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Monfhlu Review Atlanta, Georgia June • 1966 Vol. LI, No. 6 Also in this issue: FLORIDA’S EMPLOYMENT PROFILE SIXTH DISTRICT STATISTICS DISTRICT BUSINESS CONDITIONS District Banks Expand Their Role as Capital Market Intermediaries A “banking revolution” has occurred in the 1960’s, judging from the variety of innovations to expand the role of banks as capital market intermediaries. Corporate certificates of deposits, commercial bank capital notes and debentures, Euro-dollar accounts, unsecured negotiable notes, and consumer savings certificates were seldom heard of in 1960, but are now common terms. In the first phase of the banking revolution, banks were less successful in employing savings flows than in attracting them. They were quite adept, however, in expanding their holdings of earning assets in forms long acceptable to bank supervisors. In addition, supervisory attitudes toward their efforts to expand their uses of increased funds flows were modified. A second phase of the banking revolution has occurred since early 1965. Corporate demand for external funds has increased greatly, along with growing credit demand from other sectors. Commercial banks have found that experience with issuing new forms of intermediary liabilities has strengthened their abilities to meet greater credit demands. Participation in this banking revolution has varied considerably, not only in range of innovations but also in pace. For example, banks in this District expanded their total deposits almost as rapidly as did money market banks1 between mid-1959 and mid-1965 without extensive use of the newer forms of bank liabilities. Growth in earning assets was also achieved within the range of accustomed uses of funds for a great majority of District banks. Nevertheless, the impact of the “banking revolution” on District banks, as well as on other financial institutions, has been significant enough to warrant looking at banking revolutions in longer perspective. A Recurring Phenomenon What is a “banking revolution”? Basically, it is a positive effort by com mercial banks to enlarge their role as financial intermediaries in the national economy. A financial intermediary, in turn, influences financial flows by providing services or by changing either side of its balance sheet. Since commercial banks are already primary administrators of the money supply and to a great extent the main agencies of the money market, a “banking revolution” entails expansion of commer cial banks’ role “. . . as intermediaries between savers and borrow ers, providing the financial assets savers want and the funds borrowers want.”2 A sharp expansion in the intermediary role thus involves new forms of claims, as well as changes in services or assets. ’In addition to the large New York and Chicago banks, this term includes a number of banks in regional money centers. While it is used here in the broader sense, data availability limits its use in the table and chart on page 43 to New York and Chicago reserve city banks. 2The R eport of the Commission on M oney and Credit, Prentice-Hall, Inc., p. 153. Chapter 6 of this study offers an excellent summary of the family of private financial intermediaries. Banks have been responsive to changes in major finan cial needs throughout the history of this country. How ever, they have had a legacy of regulatory or philosophical inhibitions to overcome in order to further refine the in struments and practices of the money and capital markets. Banking revolutions, both major and minor, abound in the history of American banking. Expansion of the intermediary function typically occurred at the initiative of the banks themselves, as they sought to provide the developing economy with more services. Conversely, banks were periodically forced by legislation or regulation to give up some functions and concentrate more on administering the money supply. Even the severely restrictive national banking legislation of the 1860’s did not keep commercial banks from re-establishing themselves as major capital market intermediaries for long. The range of intermediary functions open to commer cial banks was narrowed severely, following the collapse of the economy in the 1930’s. The national mortgage market, which had been slowly developed and redeveloped over many previous crises and in which commercial banks had become major participants, was virtually destroyed overnight. In the banking legislation of the mid-thirties bankers had to choose between continuing as investment bankers or commercial bankers. Payment of interest on demand deposits was forbidden and controls on time and savings deposits were instituted. Mortgage bonds, which many banks had underwritten and distributed, were out lawed in some states, along with mortgage participation certificates. The whole mortgage guaranteed by private sources was taken over by Federal government insurance. Underwriting of state and local securities by banks was limited to general obligations and underwriting of corpo rate securities was forbidden entirely. Given the severity of these and other restrictions, the uncertainties of the late 1930’s, and a long world war, it is not surprising that banks were slow to broaden their role in financial intermediation. In longer historical perspective it is not unusual to see the resumption of banking’s efforts to broaden and fill out its role as the major financial intermediary. Only in the rapidity of such a movement, after more than a gen eration of quiescence, is it rightly considered as revolu tionary today. The Current Banking Revolution The present banking revolution, viewed by many observers as having begun around the end of the 1950’s, is mild in deed in comparison with past ones, but it has proceeded rapidly and has brought significant changes. The main stimulus of the current banking revolution came from a decrease in the early 1960’s in the need for financing the investment expansion of corporate and