w o r l d .
Fortunately, t h e capitalistic spirit—truly alive
and well in t h e U n i t e d S t a t e s — p r o m p t e d entrepreneurs t o f i n d ways t o take advantage of these
increasingly o u t d a t e d restrictions, w h i c h w e r e
put o n t h e books before t h e a d v e n t of data
processing, satellite c o m m u n i c a t i o n , a n d n e w
investment instruments. A w h o l e entrepreneurial
force entered the financial services field t o undertake w h a t Congress had f o r b i d d e n t o t h e traditional purveyors of these services.
An obvious e x a m p l e of such an effort is t h e
m o n e y market m u t u a l fund, t h e marketplace's
response t o t h e restrictions of Federal Reserve
Regulation Q, w h i c h severely l i m i t e d t h e level of
interest t h a t thrifts and c o m m e r c i a l banks c o u l d
pay o n savings deposits. W h e n interest rates
soared in the 1970s, t h e increasingly sophisticated
American saver realized that inflation was running
at 8 or 9 percent a n d Treasury bill rates ranged
f r o m 10 t o 11 percent, w h i l e banks or thrifts
c o u l d pay o n l y 5 t o 5 3 / 4 p e r c e n t Consumers
clearly u n d e r s t o o d that t h e y w e r e not getting a
fair deal. A n e n t r e p r e n e u r t h e n created t h e
m o n e y market fund, a n d such funds grew at a
staggering pace d u r i n g t h e late 1970s a n d t h e
early 1980s. Savings deposits f l o w e d o u t of t h e
c o m m e r c i a l banks a n d thrifts into t h e m o n e y
market funds as w e l l as i n t o Merrill Lynch's Cash
M a n a g e m e n t A c c o u n t and similar instruments.
The free market successfully r e s p o n d e d t o a
consumer need.
As for geographic restrictions and the supposed
lack of n a t i o n w i d e banking, Congress p e r m i t t e d
c o m m e r c i a l banks a n d bank h o l d i n g c o m p a n i e s
t o create Edge Act corporations a n d loan prod u c t i o n offices, t o purchase mortgage bankers,
F E D E R A L RESERVE B A N K O F A T L A N T A
a n d so on. A n d in p r o d u c t s a n d services, o n e of
t h e great examples of t h e entrepreneurial system
o v e r c o m i n g t h e legislative f r a g m e n t a t i o n of t h e
past was t h e creation of c o m m e r c i a l paper t o act
as a substitute for bank lending. W h i l e t h e
market a n d t h e e n t r e p r e n e u r i a l spirit w e r e alert
a n d energetic, Congress was fast asleep.
N o such t h i n g as g o v e r n m e n t deregulation of
t h e financial services industry exists today. Rather,
it is t h e market t h a t has deregulated t h e industry
a n d continues t o d o so. The issue is w h e t h e r
Congress can catch up w i t h t h e marketplace and
perhaps p u t into this deregulatory process some
sensible p r o t e c t i o n s a n d delineations. W e are
n o w a t t e m p t i n g t o c o n f o r m U.S. laws t o t h e
existing realities of the worldwide financial system.
The boundaries have been challenged, and those
being served are d e m a n d i n g n e w services a n d
n e w products at a c o m p e t i t i v e price. The powerful e c o n o m i c forces w o r k i n g in this c o u n t r y also
are exerting pressure for change in Japan, Australia
and Canada.
Hastening this long-term t r e n d are t h r e e o t h e r
forces basic t o today's financial world. The first
a n d perhaps most i m p o r t a n t force is t h e instit u t i o n a l i z a t i o n of savings, t h e c o n c e n t r a t i o n of
i n v e s t m e n t capital in relatively f e w managerial
hands. This change has implications for all financial
intermediaries, all financial instruments, a n d all
financial markets, including depository institutions
along w i t h contractual savings institutions (life
insurance c o m p a n i e s and pension a n d profitsharing firms) a n d t h e securities intermediaries.
Possibly t h e least u n d e r s t o o d of all is t h e effect of
this c o n c e n t r a t i o n u p o n t h e issuers of securities,
that is, those w h o raise capital, a n d t h e changes it
has brought a b o u t in t h e marketplace.
Today t h e institutional manager looks for a
" c o u n t e r p a r t y " rather than for an intermediary. A
f e w years ago, if an insurance company, retirem e n t system, or central bank w i s h e d t o buy or
sell a large a m o u n t of securities, it w o u l d go
t h r o u g h an intermediary, or broker, w h o w o u l d
act as agent in t h e purchase or sale. W h a t t h e
investor n o w wants is n o t an agent b u t a firm
c o m m i t m e n t for t h e order. This institutionally
driven r e q u i r e m e n t places substantial capital
needs on the traditional brokers and intermediaries,
w h o have r e s p o n d e d t o customer d e m a n d s by
b e c o m i n g principals instead of brokers. The
change in roles is i m p o r t a n t and far-reaching.
A t t h e same time, issuers of securities require
t h e i n t e r m e d i a r y t o b i d o n securities w i t h o u t t h e
37
traditional benefit of syndicate formation, market
testing, a n d t h e like. W i t h Securities Exchange
Commission Rule 415, t h e securities issuer can
o p t for a shelf registration. The intermediary bids
and must have the capital and capacity to support
t h e purchase of those securities. To serve b o t h
t h e investor a n d t h e issuer, intermediaries n e e d
considerable capital—hence, the merger of Lehman
into Shearson and of Becker into Merrill Lynch,
as well as Donaldson's acquisition by Equitable.
The second force affecting deregulation in t h e
marketplace is technology. The satellite, for instance, is q u i t e extraordinary in c o m m u n i c a t i n g a
bit of i n f o r m a t i o n a n y w h e r e in t h e w o r l d in less
than 60 seconds. Everybody knows everything
simultaneously, and that instant access t o inform a t i o n has an effect on market volatility.
Traders in f r o n t of t h e flickering D o w Jones
and Reuters screens are not so m u c h a t t e m p t i n g
to evaluate t h e i n f o r m a t i o n c o m i n g across as t o
evaluate h o w other traders will react t o that
information. W h e t h e r t h e traders are in H o n g
Kong or Zurich or Atlanta, their m e n t a l i t y is m u c h
the same. The a p p r o a c h is not t o a s k " W h a t does
it really mean if retail sales rise 2.1 percent?" b u t
" W h a t will other traders t h i n k a b o u t it?" M a r k e t
volatility has increased substantially because of
t h e free, c o m p l e t e , a n d instantaneous dissemination of information.
The growing internationalization of the world's
financial markets is another factor to consider.
