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In T h is Is s u e :

U n ifo rm

P r ic e a n d B a n k in g

M a rk e t D e lin e a tio n

T h e C u r r e n t R e c e s s io n
In P e r s p e c t iv e

B a n k in g N o t e s : L o w e r E a r n in g s

D is t r ic t B u s in e s s C o n d it io n s

M

O N T W

F e d e ra l R e s e rv e




«

e v i

B a n k

o f A t la n t a




U n ifo r m

P r ic e a n d

B a n k in g M a r k e t
D e lin e a t io n
b y

C h a rle s

D . S a lle y

This study tests the service area m ethod of geographic banking market
delineation, using a uniform price criterion. Secondarily, the study seeks to
identify other uniform perform ance variables that may coexist with geographically
uniform prices. These other variables include banks' return on assets and
capital, measures of portfolio mix, and measures of operating efficiency. There
is no theoretical expectation that most of these variables, apart from profit
and o utput measures, should be uniform in separate geographic markets.
Coincidental uniformities are sought primarily for future investigation, although
they might serve as proxies for price measures that are difficult to obtain.
The study attem pts to delineate objectively num erous local markets that can
be used to evaluate proposed bank mergers. Previous studies have used the
m ore readily available county and SMSA boundaries or subjective estimates
of econom ic trade areas.

M a r k e t d e f i n i t i o n b o u n d s a n t it r u s t j u r i s d i c t i o n b o t h t h e o r e t ic a l l y a n d
a d m in is t r a t iv e ly . T h e A n t i - M e r g e r A c t o f 1 9 5 0 p r o h i b i t s m e r g e r s w h i c h
s u b s t a n t ia lly le s s e n c o m p e t it i o n " in a n y lin e o f c o m m e r c e in a n y s e c t io n
o f t h e c o u n t r y . " T h e s e p r o d u c t a n d g e o g r a p h ic a re a s , o r m a rk e ts , m u s t
b e e m p i r i c a ll y d e lin e a t e d to e v a lu a t e th e c o m p e t i t i v e im p a c t o f p a r t ic u la r
m e r g e r s f o r e n f o r c e m e n t p u r p o s e s . P r io r t o e m p ir ic a l d e li n e a t i o n , t h o u g h ,
m a rk e ts m u s t b e c o n c e p t u a l l y d e f i n e d t o e s ta b lis h th e s o u g h t - f o r p e r f o r m a n c e
c r it e r ia u n d e r l y i n g a c tu a l c a se e v a lu a t io n s .
T h e s o c ia lly d e s ir a b le m a r k e t p e r f o r m a n c e c r it e r ia s o u g h t b y s u c h le g is la t io n
in c lu d e s th e l o w e r p r ic e a n d p r o f i t le v e ls f o u n d in " c o m p e t i t i v e m a rk e ts "
in c o n t r a s t to h ig h e r p r ic e a n d p r o f i t le v e ls e x p e c t e d o f " m o n o p o li s t i c m a rk e ts ."
P o li c y a c tio n s th u s p r e s u m e c e rta in m a r k e t d e f i n i t i o n s a n d

M onthly Review, V o l. LX, N o . 6. Free su b s c rip tio n and a d d itio n a l co p ie s a va ila b le

u p o n req u est to the Research D e p a rtm e n t, Federal R eserve Bank o f A tla n ta,
A tla n ta, G e o rg ia 30303. M aterial h e re in m a y be re p rin te d o r abstracted p ro v id e d
this Review, the Bank, a nd the a u th o r are c re d ite d . Please p ro v id e this Bank's
R esearch D e p a rtm e n t w ith a c o p y o f a n y p u b lic a tio n in w h ic h such m aterial is
re p rin te d .

JU N E 1975, M O N T H L Y R E V IE W

a c c o m p a n y i n g p e r f o r m a n c e l e v e ls .
In s i m p l e s t t e r m s , a m a r k e t m u s t i n c l u d e b u y e r s
a n d s e lle r s . In t e r a c t io n s b e t w e e n b u y e r s a n d s e lle r s
e s t a b lis h p r o d u c t , p r ic e , a n d g e o g r a p h ic d im e n s io n s

g r o u p o f b u y e r s id e n t if ie d b y t h e ir r e a c t io n to p r ic e
ch an g es.
O n c e p r o d u c t a n d b u y e r s a re d e f in e d , s e lle r s c a n
b e g r o u p e d in t o i n d u s t r i e s ( p r o d u c t lin e s u p p l i e r s ) .

w h ic h e c o n o m is t s a n d p o lic y m a k e r s u s e to id e n t if y

" A n y s u c h s u b g r o u p m a y b e c a lle d an in d u s t r y —

m a rk e ts.

s tr ic t ly a g r o u p o f s e lle r s o f c lo s e - s u b s t it u t e o u t p u ts
w h o s u p p ly a c o m m o n g ro u p o f b u y e r s ." 2

Stru ctu ra l M ark e t D e fin itio n s
G e o g ra p h ic A re a an d P rice*
T h e m o s t c o m m o n d e f in it io n s o f m a rk e ts a re
s t r u c t u r a l ; t h a t is , t h e y a r e b a s e d o n t h e n u m b e r

T h e d e f in it io n a l r e la t io n b e t w e e n t h e n u m b e r o f

o f b u y e rs a n d s e lle r s . S t r u c t u r a l d e f in it io n s p r e s e n t

s e lle r s a n d a g e o g r a p h ic m a r k e t p a r a lle ls th e

p r o b le m s , h o w e v e r , b e c a u s e th e n u m b e r o f p a r t ic i­

in te r d e p e n d e n c e b e tw e e n th e g ro u p o f b u y e rs a n d

p a n t s in a m a r k e t v a r i e s a s t h e m a r k e t b o u n d a r i e s

th e p r o d u c t d e f in it io n . A g a in , a p r ic e m e a s u r e

c h a n g e , b o th b y p r o d u c t d im e n s io n a n d b y g e o ­

is u s e d t o f o c u s o n t h e r e l a t i o n s h i p .

g r a p h ic d e lin e a t io n . T h e n u m b e r o f b u y e r s a n d
th e p r o d u c t d e f in it io n a re d e t e r m in e d s im u lt a n e ­

B o th m o n o p o ly a n d c o m p e t it iv e m a rk e ts , fo r
e x a m p le , a re s t r u c t u r a lly d e f in e d a c c o r d in g to th e

o u s ly ; t h e n u m b e r o f s e lle r s a n d th e g e o g r a p h ic

n u m b e r o f s e lle r s . T h e f e w e r s e lle r s , th e m o r e

d e lin e a t io n a re d e t e r m in e d s im u lt a n e o u s ly .

" c o n c e n t r a t e d ” th e p r ic in g a n d e x c h a n g e d e c is io n s .
E c o n o m ic t h e o r y a s s o c ia t e s h ig h e r le v e ls o f c o n ­

P ro d u ct Lin e an d P rice

c e n t r a t i o n w i t h h i g h e r p r i c e s , h i g h e r p r o f it s , a n d
l o w e r o u t p u t . M a n y e m p i r i c a l in v e s t i g a t i o n s a r e

B u y e r s h a v e a m a r k e t id e n t ity o n ly a s t h e y

c o n d u c t e d t o e s t a b l i s h t h is t h e o r e t i c a l l y e x p e c t e d

c o m m o n l y d e m a n d a s p e c i f i c p r o d u c t . T o is o l a t e a

s t r u c t u r e - p e r f o r m a n c e l in k u n d e r l y i n g m u c h a n t i ­

g r o u p o f b u y e r s , a m a r k e t a n a l y s t m u s t f ir s t is o l a t e a

t r u s t a c t iv i t y .

p r o d u c t . A n i s o l a t e d p r o d u c t is o n e f o r w h i c h

O b v io u s ly , th o u g h , th e n u m b e r o f s e lle r s a n d

b u y e r s w ill a c c e p t n o s u b s tit u te s . F o r in s t a n c e , a

t h e le v e l o f c o n c e n t r a t i o n w i l l d e p e n d d i r e c t l y o n

b u y e r m ig h t b e e q u a l l y s a t is f ie d w i t h o r a n g e j u i c e

th e g e o g r a p h ic e x t e n t o f th e m a r k e t . R e g u la t o r s

o r a s o ft d r in k . In c r e a s e d c o n s u m p t io n o f o n e

m a y w i s h t o d e f i n e a m a r k e t 's c o n c e n t r a t i o n b y t h e

r e s u lt s in a d e c r e a s e d c o n s u m p t i o n o f t h e o t h e r .

n u m b e r o f p a r t ic ip a n t s , b u t a s p r ic e t h e o r y te x ts

( T h i s s u b s t i t u t a b i l i t y in c o n s u m p t i o n is c a l l e d

p o in t o u t , " t o k n o w th e p r o p e r n u m b e r o f

" c r o s s - e l a s t i c i t y . " ) In t h is c a s e , t h e t w o f o r m s o f

in d iv id u a ls to in c lu d e w it h in t h e m a r k e t fo r a

r e f r e s h m e n t a re r a t h e r c lo s e s u b s tit u te s . B e c a u s e

c o m m o d ity , th e m a rk e t a re a fo r th e p r o d u c t m u st

t h e y h a v e a h ig h d e g r e e o f c r o s s - e l a s t i c i t y , t h e y d o

b e e s t a b l i s h e d . " :i It is p o s s i b l e t o d e f i n e a r b i t r a r i l y

n o t m a k e u p t w o c o m p l e t e l y s e p a r a t e p r o d u c t l in e s

a m a r k e t s o s p e c i a l i z e d a n d s o lo c a l t h a t t h e r e w i l l

o r m a r k e t s . A m o r e is o la t e d p r o d u c t d e f in it io n

b e b u t o n e s e lle r o f a p a r t ic u la r p r o d u c t . C o n t r a s t

w o u ld b e a c o lle c tiv e te rm , sa y , b e v e ra g e s , w h ic h ,

t h e n a r r o w P o r t S t. J o e , F l o r i d a , m a r k e t f o r a u t o

as a g r o u p , h a s a v e r y lo w d e g r e e o f c r o s s - e la s t ic it y

in v e n t o r y lo a n s w it h a b r o a d n a t io n a l m a r k e t fo r

w i t h p r o d u c t s l i k e g a s o l i n e o r in k .

b u s i n e s s c r e d i t . T h e f ir s t is g e o g r a p h i c a l l y s m a l l w i t h

A w e ll- k n o w n d e f in it io n o f a p r o d u c t m a rk e t
( o r li n e o f c o m m e r c e ) r e q u i r e s t h a t t h e p r o d u c t

f e w s e l l e r s ; t h e s e c o n d is la r g e a n d i n c l u d e s m a n y
s e lle r s . M a r k e t s t r u c t u r e a n d e x t e n t a re in t e r r e la t e d

" b e b o u n d e d o n a ll s i d e s b y a m a r k e t g a p in t h e

in t h a t d e f i n i t i o n s o f o n e b a s e d o n t h e o t h e r a p p e a r

c h a in o f s u b s t it u t e s ." 1 C o m m o n s e n s e p la c e s th e

to b e c ir c u la r o r in d e t e r m in a t e .

b u y e r s o f in k a n d t h e b u y e r s o f o r a n g e j u i c e o n
o p p o s i t e s i d e s o f s u c h a g a p . H o w e v e r , in t h e c a s e

T h e m u t u a l i t y in s t r u c t u r a l g e o g r a p h i c d e f i n i t i o n s
o f m a r k e t s is t r a d i t i o n a l l y o v e r c o m e b y r e s o r t in g

o f c l o s e r s u b s t i t u t e s li k e o r a n g e j u i c e , m i l k , a n d

to a p r i c e d i m e n s i o n . A l f r e d M a r s h a l l d e f i n e s a

b e e r , m a r k e t s m a y b e o u t l i n e d o n l y b y r e s o r t in g t o a

g e o g r a p h ic m a r k e t a s th e a re a w it h in w h ic h p r ic e

p r i c e r e s p o n s e m e a s u r e . C r o s s - e l a s t i c i t y is a c t u a l l y

t e n d s to u n i f o r m i t y . " T h u s , t h e m o r e n e a r l y p e r f e c t

a m e a s u r e o f s u b s t i t u t i o n in r e s p o n s e t o p r i c e

a m a r k e t is , t h e s t r o n g e r is t h e t e n d e n c y f o r t h e

c h a n g e . If t h e p r i c e o f o r a n g e j u i c e r o s e h ig h
e n o u g h , m i l k o r b e e r m ig h t n o t a p p e a r s o r e m o t e
as s u b s tit u te s . O n th e o t h e r h a n d , at n o p r ic e o f
o r a n g e j u i c e is in k a l i k e l y s u b s t i t u t e . In t h is w a y ,
p r o d u c t lin e s c a n b e c o n c e p t u a ll y is o la t e d a n d a
-Bain, joe. Industrial Organization, New Y ork; W ile y, 1968, p. 6.

*The synthesis of concepts used to define the theoretical banking
market in this study was suggested in conversations with
David D. Whitehead, economist at the Federal Reserve Bank
of Atlanta, concerning his dissertation in progress.
'R obinson, Joan. Economics of Imperfect Competition, New
Y ork: St. M arlins Press, 1961, p. 5.

FE D ER A L R ESER V E BANK O F A TLAN TA




:tStigler, George j. The Theory of Price, New Y o rk: M acm illan,
1966, p. 92.

