Full text of Economic Review (Federal Reserve Bank of San Francisco) : August-September 1945

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FEDERAL

RESERVE

R eview
BANK

OF

SAN

FRANCISCO

A U G U S T - S E P T E M B E R 1945

Government Security Sales
he

end of the war made it possible to anticipate a

substantial downward revision in Treasury expendi­
T
tures. As of August 30, total expenditures for the fiscal
year ending June 30, 1946 were estimated by the Budget
Bureau at 67 billion dollars, as against an August 1 esti­
mate of 85 billion. Even the lower figure, however, is
markedly above probable post-transition levels and in­
volves a substantial deficit, estimated for the year at 31
billion dollars. Expenditures arising out of the war but
yet to be made include payments for materials and muni­
tions already delivered, contract settlements, and pay­
ments related both to the maintenance of the armed forces
and to the veterans program.
The Victory Loan

To supply these funds in part, the Victory Loan Drive
will begin October 29 and close December 8. (Savings
bonds and notes processed through the Federal Reserve
Banks from December 8 to December 31 will also be
credited to the drive.) The goals established are 14 bil­
lion dollars for sales to all non-bank investors and 4 bil­
lion for sales to individuals, of which 2 billion is to come
from Series E bonds. The securities to be sold under the
direction of the State War Finance Committees are:
Series E, F, and G Savings Bonds
Series C Savings Notes
percent Certificates of Indebtedness
2*4 percent Bonds of 1959-62
2 y 2 percent Bonds of 1967-72
Inflationary pressures did not disappear with the end
of the wrar, and the major emphasis in the Victory drive
will again be on sales of securities to individuals. As in
other drives, efforts are being made to discourage the
direct or indirect use of bank credit except to facilitate
permanent investment in Government securities.
Commercial banks will not be allowed to subscribe for
new issues, except that commercial banks accepting time
deposits will again be permitted limited subscriptions, not
to exceed 10 percent of their time deposits or $500,000.
Certificates of indebtedness are the only securities being
offered without restrictions as to bank ownership after
the drive. Banks are urged not to make loans nor to ac­
cept subscriptions for speculative purchases and not to
purchase outstanding securities with the understanding
that a corresponding subscription for new securities will
be entered through such banks.




Non-bank investors are requested not to sell securities,
except for ordinary portfolio adjustments, to obtain
funds for Victory Loan subscriptions. Limitations are
placed upon subscriptions of dealers and brokers and, for
the first time, upon those of insurance companies and
savings institutions.
As in the Seventh W ar Loan, dealers’ and brokers’
subscriptions will be restricted to the 2% and 2 y 2 per­
cent Treasury bonds. No such subscription may exceed
the greater of two amounts: (1 ) the amount of those two
restricted issues sold outright by the dealer or broker to
customers other than dealers or brokers in the 45 days
following the Fourth War Loan, or (2 ) 40 percent of
the dealer’s or broker’s net capital.
Insurance companies wall be limited in their subscrip­
tions to either 15 percent of their total Government se­
curity holdings on December 31, 1944 or 6 percent of
their total admitted assets on that date, whichever is
larger. Savings institutions, including savings banks not
accepting demand deposits, savings and loan and build­
ing and loan associations, cooperative banks, and credit
unions, wrill be limited to twice the amount of their in­
crease in net assets (total assets less borrowed funds)
from July 1 through September 30, 1945 plus 7 percent
of their Government securities held on June 30, 1945.
Goals for non-bank investors are lower than in any war
loan drive except the first two, but the need to meet these
goals with the minimum possible expansion in bank
credit is as pronounced as ever. The desirability of con­
tinuing purchases of Government securities by individ­
uals will remain after the Victory Loan Drive is con­
cluded. The Treasury has indicated that, while this will
be the last great public drive, both the general sale of
savings bonds and the sale of Series E bonds through
payroll deduction plans will be continued.
Results of the Seventh W a r Loan

Security sales in the Seventh War Loan Drive amount­
ed to 26.3 billion dollars, 5.7 billion more than the Sixth
Drive total, which wras the previous high. In addition,
sales to commercial banks having time deposits were 1.3
billion dollars and to Treasury investment accounts, 1.1
billion. Sales to individuals totaled 8.7 billion dollars, 2.3
billion above the earlier record established in the Fifth
War Loan. Series E bond sales of 4 billion dollars were
also substantially higher than in any previous drive.

62

FEDERAL RESERVE BAN K

Twelfth District sales also reached new highs. Total
sales amounted to 2.2 billion dollars, compared with 1.7
billion in the Sixth D rive; and sales to individuals were
0.9 billion, compared wTith 0.7 billion in the Fifth Drive.
In terms of quotas, Washington and Oregon were the
leading District states in total sales with 193 and 187 per­
cent ; Oregon and Nevada led in sales to individuals with
125 and 123 percent of their quotas and in sales of Series
E bonds with 109 and 106 percent. Comparable national
figures were 188 percent of the quota for total sales, 124
percent for sales to individuals, and 99 percent for sales
of Series E bonds.
The extremely high level that was reached in sales
of securities other than savings bonds was not attained
without a substantial expansion of bank credit, which
probably amounted nationally to more than 10 billion
dollars. Funds for non-bank purchases were obtained
both from bank borrowing and from the sale of outstand­

August-Septem ber 1945

OF SAN FRANCISCO

ing securities to the banking system. Although the in­
crease in bank credit related to drive sales was as great
S a l e s o f S e c u r i t i e s , S e v e n t h W a r L o a n D r iv e
U n it e d S t a t e s a n d T w e l f t h D is t r ic t b y S t a t e s
(millions of dollars)
t ---------- Sales to individuals---------- N

United States ..........
Twelfth D i s t r i c t ....
Arizona .................
California ...............
Idaho ......................
N e v a d a ...................
Oregon ...................
Utah ........................
W a s h in g t o n ..........

Total

Total

Series E

26,313
2,191
43
1,449
42
16
205
72
364

8,681
910
21
594
22
11
100
31
130

3,976
508
13
318
13
5
58
21
80

Series
F & G

Other

Other
sales1

683 4,022
17,635
78
323
1,281
3
5
22
56
220
856
1
7
20
1
5
5
6
36
105
1
9
40
11
39
234

1 Excluding sales to commercial banks and Treasury investment accounts,
which were outside the loan drive.
N o te : Figures do not necessarily add to totals because of rounding.

as or greater than in previous drives, the net absorption
of securities by non-bank buyers was also probably great­
er than in any other drive.

Business Conditions— Twelfth District
rom

the end of 1943 to mid-August of this year, em­

ployment in manufacturing industries in the Twelfth
F
District declined appreciably although few persons were
unemployed and more or less acute labor shortages were
widespread. In the first month since the end of the war,
an even more paradoxical situation has developed. Man­
ufacturing employment has been reduced sharply and there
has been some increase in unemployment, but local labor
shortages continue and a substantial number of job open­
ings exists. The new situation, aggravated by the unex­
pectedly early ending of the wTar, necessarily involves a
certain amount of dislocation and individual hardship,
especially in the war industry centers. The full impact of
the end of the war has not yet been felt, however; some
industries and areas are faced with the necessity of an im­
mediate shift to a peacetime economy, but the continuance
of services related to military traffic to and from the trans­
pacific area has temporarily delayed part of the expected
reduction in war-supporting activities. Even in the two
major war industries of the District, aircraft and aircraft
parts and ship construction and repair, the volume of em­
ployment at September 15 was still around 400,000, a
figure far in excess of any purely peacetime level that may
reasonably be expected. The adjustments attendant upon
the transition from a wartime to a peacetime economy in
the District will probably not be completed rapidly.
Industrial employment

While the approaching end of the war had already re­
sulted in appreciable employment reductions in the major
war industries of the Twelfth District, the immediate
effect of the Japanese surrender was the additional loss
of nearly 300,000 jobs during the four weeks following
August 15. About one-third of these were in shipbuilding
and repair yards, about one-quarter in the airframe and
aircraft parts industries, with the remainder scattered
through a miscellaneous group of metals, ordnance, and
munitions plants, parts manufacturers and sub-contrac­




tors. The areas experiencing the largest reductions in war
industry employment were metropolitan Los Angeles,
with approximately 100,000 layoffs, the Seattle-TacomaBremerton area with about 50,000, the San Francisco
Bay area with about 45,000, the Portland-Vancouver
area with about 30,000, and San Diego, with about
17,000. Among individual communities, the most severely
affected by contract cancellations were Long Beach,
Wilmington, Santa Monica, Inglewood, Huntington
Park and San Diego in southern California, and Port­
land, Vancouver, Seattle and Tacoma in the Northwest.
While the San Francisco Bay area has had relatively few
large cancellations since mid-August, a considerable num­
ber of small manufacturers were affected ; there were also
sizeable layoffs in the shipyards at Richmond and Sausalito.
Among the several industrial areas of the District, the
San Francisco Bay region seems to be experiencing rela­
tively less difficulty than the other large centers in the
current situation, in large part because more or less read­
justment had already been made in this area as new ship­
building construction approached completion and ship­
yard workers transferred themselves to other lines which
are still active, left the district, or retired from the labor
force. A large volume of transport and shipping activity
and ship repair work continues to center at San Francisco
Bay in connection with trans-Pacific military and naval
supply and replacement operations; labor requirements
for these services are providing some offset to declining
employment in direct war activities.
A sharp increase in unemployment compensation
claims was one of the first consequences of contract can­
cellations and layoffs in Twelfth District industrial cen­
ters.1 Total claims on file jumped from approximately
42,000 in California, Oregon, and Washington at the be1It should be noted that the number of persons receiving unemployment
compensation is well below the number of persons having filed claims.