America is no longer d o m i n a n t : if y o u t o o k t h e
t o p 5 0 0 banks in t h e world, 27.3 percent of their
assets are held by Japanese banks a n d o n l y 16.8
percent by American banks. Those n u m b e r s are
a little misleading because t h e y refer exclusively
t o t h e largest banks. If y o u take total b a n k i n g
assets in t h e U n i t e d States w i t h its 14,500 banks,
you f i n d that this c o u n t r y emerges as just barely
t h e largest, h o l d i n g 25.6 percent of t h e assets
compared w i t h the Japanese banks' 25.3 percent
Internationalization of t h e d e b t markets is
critical, for it means that markets n o w o p e r a t e 20
hours a day. The major banks a n d intermediaries
o p e n in L o n d o n in t h e morning; their books
m o v e t o t h e U n i t e d States d u r i n g t h e day; a n d at
night, t h e y m o v e t o H o n g Kong or t o Tokyo. For
example, t h e run o n C o n t i n e n t a l Illinois was
started in H o n g Kong a n d t h e n m o v e d t o London
w i t h t h e clock. The same was true for t h e rumors
a b o u t Manufacturers Hanover that p r o v e d t o be
false Markets have changed; therefore, the world's
financial structure has changed.
Clearly, t h e A m e r i c a n experience has been
messy, in t h e sense that it has been unplanned.
The politics of b a n k i n g a n d of t h e financial
intermediary services are n o t normal American
politics, b u t politics of self-interest on t h e part of
t h e large banks versus t h e smaller banks, t h e
thrifts versus t h e c o m m e r c i a l bankers, a n d t h e
i n v e s t m e n t bankers versus a n y b o d y a t t e m p t i n g
t o broach t h e Class-Steagall Act.
The U.S. deregulatory process for t h e last five
years can best be described a s " c r a w l i n g t h r o u g h
t h e l o o p h o l e " or " s c o r i n g from t h e off-side."
Congress has b e e n an i m p e d i m e n t t o change,
u n w i l l i n g to face t h e task of defining role and
r e s p o n s i b i l i t y . E n t r e p r e n e u r s h a v e t a k e n advantage of t h e cracks in t h e legislative infrastructure. All t h e e l e m e n t s of confusion are
p r e s e n t In fact, w e have even i n v e n t e d a new
language w i t h s o m e t h i n g called a " n o n b a n k
bank." Those w h o are a m u s e d by t h e t e r m ask
h o w there can be a " n o n b a n k bank." But isn't an
Edge Act c o r p o r a t i o n or a loan p r o d u c t i o n office
a n o n b r a n c h branch?
Rather than facing t h e c o m p l i c a t e d issues of
financial structure and f i n d i n g solutions, w h i c h
by d e f i n i t i o n w i l l upset some of t h e interests
involved, the congressional instinct has been to
p e r m i t t h e market t o arrive at answers that
inevitably created inequities. This a p p r o a c h has
"Congress has been an impediment to change, unwilling
to face the task of defining role and responsibility.
Entrepreneurs have taken advantage of the cracks in
the legislative infrastructure."
38
DECEMBER 1984, E C O N O M I C
REVIEW
m a d e a hash of y e s t e r d a / s standards, such as the
p r o h i b i t i o n of n a t i o n w i d e b a n k i n g in t h e U n i t e d
States.
I have just m e t a gentleman f r o m o n e of t h e
large m o n e y center banks t h a t has a facility in
Atlanta, at w h i c h 3 0 0 t o 4 0 0 p e o p l e work. W h a t
are those p e o p l e actually d o i n g if not s o m e t h i n g
related t o banking? Bank of America maintains
a p p r o x i m a t e l y 367 n o n b a n k offices in 37-plus
states, a n d t h e y recently m o v e d 1,500 p e o p l e to
the site of N e w York's o l d Biltmore Hotel. I
daresay those p e o p l e are d o i n g w o r k related to
banking. Manufacturers Hanover's n e w advertisements for CIT s h o w t h e m a p of t h e U n i t e d
States w i t h t h e bank's name underneath. In
these ads Manufacturers Hanover claims, " w e
service t h e w h o l e c o u n t r y " — a n d t h e y do.
In t h e area of products a n d services, t h e
b r e a k d o w n of traditional barriers is s o m e w h a t
more complicated. In any major airport or hotel
you can get cash f r o m an American Express
machine, a service your bank or thrift cannot
provide. American Express can offer cash services
across this c o u n t r y and around t h e world, w h i l e a
U.S. d e p o s i t o r y institution cannot.
This situation leaves us with countless questions.
W h e r e d o w e go f r o m here? W i l l there be any
difference whatsoever among the future's financial
institutions? W i l l a high degree of financial concentration prevail? W h a t will o u r s y s t e m look like
in t h e future, and what will be its logical rationalization? W h o w i l l regulate it a n d why?
It is clear t o m e that t h e c o m m e r c i a l bank's
future holds more market segmentation—knowing
w h o it is, w h o it wants t o serve, a n d w h a t it does
well. The commercial bank's future does not lie in
merely securing m o r e business, b u t in paying
greater a t t e n t i o n t o m a n a g e m e n t i n f o r m a t i o n
systems and in i m p r o v i n g credit and quality
controls.
Every bank w o r t h its salt has hired scores of
MBAs over t h e years, ail of w h o m have b e e n
trained t o go o u t a n d get business. But is it t h e
right business at t h e right profit margins? The
mark of a successful c o m m e r c i a l bank over t h e
next five years will be t h e quality of its increasing
profitability.
Finally, I think you will see further concentration
in c o m m e r c i a l banking, b u t n o t in t h e w a y that
many p e o p l e predict. An extraordinarily important role will remain for t h e c o m m u n i t y bank,
for n o t h i n g can substitute for t h e bank run by
s o m e b o d y w h o knows t h e c o m m u n i t y ' s people.
In the U n i t e d States, w e p r o b a b l y will e n d up
w i t h a system of franchise banking in w h i c h t h e
large m o n e y center banks and regional banks
provide services to, a n d perhaps even have
o w n e r s h i p in, t h e c o m m u n i t y banks. These w i l l
still be run by t h e local Mr. a n d Mrs. Jones, b u t
t h e y w i l l secure their support services f r o m t h e
larger institutions that can afford t o provide
customers w i t h credit cards, cash m a n a g e m e n t
accounts, and m o n e y market funds. That w a y a
small c o m m u n i t y bank can c o m p e t e — n o t only
w i t h t h e regional bank and Citibank, b u t w i t h
Merrill Lynch or Dean Witter or Shearson-Lehman.
So this kind of franchise banking will develop, as
w i l l thousands of smaller institutions w h o s e linkages p e r m i t t h e m to c o m p e t e effectively w i t h o u t
l o s i n g t h e d e f i n i t i o n and strength that distinguish
t h e local bank.
