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In t h i s i s s u e : T h e D i s c o u n t R a te : P ro b le m s a n d R e m e d ie s W h a t 's in S t o r e f o r B a n k C r e d i t C a r d s in t h e S o u t h e a s t ? D is tr ic t B a n k in g N o t e s D is tr ic t B u s in e ss C o n d i t i o n s The Discount Rate: Problems and Remedies b y W illia m N. C o x , III W h e n the Fed c h a n g e s its d is c o u n t rate, h e a d lin e s app ear. S to c k b r o k e r s' te le p h o n e s ligh t up, a n d fin a n c ia l p u n d its a ro u n d the c o u n try vie to ana ly z e w h y the c h a n g e o c c u rre d a n d w h a t it p orte n d s. In v e sto rs b u y a n d sell se cu rities in re sp o n se to the Fed's a n n o u n c e m e n t, c h a n g in g p rice s an d in v e stm e n t yie ld s. In o th e r w o rd s, d is c o u n t rate c h a n g e s m a k e w a v e s in fin a n c ia l m arkets. W e call the se w a v e s "a n n o u n c e m e n t e ffe c ts." In o n e sense, all the stir s o u n d s silly. T h e o n ly b o rr o w e rs w h o a ctu a lly p a y the d is c o u n t rate are a fe w m e m b e r b a n k s w h o h a p p e n to be b o r r o w in g fro m their D istric t Federal R ese rve Bank. T h e Fed can so m e tim e s be an im p o rta n t so u rc e o f fu n d s to an in d iv id u a l ban k, o f cou rse. Bu t if w e lo o k at the n u m b e r o f b a n k s a n d the a m o u n t o f fu n d s in v o lv e d , a n d if w e v ie w the m in the c on tex t o f o ve ra ll b a n k in g activity, then b a n k b o r r o w in g fro m the Fed a p p e a rs relatively in sig n ifica n t. O n a typ ica l day, 1/100 o f the n a tio n 's b a n k s m ig h t be b o r r o w in g an a m o u n t e q u a l to 1/1000 o f the n a tio n 's d e p o sits. In term s o f w h o is affected a n d b y h o w m u c h , the a n n o u n c e m e n t effects se e m u n w arran ted . A n n o u n c e m e n t Effects Yet, each d is c o u n t rate c h a n g e d o e s c a u se a stir, a n d fo r g o o d rea son : T he Federal R ese rve S yste m a d m in iste rs m o n e ta ry p o licy . It exerts a stro n g in flu e n c e o n the a v a ila b ility o f m o n e y , o n the ge n e ral level o f interest rates, a n d e v e n tu a lly o n the t e m p o o f in c o m e a n d p ro d u c t io n t h r o u g h o u t o u r e c o n o m y . B e ca u se a d is c o u n t rate c h a n g e is a s im p le p u b lic a n d d e fin ite a ctio n taken by the Federal R eserve S yste m at its o w n d isc re tio n , it is p erfectly natural for the p u b lic to v ie w the a ctio n as a sig n a l o f Fed p o licy . D is c o u n t rate c h a n g e s p r o v o k e a n n o u n c e m e n t effects b e c a u se o f who c h a n g e s the rate. C u s t o m has re in fo rce d the a n n o u n c e m e n t effects. T h e Federal R ese rve has so m e tim e s u se d c h a n g e s in the d is c o u n t rate to te le gra p h c h a n g e s in m o n e ta ry p o licy . B a ck in A p r il 1969, fo r e x am p le , the Fed u se d a V 2-p e rc e n t d is c o u n t rate increase to e m p h a siz e a p o lic y o f re sistin g in flatio n . In that Monthly Review, Vol. LVII, No. 6. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. M O N T H L Y R EV IEW case an d d is c o u n t W h e n o th e rs, th e ra te p ro d u ce th e Fed r e s e m b le s neck: are a T h e re t im e s to in t o to w it h is w ay to th e th e th e th e in th e Fed w it h ch a n ge d fro m th e p re ss o n ly tw o s ig n a ls w e re r o u t in e . of is r o u t in e . rate sh o rt-te rm r a te s ix a n n o u n c in g w e re a ll w in d o w is is d is c o u n t a m b ig u o u s ly n o t?), a n d in b o th rate . by rate th e ch an ges p u b lic th e a m b ig u it y a d m in is t e r in g T h e e ffe c ts s ig n a l a so m e ob servers m e r e ly s h ift to o f in t h in k in t u r n m ay be th e F e d 's th e d is c o u n t a ch an ge b r in g th e lin e as a m b ig u it y ch an ge r is e crop s th e th e rate an d w h e n is If fo r th e T he Fed m arke t p o s in g its s ig n a l fo r th e to th e th e rate s m o re p o s in g d is c o u n t p u b lic in t r y in g rate . th e D is c o u n t R a te in th e s h o u ld th e d is c o u n t in te r e st rate s to th e ra te ra te s in th e b an k T reasu ry fa c e th e Fed. an d th o se w h en ch o o se s its o f th e se ve ra l w ays b a n k in g th e by th e b o rro w m e m b e r Fed has to D is c o u n t pay and rate s d o of s u p p ly th e is rate th e Fed. o n ly re se rve s w in d o w fro m if n ew is an a v a ila b le th e is of w h e th e r Fed or in flu e n c e d rate on and by o th e r m eet w h e n w h o d e s ir a b le to c lo s e ly lin e to in t h is th at rate of th a n v ie w is banks not th e ra th e r, th e banks N e v e r t h e le s s , even it w o u ld rate m arket ra te s, th e in t e r e s t be m o re if o n ly ad v an tage s w h en e ve r w it h t h is r e q u ir e m e n t s d is c o u n t a r is e c o s tly b u t, agre e b an k s' th a t b e co m e reason Fed rate , m o n e y lin e th e th e b o rro w . th e w it h o u t th at p o s itio n m e m b e r d is a d v a n t a g e s ge ts le s s fin d c o lla t e r a l keep e lim in a te it b e c o m e s d is c o u n t th e y ta k e e v id e n t w o u ld e c o n o m is ts fro m th e b o r r o w in g , se e m fu n d s argu e an d im p o r ta n t c o n t r o llin g w o u ld m o re th e how over in it w h en a d m in is t r a t iv e th o se is T h e y or d is c o u n t rate s in th e m a rk e t. a v a r ie t y s h o u ld are be o f re aso n s, c o n v in c e d ch an ge d c lo s e ly in F e d e ral lin e th e F e d eral M e c h a n is m , c o m p le t in g w it h a m o st d is c o u n t m o n e y S y s t e m 's o f agre ed th e fr e q u e n t ly w it h R e a p p r a is a l 1969, th e re fo re , th at m o re R e se rve A c h ie v in g an d rate kept m arket rate s. C o m m it t e e R e se rve on th e D is c o u n t c o m p r e h e n s iv e t h is m a x im u m m a in t e n a n c e a le v e l of to b o r r o w in g 2O pen market operations— purchases and sales of Government securities— are the most important. of r e la t io n s h ip la r g e ly o n o b je c t iv e s , to r e v ie w c o n c lu s io n : th e The c lo s e to re se rv e m arke t but rate s c lo s e r it in rate rate s on The t im e e x p e c te d h ig h e r fo r exact w ill d e p e n d and p o lic y th at r e la t iv e r e la t e d to th e p e r io d s o f r e s t r a in t a n d lo w e r rate ease . lin k a g e p r o b a b ly d u r in g of c a ll th e fo r p e rio d s d is c o u n t m o re at a lt e r n a t iv e c o n d itio n s be m ove c a lls c o n s is t e n t ly a d ju stm e n t. rate s a t a n y w o u ld w o u ld d is c o u n t rate s w ill e ffe c t iv e n e s s d is c o u n t cu rren t m o n e ta ry d is c o u n t rate to th e r e a s o n a b ly in s t r u m e n ts o n e ^ 'M o n e ta ry Policy and the U. S. Econom y in 1971," 58th Annual Report, 1971 (Washington D. C.: Board of Governors of (he Federal Reserve System, 1972), pp. 3-58. FEDERAL RESERVE BANK OF ATLANTA But s t a n d p o in t d is c o u n t d iv id e d so m e b o rro w m arket o ld u se s th e re d if f e r e n c e c h o ic e b o rro w e d a p p e a lin g n ot fro m in flu e n c e s fro m th e If sy ste m th e a n e w F e d 's m em b er d is c o u n t ban ks T he sp re ad a lt e r n a t iv e s , in sh o rt-te rm b o r r o w in g th e re fo re , to ban ks F ro m an d th e d iffe r e n t. re se rve s b o rro w A lth o u g h so u rc e T he th e se o th e r a lt e r n a t iv e b e tw e e n ban ks sy ste m ." ra te each c o n s id e r ra te s, le n d in g fu n d s fro m are rate h o w e ve r. m o re m arke t b e cau se to b e tw e e n E c o n o m is t s For k e e p in g o f m akes e ls e w h e r e . o ld fro m Fed, Fed, a n o th e r in t e n s iv e ly . th e The th e rate s. L in e w it h m o n e y y ie ld e d are th e th e y re se rv e s D is c o u n t w it h B a s ic a lly rate s sp re ad o th e r a m o u n t o f lin e F e d eral b ill T he co n ce rn e d re se rv e s T r e a s u r y s e c u r it ie s ) b an ks be an yw ay? (n o t a b ly b o rro w Fed bank, q u it e fro m sy ste m . it m any. fro m but ban k d is c o u n t fro m b a n k in g m o re am o u n t p o lic y , o b servers W h y th e b a n k in g m o n e y K e e p in g th e are b o rro w e d sp re ad m u st th is T o th e in b an k a m o n g re se rv e s tw o re se rv e s are p r e m iu m th e p e r s is t s , th e F e d 's re se rv e s b o rro w e d , u n p e r s u a s iv e . not in th e v ie w b o rro w th e w a ys. It m em b er in d iv id u a l th e in d is t in g u is h a b le , are m o n e tary m o re to sam e D o e s a o f e x is tin g any w it h in t e r e s t it a d m i n i s t e r s p r o b le m s th e is d o es r e s u lt. to b e cau se lin e ch an ge can are d is c o u n t to in te n d e d Fed v a r io u s re se rve s d is c o u n t in c o r r e c t ly a m b ig u it y as it m eant in be th e r e fu s in g th e M o re o ve r, a c c o m p a n y in g Fed in t e r p r e t rate . is p u rp o se ra te m ay s ig n a l. c o n fu s io n p o lic y ? p r o b le m s to an rate , r e s t r ic t iv e up d is c o u n t w it h o u t d is c o u n t m ean in t o a p o lic y or w e aken e d m e r e ly in re se rve s h o w e ve r: in d iv id u a l o f an so u rc e "o ld " to p r e s e n ts p r o b le m s a c t u a lly rate s, w h e r e a s rate s ig n a l in t e r p r e t in g o th e r in t e r p r e t e d in t e r p r e t e d it a ch an ge p o lic y keep ( Is an d a are o n e a c q u ir e th e T h u s, o n ly o f re se rv e s, can it e x p a n s io n e ffe c ts. s t a n d p o in t or to fo u r th e b o rro w "n e w " re se rve s o th e r re sp e ct, b o rro w ch an ges, an n o u n ce m e n t o n e in itia t iv e can p o in t be le a s t th e b an k b an k t im e s . J u d g in g in te n d e d p ro d u ce d e ffe c t at Fro m th e re in s ta n c e , th e se in at to in t e r e s t p o lic y . 