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MONTHLY QuiUmaK&/ieu/ IN THIS ISSUE - F E D E R A L RESERVE BANK of CLEVELAND1 Business Highlights in Eastern Kentucky . Address of William McC. Martin, Jr. 'Jfov&HJien t$55 2 . 5 "W arehousing" of Real Estate M o rtgage s 9 Personal Income in Ohio ................. 12 Business Highlights in Eastern Kentucky and expansion has been one of the outstanding features of the business scene in Kentucky during the decade following W orld W ar II. Between 1946 and 1954, 240 new manufacturing plants, each employing 25 or more persons, were estab lished in the state. In addition, companies which had been located in Kentucky for a number of years spent over $300 million for expansion. I n d u s t r ia l d e v e lo p m e n t The growth of manufacturing in Kentucky is also reflected in figures on employment. In June this year, for example, manufacturing employment in Kentucky was estimated at 160,800, an increase of over 30,000 from the total for 1947. A large part of this gain in employment can be attributed to substantial increases in the electrical machinery and chemicals industries. While manufacturing has been gaining in importance in Kentucky’s economy, both agriculture and mining have experienced set backs from earlier postwar peaks of activity. Coal production for the state as a whole has fallen off considerably from the postwar rec ord set in 1947 when production totaled 84.2 million tons. In 1954 production amounted to only 60.0 million tons, although 1955 produc tion to date is moving somewhat above the figure for last year. In the material which follows, attention is given to business activity in the 56 counties of Eastern Kentucky which are included in the Fourth Federal Reserve District. Where 2 available, data for individual counties have been utilized to permit more detailed analysis of changes in the area. New Manufacturing Plants Of the 240 new manufacturing plants which have come into existence since 1946 in the state of Kentucky, 89 are located in the East ern portion of the state. Approximate loca tions are shown on the cover chart. As the map shows, the majority of the new Eastern Kentucky manufacturing sites tend to be clustered around a line running approxi mately north and south through Lexington. Two centers, Lexington and Covington, each attracted ten or more new factories during the period. Kenton County stood first among the fiftysix counties in number of new factories estab lished during the postwar period. Besides the ten plants in Covington, six additional fac tory sites were located in other cities or vil lages of the county. Fayette County was selected as the site for eleven new enterprises (all in Lexington), while Pulaski and Bell Counties attracted five plants each. A wide variety of manufacturing activity is represented by the new plants described above. In Lexington, for example, the new factories are in such lines as electrical equip ment, automotive and home appliance parts, parachutes, and food items. The new Coving ton plants manufacture, among other items, such products as machine tools, materials handling equipment, metal fabricated prod ucts, envelopes, and handkerchiefs. O f the seven top coal producing counties in the Eastern Kentucky coal field, all but one produced less coal in 1954 than in 1946. Millions of Tons Gains in Manufacturing Employment The increasing importance of manufactur ing in the Eastern Kentucky area has been reflected in the data on manufacturing em ployment. Between 1945 and 1954, manufac turing employment in the 56-county area rose about 30 percent. In Kenton County, which includes Covington, the gain in employment between the two years amounted to about 55 percent, while in Fayette County, with Lex ington as the principal city, the rise amounted to 42 percent. Certain other counties in the area had considerably larger percentage in creases in manufacturing employment during the interval, although in terms of actual num bers employed, the increases were not so large. In most such counties, total manufac turing employment in 1945 had amounted to less than 100 persons. Boyd County, which includes Ashland, had the largest number of manufacturing employ ees in 1954 (about 10,000) of any of the counties under consideration. The gain for the county from 1945 amounted to 53 per cent. The bulk of manufacturing employees in the Ashland area are engaged in the petro leum and sheet steel industries. A number of counties, including Jessamine, Johnson, and Leslie, had practically no manufacturing em ployment in 1945, but last year had over 100 persons engaged in manufacturing activity in each county. Mining Activity in the Eastern Kentucky Coal Field Production o f coal in the Eastern Kentucky field has dropped off considerably in recent years as compared with the postwar record attained in 1947. During 1947, production in the Eastern field (which includes several coun ties not a part o f the Fourth Federal Reserve District) reached 62.1 million tons. B y 1954, production had dropped 39 percent to 37.6 HARLAN PIKE LETCHER FLOYD PERRY LESLIE BE LL million tons. The decline in production has not been steady throughout the span of years, although total production declined each year from 1951 through 1954. During the first half o f the current year, however, production has been running about 10 percent ahead of the 1954 pace.