August-Septem ber 1945

ginning of August to about 100,000 at the end of the
month and to about 145,000 by mid-September. The
heaviest increase was in southern California— from 28,000 claims on August 1 to over 100,000 on September
15, while the lowest proportionate increase was in the
northern California area— from about 11,000 claims to
about 20,000. Greater relative increases occurred in Ore­
gon and Washington, where the total number of claims
increased from about 2,500 for the two states on August
L to nearly 24,000 on September 15.
Some of those laid off or having voluntarily left war
jobs have taken other employment; some, especially in­
dustrially trained women, are unemployed; and some
have left the District labor force by retirement or by leav­
ing the area. Substantial numbers of job openings are
reported by the United States Employment Service in
most of the larger District cities. Most of these openings
are in the trades and services. The railroads and public
utilities are also seeking to augment their forces, and cer­
tain industries, including lumbering, metal mining, and
steel mills and foundries, are having considerable diffi­
culty in obtaining enough men to sustain their operations.
Concern is also being expressed over the adequacy of the
agricultural labor supply. Lower wages offered, differing
and in many cases lower skills required, lack of housing,
and in some instances lack of employment opportunities
for women and for members of minority races as well as
for marginal workers, are among the factors explaining
the over-supplv of some types of labor and the shortage
of others.
W ar industries

By mid-August Pacific Coast shipyards building for
the Maritime Commission were within measurable dis­
tance of completing their contracts. Following the sur­
render of Japan, the Commission announced the cancel­
lation on August 20 of 355 million dollars in contracts
covering the construction of 135 ships, of which 53 were
under contract to West Coast shipyards. At the end of
August there still remained about 100 vessels of the Com­
mission’s Pacific Coast program to be completed— assum­
ing no further cancellations; most of these were under
contract to yards at Los Angeles harbor and at Portland
and Vancouver. In probably not more than two West
Coast yards, however, will the remaining ships require
any appreciable amount of construction extending into
1946. Naval contracts have also been extensively cancelled,
including a recent large order for aircraft carriers held
by a Vancouver yard and contracts for destroyers at
Seattle and San Pedro; naval work at a large Tacoma
yard has also been greatly curtailed. A considerable num­
ber of army and navy contracts for barges and lighters of
various kinds have either been cancelled or suspended.
On the other hand, one of the smaller Portland yards is
actively working on a contract for the Netherlands Indies
calling for the construction of 20 freighters for use in
inter-island traffic. A number of inquiries have also been
reported from European and South American countries
for new ships to be built in American shipyards, and it is




63

M O N T H L Y R EVIEW

not impossible that West Coast yards may participate in
this business. Ship repair and conversion work is still
going forward, offsetting to some extent the rapid de­
cline in new ship construction activity. The overall reduc­
tion in District shipyard employment between August 15
and September 15 was approximately 100,000, from
about 385,000 to about 285,000.
Cutbacks in the procurement of aircraft had been con­
siderably greater than in the case of ships during the
period following V -E day. In spite of heavy cancellations,
however, the backlog of Twelfth District airframe plants
still remained at a high figure in early August, and the
total weight of airplanes to be produced by all plants for
the army air forces and for Lend-Lease during the sec­
ond half of 1945 had been scheduled at a rate equal to
70 percent of production in the first six months of the
year.
This program was abruptly changed by the surrender
of Japan. During the period immediately following Au­
gust 15, the Army Air Forces announced the cancellation
of orders for more than 31,000 military planes, involving
approximately 7 billion dollars. Among the Pacific Coast
airframe plants, large units at Long Beach, Santa Mon­
ica, Inglewood, San Diego and Seattle have had exten­
sive cancellations, and numerous sub-contractors, parts
manufacturers and feeder plants have also been affected.
In the month ending September 15, employment in West
Coast airframe and aircraft parts establishments was
reduced by approximately 40 per cent, from about 185,000 to around 110,000 persons. Following the cancella­
tion of military orders, the larger airframe plants inau­
gurated a five-day, 40-hour work week.
The situation is still too confused to permit a reliable
estimate of the probable rate of production and employ­
ment by the District aircraft industry during the next
few months. A considerable backlog of military orders
remains to be filled even after allowing for the extensive
cancellations of August and early September. Some of
the larger plants, notably those at Burbank and Santa
Monica, will fare better than the average in this respect,
Production and Employment—
Index numbers, 1935-39
average—100
Industrial production1
L u m b e r ....... ...................
Refined oils2 .................
Cement2 ........................
W h ea t flour2 ..............
Petroleum2 ....................
Electric power2 .......... . . . .

With seasonal

Without seasonal

,------- 1945------- \ 1944
Aug. July June Aug.

,---------1945------- N1944
Aug. July June Aug.

t------ adjustment------->---- /------- adjustment------->

—

—

—

143
—
395

128
170
—
394

122
173
—
407

124
—
I ll
137
—
415

222
252
189
159
207
106

230
261
197
165
217
109

280
327
224
193
243
123

528

547

679

103 r l l 8

Factory employment and payrolls3
Employment
Twelfth District . .
California ............ ’ ’ ’ ! 244
Pacific Northwest
Oregon ............
W ashington . .
Intermountain . .
Payrolls
California ................. . . . 486

1 Daily average.
2 1923-25 average — 100.
3 Excludes fish, fruit, and vegetable canning,
r Revised
p Preliminary.

p ll4
262
143
139
433

245

489

114
265
140
150
143
440

134
263
139
152
143
436

149
220
124
137
130
455

222
252
190
160
208
109

230
261
196
167
214
112

282
328
229
199
247
123

528

550

682

64

FEDERAL RESERVE BANK

while a few smaller plants will also retain a fair volume
of army and navy work. An appreciable amount of com­
mercial business had already been booked by at least
two of the leading Pacific Coast concerns before the end
of the war and it is expected that the requirements of the
commercial air lines for replacements and additions will
provide a substantial volume of business over the next
year or two for the aircraft industry as a whole, though
at a rate far below the output attained during the past
three years. Many of the aircraft parts manufacturers are
converting their plants to production of civilian goods, in
some cases prewar products, in others new lines of output.
A minor casualty in the general policy of retrenchment
following the cessation of hostilities was the abandon­
ment by the W P B of its project for the construction of
four additional mills in California to process guayule
shrub for the emergency production of natural rubber.
The Department of Agriculture will continue to operate
the two mills currently in production, one at Salinas and
one at Bakersfield, California, but the improved outlook
for natural rubber makes unnecessary any further expan­
sion of processing facilities.
Petroleum and lumber

Among the basic industries of the District, petroleum
production and refining probably finds fewer problems
than most others in adapting itself to immediate postwar
conditions. The elements of the situation are fairly simple.
On the demand side, military requirements for high
octane gasoline have contracted sharply, while consump­
tion of fuel oil for naval and transport purposes still re­
mains high, and civilian demand for gasoline, with ration­
ing and road speed limitations removed, has increased.
Increased civilian gasoline requirements fall far short,
however, of the decline in military needs; the problem is
largely one of reducing refinery operations and relieving
pressure on sources of crude petroleum. No fundamental
technical changes are involved in adjusting refinery
technique; the reduced needs for petroleum have already
been given effect by eliminating imports from the mid­
west and by cutting down on local production. The latter
has taken the form chiefly of curtailing production in the
Elk Hills naval reserve to 15,000 barrels per day, as
contrasted wTith the recent rate of about 65,000 barrels.
Automobile registrations in California during the first
seven months of 1945 were within 5 percent of the num­
ber for the corresponding months in 1941, while the num­
ber of trucks registered was larger by about 15 percent.
In addition, there are large numbers of out-of-state cars,
many of them owrned by military personnel or members
of their families. It is probable that the total civilian de­
mand for gasoline in the Twelfth District is running not
very far below the levels of 1941, the highest prewar year.
The lumber industry is currently facing a very difficult
situation. Large cancellations of military orders have
theoretically released supplies of lumber for civilian pur­
chase in western producing areas, but stocks at mills as
well as in dealers’ yards are at a very low level, and




OF SAN FRANCISCO

A ugust-September 1945

production has been hampered by labor shortages and
wage disputes as well as by fire weather shutdowns and
inadequate equipment, particularly of trucks and tires
needed in logging operations. Since the beginning of the
war the labor force of the northwestern lumber industry
has been considerably below its needs and the differ­
entials between wage levels in this industry and those
prevailing in war industry centers have undoubtedly con­
tributed to its difficulties in obtaining necessary man­
power. Strike votes were being conducted in August and
early September by the A. F. of L. and C. I. O. unions
among the sawmill operatives and loggers respectively,
to enforce their demands for a basic hourly wage rate of
$1.10 as compared with the present minimum of 90 cents
per hour. Until these labor difficulties are cleared up and
mechanical equipment needs are made good, there is little
prospect that the industry will resume operations at any­
where near its potential capacity.
Reports continue to be heard of housing shortages
throughout the District, not only in the larger cities but
also in many smaller communities at some distance from
the industrial centers, and in some cases even in agricul­
tural districts. Government controls on the allocation of
lumber for civilian use were relaxed in August ; the re­
maining limitations on distribution were dropped at the
end of September and all restrictions on new construc­
tion, including house building, will be removed effective
October 15.
Transportation and shipping

Up to mid-August the railroad and ocean shipping
situation remained extremely tight. As a means of speed­
ing up the return of empty cars to eastern points for
loading military equipment and supplies, it became nec­
essary to impose restrictions on carloading at the week­
ends, wThich caused losses to producers of perishable farm
products at scattered points in California. In addition,
off-shore shipping was hampered by the large number of
vessels requiring overhauling or repair, in spite of strenu­
ous efforts to speed up ship repair work.
The cessation of hostilities in August lessened some­
what the urgency of military needs, and the movement of
supplies through the Pacific ports, which had averaged
over 70,000 cars per month from January through July,
has diminished sharply. Carloadings within the District
have also declined, reflecting the cancellation of war con­
tracts, with corresponding reductions in output by Dis­
trict producers, as well as the curtailment of lumber pro­
duction in the Northwest. While the railroads still need
additional manpower and equipment to meet the normal
crop moving requirements, which are at a peak in the
fall months, their operating problems have been consid­
erably mitigated by the ending of the war.
The long continued strain on overland transportation
occasioned by the wrar has prompted inquiry from time
to time as to the prospects for resumption of intercoastal
shipping service. The present lack of suitable vessels, to­
gether with the need for more thorough reorganization
than can be effected immediately, makes the early re­