1 T h e s ix ban ks. c lo s e ly 1 971, fo r u n iq u e w a n tin g It m o re d is c o u n t m o n e tary Y e t, m o re In ch an ge s but is h ap p e n s its an n o u n ce m e n t o th e r th e it p u rp o se . m ark e ts. r e le a s e s o f th e se o ve rt n o a th e aro u n d q u ie tly , se rv e s d is c o u n t n a t i o n 's u se d e ffe c ts. rate , c o w b e ll m o ve p u rp o se b r in g d is c o u n t a c la n g in g h o w e ve r, a lig n m e n t rate s th e co w n o d e lib e r a t e ly an n o u n ce m e n t ch an ge s w h en in t e n d e d ; m e r e ly has le a d S o m e t im e s , is Fed of rate fre q u e n t to r e la t iv e m arke t changes 95 in th e d is c o u n t rate ye ars. It is a c h ie v e d S y ste m by m o re and m o re w ill redu ce th e have th at a c t iv e e a s ie r d is c o u n t a ttach to m ade changes rate as th e in can c o m m u n ic a tio n u n p r e d ic t a b le o fte n been su ch becom e fre q u e n t w h ic h th a n b e lie v e d rate s ig n a ls re ason s, w it h in a d ju stm e n ts g iv e n c o n s t it u t e an d p a tte rn th e of o th e r d is c o u n t to e ffe c ts The c h a n g e .3 a d m in is t e r in g d iffic u lt ie s , e v id e n tly (1 ) It so m e th e a sy ste m s h o u ld o f d is c o u n t e lim in a t e e ffe c ts, in th e It s h o u ld an d th e of rem e d y rate th e a d m in is t r a tio n o b je c t iv e s : u n d e s ir e d have a n n o u n ce r o u t in e ch an ges ra te . th e F e d 's rate fo r a b ility th at in r e c o g n it io n d is c r e t io n a r y o b je c tiv e s ch an ge s is in p ro p o sal to th e u se to a c c o m p lis h s m a lle r d is c o u n t an d rate . th e m o re The ab o ve fre q u e n t r a t io n a le A s c lo s e a lig n m e n t d u r in g T he Fed to u ch th e w o u ld w it h d is c o u n t o b v io u s ly keep th e m o n e y ra te Le ss d is c o u n t m arket m o re redu ce d iffic u lt ie s . fr e q u e n t ly . th e F e d 's o b v io u s ly , rate rate s c lo s e ly by c h a n g in g T h is it w o u ld a ls o red u ce a n n o u n c e m e n t e ffe c ts. T h is is b e c a u s e , d is c o u n t co m e in fr e q u e n t ly d is c o u n t fo r so o n id e a ch an ge s p o lic y so in te r p r e te d or m ad e n o t, as t w ic e a ra th e r th a n t w ic e a ye ar, th at m o st of th e A s a be m ad e id e a s m a lle r o f any a p o lic y m o n th , th e p u b lic d id m o n e tary th e in s t e a d w o u ld m a k in g a ls o be th e w ay p o lic y so o n ch an ge s ch an ge s a d v a n ta ge s. ch an ge s in Fed o f e it h e r fo r can to u se a n n o u n c in g s ig n a ls If ch an ges c o u ld th at co m e to w e re r o u t in e be w e re u n d e rstan d in te n d e d an d to (W ashington D. C.: Board of Governors of the Federal Reserve System, 1971), I, 21-22. p re se n t an d m o re rate . "b a se Fed w o u ld o ve r th e e ffe c ts fo r by n ot m an y w it h o u t p re c e d e n t. c o u n t r y 's fro m r e c e n t ly p r im e to ad o p te d W it h have re ga rd on of p o lic y it o ve r p u b lic ly to th e th e m ake no m e c h a n ic a l s ig n a ls . been u rged ye ars. o f Fed, it , c o n tro l an n o u n ce m e n t has 20 B an k m o n e y w o u ld w o u ld th e N o r C an ad a, u se d la r g e a is t ie d to it th a t A m e r ic a n p ro ce d u re ra te ban ks se t th e ab o ve T re asu ry d id . th e ir an d are w id e ly rate c a n d id a t e m e c h a n ic a l, d is c o u n t rate s u b s t a n t ia l a T h is in b ase th e m ake o b je c t io n : a th e Sta te s, by an d at rate w h at th e a u c tio n fin a n c ia l th e it p re ss. b ill an rate . n o n d is c r e t io n a r y p r o p o s a l, is each kn ow n , to rate U n ite d a fte r e n o u gh fo r p ro p o sal ave rage p u b lis h e d e n o u gh la r g e th e th e d ay p u b lic iz e d w id e ly is in are th e m o st rate d is c o u n t b ills . H e re ave rage s its e lf fo r m u la , d is c o u n t sp re ad T he is s p e c ific s e ttin g 9 1 -d a y C a n a d a a u c tio n a it v ie w as t ie d D e p artm e n t to s in c e Se ve ral T re asu ry t ie d be ad h e re U n in te n d e d fo r a th e 1 -p e rc e n t q u o te d b ill to a ra te d is c r e t io n a r y s im ila r to o f a d v o ca te d or Bank b e tw e e n c o u ld to th e rate s. p ro p o n e n ts 2- a lo n g "t ie " d is c o u n t an y o f 1962. w o u ld an sw er c o n tin u e to sp re ad T he a n a lo g u e 1956 w h o m a r k e t -d e t e r m in e d p r o p o s a l; e c o n o m is ts ch an ges. ch an ges th o se s im p ly th e rate . rash ch a n ge s, o b v io u s n ot o th e r ch an ge s a rate s a g a in . u n in t e n d e d are a g r e e in g p u b lic rate is is d is a p p e a r , th e up rate m o st fo r m u la d is c o u n t of ch an ge s m arke t m o ve d fre q u e n t d id an d by f lu r r y ra te o u t. r e lin q u is h w o u ld T h is A an d in m a rk e ts e x p e r im e n t a t io n , T h e re co n sta n t rate " t h is m o n e y o f th e so m e m a in t a in e d . an n o u n ce d , V A in t e r e s t staye d d is c o u n t th e n r e le a s e m ad e m o n e y r e d u c in g p ro p o sa l to th e m o re o f fin d w as q u a rte r-p e rc e n t e x p e r im e n t ra te in p e r io d d u r in g p re ss rate d is c o u n t an d to a sh o rt-te rm th o u gh but N o v e m b e r s u c c e s s iv e by in n o an d e ffe c ts? us m arke t T he b r ie f se co n d a t t r a c tiv e R eappraisal of th e Federal Reserve Discount Mechanism to a n n o u n ce d fo llo w in g in v o lv e d w ay, in t e r e s t be even p r o m is e th e A But w e re s m a lle r th e m arket 96 F iv e r e d u c tio n rate s fu rth e r t h is th at o n e s. s m a lle r e x a m p le , w e re a q u a rte r- t r a d itio n a l ch an ge s For o f in rate th e se th e s m a lle r fro m d is c o u n t su b se q u e n t e n o u gh o fte n h a lf - p o in t in c r e m e n t s . w o u ld q u a rte r-p e rc e n t h a lf-p e r c e n t a ch an ges. to th e se ve ra l th a n h e lp as h a lf-p e r c e n t p u b lic o f q u a r t e r -p o in t ch an ge s p o lic y ch an ge s o ffe r r o u t in e is d is c o u n t A d o p t io n ra te fr e q u e n t ly in t e n d e d in is th e th e re have th e se f u lf ill se n se ch an ges ch an ge s m a k in g in c r e m e n t s . m atte r, c o u ld n o n -r o u tin e of d is c o u n t o n e s, m o re in c r e m e n ts do n e, fre q u e n t th e in c r e m e n ts , p o lic y are m o re m a k in g p r a c t ic a l m ad e th e d is c o u n t o f h a lf-p e r c e n t th at has r o u t in e r e a liz e w it h in o f p e rce n t th at p u b lic have r o u t in e . T he th at th e chan ge, in s t a n c e , c o m b in e d A th at rate ch an ge s B u t if c h a n g e s w e r e w o u ld w e re of rate w it h m o n th s, d is c o u n t u n in t e n d e d rate 1971. r e d u c tio n s p e r io d . d o w n h o w e ve r, w o u ld r a t e - a lig n m e n t h is t o r ic a lly , s ig n a l. fiv e argu e s im p le : in th is ch an ge s, fo r th e in t e n d e d , an n o u n ce m e n t is in s m a lle r m o n th s a c c o m p a n ie d o f rate s. A ll to For ch a n ge rem e d y w it h th e F e b ru ary e m p h a s iz in g D u r in g s p e c ific in each p u rp o ses. O n e to an d a p p e a lin g e x p e r im e n t e d ch an ge s th ro u gh m o ve d d is c o u n t fr e q u e n t ly an p e r io d , rate h e re to fo re in h ib it e d p reserve th e T o tw o w h ic h d is c o u n t a d ju st d iffic u lt ie s rate . a c c o m p lis h a c c o m p a n ie d (2 ) th e d is c o u n t s h o u ld m en t o f p o lic y . p ro p o sa l q u a rte r-p e rc e n t r e d u c tio n s w e r e th at c a p s u le d m o n e tary th e m o re o ffe rs Fed fre q u e n t R e m e d ie s have o f d iffic u lt ie s . 1970 W e rate in c r e m e n ts te n d s announcem ent a rece n t be n atu re h o w e ve r, S in c e a g iv e s o f th e r is e d is c r e t io n a r y M O N T H L Y REVIEW d is c o u n t rate can be p o lic y m a k e r s an d e c o n o m is ts up th at d is c r e t io n a u se fu l by t y in g a c c e p t a b le , a d is c o u n t ra te th e a b ilit y to o l d o w h e n th a t. o f to T he th e Fed to an its A d is c o u n t rate . th e h y b r id o f T h is t ie d rate w o u ld b e co m e a m o n e y in th e w it h m arke t t ie d - r a t e c o m p le t e pay th e su m b o r r o w in g d e c id e d d is c o u n t o f ra te w o u ld to ch a n ge an d th e w o u ld tw o p o lic y th e t im e s w it h b u t ju st as w o u ld th e to ta l to th e th is o th e rs w e r e q u ir e F ir s t, o n ly th e th re e a n t ic ip a t e d have is m o re d is c u s s e d , tw o Fed rate s rem e d y ch an ge s w o u ld r e g u la r ly in s t e a d b ase presen t o f rate , o n e: (2 ) have (1 ) in th e p o lic y an d co n ce rn s to tal rate , w o u ld b u t, f le x ib le - t ie o n have th e p r o p o s a l, fre q u e n t-c h a n g e s to p o lic y lik e id e a , m eet by o f rate o th e r th a n b e in g an d se t Fe d eral rate ch an ge s. T re a su ry c r it e r ia : in Each its o w n a d m in is t r a tiv e ly , q u ic k ly a v a ila b le o f th e se rate s o f th e d e v ic e s a to c o u ld be u se d b ase . T he rate d is c o u n t in c r e m e n ts . o f (B ill a w e eks th e ra te rate s p e rc e n t; b ase in s t e a d th e a th e th e o n ly are o f th e p e rc e n t, n o r m a lly e v e ry a tw o s u m m a r iz e d fiv e -w e e k Fe d eral in m o v in g e m p ir ic a l are b iw e e k ly ra te s w e e ks. ch an ge d w h ic h is q u o te d fu n d s rece n t be c a lm fir s t q u a rte r- th a t a s im p le m ig h t rate to u se a s im p le w e e k ly ch a n ge d in d a ily .6 O u r o f v o la t ile d is c o u n t Fe d eral be or r e s u lts an d q u a rte r c o u ld in d ic a t e s average rate , q u o t e d o f rate A p p e n d ix , m o v in g o ve r o f w e e k ly in v e s t ig a t io n , in rate m o re th e d is c o u n t t ie d are lik e th e on o fte n separate d e m a n d F in a lly , not rate . th e th e o b v io u s an d se ve ra l an d to an d is t o d is c u s s io n s n o w w id e ly is th e d is c o u n t rate s u p p ly b o th h u n d re d th s fu n d s in c r e m e n ts r e a s o n a