(1) The bulk of coal output from the Eastern Kentucky field comes from seven counties in the area, each of which produced over one million tons in 1954. Altogether, these coun ties extracted 30.7 million tons during the year, or 82 percent of the total for the area. An accompanying chart shows total output for each of the seven counties in 1954 (see black bars on chart) as compared with pro duction in 1946 (shown by the colored bars). Production during 1954 was well below the 1946 rates for each of the counties shown on the chart with the exception of Leslie County, (1) The outlook for the coal industry generally appears to be somewhat improved. There is some indication that the rate of loss of coal markets to competitive fuels has tended to level off in recent years. Likewise, the loss of export markets appears to have run its course. It is considered by many ob servers that increased consumption of coal by electric utilities should more than offset any further losses to competing fuels and result in continued net gains in total coal production. where production in 1954 was five times as great as in the earlier year. Harlan County has ranked as the top coal producing county in Eastern Kentucky throughout most of the postwar period. Pike County held the lead in 1947, 1948, and 1949. During 1954, Harlan County produced 8.9 million tons as compared with 5.5 million tons for Pike County. Employment in M ints Mining employment in the Eastern Ken tucky coal fields has declined in recent years, as might be expected in view o f the reduction in output. Changes in numbers o f mining employees through the postwar years have not followed the same year-to-year pattern as have changes in production. While produc tion reached a peak in 1947, employment in the Eastern Kentucky fields was at a peak in 1950. However, the mines were active an aver age of 216 days in 1947 as against 171 days in 1950. Production per man-day was the same in both years. Between 1950 and 1953, the latest year for which data are available, employment in Eastern Kentucky mines dipped from 60,700 to 39,300. Very little change took place dur ing this interval in the average number of days mines were active, but production per man-day increased from 5.25 tons to 6.47 tons. As could be expected, mining employment was highest in those counties mentioned above as producing the greatest tonnages of coal. In Harlan County, for example, mining activity in 1953 provided employment for 9,225 per sons. Pike County ranked second with 7,253 mining employees. In both counties, however, the totals were appreciably below those for earlier years. Population Changes In spite of increased manufacturing em ployment, population in Eastern Kentucky has declined in recent years. Between 1950 and 1954, population in Eastern Kentucky declined by an estimated 8 percent. For the state as a whole, population remained un changed during the period, while the nation experienced a rise of 8 percent in total popu lation. Only 11 out of 56 Eastern Kentucky counties showed population increases between 1950 and 1954. 4 County-by-county changes in population are illustrated on the accompanying map which indicates the range o f population in crease or decrease for each county. The eleven counties shown in solid color on the map are the only ones to have indicated pop ulation increases during the period. The gains for individual counties ranged from 16 per cent in Boone County to only a fraction of one percent in the case of Boyd County. For the most part, counties which experienced population gains were clustered around the three major industrial centers o f the area, namely Covington, Lexington, and Ashland. A t the other extreme, the eighteen counties shown in black on the accompanying map had losses in population between 1950 and 1954 amounting to more than 10 percent. Magoffin County experienced a 22 percent loss in pop ulation during the period, the largest for any county in the area. This county had very few employees in either manufacturing or mining in 1954. For the most part, the counties with popu lation losses of more than 10 percent are those in the mining areas of the extreme east ern portion of the state. A