87

T h e D ata

Sixty-eight Florida banking markets were examined
because their geographic delineation has been esta b­
lished on the service area basis in the course of many
actual bank acquisition cases. Only markets having
more than one bank were selected, since the investiga­
tion centers on comparing price variation within
markets with the variation am ong markets. The
markets include a total of 539 banks; the largest market
contains 70 banks and the smallest, 2 banks.
Price variables used in previous studies have been
limited to passbook savings rates, sam pled rates on new
automobile loans, and sampled rates on unsecured
personal loans. The present analysis uses four actual

savings rates, a calculated rate paid for borrowed funds,
and a calculated measure of account service charges
for all banks in the respective market areas.
The savings rates for 336 banks are taken from the
Federal Reserve System's Quarterly Survey of Time
and Savings Deposits for O ctober 1973. Rates for the
remaining 203 banks were obtained from FDIC reports
of examination conducted during 1973. The other per­
formance variables are taken from the Federal Reserve
System's Bank Operating Ratios for 1973. These
individual bank ratios are calculated from an average
of three Reports of Condition filed during the year.

T h e S ta tis tic a l T e s t

The statistical test is basically one of significant
difference in the mean price prevailing in two areas
designated as separate banking markets. The null
hypothesis is that there is only a single market— the
prices in the subdivided areas are merely the mean
prices of two randomly drawn samples from the same
population. There should be no difference except
by chance variation between these means as estimates
of the hypothesized common population mean.
However, if the test yields significant differences in the
means, of the divided areas, the null hypothesis must be
rejected; significantly different means must have com e
from different populations. Then the alternate
hypothesis holds: The two areas may be taken as
separate banking markets.
Such a test of two means can be extended to test
for differences am ong the means of more than two
samples (markets) using analysis of variance and the
F-test. (The technique works with variances, though,
rather than means.) If a uniform price is characteristic
of properly isolated geographic markets, there should
be little variation of price within these markets. And
if the markets are actually isolated, there should be
som e variance am ong their prices because of differing
local circumstances. If the markets are indeed separate,
the price variation between markets, then, will be
greater than the variation within them. The between
market variance: within market variance ratio (the
F-ratio) will be greater than o n e .’
The null hypothesis is that the areas defined by
overlapping bank service areas are not separate
markets, that these groupings are merely random
samples from a common population. If this is the case,
the F-ratio, except for chance variation, will be equal
to one. An F-ratio was calculated for each price variable
and also for the other performance measures.

F-ratios were also calculated for each performance
variable after the banking markets were redefined by
using the arbitrary but more commonly used countyline delineation. This tests the accuracy of county lines
(in Florida) as a proxy for delineated markets.
Previous studies did not use the F-test b ecause the
only price variable used was the passbook savings rate.
Since the Federal Reserve Board's Regulation Q sets a
maximum rate payable on such accounts, the rate
variations am ong banks would not be normally
distributed, even though not all banks pay the ceiling
rate. The F-test is limited to samples (markets) drawn
from normal populations.
For this reason, Edwards- used the following t-test:
x 7 -x ^

~ \l
v

S S ':
h
N>

N2

where Ni and N-j are the banks in either market,
Si and S^ are the standard deviation, and Xi and
Xs are the mean interest rates. Glassman, in a more
ambitious study of all banking markets in Pennsylvania,
used the chi-square t e s t .;
Nonetheless, the analysis of variance was chosen for
the present study, since in the fall of 1973 Regulation
Q interest rate ceilings did not apply to the four-year
and large-denomination CD rates. These, as well as the
operating ratios, may be assumed to c om e from normal
populations. Also, Cochran suggests that with
nonnormality in the experimental errors, the true
probability corresponding to the 1-percent significance
level of the F-table may lie between one-half of 1
percent and 2 percent.4
-Edw ards, Frank R. " T h e Banking C o m p etitio n C o n tro v ersy,"
N ational Banking R eview , Septem ber 1965, p. 8.

’ The F-ratio is actually a com parison of two independent
estim ates of the population variance. O n e is derived from
variance w ithin sam ples and the other from the variance of the
sam ple m eans. If they are in fact both estim ates of the same
population, their ratio w ill equal one. B lalock, Hubert M.
Social Statistics, N ew Y o rk : M cG raw -H ill, 1972.

88




■'Classman, C ynthia A. "B an kin g M arkets in P en nsylvania,"
C hanging Pennsylvania's B ranching Laws, Federal Reserve Bank
of P hiladelp hia, 1973, pp. 19-41.
^Cochran, W . G . "S o m e C o nseq u ences W hen the Assum ptions
lor the Analysis of Variance are not S p e c ifie d ," B iom etrica,
M arch 1947, pp. 22-38.

JU N E 1975, M O N T H LY R E V IE W

The F-ratios for the 68 delineated markets are
significantly greater than 1 for 7 of the 8 price measures
(see table). Five are significant at the .01 level, and two
others are significant at the .05 level. The null hypothesis
that these geographic areas are not separate banking
markets on the basis of uniform price can be rejected.
The F-ratios for the 51 county markets are
significantly greater than 1 for six of the eight price
measures. Five are significant at the .01 level, and one is
significant at the .05 level. The test of the delineated
market areas obtained a higher level of significance
than the county market test only on the performance
variable that included interest received for Federal
funds.
Two conclusions seem reasonable: (1) Geographic
areas in Florida delineated by clustering bank service
areas are separate banking markets and (2) county
boundaries are valid proxies for banking markets, at
least when concentration or performance studies are
carried out with statewide data. This may not be true
for studies limited to a small number of counties.
Nine additional performance measures have F-ratios
greater than one. All are at the very high .01 level of
significance. Various hypotheses and conclusions can
be drawn to "fit" these results. In general, the local
uniformity of income shares related to pricing, wage
measures of efficiency, and portfolio mix seem to
coincide with the uniform price delineation of
separate banking markets. On the other hand, rates
of return and measures of risk, contrary to theoretical
expectation, are not uniform within markets delineated
either by service area or by county line technique.
Bank size and time in operation are likely influences
on these variables.

s a m e p r ic e t o b e p a id f o r th e s a m e t h in g at all p a rts
o f th e m a r k e t ." 4 ( T h is p r e s u m e s th a t th e p r o d u c t
lin e h as b e e n d e fin e d .)
E m p ir ic a l s tu d ie s h a v e g e n e r a l l y f o l l o w e d
M a rs h a ll's (a n d L o e sc h 's ) m e a n s o f g e o g r a p h ic
d e lin e a t io n . S c h w e ig e r a n d M c G e e firs t u s e d p ric e
u n i f o r m i t y as a t o o l o f i d e n t i f y in g b a n k in g m a rk e ts
in 1 9 6 1 , u t il i z i n g s ta te b o u n d a r ie s as s ig n if ic a n t
m a r k e t d e lin e a t o r s . T h e y f o u n d th a t e v e n w h e n
sta te lin e s c ro s s t h r o u g h s in g le m e t r o p o l i t a n a re a s,
p ric e s d if f e r s ig n if ic a n t ly o n e it h e r s id e , in d ic a t in g
s e p a ra te g e o g r a p h ic m a r k e t s .5
S c h u ll a n d h lo r w i t z u s e d th e p r ic e a p p r o a c h in
1 9 6 4 to e s ta b lis h th a t s u b s e c t o r s o f m e t r o p o l i t a n
a re a s w i t h b r a n c h in g s y s te m s f o r m s in g le b a n k in g
m a rk e ts , w h e r e a s u n it b a n k in g m e t r o a re a s h a v e
less p r ic e u n i f o r m i t y a n d , t h e r e f o r e , c o n s is t o f
n u m e r o u s s u b m a rk e ts .

4Marshall, Alfred. Principles of Economics, London: Macmillan,
1961 ed., p. 324.
5Schweiger, Irving, and McGee, John S. "Chicago Banking,"
The Journal of Business of the University of Chicago,
July 1961, p. 258.

FE D ER A L R ESER V E BAN K O F ATLA N TA




The level of significance for interest paid on
$1,000 four-year certificates was disappointingly low,
although a somewhat higher level of significance was
obtained in delineated markets (.18) than in county
markets (.36). These savings certificates are the highly
publicized and controversial "wild card" certificates
exempted from Regulation Q rate ceilings during the
period when the data were reported. As a highly
competitive savings instrument, rates on these
certificates were expected to provide a particularly
accurate test of local banking market delineation.
Two explanations might account for the low level
of significance obtained. The certificates, introduced
first in the summer of 1973, may have ap peared too
recently to have established equilibrium market prices
by the time of the October survey. Alternatively,
many banks may not have been interested in raising
funds in this manner and consequently priced their
certificates well below the local market rate. For this
reason, a 5-percent quoted rate might appear amid
several 8-percent quoted rates in the same market.
Such great local variance would produce a very
low F-ratio.
Finally, an analysis of variance of deposit size by
banking market was performed as a loose check for
the influence of bank size on the performance
measures. Although the test is no substitute for a
vigorous two-way analysis of variance to remove the
influence of bank size, a large F-value would indicate
the need for further testing. The F-ratio was less than
one both for delineated markets and county markets,
indicating that there is no systematic variation am ong
markets and bank size which would bias the
conclusions.

" O u r c o n c e p t i o n o f a 'm a rk e t' is th e t r a d it io n a l
e c o n o m ic o n e . It is a p a r t ic u la r p la c e in w h i c h
g o o d s o r s e r v ic e s a re b o u g h t a n d s o ld , a n d in
w h i c h th e r e la t io n s h ip b e t w e e n b u y e r s a n d s e lle rs
is s u c h th a t th e p r ic e s o f th e 'sa m e' p r o d u c t s t e n d
t o w a r d e q u a lit y . . . . b u t if a p r o d u c e r ca n
'se p a ra te ' h is c u s t o m e r s s o th a t h e c a n c h a rg e
d if f e r e n t p r ic e s f o r th e 'sa m e' p r o d u c t , h e is, in
e ffe c t, s e llin g in m o r e th a n o n e 'm a rk e t.' " r“
S e llin g th e s a m e a rtic le at d if f e r e n t p ric e s to
d if f e r e n t b u y e r s is c a lle d p r ic e d is c r i m in a t i o n ; 7 a
p r o d u c e r is t a k in g a d v a n t a g e o f g e o g r a p h ic b a rrie rs
b e t w e e n p a rts o f a p r o d u c t m a r k e t to c h a r g e d if f e r ­
e n t p ric e s f o r th e s a m e t h in g . D if f e r e n t p ric e s a re
p o s s ib le o n l y w h e n a p r o d u c e r o r s e v e ra l p r o d u c e r s
d o n o t fa c e a c o m m o n g r o u p o f b u y e r s . B u y e rs
m u s t b e s o m e h o w d i v i d e d so th a t g o o d s s o ld
c h e a p e r in o n e a re a c a n n o t b e b o u g h t f r o m th e
p r o d u c e r a n d th e n r e s o ld in th e h ig h e r - p r i c e a re a .

“Schull and Horwitz, "Branch Banking and the Structure of
Competition," National Banking Review, March 1964,
pp. 301-341.
’ Robinson, op cit., p. 179.

89

A u n i f o r m p r i c e f o r t h e s a m e c o m m o d i t y , t h e n , is

s e lle r s , n a tu r a l o b s t a c le s s u c h a s m o u n t a in s a n d

t a k e n a s e v i d e n c e t h a t t h e r e is a c o m m o n g r o u p o f

r iv e r s — a ll u s u a l l y s u m m e d u p b y a n e x i s t i n g p o l i t i ­

b u y e rs.

c a l b o u n d a r y , s u c h a s a c i t y , S M S A , o r c o u n t y l im i t .