65

M O N T H L Y REVIEW

August-September 1945

sumption of normal service by private operators out of
the question. The inauguration of coastwise and inter­
coastal cargo movement on a limited scale, however, is to
be undertaken temporarily by the W ar Shipping Admin­
istration, which has been authorized to engage in these
services up to the end of the current year as an emergency
measure.
It is reported that direct shipping service will be re­
sumed not later than October via the Panama Canal be­
tween the Atlantic Coast and Hawaii and certain South
Pacific ports. Resumption of limited service between the
East Coast of South America and Pacific Coast ports is
also in early prospect. Commercial service from the West
Coast to the Philippines was inaugurated in August by
the American President Lines as agent for the W . S. A.
The need for rehabilitation of physical facilities is ex­
pected to result in a fairly heavy volume of freight move­
ment to the Philippines and probably to the Dutch East
Indies also. Civilian transportation to Pacific areas will
be restricted, however, to essential passengers approved
by the State Department.
Late in August the W . S. A. approved the transfer of
16 coastwise vessels to Philippine registry and flag, re­
taining ownership and direction of their operation. These
vessels are to be used in coastwise and inter-island cargo
and passenger movement; Philippine laws do not permit
the coastwise operation of vessels other than those of
Philippine registry.

last year’s figures were general throughout the District,
averaging about 15 percent.
In August and early September, department store sales
continued to exceed the volume of a year ago but by a
somewhat smaller margin than in earlier months. In cer­
tain areas, however, including San Diego and Portland,
department store sales in August were below the level of
a year earlier. For the Northwest as a whole the increase
over last year was only 1 percent. The general closing of
stores in mid-August incident to the Japanese surrender
was an important factor in bringing down the month’s
sales volume in the District as a whole to a level only 4
percent above that of August 1944. Preliminary reports
from larger cities for the first three weeks of September
indicate considerable variation within the District, with
an overall increase of approximately 10 percent above
last year’s sales.
Data are also available for two other related lines, ap­
parel stores and furniture stores. District apparel stores
reported sales volume up 12 percent from last year for
July and for the first seven months of the year; the rate
of increase dropped to 7 percent in August. Furniture
store sales in the District were 8 percent above a year
earlier for the first seven months of 1945, and 10 percent
higher in July. In August, however, furniture store sales
dropped 3 percent below last year’s level. In San Diego,
Seattle, and Spokane, furniture store sales have for a
number of months run consistently lower than last year.

Ref a/7 trade

Bank deposits and reserves

The drastic curtailments already effected in District
war production plants and the reductions in manufactur­
ing employment and payrolls which are still to come may
soon be reflected in reduced spending for goods and
services. Up to mid-summer of this year, however, the
rate of consumer expenditures as indicated by available
data for retail sales was still extremely high. Daily aver­
age sales in 220 department stores in the District during
the first seven months of 1945 were approximately 14
percent higher than in the corresponding months of 1944,
while this bank’s seasonally adjusted index number of
department store sales in July, 255 percent of the 193539 average, was^ within one point of the record figure
established last February. Increased sales in July over

The end of the war made little or no immediate differ­
ence in the behavior of bank deposits and money in cir­
culation. Since the end of June, demand deposits of
individuals, partnerships, and corporations have followed
the usual pattern of increase between war loan drives, as
war loan deposit accounts of the Treasury in commercial
banks have been drawn upon and as additional funds have
continued to be brought into the District through Treas­
ury expenditure. By mid-August, demand deposits had
returned to a level approximating the high reached in late
May, just before the Seventh War Loan. In the next
four weeks, they continued to increase steadily.
The growth in time deposits has been remarkably perBanking and Credit—

Distribution and Trade—
Index numbers, 1935-39
daily average=100

With seasonal

f----- adjustment ----- >

-1945---------^ 1944
Aug. July June Aug.
Department store sales (value)
Twelfth D istrict................... 231 255
233 222
Southern C aliforn ia............ 231
260 239 221
Northern California . . . . . . 212 244 220 200
212
Portland .................................. 211 232 211
Western W ashington
275 310 282 268
Eastern Washington and
Northern I d a h o ............... 228 211 208 231
Southern Idaho and U tah., 257 253 225 239
Phoenix .................................. 319 287 272 284
Car loadings (number)1
Total .........................................
112
116 115
Merchandise and misc.. .
131 134 130
O t h e r ....................................
89
94
98
1 1923-25 daily average = * 100 .
r Revised.




Averages of Wednesday figures
Without seasonal
adjustment
1944
/-------- 1945Aug. July June Aug.

-----N

210
213
193
197
256

211 215
219 r218
200 r203
195 200
254 259

202
204
182
199
250

Loans to finance transactions in :
U . S. Government securities. .
Other securities ...........................
Real estate loans .............................
All other loans....................................

202
214
223

184 194
198 r210
218 232

205
199
199

All other securities.

115
140
85

133
145
118

125
142
104

-Change from------N
1944
June
Aug.

( m illio n s of d o lla rs)

Condition items of weekly reporting
member banks

Coin and currency in circulation
Total (changes o n ly ).................
Fed. Res. Notes of F. R . B. oJ
Member bank reserves................. ..

Aug.

July

1,091
518

_

128
51
290
104
5,533
5,133
400
3,205
1,906
1,040
—

2,992
1,775

4

4- 41
4 - 32

4 -1 2 4
4- 46

19
4
1
—
5
4- 68
4- 62
+
6
4-128
4- 41
— 172

4- 10
45
—
1
_ _
5

4 - 67
+
4
—
5
4- 12
4 -977
4-916
4- 61
4-425
4-3 9 4
45

4- 6 j
-{- 62

4- 80
4- 74
—
6

+

17

—
+

—

4- 40

4-335
4 -328
47
4- 64
4- 68
4-216

4-613
4-585
4-265

66

FEDERAL RESERVE BANK

sistent, war loan drives notwithstanding, in the past two
years or more, and has so far been impervious to the
effects of the end of the war. Time deposits continued to
rise steadily well into September. Money in circulation
in the District likewise continued to increase in the month
following the end of the war.
The rate at which Treasury disbursements have ex­
ceeded Treasury receipts in the District so far in 1945
was sustained from mid-August to mid-September. Mem­
ber bank reserves continued to rise as a consequence,
despite the offsetting effects of increases in money in cir­
culation and of the net outflow of funds from the District
in other commercial and financial transactions. This
strengthening of reserves has enabled District member
banks to add somewhat during the past two months to

OF SAN FRANCISCO

August-September 1945

their Government security holdings, which had increased
considerably at the time of the last war loan drive.
With war contract cancellations and reductions in war
industry employment and payrolls, it is reasonable to
anticipate at least some reduction in the near future in the
excess of Treasury disbursements over collections in the
District and some check upon the increase in District
bank deposits and money in circulation, but there were
no indications of such developments in the six weeks
ending September 26. In the week ending September 26,
demand deposits and money in circulation did decline
slightly, and net Treasury disbursements were smaller in
amount than in previous weeks. These appear to be sea­
sonal declines, however, related primarily to tax pay­
ments.

The Central Valley of California and the Central Valley Project
h e

Central Valley of California, 450 miles long and

approximately 50 miles wide, lies west of the Sierra
T
Nevada Mountains and east of the Coast Range, and
between Mount Shasta on the north and the Tehachapis
on the south. Two major rivers flow through the flat,
low valley floor, the Sacramento from the north and the
San Joaquin from the south and, turning westward, join
to empty into San Francisco Bay. Climate and soil are
unusually favorable for a wide variety of agricultural
products. With about a fourth of the total land area of
the state, the Valley contains over half of the available
land suitable for crops. Before the war, 43 percent of the
land in farms in California and 54 percent of the land in
irrigated farms were in the Central Valley.1 Despite the
existence of a large number of local irrigation districts,
irrigation works on the whole have not made the most
effective use of water, and excessive pumping has seri­
ously lowered the ground water level in some sections.
The chief purpose of the Central Valley Project is to
redistribute available water so as to increase its usability.
This redistribution is both in terms of the seasons of the
year, by water storage in seasons of surplus rainfall with
subsequent release during seasons of deficient rainfall and
run-off, and in terms of geographic areas of the Central
Valley, through diverting water from surplus areas in the
upper Sacramento Valley to deficit areas in the San
Joaquin Valley. At the same time, the Project is designed
to restore depleted ground water supplies in the upper,
or southern, San Joaquin Valley; to repel salt water that
has been encroaching on the agricultural lands in the
delta of the Sacramento and San Joaquin Rivers; to con­
trol floods and aid navigation on both rivers; and to gen­
erate hydroelectric power.
The Central Valley

The Central Valley did not impress the first white
immigrants as offering particularly favorable sites for
l For statistical purposes, the Central Valley is considered to include the
following 18 counties:
Sacramento Valley counties: Butte, Colusa. Glenn, Sacramento, Shasta,
Solano, Sutter, Tehama, Y o lo , Y u b a, and San Joaquin Valley counties:
Fresno, K ern, K ings, Madera, Merced, San Joaquin, Stanislaus, Tulare.