n important excep tion is Leslie County which, although located in the mining area, actually showed a 4 per cent increase in population over the 19501954 interval. Manufacturing employment in this county rose from almost zero in 1945 to over 350 in 1954. A number of counties in Eastern Kentucky, twenty-seven in all, had population losses of 10 percent or less between 1950 and 1954. These counties are shown uncolored on the accompanying map and tend to be scattered throughout the area. Sources: Kentucky Industrial and Agricultural Development Board, Frankfort, Kentucky. Agricultural Experiment Station, University of Lexington, Lexington, Kentucky, United States Department of Interior, Bureau of Mines. Address of William McC. Martin, Jr. Chairman, Board of Governors of the Federal Reserve System (before the New York Group of the Investment Bankers Association o f America, W aldorf Astoria Hotel, New York City, October 19, 1955) h e r e ’ s a n a p o c r y p h a l s t o r y about a professor o f economics that sums up in a w ay the theme o f what I would like to talk about this evening. In final examinations the professor always posed the same questions. W hen he was asked how his students could possibly fa il the test, he replied sim ply, “ W ell, i t ’s true that the questions d o n ’t change, but the answers d o .” T In our econom ic affairs, the m ajor questions con fron tin g us are in large measure hardy perennials: H ow do we attain and retain prosperity? H ow do we achieve normal healthy grow th? H ow do we preserve the purchasing power o f our m oney? The answers to these interrelated questions in the 1950’s thus fa r differ in im portant respects from those o f earlier decades. M y purpose tonight is to explore with you some o f the main currents and undercurrents o f thought which have colored and shaped these differing answers. I t is, o f course, unorthodox, i f not downright poor form , to reach your conclusion in the course o f your 5 introductory remarks. But, as a matter o f emphasis, I would like to state it now. In the absence o f war, or serious conflict am ong our people over p olitical or social aims, the road to a sub stantially higher standard o f livin g lies ahead o f us as clear and as smooth as our modern turnpikes. W e have passed through the turnstiles and are, in my judgm ent, out on the open road. This position has been achieved a fte r a good many ups and downs, false starts, adaptations to war and preparations fo r war, false turns, and poor directions. Furtherm ore, the machine we are driving is adequate and capable o f traversing the grades, curves, crossroads, and danger points, provided only that the drivers observe the speed laws, are alert and responsible, and sufficiently trained and experienced in the art o f driving to under stand the nature o f the principles o f propulsion, and the goals o f the journey they are making. Our ab ility to travel this road sa fely depends upon a community o f drivers who understand and utilize the time-tested principles which are derived from our inheritance. I t seems rather striking that one o f the ideas now firmly im bedded in our articles o f material faith , the concept o f governmental responsibility fo r m oderating econom ic gyrations, is almost entirely a product o f our own Twentieth Century. This concept, which is steadily b ein g brought into sharper focus, has evolved from general reaction to a succession o f material crises heavy in human hardship. I t grew from mass desperation and demand fo r p ro tection from econom ic disasters beyond individual control. The Federal Reserve System, which I have the honor to represent, was our earliest institutional response to such a demand. I t emerged out o f the urgent need to prevent recurrences o f such disasters as the money panic o f 1907, and out o f the thought that the Govern ment had a definite responsibility to prevent financial crises and should utilize all its powers to do so. A ccordin gly, 42 years ago Congress entrusted to the F ederal Reserve System responsibility fo r m anaging the money supply. This was an historic and revolution ary step. In fram in g the Federal Reserve A ct great care was taken to safeguard this money management from im proper interference by either private or p o liti cal interests. That is why we talk about the over-riding im portance o f m aintaining our independence. Hence we have our system o f regional banks headed up b y a coordinating B oard in W ashington intended to have only that degree o f centralized authority required to discharge effectively a national policy. This constitutes, as those o f you in this audience recognize, a blending o f public interest and private enterprise uniquely Am erican in character. Too few o f us adequately recognize or