T h is sa y s th a t th e d e m a n d c u r v e fo r a c o m m o d it y

S u c h b o u n d s a r e t a k e n a r b i t r a r i l y a s b a r r i e r s to

in e a c h m a r k e t , if it is t r u ly s e p a r a t e , is i n d e p e n d e n t

b u y e r m o b i l i t y a n d a s f in a l d e l i n e a t o r s o f i s o l a t e d

o f t h e p r i c e s c h a r g e d in o t h e r m a r k e t s . F o r i n s t a n c e ,

a n d , th e re fo re , c o m m o n g ro u p s o f b u y e rs.

if a b a n k l o w e r e d its p r i c e , o t h e r b a n k s s e r v i n g a
c o m m o n g r o u p o f b u y e r s w o u ld b e f o r c e d to lo w e r

T h is p r o c e d u r e o f a r r iv in g at a s tr u c t u r a l m a r k e t
d e f in it io n c la r if ie s t h e im p o r t a n c e a t t a c h e d to t h e

t h e ir p r i c e s a l s o o r lo s e b u s i n e s s . P r i c e d i s c r i m i n a t i o n

i n it ia l d i s c u s s i o n o f b a n k i n g a s a l i n e o f c o m m e r c e .

e i t h e r b y o n e f ir m o r s e v e r a l s e p a r a t e f ir m s w o u l d

W h e n t h e J u s t i c e D e p a r t m e n t o b j e c t e d to t h e

n o t b e p o s s ib le a n d a c o m m o n p r ic e w o u ld

m e r g e r o f th e P h ila d e lp h ia N a t io n a l B a n k a n d th e

p r e v a i l in t h e g e o g r a p h i c m a r k e t . (A s i n g l e p r i c e

G i r a r d T r u s t C o r n E x c h a n g e in 1 9 6 3 , i d e n t i f y i n g

w o u l d a l s o p r e v a i l , o f c o u r s e , if t h e r e w e r e o n l y o n e

b a n k in g 's e s s e n t ia l p r o d u c t lin e b e c a m e c r u c ia l. T w o

b a n k s e r v in g a n is o la t e d g r o u p o f c u s t o m e r s .)
A b a n k o u t s i d e t h e m a r k e t , i . e ., o n e s e r v in g a

lin e - o f - c o m m e r c e c o n c e p t s e m e r g e d d u r in g th e
c a s e . O n e , an e x t e n s io n o f th e s ta n d a rd e c o n o m ic

d i f f e r e n t g r o u p o f b u y e r s in s o m e w a y i s o la t e d

m o d e l o f a m u lt ip le p r o d u c t fir m , m a in t a in s th a t

f r o m t h e f ir s t g r o u p , c o u l d m a i n t a i n a p r i c e d i f ­

b a n k s s e ll d i s t i n c t p r o d u c t s , s u c h a s p a y m e n t s e r ­

f e r e n c e . D i f f e r e n c e in p r i c e c a n b e u s e d , t h e n , a s a n

v i c e s , lo a n s , f i d u c i a r y s e r v i c e s , e t c . , t o s e p a r a t e

in d ic a t o r o f d if f e r e n t g e o g r a p h ic m a r k e t s . T h is sa y s

g r o u p s o f c u s t o m e r s . 10 A c c o r d i n g l y , t h e d e m a n d

n o t h i n g , h o w e v e r , a b o u t e x p e c t e d d i f f e r e n c e s in

e l a s t i c i t i e s a r e d i f f e r e n t f o r e a c h p r o d u c t l in e

p r i c e le v e l a n d a n y c o r r e l a t i o n w i t h t h e n u m b e r

( i.e ., t h e r e is a g a p in t h e c h a i n o f s u b s t i t u t e s ) , a n d

o f s e lle r s .

a b a n k c a n p r a c t ic e p r ic e d is c r im in a t io n . ( G e o ­

F r a n k E d w a r d s a ls o u s e d a u n i f o r m p r i c e c r i t e r i o n

g r a p h ic d e f in it io n s c a n th e n b e c o n s t r u c t e d fro m

in h is 1 9 6 5 s t u d y o f t h e s i g n i f i c a n c e o f s t a t e

i n d i v i d u a l l y d e f i n e d p r o d u c t li n e s .) In t h is p a r t i c u l a r

b o u n d a r i e s a s g e o g r a p h i c m a r k e t lim it s .

c a s e , lo w e r c o u r t s v ie w e d c r e d it a s t h e p r im a r y

“ It is o b v i o u s t h a t t w o m a r k e t s m a y h a v e
id e n t ic a l o r n e a r ly id e n t ic a l p r ic e s b e c a u s e o f a

p r o d u c t . C o m m e r c ia l c r e d it a s a lin e o f c o m m e r c e
p e r m it t e d g e o g r a p h ic d e lin e a t io n o f a b r o a d n a t io n a l

c o in c id e n t a l c o m b in a t io n o f s u p p ly , d e m a n d , a n d

m a r k e t w h i c h , o f c o u r s e , w o u l d b e lit t le a f f e c t e d b y

s t r u c t u r e . H o w e v e r , w h e n a s ig n if ic a n t d if f e r e n c e

a lo c a l m e rg e r.

d o e s e x is t b e t w e e n t h e ' m e a n ' p r i c e s in t w o a r e a s ,
t h e s e m a y b e t a k e n a s d i f f e r e n t ' m a r k e t s . ' ,,s

T h e a lt e r n a t iv e lin e - o f - c o m m e r c e c o n c e p t v ie w e d
b a n k i n g a s a c o m p o s i t e s e r v i c e i n d u s t r y . 11 L o a n
c u s t o m e r s a re g e n e r a lly d e p o s it c u s t o m e r s a ls o ,

The U niform Price Criterion

e s p e c ia lly w h e n c o m p e n s a t in g b a la n c e r e q u ir e m e n t s
a re c o n s id e r e d . E m p ir ic a ll y , lo n g - t e r m c u s t o m e r

P r i c e u n i f o r m i t y , t h e n , a p p e a r s to b e a u s e f u l

r e la t io n s h ip s a re o b s e r v e d r a th e r th a n a c o n s t a n t

t o o l in e m p i r i c a l l y e s t a b l i s h i n g g e o g r a p h i c m a r k e t s .

s h if t i n g o f c u s t o m e r s f r o m b a n k t o b a n k in

T h i s in i t ia l d e l i n e a t i o n is o f o v e r r i d i n g i m p o r t a n c e

r e s p o n s e to th e p r ic in g o f in d iv id u a l s e r v ic e s .

in s t r u c t u r a l a n t it r u s t c a s e s , s i n c e it a u t o m a t i c a l l y

F o l l o w i n g t h is c o n c e p t , t h e S u p r e m e C o u r t f o u n d

e s t a b lis h e s t h e c o n c e n t r a t io n le v e l.

c o m m e r c ia l b a n k in g to b e a s in g le lin e o f c o m m e r c e

M o r e a c c u r a t e ly s ta t e d , th e u n if o r m p r ic e m e a s u r e ,
r a t h e r th a n d e lin e a t in g m a r k e t lim it s , v e r if ie s a

in f a ir l y n a r r o w , l o c a l i z e d m a r k e t s . T h e p r o p o s e d
m e r g e r w o u ld n a t u r a lly le a d to h ig h e r c o n c e n t r a t io n

m a r k e t p r e v i o u s l y e s t a b l i s h e d in t h e m a n n e r

in t h e m a r k e t d e l i n e a t e d a s t h e l o c a l P h i l a d e l p h i a

d e s c r i b e d . F ir s t , t h e p r o d u c t l i n e is i s o l a t e d in t e r m s

a re a , a n d th e m e rg e r w a s e n jo in e d .

o f a la c k o f s u b s t it u t e s . S im u lt a n e o u s ly , a ra n g e
o f b u y e r s f o r t h e p r o d u c t l i n e is e s t a b l i s h e d , i.e .,

The Service Area Concept

t h o s e w h o v ie w th e p r o d u c t a s u n iq u e . A ra n g e o f
s e l l e r s , t h e i n d u s t r y , is n e x t a p p r o x i m a t e d a s t h o s e

In a c t u a l l y d e l i n e a t i n g g e o g r a p h i c m a r k e t s ,

f ir m s c a p a b l e o f s u p p l y i n g t h e p r o d u c t . T h e s e a r e

t h o u g h , th e t w o c o n c e p t s a re p e r h a p s n o t m u t u a lly

p o t e n t i a l b u y e r s a n d s e l l e r s in t h e p r o d u c t - l i n e

e x c lu s iv e . M a n y s t u d ie s h a v e c o n c lu d e d th a t th e

s e n s e . T h e f ir s t g e o g r a p h i c e s t i m a t e t o i n c l u d e a

m a r k e t ( s ) f o r t h e m a j o r i t y o f b a n k i n g s e r v i c e s is

s p e c i f i c d o m a i n 9 o f s e l l e r s a n d b u y e r s is j u d g m e n t a l l y c h o s e n o n t h e b a s is o f o b s e r v e d e x c h a n g e
p a t te r n s , t h e r o le o f d is t a n c e b e t w e e n b u y e r s a n d

-------------8Edw ards, Frank R. " T h e Banking C o m petition C o n tro v ersy,"
National Banking Review, Septem ber 1965, p. 8.
9Range and dom ain are used in the functional sense of m apping
a sp ecific subset from all possible market participants.

90




1°Schu11, Bernard. "C o m m e rc ia l Banks as M u ltiple-Prod u ct
P rice-D iscrim in atin g F irm s,” Banking and Monetary Studies,
ed. D eane C arson, H o m ew ood, Illin o is: Richard D . Irw in,
In c., 1963, pp. 351-368.
" Flo d g m a n , Donald R. Commercial Bank Loan and Investment
Policy, Bureau of E co n o m ic and Business Research, U rbana,
Illin o is: U niversity of Illin o is Press, 1963.

JU N E 1975, M O N T H L Y R E V IE W

F L O R ID A B A N K IN G M A R K E T F - R A T I0 S (1 9 7 3 )

68 Delineated
M arkets

51 County
M arkets

P rice s Paid
Passbo ok Savin g s
1 to V -year C ertificate
$1,000 4-year C e rtificate
$100,000 C ertifica te
In terest Paid on D e p o sits/A ssets
In terest on T im e & Savin g s D eposits/Total T & S Deposits

2.78 +
2.25 +
1.17
1.33
4.33
1.65

(.01)*
(.01)
(.18)
(.05)
(.01)
(.01)

3.50 +
3.46 +
1.07
1.52
4.20
1.55

(.01)
(.01)
(.36)
(.02)
(.01)
(.01)

1.81
1.35

(.01)
(.04)

2.08
1.33

(.01)
(.07)

2.86
2.11
2.72

(.01)
(.01)
(.01)

4.65
2.08
3.56

(.01)
(.01)
(.01)

2.56
2.06
4.78

(.01)
(.01)
(.01)

2.56
2.64
4.95

(.01)
(.01)
(.01)

.80
1.03
1.17

(.86)
(.42)
(.18)

.95
1.04
1.27

(.57)
(.40)
(.11)

2.08
1.87
4.29
.73
.98

22

(.01)
(.01)
(.01)
(.92)
(.52)

2.84
2.48
4.25
.73
1.23

(.01)
(.01)
(.01)
(.88)
(.14)

P rice s Charged
In terest & Fe e s on Lo an s/A verage Lo an s O utstanding
In terest & F e es on Lo an s & FF/A verag e Lo an s O utstanding
Incom e S h a re s
Deposit A ccount S ervice C harg es/Total O perating Incom e
In terest & F e es on Lo an s/To tal Operating Incom e
U. S. S e c u ritie s Incom e/Total Operating Incom e
Portfolio Mix
G ro ss Lo an s/To tal A sse ts
C o n su m er Lo an s/G ro ss Lo an s
T im e & S avin g s D eposits/Total Deposits
R a te s of Return
After Tax In co m e/Eq u ity C apital
After Tax In co m e/A ssets
Net In co m e/A ssets
E ffic ie n c y and R isk M easures
W ages/A ssets
S a la rie s and W ages/Total Operating Incom e
In terest Paid on D eposits/Total Operating Incom e
Interest Paid on Borrowed M oney/Total Operating Incom e
Loan Lo sses/A vera g e Lo an s O u tstanding
B ased on data from 539 ban ks
+ N orm ality assu m p tio n violated
* Level of sig n ifica n ce , i.e., .01 probability, that F-value is by ch an ce

f a ir ly l o c a l.1" M o r e o v e r , i n d i v i d u a l b a n k s e r v ic e
a re a s f o r d e m a n d d e p o s it s , t im e d e p o s it s , b u s in e s s
lo a n s , a n d c o n s u m e r lo a n s , as d e t e r m i n e d in
n u m e r o u s m e r g e r a n d h o l d i n g c o m p a n y a c q u is it io n
a p p lic a t io n s , r a r e ly e x t e n d b e y o n d lo c a l p o lit ic a l
lim its . T h e s e r v ic e a re a as a r e g u la t o r y d e f i n i t i o n
is th e c o n t ig u o u s g e o g r a p h ic a re a f r o m w h i c h a
b a n k d e r iv e s a p p r o x i m a t e l y 80 p e r c e n t o f its d e p o s it s
o r lo a n s . L o a n s e r v ic e a re a s t e n d to b e s o m e w h a t
la rg e r th a n d e p o s it s e r v ic e a re a s, b u t t h e ir b o u n d s
re m a in lo c a l w h e t h e r m e a s u r e d b y n a r r o w e r p r o d u c t
lin e s o r b y n u m b e r o r d o ll a r a m o u n t o f a c c o u n t s
a n d re g a rd le s s o f a c c o u n t s a m p le s i z e . 13
W i t h th is e v id e n c e , th e t w o t h e o r e t ic a l c o n c e p t s
m ig h t b e r e c o n c ile d . It c o u l d w e l l b e th a t t h e re
a re b a n k in g p r o d u c t lin e s th a t h a v e d if f e r e n t

“ Federal Reserve Bank of Chicago, Bank Loans to Business, Chicag o,
1956; Kaufman, George G . “ Bank M arket Structure and
Perform ance: The Evid en ce from Io w a ," Southern Eco n o m ic
Journal, April 1966, pp. 429-439.
“ Austin, D ouglas V. " D e fin in g the M arket Area of a B ank,"
The Bankers M agazine, spring 1969, p. 73.