development. Before improvement, much of the land area
appeared to be useless because of poor natural drainage
resulting in swamps, on the one hand, and inadequate
rainfall resulting in large reaches of arid land, on the
other. Early exploitation took the form of extensive grain
cultivation and cattle grazing. As the more attractive
lands were taken up, the Valley commanded closer atten­
tion, and its possibilities under irrigation began to be ap­
preciated. By 1940, with irrigation extended to over
2,600,000 acres, the Central Valley had a population of
1,126,000, which was 16 percent of all California resi­
dents, living on more than 50,000 farms and in 80 cities
and towns. Forty-nine percent of the state’s rural farm
population, 27 percent of the rural nonfarm population,
and 9 percent of the urban population were in the Valley.
Population of Central
Valley, April 1940
Number
(thousands)
Percent
T o t a l ..............................................
1,126
100
U r b a n .......................................
441
39
Rural .......................................
685
61
Farm ..................................
313
28
Nonfarm ...........................
372
33

Percent of California population
living in Central
Valley
16
9
34
49

27

Population and occupations

Although agriculture is basically the most important
industry in the Central Valley, the permanent population
is not predominantly a farm population. Less than three
out of every ten Valley residents were living on farms
in April 1940, and well over twice as many persons re­
ported that they were earning their livings in non-agricultural as in agricultural occupations. Trade and service
accounted for 44 percent of the gainfully occupied ; agri­
culture, forestry and fishing for 29 percent ; manufacturing, together with transportation, communications and
other public utilities for 17 percent ; and construction and
mining together accounted for 10 percent. The figures
understate somewhat the importance of farming since
they apply to employment during the last week in March.
This month represents a seasonal low in hired agricul­
tural labor, much of which moves from place to place
with the harvests. Over half of the Valley residents, 56

August-September 1945

M O N T H L Y REVIEW

percent, lived in unincorporated places in 1940, with an
additional 10 percent in towns and villages of less than
5,000 population. Thirty percent, however, were located
in the metropolitan areas of Sacramento, Stockton, and
Fresno, either within the central cities, in the suburbs,
or in the unincorporated environs.
Over a period of several decades the Central Valley
has gained in total population but not as rapidly as Cali­
fornia as a whole. In this respect there have been differ­
ences between the northern and southern parts of the
Central Valley, with the Sacramento Valley growing
more slowly than the state and the San Joaquin Valley
generally growing more rapidly than the state. During
the war this has been reversed; population in the Sacra­
mento Valley has grown at about the same rate as in the
entire state, while the San Joaquin Valley has gained
much less rapidly. In both sections, there has been an in­
crease in urbanization over the years, but its extent and
rate of increase since 1900 are lower for the Central Val­
ley than for the state.
Racially, the people of the Central Valley depart only
slightly from the state average. In 1940 there were fewer
Negroes, proportionately, than in the state, but more
Japanese and other groups classified as non-white by the
Census. A smaller proportion of adults in the Central
Valley in 1940 had completed college, high school, or
grade school, respectively, than in California as a whole.
These differences between the Valley and the state were
greater for men than for women, and were greater for the
higher degrees of education than for the lower.
Income

People living in the Central Valley counties are es­
timated to have received less than 14 percent of the
individual income of all California civilians in 1940,
although they constituted a little more than 16 percent
of the civilian population. Over 22 percent of the in­
comes of California proprietors of unincorporated busi­
nesses, which include most farms as well as trade and
service enterprises, were received in the Central Valley,
but less than 14 percent of the wage and salary incomes
and about 6 percent of the dividend, interest and net
rental incomes. Wages and salaries were the most im­
portant single source of income in the Central Valley as
well as in the state, accounting in each area for about 60
percent of all income. In none of the Central Valley coun­
ties was income of proprietors, which include farmers, of
greater aggregate importance than income of wage and
salary earners. Wages and salaries were considerably
more important in Sacramento, Shasta, and Solano coun­
ties, largely because of state and national government
activities, than in the state or in the Valley as a whole.
The average income of Central Valley residents was
estimated at $674 in 1940, and in only two counties, Sac­
ramento and Solano, was income above the state average
of $803. The increase in per capita income to $1,250 in
1943 was greater for the Valley than for the state as a
whole, despite the location of the bulk of war industry
outside the Valley. In 1943, per capita income in three




67

agricultural counties, Colusa, Sutter, and Yolo, in addi­
tion to Sacramento and Solano counties, stood above the
state average of $1,425 per civilian resident. Income
of proprietors displaced wages and salaries as the most
important source of income in Colusa, Glenn, Sutter,
Tehama, Madera, Merced, Stanislaus, and Tulare coun­
ties, all of which are mainly agricultural, rather than
industrial or commercial.
Agricultural specialization

Agriculture in the Central Valley, as in California as
a whole, tends to be highly diversified between farms or
local farming areas, but highly specialized within farms
or local farming areas. That is, many different crops are
produced in significant volume, but individual farms tend
to concentrate, often to the exclusion of other products
even for the farmer’s own family consumption, on a single
crop or on a very limited number of related crops or
products. For example, in the United States, 67 percent
of all livestock were produced in 1939 on farms special­
izing in livestock— in the Central Valley, 81 percent.
Corresponding percentages of other groups of products
are: dairy products, 67 percent and 80 percent; poultry
and poultry products, 72 percent and 89 percent; field
crops, 68 percent and 85 percent; vegetables, 74 percent
and 86 percent; and fruits and nuts, 84 percent and 91
percent.
Concentration on the production of one or two specialty
products results in a high degree of dependence on the
market, not only in the disposal of the product, but in the
purchase of food for the farmer’s own table. The farm
family’s food supply, in such a case, is no more stable and
secure than that of an urban worker— both the farm and
the city breadwinners must sell their services or products
on an uncertain market and must in turn obtain practi­
cally all their food and other necessities from the market.
In the Central Valley in 1939 only a little over 2 percent
of the agricultural production was consumed on the home
farm, compared with 14.5 percent for the country as a
whole.
The Central Valley produced 2.6 percent of all farm
products, in terms of value, in the United States in 1939.
Less than this proportion of livestock and livestock prod­
ucts (with the exception of sheep and lambs) and much
more of such cash specialties as rice, sugar beets, aspara­
gus, peaches, figs, olives, almonds, oranges and grapes,
came from the Valley. The percentage of national and
state production of specified crops that occurred in the
Central Valley, and the concentration of production
within leading Central Valley counties, are brought out
in the accompanying table. Within each of the counties,
the various special crops often are concentrated in still
smaller areas, of no greater compass, in the extreme, than
a few contiguous farms.
Even in products for which the Central Valley does not
possess unique climatic advantages there is often a high
degree of specialization within the Valley. Sixty-seven
percent of the Valley’s production of green beans, for
example, was in Tulare and Fresno counties. Similarly,

FEDERAL RESERVE BAN K

68

August-Septem ber 1945

OF SAN FRANCISCO

72 percent of the cotton grown in the Central Valley came
from Kern, Tulare and Fresno counties; and 97 percent
of the Irish potatoes from Kern and San Joaquin counties.

Valley agricultural counties, Colusa, Sutter, and Yolo,
however, the percentages of farms reporting hired labor
were 75, 81, and 77, respectively.
Over three-fourths of the farms, containing well over
Business characteristics of Valley agriculture
half of the land in farms in the Central Valley, were irri­
Because of its specialized character, agriculture in the
gated in whole or in part in 1939. Costs of operation are
Central Valley typically is a business. Its costs are higher,
higher for irrigated than for unirrigated land, not only
its risks are heavier, a larger part of both its outlays and
because of the greater out-of-pocket outlays for water,
its income is in cash, its monetary returns to the owner
but also because of the greater investment in wells, pumps,
are greater and are more in the nature of profits and less
and other fixed and movable equipment that is required.
in the nature of wages, than in farming in the usual sense.
Specialized agricultural business has much the same kind In addition to the cost of irrigation equipment, Central
of labor problems as any other business in which wages Valley farms represent a greater than average investment
are an important cost and in which the demand for labor because of high land values. In 1940, before recent sharp
is highly seasonal or erratic. In the past its attitudes to­ farm price increases, the average value of farm land and
ward labor and the unionization of labor, and its method ■> buildings in the Central Valley was a little over $16,000,
of seeking to make these attitudes prevail, have been simi­ compared with $16,300 in all California, $12,600 in Iowa,
lar to those of other businesses that see a direct connec­ and $5,500 in the United States as a whole. Irrigated
tion between plentiful supplies of cheap labor and profita­ farms in Kern, Colusa and Yolo counties averaged well
bility of operations. The relationship between the agri­ over $30,000. There is some evidence that land prices in
cultural businessman and agricultural labor under these the Central Valley went up more, during the war, than
conditions departs widely from the traditional relation­ either prices throughout the United States or in Califor­
ship between the farming family and the hired man.
nia as a whole. Bona fide sales in Tulare County indicate
The Central Valley as a whole stood above the state price increases for irrigated land of nearly 190 percent
in the percentage of farms hiring labor, 67 percent as between 1941 and the middle of 1945 and it is not uncom­
against 62 percent, and in the proportion of farm cash mon to hear of individual tracts planted to fruit, nuts, or
wage payments that were made on a day, week, or piece grapes in the various other parts of the Valley selling
basis, 82 percent as against 74 percent. Use of hired labor for as great or even greater mark-ups over pre-war
was considerably greater in the San Joaquin Valley, prices.1
where 71 percent of the farms reported it, than in the
1From 1941 to the second quarter of 1945, United States farm prices in­
Sacramento Valley, where 57 percent of the farms so
creased 55 percent; California farm prices about 70 percent; Tulare County
irrigated farm prices about 190 percent and unirrigated farm prices about
reported. In the three unusually well-to-do Sacramento
75 percent.
C o n c e n t r a t io n of P r o d u c t io n of S ele c te d A g r ic u l t u r a l P r o d u c t s
in

Product

the

44
..
H o g s and pigs. . .
Sheep and lambs.
Chicken eggs.
Barley ............
Rice .................