other business which had been a prominent feature of the 1950’s. To this extent, it was similar to the mid-1920’s. Demand for bank credit in the late 1950’s was further reduced by rising business profits and a substantial re definition of taxable corporate “profit.” Because of rising interest rates and other factors, the public preferred in terest-bearing intermediary claims over demand deposits or currency. Moreover, as corporate borrowing needs de clined with the tapering off of investment expansion in the private sector, the volume and character of military pro http://fraser.stlouisfed.org/ • 42 • Bank of St. Louis Federal Reserve duction needs also changed markedly. Money market banks now found that their erstwhile corporate customers had become banking competitors. They had developed competence in the direct investment management of their large internal cash flows, sharply reducing their idle balances with banks. And they had be come providers of credit in the normal channels of trade, curtailing bank credit demand from this source. Bankers also faced competitive limitations on the ex pansion of their intermediary role from two other sources. Although they had never been “out” of the mortgage lend ing or consumer lending fields, most banks had not espe cially emphasized these forms of intermediation. Special ized intermediaries had pre-empted a major share of con sumer savings flows and dominated the conventional residential mortgage credit field. With only a few significant exceptions, bankers had not attempted to re-enter the national mortgage banking field. By 1960, mortgage bank ers were leaders in originating and servicing FHA home mortgages and had expanded their operations in com mercial and other mortgage lending. Changing needs of state and local governments had stimulated substantial growth in volume of long-term financing in forms barred to bank participation. Moreover, governmental agencies had developed and expanded numerous programs to fill “credit gaps” in spite of the growth of these private spe cialized intermediaries. The emerging pattern of fiscal and monetary policies in the early 1960’s further complicated the banking prob lem. Domestic growth in employment and output required provision of additional financial resources and their re direction. Service to consumption and social needs had to be expanded while the slack in investment in produc tive capital was restimulated through fiscal means. Mean while, balance-of-payments constraints dictated mainte nance of short-term interest rates at relatively high levels. Under these conditions it was hardly surprising that the banking revolution was led by money market banks. Nor was its direction contrary to the general pattern of past banking revolutions which concentrated on the major problem of the times. In the current revolution, expansion of the intermediary function began on the “liability issu ing” side, i.e., the development of negotiable certificates of deposit. Rapid growth of this instrument’s use, to a level of $17.6 billion in May of this year, is eloquent testimony to its efficacy in helping to expand bank intermediation for the larger banks. The rapid rate at which money market banks were able to regain custody of these large corporate cash funds em phasized the problem of redirecting them in the economy. Concentration of these funds in money market instruments was hardly consistent with banks’ overall objectives, even if it had been possible. Although the banking community had by the later 1950’s recognized the need to help re establish a broader national mortgage market, necessary legislation had not been secured. Regulatory attitudes and actions were favorable in some areas of intermediation, such as underwriting and owning state and local securities. Banks also found sympathy and favorable rulings in their expansion into some business areas, such as equipment leasing, insurance, and travel agencies. Rising costs for deposits and for providing services re MONTHLY R E V IE W quired large outlets for more profitable employment of bank funds. Expanded underwriting and ownership of tax-exempt securities, increase in consumer and real es tate lending, purchases of mortgages, increased foreign lending, and growth of term lending to business were the major areas of intermediation still open to banks. The rapid move by money market banks into more ag gressive acquisitions of tax-exempt securities and real es tate mortgages was important in helping them meet rising costs. It also served a broader national purpose, because the investment of these funds put additional pressure on the downward trend of long-term interest rates, particu larly between 1961 and 1964. It helped to improve access to the financial markets by capital-short regions and stim ulated commercial banks in smaller financial centers to become more broadly based intermediaries as deposit costs continued to rise. Percentage Growth of Selected Assets of Commercial Banks District Banks’ Response Banks in this region were not under the same kind of pres sure to modify their liability mix or their portfolio policies as were the large money market banks. Tighter manage ment of corporate cash affected them, but in a different way. Expansion of corporate investment and operations in the region, even under cash-conserving policies, some times required larger demand balances. Growing inflows of funds for residential construction and expansion of plant and services of state and local governments, as well as for Federal expenditures, also supported growth in transaction balances. Commercial banks in this region thus enjoyed a sharply higher rate of demand deposit growth of individuals, partnerships, and corporations than did the money market banks or all banks as a group (see table). As the table shows, this region’s banks also had a some what larger growth rate in time deposits of “individuals, partnerships, and corporations” than did all banks. While their growth rate for total IPC deposits