FE D ER A L R ES ER V E BANK O F A TLAN TA




d e m a n d e la s tic itie s . H o w e v e r , J o a n R o b in s o n a d d e d
a s a lie n t c o n d it i o n f o r th e m u l t i p l e p r o d u c t
a r g u m e n t : P ric e d is c r im in a t io n is p o s s ib le , “ p r o ­
v i d e d th a t th e e la s tic itie s o f d e m a n d in th e
s e p a ra te m a rk e ts a re n o t e q u a l.' ' 14 S o th e c o n ­
v e n i e n c e o f " o n e - s t o p b a n k in g " o r th e r e q u i r e m e n t
th a t lo a n c u s t o m e r s m a in t a in c o m p e n s a t in g b a l­
a n c e s c o u l d m a k e o t h e r w i s e s e p a ra te d e m a n d
e la s tic itie s so n e a r ly e q u a l th a t th e o b s e r v e d c o i n c i ­
d e n c e o f v a r i o u s p r o d u c t lin e s e r v ic e a re a s
re s u lts .
M o r e o v e r , n o t o n l y d o e s th e s e r v ic e a re a c o n c e p t
o f f e r a n e m p ir ic a l s o lu t io n t o th e in itia l l in e - o f c o m m e r c e d e t e r m i n a t i o n , it h e lp s o v e r c o m e a
fu r t h e r c ir c u la r a r g u m e n t in th e a ll - i m p o r t a n t s tru c t u r e - p e r f o r m a n c e r e la t io n s h ip . If th e u n i f o r m p r ic e
c r it e r io n a lo n e w e r e u s e d to e s ta b lis h a g e o g r a p h ic
m a rk e t, th e s t r u c t u r e - p e r f o r m a n c e t h e o r e m s b a s e d
o n th e r e la t io n b e t w e e n le v e l o f p ric e s a n d le v e l o f
c o n c e n t r a t io n (its e lf d e r iv e d f r o m p r ic e b e h a v io r )

“ Robinson, op. c it., p. 181.

91

Defined by service area overlap.
Note: The market boundaries shown do not
reflect in all cases the current market defini­
tions used by the Board of Governors in bank
holding company decisions.

w ill h a v e n o o p e r a t io n a l c o n t e n t b e y o n d a c ir c u la r

m a r k e t a re a id e n t if ie d as a c lu s t e r o f o v e r la p p in g

d e f in it io n .

s e r v i c e a r e a s is in t h is m a n n e r d e l i n e a t e d a s a c o m ­

" T o d e f in e t h e m a r k e t a c c o r d in g to t h e
p r ic e b e h a v io r e x h ib it e d d e s t ro y s a n y p o s s ib ilit y

m o n g r o u p o f b u y e r s t o g e t h e r w it h t h e s e lle r s ,
in d e p e n d e n t ly o f p r ic e . P ric e u n if o r m it y c a n th e n

o f u s in g t h e m a r k e t s o d e f in e d to s a y a n y t h in g

b e u s e d t o t e s t if m a r k e t s s o e s t i m a t e d a r e i n d e e d

a b o u t p r i c e b e h a v i o r , a n d it p r e j u d g e s t h e

s e p a ra t e m a r k e ts . M o r e im p o r t a n t ly , m a r k e t s so

q u e s t i o n o f w h i c h m a r k e t s t r u c t u r e is t h e r e l e v a n t

d e f in e d c a n b e u s e d to p r o d u c e s t r u c t u r e - p e r f o r m -

o n e f o r m a k i n g p r e d i c t i o n s . " 15

a n c e t h e o r e m s w it h s o m e p r e d ic t iv e c o n t e n t .

T h e m e a s u re d s e rv ic e c o n c e p t c a n b re a k th e
c h a i n o f m u t u a l d e t e r m i n a t i o n , s i n c e it s t a t i s t i c a l l y

I m p l i c a t io n s f o r C a s e A n a ly s is

id e n t if ie s a g r o u p o f b u y e r s a n d a s u p p lie r . A
T h e p r e s e n t s tu d y n o t o n ly le n d s s o m e s u p p o r t
to th e G la s s m a n ( F e d e r a l R e s e r v e B a n k o f
l;iSteiner, Peter O . "M arkets and In d u strie s," International
Encyclopedia of the Social Sciences, V o l. 9, p. 577.

92




P h ila d e lp h ia ) f in d in g s o n th e lo c a l n a t u r e o f b a n k in g
m a r k e t s ; it a ls o s u g g e s t s a t e c h n i q u e f o r t e s t i n g

JU N E 1975, M O N T H L Y R E V IE W

geographic delineations used to analyze holding
company and merger applications (see map).
Market areas are particularly difficult to separate
where there are no obvious geographic breaks
between population centers. This has been the
case in Florida for the coastal area north of Miami
and the various cities in Polk, Lake, and Brevard
Counties. In the Daytona Beach-New Smyrna Beach
area, an actual poll of bank customers had to be
used to determine a boundary.
This study suggests a method of delineating

neighboring local markets on the basis of micro­
banking data. Banks in contiguous market areas
located adjacent to a disputed boundary can be
shifted from one side of the boundary to the other
until a maximum F-ratio value is attained for the
test variables or the highest significance level is
achieved.
Such a method is surely easier than polling banks
and their customers and may prove valuable when
local markets in Georgia, Mississippi, and Louisiana
must be determined. ■

April 24,1975
DEER CREEK STATE BANK
Deerfield Beach, Florida

O
pened for business a a par-rem
s
itting nonm ber.
em
April 28, 1975

Bank
A n n o u n c e m e n ts

JUPITER-TEQUESTA NATIONAL BANK
lupiter, Florida

O
pened for business a a m ber. O
s
em
fficers: Jack T
.
W s, chairm W
illiam
an; illiam R M
. cDonald, president;
D
avid N D
. evick, cashier. Capital, $ 0 ,0 0 surplus an
60 0;
d
other funds, $ 0 ,0 0
40 0.

April 1, 1975
SOUTH C O U N TY BANK

May 1,1975

South Venice, Florida

CITIZENS BANK

O
pened for business a a m ber. O
s
em
fficers: Gilbert N
.
Parker, chairm Charles J H
an;
. enning, president: Jack G
.
Shultz, executive vice president; Jam S Brow vice
es .
n,
president an cashier; John C Pinkerton, vice president.
d
.
C
apital, $ 0 ,0 0 surplus an other fu d $ 0 ,0 0
50 0;
d
n s, 5 0 0 .

Ville Platte, Louisiana

O
pened for business a a par-rem
s
itting nonm ber. Of­
em
ficers: C Fontenot, president; J R Aucoin, executive
arl
. .
vice president; J B Veillon, first vice president; D R ,
. .
ale eed
second vice president; E
ugene Fontenot, secretary. Capital,
$ 7 ,0 0 surplus an other fu
35 0;
d
nds, $ 7 ,0 0
35 0.

April 4, 1975
CITY NATIONAL BANK O F SOUTH D ADE

May 1, 1975

Miami, Florida

CITIZENS FIRST NATIONAL BANK O F
CRYSTAL RIVER

O
pened for business a a m ber. O
s em
fficers: Allan T A
. bess,
Jr., chairm R L B
an; . . udde, president; Connie Arnaz, vice
president an cashier; Florence S Km
d
. itto, assistan vice
t
president. Capital, $ 5 ,0 0 surplus an other fu d
80 0;
d
n s,
$ 2 ,0 0
45 0.
April 11, 1975
CITRUS PARK BANK
Citrus Park, Florida

O
pened for bu
siness a a par-rem
s
itting nonm ber. O
em
fficers:
R
obert D Sellas, president; G
.
eorge G Lam
.
berson, vice
president an cashier. Capital, $ 9 ,0 0 surplus an other
d
80 0;
d
fu d $ 1 ,0 0
n s, 3 1 0 .
April 15, 1975
THE BANK O F CENTRAL FLORIDA
Orlando, Florida

O
pened for business a a par-rem
s
itting nonm ber. Of­
em
ficers: Joseph O H
. utchinson, president; Fran H R
k . oark,
vice president; Keith N King, cashier. Capital, $ 6 ,7 0
.
86 9;
surplus an other funds, $ 3 ,3 5
d
43 9.

FEDERAL RESERVE BANK O ATLANTA
F



Crystal River, Florida

O
pened for business as a m ber. O
em
fficers: T as J
hom .
Tobin, president; Shirley H es, vice president an cashier.
ayn
d
Capital, $ 5 ,0 0 surplus and other funds, $ 5 ,0 0
60 0;
60 0.
May 1, 1975
CO V IN G TO N C O U N TY BANK
Collins, Mississippi

O
pened for business a a par-rem
s
itting nonm ber. Of­
em
ficers: R E Blackw chairm Jack D Triggs, president;
. .
ell,
an;
.
S
tephen L G cashier. Capital, $ 1 ,5 0 surplus and other
. off,
32 0;
funds, $ 1 ,5 0
32 0.
May 1, 1975
C & L BANK O F BRISTOL
Bristol, Florida

O
pened for business a a par-rem
s
itting nonm ber. O
em
fficers:
| W W
. . eaver, S chairm Jerry M Sm president;
r.,
an;
. ith,
Butler R ad exec, vice president and cashier.
e ,

9
3




T h e C u r r e n t R e c e s s io n
in

P e r s p e c t iv e *

b y A rth u r F. B u rn s, C h a irm a n
B o a rd o f G o v e r n o r s o f th e F e d e ra l R e s e rv e S y ste m
I am glad to meet with this distinguished group of business and financial
journalists in a leisurely setting. As a policymaker, I feel I have much in common
with the members of your profession. Both you and I must be alert to every
twist and nuance of the changing economic scene. Both you and I must keep
busy searching the business skies for some clues to the economic future. I find
this aspect of my work exciting and intriguing, as I am sure you do. But it does
involve a certain risk for both of us.
Sharing — as we do — the problem of continually meeting deadlines, we are
in danger of becoming so preoccupied with the very short run that we fail to
see economic events in perspective. For that very reason, I have wanted to take
advantage of your invitation, so that we might ponder together the historical
developments which have brought our economy to its present condition.
This is a large and highly important subject. I cannot hope to do full justice to
it on the present occasion. Nevertheless, I shall make a start this evening.
As you are well aware, these past few years have been trying times for the
American people. Not only have we lived through the agony of Vietnam and
Watergate, but some of us have even begun to wonder whether our dream of
full employment, a stable price level, and a rising standard of living for all our
people is beyond fulfillment.
Early last year, economic expansion began to falter in our country, as it did in
other countries around the world. At the same time, the pace of the inflation
that had been building for more than a decade accelerated sharply further.
As the year advanced, it became increasingly clear that our economy was
moving into a recession.
During the past two quarters, the real gross national product has declined by
5 per cent, and the level of industrial production is now 12 or 13 per cent below
last September. The unemployment rate has risen swiftly, and so also has the
idle capacity in our major industries. The decline in business activity since last
fall has been the steepest of the post-war period, and yet the advance of the
price level — while considerably slower than last year — is continuing at a
disconcerting pace.
No business-cycle movement can be comprehended solely in terms of the
events that occur within that cycle or the one preceding it. The economic
*An address given before the Society of American Business Writers, Washington, D.C.,
May 6,1975.

JU E 1 7 , MONTHLY REVIEW
N 95

currents of today are heavily influenced by longerrange developments— such as changes in economic
and financial institutions, the course of public
policy, and the attitudes and work habits of people.
By examining the historical background of recent
economic troubles, we should be able to arrive at a
better understanding of where we now are.
The current recession is best viewed, and I believe
it will be so regarded by historians, as the culminat­
ing phase of a long economic cycle.
There have been numerous long cycles in the
past — that is, units of experience combining two
or more ordinary business cycles. One such long
cycle ran its course from 1908 to 1921; another
from 1921 to 1933. And if we go back to the
nineteenth century, we encounter long cycles from
1879 to 1894 and from 1894 to 1908. These long
cycles differ in innumerable ways from one another.
But they also have some features in common — in
particular, each culminates in an economic decline
of more than average intensity.
The beginning of the long cycle that now appears
to be approaching its natural end may be dated as
early as 1958, but it is perhaps best to date its start
in 1961. The upward movement of economic activity
which began in that year was checked briefly in
1967 and interrupted more significantly in 1970.
Although these interruptions were watched with
concern and some anxiety by practicing economists
and other interested citizens, they will be passed
over lightly by economic historians concerned with
large events.
The reason is not hard to see. Putting aside
monthly and quarterly data and looking only at
annual figures, we find that total employment rose
every year from 1961 through 1973. So also did
disposable personal income and personal consump­
tion expenditures — both viewed on a per capita
basis and in real terms. This sustained upward trend
of the economy came to an end in 1974.
The successive phases of the long upswing from
1961 to 1974 provide a useful perspective on our
current problems. Some years ago, in my work at
the National Bureau of Economic Research, I
observed a pattern in past long upswings — an
initial stage that may be called the "industrial
phase" followed by what is best described as the
"speculative phase." The imbalances that develop
in this latter phase lead inevitably to the final
downturn. The events of the past 15 years conform
rather closely to this pattern.
The period from 1961 through 1964 may be
regarded as the industrial phase of the long upswing.
Productivity grew rapidly — increasing in the private
nonfarm sector at an annual rate of 3.6 per cent
between the final quarters of 1960 and 1964, or well
above the average rate of the preceding decade.
Unit labor costs were then remarkably stable, and
so too was the general price level. Real wages and
profits rose strongly. During this period of sustained