Currently, thrifts are in t h e best position
because they have b e e n granted so many n e w
a n d c o m p e t i t i v e powers. Their biggest p r o b l e m ,
however, is to o v e r c o m e their shortage of aggressive and t h o u g h t f u l m a n a g e m e n t As these
new powers subject the thrift industry to enormous
change, the industry's requisite for success is
substantially to improve the quality, scope, reach,
and d e p t h of its management Thrifts will become
more like c o m m e r c i a l banks. Five years f r o m
"The commercial bank's future does not lie in merely
securing more business, but in paying greater attention
to management information systems and in improving
credit and quality controls"
, F E D E R A L RESERVE B A N K O F A T L A N T A
39
n o w w e w i l l have some strikingly profitable thrift
institutions, superb c o m p e t i t o r s w i t h i n t h e financial services industry.
Investment brokers a n d bankers always have
been part of t h e intermediary system b u t not as
direct c o m p e t i t o r s w i t h d e p o s i t o r y institutions.
W e can d i v i d e these firms into t w o groups:
distributors of securities, such as Merrill Lynch
a n d Dean Witter, and true i n v e s t m e n t bankers,
such as M o r g a n Stanley or G o l d m a n Sachs.
Today, most firms d o b o t h functions but, w i t h t h e
e x c e p t i o n of t h e very largest companies, I d o u b t
that t h e distributors of securities w i l l be indep e n d e n t five years f r o m now. Tie-ins w i t h other
financial services a n d t h e resulting sales forces
are so persuasive that less p o w e r f u l firms will be
absorbed by or m e r g e d w i t h those p r o v i d i n g
services b e y o n d brokerage. This already has
h a p p e n e d in t h e cases of Bache, Shearson,
Lehman, and Donaldson. Investment b a n k e r s risk takers w h o live by their ability t o p r o v i d e
ideas and tap markets—will survive as independents, b u t t h e y will n e e d capital a n d w o r l d w i d e distribution.
Insurance c o m p a n i e s face an e n o r m o u s challenge: their structure must be reshaped, a n d
they must define w h o they are Mutual companies
will disappear because of t h e need forcapital, for
t h e y can grow o n l y through retained earnings. In
order to c o m p e t e w i t h banks, thrifts, a n d t h e
i n v e s t m e n t bankers p r o v i d i n g similar services,
mutual c o m p a n i e s must have greater access t o
equity. The t r e n d in t h e insurance industry will
be consolidation a n d demutualization. Firms will
have t o reconfigure their sales networks a n d
create n e w products and services.
W h a t all this points to is heightened competition,
and this means better services, better products,
better pricing, a n d increased profitability for
successful management. Current d e v e l o p m e n t s
also strengthen t h e l i k e l i h o o d that financial institutions unable t o k e e p a p r u d e n t pace w i t h their
c o m p e t i t o r s will vanish. A n d this brings us to
C o n t i n e n t a l Illinois. That bank's p r o b l e m was not
a matter of loans t o less-developed countries,
nor of deregulation. C o n t i n e n t a l Illinois got into
t r o u b l e because it m a d e bad d o m e s t i c loans.
C o n t i n e n t a l Illinois' situation underlines t h e
need for a r e d e f i n i t i o n of d e p o s i t insurance.
Rather t h a n deregulation or m o d e s t changes in
t h e powers of thrifts, c o m m e r c i a l banks, and
investment bankers, the important question Congress should debate is whether deposit insurance
is i n t e n d e d t o p r o t e c t banks, depositors, or t h e
b a n k i n g system. Can w e differentiate b e t w e e n
t h e large bank failure, w h i c h has w i d e s p r e a d
ramifications here a n d abroad, a n d t h e smaller
bank failure, w h i c h may be a tragedy b u t has no
lasting i m p a c t on t h e system? W i l l regulators
treat all failures uniformly?
Any rediscussion of d e p o s i t insurance should
encompass t h e responsibilities of those institutions that benefit f r o m g o v e r n m e n t protection,
for t h e y clearly enjoy a c o m p e t i t i v e advantage
over uninsured depositors. In particular, their
responsibilities vis a vis capital adequacy a n d risk
diversification should be explored. Perhaps institutions w i l l f i n d it m o r e profitable in t h e f u t u r e to
relinquish their bank charters and become finance
companies because t h e limitations inherent in
t h e n e w deposit insurance may be t o o restrictive
for their business.
The w o r l d has changed, b u t n o t all financial
institutions have changed along w i t h i t To understand w h a t is going on, w e must look first at the
w o r l d and t h e n at t h e A m e r i c a n capital market as
it exists w i t h i n that f r a m e w o r k , rather than as an
isolated segment or industry.
As I v i e w deregulation, it is t h e marketplace,
nationally and internationally, that is deregulating
t h e financial services industry of this country.
W e really h a v e n o t b e g u n t o a d d r e s s t h a t
reality. W i t h d u e r e s p e c t t o all t h e bills that
have b e e n p r o p o s e d in Congress, I believe they
]
"The important question Congress should debate is
whether deposit insurance is intended to protect banks,
depositors, or the banking system."
40
DECEMBER 1984, E C O N O M I C
REVIEW
try t o deal w i t h yesterday's problems. Surely
there are inequities t o be redressed, b u t t h e real
problems are t h e result of market volatility, t h e
free f l o w of capital t h r o u g h o u t t h e world, a n d t h e
lack of d e f i n i t i o n in t h e financial intermediary
system and its consequent unfairness. W h o is prot e c t e d and w h o is not p r o t e c t e d by deposit
insurance? A n d h o w d o w e e q u i t a b l y p r o t e c t
everyone w h o uses our system? Those issues are
especially ill-defined and call o u t for the attention
of Congress.
N o t only as participants in the financial services
industry b u t as citizens w e ought t o be i n v o l v e d
in those definitions, because t h e effect on t h e
FEDERAL RESERVE B A N K O F A T L A N T A
economy of a weak financial intermediary system
can range f r o m negative t o destructive. The
system's role is t o take savings a n d p u t t h e m t o
w o r k p r o d u c t i v e l y in society. If that transmission
f u n c t i o n is b l o c k e d or d i v e r t e d in any way, t h e
e c o n o m i c cost w i l l be high a n d it can be disastrous. W e have t o c o n f o r m our statutes and our
t h i n k i n g t o t h e true nature of today's markets.
W e must d e c i d e w h e r e w e w a n t t o create
protective barriers for very good p u b l i c policy
reasons and put t h e m into effect. The w o r l d of
1984 cannot c o n t i n u e t o be p a t t e r n e d after t h e
w o r l d of 1928 t o 1932.