b le fo rm u la . th e th e R e c a p it u la t io n s m a lle r - a n d -m o r e - ap p e a rs to o ffe r an T o a p p e a lin g b ase o f w o u ld is its e lf in s ix t e e n t h s . ) T h e s e c o n d sp re a d .4 T h u s, th e rate average spre ad , fo c u s, rate h o w e ve r, th a n th at b e t t e r a lt e r n a t iv e . e lim in a t e fu n d s se ve ra l m o ve p e rc e n t p u b lic ly (3 ) t h e t o t a l d i s c o u n t r a te . S e c o n d , p o l i c y m ove, to an n o u n ce th e th e o b se rv e rs w o u ld m o n e y p ro ce d u re s. to m an y m o ve m e n ts c o m p lic a t e d b a n k in g in te r e s t d e lib e r a t e its a d o p t i o n in fu n d s fu n d s s t ill is w i d e l y rate , d e c id e d a m arke t e ffe c ts rath e r A lth o u g h p r o v o k in g an d th e m ,5 so be t ie d . p u b lic . spre ad , e ffe c ts, a ls o each th a n u n a m b ig u o u s . A lth o u g h an d w h en co m p o n e n t, ty in g Fe d eral m ark e ts, se t Fed Fed Fe d eral be rate . h o w e ve r, w it h m o n e y w o u ld is d e t e r m i n e d th e th e a n n o u n ce m e n t a c t io n s , ra te ra te m ig h t b ill as a b a ro m e te r o f o th e r F e d eral R e se rv e p o lic y w h e n w it h o u t W h e n sp re ad t ie d b ase th e m ig h t F e d eral fu n d s b ill of its a l i g n m e n t w i t h th e th e rate th e the as in t e r p r e t e d su m b ase ch a n ge d an n o u n ce m e n t B anks th e ch an ged , have p re se n t, B o th rate u se d have A lth o u g h in t o in fle x ib ly Fed. p o lic y m o ve e ffe c ts. be ra te co m p o n e n ts th e ra te s, 1962. fo r m u la th e A t re ga rd e d policy spread, a by p r e s e r v in g in t e r e s t rate (2 ) Fed. ch a n ge an n o u n ce m e n t th e re th e se th e to a u t o m a t ic a lly m ark e t an d d is c r e tio n fro m n o t in te r e s t case, A t Bank C a n a d a Fe d eral fu n d s p ro ce d u re , th e base rate, a th e d is c o u n t o f p r a c t ic e s can n ot an d f le x ib le - t ie th e B an k th e e s s e n t ia lly th e th e to is d is c o u n t a (1 ) in t ie d U n d e r co m p o n e n ts: d is c r e t io n a r y rate w h ic h T he T im e s re m e d y, h o w e v e r: rate . d is c o u n t to g iv e p reserve cau sed a d m in is t e r e d tw o be T o e x p e r im e n t m o d if y a c c e p t a b le rate . t ie d w h at le a d s u s t o a t h ir d to so m e to rate a s a to . w as ab a n d o n p r o b le m a tte m p t w a n ts o b je c t io n flexibly tied th e an th e t o o l, r e lu c t a n t re m e d y s h o u ld u se th e d is c o u n t T h is C a n a d a p o lic y are su m m atte rs up, w e have n o te d th a t d is c o u n t r e m e d y to t h e d iffic u lt ie s o f th e d is c o u n t rate ch an ge s are o f tw o typ e s: (1 ) r o u t in e ch an ges rate . m ad e O n e q u e s t io n ab o u t th e f le x ib le - t ie h o w e ve r: H o w s h o u ld th e b ase rate T h e s p e c ific an sw e r n ot c r it ic a l, p r o v id e d to th is sh o rt-te rm ch an ge s p r o b a b ly th e m e e ts w h ate v e r e n te rs c e r t a in m o n e y in t o th e c r it e r ia . m arke t b ase ra te ra te T o (o r b e g in gro u p c a lc u la t io n , be r e p r e s e n t a t iv e m o v in g o f th e m o n e y r o u g h ly in lin e it co sts fa c e d th e by m e m b e r o f b an k s. id e a th e T w e n ty g a in e d in te n d e d an d Id e a lly , a c q u ir e d b ills . P e rh ap s o fte n been fo r re se rv e s th a t m e n t io n e d by re ason , as a in ye ars s e llin g m o n e y in f lu e n c e and d is c o u n t - w in d o w to th e co n ve y s ig n a ls se co n d typ e o f m o n e ta ry s h o u ld In th e p ro vo k e fir s t t y p e p r a c t ic e , ho w e ve r, th e p u b lic s h o u ld fin d s to d is t in g u is h b ill b e tw e e n th e it tw o . W e th e have a s it u a t io n p ro d u ce w h e re r o u t in e u n in t e n d e d d is c o u n t rate an n o u n ce m e n t ago, o n th e o n e hand, an d w h e re th e ban ks e ffe c ts p ro d u ce d by ch an ges T re asu ry rate m arket has rate 4The Board of Directors of each of the 12 Federal Reserve Banks, as now, w ould establish changes in both the total rate and the policy spread subject, as now, to review and determination by the Board of Governors in Washington. FEDERAL RESERVE BANK OF ATLANTA lin e ra te s, b o r r o w in g cu rre n cy, th e to n o t. an n o u n ce m e n t p r e s u m a b ly in te r e s t rate s) e ffe c ts, t ie d - r a t e m arke t a n n o u n c e m e n t e ffe c ts; ch an ge s w h e n in s h o u ld m ark e ts w it h m o n e y su ch th u s o f ra te w it h , d if f ic u lt se n se d is c o u n t p ro ce d u re p o lic y . s e le c t e d th e q u e s t io n b o r r o w in g is keep be (2 ) c a lc u la t e d ? to p ro p o sal w it h r e m a in s , m e r e ly “See A rn old Dill, "L ia b ility Managem ent Banking: Its Growth and Im pact," this R e v i e w , Federal Reserve Bank of Atlanta, February 1971, pp. 22-33. 6The Federal Reserve Act (Section 14d) requires that each Federal Reserve bank "sh a ll establish such (discount) rates every fourteen days. . . . " 97 in te n d e d to a m b ig u it y , T o be on o ve rco m e r e q u ir e w it h a F e d 's a b ilit y th e n th e se ch an ge s u se p o lic y It th e to A by se em to a d m in is t r a tio n e lim in a t e e ffe c ts o f it s h o u l d d is c o u n t S m a lle r fill in fle x ib ly r o u t in e p re se rve ra te as th e a th e in an d fre q u e n t m o re lig h t r e q u ir e m e n t s m e c h a n ic a l fo r p r o p o s a l, th e d is c o u n t in th e m o n e y u n s a t is fa c t o r y b e cau se to d is c r e t io n a r y r e lin q u is h b e tw e e n rate r e m a in e d as th e in w o u ld r e m e d ie s "ty in g " rate d e te r m in e d b o th s p e c ific m o re o f sp re ad th e t o o l. r e q u ir e m e n t s : se e m e d w o u ld rate s h o u ld an d d is c u s s e d im p r o v e m e n t. w e aken e d d iffic u lt ie s d is c o u n t ch an ge s, to are b ase an n o u n ce m e n t ra te d is c r e t io n a r y W e o f a tt r ib u t e s . u n in t e n d e d s ig n a ls o th e r. th e se sy ste m tw o d is c o u n t o f p o lic y th e o f th e m e t. "f le x ib le p o s s ib le rate to an d t ie " w ays m o re o f so m e fo rc e an d th e th e t ie , " w e Fed But if th e change, r e q u ir e m e n t s c o n c lu d e d fre q u e n t fu rth e r th e d is c o u n t d is c r e t io n a r y "f le x ib le m e r it to m a rk e t, se e m e d c o n t r o l. T h e re fo re , " s m a lle r th e w o u ld b ase su b je c t case be th e it rate th at ch a n ge s" and c o n s id e r a t io n im p r o v in g d is c o u n t as rate a d m in is t r a tio n . ■ th a t A P P E N D IX The Percent fir s t c h a rt sh o w s c le a r ly how , b r ie f p e r io d , th e d is c o u n t rate fa ile d w it h m oney m a r k e t rate s (h e re m o v in g a v e ra g e s, ro u n d e d o f th e F e d eral fu n d s a u c tio n on ra te ). T h e th e ch a rt, re p re se n te d rate a n d w it h s m a lle r a n d p e r io d , b e tw e e n th e in d is c o u n t th re e m o re m o n th s. A changes fa ile d r e d u c tio n s in or "sp re a d s" of th e p e r io d how r a p id to keep m oney m oney th e at th e up th e to 4 3A th e rate s, m oved ch a rt sh o w s rate s im u lt a n e o u s fo r th e rate s and p e rc e n t o f d is c o u n t d is c o u n t b e cau se 1970 a n n o u n c in g se con d w it h b ill F e d e x p e r im e n t e d r e d u c tio n s w h ic h s u c c e s s io n m arke t is i n s t r u c t i v e th e p e rc e n t m arke t b e tw e e n tw o 6 g la n c e h o w e v e r, th at e v e n s im p le c ro s s-h a tc h e d fre q u e n t c h a n g e s, fro m by m id -N o v e m b e r q u a rte r-p e rc e n t rate one in t a n d e m th e 9 1 -d a y T re a su ry m id -F e b r u a r y 1 9 7 1 . T h is w a s w h e n fiv e s u c c e s s iv e fo r m ove to th e n e a re st q u a rte r-p e rc e n t, e x c e p tio n a l cam e except to rate rose d iffe r e n c e s and each g r a d u a lly . it p r o v i d e s a The s a m p le of " s m a lle r -a n d -m o r e -fr e q u e n t -c h a n g e s " p r o p o s a l fo r d is c o u n t rate a d m in is t r a t io n w o u ld o p e r a te . to n e a r e s t V4% W e can a ls o Fe d eral fu n d s how a th e T re a su ry sy ste m on u n w e ig h t e d as rate s th e m o v in g p e rc e n t. are in rate a v a ila b le , but rate s p lo t t e d o th e r we and They of th e have are rou n d e d w ays ch o se se e a d m in is t r a tio n a r t ic le : averages M any rate f ir s t c h a r t t o o f d is c o u n t su gge ste d fiv e -w e e k b ill th e h a v e w o r k e d . A g a in , th e b a se tre a te d n e are st q u a rte r base at m o ve m e n ts "t ie d -r a t e " w o u ld been lo o k rate to th e c a lc u la t in g fiv e -w e e k a v e r a g e b e c a u s e fo r e a c h o f th e rate s o v e r th e fo u r -y e a r p e r io d 1 9 6 8 -7 1 , t h is f o r m u la p r o d u c e d th e f e w e s t n u m b e r o f c h a n g e s in d i r e c t i o n . It is m o re d if f ic u lt p ro p o sa l w o u ld w o u ld have co u rse, have behaved but it co m p o n e n t. 1970 The tw o v a r io u s ch a rts sy ste m s have p e rfo rm e d rate s sh o w e d m a k in g put th e o rd e r m oney to it a of u n u su a l p e r io d keep it b a s is d is c o u n t d u r in g d is c o u n t a rate 1970 and v o la t ilit y w hen rate in fo r lin e th e Fed th ro u gh w it h m ark e t. 98 how d e te r m in a t io n M oney d u r in g th e se w o u ld u n u su a l in te re st ju st a s im p o s s ib le th e how th e been "fle x ib le -t ie " base rate c o m p o n e n t in th e t ie d - r a t e case, o f to te ll how Fed d is c r e t io n a r y If, f o r e x a m p l e , had rate w o u ld d is c u s s in g 1971. se e " p o lic y e ith e r o f ad o p te d in th e th e w o u ld spre ad " tw o c o n ju n c tio n b a se -ra te w it h a c o n s ta n t p o lic y sp re a d o f o n e -h a lf p e rc e n t, th e d is c o u n t 1971 p r o v id e is m anaged fo rm u la s to have w o rke d . T