was higher than that of the all-bank group, it was substantially below that of the money market banks. Part of the reason for this latter difference, of course, was that most District banks did not elect to enter aggres sive competition for corporate funds through issuance of negotiable certificates of deposits. A study by this Bank (Monthly Review, August 1964) found that in late 1962 District banks accounted for only 3 percent of all out standing negotiable CD’s. The study revealed that the majority of bankers did not feel that expansion prospects or changes in banking practices required by large ne gotiable CD’s were appropriate for their situations. In short, established patterns of intermediation were produc ing good expansion of funds inflows in most markets. The same growth factors which were producing increases in demand deposits were also important in raising personal incomes. Moreover, in some important financial submar kets in the District, the competitive vigor characteristic of nonbank depositary institutions in the 1950’s had been weakened by slow recovery from residential overbuilding in 1959-60. By and large, rising interest rates paid by banks on the accustomed types of intermediary claims were sufficient assurance of continued growth in savings and time deposits. The philosophy of the banking revolution held that banks could rely more heavily upon issuance of their expanding variety of liabilities for liquidity as needed. Owned liquidity reserves with their low yields could be further minimized, allowing greater flexibility in asset management. More stable deposits and rising ratios of amortized loans would also augment liquidity, so that rising loan-to-deposit ratios were accepted as appropriate under the new philosophy. Although some of the larger District banks found this new philosophy either wholly or partially acceptable, many did not. Since mid-1965 they have witnessed what many expected: that under conditions of increased credit demand from money market banks and rising interest rates, funds represented by CD’s and time deposits can acquire considerable mobility. The comparative response of District banks in expand ing their capital market intermediary role on the asset side is suggested by the chart above. Total loans and invest ments expanded in line with total deposit growth that was somewhat greater than that of all banks but less than that of money market banks. The same relationship held for total loans, as commercial and industrial loans ex panded more rapidly for District banks than for either group. Since the rate of total deposit growth was greater at money market banks, it would be expected that total loan and investment growth would be greater, as it was. The sharpest contrast occurred in municipals and real estate loans, reflecting the immediate needs of the money market banks to utilize large increases in time-deposit Deposit Expansion of Individuals, Partnerships, and Corporations Mid-1959 to Mid-1965 D em an d D eposits Tim e D eposits D em and and T im e D eposits (Percent) + 5 .1 + 3 6 6 .5 + 6 3 .7 + 4 .5 + 2 9 9 .0 + 5 8 .8 O th e r R e s e rv e C it y M em b er Banks + 5 .6 + 1 0 0 .3 + 3 8 .2 A l l C o m m e r c ia l B a n k s in S ix t h D is t r ic t S ta te s + 2 5 .5 + 1 0 2 .0 + 5 0 .6 A l l C o m m e r c ia l B a n k s + 1 4 .1 + 9 8 .7 + 4 5 .2 N ew Y o rk C h ic a g o C it y M e m b e r B a n k s M em b er B anks Source: Computed from data in R eports of Call, Federal Deposit Insurance Corporation. Expansion rates for New York and Chicago reserve city banks and other reserve city banks from data in Federal Reserve Bulletins. J U N E 1 9 66 June 10, 1959-June 30, 1965 funds. Holdings of tax-exempt securities of the money market banks increased rapidly, particularly after 1961, rising by 187 percent during the period under review. The ratio of such securities to total loans and investments of New York City reserve city banks doubled as a result. Chicago reserve city banks’ ratio increased somewhat more slowly, from 8.6 to 13.8 percent. Banks in the six District states increased their taxexempts by only 94 percent over the period, suggesting much less pressure for immediate employment of higher cost funds. On the other hand, these banks had started the period with a ratio of tax-exempts to total loans and investments of better than 10 percent and increased it to more than 12 percent. In short, banks in this region had already been quite active as intermediaries in channeling savings flows into state and local government uses, partic ularly in smaller communities. Two especially noteworthy developments were the reg ulatory upgrading for bank participation of a significant number of “authority or revenue” issues and the growing size of general obligation issues from this region. Ex panded bank underwriting interest had the effect of sub stituting national groups of bidders for this region’s local or intraregional groups. Banking resources of this region could thus be shifted to more aggressive search for under writing or purchase of smaller issues which previously had severely limited interest. The contrast in expansion of real estate loans among the all-bank group, money market banks, and District banks was most outstanding among major uses of banks’ increasing funds flow. As in the case of tax-exempts, the money market banks expanded their real estate loans sharply in the period. This development was all the more remarkable in view of the absence of many forms of mar keting mortgage debt which had existed in earlier periods. Banks in the six District states expanded conventional residential mortgage holdings somewhat less than did all U.S. banks. Comparative growth in nonresidential mort gages was also less. On the other hand, District banks increased their holdings of FHA and VA mortgages at a much higher rate than did all banks. Rapid growth of mortgage debt during the early sixties and the continued pressure of investable funds suggested a growing opportunity