41
Index for 1 9 8 4
AGRICULTURE
The Advent of Biotechnology:
Implications
lor Southeastern
Agriculture.
W. Gene Wilson and Gene D. Sullivan,
March, 42.
-4 Crucial Year lor Southeastern Farmers.
W. Gene Wilson and Gene D. Sullivan,
September, 44.
S&L Use of New Powers: A Comparative
Study oi State- and
Federal-Chartered
Institutions.
Robert E. Goudreau, October, 18.
S&L Use of New Powers: Consumer and
Commercial Loan Expansion.
Robert E. Goudreau, December, 15.
BANK E A R N I N G S
Commercial Bank Profitability
Larry D. Wall, June, 18.
DEREGULATION
Contemporaneous
Reserve Accounting:
The New System and Its Implications
for
Monetary Policy.
Mary Susan Rosenbaum, April, 46.
Risk Considerations in Deregulating
Bank Activities.
Larry D. Wall and Robert A. Eisenbeis,
May, 6.
Bank Product Deregulation: Some Antitrust
Trade Offs.
Elinor H. Solomon, May, 20.
in 1983.
BANK SURVEILLANCE
Deposit Insurance Reform: The Insuring
Agencies' Proposals.
Larry D. Wall, January, 43.
"Financial Crises" and the Role of the Lender
of Last Resort.
James R. Barth and Robert E. Keleher,
January, 58.
Financial Disclosure and Bank Failure.
George J. Benston, March, 5.
The Future of Deposit Insurance: An Analysis
of the Insuring Agencies' Proposals.
Larry D. Wall, March, 26.
Bank Product Deregulation: Some Antitrust
Trade Offs.
Elinor H. Solomon, May, 20.
Risk Considerations in Deregulating Bank
Activities.
Larry D. Wall and Robert A. Eisenbeis,
May, 6.
Insulating Banks from Nonbank
Affiliates.
Larry D. Wall, September, 18.
DEPOSITORY INSTITUTIONS
Contemporaneous
Reserve Accounting:
The New System and Its Implications for
Monetary Policy.
Mary Susan Rosenbaum, April, 46.
What Distinguishes Larger and More Efficient
Credit Unions?
William N. Cox and Pamela V. Whigham,
October, 34.
Interest on Deposits and the Survival of
Chartered Depository
Institutions.
George J. Benston, October, 42.
Money Market Account
Competition.
Larry D. Wall and Harold D. Ford,
December, 4.
42
Consumer Demand for Product Deregulation.
Veronica Bennett, May, 28.
S&L Use of New Powers: A Comparative
Study of State- and
Federal-Chartered
Associations.
Robert E. Goudreau, October, 18.
S&L Use of New Powers: Consumer and
Commercial Loan Expansion
Robert E. Goudreau, December, 15.
Market-Driven
Deregulation of Financial
Services.
John Heimann, December, 36.
EDUCATION
Education's Contribution
to Productivity
and Economic
Growth.
Bobbie McGrackin, November, 8.
Education Inventory: Where Does the
Southeast Stand?
Gene Wilson and Gene Sullivan,
November, 24.
Financing Education in the Southeast.
Bobbie McCrackin, and Gene Sullivan,
November, 34.
EMPLOYMENT
The Southeast's Occupational
Employment
Outlook.
William J. Kahley, November, 44.
FINANCIAL STRUCTURE
Can Interstate Banking Increase Competitive
Market Performance? An Empirical Test.
David D. W h i t e h e a d and Jan Luytjes,
January, 4.
Deposit Insurance Reform: The Insuring
Agencies' Proposals.
Larry D. Wall, January, 43.
"Financial Crises" and the Role of the
Lender of Last Resort
James R. Barth and Robert E. Keleher,
January, 58.
Financial Disclosure and Bank Failure.
George J. Benston, March, 5.
Brokered Deposits: Issues and Alternatives.
Caroline T. Harless, March, 14.
The Emerging Financial Services Industry.
Challenge and
Innovation.
Donald L Koch, April, 25.
Bankers' Banks: An Institution
Whose Time
Has Come?
Pamela Frisbee, April, 31.
Interstate Banking: Issues and Evidence.
B. Frank King, April, 36.
Bank Product Deregulation: Some Antitrust
Trade Offs.
Elinor H. Solomon, May, 20.
Consumer Demand for Product Deregulation.
Veronica Bennett, May, 28.
Business and Bank Reactions to New
Securities Powers.
Bernell K. Stone, May, 41.
Investment Banking: Commercial Banks'
Inroads.
Samuel L Hayes, III, May, 50.
A Banker's View of the Payments Area.
Gordon Oliver, July/August, 26.
EFT in Florida: A Banker's Perspective.
David Strickland, July/August, 28.
Chemical BanKs Experience with Home
Banking.
Lee Pomeroy, July/August 36.
Competitive
Forces in Financial Services:
Signals for Southeastern
Thrifts.
Robert P. Forrestal, September, 18.
Insulating Banks from Nonbank
Affiliates.
Larry D. Wall, September, 18.
Market-Driven
Deregulation
of
Financial Services.
John Heimann, December, 36.
HEALTH CARE
Dynamics of Growth and Change in the
Health-Care
Industry.
Bobbie H. McCrackin, October, 4.
DECEMBER 1984, E C O N O M I C REVIEW
INDUSTRY STUDIES
The Do-lt-Yourself
Movement
An Element of the Shadovs Economy.
Joel R. Parker, January, 22.
High Performance: How Do We Achieve It?
Donald E. Bedwell and Melinda Dingier,
June, 10.
The Robots Corps in Southeastern
Industry.
William J. Kahley and David Avery,
September, 8.
INTERNATIONAL
"Financial Crises" and the Role of the
Lender of Last Resort.
James R. Barth and Robert E. Keleher,
January, 58.
Is the Dollar Overvalued in Foreign Exchange
Marketsf
Gerald P. Dwyer, March, 51.
INTERSTATE B A N K I N G
Can Interstate Banking Increase Competitive
Market Performance? An Empirical Test
David D. Whitehead and Jan Luytjes,
January, 4.
Interstate Banking: Issues and Evidence.
B. Frank King, April, 36.
NATIONAL E C O N O M Y
Deficits and Monetary
Growth.
William G. Dewald, January, 11.
The Do-lt-Yourself Movement
An Element
of the Shadow Economy.
Joel R. Parker, January, 22.
PAYMENTS SYSTEM
In-Store ATMs: Steppingstone to POS.
Helen Stacey and William N. Cox,
January, 31.
"Off-Bank" Retail Payment Systems: The
Economic Issues.
George J. Benston, July/August, 6.
Firms Involved in ATM, POS, and
Home
Banking: A Survey.
David D. Whitehead, July/August, 13.