adequately salute the genius o f the fram ers o f our central banking system in providing this organizational bulwark o f private banking and business. Since the Federal Reserve System came into being, the problem s o f inelasticity o f currency and im m obility 6 o f bank reserves— which so often showed up as short ages o f currency or credit in times o f critical need— have been eliminated, and m oney panics have largely disappeared. In this specialized respect there can be no doubt that the System has made notable progress, but in the more fundam ental role o f stabilizing the econom y the record is not so clear. A ll o f us in the System are bend ing our best efforts to capitalize on the experience o f the past, and our current knowledge o f money, so as to make as large a contribution as possible in this direction. B u t a note should be made here that, while money p olicy can do a great deal, it is b y no means all pow erful. In other words, we should not place too heavy a burden on m onetary policy. I t must be accom panied b y appropriate fiscal and budgetary measures i f we are to achieve our aim o f stable progress. I f we ask too much o f m onetary p olicy we will not only fa il but we will also discredit this useful, and indeed in dispensable, tool fo r shaping our econom ic develop ment. The answers we sought to the massive problem s o f the 1930’s increasingly emphasized an enlarging role fo r Government in our econom ic life . That role was greatly extended again in the 19 4 0 ’s when the emer gency o f W orld W ar I I led to direct controls over wages, prices, and the distribution o f goods ranging from sugar to steel. That experience led to grow ing concern over the effect o f a strait jacket o f controls on the econ om y’s productive capacity, and the price that w ould be exacted in terms o f individual liberty i f the harness o f wartime econom ic controls were carried over into the postwar years. Such a strait-jacketing o f the econom y is wholly inconsistent with our politica l institutions and our private enterprise system. The history o f despotic rule, o f authoritarian rule, not merely in this century but throughout the ages is acutely repugnant to us. I t has taken a frig h tfu l toll in human m isery and degradation. The transform ation o f this country from a wilderness to a highly developed civilization demonstrates the results that can be obtained through a system which is directed tow ard releasing, not shackling, energies and abilities. The fruits o f these energies and labors are shared in grow ing abundance, n ot b y prim itive barter, but b y the processes o f the market place. The advantages o f a system where supply capacities and demand wants and needs are m atched in open markets cannot be measured in econom ic terms alone. In addition to the advantages o f efficiency in the use o f econom ic resources, there are vast gains in terms o f personal liberty. Powers o f decision are dispersed among the m illions affected instead o f being central ized in a few persons in authority. The basic concept o f the market system has re mained with us since the foun din g o f the nation. I t has remained the cornerstone o f our society to this day, although we have done some extensive rem odeling o f the structure as a whole from time to time. W e have in the past done some rem odeling fo r the admirable purpose o f correcting structural defects and distortions. Competitive, freely functioning markets are one thing, and rigged markets are another. Rules and regulations to prevent rig g in g are necessary and essential to a sound structure. Other rem odeling has come about because the A m eri can people have refused to accept econom ic goals as their sole objective. That was true in older generations, as well as our own. Our fa m ily inheritances have, I am glad to say, usually included the b eliefs that man cannot live b y bread alone, and that in a properly equipped home library the B ible should occupy a more im portant place than a manual o f arms or a mail order catalogue. L et it be said, to our credit, that Am erican economic action has o ften been determined b y balanc ing material advance against other human objectives. F o r these reasons, and perhaps others, our market system has been modified continuously throughout this cou n try’ s history. Ideas o f market places fu n c tioning with no rules or regulations except the ‘ ‘ law o f the ju n g le ” have, quite justly, gone the w ay o f the great buffalo herds. W hen we speak tod ay o f ‘ ‘ free m arkets” we o f course mean markets that are only relatively free, as the freedom o f speech we en joy is itself only a relative freedom . The essential charac teristics o f free markets have nevertheless been re tained. I t is true that in a great emergency