for banks. Many large banks be came buyers of government underwritten mortgages for their own portfolios. They also broadened construction lending and warehousing of real estate loans with cor respondent banks. Mortgage companies found that some commercial banks were becoming better customers for their export of mortgage originations but others were com peting with them in the mortgage banking business. As a part of the effort to broaden their role as inter mediaries, a number of banks purchased well-established mortgage companies. Other banks, already active in the mortgage banking business, expanded their operations. Still others sought to expand their mortgage departments and enter mortgage banking gradually. Newcomers, how ever, found that this highly competitive field was difficult and expensive to penetrate. Precise measurements of the changing role of commer cial banks in the mortgage banking field of intermediation •4. . c o n tin u e d o n p a g e 4 6 Florida’s Profile Floridians added another billion dollars to their personal income in 1965. “What’s another billion dollars?” you ask. It does seem rather unimpressive when the nation’s economy is cranking out more than $700 billion of goods and services this year. Nevertheless, this $1-billion in crease raises total personal income in Florida to over $14 billion— almost twice the state level just ten years ago. Moreover, the rate of increase in personal income, which quickened in the latter half of 1965, seems to be main taining its gain through the first three months of this year, indicating that 1966 will see at least another $1billion increase. Where does the money come from? Although it is often said that you can’t get rich working for a living, it is still by far the most common way of gaining income. Where the money comes from, therefore, is reasonably well de picted by employment data. In the accompanying table, we have shown the percentage distribution of nonfarm employment, by type, for the United States, Florida, and selected areas within the state. Looking at the slightly Star F t. L auderdaleH o lly w o o d M a n u fa c t u r in g M in in g C o n s t r u c t io n T r a n s p ., C o m ., P u b . U t il. T ra d e W h o le s a le R e t a il F i n . , I n s ., R e a l E s t a t e Jacksonville M ia n 1965 1960 1965 1960 1965 1 1 0 .7 1 0 .7 1 3 .8 1 4 .4 1 5 .0 I — — — — — 1 3 .3 1 4 .7 6 .8 8 .3 6 .3 5 .7 6 .0 1 0 .4 1 0 .3 1 0 .4 1 2 9 .0 2 9 .4 2 8 .3 2 8 .3 2 7 .3 1 3 .9 3 .8 9 .6 9 .6 7 .1 2 5 .1 2 5 .6 1 8 .7 1 8 .7 2 0 .2 7 .1 8 .2 9 .0 9 .7 6 .9 1 4 .8 1 3 .2 2 1 .5 i S e r v ic e s , M is c . 1 9 .2 1 6 .5 G o vern m e n t 1 5 .0 1 4 .5 1 6 .9 1 5 .8 1 2 .6 ] 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1( T R a te o t a l o f U n e m p lo y m e n t (M a rch 1966— not s e a s o n a lly a d j u s t e d ) 2 .5 2 .4 S o u r c e : F l o r i d a I n d u s t r ia l C o m m is s io n , F l o r i d a S t a te E m p lo y m e n t S e r v ic e . 2 .5 Orlando and Brevard County, two areas currently under going rapid economic expansion. Trade and services, two types of employment which play a declining, yet prominent, role in the economies of Miami and West Palm Beach, increased their shares of employment in Orlando and Pensacola. In Jacksonville and Tampa-St. Petersburg, also “industrialized” areas by Florida standards, small declines in the percentage of persons employed in manufacturing and construction have been counterbalanced by increases in the relative impor tance of services and government employment. What are the results of these gyrations? To repeat, the relative shares of various types of employment have changed little in Florida in the past five years, indicating that the state is depending to a large extent upon her tradi tional income producers. But within the framework of this dependence is the willingness and ability of her major centers to change— to evolve and adapt. Cities which have heretofore not attracted tourists in great numbers are promoting their natural resources. Areas which have long been prime tourist and retirement areas are expanding their economic bases to include more manufacturing. In the last five years the state has undergone some sig nificant changes, many of which were prompted by a slow down in the rate of population increase. (The average an nual increase in population in this decade has been less than one-half that of the 1950’s.) What these changes have entailed varies with the section of the state, as we have illustrated. The degree of success is measured in part by the rate of unemployment, given on the bottom line of the table. Each area currently has a lower rate than the national average. This low rate of unemployment is one of the many factors contributing to Florida’s rising per sonal income. P a u l A. C r o w e darker portion of the table, one can compare the im portance of various types of employment in Florida and the U. S. It is easy to see that Florida has a much higher proportion of her workers engaged in construction, trade, and services and comparatively fewer people employed in manufacturing than the U.S. as a whole. These differences in the relative importance of em ployment types are certainly to be expected. But the sim ilarity of changes in the employment mix from 1960 to 1965, also shown by the table, may shatter a few illusions about the degree of change in Florida’s economy in the past five years. Note that the pattern of change is virtually the same in Florida as in the U.S. What of Florida’s heralded diversification? Her growing manufacturing? Her new trades and talents? In order to find these changes, one must look beneath the state totals to catch economic developments in the scattered metro politan areas. Here we find that there have been sizable shifts in several types of employment. Looking again at the table, this time at the slightly lighter area, we see that many offsetting changes in em ployment have occurred among the Standard Metropolitan Statistical Areas and other