C e n t r a l V a l l e y a n d i n L e a d i n g V a l l e y C o u n t i e s , 1939

Central Valley production
as percent of :
United
California
States

..
. .

Cotton ........................................................
Irish p o ta to e s .........................................
Sweet potatoes and ya m s...................
Sugar beets..............................................
Field b e a n s ..............................................
Green beans ..........................................................
Asparagus ..............................................
..
Dry onions ............................................
..
Tomatoes ................................................
Cherries ...................................................
,.
Peaches ...................................................
Pears ........................................................
F igs ..........................................................
Olives .....................................................
Alm onds ...................................................
Navel oranges.......................................
Grapes— total .........................................
table g r a p e s ............................. . . .
raisin g r a p e s ....................................
wine grapes ....................................

56
41
49
65
32
27
74
99
63
98
71
70
52
38
11
86
61
46
42
92
22
94
91
76
25
90
97
99
63

2.6
2.3
2.6
1.6
0.7
3.6
1.7
1.7
9.2
17.9
7.4
4.0
4.1
1.0
12.2
9.0
0.6
42.6
5.0
7.2
7.2
32.7
7.7
89.0
91.0
76.0
24.8
82.0
—
—

—

Leading counties production
as percent of :
Central
United
Valley
California
States

Leading Agricultural Counties1

39
25
29
35

Tulare, Fresno, San Joaquin
Stanislaus, Merced
Tehama, Glenn
Tulare, Kern

30
61
46
17
64
66
72
97
62
42
82
67
96
45
39
71
46
73
80
64
33
88
73
60
60
46

Glenn, Stanislaus
Stanislaus, Tulare, Fresno, Sacramento, Merced
Sacramento, Tulare, Fresno
Kings
Sutter, Butte, Colusa
Stanislaus, Merced, Fresno, San Joaquin, Tulare
Kern, Tulare, Fresno
Kern, San Joaquin
Merced
Yolo
Stanislaus, San Joaquin, Sutter
Tulare, Fresno
San Toaquin, Solano, Sacramento, Yolo
San Joaquin
San Toaquin
San Toaquin
Sutter, Stanislaus
Sacramento, Solano
Fresno, Merced
T ulare
Butte, Y o lo
Tulare
Fresno, San Joaquin, Tulare
San Toaquin, Tulare
Fresno
San Joaquin

12
63
71
69
44
22

83
28
18
30
43
76
58
25
22
66
59
60
29

*5
15
71
58
25
22
60
—
—

—

1 Counties listed in descending order of importance. N o county listed unless it accounts for more than 10 percent of production in Central Valley, and no
percentages shown in California or United States columns unless the least of the leading counties accounts for 10 percent or more, or 5 percent or more,
respectively, of total. A county may account for more than these minimum percentages, however, and still not be included if it is markedly outranked by
another producing county or counties.
Source: United States Census of Agriculture.




August-September 1945

M O N T H L Y REVIEW

Land ownership and size of farms

About two-thirds of the farms in the Central Valley
were operated by full owners in 1940 These owneroperated farms were well below average in size, however,
since they included only one-fourth of the acreage. Partowners operated 14 percent of the farms but 43 percent
of the acreage, which suggests that high land prices may
prove an obstacle to full ownership, at least of larger
tracts. Only 2 percent of the farms were run by man­
agers, but these included 13 percent of the acreage. Ten­
ants accounted for about one-fifth of the farms and of
the acreage.
Differences in the size of farms are extremely pro­
nounced in the Central Valley, partly as a result of high
land values and great variation in the productivity of the
soil, and partly as a result of the historical development
of land ownership in California. Under the Spanish sys­
tem, missionaries held the land in trust for their wards,
the Indians, although a few gifts of land wrere made to
retired soldiers or other deserving Spanish subjects.
Under Mexican rule, a commandante could make grants
in the neighborhood of his presidio, and the Governors
could make larger grants anywhere in California. A l­
though preference was supposed to be given Mexican
citizens, in practice all who could use lands were granted
them freely. The unit of land was a square league, about
4,439 acres, and 11 units, or 48,824 acres, could be
granted to one individual on the theory of one league of
irrigable land, four of crop land dependent on natural
rainfall, and six for grazing cattle. Following American
seizure of California, Congress passed a law requiring
proof of title and recognizing the original grants where
proof was clear. Lands for which title was not proved
passed into the public domain. If the documents relating
to the original grants w7ere incomplete or defective, as
many were, a tedious and costly process of adjudication
was prescribed. The uncertainties surrounding title and
the difficulty of establishing clear claims made land hard
to sell, with the consequence that vast tracts fell into the
hands of sharp lawyers and land speculators.
Spanish and Mexican titles to about S y 2 million acres
in California were finally recognized by the United
States. About 11^2 million acres of the public domain
were granted to the railroads and about 8y> million acres
to the State of California. These grants, with the sus­
tained Spanish and Mexican titles, embraced a little more
than half the total land area in California in private or
state ownership. Still other large tracts of public lands
were sold for cash or exchanged for scrip. The Home­
stead Act and similar laws designed to transfer land in
small units from public to private ownership were less
important in California than in most other parts of the
country, and fraud in the operation of the various land
laws is reputed to have been extensive. Early California
land practices facilitated concentration of ownership in a
relatively small number of relatively large holdings. Eco­
nomic tendencies also favored large holdings, the chief
uses of the land being for grazing livestock and raising
grain. Other forces, however, worked in the opposite direc­




69

tion. Squatters took advantage of the Federal Preemp­
tion Act whereby they could preempt 160 acres of land
that was vacant. As population became more dense and as
new or different agricultural products or techniques were
introduced, economic incentives for breaking up large
holdings have been strengthened. The Chinese Exclu­
sion Acts impaired the profitability of huge single-crop
ranches, but the automobile and low paid migratory labor
partially restored it.
On balance, a relatively high concentration of land
ownership persists in California, especially in parts of the
Central Valley. The Valley is characterized by many more
very small holdings than is typical of American agricul­
ture, and by a great deal higher proportion of the land in
holdings of large size. In 1940, 50 percent of the farms
in the Valley had only 3 percent of the land and 75 percent
of the farms had only 10 percent of the land, compared
with 8 percent and 25 percent in the United States as a
whole. At the other end of the scale, 10 percent of the
Central Valley farms contained 80 percent of the land,
and two thousand farms of 1,000 acres or more had twice
as much land as fifty thousand farms of less than 1,000
acres apiece. Part of this inequality doubtless is due to
differences in productivity, which are very great, with
highly fertile, intensely cultivated, irrigated land at one
extreme and semi-arid range land at the other. Even
after allowances for differences in the value per acre, how­
ever, a high concentration of ownership of farms in the
Central Valley is evident. In 1940 the most valuable 10
percent of the farms had 47 percent of the value of all farm
lands and buildings, and the upper 25 percent of the farms
had 66 percent of the value. The lower 25 percent of the
farm units, in contrast, had only 6 percent of the value
and the lower 50 percent of the farm units had 16 percent
of the value. Perhaps the chief reason for a less extreme
concentration of value than of acres is that the most
valuable lands have tended to be broken up to a greater
extent than the less valuable lands. The introduction and
extension of irrigation no doubt contributed to this proc­
ess, although in areas where water is obtained by pump­
ing from farm wells economies of large scale operation,
within limits, exist even on irrigated lands. Another
reason for the less extreme concentration of control in
terms of value than in terms of acres is that the value
figures include the farm homes and other buildings, which
make up a higher proportion of the value of small than of
large farms. In terms of value, as well as in terms of acres,
the extent of concentration in large holdings is notably
greater in the Central Valley than in the United States
as a whole.
Large farms, of 1,000 or more acres each, are more or
less evenly distributed in number throughout the Central
Valley, with 27 percent of the total in the upper Sacra­
mento Valley, 23 percent in the lower Sacramento, 20
percent in the lower San Joaquin, and 30 percent in the
upper San Joaquin in 1940. The size of the large holdings
is greater in the San Joaquin Valley than in the Sacra­
mento Valley, and is greater in the upper than in the
lower parts of both valleys. The large farms were largest

70

FEDERAL RESERVE BAN K

on the average in Kern County, where the mean size of
177 of them, all of 1,000 acres or more, was over 8,000
acres. The number and financial importance of large
farms in the Central Valley, and the consequent power of
the owners of large tracts, is one of the principal reasons
for the bitterness of the controversy over acreage limita­
tion provisions of the reclamation laws under which the
Central Valley Project is being constructed and, unless
other arrangements are made, will be operated.
D IS T R I B U T I O N O F F A R M L A N D -1 9 4 0
Percent of farms, starting with the smallest, accounting for various
percents of the total land in farms.

OF SAN FRANCISCO

August-September 1945

The Central Valley Project

The Central Valley Project is a water project, con­
cerned with irrigation, flood control, navigation, salinity
repulsion, and restoration of ground water, with the gen­
eration of hydroelectric power as a by-product. The
primary object is to store and distribute water for irriga­
tion. Two-thirds of the irrigable land is located in the
San Joaquin Valley, while two-thirds of the rainfall and
stream flow occurs in the Sacramento Valley. The geo­
graphic redistribution of this wTater through a series of
engineering works has been under active study by the
State government since 1921 and by the Federal govern­
ment since 1929. The electorate of California in 1933 ap­
proved a bond issue of 170 million dollars for financing
the Central Valley Project, and the legislature estab­
lished the California Water Project Authority to take
charge of construction and operation. By this time the
market for municipal bonds had weakened; the United
States Public Works Administration had launched its
program for stimulating construction by the loan-andgrant of federal funds to public bodies; and the California
authorities decided not to issue the authorized bonds. The
Public Works Administration had the Central Valley
Project under consideration from time to time, with no
final approval. In 1935 the President allocated Federal
funds and Congress, in the Rivers and Harbors Act,
voted approval of construction of parts of the Project
by the United States Bureau of Reclamation.
Irrigation features

D IS T R I B U T I O N O F V A L U E O F F A R M L A N D
A N D B U I L D I N G S -1940
Percent of farms, starting with the least valuable, accounting for va­
rious percents of the total value of farms.