A Retailer's Perspective on ATM and POS
Systems.
Craig Gieler, July/August 20.
A Banker's View of the Payments Area.
Gordon Oliver, July/August, 26.
EFT in Florida: A Banker's Perspective.
David Strickland, July/August, 28.
, FEDERAL RESERVE BANK OF ATLANTA
POS Is on Its Way.
Ronald Osterberg, July/August, 32.
Chemical Bank's Experience with Home
Banking.
Lee Pomeroy, July/August, 36.
The Business Plan for Home Banking.
Allen R. DeCotiis, July/August, 40.
The Revolution in Retail Payments:
A Synthesis.
Bernell Stone, July/August 46.
PRODUCTIVITY
High-Performance
Companies in the
Southeast What Can They Teach Us?
Donald L Koch, Delores W. Steinhauser,
Bobbie H. McCrackin, and Kathryn Hart
April, 4.
Partnership for Productivity.
Robert P. Forrestal, June, 4.
High Performance: How Do We Achieve Iti
Donald E. Bedwell and M e l i n d a Dingier,
June, 10.
REAL ESTATE
The Outlook for Commercial Real Estate in
the Southeast.
Joel R. Parker, September, 30.
REGIONAL E C O N O M Y
The Southeast in 1984: An Overview.
Donald L Koch, February, 4.
Florida: Expecting a Boom.
Donald L Koch, Pamela V. Whigham,
and Delores W. Steinhauser,
February, 6.
Georgia: A Healthy Economy Looks for
Solid Growth.
William N. Cox, Leigh Watson Healy,
Rugh Hughes, and Joel R. Parker,
February, 22.
Tennessee: Continuing the Momentum
of
Recovery.
Bobbie H. McCrackin and Paula
Johannsen, February, 34.
Louisiana: Hopes Ride on World Trade,
Energy and World's Fair.
William J. Kahley and Gustavo Uceda,
February, 48.
Alabama: Prospects Brighten for 1984.
Charlie Carter and David Avery,
February, 58.
Mississippi: A State in Transition.
W. Gene Wilson and Gene D. Sullivan,
February, 66.
North Carolina: Impressive Growth, LongTerm Questions.
Rickey C. Kirkpatrick, February, 76.
South Carolina: A Strong Recovery, But
Problems Remain.
Richard W. Ellson and Randolph C. Martin,
February, 84.
High-Performance
Companies in the
Southeast What Can They Teach Us?
Donald L Koch, Delores W. Steinhauser,
Bobbie H. McCrackin, and Kathryn Hart,
April, 4.
High Performance: How Do We Achieve It?
Donald E. Bedwell and Melinda Dingier,
June, 10.
Economic Influence of Retirees on Selected
Southeastern
Communities.
Charlie Carter, June, 30.
The Robot Corps in Southeastern Industry.
William J. Kahley and David Avery.
September, 8.
The Outlook for Commercial Real Estate in
the Southeast
Joel R. Parker, September, 30.
A Crucial Year for Southeastern Farmers.
W. Gene Wilson and Gene D. Sullivan,
September, 44.
Educational Inventory
Where Does the
Southeast Stand?
Gene Wilson and Gene Sullivan,
November, 24.
Financing Education in the Southeast
Bobbie McCrackin and Gene Sullivan,
November, 34.
The Southeast's Occupational
Employment
Outlook.
William J. Kahley, November, 44.
TECHNOLOGY
The Advent of Biotechnology:
Implications
for Southeastern
Agriculture.
W. Gene Wilson and Gene D. Sullivan,
March, 42.
The Robot Corps in Southeastern Industry.
William J. Kahley and David Avery,
September, 8.
43
FINAKCE
f ir
ir
$ millions
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Time
SEPT
1984
OCT
1984
ANN.
OCT
1983
%
CHG.
1,414,002 1,387,112 1,296,169
308,345 299,548 307,622
90,212 90,141 82,865
358,365 354,134 346,078
695,481 677,954 596,651
57,705 53,132 60,902
6,159
5,581
5,461
39,309 41,459 50,054
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings <5c Time
160,606
35,450
11,429
41,024
76,866
6,447
555
5,753
17,102
3,726
1,063
3,289
9,525
975
96
853
159,130
34,851
11,581
40,735
74,960
6,174
537
5,531
16,560
3,656
1,045
3,280
9,080
966
97
850
146,524
35,595
10,598
38,247
65,946
5,946
483
5,063
15,333
3,734
957
3,141
8,066
914
87
780
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
55,791
12,302
4,731
19,138
20,693
2,720
266
2,311
51,173
12,418
4,405
17,598
17,864
2,602
242
2,057
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings & Time
56,245
12,338
4,683
19,290
21,180
2,888
283
2,473
24,828
7,255
1,556
5,917
11,517
1,373
90
1,279
24,266
6,927
1,563
5,733
11,162
1,303
84
1,216
21,372
6,959
1,426
4,770
9,330
1,352
72
1,203
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings <5c Time
96,373
1,443
1,499
5,438
14,469
181
16
177
26,180
5,446
1,534
5,484
14,180
212
23
239
24,903
5,734
1,373
5,317
13,007
199
23
194
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings óc Time
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings <5c Time
12,232
2,315
817
2,304
7,110
12,139
2,255
838
2,310
7,033
11,484
2,398
785
2,420
6,233
*
*
+
+
+
+
+
+
-
*
•
*
*
*
23,826
4,373
1,811
4,786
13,065
1,030
70
971
23,538
4,265
1,870
4,790
12,812
973
67
915
22,259
4,352
1,652
5,001
11,446
879
59
829
Mortgages Outstanding
Mortgage Commitments
Savings & Loans
Total Deposits
NOW
Savings
Time
15
14
Mortgages Outstanding
Mortgage Commitments
8
+
-
+
+
+
+
+
+
+
-
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
-
+
+
+
-
+
-
+
-
+
*
*
9
0
9
4
17
5
13
21
10
0
8
7
17
12
0
11
5
18
7
10
9
10
1
6
10
19
11
17
20
Savings <5c Loans**
Total Deposits
NOW
Savings
Time
Savings & Loans**
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
Savings & Loans**
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
16
4
9
24
23
2
25
6
Savings & Loans
Total Deposits
NOW
Savings
Time
6
5
9
2
11
9
30
9
Savings & Loans**
Total Deposits
NOW
Savings
Time
7
3
4
5
14
Savings <5c Loans
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
Mortgages Outstanding
Mortgage Commitments
Mortgages Outstanding
Mortgage Commitments
OCT
1984
SEPT
1984
OCT
1983
701,480
20,365
163,565
520,264
SEPT
585,449
42,041
682,812 611,947
29,783 17,927
163,423 179,418
501,408 417,960
SEPT
AUG
572,336 472,267
31,827
47,383
93,740
3,157
20,782
69,458
SEPT
74,309
4,732
90,779
3,197
20,707
67,254
AUG
72,827
5,562
N.A.