areas. A prime example is manufacturing. Note that, on average, manufacturing ac counted for about the same percentage of total nonfarm employment in Florida in 1965 as in 1960. However, the proportion of workers employed by manufacturing firms grew considerably in Miami and West Palm Beach, where manufacturing employment has generally been less impor tant. These gains were offset by declines in areas of heavi est manufacturing employment. Every area above the state average for manufacturing employment in 1960— Orlando, Pensacola, Tampa-St. Petersburg, Brevard and Polk Counties— experienced a decline in percentage of manufacturing workers. Decreases were most evident in Percentage Distribution of Nonfarm Employment ropolitan Statistical A reas O rlando O ther A reas Pensacola T am pa-St. Petersburg W. Palm Beach B revard C oun ty P olk C ounty Volusia County 965 1960 1965 1960 1965 1960 1965 I960 1965 1960 1965 1960 1965 1960 1 7 .7 2 0 .1 2 6 .1 2 6 .8 1 7 .6 1 8 .3 1 8 .4 1 4 .8 1 5 .1 2 0 .6 1 8 .0 1 8 .8 1 5 .8 — — 8 .8 8 .9 1 4 .6 8 .4 1 1 .3 9 .3 — — 8 .7 1 1 .7 i m'Mifp 5 .4 5 .6 2 9 .1 1 0 .2 — — — — — — 1 0 .4 1 2 .0 State of Florida U nited States 1965 1960 1965 1960 1 1 .1 1 5 .6 1 5 .7 2 9 .8 3 1 .0 — — 0 .6 0 .6 1 .0 1 .3 7 .0 8 .0 8 .5 9 .2 5 .3 5 .4 8 .2 9 .0 8 .0 1 0 .3 5 .5 6 .1 7 .1 7 .2 4 .9 5 .9 2 .9 3 .6 4 .3 5 .0 4 .8 6 .3 6 .9 7 .7 6 .7 7 .4 2 1 .3 2 0 .8 2 9 .3 3 0 .1 2 5 .5 2 8 .4 1 7 .0 1 7 .3 2 6 .3 2 7 .1 2 7 .1 3 1 .9 2 6 .5 2 7 .3 2 0 .8 2 1 .0 9 .8 9 .9 3 .7 3 .6 7 .1 7 .4 3 .6 4 .1 4 .0 3 .0 9 .9 9 .5 3 .0 3 .5 6 .5 6 .6 5 .4 5 .5 !0 .4 1 9 .2 1 7 .6 1 7 .2 2 2 .2 2 2 .7 2 1 .9 2 4 .3 1 3 .0 1 4 .3 1 6 .4 1 7 .6 2 4 .1 2 8 .4 2 0 .0 2 0 .7 1 5 .4 1 5 .5 6 .8 6 .2 3 .9 3 .8 6 .0 5 .8 6 .3 7 .5 3 .0 3 .0 5 .0 3 .9 6 .4 6 .6 6 .1 6 .2 5 .1 4 .9 6 .5 1 5 .4 1 0 .3 9 .6 1 6 .6 1 4 .8 1 8 .0 1 8 .1 2 9 .5 3 1 .9 1 2 .9 1 3 .9 2 2 .3 2 1 .2 1 7 .6 1 6 .6 1 4 .7 1 3 .6 4 .5 1 2 .1 2 4 .7 2 3 .9 1 5 .4 1 3 .5 1 6 .5 1 3 .3 1 7 .9 1 5 .2 1 3 .4 1 3 .1 1 6 .6 1 4 .9 1 8 .2 1 6 .7 1 6 .6 1 5 .4 > 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 1 0 0 .0 2.6 IIP! 3 .2 : s ; 2 .5 1.8 2.2 2 .5 4 .0 Debits to Demand Deposit Accounts D is tr ic t B a n k s In su re d C o m m ercial B a n k s in th e S ix th D istrict (In Thousands of Dollars) c o n tin u e d f r o m p a g e 4 4 are not available at this time. Judging from the continu ing decline in the share of bank originations of both home and project mortgages insured by FHA, however, it would appear that whatever net expansion has taken place has been through mortgage banking subsidiaries. Whither the “Banking Revolution”? Financial developments since mid-1965 suggest that some of the pressures for broadening the banks’ role as inter mediaries have lessened. Resurgence of corporate credit demand under a prolonged investment spending splurge, reversal of declining trends in defense spending, and continued high consumer credit demand have been more obvious. Expansion of banks’ total intermediary volume in familiar areas of credit allocation appears for the moment to have replaced pressures for growth in the variety of such services. Meanwhile, sharp growth in credit demands upon the money market banks, which pioneered the negotiable CD as a new form of intermedia tion, has left them with this powerful innovation for ex panding their share of a declining amount of uncom mitted corporate and other savings. Commercial banks in this District have in recent months experienced a growing competitive disadvantage in holding corporate funds represented by negotiable CD’s, as credit demands and interest rates have risen. Some Dis trict banks which had issued this type of intermediary claim have recently intensified their use of the consumer savings certificates. There is some suggestion that wider use of these intermediary claims is a defensive one, operat ing as a means of shifting pressures in the large CD mar ket to less competitive banks and nonbank depositary institutions. On balance, it is clear that a number of banks in this District have broadened their roles as capital market intermediaries. It appears that pressures for further in novations in their offerings of “financial assets savers want” and in developing new uses for funds have subsided. Judicious allocation of a savings supply inadequate to meet all credit demands is now the prime requisite of a growing region, as it is for the whole economy. Reshaping of total financial flows to fit a reduced margin of real re sources not fully employed need not result in unwarranted pressures on particular sectors or types of institutions. H i r a m J. H o n e a B a n k A n n o u n c e m e n ts F a r m e r s A n d M e r c h a n t s B a n k , A s h fo r d , A la b a m a , a n o n m e m b e r b a n k , b eg a n to r e m it a t p a r o n M a y 1 f o r c h e c k s d ra w n o n it w h e n re c e iv e d fr o m th e F e d e r a l R e se rv e B a n k . T h e O n M a y 16 , th e U n i t e d N a t i o n a l B a n k , C o c o a B e a ch , F lo rid a , a c o n v e r sio n o f th e C o c o a B e a c h S t a t e B a n k , o p e n e d f o r b u sin ess as a m e m b e r b a n k a n d beg a n to r e m it a t p a r. O fficers in c lu d e O . J. M o o n e y h a m , Jr., C h a irm a n a n d P re sid e n t; E . L . J o h n so n , Jr., E x e c u tiv e V ic e P re sid e n t; A . L o r iz , V ic e P re sid e n t; a n d E . C h a m a s, C a sh ier. C a p ita l a m o u n ts to $ 3 7 5 ,0 0 0 , a n d su rp lu s a n d o th e r c a p ita l fu n d s, $ 3 9 7 ,0 6 1 . http://fraser.stlouisfed.org/ • 46 • Federal Reserve Bank of St. Louis Percent Change Year-to-Date 4 months Apr. 1966 from 1966 Mar. Apr. from 1966 1965 1965 Apr. 1966 Mar. 1966 Apr. 1965 STANDARD METROPOLITAN STATISTICAL AREASf Birmingham . . . 1,440,410 Gadsden . . . . 60,077 Huntsville . . . 166,282 Mobile . . . . 502,260 Montgomery . . . 280,437 Tuscaloosa . . . 