The above curves indicate the concentration of land in the larger farms,
and the concentration of the value of land and buildings in the larg­
er farms. The more a curve departs from the diagonal (which would rep­
resent an even distribution) the greater the degree of concentration. Read­
ings can be taken from either end of the curve: for example, the smallest
25% of farms in the Central Valley contain 1% of the land; and the larg­
est 25% (100% minus the smallest 75% ) of the farms contain 90% of the land.




The authorized wrater features of the Central Valley
Project provide for storage of upper Sacramento River
water behind Shasta dam and its subsequent release into
the river channel during dry seasons, and for the storage
of upper San Joaquin River water behind Friant dam.
Some of the water released into the Sacramento River
during the dry season is to be used for additional irriga­
tion in the Sacramento Valley and the upper San Fran­
cisco Bay region, and some of it is to be conveyed to the
lower, or northern, part of the San Joaquin Valley, to
replace San Joaquin River water. This, in turn, will per­
mit diversion of water from Friant reservoir into the
deficit areas of the upper San Joaquin Valley. Part of the
Project water will be used to supplement irrigation water
now available, part will be used to bring additional land
under irrigation, and part will be used to restore the un­
derground water table in the upper San Joaquin Valley.
Water from Shasta dam, in addition, will be used to gen­
erate power, to push back salt water from the ocean that
has been threatening agriculture in the Sacramento-San
Joaquin delta, and to improve navigation on the Sacra­
mento River; and both Shasta and Friant reservoirs will
provide flood control.
Most of the irrigated lands in the Sacramento Valley
take their water from hitherto unregulated streams or
from streams regulated in the interest of hydroelectric
power generation. A relatively small fraction of the irri­
gated land drew on stored water, and, while in general
the amount of wrater has been sufficient for existing irriga­

August-Septem ber 1945

M O N T H L Y R EVIEW

tion needs, in dry years there has not always been enough
to go around. The main streams tributary to the lower
San Joaquin Valley already are regulated by storage
reservoirs, and the water has been sufficient for the irri­
gated sections, but not for substantial extension of irriga­
tion to additional land. In the upper San Joaquin Valley
there were no storage reservoirs for irrigation before con­
struction of Friant dam. The amount of land that can
be adequately irrigated from surface run-off under estab­
lished water rights necessarily varies from year to year
with the amount of rainfall. Wells are widely used in the
upper San Joaquin Valley both as a supplemental source
of water and as the chief water supply. It is estimated that
about 70 percent of the irrigation water in this area is now
being pumped. The pumping of water has been excessive,
with the consequence that the underground water level
has fallen sharply. In adversely affected localities the
ground water level receded by 50 to 200 feet between
1921 and 1939, causing the abandonment of almost 50,000
acres of once highly productive land and threatening an
additional 200,000 acres.
Irrigation features of the Central Valley Project that
have been authorized to date include, in addition to the
recently completed Shasta and Friant dams, a number of
canals and pumping stations and subsidiary works. The
principal canals are the Delta Cross Channel canal, to
carry Sacramento River water across the delta; the DeltaMendota canal, to carry it, with the aid of pumps, up the
San Joaquin Valley to Mendota, as a substitute for San
Joaquin River water; the Friant-Kern canal, to carry
irrigation water southward from Friant reservoir to the
Kern River below Bakersfield and to points between; and
the Madera canal, to carry irrigation water from Friant
reservoir northwestward to the Chowchilla River. Con­
struction wras postponed for the most part during the war.
The Madera canal is now nearing completion and work
is under way on the Friant-Kern canal. Letting of con­
tracts for the Delta Cross Channel and Delta-Mendota
canals awaits appropriations. The Contra Costa canal, a
much smaller carrier than any of the major irrigation




71

canals, was substantially completed as a war project, to
serve the upper San Francisco Bay region with indus­
trial, and to some extent with agricultural, water.
New irrigation water

With completion of the authorized features, irrigation
water will be made available to an additional 100,000
acres in the Sacramento Valley, 20,000 acres on the west
side of the lower San Joaquin Valley along the DeltaMendota canal, 20,000 acres along the Contra Costa
canal, and 500,000 acres in the Friant-Kern and Madera
canal service areas in the upper San Joaquin Valley, a
total of 640,000 acres. In addition, a substitute and assured
water supply will be made available to 100,000 acres now
under irrigation and the ground water level will be re­
stored and maintained over an area even larger than that
to which irrigation will be extended. First call on the
water is to go to supplementary uses and to raising the
ground water level in the upper San Joaquin Valley. It is
estimated that the accumulated overdraft of ground water
will take about ten years of average rainfall to overcome,
and it is planned to bring new land in this area under
irrigation only gradually as the deficit is made up.
Although authorized storage and distribution works carry
water only as far south as the Kern River, pumping south
of the Kern River also has exceeded natural replenish­
ment of ground water. Should Friant-Kern canal deliv­
eries be extended to overdraft areas south of the Kern
River, the smaller amount of water available for irrigat­
ing new land would be sufficient for about 400,000, rather
than 500,000, acres in the upper San Joaquin Valley.
Acreage limitation controversy

The irrigation program of the Central Valley Project
has given rise to a number of problems, some of which
have been the subject of recent and continuing contro­
versy. United States reclamation laws, under which the
Project is being built, have consistently favored the estab­
lishment of family size farms as a matter of public policy.
The chief instrument for effectuating the policy has been

P R IN C IP A L F E A T U R E S O F T H E C E N T R A L V A L L E Y P R O JE C T — C A L I F O R N I A

72

FEDERAL RESERVE BANK

limitation of the acreage to which water will be supplied
under public subsidy consisting of interest-free construc­
tion capital. The statutory limit is 160 acres. Because of
the importance of large land holdings in the Central Val­
ley, and particularly in the upper Sari Joaquin Valley
where most of the new water will become available, modi­
fication of the statutes has been discussed in a number of
quarters. A Central Valley Project Studies Committee,
appointed at the instance of the Bureau of Reclamation
and including representatives of other interested Federal,
State and local governmental agencies, farm organiza­
tions, irrigation districts, and land owners, has recom­
mended that national reclamation law be changed to pro­
vide: (1 ) a limit of 160 irrigable acres on the area of
presently unirrigated lands; (2 ) a limit of 640 irrigable
acres on the area of presently irrigated lands; (3 ) an
incentive to reduce land holdings to 160 acres by includ­
ing 3 per cent interest on construction costs in the charge
to holdings of more than 160 irrigable acres. Congress has
changed various provisions of reclamation law in the past
as conditions have been deemed to justify it, but no action
has yet been taken in reference to the Central Valley.
Outright repeal of all acreage limitations has been
urged by the large land owners, their spokesmen and
their sympathizers. Those who agree with this solution
also support proposals to remove the Project from under
the jurisdiction of the Bureau of Reclamation through
transfer to some other Federal agency or purchase by the
State. In the Flood Control Act of December 1944, Con­
gress authorized construction along the Kern and Kings
Rivers and their tributaries as a civil function of the
W ar Department. In signing the bill, President Roose­
velt criticized division of responsibilities for water projects
within the Central Valley and announced his intention of
seeking Congressional transfer of all such responsibilities
to the Bureau of Reclamation. Others, including some
Congressmen, have urged formation of a Central Valley
Authority somewhat along the lines of the Tennessee Val­
ley Authority. Still other groups propose State acquisi­
tion of the Project.
Assessment of costs

A second problem arising out of the irrigation features
of the Project is the equitable allocation of costs among
the various beneficiaries. In the Sacramento Valley, most
of the irrigation water now comes from streams which,
on the whole, provide an adequate supply of water for the
area at present being irrigated. Regulating the stream
flow will make it possible for farmers to draw more
heavily during dry seasons, but will not be of any par­
ticular advantage to those who already are adequately
supplied with water. Newr lands for which an assured
water supply is made available, however, would clearly
gain. Repulsion of salinity in the delta region of San Joa­
quin and Sacramento Counties unquestionably benefits
lands that have already suffered, and protects other
lands that might soon be damaged. The value of the bene­
fits to already damaged lands and of protection from
potential damage to additional lands is not readily meas­




OF SAN FRANCISCO

August-September 1945

urable, so that an acceptable allocation of costs is ex­
tremely difficult to achieve. Most of the water to be car­
ried by the Delta-Mendota canal will merely replace river
water already being taken by farmers in the lower San
Joaquin Valley, to permit diversion of the river water to
farmers in the upper part of the Valley. There is no
apparent reason for the lower Valley farmers to pay for a
mere substitution made for the purpose of improving the
water supply of others. The canal, however, will provide
additional water as well, which can be used either to sup­
plement present supplies or to bring new land under irri­
gation. It would appear to be equitable to seek payment
for this additional water.
Distribution of costs in proportion to benefits, or on
some other fair basis, probably will prove most trouble­
some in the upper San Joaquin Valley. To the extent that
Project water is metered out to existing or newly estab­
lished irrigation districts, a reasonable charge presumably
can be agreed upon. The restoration and maintenance of
ground water supplies gives rise to more complex prob­
lems. Those who pump water are benefited, as a group,
but it is hard to measure the overall benefit, the benefit
to each individual land owner, or the relative distribution
of benefits among land holders. For example, some farm
operators may already have sufficient pumping capacity
for all needs at present ground water levels. If they have
not experienced so far any alarming decline in the ground
w^ater level on their farms, they might be difficult to con­
vince of the necessity for raising the ground water level
generally. Yet the area as a whole has clearly suffered
from excessive pumping, and will gain in a most direct
way from completion of the Project. Failure to charge a
fair share of the cost to the area would constitute a subsidy
for those wTho continue to mine their water resources, at
the expense either of other Project beneficiaries who pay
enough to meet all the costs assigned to the irrigation
features, or of the public at large through failure to col­
lect all the costs of providing water for irrigation. Conmittees similar to the advisory group described earlier in
connection with acreage limitation have been studying
problems of cost allocation.
Since the Central Valley Project has a number of pur­
poses, there also is a question of the allocation of total
construction costs among the various purposes. Some
controversy has arisen in connection with the charges to
be made for electric power, the issue being whether price
policies should be designed to promote the greatest use­
fulness of the power feature from the standpoint of all
elements in the widest practicable service area, or should
be designed to yield the greatest net contribution to total
cost in order to reduce the charges to users of Project
water. Bureau of Reclamation policy in administering
multi-purpose projects apparently favors the indepen­
dent development of each feature to be of greatest value
to those served both directly and indirectly by that fea­
ture. While this general approach does not automatically
establish the relative charges to water and power users,
it suggests that the Bureau would not deliberately price
any service to subsidize users of the other services.