FEDERAL RESERVE BANK O ATLANTA
F



economic expansion, unemployment fell from about
7 per cent of the labor force to 5 per cent, while the
rate of use of industrial capacity rose substantially.
The second — or speculative — phase of the long
upswing began around 1965 and continued through
much of 1974. This ten-year period was marked by
a succession of major, interrelated, and partly
overlapping speculative waves that in varying
degrees gripped other leading industrial countries
as well as the United States.
The first speculative movement involved corpo­
rate mergers and acquisitions. In the euphoria of
what some commentators have called the "go-go"
years, rapid growth of earnings per share of common
stock became the overriding goal of many business
managers. Other yardsticks of corporate perform­
ance — such as the rate of return on new
investments — were neglected, and so too were the
serious risks of increased leveraging of common
stock.
The aggregate volume of large corporate
acquisitions, which for some years had been running
at about $2 billion per year, jumped to $3 billion in
1965, to $8 billion in 1967, to $121 billion in 1968,
/2
and then tapered off. This was the great era of
conglomerates, when a variety of unrelated busi­
nesses were brought together under a single
corporate management. Entrepreneurs who
displayed special skill in such maneuvers were
hailed as financial geniuses — until their newly built
empires began to crumble. Being preoccupied with
corporate acquisitions and their conglomerate
image, many businessmen lost sight of the
traditional business objective of seeking larger
profits through better technology, aggressive
marketing, and improved management. The
productivity of their businesses suffered, and so too
did the nation's productivity.
The spectacular merger movement of the late
1960's was reinforced, and to a degree made
possible, by the speculative movement that
developed in the market for common stocks. The
volume of trading on the New York Stock Exchange
doubled between 1966 and 1971, and fora time
trading volume on the American Exchange rose even
faster. The prices of many stocks shot up with little
regard to actual or potential earnings. During the
two years 1967 and 1968, the average price of a
share of common stock listed on the New York
Exchange rose 40 per cent, while earnings per share
of the listed companies rose less than 2 per cent.
On the American Exchange, the average price per
share rose during the same years more than 140
per cent on an earnings base that again was virtually
unchanged.
Much of this speculative ardor came from a
section of the mutual fund industry. For the new
breed of "performance funds," long-term invest­
ment in the shares of established companies with
proven earnings became an outmoded concept. In

9
5

their quest for quick capital gains, these institutions
displayed a penchant for risky investments and
aggressive trading. In 1965, a typical mutual fund
turned over about one-fifth of its common stock
portfolio; by 1969, that fraction had risen to nearly
one-half. As Wall Street then had it, the "smart
money” went into issues of technologically-oriented
firms or into corporate conglomerates — no matter
how well or poorly they met the test of profitability.
Speculation in equities was cooled for a time by
the stock market decline of 1969-1970, but then it
resumed again and took on new forms. Money
managers began to channel a preponderant part of
their funds into the stocks of large and well-known
firms — apparently with the thought that earnings
of those companies were impervious to the
vicissitudes of economic life. A huge disparity was
thereby created between the price-earnings ratios
of the "favored fifty” and those of other corpora­
tions. Share prices of these "favored” companies
were, of course, especially hard hit in the
subsequent shakeout of the stock market.
Speculation in common stocks was not confined
to the United States. From the late 1960's until
about 1973, nearly every major stock exchange in
the world experienced a large run-up in share prices,
only to be followed by a drastic decline. Indeed,
speculation reached a more feverish pace in some
countries than in the United States. On the Tokyo
stock exchange, for example, both share prices and
the trading volume actually doubled in the twelve
months between January 1972 and January 1973
and then suffered a sharp reversal.
The third speculative wave that nourished the
long upswing of our national economy occurred in
the real estate market. Homebuilding fluctuated
around a horizontal trend during the 1960's. The
vacancy rate in rental housing was at a high level
from 1960 to 1965, then fell steadily until the end
of the decade, and thus helped pave the way for a
new housing boom. Between January of 1970 and
January of 1973, the volume of new housing starts
doubled. Since then, homebuilding has plunged,
and in some sections of the nation it has virtually
come to a halt. Failures of construction firms and
unemployment among construction workers have
reached depression levels. These unhappy develop­
ments stem in large measure from the excesses of
the housing boom that got under way in 1970.
Inflationary expectations clearly played a
substantial role in bolstering the demand for houses.
But the boom was fostered also by an array of
governmental policies designed to stimulate activity
in the housing sector. These governmental measures,
however well-intentioned, gave little heed to basic
supply conditions in the industry or to the under­
lying demand for housing.
In response to easy credit and Federal subsidies,
merchant builders moved ahead energetically, put
up one-family homes well ahead of demand, and

9
6



thus permitted the inventory of unsold homes to
double between 1970 and 1973. Speculative activity
was even more intense in the multi-family sector —
that is, in apartments built for renting, and
particularly in condominiums and cooperatives,
which accounted for a fourth of the completions of
multi-family structures by the first half of 1974.
The boom in housing was financed by a huge
expansion of mortgage credit and construction
loans. Real estate investment trusts played an
exceptionally large role in supplying high-risk
construction loans for condominiums, recreational
developments, and other speculative activities. The
growth of real estate trusts was extraordinary by any
yardstick. Their assets, amounting to less than $700
million in 1968, soared to upwards of $20 billion by
1973. Unsound practices accompanied this rapid
growth and, as a result, many real estate trusts now
face difficult financial problems.
The speculative boom in real estate was not
confined to residential structures. It extended to
speculation in land, to widespread building of
shopping centers, and to construction of office
buildings. By 1972, the vacancy rate in office
buildings reached 13 per cent, but this type of
construction still kept climbing.
The real estate boom in the United States during
the early 1970's had its parallel in other countries.
Speculation in land and properties became rampant
in the United Kingdom. In 1972 alone, new house
prices rose 47 per cent on the average. The
amount of credit absorbed in real estate ventures
rose so rapidly that the Bank of England felt forced
to place special controls on bank lending for such
purposes. And in Germany, the boom in residential
construction during 1971-73 left an inventory of
about a quarter million unsold units— more than
a third of a peak year's output— that now overhang
the market.
It is in the nature of speculative movements to
spread from one country or market to another.
Just as the speculative wave in real estate was
beginning to taper off in 1973, a new wave of
speculation got underw ay— this time in inventories.
That was the fourth and final speculative episode of
the long economic upswing from 1961 to 1974. It
involved massive stocking up of raw materials,
machinery, parts, and other supplies in the United
States and in other industrial countries.
The inventory speculation of 1973 and 1974 was
the outgrowth of a boom in business activity that
had raised its head by 1972 in virtually every
industrial country of the world. The synchronism of
economic expansion in these countries was partly
coincidental, but the expansion that stemmed from
ordinary business-cycle developments was rein­
forced by the adoption of stimulative economic
policies almost everywhere. As a result, production
increased rapidly around the world and led to a
burgeoning demand for raw materials, machine

JU E 1 7 , MONTHLY REVIEW
N 95

tools, component parts, and capital equipment—
goods for which our country is a major source of
supply. The pressure of rising world demand was
reinforced in our markets by the devaluation of the
dollar, which greatly improved our competitive
position in international trade.
By the beginning of 1973, as business firms at­
tempted to meet intense demands from both
domestic and foreign customers, serious bottlenecks
and shortages had begun to develop in numerous
industries— especially those producing steel, nonferrous metals, paper, chemicals, and other raw
materials. In this evironment of scarcities, the rise
in prices of industrial commodities quickened both
here and abroad. The dramatic advance of food
prices in 1973, and later in energy prices, greatly
compounded the worldwide inflationary problem.
In our country, these price pressures were sup­
pressed for a time by price and wage controls, but
the general price level exploded when controls were
phased out in late 1973 and ealy 1974.
O ne of the unfortunate consequences of infla­
tion is that it masks underlying economic realities.
As early as the spring of 1973, a perceptible weak­
ening could be detected in the trend of consumer
buying in this country. The business community,
however, paid little attention to this ominous de­
velopment. The escalating pace of inflation fostered
expectations of still higher prices and persistent
shortages in the years ahead, so that intensive
stockpiling of commodities continued. Inventories
increased out of all proportion to actual or pro­
spective sales. In fact, the ratio of inventories to
sales, expressed in physical terms, had risen by the
summer of 1974 to the highest figure for any
business-cycle expansion since 1957— another year
when a severe recession got under way.
In summary, the period from 1965 to 1974 was
marked by a succession of interrelated, partly over­
lapping, speculative waves— first, in buying up of
existing businesses; then, in the stock market; next,
in markets for real estate; and finally, in markets for
industrial materials and other commodities.
A prolonged speculative boom of this kind can
seldom be traced to a single causal factor. In this
instance, however, a dominant source of the
problem appears to have been the lack of discipline
in governmental finances.
The industrial phase of the long upswing drew
to a close in late 1964 or early 1965. By then, the
level of real output was very close to the limits
imposed by our nation's physical capacity to
produce. By then, the level of wholesale prices was
already moving out of its groove of stability. Never­
theless, our Government did nothing to moderate
the pace of expansion of aggregate monetary
demand. On the contrary, it actually embarked on
a much more expansive fiscal policy. The tax
reductions of 1964 were followed in 1965 by fresh
tax reductions and by a huge wave of spending both

FEDERAL RESERVE BANK O ATLANTA
F



for new social programs and for the war in Vietnam.
These misadventures of fiscal policy doomed the
economy to serious trouble, but we were slow to
recognize this. Indeed, substantial tax reductions
occurred again in 1969 and 1971, and they too were
followed by massive increases of expenditures.
Deficits therefore mounted, and they persisted
year in and year out. Over the last ten complete
fiscal years— that is, from 1965 through 1974— the
Federal debt held by the public, including obliga­
tions of Federal credit agencies, rose by more than
50 per cent. The large and persistent deficits added
little to our nation's capacity to produce, but they
added substantially to aggregate monetary demand
for goods and services. They were thus directly
responsible for much of the accelerating inflation of
the past decade.
Monetary and credit policies were not without
some fault. As every student of economics knows,
inflation cannot continue indefinitely without an
accommodating increase in supplies of money
and credit. It is very difficult, however, for a central
bank to maintain good control of money and credit
when heavy governmental borrowing drives up
interest rates, and when the public is unwilling to
face squarely the long-run dangers inherent in
excessively stimulative economic policies.
To make matters worse, laxity in our national
economic policies spilled over into private markets.
The "new economics," of which less is now heard
than before, held out the possibility, if not the
actual promise, of perpetual prosperity. Many
businessmen and financiers came to view the
business cycle as dead, and to expect the Federal
Government to bail out almost any enterprise
that ran into financial trouble. All too frequently,
therefore, the canons of financial prudence that
had been developed through hard experience were
set aside.
Many of our business corporations courted
trouble by permitting sharp reductions in their
equity cushions or their liquidity. In the manu­
facturing sector, the ratio of debt to equity— which
had been stable in the previous decade— began
rising in 1964 and nearly doubled by the end of
1974. Moreover, a large part of the indebtedness
piled up by business firms was in the form of short­
term obligations, and these in turn grew much more
rapidly than holdings of current assets.
Similar trends developed in some segments of
commercial banking. Large money-market banks
came to rely more heavily on volatile short-term
funds to finance their business customers, and at
times they increased their loan commitments to
businesses beyond prudent limits. A few bank
managers, too, began to concern themselves exces­
sively with maximizing short-run profits, so that the
prices quoted for their common stock would move
higher. Capital ratios of many banks deteriorated;
questionable loans were extended at home and

9
7

abroad; insufficient attention was given here and
there to the risks of dealing in foreign exchange
markets; and too much bank credit went into the
financing of speculative real estate ventures.
A variety of loose practices also crept into State
and local government finance. Faced with rapidly
expanding demands for services and limited sources
of revenue, some governmental units resorted to
extensive short-term borrowing and employed
dubious accounting devices to conceal their budget
deficits. Statutory debt limits were circumvented
through the creation of special public authorities
to finance the construction of housing, schools, and
health facilities. Some of these authorities issued socalled "moral obligation” bonds, which investors
in many instances regarded as the equivalent of
"full faith and credit" obligations. The novel fi­
nancial devices seemed innocuous at the time, but
they have recently become a source of serious
concern to investors in municipal securities.
A nation cannot realistically expect prosperous
economic conditions to continue very long when
the Federal Government fails to heed the warning
signs of accelerating inflation, when many of its
business leaders spend their finest hours arranging
financial maneuvers, and when aggressive trade
unions push up wage rates far beyond productivity
gains. After 1965, the strength of the American
economy was gradually sapped by these ominous
trends. Productivity in the private nonfarm sector,
which had grown at an annual rate of 3.6 per cent
from 1961 through 1964, slowed to a 2.2 per cent
rate of advance from 1964 to 1969, then to 1.5
per cent from 1969 to 1974. Expansion in the
physical volume of national output likewise de­
clined during successive quinquennia. The rate of
inflation, meanwhile, kept accelerating.
With the pace of inflation quickening, seeds of
the current recession were thus sown across the
economy. Rising prices eroded the purchasing
power of workers' incomes and savings. Corporate
profits diminished— a fact that businessmen were
slow to recognize because of faulty accounting
techniques. New dwellings were built on a scale
that greatly exceeded the underlying demand.
Inventories of commodities piled up, often at a
fantastic pace, as businessmen reacted to gathering
fears of shortages. Credit demands, both public
and private, soared and interest rates rose to un­
precedented heights.
These basic maladjustments are now being
worked out of the economic system by recession—
a process that entails enormous human and financial
costs. Our country has gone a considerable distance
in developing policies to alleviate economic hard­
ships, and these policies have been strengthened
recently. Nevertheless, the recession has wrought
great damage to the lives and fortunes of many of
our people.
This recession has cut deeply into economic