h e m ig h t m arket tw o have had g y r a tio n s rate s in rate th e ye ars, to in at a d is c u s s e d ap p e a rs in s t ill se con d w o u ld th e over a n o th e r c h a rt as have have p a r a lle le d h a lf - p e r c e n t a r t ic le , p r e fe r a b le T a k in g th e o b v io u s ly c o n sta n t a Fe d eral one f in a lly , d e s c rib in g r e s u lte d had a th e rate th e we b ase re ason s b ase b ill can ra te .) a ls o sp re ad f le x ib le - t ie sy ste m actual p a t t e r n th e rate . d is c o u n t on (F o r p o lic y u se d to p r o d u c e th e to tal fu n d s b ase d ta c k , th e c h o se n p r e m iu m . v ie w th at been o f b e h a v i o r in M O N TH LY REVIEW W h a t 's in S t o r e f o r B a n k C r e d i t C a r d s in t h e S o u t h e a s t ? by Em erson A tkinson C r e d it card s a c c o r d in g sy ste m . th e y th e w h e th e r is s u e d c r e d it v o lu m e p h y s ic a l B anks p e r io d been q u ic k ly as a w e ll h e a d -o n o r, s o lic it e d card s lo s s e s d e b ts w as card s w as and in le d la r g e S in c e th e y c a r d h o l d e r 's m o st w it h t h e ir e x c e p tio n s . FEDERAL RESERVE BAN K O F ATLANTA a le a s t o f ta k e n c r e d it card s, an d e a r ly 1 9 6 0 's , th e o f ban ks of b an k fo r fo r a n y a se t w ay sy ste m up c r e d it an d a c r e d it o f su ch an d of p la n s and card s d is t r ib u t io n p r o f it m e e t in g ahead. to an d r e s u lt, t h e p o t e n t ia l. th e be w e re In a d d itio n , c o m p e t it io n m ass w e re m a ilin g o f and, so m e la r g e b e cau se e n t h u s ia s m in w o u ld acc o u n ts ap p roach , ban ks ab so rb sy ste m sy ste m th e T he m a r k e t in g w h e th e r card a cu sto m e r go o d o f ju m p in g have d r a s t ic a lly w h ic h o f fo r in o r u n s m a ll. The u n c o lle c t ib le b an k c r e d it r e v is e d e x p e r ie n c e w it h t h e ir m ass m a r k e t in g m a ilin g le g is la t io n . A m e n d m e n t s t o b e cam e e ffe c t iv e in c r e d it c a r d s a n d a r e s u lt, b a n k s h a v e b e e n m o re th e O c to b e r lim it e d 1970, th e c a r e f u l in c a r d h o ld e r s . o p e r a t io n s e m e r g e d in d e p e n d e n t sy s te m th e card gro w th o ffe r in g t e m p o r a r ily . ban ks le g is la t io n , lia b ilit y . A s p la n . lo s s e s . T h u s, e m b le m an d it w o u l d as th e m a in t a in carry or ty p e o f o p e r a t io n on th e card b an k c r e d it an d be in te r c h a n g e a r r a n g e m e n ts w a s t h e c o n c e p t o f lic e n s e e in d e p e n d e n t b a n k d e s ig n m o st co m m o n . A th e o p e r a t io n a l c a r d h o ld e r s ' It c o u l d , if p o s s i b l e , h a v e w a s s im ila r to th e T he typ e s ye ars, has te rm s re w ard s u n s a t is fa c t o r y o th e r sy ste m s. T h e s e c o n d b a n k s ,w h ic h te n th at e n te r t a in m e n t re p re se n te d fo rce d A s at to m a s s m a ilin g o f u n s o lic it e d s t a r t its o w n , r e s p o n s ib le o ve r p a ym e n ts a n d /o r m e rch an t r e s u lts , p u b lic iz e d . p r o s p e c tiv e r e s p o n s ib ilit ie s a ll and, th e tra v e l th e c o m m o n w e re T h r e e t y p e s o f c r e d it c a r d c o u ld fo r in o ccu rre d . o f c o n s u m e r p r o t e c t io n th e fo r ch an ge acce p tan ce th e w as s it u a t io n s , th e ban ks of N e w in o f a ls o th at sy ste m d is a s tr o u s L e n d in g p r o h ib ite d o b lig a t io n s ch an ge s card s tru e 1 9 5 0 's s c r a m b le d la r g e . m id - S ix t ie s , b e cau se is b o th p u b l i c 's t h in k in g so m e th e o p e r a t io n b e cau se to in card s n a t io n d am p e n e d , th e s c r e e n in g th e card th at w e ll c r e d it c o m p a n ie s , r a p id , th e th e as w as b e cau se in in o f th e c r e d it in sta n c e s, A s p e rh ap s a ttra c te d o ffe r in g T ru th has ch an ge s im m e d ia t e fin a n c ia l fu tu re tre m e n d o u s T h is o il to ban ks. card s acro ss th e sto re s, s e tt in g key u se d of b u s in e s s . r e t a il o f th e have u n s e t t lin g m ak e u p m i d - 1 9 6 0 's , are aw are card o u ts t a n d in g . in c r e a s e d , e ffo rts not by an d an m e th o d p e rso n s, co n su m e rs c r e d it c o m p a n ie s , A fte r u n iq u e p r o b a b ly in ban k a m an y T h o u gh are p la c e are to sy s te m , b u t w it h w o u ld not be th at se ve ra l o f th e 99 li c e n s e e 's o n th e to b a n k s, a lth o u g h card . th e In t h is age n t o p e ra te th e w o u ld c a r d h o l d e r 's in t e r c h a n g e th e m ean s a ll a o f th e s p e c ia l th e to d a y. In has been th e d ate o f to cut c u s t o m e r 's is ch an ged. e x p ir a tio n d o w n lin e , u s u a lly has o f p resen t A s th e d a ta in has excee ded 31, 1967 o f t h e ir O n th e o th e r m o re D is t r ic t as hand, p h y s ic a l C o n su m e rs in w e ll n u m b e r o ccu rre d gro w th w as o f c a r r ie d in c r e a s e d m o re in b an k in th e b an ks d u r in g o ve r U. t h r e e fo ld . as 300 th e p a rt ic ip a t io n th e U. S. f o r a card th e For p e rc e n t; fo r to in n a ir e s t o a r e c e iv a b le s s ix f o ld . c o m p a r a b le w as U. in c r e a s e card W it h th e th is n e w S ., in 136 th e e x c e p t io n o f 1968, la r g e s t n u m b e r in o f th e D is t r ic t ban ks an d p aym en t typ e w as T A B L E D ecem ber 31, 1967 No. with Amount P lans O utstanding ($ mil.) Sixth D istrict U. S. an d o f ban ks g re a te r A re as in ( S M S A 's ) s h o u ld be d e n s it y C ard C o n su m e r B a n k in g be a 4 ), o f a t h is B an k in o f re ga rd o f in v o lv e d s e le c t e d at le a s t id e a s o f a to th e th e p a ym e n ts q u e s t io n an d th u s w as th a n p r o v id e d o f card s, c r e d it P h ase p ro b e a t t it u d e s th a n m ad e in m o re th e card , III in t o re ga rd to e x te n s iv e re se arch P h ase s I an d th re e -fo u rth s w id e s p r e a d in F lo r id a , o f a ll th e d o n e u se in c o m e p o sse sse d . R e ta il II o f o f so m e p e rc e n ta ge h o u s e h o ld s . h ig h e r th e h o u s e h o ld th e d e ta ile d an d fo r m a ilin g o w n e r s h ip r e s u lts f r o m fo u r -fifth s 1969 go al p ro je c t. m o re card ; in It s o v e rd ra fts. an d th e Tech P ro je c t A t la n t a . by ab o u t to a c c e p t a b le d iffe r e n t ly II th e in G e o r g ia to u n iv e r s a lly f a m ilie s e x p e c te d , card s b e gan p ro ce d u re s c r e d it an d have a c c o r d in g o f h o u s e h o ld s , s lig h t ly over d e fin it e T h e p aym e n t I an d p a rt, m e a n s o f im p r o v in g ap p ro ach e d P h ase s a ll A t la n t a r e p o r tin g C r e d it w as A t la n t a m o st have m o tiv a t io n s A c c o r d in g 1The Sixth District includes: Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee. D is t r ic t o f re se arch (T a b le U . S ., t h e 1969 p o p u la t io n th e a c c o m p lis h e d r e s u lts a u t o m a tic an d th e w as a s a m p le co n su m e r p e rc e n t. in fo r n u m b e r co u rse , P ro je c t. R e se rve T h is acc e p tan ce of th e D is t r ic t , an d th e an d in v e s t ig a t e in t e r e s t in g an d fo r In s t it u t e w as th a n th e R e se arch sy ste m . in can b a n k in g . n o n -S M S A . d e v e lo p m e n t s , n u m b e r la r g e s t th e o f g re a te r th e P a y m e n ts D e ce m b e r in d a ta th e p la n s m e t r o p o lita n card Fe d eral M o re o v e r, S ., c r e d it D is t r ic t 1 in th e p a rt ic ip a t io n p a r t ic ip a t in g 1968. o f R e se rve 1970, s iz e , card S t a t is tic a l T h is , C a rd s F lo r id a , c r e d it fu tu re gro w th ( i.e ., t h e y in in c r e a s e th a n 31, t h e ir b o ok s) th e Fe d eral th e card o f th e th a n C r e d it Expands U . S. B e tw e e n D e ce m b e r o th e r th e th e th a t o f th e o w n s lig h t ly sh o w , S ix t h o p e r a t io n p e r io d , p la n s 1 th e r e p o r tin g card o n in an d ban ks c r e d it in T a b le b a n k in g v ie w S M S A A t la n t a card in o f in T h is o f c it ie s B a n k in g c r e d it b illio n . c r e d it th at M e t r o p o lit a n on o n e C ard in n o n - S M S A 's . th e o f e ig h t m illio n o th e r s t a n d a r d iz a t io n t h ic k n e s s , a n d Stan d ard in in b ase d o f $5 s iz e m illio n s m a ll, $1 r e g a r d le s s in d ic a t e d d e p o s it $25 co m p o se d th a n p a r t ic ip a t e 3) to tal an d le s s t h a n m o re b an ks, a r e la t iv e ly c la s s ific a t io n e x p e c te d m a g n e t ic o r th at (T a b le th a n on p ic t u r e , s ig n a t u r e a d d it io n , a ls o is r a n k in g to p a r t ic ip a t in g card ran ge had m illio n r a n g in g fr o m s u c c e s s fu lly fu rth e r $11 s iz e d e p o s it s su gge sts A in c r e a s in g . C r e d it 2 ). T h i s d e p o s it to ta l c a r r y in g b an k p a r t ic ip a t io n b e tw e e n gro u p s an d stan d ard s, d e te r m in e o f an d code, m a t e r ia ls , s h a p e s , asp e cts c r e d it a 1970 th e card , id e n t ific a t io n , card s card o fte n , th e u sage , w it h an d d e v e lo p m e n t m o re o n fr a u d u le n t s t r ip c r e d it , on (n o t in c lu d in g card r a n g in g (T a b le th e agen t o p e ra to r se t fe e r e c e iv e th at o f an sy ste m , a P erh ap s c a r d 's p h y s ic a l a p p e a r a n c e an d a p p e a re d u s u a lly pay it w o u l d p l a n 's c r e d it ap pear to a rra n ge m e n ts. sy ste m , th e M o re bu t a s s is t a n c e . th e a c c o u n t in g w o u ld have arran ge m e n t w as bank) D u r in g p la n , s it u a t io n , th e m ig h t o p e r a t io n a l co m m o n bank. th e an d its n a m e lic e n s e e o p e r a to r o f th e t e c h n ic a l m o st The A s m ig h t le v e l t h e sto re m o re card s 1 O u tp a ce s D ecem ber 31, 1968 No. with Amount Plans O utstanding ($ mil.) T h a t o f U . S. D ecem ber 31, 1969 No. with Amount P lans O utstanding ($ mil.) D ecem ber 31, 1970 Am ount No. with O utstanding P lans ($ mil.) 43 40.0 53 99.5 243 301.4 273 438.5 390 828.4 510 1311.5 1207 2638.7 1432 3791.6 N O TE: F igu res cover all co m m ercial banks. So urce of national data is “Growth and Pro fitab ility of Credit Card B a n k in g ,” a paper presented at the 1971 N ation al Credit Card Conference of the A m e rican B a n k e rs A sso c ia tio n on O ctober 27, 1971, by Andrew F. Brim m er, m em b er of Board of Governors. 