we have been w illing to make a departure from our market structure, but our mood has been that o f the man who has to leave home fo r the confines o f a bom b shelter. When a war comes on, we are w illin g to put up with all sorts o f economic controls and dictation o f even small details o f our economic life . The dignity o f the in di vidual gets submerged in the necessity to win the war. The law o f supply and demand is suspended tem po rarily, but it cannot be permanently repealed. I t is always with us ju st as is the law o f gravity. When peace is restored we do not continue to ignore it. W e cannot substitute the judgm ent o f a few in authority fo r the free and independent judgm ents o f the com munity as they are expressed in the market place. W e cannot do so, that is, and retain our con cept o f freedom in a com petitive, private enterprise economy. I am not unaware that freedom entails certain hard ships on the nervous constitution. I t gives us opp or tunity to choose, but it also requires the m aking o f choices. The pleasure o f having a choice to make is counterbalanced b y not only the necessity fo r making a choice, but also the responsibility fo r accepting the consequences o f that choice, whether good or bad. Naturally we like the consequences only when our choice proves right. T h a t’ s one reason it is easier to make a mistake than to admit one. I t requires no strain on m y im agination to suppose that there m ight be some, even in this audience, who occasionally feel a nostalgia fo r the pegged money market that came into existence during the war and continued until the Treasury-Federal Reserve accord o f March 1951 turned us back in the direction o f a freer market. Free markets, like free economies, have a w ay o f goin g down as well as up, and thus rem inding us that our system is one o f profit and loss, entailing penalties as well as rewards. D uring the last fou r and a h a lf years the Federal Reserve has pursued a monetary policy characterized b y flexibility, or prom pt adapta tion to the sharply changing needs o f a dynamic economy. It has been necessary in this period to com bat both the forces o f inflation and o f deflation. There are some who contend that a little inflation— a creeping inflation— is necessary and desirable in prom oting our goal o f maximum employment. M y able associate, A llan Sproul, President o f the Federal R e serve Bank o f New Y ork, put his finger on the fa lla cy in this contention in testify in g before a Congressional committee earlier this year when he said: “ Those who would seek to promote ‘full employ ment’ by creeping inflation, induced by credit policy, are trying to correct structural maladjustments, which are inevitable in a highly dynamic economy, by debasing the savings of the people. If their ad vocacy of this course is motivated by concern for the ‘little fellow,’ they should explain to the holders of savings bonds, savings deposits, building and loan shares, life insurance policies and pension rights, just how and why a rise in prices of, say, 3 per cent a year is a small price to pay for achieving ‘full employment.’ They should also explain to all of us— little, big, and just plain ordinary Americans— what becomes of our whole system of long term contracts, on which so much of our economic activity depends, if it is to be accepted in advance that repayment of long term debt will surely be in badly depreciated coin.” I f inflation would in fa c t make job s, no reasonable man would be against it. But as I have frequently emphasized, inflation seems to be putting money into our pockets when in fa c t it is robbing the saver, the pensioner, the retired workman, the aged— those least able to defen d themselves. A n d when the inevitable afterm ath o f deflation sets in, businessman, banker, worker, all suffer. That d oesn ’ t mean jobs. I t means ju st the opposite. There have been some rather wide swings in attitudes toward monetary p olicy during recent years. In the depression, a great number came to the conclusion that monetary p olicy was ineffective as an instrument fo r prom oting recovery from economic decline. F ollow ing W orld W ar I I , some were troubled b y the move from direct controls to restoration o f the general con trol involved in monetary p olicy because they feared it could not restrain the inflation then prevalent— not, 7 that is, without being so drastically exerted as to plunge us into a devastating depression. N owadays, there is perhaps a tendency to exaggerate the effectiveness o f monetary policy in both directions. Recently, opinion has been voiced that the cou n try ’s main danger comes from a roseate b elief that monetary policy, backed b y flexible tax and debt management policies and aided b y a host o f