9
8



activities. It must not, however, be viewed as being
merely a pathological phenomenon. Since we
permitted inflation to get out of control, the reces­
sion is now performing a painful— but also an
unavoidable— function.
First, it is correcting the imbalances that de­
veloped between the production and sales of many
items, also between orders and inventories, between
capital investment and consumer spending, and
between the trend of costs and prices.
Second, business managers are responding to the
recession by moving energetically to improve ef­
ficiency— by concentrating production in more
modern and efficient installations, by eliminating
wasteful expenditures, by stimulating employees
to work more diligently, and by working harder
themselves.
Third, the recession is improving the condition of
financial markets. Interest rates have moved to
lower levels as a result of declining credit demands
and of the Federal Reserve's efforts to bolster the
growth of money and credit. Commercial banks
have taken advantage of the reduced demand for
loans to repay their borrowings from Federal
Reserve Banks, to reduce reliance on volatile
sources of funds, and to rebuild liquid assets. The
rapidly rising inflow of deposits to thrift institutions
has likewise permitted a reduction of indebtedness
and addition to their liquid assets.
Fourth, the recession is wringing inflation out of
the economic system. W holesale prices of late have
moved down, and the rise of consumer prices has
also slowed. Although general price stability is not
yet in sight, a welcome element of price competi­
tion has at long last been restored to our markets.
These and related business developments are
paving the way for recovery in economic activity.
No one can foresee with confidence when the
recovery will begin. The history of our country
indicates clearly, however, that the culminating
downward phase of a long cycle need not be of
protracted duration.
Signs are multiplying, in fact, that an upturn in
economic activity may not be far away. For example,
employment rose in April after six successive months
of decline. The length of the workweek also
stabilized last month. The rate of layoffs in manu­
facturing is now turning down, and some firms
have been recalling workers who formerly lost
their jobs. Sales of goods at retail— apart from
autos— have risen further. Business and consumer
confidence has been improving. And prospects for
an early upturn in economic activity have been
strengthened by passage of the Tax Reduction Act
of 1975.
Our nation stands at present at a crossroads in its
history. With the long and costly cycle in business
activity apparently approaching its end, the critical
task now is to build a solid foundation for our
nation's economic future. W e will accomplish that

JU E 1 7 , MONTHLY REVIEW
N 95

only if we understand and benefit from the lessons
of recent experience.
Since World War II, a consensus has been build­
ing in this country that the primary task of economic
policy is to maintain full employment and promote
maximum economic growth. We have pursued
these goals by being ever ready to stimulate the
economy through increased Federal spending,
lower taxes, or monetary ease. Neglect of inflation
and of longer-run economic and financial problems,
has thus crept insidiously into public policy mak­
ing. Our Government has become accustomed to
respond with alacrity to any hint of weakness in
economic activity, but to react sluggishly, and
sometimes not at all, to signs of excess demand
and developing inflationary pressures.
The thinking of many of our prominent
economists has encouraged this bias in our eco­
nomic policies. During the 1950's and 1960's, they
frequently argued that "creeping inflation" was a
small price to pay for full employment. Some even
suggested that a little inflation was a good thing—
that it energized the economic system and thus
promoted rapid economic growth.
This is a dangerous doctrine. While inflation may
begin slowly in an economy operating at high
pressure, it inevitably gathers momentum. A state
of euphoria then tends to develop, economic
decision-making becomes distorted, managerial and
financial practices deteriorate, speculation becomes
rampant, industrial and financial imbalances pile up,
and the strength of the national economy is slowly
but surely sapped. That is the harsh truth that the
history of business cycles teaches.
To emphasize this truth, I should now like to
offer this distinguished group of journalists a bit
of professional advice. Since few of you are reluc­
tant to pass along hints as to how I should do my
job, I have decided to suggest to you what the
really big economic news story of 1975 is likely to
be.
The story has to do with the drama now unfolding
on Capitol Hill in the implementation of the Budget
Control Act adopted last year. If I am right in
thinking that our present economic difficulties are
largely traceable to the chronic bias of the Federal
budget toward deficits, there can be no doubt about
the importance of what is now being attempted.

FEDERAL RESERVE BANK O ATLANTA
F



No major democracy that I know of has a more
deficient legislative budget process than the United
States— with revenue decisions separated from
spending decisions and the latter handled in piece­
meal fashion. Budgets in this country have just
happened. They certainly have not been planned.
We are now attempting to change that by
adopting integrated Congressional decisions on
revenues and expenditures. My advice to you
journalists is to follow this new effort closely. It has
a significance for our nation that may carry far into
the future. But nothing can be taken for granted
here. We have tried budgetary reform once before
under the Legislative Reorganization Act of 1946,
and it failed. It failed partly because of the challenge
to cherished Committee prerogatives, partly also
because Congress as a whole balked at accepting
so much self-discipline. I would urge you to study
the history of that earlier effort and to watch the
present undertaking for tell-tale signs of similar
faltering.
The potential gain for our nation from budget
reform is enormous even in this first year of "dry
run." If, in fact, the work of the new budget com ­
mittees produces in the Congress a deeper under­
standing of the impossibility of safely undertaking
all the ventures being urged by individual legisla­
tors, a constructive beginning toward a healthier
economic environment will have been made. On
the other hand, if the new budget procedures are
scuttled, or if they are used with little regard to
curbing the bias toward large-sized Federal deficits,
there ultimately may be little anyone can do to
prevent galloping inflation and social upheaval.
I am inclined to be optimistic about the outcome.
More and more of our people are becoming con­
cerned about the longer-range consequences of
Federal financial policies. Perspective on our
nation's economic problems is gradually being
gained by our citizens and their Congressional
representatives. A healthy impatience with inflation
is growing. You journalists are becoming more
actively involved in the educational process. I
therefore remain hopeful that we shall practice
greater foresight in dealing with our nation's
economic problems than we have in the recent
past, and that we will thus build a better future
for ourselves and our children in the process.

99

BANKING STATISTICS
Bil.

-40

40

-3 6

-36

A/

-1 4

-3 2

r
j
- 24

-1 0
/V

-1 8

- 2 0

rj

- 8

-1 4

-5
-1 0
- 2
- 6

* F ig u res a re fo r th e la s t W e d n e s d a y of e a c h m o n th
**Daily a v e ra g e fig u re s

LATEST M O N T H PLOTTED: APRIL

SIXTH

D IS T R IC T

B A N K IN G

1974: L o w e r B a n k

N O T ES

E a r n in g s

N et In c o m e

% o f E q u it y C a p it a l

1973

14

1971
12

10

Ala.
‘ D i s t r i c t P o rtio n




Fla.

G.
3

La.*

Miss.*

Tenn.

District

District banks experienced strong demands for
credit and rising interest rates during 1974. Though
record interest rates on loans pushed operating
income to new highs, banks were also forced to
pay record interest rates for funds. As a result,
operating expenses rose more than income and
profitability declined. Net income, as a percentage
of equity capital, for District member banks de­
clined from 12.7 percent in 1973 to 10.4 percent
last year. Even though earnings were down, banks
tended to maintain their cash dividends by paying
out a larger portion of net income.
Earnings declined in five District states; the largest
drop was in Florida. Alabama banks posted the
smallest decline and continued with the highest
earnings rate in the District. After declining in 1973,
Louisiana banks again bucked the District trend by
exhibiting higher earnings in 1974.
Increased income usually leads to higher earn­
ings, but this is not always the case. While banks
collected more income in interest from loans and
investments, they also had to pay much higher
interest rates for deposits and borrowed funds.
These crosscurrents worked to the disadvantage of
many banks.
Because of a strong loan demand, District banks
increased their portfolios, at the same time cutting
back on securities relative to total assets. Larger
relative volumes and a higher return on loans (9.35
percent in 1974 compared to 8.52 percent in 1973)
increased the proportion of total income derived
from lending. Part of the higher loan interest, how­
ever, was offset by increased losses on loans and
additional provisions for such losses. Real estate

RATES OF RETURN ON ASSETS
AND INTEREST ON DEPOSITS
1973
1974
(p e rc e n t)
L oans (in c lu d in g F e d e ra l fu n d s)

9.52

10.67

L oans (e x c lu d in g F e d e ra l fu n d s)

8.52

9.35

T rea su ry s e c u ritie s

6.01

6.72

S ta te a n d m u n ic ip a l o b lig a tio n s

4.36

4.70

In te re s t on all tim e d e p o s its

5.38

6.25

from 5.38 percent to 6.25 percent; such payments
equai 40 percent of total income. Interest on
borrowed funds such as Federal funds purchased,
a major expense for most large banks, was also
much higher. And at times last year banks had to
pay more for Federal funds than the interest rates
they charged their prime customers for loans. One
large expense, employee wages and salaries, de­
clined in relation to total costs.
The earnings decline affected every size of bank,
though in different ways. The smallest banks (de­
posits of less than $10 million) tended to have the
lowest earnings level. These banks have relatively
higher salary and occupancy expenses. They also
experienced a large increase in interest payments on

DISTRIBUTION OF ASSETS* AND LIABILITIES
1974

1973
(p e rc e n t)
L oans
T re a su ry s e c u ritie s

52.7

54.8
7.7

S ta te an d m u n ic ip a l o b lig a tio n s

14.1

14.3

G ross lo a n s

SOURCES AND USES OF BANK INCOME*

9.8

52.7

54.8

INCOME

1973
1974
(p e rc e n t)

C ash a s s e ts

13.1

12.9

L oans

65.9

68.8

T im e d e p o s its to to ta l d e p o s its

53.8

56.5

T re a su ry s e c u ritie s

8.9

7.1

S ta te a n d m u n ic ip a l o b lig a tio n s

9.6

9.3

36.7

40 .4

EXPENSES
In te re s t on d e p o s its
In te re s t on b o rro w ed m o n ey

1.7

2.3

20.6

20.0

P ro v isio n fo r loan lo s se s

2.4

3.6

T axes

4.1

2.5

E m ployee e x p e n s e s

* E x p ressed a s a p e rc e n ta g e of to ta l o p e ra tin g in c o m e

loans, though they grew the most, seem to have
caused much of the problem.
The major factor accounting for last year's sharply
higher expenses was higher interest costs. The
average rate of interest paid on time deposits rose
N ote: D ata b a s e d on “ 1974 O p e ra tin g R atio s, Sixth D istric t
M em ber B a n k s ,” now a v a ila b le u pon re q u e s t (m ax. 10 c o p ie s).

FEDERAL RESERVE BANK O ATLAN
F
TA



*as a p e rc e n t of to ta l a s s e ts

time deposits. And since these banks tend to
concentrate on loans with relatively constant rates
of return (real estate and consumer instalment lend­
ing), they were less able to take advantage of the
increasing returns on other loans available through­
out most of last year.
The very largest District banks, in contrast, were
able to spread salary and occupancy expenses over
a large asset base; also, they tended to make more
business loans, which allow quicker adjustment to
other borrowing costs. These banks' earnings suf­
fered most from much higher interest payments on
deposits and borrowed funds, expenses that
amounted to three-fifths of total operating ex­
penses.
JOHN M. G OD FREY

11
0

S ix t h D is t r ic t S t a t is t ic s
S e a s o n a lly A d ju s te d
(A ll d a t a
L a t e s t M onth
1975

a r ien di e x e s ,
O ne
M onth
Ago

Tw o
M o nth s
Ago

O ne
Year
Ago

IN C O M E A N D S P E N D IN G
170 .6
2 24
391
177

1 68 .2
2 14
308
188

170.2
254
354
194

172.3
203
2 18
203

. Apr.
A p r.

L iv e s to c k
.........................................................
In s t a lm e n t C re d it a t B a n k s * (M il.$ )

. Apr.
. M ar.
. M ar.
M ar.

568
613

522
6 04

628
7 14

130.3
107.5
1 05 .9
104.5
9 5.2

1 04 .9
123.7
1 05 .4
109 .2
9 4 .5
116 .8
1 02 .9

1 05 .0
1 25 .0
105 .7
109.5
9 4.0
1 16 .6
103 .9

131.1
109.1
108 .0
104 .0
9 6.5
104.3
107.5
126.0
107 .9
110.5
9 5 .9
119.1
106.6

134 .5
119 .7
116 .7
1 06 .4
114 .2
115 .8
114 .2
131 .0
1 10 .4
1 23 .4

149 .8
9 7.5
137.7
133.1
1 2 3 .4
1 34 .3
1 49 .9
153 .9
105 .0
143.7
9 4. l r

1 50 .4
9 7.5
138 .4
1 3 6 .4
1 23 .6
135.1
150.3
154.3
106 .0
143 .5
93. r

1 5 1 .4
9 6.5
138 .9
1 41 .0
124 .8
1 35 .6
151.1
154.7
106 .2
1 42 .8
9 2 .2 r

E M P L O Y M E N T A N D P R O D U C T IO N
.
.
.
.
.
.
P a p e r ............................................
.
.
P r in t in g a n d P u b lis h in g
.
.
. .
.
S to n e , C la y , an d G la s s
.
.
.
T ra n s p o rta tio n E q u ip m e n t
.
.
.
T ra n s p o rta tio n
.
.
.
F in ., in s ., a n d re a l e s t.
S e r v i c e s ................................
.
.
S ta te a n d L o c a l G o v e rn m e n t
.
.
U n e m p lo y m e n t R a te
(P e rc e n t o f W o rk F o rt
In su re d U n e m p lo y m e n t
.
Avg . W e e k ly H rs. in M fg. (H rs .)
.
.
.
.
C otto n C o n s u m p tio n *
.
.
.
.
Food
.
T e x t ile s
.
.
P r in t in g a n d P u b lis h in g
.
C h e m i c a l s ......................................
.
.
D u ra b le G o o d s ......................................
.
L u m b e r an d Wood . . . .
.
F u rn itu r e an d F ix t u r e s . .
.
S to n e , C la y , a n d G la s s . .
.
P r im a ry M e t a l s .........................
F a b ric a te d M e ta ls . . . .
N o n e le c tric a l M a c h in e ry
.
E le c t r ic a l M a c h in e ry
. .
.
.
T ra n s p o rta tio n E q u ip m e n t

Apr.
A p r.
A p r.
Apr.
Apr.
Apr.
Apr.
A p r.
A p r.
Apr.
Apr.
A p r.
A p r.
Apr.
A p r.
Apr.
A p r.
Apr.
Apr.
A p r.
A p r.
A p r.
Apr.
Apr.
M ar.
A pr.