100 M O N T H L Y REVIEW T A B L E T h e S iz e D is t r ib u t io n o f B a n k s P a r tic ip a tin g S im ila r to th e Size of Bank D ecem ber 31, 1968 U. S. D istrict C r e d it C ard P la n s D ecem ber 31, 1969 U. S. District D ecem ber 31, 1970 D istrict U. S. Under 5 29 1 56 12 74 26 58 6 157 48 171 46 70 11 — 25 123 9 331 69 389 26 — 50 80 10 227 54 271 57 5 1 — 100 67 8 153 27 190 35 101 — 500 109 17 209 28 241 33 501 — 1000 19 1 41 4 52 5 Over 1000 25 1 33 1 44 1 510 53 1207 243 1432 273 Source: w e re U. S. Data —S am e a s Table 1 D istrict Data— Reports of Condition th e m o st p o p u la r c o m p a n ie s , an d o th e r w h o at le a s t o n e -h a lf F lo r id a in o w n e d sto re th a t F lo r id a . sam e per T h is acc o u n ts n ot b an k an d c r e d it o f card s, in m ig h t D o e s w as to th e o f is th e F lo r id ia n s not to o th e th e th e in c lin e d w as ve rsal ca rd m o re 25 g ro u p " th e o f a ll c r e d it a ll age sal card T he th e b u t, had gro u p s. For th e A s gro u p s a w e re co n ce p t re sp o n se a u t o m a tic th at th e th e fu tu re su m e r O v e r m o st o f a ll h a lf o f th e p re fe rre d th e (T a b le O n c e a 5 ). d ir e c t a b o u t F u tu re a g a in , t w o -fifth s o f c o n c e p t, th e h o u s e h o ld s T he re sp on se n u m b e r o f its le v e l o f u n iv e r s a l M a le s re sp e ct th e card s an d to in o f w it h n e a r ly in c o m e w as by in c o m e , card is fe m a le s acce p tan ce w e re a o f w as A t la n t a In in th e p a rt, th e u n i "u n d e r h ig h e s t f a v o r a b le f e m a le s in p r a c t ic a lly r e c e p t iv e to th e le s s an w e re w as re sp o n se rate u n iv e r m a le s . a lr e a d y o v e rd ra ft, a v a ila b le a ls o s e r v ic e , su rve ye d . The le v e l w it h a o f th e $ 2 5 ,0 0 0 S in c e an d n ot t h in k o f th e u n iv e r s a l o f o ve r. th e in c r e a s e s p o p u la r ity u n d e r s t a n d a b le . FEDERAL RESERVE BANK OF ATLANTA had gro ss th re e -fo u rth s g re a te r 3 in B a n k s B a n k s L o cate d C r e d it C ard O u t s id e in P la n s S M S A ’S T h an D id S M S A ’S co n ce p t fa v o r h o u s e h o ld D is t r ic t P a r tic ip a te d F lo r id a A t la n t a , d o M ore card . an d card s im ila r . th e c o n in c o m e h o u s e h o ld s F lo r id a h e ld in re sp on se . w it h h o u s e h o ld s , r e g a r d in g a cc e p te d acc e p te d $ 5 ,0 0 0 co m p are d card s h o u s e h o ld th e le s s t h a n w it h c r e d it u n iv e r s a lly u n iv e r s a lly on o f o f a o f to w ard m o st im p o r t a n t H o ld ? in fo r m a t io n h o u s e h o ld s b e a r in g in c o m e a fo r an G e n e r a lly s e r v ic e s . im p o r ta n t typ e s p re fe re n c e h e ad s. w h o le , th an to w as heads T A B L E P e rh ap s age id e a . w e re th e A t la n t a le s s resp o n se s. o n e -c a rd th e y in w it h h o u s e h o ld s im ila r yo u n ge r id e a . h o u s e h o ld s co m p are d f e m a le s u r p r is in g in o f id e a , had s p e a k in g , m o re heads th e g re a te r ja rgo n , e x p e c te d o n e -h a lf d e te r m in a n t c h e c k in g e c o n o m ic be m a le o f r e la t iv e o f o w n o f fa v o r A g a in , It so m e th a t in th an typ e , w ro te not w e re in card s card s d id T w o -t h ir d s A t la n t a , card s th e re fo re , as In h o u s e h o ld s , th a t by f a m ilie s an y tw o -fift h s c r e d it " c o m p le m e n t a r y " W h a t th e c r e d it d id le v e l, su gge sts, O f card s u r p r is in g th a n f o llo w e d e n te r t a in m e n t, card s. c o m p a n y h a v in g s u b s t it u te s rath e r, a re o f o il m o n th e c o n o m ic card s. c r e d it P erh ap s h o u s e h o ld s ch e cks typ e s. an d acc e p tan ce in an d A t la n t a to th a n ty p e s, c r e d it b an k an d a ll tra v e l o n e p o p u la r r e t a il o f b an ks, m is c e lla n e o u s o w n e d n e a r ly th e is 5 — 10 TOTAL are in U . S. N um ber of Banks (Total D eposits in Millions of Dollars) o il 2 a lik e , w it h Size of Bank N um ber of Comm ercial Banks (Total D eposits in D ecem ber 31, 1969 Decem ber 31, 1970 Millions of Dollars) SMSA Non-SMSA SMSA Non-SMSA 21 Under 5 5 3 9 31 36 15 5 — 10 12 30 40 1 1 — 25 34 35 22 34 23 26 — 50 32 10 51 — 100 8 25 19 32 1 27 1 101 — 500 5 501 — 1000 4 1 Over 1000 1 126 147 TOTAL 132 111 So urce: Reports of Condition card . 101 T A B L E H o u s e h o ld C r e d it C ard O w n e r s h ip M e t r o p o lit a n 4 A t la n t a A re a s of M e t r o p o lit a n A re a an d F lo r id a Percentage of H o u seh o ld s O w n in g at Le ast One Credit Card Atlan ta M etropolitan Area 76 M e tro p o litan A re as of Florida 83 B Y IN C O M E L E V E L G ro ss In co m e Level of H ou seh old Percentage of H o u se h o ld s with at Least One Credit Card Average num ber of C a rd s Held Percentage of H o u se h o ld s w ith at Le a st One Credit Card 37 74 85 93 98 96 1.8 3.2 5.2 6.2 8.6 9.3 59 86 92 96 94 97 U n d e r $5,000 $ 5,000 — 9,999 $10,000 — 14,999 $15,000 — 19,999 $20,000 — 24,000 $25,000 and Over Average N u m b e r of C a rd s Held 2.2 4.1 5.5 7.6 7.9 9.3 BY TYPE Credit Card Type Percent of H o u seh o ld s with Credit Card Type Average N u m b e r Held Percent of H o u se h o ld s w ith Credit Card Type 66 55 48 18 3 2.8 2.8 1.5 1.5 1.8 71 64 39 19 6 Retail Store Oil C o m p a n y Bank Travel and En tertain m en t All Other r e s u lts sh o w e d su m e rs w e re th e in A t la n t a a c h e c k in g acco u n t near fu tu re , b an k c r e d it c a r d s a s w e u n d e rgo h o u s e h o ld s of th at a c r e d it S ix t h D is t r ic t m a jo r it y card v e r s a lly m ate d A t la n t a an d o f an d th is an d m a c h in e s fu n c t io n th e m to d a y to w ill is p ro b th at re p re se n ta c le a r at le a s t on e have o n ly a R e c e n t ly , T A B L E are it have have o p e r a t io n of of A s s u m in g F lo r id a p re fe r one. c o n co n ce p t " a u t o m a t ic a lly ." co n su m ers, w o u ld F lo r id a o f ch an ges. co n su m e rs a c c e p t a b le b a n k in g fo rm k n o w d r a m a t ic in fa v o r th e a b ly t iv e an d in s t r e t c h in g In th a t g e n e r a lly 2 4 -h o u r been put te ste d in t o 5 in n a t io n . to w ard card is fu n d s a A c c e p t a b le C r e d it C a rd A n card to M etropolitan Areas of Florida 65 61 B y Inco m e (Percentage) L e ss than $5,000 $25,000 and over 44 46 70 72 P ro je c t. T h e P h ase By Sex (Percentage) 65 F em ale 45 102 67 53 gro u p s III d u a l-p u r p o s e as w e ll have o f c a sh -c a rd b a s ic as a card . in t o a p e rso n s a le s s lip , s i m i la r t o u se d . T he be A t en d th e th e sta te m e n t se p a ra te cate go ry re co rd e d . T h e an d m o n th (a n d w it h stu d y a p a rt be or fo u n d h is fo r w ith its e lf a It w o u ld by th e r e c e iv e r e c e ip t a p r e s e n t ly acco u n t tra n sfe r. s p e c ifie d r e c e iv e to s e t t le h is c h e c k in g ch e cks) c a sh -c a rd co n su m e rs very card e le c t r o n ic c a n c e lle d a ll u se d w o u ld o th e r th e card , T h e c u s t o m e r 's by o f th o u gh c r e d it t e r m in a l c r e d it c a r d s e t t le d cashto P a y m e n ts n u m b e r. c u s to m e r w o u ld acco u n t as e n co d e d cu sto m e r m e r c h a n t 's th e o f acco u n t th e p r o m p tly of 1971 c o u ld s t r ip fir s t th e q u ite th e A t la n t a p o in t - o f -s a le s a le s w o u ld an d It th e of p re se n te d t r a n s a c t io n s . m a g n e t ic c h e c k in g is is arra n ge m e n t, c r e d it be in s e r t e d in th e o p e r a t io n c o n s u m e r 's tra n sfe r th at w as be b e cau se a cc o u n t. o p e r a t io n s co n ce p t in a th e th e sy ste m ? sy ste m fo r been acro ss a u to c o u ld c o n s u m e r 's card co n su m e r th e o f an p a y m e n ts arran ge m e n t T h is m e n t t im e , t h e M a le a re se a rch is b e g in n in g v e h ic le an d have r e t a il o u t l e t s p a ym e n ts fro m s e le c t e d w o u ld A tlan ta M etropolitan Area a presen t to r e g io n d e v e lo p m e n t s su ch s e r v ic e . t h is t e r m in a ls p a p e r le s s , su ch an d o f an d s m a ll in t e r e s t in g s im ila r cash Percentage of H o u seh o ld s in Favor of a U n iversally _________________ A cceptable Credit Card_________________ th e n atu ral to p a rts ban ks p r a c t ic a lly ste p 3.2 2.9 1.4 1.6 2.2 p o in t - o f -s a le s e le c t e d U n d o u b t e d ly s im ila r C o n s u m e r s W e re R e c e p t iv e to a U n iv e r s a lly v a r io u s an d Is t h is m a t ic , u n i a u to in e ls e w h e r e , A verage N u m b e r Held an d a t r a n s a c t io n s be o n ly M O N T H L Y REVIEW m ild ly but d o p o s itiv e w illin g have a b ilit y d o tra n sfe r in th e fu tu re of s e t t lin g to " p la y It c a sh -c a rd is c l e a r fu n d s, th e to c r e d it card o f o f lo s s an d but gre a t d o e s su ch have a th e of th e an d s e r v ic e s th e c r e d it, w ay an d fo r w id e s p r e a d p e r fe c t io n is fu lly not and lik e ly re ason its is th at of " t a ilo r - m a d e " d e p o s it s w o u ld b u s in e s s e s . sp u rre d by an m ake ch an ge e c o n o m ic a lly m ass A n d in o u r tra n sfe rs, to p u b lic as w e ll C a p it a l, $ 1 ,0 0 0 ,0 0 0 ; s u r p lu s a n d an d a cc e p ta n ce , e ffo rt, sy ste m as re co rd co n su m e rs e d u c a t io n a l p a ym e n ts fe a s ib le m an age m e n t w it h d r a w a ls , ap peal g re a te r in t e n s iv e P erh ap s, b y fin a n c ia l fin a n c ia l an d p a ym e n ts, have so m e a d v a n ta ge s. s u g g e s te d , th e o ffe r in g c o lle c t io n s , a O n e r e c o g n iz e d ( in c lu d in g k e e p in g ) th e sy ste m im m e d ia t e ly . not in s t it u t io n s of o b je c t io n s sy ste m , o ccu r as o th e rs h a ve im grace lo s s th e se sm o o th co n ce p t of to co n su m e rs in t e n s it y . p a ym e n ts th e im p le m e n t a t io n th e flo a t ," be c o n c e p t, th at c o n c e r n in g acc o u n ts, e le c t r o n ic acce p tan ce th e it. r e s e r v a t io n s n ot ap p ear If a to w ard accept so m e m e d ia t e p e r io d s to m ig h t m o re e a s ie r .