August-September 1945

M O N T H L Y R EVIEW

Distribution of power

The chief controversy affecting Project power is be­
tween the proponents and opponents of public power
generation and distribution. Since public generation is
now an accomplished fact, the current issue revolves
about plans for distribution, although any proposals to
expand generating capacity as part of a postwar works
program doubtless would encounter renewed resistance.
Two of the five generators included in the design for
Shasta dam have been installed. Keswick dam, a smaller
structure to form a balancing reservoir a little below
Shasta, is partially constructed. Keswick dam is designed
for three generators, with an ultimate capacity of 75,000
kilowatts compared with 375,000 kilowatts at Shasta
dam. Authorized features of the Project include power
lines from Keswick and Shasta dams to electric power
use areas, and an auxiliary steam plant at Antioch, in the
delta region. A publicly owned transmission line to Oroville on the east side of the upper Sacramento Valley was
completed in order to deliver power to the private utility
company serving Northern California war production
centers. Construction of other transmission lines, which
was postponed during the war because of materials and
manpower shortages, is opposed by those who favor ex­
clusively private power distribution.
The Antioch auxiliary steam plant has not yet been
built. It is strategic in two ways. In the first place, an
auxiliary steam plant in any appropriate location should
greatly increase the amount of firm power that the Project
could undertake to deliver, thus strengthening the posi­
tion of the Project regardless of whether the power is
sold to a single private company for redistribution or is
distributed to a number of buyers. In the second place,
location of the steam plant at or near Antioch would re­
quire a transmission line into that area, in order to in­
tegrate the main hydroelectric power with the steamelectric auxiliary power. This would bring Project power
into the delta region near the center of the expected serv­
ice area for Project power. Furthermore, the irrigation
features of the Project will require large blocks of power
to lift Sacramento River water into and through the
Delta-Mendota canal. Without a transmission line into
the vicinity of Antioch, the Project would be forced to
purchase power that it had in abundance a relatively
short distance away. Quite naturally, the officials charged
with administering the Project desire to avoid such a
situation.
Congress so far has refused appropriations for the
Antioch steam plant and the related transmission line.
Authorization has not been rescinded, however, so that
Congressional refusal to appropriate funds does not as
yet represent a decision on the public versus private power
question. As materials, equipment, and manpower again
become available, the question presumably will be settled
one way or the other. Unless Congress reverses its pre­
vious authorization, the decision will favor public power.
The Reclamation Project Act of 1939 specifies that,
in the sale of electric power or in the lease of power




73

privileges, preference shall be given to municipalities and
other public corporations and agencies, and to coopera­
tives and other nonprofit organizations financed under
the Rural Electrification Act and amendments. Those
favoring private, as against public, distribution of Project
power reasonably can be expected to support suggestions
designed to change the reclamation laws or to remove the
Project from under the operation of these laws. A num­
ber of such suggestions already have been noted, in the
description of irrigation features of the Project.
Economic effects of the Project

The Central Valley Project will not revolutionize the
economy of the Central Valley, but it is bound to be a
considerable factor in the future development of the Val­
ley and may indirectly affect other parts of California
and of the United States as well. Perhaps the most im­
portant contribution the Project can make will be to
preserve agricultural land from threatened deterioration
through continued encroachment of salt water in the
Delta and through continued mining of ground water in
the upper San Joaquin Valley. Such protective services
do not make a noticeable favorable difference in the
amount of agricultural production— they simply prevent
the occurrence of an adverse difference that is debatable
in extent. Greater availability of electric power, or a pos­
sible reduction in power rates to some consumers, or both,
likewise are expected to have a gradual and largely nonmeasurable effect on the development of the area.
Similarly, the land for which water is to be made avail­
able for the first time, 540,000-640,000 acres, will be
brought under irrigation only gradually.
If the water features of the Project are administered to
discriminate against large holdings in favor of family size
farms, presumably there will be a greater tendency to­
ward subdivision of affected large operating units. It is
not clear how strong the tendency will be, or what forces
already may be operating in the same or in the opposite
direction. Large scale farmers could scarcely be forbid­
den to pump water from underground sources replen­
ished by the Project, but the availability of adequate
water, either by pumping or from irrigation canals, may
well make it profitable to reduce the size of extremely
large operating units, most of which are only partly un­
der irrigation at the present time. Even where irrigation
water is obtained by pumping from wells, the method re­
quiring the largest amount of equipment, the advantages
of large scale operation of the irrigation equipment ap­
parently can be realized on farms of 200 to 250 acres
under average conditions of water need and lift. A change
to smaller size farms in areas now dominated by very
large land holdings would, it is held, have a number of
desirable results. A case study recently completed by
the Bureau of Agricultural Economics, comparing two
Central Valley country towns distinguished chiefly by
the size of surrounding farms, suggests that the houses
and business properties, and the educational, recreational,
religious, and civic facilities are better, and that the
general standards of economic and social existence are

74

FEDERAL RESERVE BANK

notably higher in communities with family size, owneroperated farms than in communities serving large-scale
farming areas. If these differences prevail generally, and
if the type of farming is a causal factor, operation of the
Project can be expected to favor a higher general level
of economic and social activity among Valley residents
to the extent that the relative importance of family size
farms is increased.
There is some hope that the new lands to be brought
under irrigation will increase the production of livestock,
of livestock feed and forage, and of dairy products and
other livestock products. The concentration of Central
Valley agriculture on specialty crops, with heavy de­
pendence on favorable markets outside of California, is
expected to continue, but if the total productive capacity
of the Valley is sufficiently increased the profitability of
specialized farming compared to general farming may be
reduced. An excessive expansion of specialty crops would
have serious consequences for existing California agri­
culture. Cash costs, including marketing costs, are rela­
tively high and inflexible for specialty crops, so that
changes in prices result in more *than proportionate
changes in agricultural profits. Furthermore, prices of
perishables are sensitive to changes in that part of pro­
duction that reaches the market. Increases in the produc­
tion of livestock, on the other hand, to the extent of re­
placing imports from out of state with domestic products,
would not necessarily affect local prices adversely, it is
held, but wrould contribute to local agricultural stability.
Furthermore, the specialty crops require large numbers
of agricultural laborers for short periods, while the rais­
ing of livestock and livestock products provides a higher
proportion of year-round employment, an additional fac­
tor making for greater economic and social stability.
The hoped-for increases in the relative importance of
livestock and general farming as a result of Project opera­
tions may be either direct or indirect. Central Valley
Project water will not be cheap water— it apparently will
cost in the neighborhood of ten dollars an acre for the
average use in the area served. Livestock and general
farming operations may not thrive on so high a water
cost, although some of the specialty crops have shown
profits on much more expensive water. It is unlikely that




OF SAN FRANCISCO

August-September 1945

all of the new land brought into cultivation, or the pres­
ently farmed lands on which intensive cultivation will be
made feasible by additional water supply, will be used
directly for livestock or general farming. These lands
may be better suited to some of the specialty crops than
land now7devoted to those crops. Consequently, a process
of displacement and shifting is likely to take place, with
part of the hoped-for increases in livestock and general
farming ultimately occurring on land nowr specializing in
other crops. This would be a painful process for the grow­
ers who are forced to make the shift. By the same token,
capture of local markets now served by imports from
other agricultural producing areas, as is contemplated in
the case of livestock and livestock products, might be pain­
ful to farmers in the areas that now supply the California
market.
If, as appears likely, redistribution of Central Valley
water has a gradual effect on agricultural production in
the area served, its adverse effects on other agricultural
producers should be less pronounced. Displacement of less
efficient by more efficient uses of resources is one of the
costs of progress. When public funds are used to bring
about more efficient agriculture in one area, however, pos­
sible adverse effects on other agricultural areas ordinarily
are one of the considerations wTeighed by the legislative
body authorizing use of the funds. In the case of the Cen­
tral Valley Project, there is some reason to believe that
the adverse effects will be neither widespread nor unduly
severe in their impact. Much of the water will be used to
conserve present agricultural lands, and the amount of
new land that will be brought under cultivation over a
period of years, under Project features authorized to date,
is expected to be relatively small compared with additions
to and abandonments of farm land in the country as a
whole for all reasons. Continued increase in agricultural
productivity in the Central Valley over a ten-year period,
if past trends are an indication, could well influence agri­
cultural production much more than the extension of irri­
gation to half a million additional acres.
N o te : M any of the data used in this article have been taken from “ The
Effects of the Central Valley Project on the Agricultural and Industrial
Econom y and on the Social Character of California,” a Report on Problem
24, Central Valley Project Studies, reproduced and distributed by the Bureau
of Agricultural Economics, Berkeley, California.