N.A.
N.A.
N.A.
SEPT
67,455
5,142
5,927
166
913
4,880
SEPT
4,265
177
5,543
166
870
4,554
AUG
4,190
288
5,158
146
875
4,182
SEPT
3,712
272
60,049
2,184
14,238
42,789
SEPT
43,626
3,008
58,582
2,239
14,271
42,076
AUG
42,426
3,560
53,070
2,033
15,647
35,725
SEPT
39,988
3,468
8,174
283
1,804
6,222
SEPT
8,950
462
7,993
276
1,769
6,071
AUG
8,908
553
N.A.
N.A.
N.A.
N.A.
SEPT
8,212
503
10,773
267
2,294
8,348
SEPT
9,126
568
9,663
236
2,160
7,377
AUG
9,010
631
8,883
190
2,403
6,374
SEPT
7,730
620
1,605
49
283
1,448
SEPT
2,038
175
2,004
80
379
1,590
AUG
2,010
200
N.A.
N.A.
N.A.
N.A.
SEPT
2,051
57
ANN.
%
CHG.
+
+
+
15
14
9
24
+ 24
+ 32
+ 10
- 8
+
+
+
+
+
-
+
+
-
+
+
-
+
-
+
+
-
+
+
-
15
14
4
17
15
35
13
7
9
20
9
13
9
8
21
41
5
31
18
8
1
+207
7
Savings <5c Loans**
0
Total Deposits
7,212
6,994
N.A.
10
NOW
208
200
N.A.
4
Savings
1,250
1,258
N.A.
+ 14
Time
5,793
5,586
N.A.
•/•: 1
+ 17
SEPT
AUG
SEPT
+ 19
Mortgages Outstanding
6,304
6,283
5,762 + 9
+ 17
Mortgage Commitments
342
330
222 + 54
Notes: All deposit data are extracted from the Federal Reserve Report of Transaction Accounts, other Deposits and Vault Cash (FR2900),
and are reported for the average of the week ending the 1st Wednesday of the month. This data, reported by institutions with
over $15 million in deposits as of December 31, 1979, represents 95% of deposits in the six state area. The major differences be
this report and the "call report" are size, the treatment of interbank deposits, and the treatment of float. The data generated fr<
the Report of Transaction Accounts is for banks over $15 million in deposits as of December 31, 1979. The total deposit data ge;
from the Report of Transaction Accounts eliminates interbank deposits by reporting the net of deposits "due to" and "due from" ot
depository institutions. The Report of Transaction Accounts subtracts cash items in process of collection from demand deposits, w
the call report does not. Savings and loan mortgage data are from the Federal Home Loan Bank Board Selected Balance Sheet Dr
The Southeast data represent the total of the six states. Subcategories were chosen on a selective basis and do not add to total.
* = fewer than four institutions reporting.
** = S&L deposits subject to revisions due to reporting changes.
N.A. = not comparabe with previous data at this time.
http://fraser.stlouisfed.org/
44
Federal Reserve Bank of St. Louis
+
+
+
CONSTRUCTION
ANN
1984
AUG
1984
SEPT
1983
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Mil.
58,997
7,950
14,231
9,060
1,829
872
59,147
8,013
14,315
8,945
1,897
867
49,130
5,300
12,197
6,468
1,903
886
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
9,033
885
2,100
1,795
405
111
9,060
890
2,067
1,781
450
114
7,679
666
1,835
1,189
466
168
Nonresidential Building Permits
Total Nonresidential
Industrial Bl<£s.
Offices
Stores
Hospitals
Schools
MiL
742
185
97
128
19
5
755
185
97
127
16
5
430
20
58
83
24
8
Nonresidential Building
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Mil.
4,451
416
1,000
1,025
175
45
4,449
428
987
1,012
186
46
3,875
358
854
661
298
52
+
+
+
+
-
15
16
17
55
41
13
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
MiL
1,650
160
521
248
62
13
1,623
151
525
245
62
14
1,233
173
373
132
26
28
+ 34
- 8
+ 40
+ 88
+138
- 54
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ MiL
P r e s i d e n t i a l Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
1,114
29
268
210
123
39
1,178
31
283
208
154
41
1,209
47
406
121
78
65
+
+
-
8
38
34
74
58
40
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ MiL
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
242
14
29
52
11
2
233
14
28
49
12
2
190
7
17
38
18
8
+ 27
+100
+ 71
+ 37
- 39
- 75
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
834
81
185
132
15
7
822
81
147
140
20
6
742
61
127
154
22
7
+
+
+
-
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ MiL
%
CHG
12-month Cumulative Rate
50
17
40
4
2
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
18
33
14
51
13
34
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
+ 73
+825
+ 67
+ 54
- 21
- 38
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
20
+
+
+
+
-
12
33
46
14
32
0
R e s i d e n t i a l Building P e r m i t s
ANN
SEPT
1983
AUG
1984
SEPT
1984
SEPT
%
CHG
74,275
74,573
63,233
904.9
747.5
912.5
760.0
850.8
653.3
133,720
112,363
+
19
13,991
14,145
11,549
+
21
188.4
174.7
188.8
179.3
174.3
143.7
23,024
23,204
19,229
+
468
472
384
+
8.1
7.8
8.1
8.2
7.7
6.8
1,210
1,227
815
+
8,112
103.6
95.5
8,242
6,693
+
21
103.7
98.5
92.3
81.2
+
+
12
18
12,563
12,691
10,568
+
19
2,789
2,242
+
24
43.0
28.8
2,769
42.9
28.7
4,439
4,393
3,475
+
1,118
1,151
1,009
+ 11
14.8
15.9
15.1
17.0
16.6
14.4
2,232
2,328
2,218
- 11
+ 10
+ 1
385
5.6
6.0
627
396
288
+ 34
5.6
6.5
4.7
3.8
+ 19
+ 58
629
478
+ 31
1,119
1,115
933
+
13.3
20.7
13.4
20.4
13.2
14.2
+
+
1,953
1,936
1,675
+
39.8
23.3
17
+
6
14
+
+
8
22
20
+
+
22
5
15
48
+
+
8
24
+
+
28
20
1
46
17
Data supplied by the U. S. Bureau of the Census, Housing Units Authorized By Building Permits and Public Contracts, C-40.
Nonresidential data excludes the cost of construction for publicly owned buildings. The southeast data represent the total of
the six states. The annual percent change calculation is based on the most recent month over prior year. Publication of K W.
Dodge construction contracts has been discontinued.