built-in stabilizers, has com pletely conquered the problem o f m a jor economic fluctuations and relegated them to ancient history. This, o f course, is not so because we are dealing with human beings and human nature. W h ile the pendulum swings between too little or too much reliance upon credit and monetary policy, there is an em erging realization more and more w idely held and expressed b y business, labor and farm organiza tions that ruinous depressions are not inevitable, that something can be done about m oderating excessive swings o f the business cycle. The idea that the business cycle can be altogether abolished seems to me as fa n ci fu l as the notion that the law o f supply and demand can be repealed. I t is hardly necessary to go that fa r in order to approach the problems o f healthy economic growth sensibly and constructively. Laissez fa ire con cepts, the idea that deep depressions are divinely guided retribution fo r m a n ’s econom ic follies, the idea that m oney should be the master instead o f the servant, have been discarded because they are no longer valid, i f they ever were. N or does the discarding o f old ideas and the substitu tion o f new ones mean that we are throw ing basic laws or principles overboard. I t is the return to first principles in m any parts o f the free w orld that is the most significant aspect o f world-wide recovery and progress outside o f the iron curtain. A n d that, in turn, vastly brightens the hope o f lasting peace. B y first principles I mean time-tested basic concepts o f the market place and the development o f com peti tive private enterprise, with only that degree o f Government interference or regulation necessary to prevent abuses and excesses. W e see a return to these concepts here and abroad because other concepts have failed, and where there has not yet been a revival o f these concepts econom ic troubles are acute. A s I suggested at the outset, the basic problem s, the questions, remain pretty much the same always. The answers are different— and no one w ould be so rash as 8 to say we have ultim ate solutions fo r all o f our p rob lems. W e can say confidently, I think, that we have discarded some w rong answers— that we have returned to some o f those fundamental principles under which our society, our institutions, have flourished with in com parable benefits, benefits n ot merely material. There w ill always be some, o f course, who think we must go through the w ringer periodically to purge the economy. There w ill always be cynics and defea t ists, no doubt, who say that because there have always been disastrous depressions and more disastrous wars, we must accept these visitations as inevitable. I f there are enough hopeless Jeremiahs, enough defeatists and cynics, those calamities are indeed inevitable. I f we do nothing about it, i f we do noth ing to prevent infla tion and thus avoid the inevitable afterm ath o f de flation, then o f course we are defeated. T o d a y ’s genera tions w ill accept no such fata listic philosophy. I f we fa il to apply the brakes sufficiently and in time, o f course, we shall go over the cliff. I f business men, bankers, your contem poraries in the business and financial world, stay on the sidelines, concerned only with making profits, letting the Government bear all o f the responsibility and the burden o f guidance o f the economy, we shall surely fa il. I am as weary as you are o f pious platitudes and a fter dinner preachments about leadership and financial statesmanship. B u t the fa c t is that the Government is n ’t something apart and remote from you. I t is you— all o f us. I f those responsible fo r m ajor decisions in business, finance, labor, agriculture, are irresponsible, Government c a n ’t com pel you, short o f m oving in the direction o f dictatorship, to be reasonable, or moderate, or prudent. In the field o f monetary and credit p olicy, precau tionary action to prevent inflationary excesses is bound to have some onerous effects— i f it did not it would be ineffective and futile. Those who have the task o f making such p olicy d o n ’t expect you to applaud. The Federal Reserve, as one writer put it, a fte r the recent increase in the discount rate, is in the position o f the chaperone who has ordered the punch bow l removed ju st when the party was really w arm ing up. B ut unless the business com munity, leaders in all walks, exhibit moderation, prudence, and understand ing, then we w ill fa il and deserve to fa il. I cannot believe we w ill be so blind. I have a deep and abiding faith in that undefinable yet m eaningful phrase we frequently use— “ the Am erican W a y o f L i f e .” "Warehousing” of Real Estate Mortgages Fourth District in mortgage financing and widespread acceptance of mortgages