■ o t h e r c a p ita l fu n d s , $ 7 0 0 ,0 0 0 . Bank A n n o u n c e m e n ts M ay 8, 1972 P E O P LE S O pened z i, J. M ay 1, 1972 & M E R C H A N T S B A N K Centre, Alabama O pened to fo r r e m it W a it e , d e n t; at O a te s, v ic e p a r. p r e s id e n t ; L o u n e ll D a v is , a s s is t a n t M ay P A N N e ll nonm em ber M ary K ilg o r e , v ic e E lb a U sry, S e w e ll, and S. p r e s i Jane c a s h ie r ; Poovey, and and Jack N e ll P h illip fo r B A N K and b u s in e s s S h u lm a n , p r e s id e n t ; W illia m R o n a ld G. and M rs. and W illia m W . M . V. C. p r e s id e n t Duke p r e s id e n t ; and T a lia fe r r o , A n sp ach , R o o t, M rs. c a s h ie r ; v ic e H. p r e s id e n t s ; M ild r e d a s s is t a n t E d w a rd John A. v ic e N e sto r, p r e s id e n t s . $ 3 0 0 ,0 0 0 ; $ 1 ,5 0 0 ,0 0 0 . M ay 15, B A N K 1972 O F B O S T O N IN T E R N A T IO N A L O F M IA M I Miami, Florida s u r p lu s O pened fo r b u s in e s s as an Edge Act C o r p o r a t io n . f u n d s , $ 1 ,0 4 0 ,1 3 2 . O F M IA M I B E A C H as a c h a ir m a n ; E. P o tte r, Boyd, v ic e FEDERAL RESERVE BANK O F ATLANTA M ay 16, 1 97 2 T H E C IT IZ E N S C O M M E R C IA L B A N K O F O C A L A Ocala, Florida Miami Beach, Florida O pened and v ic e N. 1972 A M E R IC A N Jo sep h Jr., C h a rle s M . O d o r iz - T r a p n e ll, Jo rd an to G raves, a n d B u rn s, C a p ita l, began G e orge a s s is t a n t p r e s id e n t s ; Fran ces c a s h ie r s . o t h e r c a p ita l 2, a O ffic e r s : s e n io r T racy, and as H a m p to n , T h o m a s F o rte n b e rry , B. G e n e C a p it a l, $ 1 ,5 0 0 ,0 0 0 ; s u r p lu s a n d o t h e r c a p it a l f u n d s , b u s in e s s p r e s id e n t ; J. W . B A N K fo r b u s in e s s . O f f ic e r s : c h a ir m a n ; D ru ffe l F A R M E R S N A T IO N A L Naples, Florida n o n m e m b e r. E d w a rd s e n io r J. v ic e p r e s id e n t O ffic e r s : M e ln ik e r , p r e s id e n t ; and c a s h ie r . O pened D. v ic e H. fo r b u s in e s s O s w a ld , p r e s id e n t p lu s a n d as a p r e s id e n t ; and c a s h ie r . o t h e r c a p ita l n o n m e m b e r. and Jam es C a p ita l, fu n d s, L. O ffic e r s : W illia m s , $ 2 5 0 ,0 0 0 ; su r $ 2 0 8 ,6 1 7 . 103 B A N K IN G S T A T IS T IC S B illio n $ — 30 L D E P O S IT S - 1 2 <r -1 1 /v/ Net Dem and T o ta l D e p o s it s ' - 8 . 5 L o a n s (n e t) — 7 .5 'V In v e s t m e n t s * * — 5 .4 — 5 .0 — 4 .6 S a v in g s ' ii j LATEST M O N T H PLO TTED: A P R IL Note: All figures are seasonally adjusted and cover all Sixth District m ember banks. 'D a ily average figures **Figures are for the last W ednesday of each month. S IX T H D IST R IC T B A N K I N G N O T E S v IN C O M E A F T E R T A X E S % of e q u ity cap ital - 15 D e p o s it S iz e 1 ^ _ (M illio n $) Note: F ig u r e s sh o w n are b efore g a in s o r lo s s e s on se c u ritie s. R a tio s are a v e ra g e s of in d iv id u a l b a n k ra tio s a n d co v e r all S ix t h D istric t m e m b e r b a n k s. 104 M O N T H L Y REVIEW P R O F IT For th e as a se co n d year p e rce n t o f D is t r ic t m e m b e r in to 1 0 .9 p e rc e n t in c o m e a fte r o p e r a t in g n o te s an d le s s t h e ir th a n rate r a n g in g to $5 o f fro m m a in t a in T h e re b an k s to th e D is t r ic t est But to th e th e th a n 10 b an k s to an d in t e r e s t o n p a y m e n ts ye ar, o n in 1971, th e in a m a jo r o f rate s est o f t im e an d u n ch an ge d . m e asu re d to ta l o p e r a t in g th e r e d u c tio n m a jo r w e re s a le s , w e re re ason h it h a rd e st w h ile a ffe c te d b u s in e s s , to ta l r e s p o n s ib le as re al a fo r a b y o f h o ld in g s o n fo r in te r m on ey. rate s p e r io d , g e n e r a lly an d lo c a l to ta l stro n g th e se b o o st an d in t e r d e p o s it a lth o u g h th e d e p o s it s w as b an ks, o n ly an o th e r cash asse ts fro m an c le a r ly s lip p e d fe e s o n d e cre ase . lo w e r by lo a n s b e in g F e d e ral la r g e -s iz e rate s to ta l in a sse ts, 1 9 7 1 , w ith o n lo a n s . d e cre ase in s m a lle r an d o f to ta l T h e rate s lo w e r e sta te o f o n T he th e ban ks fu n d s ban ks co n su m e r, d e c lin e asse ts o p e r a t in g w as in a ls o in c o m e . t im e la s t FEDERAL RESERVE BAN K O F ATLANTA in ye ar taxe s. T h e o th e r e m p lo y e e m o s tly b e n e fit s , w h e re c o m p e n s a tio n ro se . so m e b e n e fit in c o m e ta x e s c a t e g o r ie s , o f th e d ip th u s in h ig h e r o f to ta l as d id . T h e p a ym e n ts rate p a id s lig h t ly , fu n d s— la s t in w as o f an d a c t u a lly la r g e s t e m p lo y e e w a s n o t P a y m e n ts d e c lin e th e an d s a la r ie s , in c o m e b an k s: tw o c o sts at th e v e ry net r e la t iv e d e c lin e d ye ar la b o r m easu re o f o n b an k s. average, th e In t e r e s t la r g e r a d e p r o p o r t io n w age s, m o d e r a t in g net d o w n in t e r e s t - b e a r in g ite m s : t h is a d ip p e d th e R e d u ce d p o ste d o f in t e r e s t o ccu rre d fo r asse ts, p a ym e n ts. o n fo u n d re d u ce d 1970. ave rage r e lie f im p a c t age n cy B an ks in c o m e F e d e ral so m e w ith o u t pact a fo r expen se e x c e p tio n b an ks, in in t e r e s t r e la t iv e re d u ce d . O n e in n o t in c r e a s e d T h e y p e rc e n t th e in c r e a s e fin d im p o r ta n t a in d e p o s it s a m o u n t t h e ir to ta l w as th o u gh m o n e y— d id as expen ses fo r o th e r o f th e b an k s a ls o in c o m e . o p e r a t in g r e s u lte d g o in g o n th e y to is s u e s o ffs e t tin g T h e y ie ld b u t m an a ge d age n cy th a n p e rc e n t as s a v in g s hand, m o re d e c lin e d s ig n ific a n t D is t r ic t r e d u c in g s h o r t-m a t u r ity s e c u r it ie s . 1 5 .1 2 0 -p e rc e n t B anks rate s 1971, lo n g - t e r m w h ile s e c u r it ie s . p e rc e n t o f Even an d expen ses o th e r in c r e a s e m u ch in c r e a s e on s iz e *Data are based upon information contained in "1971 Operating Ratios, Sixth District Mem ber Banks" and are subject to the footnotes and explanatory remarks contained therein. Copies of this release are available on request. a ls o d e p o s it s . a fo r d e v e lo p m e n t an d G o ve rn m e n t th e se to 1 4 .3 n o t as o n b y m ark e t t h is o f reason s d u r in g y ie ld in g ave rage o f w ay to Exp e n se s th e fro m th e ave rage se ts, b u t p o s its G o ve rn m e n t th e o ffse t p o r t f o lio s , h o ld in g s s t ill n e a r ly co n su m e r o th e r p o r t f o lio s T reasu ry in c r e a s e d m a jo r had m illio n p r o p o r t io n m e d iu m - o b lig a t io n s , fro m m u n ic ip a l t h e ir S. th e d e c lin e d lo w e r o n in c o m e m u n ic ip a l an d th e an d U. in w e re to $50 s la c k . W h ile y ie ld in g d e c lin e , rate s, co u p o n s. th e d e c lin e s e c u r it ie s G o ve rn m e n t d e p o s it s , o n th a n In t e r e s t S. o f n e a r ly u n fa v o r a b le state U . in have an d D is t r ic t in t e r o n a sse ts t h e ir o ve r t h is g e n e r a lly h ig h e r lo a n e sta te u p in c o m e . r e la t iv e w ith real m an a ge d t h e ir is d e r i v e d th e p r o p o r t io n p r o p o r t io n th e an b an k s to m o re g o to ta l G o ve rn m e n ts ch a n ge T re a su ry sam e m e d iu m - m o st an d lo a n s t h is b y G o ve rn m e n ts b o rro w e d as th e in S. an d p a id d ro p o n a d d in g b an k s r e d u c tio n to ta l ye ars, in b o rro w e d in to th e D is t r ic t b u s in e s s in t e r e s t th e b y m illio n ) b e cau se ch an ge s: in t e r e s t a n d fo r in la r g e s t in to o k in an d m ean rate s in c o m e b e cau se in c o m e in th e expen ses e a rn e d t h is rate G o ve rn m e n ts $10 o f o ffse t s a v in g s v ir t u a lly W h e n n o t in c r e a s e d in t e r e s t rate s a lth o u g h o n d e c lin e p r o f it o n ly im p a c t th e E xpan ded s e c u r it ie s n o t a b ly , cu ts h o w e ve r, w it h In t e r e s t an d U . T h e th e p o ste d w it h d e p o s its . le n d in g , B an ks s e c u r it ie s a n d ra te re tu rn ave rage gro u p , D is t r ic t e a r n in g s an d D u r in g m il th a n lo a n s a lo n g gre a te st b ills cau gh t o b lig a t io n s is s u e s . in lo a n s w e re expen ses g a in s w e re in t e r e s t b u t in ch a n ge s p a rt d e p o s it s B u s in e s s w h ic h , $10 m illio n u n d e r 1971. o p e r a t in g o n go v e rn m e n t age n cy *E xp re sse d a s a percentage of total o p e ratin g incom e. th e p r e v io u s le v e l a n d lo a n s a n d m o st d e c lin e d , h ig h e r 32.1 0.8 20.7 2.6 m e d iu m - M o st $500 o f p r o f it s . th e b a n k in g b an k s cro sscu rre n t e a rn e d 34.7 0.6 20.4 2.7 in cate m o re had o f A s rate s iz e o f t h is m ean. excee ded d u r in g p e rc e n t o f to ta l Last Ex p e n se s* Interest on D e p o sits Interest on Borrowed M o n e v S a la rie s and W a ge s Em ployee Ben efits h o w d e p o s it s th e m o st. 9 0 p e rc e n t o f to ta l b a n k o p e r a t in g est 1970 