August-Septem ber 1945

75

M O N T H L Y REVIEW

National Summary of Business Conditions

INDUSTRIAL PRODUCTION

Released September 29, 1945— Board of Governors of the Federal Reserve System

employment at factories dropped sharply after the middle of August
Pwhen most and
military contracts were cancelled. Activity in most other lines was main­
ro d u c tio n

tained and the value of retail sales continued above last year’s high levels.
I n d u s t r i a l P r o d u c t io n

1937

>938

1933

1940

1941

1942

1943

<944

(9 4 5

Federal Reserve index. Monthly figures, latest
shown is for August.

DEPARTMENT STORE SALES AND STOCKS

Industrial production declined 11 percent in August, reflecting primarily the sharp
curtailment of activity in aircraft, shipbuilding and ordnance plants in the last half of
the month, and the Board’s seasonally adjusted index was 188 percent of the 1935-39
average as compared with 211 in July.
The largest part of the decline was in the machinery and transportation equipment
industries, where activity during the month averaged about 20 percent below July. Out­
put of steel and of nonferrous metal products likewise declined with the sudden elimina­
tion of almost all military demands. In September steel output increased with the receipt
of orders in large volume from the automobile and other steel-consuming industries now
rapidly converting to civilian production.
Production of nondurable goods in August was also below the July level, reflecting
primarily military contract cancellations affecting output in the chemicals and rubber
products industries. Cattle slaughter at federally inspected plants rose sharply in August
and the first two weeks of September. Output of shoes and newspaper publishing activity
also increased in August. Output of textiles, most manufactured food products, and other
nondurable goods showed little change or declined slightly. Immediately after Japan’s
capitulation, rationing was ended for gasoline, fuel oil, and canned fruits and vegetables.
Increased supplies of dairy and meat products and tobacco products were also made
available for civilians.
Minerals production declined somewhat in August reflecting chiefly a 4 percent de­
crease in coal production. In the first part of September output of bituminous coal ad­
vanced. Crude petroleum output was maintained in August at the record July level, but
due to the substantial decline in military demand for petroleum products, the production
rate in the first half of September w^as about 8 percent below August.
Awards for the construction of privately-owned factories and commercial buildings
continued to increase sharply in August. Contracts for private residential construction
were awarded at about the same rate as in June and July, which was about twice the
value of awards in the summer of 1944.
D is t r ib u t io n

Federal Reserve indexes. Monthly figures, latest
shown are for July (stocks) and August (sales).

WHOLESALE PRICES
." ¡ ....... ........ ^
:

Ii

;1

1

. !

M

~....T
i

'
1

FARM PROOUCTS/^

1/

1

j

i

1

^

Department store sales in August were smaller than in July on a seasonally adjusted
basis but about 6 percent larger than in August last year. In the first half of August
sales were about 20 percent larger than a year ago. In the last half of the month and
the early part of September, following Japan’s surrender, sales slackened and were little
changed from last year’s level. Sales in the two weeks ending September 22, however,
rose sharply and were 11 percent larger than in the corresponding period a year ago.
Railroad shipments of revenue freight in the last two weeks of August and the early
part of September were in almost as large a volume as in the period prior to the week
of Japanese surrender and only 7 percent smaller than during the same period last year.

- • V

ALL COMMOOITIES

r

?

L— — —
"otheÌÍ ♦

/

C o m m o d i t y P r ic e s

Prices of agricultural commodities declined from the early part of August to the early
part of September but since that time have increased somewhat.
Maximum prices of petroleum products have been reduced somewhat since the early
part of August, owing to lower transportation charges, while maximum prices of cotton
goods, building materials, and various other industrial commodities have been increased.
A g r ic u l t u r e

r

..[..... ...........

M l
1939

1940

1941

1942

1943

1944

1945

Bureau of Labor Statistics indexes. W eekly figures,
latest shown are for week ending September 22.

M EM B ER BANK RESERVES AND R E L A T E D ITEMS

Wednesday iigures, latest shown are for
September 19.




Crop prospects continued to improve during August and total production is expected
to equal the record harvests of 1942 and 1944. Cotton production, howrever, is forecast at
only 10 million bales, which is about 2 million smaller than last year’s crop and the
average tor the past 10 years. Total carryover of raw cotton in this country on August 1
was about 11 million bales, slightly more than in the two previous seasons.
B a n k C r e d it

In the first month of peace, Federal Government expenditures though reduced were
still well in excess of receipts, and war loan balances at commercial banks were accord­
ingly reduced. Adjusted demand and time deposits of weekly reporting banks increased
by 1.8 billion dollars during the five weeks ended September 19, while war loan balances
at these same banks declined by 3.4 billion. Thus, as in other periods between Treasury
financing drives, Treasury expenditure tended to increase deposits of business and
individuals at small banks more than at large ones.
The currency outflow continued and totaled 425 million dollars during the five-week
period, but it was somewhat below the outflow of last year for the comparable period.
Time deposit expansion continued as rapidly as in recent months.
Loans for purchasing and carrying Government securities at reporting banks were
further liquidated during the five weeks by 470 million dollars and, in addition, reporting
banks reduced holdings of U. S. Government securities by 1.3 billion dollars to meet the
increase in reserve requirements and net deposit declines. Smaller banks appear to have
been purchasing Government securities during the period.
Reserve funds during the five-week period were supplied by an increase of 1.1 billion
dollars in Reserve Bank holdings of Government securities and by a small increase in
member banks borrowings from the Reserve Banks. This increase met the currency out­
flow and increased average reserve balances by close to 550 million dollars; this was
about as much as the increase in required reserves, and excess reserves remained near
one billion dollars.

VICTORY LOAN
Summary of Information Regarding Securities

Title of Security

Dated

Due

Cost price

Yield

Denominations
Registration

Redeemable
for cash prior
to maturity

% % Treasury
Certificates of
Indebtedness
SERIES K— 1946

2»/4% Treasury
Bonds of
1959-62

2|/2% Treasury
Bonds of
1967-72

1st day of month
in which
purchased

December 3,1945

November 15,1945

November 15,1945

3 years from
issue da;te

December 1,1946

December 15,1962

December 15, 1972

100% and accrued
interest after
November 15, 1945
(6) (7)

100% and accrued
interest after
November 15,1945
(6) (7)

United States
Savings Bonds
SERIES E

United States
Savings Bonds
SERIES F

United States
Savings Bonds
SERIES G

Treasury
Savings Notes
SERIES C

1st day of month
in which
purchased

1st day of month
in which
purchased

1st day of month
in which
purchased

10 years from
issue date

12 years from
issue date

75% of maturity
value

74% of maturity
value

Varies— 2.90% if
held to maturity

Varies—2.53% if
held to maturity

12 years from
issue date

100%

Varies— 2 % % if
held to maturity (1)

100%

Varies— 1.07%
if held to
maturity (2)

$25 to $1,000

$25 to $10,000

$100 to $10,000

$100 to $1,000,000

Registered
form only

Registered
form only

Registered
form only

Inscribed
form only

At holder’s option,
on 1st of month fol­
lowing one month’s
notice, after 6
months from issue
date

At holder’s option,
on 1st of month fol­
lowing one month’s
notice, after 6
months from Issue
date (1)

At holder’s option,
60 days from issue
date, on variable
redemption
schedule

Bearer form only

Bearer or
registered form

Bearer or
registered form

For loans from
banks only

Yes

Yes

Yes

Yes, after
December 8,1945

Yes, after
December 8,1945

Yes, after
December 8, 1945

All investors (3) (4)

All investors (3) (4)

No limit
(3) (4)

No limit
(3) (4)

No

No

Salable in open
market

No

No

No

No

All investors (3)

All investors (3)

All investors

Not more than $100,000 issue price of
Series F and G together in one calendar
year

No limit

On death o f owner, redeem able at 100% after 6 months from issue date, If application is
made within 6 m onths after death.

(5 )

(2 )

N otes owned by com m ercial banks bear interest only if used in payment o f Federal taxes.

(6 )

(3 )

Com m ercial banks permitted to subscribe for only a limited portion of their savings deposits
and certain time certificates o f deposit.




$500 to $1,000,000

Federal estate
taxes only, on
death of owner

No

( 4 ) Comm ercial banks will not be perm itted to own until within ten years of m aturity, except
as provided in ( 3 ) .

$500 to $1,000,000

No

Use as collateral

(1 )

$1,000 to $1,000,000

Yes, during and
after 2nd calendar
month after
month of purchase

No

Limited to $5,000
maturity value
in one calendar
year (5)

2y2%

No

No

Amount an
eligible investor
may buy

2^4%

At Government’s
At Government’s
option, on or after
option, on or after
December 15, 1959,
December 15, 1967,
at 100% and
at 100% and
interest
interest

No

Individuals only

%%

At holder’s option,
after 6 months
from issue date,
at 100% and
interest (2)

Acceptable in
payment of Federal
income, estate or gift
taxes prior to maturity

Who may subscribe

100% and accrued
interest after
December 3,1945

All investors except
securities dealers
and brokers (3)

No limit
(3)

Federal estate
taxes only, on
death of owner

Additional bonds m ay be purchased in coownership form in certain cases, and also when
Series A Bonds are exchanged for Series E Bonds during and after the m onth in which Series
A Bonds mature.

Subscriptions from others than Individuals m ust include accrued interest to Decem ber 3
1945. or such later date as paym ent is made to a Federal Reserve bank The term “ indi­
viduals* includes partnerships (other than securities dealers and brokers) and personal
trusts, but does not include personal holding companies, corporate trusts, bonus funds
pension funds, or similar aggregations of individuals.
’
( 7 ) Accrued interest on subscriptions for $500 and $3,000 will be waived.