10
2.0 101.1

121.2 121.8 122.8

10
.2

Apr.
A p r.
Apr.
Apr.
A p r.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.
M ar.

6 .9
3 8.8
163
133
191
56
139 .8
142 .6
135 .9
136.5
1 17 .9
132 .4
126.3
1 60 .4
135.5
129.3
115 .2
135.5
1 01 .4
111.3
151 .3
2 26 .7
1 22 .4

. A p r.
A pr.

267
2 50

. A p r.
. A p r.

2 19
192
3 08

8
10.1

6 .7
3 8.6
224
131
316
54
1 41 .4
144 .6
135 .6
1 36 .9
120 .9
133 .7
127.3
1 59 .7
136 .6
126 .2
117.1
142.3
1 02 .7

111.2

1 3 0 .9
1 14 .6
134 .5
164 .7
1 10 .3
1 39 .8
1 60 .3
127 .7
138 .2
153 .2
1 51 .7
1 04 .0
137.1
9 8 .5r

D e b its * / *

9 .3

2
.2

3 8 .9
153

110

195
53
142.6
1 44 .4
135.0
137.0
125.1
135 .5
127 .9
156.7
139.7

3 9 .7
228
247

210
8
6

1 21 .4
144 .8
105 .2
116.1
156.7
2 3 2 .4
1 28.1

1 47 .7
146 .8
131.1
148 .2
1 37 .3
1 35 .4
133.3
1 55 .4
1 49 .6
149 .5
152 .0
1 57 .5
109 .2
1 31 .3
147 .6
2 50 .7
127.1

276
255

278
261

272
2 54

2 19
193
3 03 r

217
188
287

112.6

153 .8
2 2 7 .8

121.8

120
.2

210

A p r.
A p r.
A p r.

265
216
310

267
2 14
2 94

267

2 49

2 80

245

A p r.
M a n u fa c tu rin g P a y ro lls
................................A pr.
M
F a rm C a sh R e c e i p t s .............................................M ar.

178 .7
309

180 .7
2 49

1 79 .4
2 29

1 82 .3
176

149 .6
1 17 .6
1 55 .8
1 58 .3
8 0 .8

1 49 .8
117 .2
156 .1
162.1
7 5 .3

150 .1
1 18 .5
1 5 6 .2
1 6 7 .4
7 7.2

1 5 6 .4
1 2 8 .4
1 6 1 .8
2 2 2 .9
8 4 .3 r

12.3
3 9 .2

1 0.7
3 9 .9

9 .5
3 9 .5

5 .3
3 9 .7

3 08
241
2 96

306
240
310

149 .1
2 18

1 51 .5
244

163 .3

1 31 .1
113 .1
1 3 9 .4
1 4 7 .9
1 1 7 .l r

212

22
0

EM P LO YM EN T
A p r.
N o n fa rm E m p l o y m e n t ...................................... Apr.
A p r.
M a n u fa c tu rin g
...................................................Apr.
Ap r.
N o n m a n u f a c t u r in g .............................................Apr.
Ap r.
C o n s t r u c t i o n ...................................................Apr.
M ar.
F a rm E m p l o y m e n t ...................................................M ar
U n e m p lo y m e n t R a te
Ap r.
(P e rc e n t o f W o rk F o r c e ) ..........................A pr.
Avg. W e e k ly H rs. in M fg. (H rs .)
Ap r.
F IN A N C E A N D B A N K IN G

B ank

D e b its *

. A pr.
. A p r.
. Apr.

M a n u fa c tu rin g P a y ro lls
................................A pr.
F a rm C a sh R e c e i p t s ............................................ M ar.

2 88
2 40
303

1 50 .0

202

301
242
309r

221

F a rm E m p lo y m e n t
U n e m p lo y m e n t R a te
A vg. W e e k ly H rs . in M fg. (H rs .)

A pr.
Ap r.
A p r.
A p r.
M ar.

124 .5
9 8 .8
1 36 .3
124 .0
1 0 4 .0 r

125 .1
9 7 .8
1 3 7 .6
128 .2
1 0 4 .6 r

1 25 .9
9 8 .2
138 .3
1 3 3 .2
9 9 .0 r

A p r.
A pr.

1 0.3
3 8 .7

11.5
3 7 .9

3 8 .3

4 .9
3 9 .8

A pr.
A pr.
A pr.

248
195
38]

250
191
353

256
190
326

269
186
364

A pr.
M ar.

N o n m a n u fa c tu rin g

1 67 .0
239

1 69 .4
181

1 66 .3
346

1 5 3 .9
178

A pr.
A p r.
A pr.
A pr.
M ar.

1 07 .2
1 2 2 .9
1 05 .5
1 02 .5

120 .9
1 0 7 .4
1 23 .7
1 07 .6
102.7

1 08 .0
1 2 4 .0
1 09 .2
6 4 .5

11.2

F IN A N C E A N D B A N K IN G

Bank

D e b its **

EM PLO YM EN T
N o n fa rm

E m p lo y m e n t

U n e m p lo y m e p t R a te
(P e rc e n t of W o rk F o rc e ) .
A vg . W e e k ly H rs. in M fg. (H rs .)

120
.2
8
.1

121.2
8
.8

1 1 9 .8
1 09 .7
1 2 1 .9
1 0 8 .4
93. r

8

A p r.
A p r.

3 8 .6

8 .4
3 9 .5

Apr.
A p r.
A p r.

253
207
261

261
207
259

253

20
1
253

249
1 89
2 25

A p r.
M ar.

1 9 5 .9
2 30

1 93 .0
215

1 9 5 .4
329

1 91 .3
2 90

Apr.
Ap r.
Ap r.
Ap r.
M ar.

126 .5
118 .6
1 30 .2
1 25 .9

127 .5
1 19 .5
1 31 .2
1 35 .0
8 5.2

128 .3
121 .3
131 .5
1 40 .5
8 4 .6

1 3 0 .9
1 3 3 .6
129 .6
150 .2
9 2 .l r

3 8 .8

6 .7
3 9 .2

F IN A N C E A N D B A N K IN G

181
293

M I S S IS S IP P I

IN C O M E
. Apr.

172 .2
2 04

170 .6
233

118.3
106.1
123 .8
1 31 .4
113 .6

118.5
105 .8
124.3
131.2
112.7

EM PLO YM EN T




5 .2
4 0 .4

F IN A N C E A N D B A N K IN G

5.1

6
.1

A LABAM A

12
0

9 .5
3 9 .0

3 8 .4

E M P LO YM EN T

Loan s*

N o n m a n u fa c tu rin g
C o n s tru c tio n
F a rm E m p lo y m e n t .

O ne
Year
Ago

9 .8
3 8 .0

F IN A N C E A N D B A N K IN G

Bank

10.2

Tw o
M o nth s
Ago

687
643

129 .9
1 07 .8
106.7
104.5
9 6 .4

O ne
M onth
Ago

A pr.
A pr.

U n e m p lo y m e n t R a te
(P e rc e n t o f W o rk F o rc e ) . . .
Avg. W e e k ly H rs. in M fg. (H r s .) .

S IX T H D IS T R IC T

F a rm C a s h R e c e ip t s

L a t e s t M onth
1975

.
.
.
.
.

Apr.
A p r.
Apr.
A p r.
M ar.

176 .4
3 00

120.1
109.3
125.0
134.3
115 .6

1 81 .8
217

IN C O M E

EM P LO YM EN T
121*9
1 18 .4
123 .4
1 41 .2
1 2 5 .Or

8 .2
6

JU E 1 7 , MONTHLY REVIEW
N 95

O ne
M onth
Ago

L a t e s t M o nth
U n e m p lo y m e n t R a te
(P e rc e n t o f W o rk F o rc e ) . .
Avg. W e e k ly H rs. in M fg. (H rs .)

Tw o
M o n th s
Ago

O ne
Year
Ago

Tw o
M o nth s
Ago

O n*
Year
Ago

EM P LO YM EN T
. Apr,
. Apr.

. Apr.
. Apr.

F IN A N C E A N D B A N K IN G
M em b er B a n k L o a n s * . . . .
M e m b e r B a n k D e p o sits* . . .
B a n k D e b i t s * / * * ......................................

O ne
M onth
Ago

L a t e s t M onth

. Apr.
. Apr.
. Apr.

248
217
259

266
217
2 55 r

263
215
237

. Apr.

257
216
260

F a rm E m p lo y m e n t .
U n e m p lo ym e n t R a te

Apr.

A vg. W e e kly H rs. in M fg. (H rs .)

. M ar.

1 29 .4
119 .9
134.7
139.8

125.1
107.5
134.9
135.8

125.5
107.5
135.5
138 .4

126.9
109.4
136.6
146.0

9 .0
39.2
89.8

9 .6
3 8.3
93.6

7.8
3 9 .0
9 4.0

4.3
3 9 .4
9 1 .4r

274

291
224
276

287

258
203
265

TEN N ESSEE
F IN A N C E A N D B A N K IN G

IN C O M E
M a n u fa c tu rin g P a y r o l l s ......................................Apr.
F a rm C a s h R e c e i p t s ............................................M ar.

172.1
197

167.0
244

171.1
184

‘ F o r S ix th D is t r ic t a re a o n ly ; o th e r to ta ls fo r e n tire s ix s ta te s

. Apr.
. Apr.

174.5
205

20
2

2 58

* * D a ily a ve ra g e b a s is

t P r e lim in a r y data

r-R e v ise d

20
2
260

N .A . Not a v a ila b le

Note: All indexes: 1967=100.
S o u rce s :
M a n u fa c tu rin g p ro d u ctio n e stim a te d by th is B a n k ; n o n fa rm , m fg. an d n o n m fg . e m p ., m fg . p a y ro lls and h o u rs, an d u n e m p ., U .S . D ept, of L a b o r an d co o p e ra tin g
sta te a g e n c ie s ; cotto n c o n su m p tio n , U .S . B u re a u o f C e n s u s ; c o n s tru c tio n c o n t ra c t s , F . W. Dodge D iv ., M cG ra w -H ill In fo rm atio n S y s te m s C o .; fa rm c a s h re c e ip ts an d
farm e m p ., U .S .D .A . O th e r in d e x e s b ase d on d a ta c o lle c te d by th is B a n k . A ll in d e x e s c a lc u la te d by th is B a n k .
'D a ta b e n ch m a rk e d to Ju n e 1971 R e p o rt of C o n d itio n .

D e b it s to D e m a n d D e p o s it A c c o
Insured Commercial Banks in the Sixth District
(In T h o u s a n d s

o f D o lla rs )
P e rce n t Change

P e r c e n t C h an g e

A p ril
1975
from
M arch
1975

A p ril
1975

A p ril
1974

M ar.
1975

Apr.
1974

Year
to
date
4 m o s.
1975
from
1974

S T A N D A R D M ET R O P O L IT A N
S T A T IS T IC A L A R E A S '
B irm in g h a m .
G ad sd e n
H u n ts v ille
.
M o bile
. . . .
M ontgom ery .
T u s c a lo o s a
.

.
.
.
.

. .
. .
. .
. .
. .
. .

12 + 32 + 24
8- 1 + 2
+ 12 + 21
-r 8 + 23 + 26

5 ,8 15 ,7 46
107,292
4 02 ,4 09
1 ,5 10 ,2 29
8 60 ,1 70
2 74 ,7 89

5 .2 13 ,8 32
9 9,57 6
3 98 ,6 94
1 .3 96 ,6 02
7 38,199
257 ,0 96

4 .3 9 3 ,1 2 5
1 08,759
359 .1 23
1 ,2 28 ,5 59
6 84 ,0 67
2 52 ,1 97

909 .5 89
5 43 .2 37

8 60 ,6 23
483 ,9 14

8 03 ,4 34
4 9 6 ,2 4 4

2 .1 97 ,9 21
477 ,6 9 5
2 85 ,1 17
5 ,0 6 1 .6 61

1 ,8 78 ,1 05
445 ,8 90
286 ,4 69
4 ,9 2 1 ,1 9 4

2 ,3 3 1 ,8 2 6
415,941
2 86 .5 85
5 .0 2 3 .5 8 0

+ 17
+ 7
+ 3

+ 15
-

- 4
+
+
-

+
+

+ 17
+ 7

+ 26
+ 9

+ 17
+ 7

-1 3
+ 9

+ 9
+ 15

.
.
.

478 ,9 7 3
7 ,7 56 ,1 51
1 ,7 29 ,6 27
5 1 1 .6 5 9
6 1 0 ,1 6 2
1 ,0 1 4 ,9 8 8
4 ,6 7 0 ,5 7 0
1 .2 68 ,6 76

4 56 .7 96
7 ,3 0 2 ,0 9 5
1 ,5 6 4 ,2 7 9
5 1 6 .6 7 0
5 4 5 ,1 0 4
1 ,1 70 ,2 33
4 ,2 4 5 ,4 0 2
1 ,2 9 8 ,3 3 8

5 14 ,6 59
7 ,8 8 8 ,8 3 5
1 ,6 8 7 .7 7 4
4 7 7 ,0 6 1
6 2 1 ,4 6 9
9 3 3 ,0 3 9
4 ,4 8 6 ,8 7 9
1 ,4 8 4 ,8 0 7

+ 5
+
+
+
-1 3
+
-

- 7
+
- 7
+ 9
+ 4
-15

+ 5
+ 16
+
+
+
- 4

A lb a n y
.........................
A t l a n t a .........................
A u g u s t a .........................
C o lu m b u s . . . .
M acon
.........................
Savannah
. . . .