underwritten by the Government have stimu lated the development of a number of new financing techniques. The chart on page 11 shows the extent of participation of the weekly reporting member banks of the Fourth Federal Reserve District in one specialized financing arrangement that is used by insti tutional lenders. This type of financing is commonly labelled “ warehousing,” but the various existing types of bank and nonbank warehousing arrangements make it difficult to give a close definition to the term. To the ex tent that commercial banks participate, ware housing can be described as interim financing for real-estate mortgage lenders. E x te n s iv e a c tiv ity The occasion for interim financing, in the case of a mortgage company, arises when mortgages have been brought into the port folio (1) at a rate faster than they can be disposed of by sale to long-term holders, or (2) prior to the date that long-term holders have committed themselves to purchase speci fied amounts and types of mortgages. Insur ance companies, savings and loan associations, and mutual savings banks find interim financ ing with commercial banks a convenient way to maintain the flow of mortgages into their portfolios at a pace set by the inflow of pre miums or savings. They can anticipate the latter with reasonable accuracy and, with the aid of commercial bank credit, they can originate or purchase desirable mortgages be fore the necessary funds become available. Of course, if the interim credit provided by com mercial banks is allowed to roll over, it be comes a net addition to the volume o f real estate credit over a long term, despite its apparent short-term character. A special survey of the weekly reporting member banks in leading cities of the nation was made in August of this year in order to obtain information on the extent of indirect lending by commercial banks to real estate mortgage lenders that was not apparent in currently available statistics. The 400 banks included in the survey hold about two-thirds of all loans of member banks of the nation. The 17 Fourth District banks which were in cluded in the survey hold about three-fifths of all loans and about two-fifths of all real estate loans of member banks in the District. Some of the results of the survey for the Fourth District, together with corresponding figures for the nation, are shown in the ac companying table.(1) Total indirect lending by Fourth District banks was about six per cent of the United States total; unused com mitments to participate in such loans in this District were about four percent of the United States total. The pattern of lending by Fourth District banks to each type of real estate mortgage lender in each loan category was similar to that shown by all weekly reporting member banks. On August 10, 1955, Fourth District banks held mortgages under resale agreement in the amount of 16 million dollars. This comprised about two percent of real estate loans included on the report of condi tion. However, reported real estate loans were understated by a large portion of the 71 mil lion dollars in warehoused mortgages that ( i ) For a summary of the results of the survey on a national scale, see Federal Reserve Bulletin, September 1955, p. 980. 9 LOANS TO REAL ESTATE MORTGAGE LENDERS By Weekly Reporting Member Banks August 10, 1955 and August 11, 1954 (M illions o f dollars) F O U R T H D IS T R IC T M a jo r Classes o f Borrower U N IT E D S T A T E S O utstanding on O utstanding on B y T y p e of Loan Changes Changes Aug. 10, 1955 Mortgages Purchased Under Resale Agreement: Insurance Companies.................. Mortgage Companies.................. O thers®........................................ Aug. 11, 1954(D Aug. 10, 1955 Aug. 11, 1954(D .i + + + 10.9 5.2 .1 226.9 96.9 12.3 3.7 43.6 4 .4 + 2 2 3 .2 + 53.3 + 7.9 16.2 .1 + 16.1 336.1 51.7 + 2 8 4 .4 1.3 57.7 .2 16.1 + 1.1 + 41.6 (a) (a) 28.9 860.5 54.9 12.0 460.4 25.9 + 16.9 + 4 0 0 .1 + 29.0 T o ta l.. . . Unsecured, or Secured other than by Real Estate Mortgages: Insurance Companies.................. Mortgage Companies.................. O th ers® ........................................ 59.0 16.3 + 42.7 944.3 498.3 + 4 4 6 .0 .9 10.7 1.4 4 .5 " .5 3 .8 13.4 39.3 + 2.6 + 9.1 + 36.5 T otal. . . . 11.5 5.9 + 48.2 Unused Firm Commitments to Extend Credit of Above Types: Insurance Companies.................. Mortgage Companies.................. O th ers® ........................................ 20.4 26.6 4 .4 T otal. . . . 51.4 Total Secured by Real Estate Mortgages: Insurance Companies.................. Mortgage Companies.................. Others(2)........................................ 10.9 5.2 .2 (a) 6.2 + 5.6 104.7 56.5 183.6 857.2 221.1 (3) + 6.4 22.5 75.8 ---- 1,261.9 (3) — (3) (a) Less than $50,000. C R eportin g banks were asked to estimate year-ago figures. 