45
ü
GENERAL
LATEST CURR. PREV.
DATA PERIOD PERIOD
Personal Income
($bil. - SAAR)
Taxable Sales - $bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - mils.
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index
1967=100
Kilowatt Hours - mils.
2Q
YEAR
AGO
ANN.
%
CHG.
OCT
2,970.9
N.A.
N.A.
8,776.3
2,910.0
N.A.
N.A.
8,819.7
2,703.3
N.A.
N.A.
8,729.0
+ 1
OCT
AUG
315.3
208.4
314.5
202.1
302.6
207.5
+ 4
+ 0
2Q
AUG
OCT
361.8
N.A.
4,723.3
1,484.0
351.6
N.A.
4,530.5
1,479.0
+11
AUG
N.A.
34.4
N.A.
34.1
326.4
N.A.
4,247.6
1,450.0
N.A.
35.2
+10
+11
+ 2
- 2
Personal Income
($bil. - SAAR)
2Q
Taxable Sales - $ bil.
Plane Pass. Arr. 000's AUG
Petroleum Prod, (thous.) OCT
Consumer Price Index
1967=100
Kilowatt Hours - mils. AUG
Personal Income
($bil. - SAAR)
2Q
Taxable Sales - $ bil. OCT
Plane Pass. Arr. 000's AUG
Petroleum Prod, (thous.) OCT
Consumer Price Index - Miami
Nov. 1977 = 100
Kilowatt Hours - mils. AUG
39.8
N.A.
126.7
51.0
N.A.
4.6
39.0
N.A.
120.0
51.0
36.2
N.A.
115.9
49.0
+ 9
+ 4
N.A.
4.6
N.A.
4.6
0
136.1
82.1
2,192.9
37.0
SEPT
167.9
9.9
132.4
81.5
2,157.7
39.0
JUL
167.0
9.5
122.3
72.1
2,039.2
49.0
SEPT
162.9
9.9
Personal Income
($bil. - SAAR)
2Q
Taxable Sales - $ bil.
Plane Pass. Arr. 000's AUG
Petroleum Prod, (thous.)
Consumer Price Index - Atlanta
1967 = 100
Kilowatt Hours - mils. AUG
65.9
N.A.
1,817.8
N.A.
OCT
317.8
5.7
62.8
N.A.
1,710.5
N.A.
AUG
315.9
5.5
58.4
N.A.
1,648.3
N.A.
OCT
304.4
5.7
AUG
OCT
48.2
N.A.
369.2
1,308.0
48.5
N.A.
341.1
1,299.0
45.5
N.A.
279.3
1,266.0
AUG
N.A.
5.6
N.A.
5.8
N.A.
5.7
AUG
OCT
22.6
N.A.
39.7
88.0
22.2
N.A.
31.9
90.0
AUG
N.A.
2.4
N.A.
2.5
20.5
N.A.
38.4
86.0
N.A.
2.6
AUG
49.3
N.A.
177.0
N.A.
46.6
N.A.
169.3
N.A.
43.5
N.A.
161.5
N.A.
AUG
N.A.
6.2
N.A.
6.2
N.A.
6.7
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index
1967 = 100
Kilowatt Hours - mils.
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index
1967 = 100
Kilowatt Hours - mils.
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index
1967 = 100
Kilowatt Hours - mils.
2Q
2Q
2Q
+10
+11
+ 14
+ 8
-24
+ 3
0
+ 13
+ 10
+4
0
+ 6
+32
+ 3
-
2
+10
+ 3
+ 2
- 8
+13
+10
- 7
OCT
1984
SEPT
1984
OCT (R)
1983
ANN
%
CHG.
Agriculture
Prices Rec'd by Farmers
Index (1977=100)
138
Broiler Placements (thous.) 77,845
Calf Prices ($ per cwt.)
58.40
Broiler Prices (t per lb.)
29.50
Soybean Prices ($ per bu.)
6.04
Broiler Feed Cost ($ per ton) 221
139
80,932
56.60
32.10
6.09
221
134
73,681
56.80
29.30
8.32
237
+ 3
+ 6
+ 3
+ 1
-27
- 7
Agriculture
Prices Rec'd by Farmers
Index (1977=100)
143
Broiler Placements (thous.) 29,856
Calf Prices ($ per cwt.)
51.68
Broiler Prices (i per lb.)
27.82
Soybean Prices {$ per bu.)
6.16
Broiler Feed Cost ($ per ton) 213
137
31,357
51.93
31.65
6.20
220
118
28,559
51.99
29.02
7.91
227
+21
+ 5
- 1
- 4
-22
- 6
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUL, JUL)
1,104
Broiler Placements (thous.) 10,007
Calf Prices ($ per cwt.)
50.80
Broiler Prices (<t per lb.)
26.50
Soybean Prices ($ per bu.)
6.02
Broiler Feed Cost ($ per ton) 195
10,656
52.10
31.00
5.83
210
1,085
9,577
51.70
29.00
7.84
240
+ 2
+4
- 2
- 9
-23
-19
3,022
1,810
55.10
29.00
7.84
255
- 2
+4
- 1
- 3
-23
- 8
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUL, JUL)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (E per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
-
2,961
1,874
54.50
28.00
6.02
235
1,866
55.30
31.00
5.83
240
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUL, JUL)
1,570
Broiler Placements (thous.) 11,978
Calf Prices ($ per cwt.)
47.50
Broiler Prices (i per lb.)
27.50
Soybean Prices ($ per bu.)
6.46
Broiler Feed Cost ($ per ton) 250
12,576
46.30
31.00
6.58
255
1,515
11,490
47.60
28.00
7.71
220
+4
+4
- 0
- 2
-16
+14
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUL, JUL)
634
Broiler Placements (thous.)
N.A.
Calf Prices ($ per cwt.)
55.00
Broiler Prices (« per lb.)
30.00
Soybean Prices ($ per bu.)
6.18
Broiler Feed Cost ($ per ton) 255
N.A.
53.30
33.00
6.23
260
623
N.A.
52.90
29.50
7.75
290
+2
+4
+2
-20
-12
1,028
5,682
52.70
30.50
8.03
195
- 7
+6
- 3
- 2
-23
-18
916
N.A.
51.20
31.00
8.12
225
- 7
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUL, JUL)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices ($ per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton))
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUL, JUL)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (! per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton))
-
-
952
6,003
51.30
30.00
6.18
159
6,259
52.10
34.00
6.15
159
852
N.A.
51.00
27.50
6.06
191
N.A.