63.0 12.7 8.9 4.7 a s th e y d id e a rn o ve r (d e p o s it s e x p la in to th e p e rc e n t. m a jo r im p a c t o n 40 c a p ita l r e la t iv e w it h in ave rage rate p r o fit a b ilit y fro m U S E S OF B A N K IN C O M E 1971 60.6 12.5 10.2 5.5 m an a ge d d e p o s it gro u p , exce ss b e lo w - a v e r a g e rate s 1971 Lo an s T reasu ry Se cu ritie s M u n icip a l O b lig a tio n s G overnm ent A ge n cy Is s u e s d e p o s it s w it h d e p o s it s D is t r ic t D is t r ic t p r o f it a e a rn in m u s t e x a m in e b an k on in c r e a s e m illio n th e w ith m illio n to in c o n tin u e d d e p o s it s s m a lle r W e a $100 t h e ir e a rn e d b an ks $500 A s b an ks te n d e d eq u al m o re th e an IN in co m e * 1970 w e re, B a n k s w it h v a r io u s b an ks. average. w it h 1970 th e m illio n ) o f e q u a le d in D E C L IN E S MAJO R S O U R C E S A N D at b ase d in t e r e s t o n ra te o f p r o f it a b ilit y ch a n ge (th o se b an k s d e p o s it s b y n o $100 b an k s an d to m illio n m e m b e r lio n ab o u t p r o f it a b ilit y , a m o n g s iz e la r g e r p e rc e n t fig u r e s a re e x p e r ie n c e d $100 w as o f m illio n B A N K S p r o f it s — d e c lin e d taxe s. T h e r e M E M B E R p r e v io u s ye a r. p r o fit a b ilit y g o r ie s 1 1 .3 t h is d e c lin e : th e sa m e d u r in g th e average e x p e n se s, an d D IS T R IC T c a p it a l— fro m d e b e n tu re s, A T row , 1 9 7 1 .1 T h e se e v e r, e x c e p tio n s to o f a e q u ity b an ks in R A T E in a ll fo r b an k "a fte r-ta x " im in c o m e . J O H N M . G O D F R E Y 1 05 S ix t h D i s t r i c t S ta tis tic s S e a s o n a lly A d ju ste d (A ll d a t a a r e in d e x e s , u n l e s s i n d i c a t e d o t h e r w i s e . ) Latest Month 1972 SIXTH One Month Ago Two Months Ago One Year Ago DISTRICT Latest Month 1972___ Unemployment Rate (Percent of Work F o r c e ) ............. April Avg. Weekly Hrs. in Mfg. (Hrs.) . . . April IN COM E AND SP EN D IN G . March . Viarch . March March 146 146 193 143 145 144 160 149 143 142 175 132 134 125 138 127 . April 450 380 434 377 425 363 380 349 116 109 110 104 104 106 109 114 104 107 102 112 105 117 122 103 119 113 116 118 124 123 100 125 89 116 108 109 104 104 107 109 115 103 107 101 112 106 117 121 104 119 113 115 118 124 123 101 124 93 116 107 108 104 103 107 109 114 104 106 102 112 105 116 120 102 118 113 118 118 124 123 101 124 91 112 106 107 101 103 105 110 113 105 104 98 107 105 113 116 105 114 110 112 115 120 119 100 118 92 4.3 4.4 4.4 5.0 2.3 4i.3 224 282 167 170 93 112 258 224 178 263 272 206 161 291 299 188 182 179 200 252 386 627 388 2.5 41.2 193 222 165 168 89 119 258 222 177 257 267 204 161 282 300 189 181 174 198 251 384 635 392 2.6 41.1 211 273 150 169 88 118 258 222 176 257 269 205 161 267 302 193 181 174 195 250 401 635 398 3.0 40.6 168 154 181 162 93 128 248 213 171 240 268 200 167 263 289 167 181 171 209 246 373 621 355 . April . April 173 159 175 161 170 154 151 138 . April . April April 161 143 182 160 143 183 159 143 178 142 129 161 Member Bank L o a n s * .................... April Member Bank Deposits* . . . . April Bank D e b i t s * / * * .......................... April ALABAMA M IS S IS S IP P I INCOM E Manufacturing Payrol Farm Cash Receipts 135 144 IN CO M E Manufacturing P a y r o l l s .................March Farm Cash R e c e i p t s .................... March Manufacturing P a y r o l l s ............. Farm Cash R e c e ip t s ................... C r o p s .................................... Livestock .............................. Instalment Credit at Banks* (Mil. $) New Loans ............................. Repayments .......................... . April . April April . April . April April . April April April April <. April April Stone, Clay, and Glass . . . April Primary M e t a l s ................ April . . . . Fabricated Metals April M a c h i n e r y ....................... April Transportation Equipment April Nonmanufacturing ................ Aprtl C o n s t r u c t io n .................... April Transportation ................ April T r a d e .............................. April Fin., ins., and real est. . . April Services ......................... April Federal Government . . . . April State and Local Government. April Farm E m p lo y m e n t .................... Unemployment Rate April (Percent of Work Force) . . . . Insured Unemployment April (Percent of Cov. Emp.) . . . . April Avg. Weekly Hrs. in Mfg. (Hrs.) . . April Construction C o n t r a c t s * ............. April R e s id e n t ia l............................. April All O t h e r .............................. Jan. Electric Power Production** . . . March Cotton C o n s u m p t io n * * ................ Petrol. Prod, in Coastal La. and Miss.' * May . Jan. Manufacturing Production . . . . Nondurable G o o d s ................ . Jan. Food ................................. . Jan. T e x t i l e s .............................. . Jan. Apparel .............................. . Jan. Paper ................................ , Jan. Jan. Printing and Publishing . . . C h e m i c a l s .......................... . Jan. Jan. Durable G o o d s ....................... Lumber and W o o d ................ . Jan. Jan. Furniture and Fixtures . . . . Jan. Stone, Clay, and Glass . . . Jan. Primary M e t a l s ................... Fabricated M e t a l s ................ . Jan. Nonelectrical Machinery . . . . Jan. . Jan. Electrical Machinery . . . . Transportation Equipment . . . Jan. Nonfarm Employment . . . . Manufacturing ................ Nondurable Goods . . . . Food ....................... T e x t i l e s .................... Apparel .................... Paper ...................... Printing and Publishing C h e m i c a l s ................ Durable G o o d s ............. EMPLOYM ENT Nonfarm Employment Nonmanufacturing Farm Employment 106 Two Months Ago One Year Ago 5.3 40.5 5.4 41.4 FIN AN CE AN D B AN KIN G Member Bank L o a n s ....................April Member Bank D e p o s i t s .................April Bank D e b i t s * * ..............................April 172 157 169 168 154 167 167 151 168 146 137 147 149 175 143 141 140 134 138 126 114 129 135 97 125 113 124 109 127 128 119 107 3.9 41.4 4.7 40.7 FLORIDA INCOM E EMPLO YM ENT AND PRODUCTION FIN AN CE AN D BAN KIN G Loans* All Member Banks Large Banks . . . Deposits* All Member Banks Large Banks . . . Bank Debits*/** . . One Month Ago . March Manufacturing P a y r o l l s .................March Farm Cash R e c e i p t s ....................March Nonfarm E m p lo y m e n t................... April M a n u f a c t u r i n g ...........................April Nonmanufacturing ....................April Construction ..........................April Farm E m p lo y m e n t..........................April Unemployment Rate (Percent of Work Force) . . . . April Avg. Weekly Hrs. in Mfg. (Hrs.) . . . April 130 102 3.8 41.6 April April April April 121 132 99 FIN AN CE AND BANKING Member Bank L o a n s .................... April Member Bank D e p o s i t s .................April Bank D e b i t s * * ..............................April 190 177 208 210 191 179 190 181 207 164 158 178 145 136 143 138 145 129 133 134 April April April April April 116 105 121 109 86 115 105 120 111 92 115 104 120 110 91 113 104 117 106 89 . April . April 3.7 41.2 3.8 41.0 3.8 40.6 4.1 40.4 GEORGIA INCOM E Manufacturing P a y r o l l s ................ March Farm Cash R e c e i p t s ....................March EMPLOYMENT 146 171 144 185 143 182 Manufacturing Nonmanufacturing Unemployment Rate (Percent of Work Force) Avg. Weekly Hrs. in Mfg. (Hrs.) . . . . . FINANCE AND BANKING Member Bank L o a n s ....................April Member Bank D e p o s i t s .................April Bank D e b i t s * * ..............................April 166 146 193 169 143 191 163 141 179 143 127 167 135 122 133 138 132 119 120 LOUISIANA INCOM E Manufacturing P a y r o l l s .................March Farm Cash R e c e i p t s ....................March 108 106 109 96 82 109 108 109 96 89 108 107 109 97 88 107 107 108 99 87 125 EMPLOYMENT Nonfarm E m p lo y m e n t ................... April Manufacturing ...........................April Nonmanufacturing ....................April Construction ..........................April Farm E m p lo y m e n t..........................April Unemployment Rate (Percent of Work Force) . . . . April Avg. Weekly Hrs. in Mfg. (Hrs.) . . . April 111 100 108 102 109 93 82 108 102 109 93 83 108 101 110 93 83 5.6 42.2 6.6 42.7 6.3 42.6 6.5 42.6 105 89 82 FIN AN CE AND BAN KIN G 154 150 149 152 149 151 149 150 143 137 135 142 160 162 163 179 158 208 139 152 EM PLO YM EN T . . . . 110 EMPLOYMENT Manufacturing Nonmanufacturing . . . . . April April April April April 114 119 112 96 88 114 119 112 98 96 114 118 112 99 92 111 112 111002 89 M O N T H L Y REVIEW Latest Month 1972 One Month Ago Two Months Ago One Year Ago Latest Month 1972 One Month Ago Two Months Ago One Year Ago EMPLOYM ENT Unemployment Rate (Percent of Work Force) . . . . April Avg. Weekly Hrs. in Mfg. (Hrs.) . . . April 4.2 41.0 4.0 40.8 3.9 40.9 5.1 40.3 FINANCE AND BANKING ................ April Member Bank Loans* Member Bank D e p o s i t s * ............. April Bank D e b i t s * / * * .......................... April 175 160 173 184 158 171 170 156 177 157 144 163 147 147 150 137 143 133 133 142 April April April April April 115 108 120 123 92 115 107 120 128 89 116 107 120 129 92 110 105 113 110 98 April April 3.6 40.8 3.7 40.7 3.9 41.0 4.7 40.1 Member Bank L o a n s * .................... April Member Bank D e p o s it s * ................ April Bank D e b i t s * / * * .......................... April 169 156 155 173 155 161 163 153 158 151 136 143 Nonfarm E m p lo y m e n t ................... Manufacturing .......................... Nonmanufacturing .................... Construction .......................... Farm E m p lo y m e n t ....................... Unemployment Rate (Percent of Work Force) . . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . . . T E N N ES SE E FIN AN CE AN D B AN KIN G IN CO M E Manufacturing P a y r o lls .................... March Farm Cash R e c e i p t s .................... March '•Daily average basis *For Sixth District area only; other totals for entire six states tPreliminary data r-Revised N.A. Not available Note: In d e xe s for b an k debits, co n stru ctio n contracts, cotton co n sum p tio n , em ploym ent, farm c a sh receipts, loans, deposits, petroleum production, and payrolls: 1967 = 100. All other indexes: 1957-5 9=1 00. Nonfarm employment data for all District states have been adjusted to new bench marks and to new seasonal factors. Sources: Manufacturing production 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 Div., McGraw-Hill Information Systems Co.; 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. D e b it s t o D e m a n d D e p o s it A c c o u n ts In s u re d C o m m e r c ia l B a n k s in th e S ix th D is tric t (In T h o u s a n d s o f D o lla r s ) Percent Change Mar. 1972 Apr. 1972 Apr. 1971 STANDARD METROPOLITAN STATISTICAL AREA S Birmingham . . . . 2,686,666 Gadsden . . . . 80,392 Huntsville . . . . 302,880 M o b i l e ............. 834,661 Montgomery . . . 460,303 Tuscaloosa . . . 149,194 2,802,253 75,696 264,665 916,748 482,690 157,118 2,365,380 81,682 246,895 760,523 445,782 152,926 + + - Ft. Laudetdale— Hollywood . . Jacksonville . . . M i a m i ................ O r l a n d o ............ Pensacola . . . . Tallahassee . . . T am p a-St. Pete. . W. Palm Beach 1,515,806 2,705,866 4,996 580 1,235,180 354,551 584,763 . 2,995.096 896,686 1,650,350 2,969,637 5,332,246 1,275,211 393,172 621,649 3.321,989 909,426 1,479,838 2,314,454 4,827,988r 1,115,921 339,965 282,331 2,640,247 835,974 - 8 - 9 - 6 - 3 -1 0 - 6 -1 0 - 1 + 2 +17 + 3 + 11 + 4 +107 +13 + 7 + 18 + 27 + 14 + 23 + 14 +120 + 21 + 11 148,930 9,874,733 398,412 342,346 397,715 418,260 158,226 10,715,874 413,566 368,139 422,265 438,655 140,751 8,955,452 379,430 335,738 373,368 412.2Q7 - + 6 + 10 + 5 + 2 + 7 + 1 + + + + + + Alexandria . . . . 181,871 Baton Rouge . . . 985,664 Lafayette . . . . 194,711 Lake Charles . . . 182,416 New Orleans . . . . 3,154,009 214,714 1,023,424 216,997 213,334 3,447,343 173,567 1,031,773 193,621 184,222 3,177,438r -15 - 4 -1 0 -1 4 - 9 + + - 5 4 1 1 1 + 8 + 9 + 11 + 9 + 4 Biloxi-Gulfport Jackson ............ 193,250 1,012,512 179,868 1,025,511 - 5 3 + 2 - 4 + 13 + 8 951,357r 781,253 2,599,000 976,422 700,285 2,259,196 - 7 8 3 -1 0 + 3 + 12 + 4 + 10 + 18 A l b a n y ............. A t l a n t a ............. A u g u s t a ............ Columbus . . . . M a c o n ............. Savannah . . . . . . . . 183,441 984,978 Chattanooga . . . 882,787 Knoxville . . . . 718,600 Nashville . . . . . 2,520,684 4 6 14 9 5 5 6 8 4 7 6 5 + 14 - 2 +23 + 10 + 3 - 2 + + + + + + 29 2 14 20 11 6 13 16 14 13 13 9 OTHER CEN TERS Anniston . . . . Dothan ............. Selma ............. 87,234 113,469 54,849 94,333 125,503 59,808 85,565 111,952 53,078 - 8 -1 0 - 8 + 2 + 1 + 3 + 10 + 14 + 11 B a r t o w ............. Bradenton . . . . Brevard County Daytona Beach 42,094 150,537 247,431 144,111 42,722 146,184 251,754 145,014 39,834 111,141 246,924 118,246 + - + 6 +35 + 0 +22 + 10 + 24 + 8 + 25 172,253 202,637 179,079 -1 5 - + 10 N. Ft. Myers . . Percent Chance Year to Apr. date 1972 4 mos. From 1972 Mar. Apr. from 1972 1971 1971 1 3 2 1 4 Year Apr. 1972 166,660 Gainesville . . Lakeland . . . 217,198 Monroe County 59,285 O c a l a ............ 137,244 St. Augustine 29,492 St. Petersburg . 715,793 251,322 Sarasota . . . T a m p a ................ 1,431,011 129,586 Winter Haven FEDERAL RESERVE BANK OF ATLANTA 180,352 249,715 66,052 141,498 30,831 793,558 253,853 1,606,257 134,149 Apr. 1971 150,462 203,405 52,185 116,271 27,435 659,414r 224,139 1,309,214 108,671 1972 from 1971 - 8 +11 + 18 -1 3 + 7 + 18 -10 +14 + 17 - 3 +18 + 27 - 4 + 8 + 18 - 1 0 + 9 + 16 - 1 +12 + 22 11 + 9 + 12 - 3 +19 + 21 - 5 3 4 -2 5 + 4 +13 +17 + 3 - 18 + 17 - 3 -1 6 - 3 - 7 + 5 54.413 31,068 37,505 113,652 78,666 137,813 76,009 154,968 18,781 95,632 51,373 31,987 44,761 116,629 87,548 174,060 70.952 131,558 16,148 98,692 51,303 33,459 35,697 104,785 73,814 Abbeville Bunkie . . Hammond New Iberia Plaquemine Thibodaux . 15,479 7,965 57,533 47,803 14,403 29.414 14,164 9,189 56,046 49,294 14,954 32,033 13,652 8,176 54,033 48.238 13,055 31.953 + 9 -1 3 + 3 - 3 - 4 + 13 - 3 Hattiesburg Laurel . . . Meridian . . Natchez . . Pascagoula— M oss Point Vicksburg . . Yazoo City 98,994 60,209 95,303 44,655 102,484 60,989 96,976 47,873 94,468 57.239 84,673 52,531 -1 -2 - 7 - 3 + 5 + 5 +13 -1 5 + 10 + 10 + 15 +6 116,030 56,114 39,238 121,595 59,357 39,232 98,750 55,099 40,445 5 - 5 + 0 +17 + 2 - 3 +23 + 0 + 8 Bristol . . . Johnson City Kingsport . . . . . 115,233 134,552 209,470 126,950 153,359 254,531 117,437 120,194 195,312 Athens . Brunswick Dalton . Elberton Gainesville Griffin . LaGrange Newnan . Rome . . Valdosta District Total . 131,299 73,593 148,285 18,818 . 101,222 . . . . . . . 53,237,575 Alabama} . . . . . Florida} . . . . . Louisiana}* ■ . . . . Tennessee}* 2 Includes o nly banks in the Sixth D istrict portion of the state; partially estim ated. Mar. 1972 Apr. 1972 From Mar. Apr. 1972 1971 . . . . . . 6,431,299 19,120,949 14,472,675 5,670,674 2,264,309 6,277,669 P artially estim ated. +0 + + 66 + 6 -10 + 7 -+ 61 +10 -8-8 - 9 - 2 + 9 -12 +12 + 21 -1 8 + 7 + 1 1 58,104,628r 50,759,649r 6,667,725 20,654,812r 15,489,500r 6,145,531 2,420,684 6,726,376r +8 7 + 7 5,834,460 - 4 +10 17,473,364r - 7 + 9 13,334,175 - 7 + 9 5,725,431r - 8 - 1 2,241,875 - 6 + 1 6,150,344 - 7 + 2 +15 + 21 +19 + 15 + 6 + 12 + 10 N A - N o t available. 1 07 D i s t r i c t B u s in e s s C o n d i t i o n s T h e gro w th p lo y m e n t gree n er o f th e c h ip p e d are as; C o n su m e r in M a y fo llo w in g La rge r b an ks C D 's p ic k U. fo r up. so m e at a o f in o f b an ks in o f on re M a y , th e c o n tin u e d cut in fu ll b e tte r la r g e s t sam e In A p r il, th e 4 .3 h o ld in g s b ase d e m p lo y m e n t d u r a b le in g r e g io n a l in d u s t r ie s th e se jo b s m o m e n tu m an d a ls o to o k lo s s e s in an d T e n n e s s e e 's fa c to ry e x p a n s io n m a n u fa c tu r in g e m p lo y m e n t th e h o u rs o v e r a ll a ls o in o n in an d t h e ir tw o an s t r ik in g fix t u r e e m p lo y m e n t d ip p e d b r o a d ly an d n o n n o n m a n u fa c tu r A fte r o f A d u r a b le m o st p la c e . rate fo rc e . c o n s t r u c t io n , re tu rn fu r n itu r e to w o rk m o n th s o f in c r e a s e in w o rke rs in d u s t r y gro w th . th e F a rm 1971 In A p r il, in ad d e d A v e ra ge P r ic e s 8 pace. w it h Note: 108 A ll b an k s m a jo r typ e s n o n a u t o m o tiv e in s t a lm e n t kep t o f u p a c r e d it stro n g co n su m e r in c r e a s e d , r e g is t e r in g D ata on w h ic h s ta te m e n ts are b a se d o u ts t a n d in g e x p a n s io n a r y lo a n s co n su m e r g o o d s d r iv e fo r r e c e ip t s sp u tte re d m o n th s ye ar lo a n s ; r o lle d e m to w ard in A p r il, o u tp a c e d th o u gh th o se in th e ago. th e r e c e ip t s n e a r ly m o re r e c e iv e d p o u lt r y p r ic e s in an d liv e s t o c k s t a n t ia lly gre a te r c o n d itio n s w e re d e la y e d to n so yb e an an d C o n s t r u c tio n o f 33 c o n s t r u c t io n p e rc e n t R e s id e n t ia l gage T h e re in has h e ld o ffse t th e v o lu m e o f an d in d ic a te tu rn e d c r e d it w as up su b le v e l. a lth o u g h e a r ly at d e c lin e s d a ta y e a r-a g o go o d , ste a d y h ig h e r t o b a c le v e l fa rm th e in c r e a s e d c o n tra c t aw ard s aw ard s to C ro p w e t, c o o l gro w th lit t le ce n te re d D e p o s it in th e o f A p r il. T h e th e co t th e year aw ard s w as ago. s in g le - f a m ily im p e t u s at fo r h o m e so m e w h a t fro m v a lu e m o n th o n e in flo w s s lo w e d ch a n ge co n tra c t in fo r reco rd ed p r o v id e in s t it u t io n s n o n r e s id e n t ia l fa rm ac g a in . cro p s. e x p a n s io n . been m u ch P r e lim in a r y at th a n by o f in c o m e D is t r ic t 's Sh a rp p r ic e s . c o n tra c ts, le n d in g th e A p r il a c t iv it y c o n tin u e d c it r u s o f m o n th s c o m p a r a b le le v e l. p la n t in g ab o v e th e in g e n e r a lly w e a th e r fo u r y e a r-a g o w e re T h e fir s t ab o v e h a lf fa rm e rs p r ic e s M ay. th e im p r o v e d th e v e g e t a b le in in p e rc e n t th a n b y ab o v e co 25 F l o r i d a 's fo r p e rc e n t se c to r, in c r e a s e d . co n su m e r c o m m e r c ia l a cash s a le s o n e le v e l. co u n te d s t r u c tio n at A u to fir s t f o u r cash w e re th at u n e m p lo y m e n t c iv ilia n m ad e fa rm p a r. p e r io d 1972 o f s e c u r it ie s . p e rc e n t o f th e B an ks ah e ad ; g a in . in a g a in to s w in g . th a n s a le s to le n d in g , b ack in ch a rge d lo c a l b an ks e a r ly b e m o n e y ch a rge d t h e ir an d A p r il. an d in c r e a s e redu ced s e c u r it ie s o th e r rate s g e n e r a l, t h is in state r e p o r tin g co u rse w e re re b o u n d e d a m o u n ts in t e r e s t to a c t iv it y D is t r ic t b a n k s , ch a n ge an d la r g e lo a n s , r e s u lt G o ve rn m e n t p u rch ase s n o in c r e a s e d th e la r g e r d e v e lo p m e n t s d e p o s it s v ir t u a lly a p p e a rs co n su m e r s m a ll- s iz e c o r p o r a t io n s b an k th e o f d o w n w a rd A s o f S. a e c o n o m y ro u gh ; s a v in g s A lth o u g h lo a n s d e m a n d an d is s u e d to go v e rn m e n ts. in th e c o n s t r u c t io n p e r io d m arket m a in e d o f m e d iu m - a n d a b u s in e s s o u t an d t im e at th e S o u th e a ste rn m o n th d u r in g in to c o n m o rt A p r il. m o n th th e p ast ye ar. h ave been a d ju ste d w h e n e v e r p o s s ib le to e lim in a te sea son a l in flu e n c e s. M O N TH LY R EV IEW June 1972
@FedFRASER