191 ,4 76
. 2 3 .1 9 1 ,3 7 2
66 0 ,0 4 3
5 0 3 ,3 2 4
86 2 ,5 8 0
. 1 ,0 22 ,5 88

1 85,396
1 9,4 9 4 ,2 1 4
6 3 0 ,5 0 2
4 5 5 ,1 3 4
8 1 8 ,0 4 6
9 6 9 ,0 5 5

2 2 4 ,8 1 5
2 1 ,8 3 1 ,2 8 9
6 6 4 ,3 5 0
4 9 2 ,8 0 7
7 9 6 ,0 3 3
5 9 7 .1 5 9

+ 3
*19
+ 5
+
+ 5
+

-15
+
+
+
+ 71

- 4
+
+
+
+ 13
+

331 ,5 31
1 ,9 03 ,0 51
3 7 6 .1 5 4
2 7 1 ,1 2 5
5 .4 7 6 ,5 2 1

289 ,2 21
1 ,5 9 3 ,0 6 9
3 0 9 ,8 1 4
2 8 1 ,6 0 7
5 ,1 4 7 .4 6 3

+
+
+
+

+ 9
+ 25
+ 36
+ 3
+

+ 38
+ 33
+
+ 13

+ 23
- 4

+ 18
+ 9

1 - 7
-21
1 + 11

+ 18

-

+ 10

A le x a n d ria
. .
B ato n R o u ge
.
L a fa y e tte
. . . .
La k e C h a r le s
.
New O rle a n s
.

.

.
.

+
+

6
12
0

6
11
1
12
10
2
11
6

.
.

.

.
.

.

3 1 6 ,6 8 2
1 ,9 9 5 ,5 2 6
4 2 1 ,3 2 7
2 9 1 ,0 5 0
5 ,7 6 9 ,5 0 2

B ilo x i- G u lp o rt
. .
J a c k s o n .........................

.

3 1 2 ,7 6 8
1 ,7 10 ,0 50

2 8 4 ,2 0 3 r
1,6 56 ,2 63

2 5 4 ,7 6 9
1 ,7 8 7 ,2 4 9

+
+ 3

C h atta n o o g a . . .
K n o x v ille
. . . .
N a s h v ille
. . . .

.
.
.

1 ,2 8 3 ,4 1 0
1 ,5 7 7 ,5 6 8
4 .7 0 3 ,6 7 8

1 ,3 0 0 ,1 1 0
1 ,6 6 9 ,2 3 4
4 .6 3 8 ,8 9 0

1 ,3 8 6 ,5 0 0
2 ,0 0 1 ,9 5 2
4 ,2 4 0 .7 1 2

1 2 1 ,9 24

2
2
2

6
1
2
8

- 5
+

.........................

6
1
1

4
5

12
7
5

10

12

8
6
1
1
2
2
2
1

6
8
2
6
8
+ 10
12
8
2

O TH ER C EN T ER S
A n n isto n

1 2 1 ,6 1 4 r

1 22 ,3 99

+ 0

0

'C o n fo rm s to S M S A d e fin itio n s a s of D e c e m b e r 31. 1972.
-D is tric t p o rtio n o n ly ,
r-revised
F ig u re s fo r so m e a re a s d iffe r slig h tly fro m p re lim in a ry fig u re s p u b lis h e d in “ B a n k

FED
ERAL RESERVE BANK O ATLANTA
F



A p ril
1974

M ar.
1975

A p r.
1974

Year
to
d a te
4 m os
1975
fro m
1974

A p ril
1975

M arch
1975

1 9 5 ,7 19
9 1 ,7 9 4

194 ,3 64
7 6,14 3

2 1 6 ,9 5 5
8 0,27 5

2 1 4 .2 8 3
1 2 5 ,3 98
2 5 1 ,7 7 2
4 6 ,2 9 6
1 ,1 0 6 ,0 8 8
2 ,4 5 6 ,8 6 6

2 0 1 ,8 6 3
142 ,4 48
2 2 5 ,6 67
4 9 ,4 7 4
9 6 2 ,4 9 4
2 ,1 9 7 ,7 6 8

2 2 0 ,2 9 3
1 19 ,7 89
2 1 9 ,5 51
6 4 ,9 3 8
1 ,1 3 3 ,2 8 9
2 ,1 9 6 ,0 5 1

1 69 ,4 88
124 ,9 73
1 8 0 ,9 2 4
2 8 ,5 0 0
1 7 6 ,8 55
7 7 ,5 3 8
3 8 ,3 4 5
5 0,241
1 6 5 ,6 20
118 ,2 24

1 6 5 ,7 82
1 16 ,0 03
157 ,8 50
2 5 ,9 8 2
1 63 ,6 05
6 9,26 0
3 9 ,8 7 6
4 3,47 7
1 57,446
1 09 ,1 06

184 ,5 52
118 ,8 63
1 96 ,2 40
3 0,04 3
1 65,431
9 5,29 0
5 2 ,7 3 6
59,61 7
165,521
1 1 4 ,7 28

- 4
+ 16
+ 5
+

-2 7
-1 6
+
+ 3

-1 5
-1 4
+ 3
+

19.449
17,708
1 17 ,8 47
88,38 1
2 9,41 1
7 4,27 1

1 8,915
17,401
111 ,7 08
8 8 ,3 7 9
3 2,11 5
6 8 ,8 0 9

1 8,50 7
12,327
9 6,66 9
7 2,16 5
2 4,35 5
4 1,22 1

+ 3
+
+ 5
+
+

+ 5
+44

+
+ 34
+ 34
+ 33
+ 30
+ 71

.
.

1 4 9 ,2 10
8 5 ,6 6 3
1 36 ,4 88
6 2 ,9 8 8

1 5 1 ,1 60
7 7 ,2 8 0
120 ,0 54
54,23 3

1 4 3 ,9 64
8 8 ,0 5 6
1 41,043
6 0 ,5 5 9

+ 14
+ 16

- 3
+ 4

.
.

152 ,6 26
8 0 ,5 7 9
5 4,65 0

1 8 1 ,5 99
7 5 ,7 6 8
5 2,42 9

156 ,0 59
9 1,17 5
5 3,45 7

B ris to l
. . . .
Jo h n so n C ity
K in g sp o rt . . .

148,181
1 81 ,9 29
3 2 6 ,6 3 6

149 ,7 55
1 73 ,4 83
3 56 ,3 81

, 1 47,035
196,011
3 0 8 ,3 53

Do than
S e lm a

B a rto w -L a k e la n d
W in te r H aven
D ayto na B e a c h
F t. L a u d e rd a le H ollyw o od
. .
F t. M yers . . .
G a in e s v ille
. . .
J a c k s o n v ille
. .
M elbourneT itu s v ille -C o co a
M iam i
.........................
O rla n d o
. . .
P e n s a c o la
S a ra so ta
. . .
T a lla h a s s e e
.
.
T a m p a -S t. P ete
W. P a lm B e a c h

.

A p ril
1975
fro m

. . . .
. . . .

B ra d e n to n . . .
M onroe C o u n ty
O c a l a .........................
S t. A u g u stin e
S t. P e te rs b u rg .
Tam pa
. . . .
A th e n s
.
B ru n s w ic k
D alto n
.
E lb e rto n
G a in e s v ille
G riffin
.
L a G ra n g e
N ew n an .
Rom e
.
V a ld o sta

. . .
.
. . .
. .
.
. . .
. .
. . .
. . .
. .

A b b e v ille
. .
B u n k ie
. . . .
Ham m ond . .
New Ib e ria
.
P la q u e m in e
.
T h ib o d a u x . .
H a ttie sb u rg
.
L a u re l
. . . .
M e rid ia n
. .
N a tc h e z
. .
P a sc a g o u la *
M o ss P o in t
V ic k s b u rg . .
Y azo o C ity
.

D IS T R IC T T O T A L

.

.
.
.
.

.
.
.
.
.
.
.

.

. 9 8 ,3 2 4 ,0 3 1

9 1 ,0 0 1 ,6 0 2 r 9 3 ,4 0 5 ,5 2 4

A la b a m a
. . .
F lo rid a
. . . .
G eo rg ia . . . .
L o u is ia n a . .
M is s is s ip p i. .
T e n n e ss e e . .

1 2,4 2 9 ,2 8 9
3 0 ,0 2 8 ,4 6 1
3 0 ,6 7 1 ,9 5 4
1 0 ,5 7 6 ,3 0 5
3 ,5 9 4 ,9 4 0
1 1,0 2 3 ,0 8 2

1 1,19 4,76 7
9 ,8 2 5 .1 4 6
2 8 ,3 6 0 ,143r 3 0 ,5 7 2 ,8 9 6
2 6 ,8 3 0 ,3 9 4
2 8 ,9 7 3 ,0 1 3
1 0 ,0 5 8 ,7 7 2
9 ,1 3 3 ,3 2 5
3 ,4 3 0 ,534 r
3 ,6 0 1 ,1 7 1
1 1 ,1 2 6 ,9 9 2
1 1,29 9,97 3

.
.
.
.

1 -10 - 3
21 + 14 - 8
+ 6 - 3 + 3
-12 + 5 + 9
+ 12 + 15
+ 6
- 6 -29
-2 3
+ 15
- 2 - 2
+ 12 + 12 + 9
+ 2 - 8 + 1
+ 8 + 5 +
20
- 8 -1 4
+ 15
+ 10 - 5 + 5
+ 8 + 7 + 9
-10
+ 12 - 1 9
+
+

8

0

2
+22
0+
22
8 + 21
8 + 80
- 1 + 4
+ 11 - 3

8
11

+ 15
+
+
+ 7

1
2

- 2 + 4
6 -12 -11
+ 2 + 4
- 1 + 1 + 17
+ 5
- 7 - 0
- 8 + 6 + 9
+ 8 + 5 + 8
+ 11 + 27
+21
+ 6 - 2 - 0
+ 14 + 6 + 8
+ 5
+ 16
+ 19
+ 5 - 0 + 6
- 1 - 2 + 8
-16
+
+ 4

iits a n d D e p o sit T u rn o v e r” by B o a rd of G o v e rn o rs of th e F e d e ra l R e s e rv e S y s te m .

13
0

D is t r ic t B u s in e s s C o n d it io n s

-

200

— 300

* S e a s. a d j. fig u re; n o t a n in d ex
L a te s t p lo ttin g : April, e x c e p t m fg. p ro d u c tio n a n d fa rm c a s h re c e ip ts, M arch.

Some encouraging signs were inteVminjgTed with lingering weakness in the Southeastern economy. Job
gains in manufacturing tempered April's rise iri unemployment. Consumer instalment credit declined at
a more moderate rate. Agriculture benefited from rising livestock prices, improved planting weather, and
strong farm cash receipts. District banks received increasing amounts of consumer savings deposits, but
construction sagged as the nonresidential sector weakened.
Despite an upturn in manufacturing jobs, total
nonfarm employment declined in April. The un­
employment rate rose only moderately, however,
because some workers stopped seeking jobs. W ork­
ers were recalled in several manufacturing in­
dustries; in others, job losses were halted. Textiles
and apparel both showed significant job gains at
the* same time that the average workweek and
hourly earnings increased. The employment slide
in nonmanufacturing and construction continued,
with only state and local government showing gains.
Consumers' instalment indebtedness to commer­
cial banks, buffeted by conflicting currents, con­
tinued to ebb during April. Automobile and non­
automotive consumer goods credit receded further.
Home repair and modernization credit was essen­
tially unchanged, while personal loans outstanding
rose for the second consecutive month, primarily
as a result of increased loan extensions. New auto
registrations for March sank 16 percent below the
year-ago level, documenting the prolonged weak­
ness of auto sales. Department store sales in March
were buoyed by an early Easter.
Following five consecutive months of decline,
prices of farm products stabilized in April and may
have turned upward in May, owing to rising cotton

and livestock prices. Hog prices, in particular, have
moved sharply above year-ago levels, reflecting a
severe curtailment in pork production. Broiler place­
ments have also increased but remain under the
comparable 1974 level. Crop planting progressed
rapidly, following earlier delays from heavy rainfall.
Cash farm receipts, boosted by crop sales in Florida
and Louisiana, continued strong through the first
quarter of the year.
District member banks continued to experience
sizable deposit gains during May. Inflows of pass­
book savings deposits have accounted for over onehalf of the increase. The larger banks reported that
business loan demand remained weak; the busi­
nesses paying off loans are mostly service firms,
wholesale and retail trade establishments, food
products irtdustries, and the textile and apparel
industries.
The value of construction contracts declined in
April. The nonresidential sector accounted for all
of the drop as it failed to maintain March's un­
usually high level. The value of residential contracts
remained at the same level recorded in March
because reductions in Florida were offset by gains
in other states. Large deposit inflows continued at
savings and loan associations, but residential
mortgage rates crept upward.

Note: Data on w
hich statem
ents are based have been adjusted w
henever possible to elim
inate seasonal influences.

14
0




JU E 1 7 , MONTHLY REVIEW
N 95