51.60
30.50
6.33
200
-
-
Notes:
Personal Income data supplied by U. S. Department of Commerce. Taxable Sales are reported as a 12-month cumulative total. Plane
Passenger Arrivals are collected from 26 airports. Petroleum Production data supplied by U. S. Bureau of Mines. Consumer Price
Index data supplied by Bureau of Labor Statistics. Agriculture data supplied by U. S. Department of Agriculture. Farm Cash
Receipts data are reported as cumulative fbr. the ..calendar year through the month shown. Broiler placements are an average weekly
rate. The Southeast data represent the total o f the six states. N.A. = not available. The annual percent change calculation is based
on most recent data over prior year. R = 'revised.
http://fraser.stlouisfed.org/
Federal46
Reserve Bank of St. Louis
1
- 0
-11
-25
-15
EMPLOYMENT
SEPT
1984
AUG
1984
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - ttious
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn
113,843
105,792
8,051
7.4
N.A.
N.A.
40.7
375
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mftr. Avg. Wkly. Earn. - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfe. Avg. Wkly. Earn. - $
15,107
13,941
115,076 112,197
106,694 102,366
9,830
8,382
9.2
7.5
N.A.
N.A.
N.A.
N.A.
40.8
40.4
363
369
15,050 14,798
13,864 13,446
1,352
1,186
9.5
8.1
N.A.
N.A.
N.A.
N.A.
41.0
41.1
317
328
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - . $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
1,166
8.1
N.A.
N.A.
41.1
329
SEPT
1983
ANN.
CHG.
+1
H3
-18
1,788
1,593
196
1,787
1,590
197
1,760
1,549
+ 2
N.A.
N.A.
41.0
330
N.A.
N.A.
41.2
331
N.A.
N.A.
41.6
316
-1
5,184
4 865
319
6.0
N.A.
N.A.
41.2
319_
2,814
2,652
162
6.1
N.A.
N.A.
40.8
5,166
4,846
320
6.3
N.A.
N.A.
40.8
315
2,826
2,658
168
5,101
4,686
415
8.0
N.A.
N.A.
40.6
11.6
11.2
6.2
N.A.
N.A.
41.4
313
211
12.8
SOI
2,733
2,547
187
7.1
N.A.
N.A.
41.7
298
+ 3
- 7
4
2
+4
-23
+ 6
+ 3
+4
-13
-
2
+ 5
+ 3
+ 5
-14
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. & Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. & Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. & Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. & Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin.. Ins., & Real Est.
Trans. Com. 6c Pub. Util.
Nonfarm Employment- thous.
1,932
1,970
Civilian Labor Force - thous.
1,984
Manufacturing
1,717
1,785
Total Employed - thous.
1,798
Construction
214
185
Total Unemployed - thous.
185
Trade
11.3
9.5
Unemployment Rate - % SA
9.6
Government
N.A.
N.A.
Insured Unemployment - thous.
N.A.
Services
N.A.
N.A.
Insured Unempl. Rate - %
N.A.
Fin.,
Ins., & Real Est.
40.3
41.1
Mfg. Avg. Wkly. Hours
41.5
Trans. Com. & Pub. Util.
399
416
Mfg. Avg. Wkly. Earn. 418
Nonfarm Employment- thous.
1,105
1,085
1,072
+ 3
Civilian Labor Force - thous.
Manufacturing
955
964
Total Employed - thous.
987
Construction
117
121
Total Unemployed - thous.
118
Trade
12.1
11.4
Unemployment Rate - % SA
11.8
Government
N.A.
N.A.
Insured Unemployment - thous.
N.A.
Services
N.A.
N.A.
Insured Unempl. Rate - %
N.A.
Fin.,
Ins., <5c Real Est.
40.8
40.6
Mfg. Avg. Wkly. Hours
40.8
Trans. Com. <3c Pub. Util.
276
281
Mfg. Avg. Wkly. Earn. - $
286
Nonfarm Employment- thous.
2,200
+1
2,216
2,232
Civilian Labor Force - thous.
Manufacturing
1,992
+ 3
2,021
2,046
Total Employed - thous.
Construction
208
-11
195
186
Total Unemployed - thous.
Trade
10.3
9.4
9.4
Unemployment Rate - % SA
Government
N.A.
N.A.
N.A.
Insured Unemployment - thous.
Services
N.A.
N.A.
N.A.
Insured Unempl. Rate - %
Fin., Ins., & Real Est.
41.1
+ 0
41.6
41.2
Mfg. Avg. Wkly. Hours
Trans. Com. & Pub. Util.
312
2
310
307
Mfg. Avg. Wkly. Earn. - $
Notes: All labor force data are from Bureau of Labor Statistics reports supplied by state agencies.
Only the unemployment rate data are seasonally adjusted.
The Southeast data represent the total of the six states.
The annual percent change calculation is based on the most recent data over prior year.
95,224
19,894
4,651
22,120
15,687
20,912
5,705
5,227
ANN.
SEPT
1983
AUG
1984
SEPT
1984
%
%
CHG.
752
2,973
2,172
2,452
705
706
94,507
19,850
4,657
21,997
15,107
20,891
5,763
5,214
12,059
2,283
751
2,954
2,091
2,440
706
706
91,485
18,971
4,273
21,121
15,584
19,963
5,522
5,095
11,675
2,209
1,347
346
67
285
282
218
62
72
4,144
503
312
1,114
653
1,009
312
230
1,353
351
66
285
283
219
62
73
4,094
499
312
1,107
618
1,008
311
230
1,327
345
63
274
281
220
60
71
3,920
472
276
1,048
629
964
290
231
2,451
539
143
611
429
435
130
156
2,429
539
143
603
418
432
130
155
1,572
183
113
375
312
309
84
117
¿,¿1)9
+b
520
+4
116
+23
556
+10
433
- 1
403
+ 8
123
+6
150
+ 4
1,570
1
12,168
2,280
1,582
183
114
374
319
313
83
117
812
211
33
172
186
128
34
39
1,832
498
83
415
303
349
84
92
680
2,815
2,136
2,345
672
693
35
166
183
125
34
39
500
83
413
289
348
84
92
+ 5
+ 5
+ 2
+
+
+6
+7
+13
+6
+4
+ 5
+ 8
- 0
2
2
0
1
2
0
0
U7
34
171
171
124
35
39
1,818
+ 6
+ 2
373
315
306
83
799
210
1,750
482
74
398
295
327
82
85
4
5
9
5
1
5
3
3
4
3
+ 11
180
116
793
211
+
+
+
+
+
+
+
+
+
+
2
+ 0
-
6
+4
+ 2
+ 2
0
0
5
+ 3
+ 12
+4
+ 3
+ 7
+ 2
47
leral Reserve Bank of Atlanta
». Box 1731
anta, Georgia 30301
rcss Correction Requested
Bulk Rate
U.S. Postage
PAID
Atlanta, Ga.
Permit 292
@FedFRASER