1) (2) Savings and loan associations, mutual savings banks, builders and other organizations (other than banks) that make or hold substantial am ounts of real estate loans. ® Y ear-ago figures n ot requested. 10 (3) LOANS TO REAL ESTATE MORTGAGE LENDERS Fourth District Weekly Reporting Member Banks August 10, 1955 and August 11, 1954 BY TYPE OF LENDER BY TYPE OF LOAN Millions of Dollars 10 20 30 40 50 60 Millions of Dollars 70 10 MORTGAGE COMPANIES SECURED BY REAL ESTATE MORTGAGES INSURANCE COMPANIES 20 30 40 50 60 70 PURCHASED UNDER RESALE AGREEMENT OTHER [& £ ] & C Less than $200,000 in 1954. D (2) Consists m ainly o f savings and loan associations. (3) Unsecured, or secured other than b y real estate mortgages. were included in the report o f condition under other classifications. The extent o f Fourth District participation in warehousing arrangements is shown for the reporting date and as estimated for a year ago in the accompanying chart. Loans secured by mortgages owned by the borrower were the major type o f loan involving ware housing in 1955 and showed the greatest in crease over 1954. Of less importance in 1955 were mortgages purchased under resale agree ments and loans secured other than by mort gages, or unsecured, but both categories showed relatively large increases from a year ago. The left half o f the chart reveals the major extent of loans made to mortgage com panies for warehousing purposes, which far exceeded that of other real estate lending groups and which rose substantially from 1954. As might be expected, mortgage com panies obtained most of their bank loans on the security of mortgages held. While insur ance companies and the miscellaneous group were relatively minor participants in 1955, they showed substantial gains from a year ago. The bulk of the credit extended to insur ance companies was through purchase of the mortgages under resale agreements. Savings and loan associations, which dominate the miscellaneous group, borrowed primarily on security other than mortgages, probably Gov ernment securities, or they borrowed without security. In addition to data on warehoused loans, the special survey disclosed classification errors in the weekly data on condition re ported by member banks; such information is being taken into account in current releases. 1 1 Personal Income in Ohio Form Income The Income Dollar, 1954 in Ohio during each of the years 1953 and 1954 exceeded $171 /4 billion, or slightly more than six percent of the U. S. total. Applying a six percent ratio to the current estimates of personal income in the nation would indicate that Ohio’s per sonal income in 1955 will be in excess o f $18 billion, or about two-fifths more than the state’s 1950 total. Personal income in Ohio is the current in come received by the state’s residents from all sources, i.e., from business establishments, Federal and state and local governments, households, institutions, and foreign coun tries. It is a measure of the income flow to individuals before the deduction of income and other direct taxes. This September, for the first time, the De partment of Commerce published estimates of the income of individuals by states which conform to the widely used ‘ ‘ personal income” concept.(1) This report provides a more com prehensive record o f income by states than was available heretofore, making possible an analysis of differences in income structure among states as well as changes from 1929 to 1954. The aggregate income of Ohio’s residents in 1954 ranked Ohio fifth among the 48 states and the District of Columbia, being topped only by New York, California, Illinois, and Pennsylvania— in that order. On a per capita income basis, however, Ohio ranked tenth out e r s o n a l in c o m e P ( i ) U. S. Department of Commerce, Survey of Current Busi ness, September 1955, pp. 12 ff. A more detailed report, scheduled to appear next year, is now being prepared. 12 of 49, with its 1954 personal income averag ing $1,983 for each man, woman and child in the state. In terms of per capita income, Ohio was 12 percent above the average for all states ($1,770) but 18 percent below the top per capita income average of Nevada ($2,414). Slightly more than 70 percent of the in come received by Ohio residents in 1954 was in the form of wages and salaries. Nearly half of Ohio’s wage and salary income was dis bursed by manufacturing industries, reflect ing the state’s industrial importance. Na tionally, the proportion was about one-third. Per capita personal income in Ohio increased 23 percent between 7950 and 7954. It has consistently remained above the U. 5. average, exceeding it in 7954 by 12 percent or about the same margin as in 7940 and 7929.
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