85,263 1,419,645 63,298 176,512 464,588 293,613 89,107 1,258,211 6 0,696 177,125 435,455 247,804 78,986 +1 —5 —6 +8 —4 —4 +14 —1 —6 + 15 + 13 +8 +15 +7 +1 +11 +12 +15 653,432 1,303,839 2,085,729 464,808 198,716 629,214r l,4 9 7 ,4 0 8 r 2,230,660r 508,722 203,853 556,642 1,175,450 1,886,192 457,633 194,247 +4 — 13 —7 —9 —3 +17 +11 +11 +2 +2 +15 +21 +12 +7 +3 1,192,960 510,615 1,244,407 489,121 1,101,273 398,245 +8 +28 +10 +20 84,415 4,175,897 235,365 189,314 215,457 245,249 100,756 4,360,169r 234,781 210,804 221,325 262,999 87,728 3,718,872 162,888 182,944 198,131 224,083 —4 +4 — 16 —4 +0 — 10 —3 —7 —4 +12 +44 +3 +9 +9 +7 +13 +42 +5 +6 +13 . . . . 481,918 111,304 137,754 2,286,063 557,256 119,309 121,942 2,591,169 419,528 110,962 124,091 1,992,229 — 14 —7 +13 — 12 + 15 +0 +11 +15 +17 +16 +13 +17 547,402 591,119 +14 553,008 427,096 1,230,926 576,532 426,513 1,385,952 480,399 502,852 402,742 1,292,563 —7 Chattanooga . . . Knoxville . . . . Nashville . . . . —4 +0 — 11 +10 +6 —5 +16 +12 +9 +13 OTHER CENTERS Anniston . . . . Dothan . . . . S e lm a ...................... 60,982 56,603 41,513 61,953 57,279 40,974 53,206 47,926 33,602 —2 —1 +1 +4 —1 —9 +10 + 15 + 18 +24 +13 +12 +20 +19 +6 +8 +13 +10 +12 +15 +9 +16 + 10 +7 + 11 +6 +17 +12 +8 +2 +6 —0 +14 +9 +15 +11 +12 +19 +14 +12 +14 +7 +7 +14 —3 —5 +14 +6 +15 +16 +8 +11 +8 +10 +8 +5 +6 +7 +16 +16 Ft. Lauderdale— Hollywood . . Jacksonville . . . M ia m i..................... Orlando . . . . Pensacola . . . Tampa— St. Petersburg W. Palm Beach . . Albany Atlanta Augusta Columbus . . . . . . . . . . . . . . . . Savannah . . . . Baton Rouge Lafayette . Lake Charles New Orleans . Jackson . . . . . . . . Bartow . . . . Bradenton . . . Brevard County . . Daytona Beach . . Ft. Myers— N. Ft. Myers Gainesville . . . Monroe County . . Lakeland . . . . Ocala ..................... St. Augustine . . St. Petersburg . . Sarasota . . . . Tallahassee . . . T a m p a..................... Winter Haven . . 40,110 57,340 204,024 87,896 38,518 57,987 224,956 80,088 33,694 53,986 188,674 77,582 79,715 77,225 34,283 123,083 54,581 20,456 309,557 113,953 111,164 642,361 62,898 78,011 78,109 38,202 128,309 59,540 21,308 316,121 111,596 112,939 684,113 68,664 68,686 70,290 32,076 110,728 51,545 17,447 276,336 105,732 109,317 604,857 63,185 A th en s...................... Brunswick . . . Dalton . . . . Elberton . . . . Gainesville . . . G riffin ..................... LaGrange . . . . Newnan . . . . R o m e ..................... Valdosta . . . . 66,070 37,347 80,178 14,570 73,245 30,722 22,530 28,816 66,068 46,882 70,140 38,616 89,949 13,688 56,443 31,449 25,159 25,965 71,196 50,823 59,970 38,501 89,581 10,847 62,903 26,121 21,205 23,924 60,351 43,654 —3 — 11 +6 +30 —2 — 10 +11 —7 —8 Abbeville . . . . Alexandria . . . B unkie..................... Hammond . . . . New Iberia . . . Plaquemine . . . Thibodaux . . . 9,995 107,820 5,718 34,662 33,678 9,751 22,636 11,111 112,659 5,462 33,121 34,953 9,776 22,005 8,913 99,910 5,061 32,619 31,107 7,963 18,350 — 10 —4 +5 +5 —4 —0 +3 +10 —3 — 10 +34 +16 +18 +6 +20 +9 +7 +12 +8 +13 +6 +8 +22 +23 Biloxi-Gulfport . . Hattiesburg . . . L a u re l..................... Meridian . . . . Natchez . . . . Pascagoula— Moss Point . . Vicksburg . . . . Yazoo City . . . 91,327 50,483 34,402 63,890 35,741 89,228 52,534 35,915 61,385 35,443 77,458 44,456 34,666 57,102 30,347 +2 —4 —4 +4 +1 + 18 +14 —1 +12 +18 +18 +15 +9 +9 +13 48,899 39,012 30,934 51,031 39,342 24,185 45,022 33,834 21,146 —4 —1 +28 +9 +15 +46 + 16 +17 +20 Bristol . . . . Johnson City . . . Kingsport . . . . 68,302 70,860 135,737 68,765 71,520 162,646 62,051 62,752 120,333 —1 —1 — 17 +10 +13 + 13 +13 +12 +13 28,827,762r 25,080,576 3,569,158 3,230,375 9,097,087r 8,008,905 7 ,006,132r 6 ,055,684 4,156,093 3,329,399 1,260,386 1,069,107 3,738,906 3,387,106 —5 +9 +11 +8 +11 +13 +15 +3 +13 +12 +12 +12 +16 +16 +12 SIXTH DISTRICT, Alabama# . Florida# . . . Georgia# . . . L o u isian a^ . M ississippi^ Tennessee^f . Total . . . . . . . . . . 27,438,786 3 589,923 8,643,791 6,729,114 3 ,750,206 1,234,614 3,491,138 +2 —1 — 10 —4 —8 —2 +2 —2 —6 —8 — b +1 —5 —4 — 10 —2 —7 ♦Includes only banks in the Sixth District portion of the state. fPartially estimated. ^Estimated. r-Revised. M ONTHLY R E V IE W S ix t h D i s t r i c t S t a t is t ic s Seasonally Adjusted ( A ll d a t a a re Latest Month (1966) in d e x e s , One Month Ago 1 9 5 7 -5 9 Two Months Ago C r o p s ................................................ L iv e s to c k .......................................... Instalment Credit at Banks, *(Mil. $) New L o a n s * * * ................................ R ep ay m en ts* * * ................................ 1 0 0 , u n le s s in d ic a t e d o t h e r w is e .) Latest Month (1966) One Month Ago INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Manufacturing P a y r o l l s ................................ Farm Cash Receipts ..................................... Mar. 10,036 Apr. 185 Mar. 150 9 ,937r 182r 145 9 ,871r 183 153 PRODUCTION AND EMPLOYMENT Nonfarm E m ploym ent..................................... M a n u f a c tu r in g ........................................... N o n m an u factu rin g ..................................... C o n s tru c tio n .......................................... Farm E m p lo y m e n t.......................................... Insured Unemployment, (Percent of Cov. Emp.) Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr. Apr. Apr. Apr. Apr. Apr. Apr. 130 127 132 142 58 1.1 41.6 130 127 131 143r 62 1.3 41.3r 129 127 130 142 62 1.5 41.4 123 120 125 133 64 1.8 41.1 FINANCE AND BANKING Member Bank L o a n s ..................................... Member Bank D e p o s i t s ................................ Bank D e b i t s * * ................................................ Apr. Apr. Apr. 247 191 200 251 188 196 243 187 190 205 166 172 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Mar. Manufacturing P a y r o l l s ................................ Apr. Farm Cash Receipts ..................................... Mar. 8,036 165 137 7,967r 159r 142 7,821r 162 144 7,231 150 110 One Year Ago Two Months Ago One Year Ago GEORGIA SIXTH DISTRICT INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) = Mar. 52,828 Apr. 182 Mar. 150 Mar. 158 Mar. 152 Apr. Apr. PRODUCTION AND EMPLOYMENT Nonfarm E m p lo y m en t..................................... Apr. M a n u f a c tu r in g ...........................................Apr. A p p a re l..................................................... Apr. C h e m ic a ls ................................................ Apr. Fabricated M e t a l s ................................ Apr. F o o d ...........................................................Apr. Lbr., Wood Prod., Furn. & Fix. . . . Apr. P a p e r ..................................................... Apr. Primary M e t a l s ..................................... Apr. T e x tile s ..................................................... Apr. Transportation Equipment . . . . Apr. N o n m an u factu rin g ..................................... Apr. C o n s tru c tio n ...........................................Apr. Farm E m p lo y m e n t...........................................Apr. Insured Unemployment, (Percent of Cov. Emp.) Apr. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr. Construction C o n tr a c ts * ................................ Apr. Residential ................................................Apr. All O t h e r ..................................................... Apr. Electric Power P r o d u c t i o n * * ..................... Apr. Cotton Consumption** ................................Apr. Petrol. Prod, in Coastal La. and Miss.** . Apr. FINANCE AND BANKING Member Bank Loans* All B a n k s ..................................................... Apr. Leading C i t i e s .......................................... May Member Bank Deposits* All B a n k s ..................................................... Apr. Leading C i t i e s ...........................................May Bank D e b i t s * / * * ...........................................Apr. 52,390r 181r 147 151 147 50,893r 181 144 143 140 47,402 164 124 145 118 287 249 292 233 273 222 256 217 130 130 159 123 143 130 130 159 123 143 113r 104 129 130 159 123 142 113 105 123 113 103 168r 130 132r 71 113 103 166 129 132 71 41.8r 170 184 157 134 119 192 42.0 132 145 137 134 115 200r 111 104 113 114 103 168 130 128 67 1.6 41.7 152 164 143 140 118 191 230 111 1.8 112 2.2 122 150 117 130 107 100 108 111 99 146 123 119 73 2.4 41.6 181 174 188 128 115 175 210 210 211 226 199 184 174 159 188 173 157 180r 171 155 176 155 146 164 229 8,974 164 120 LOUISIANA PRODUCTION AND EMPLOYMENT Nonfarm E m ploym ent..................................... M a n u f a c tu r in g ........................................... N o n m an u factu rin g ..................................... C o n s tr u c tio n ........................................... Farm E m p lo y m e n t.......................................... Insured Unemployment, (Percent of Cov. Emp.) Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr. Apr. Apr. Apr. Apr. Apr. Apr. 119 111 121 140 69 2.4 42.5 120 112 121 146 72 2.4 4 2 .6r 119 112 121 145 65 2.7 43.5 112 106 114 107 69 3.1 41.6 FINANCE AND BANKING Member Bank L o a n s * ..................................... Member Bank D e p o s its * ................................ Bank D e b i t s * / * * .......................................... Apr. Apr. Apr. 209 151 168 205 150 166 204 149 153 179 136 143 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Mar. Manufacturing P a y r o l l s ................................ Apr. Farm Cash R e c e i p t s ..................................... Mar. 4,036 202 155 4,050r 200r 168 3,784r 197 170 MISSISSIPPI ALABAMA INCOME AND SPENDING Mar. Personal Income, (Mil. $, Annual Rate) Apr. Manufacturing P a y r o l l s ................................ Apr Farm Cash R e c e i p t s ..................................... Mar. 7,155 168 153 7,078r 169r 154 6,821 169 154 6,491 158 119 PRODUCTION AND EMPLOYMENT Apr. Nonfarm E m ploym ent..................................... Apr Apr. M a n u f a c tu r in g .......................................... Apr N o n m an u factu rin g ..................................... Apr Apr. Apr. C o n s tr u c tio n .......................................... Apr Farm E m p lo y m e n t.......................................... Apr. Insured Unemployment, (Percent of Cov. Emp. Apr. Apr. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . 120 119 121 126 69 2.0 41.8 121 120 121 126r 66 2.2 42 .l r 120 120 121 126 71 2.6 42.3 116 114 117 124 76 2.5 42.2 213 173 184 218 173 169 216 174 168 194 155 158 FINANCE AND BANKING Apr. Apr. Apr. INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Mar. 15,214 206 Manufacturing P a y r o l l s ................................Apr. Farm Cash Receipts ..................................... Mar. 161 FINANCE AND BANKING Member Bank L o a n s ..................................... Apr. Member Bank Deposits ................................Apr. Bank D e b i t s * * ................................................Apr. PRODUCTION AND EMPLOYMENT Nonfarm E m ploym ent..................................... M a n u f a c tu r in g .......................................... N o n m an u factu rin g ..................................... C o n s tr u c tio n .......................................... Farm E m p lo y m e n t.......................................... Insured Unemployment, (Percent of Cov. Emp.) Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr. Apr. Apr. Apr. Apr. Apr. Apr. 131 142 126 140 59 1.7 41.7 131 143 126 139 64 2.2 4 1 .7r 130 143 125 137 64 2.6 41.6 125 133 122 133 62 2.8 41.2 FINANCE AND BANKING Member Bank L o a n s * ..................................... Member Bank D e p o s its * ................................ Bank D ebits*/** . ...................................... Apr. Apr. Apr. 277 209 198 268 210 190 263 206 184 213 165 164 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Mar. Manufacturing P a y r o l l s ................................ Apr. Farm Cash Receipts ..................................... Mar. 8,351 180 136 8,345r 178r 124 8,211r 177 129 7,513 157 112 TENNESSEE FLORIDA PRODUCTION AND EMPLOYMENT Nonfarm E m ploym ent..................................... Apr. M a n u f a c tu r in g ...........................................Apr. N o n m an u factu rin g ..................................... Apr. C o n s tr u c tio n ...........................................Apr. Farm E m p lo y m e n t.......................................... Apr. Insured Unemployment, (Percent of Cov. Emp.) Apr. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr. 3,638 177 130 15,013r 207r 147 14,385r 209 119 140 140 140 108 90 1.3 42.2 141 142 140r 115 90 1.3 42.4 140 142 140 116 94 1.5 42.7 232 174 184 228 173 174r 223 171 175 13,555 191 140 96 1.9 42.6 PRODUCTION AND EMPLOYMENT Nonfarm E m p lo y m en t..................................... M a n u f a c tu r in g ........................................... N o n m an u factu rin g..................................... C o n s tr u c tio n .......................................... Farm E m p lo y m e n t.......................................... Insured Unemployment, (Percent of Cov. Emp.) Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr. Apr. Apr. Apr. Apr. Apr. Apr. 131 138 128 154 70 1.9 41.3 131 138 127 156r 78 2 .2 41 .5 r 130 137 127 155 79 2.8 41.4 122 126 120 140 80 3.0 41.0 204 155 163 FINANCE AND BANKING Member Bank L o a n s * ..................................... Member Bank D e p o s its * ................................ Bank D e b i t s * / * * .......................................... Apr. Apr. Apr. 228 171 201 225 168 196 226 166 183 199 157 186 133 133 133 111 *For Sixth District area only. Other totals for entire six states. **Daily average basis. ***Adjusted to benchmark data from June 1964, Dec. 1964, and June 1965 call reports. r-Revised. Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U. S. Dept, of Labor and cooperating state agencies; cotton consumption, U. S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U. S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. http://fraser.stlouisfed.org/ J U N E 1966 Federal Reserve Bank of St. Louis • 47 • DISTRICT BUSINESS CONDITIONS - Boom conditions imposed strains on the District’s economy in April. Labor shortages held back nonfarm job gains, as insured unemployment dropped to 1.6 percent. Higher social security taxes and stepped-up in come tax withholding restrained consum er spending. Stiffer mortgage conditions reduced the volume of residential construction contracts and curtailed used home sales. Bank credit declined at banks in leading cities, as reductions in investm ents far exceeded m oderate increases in loans. Heavy rains reduced crop prospects in many sections of the District. ys o Nonfarm payrolls added only 25,000 workers and thus did not achieve the expected seasonal increase for April. The all-time low of District in sured unemployment indicates a continued worker shortage. A sharp advance in average hourly earnings pushed manufacturing payrolls higher, despite a decline in seasonally adjusted employment and the average workweek. Most of the drop in manufacturing employment occurred in Florida’s food process ing industry. In the textile industry, recent wage increases should boost June wage earnings. » C o n s tr u c tio n C o n t r a c ts After rising substantially during the first quarter, consum er spending in the District apparently m oderated somewhat in April and May. Retail sales of both durable and nondurable goods increased sharply during March; de creased District automobile sales in April and early May point to a slowdown in total retail sales, however. Major factors in the leveling off of consumer spending include higher social security taxes and the stepped-up rate of income tax withholding. Residential construction contracts declined; costs of mortgage money rose further; and lending term s were tightened. Nonbank depositary insti tutions in most major mortgage markets experienced sharp reductions in net funds available in April and May. Decreased consumer savings flows, height ened bank competition, and increased direct investments in securities markets appear to have been major causes of these declines. Nonresidential construc tion has not yet been greatly affected by less available mortgage money, but costs of new commitments have risen sharply and some plans have been can celed or deferred. Mortgage commitment backlogs have been substantially reduced in a number of District cities. F o rm C a s h R e c e ip t s - P E R C E N T O F R E Q U IR E D R E S E R V E S B o r r o w in g s fro m F. R. B a n k s _ E x c e ss R e se rv e s J /V 4 2 2-1 ....... _ / » ' f !J 1 9 6 .3 1964 1965 ♦Seas. adj. figure; not an index. t..!..l. J..J........ 1966 A decline in loans to consum ers, coupled with a very m oderate in crease in business loans, resulted in reduced gains in loans at banks in leading cities during May. Real estate loans advanced considerably more than in previous years, but these increases were concentrated in a few areas. Despite the slower pace of loan expansion, these banks continued to reduce investments, primarily short-term U. S. Government securities. May increases in total time deposits were well below those of 1964 and 1965. iS \S Heavy rains in many sections of the District created poor crop condi tions. Excess moisture has delayed the completion of planting activities and forced some farmers to replant large acreages. Furthermore, weed control op erations have been hampered. April prices received for most livestock and livestock products, though still well above last year, were down from the March level. These higher prices, combined with a larger volume of marketings, have pushed District cash receipts well above last year’s record level. N o t e : D a t a o n w h ic h statem ents are b ased h ave been adjusted whenever p o ssib le to elim in ate se aso n al influences.
@FedFRASER