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SAN FHANCISCD Monthly Review I IRC A D V N 0 V 2 819/1 it reserve: in § rnmim In ibis issue S ta r t ©f Phase 00 EM@W AB¥il@Pi(g(531i As!® Tim e-Deposit PemdliiMBin] October 1971 S t a r t o f Ptaase IS . . . The nation's new incomes policy will be built around a pay board, a price commission, and the existing Cost of Living Council. N e w A m e r ic a n s fr@m A s ia . . . In the wake of new immigration legislation, the number of Asian immigrants tripled over the course of the past decade. TIm e»O ep© sit P endulum . . . Individual and corporate time deposits at Western banks rose by 19 percent — a massive $4.8 billion — - in a year's time. Editor: William Burke MONTHLY October 1971 REVIEW Start of Phase he President outlined in early October the shape that the nation’s incomes policy will take after the expiration o f the wage-price freeze T o f a sharply lower rate o f increase in the price on November 13. He sketched a comprehensive As for price guidelines, officials say that they program o f controls, built around a newly created "price commission” o f seven private citizens and will "take profits into account” in determining a newly created "pay board” o f five management, five labor and five public members — plus the curbed directly. At the start, interest and dividends will con tinue to be the subject o f purely voluntary appeals existing Cost o f Living Council. indexes, wage increases would probably have to bear some relation to increases in productivity. acceptable increases, although profits will not be Phase II machinery also will include an "in for restraint. But the President will ask Congress terest and dividend committee” headed by Fed to add stand-by powers to bring these forms o f eral Reserve Chairman Arthur Burns, with five income under mandatory control, if needed, other official members. In addition, committees on medical costs and state-local government costs will advise the other stabilization groups regard ing problems in these inflation-prone sectors. Under Phase II, major businesses and big unions will have to ask government permission in advance to raise prices or wages. Medium sized economic units will have to report promptly as soon as they take a wage or price action, while when he asks for a one-year extension o f his authority under the Economic Stabilization Act. That legislation is now due to expire next April 30. Sanctions under Phase II will be the same as under the present freeze — a fine o f $5,000 per item, along with a court injunction to obey orders. A new "service and compliance adminis tration” will be organized under the Internal Revenue Service, regrouping some 3,000 agents small businessmen, landlords and the like will also be asked to abide by some sort o f wage and who are already at work enforcing the freeze. price standards. The duration o f these Phase II controls has been officially labeled "indefinite.” This special staff will work out o f 360 field offi ces, making investigations o f complaints and re Numerical standards for price and wage in quests for exceptions. The staff will be mainly creases will probably be developed by the pay board and the price commission before N ovem ber 14, or else the Cost o f Living Council could responsible for enforcement among businesses and unions too small to deal directly with W ash ington. But it will also collect data for analysis issue interim standards. (A s in the current freeze, in the pre-reporting big-business and union sec tors, and will do the initial review o f reports in the post-reporting middle-size sector. the new controls will exempt "raw agricultural products” entirely.) T o meet the program’s goal FEDERAL RESERVE BANK OF SAN FRANCISCO The Administration meanwhile reported a August 15, and the 10-percent excise tax on small favorable by-product o f the freeze — a signifi cant drop in wholesale prices during September. trucks would be repealed as o f September 23. For individuals, the House bill would increase Most o f the 0.4-percent decline was due to a sharp drop in prices o f farm products, which the personal income-tax exemption this year from $650 to $675, and would increase the minimum aren’t covered by the freeze, but there were also standard deduction for low-income persons from freeze-related declines for processed foods and industrial commodities. $1,050 to $1,300 in 1972. The bill also would The Administration’s attempt to stimulate the economy through fiscal actions progressed as the House passed and sent to the Senate a bill incor push forward (from 1973 to 1972) the sched uled increase in the personal exemption to $750, and the increase in the general standard deduc porating a number o f reductions in individual tion to 15 percent o f adjusted gross income with a $2,000 ceiling. The standard deduction cur and business taxes. Immediate action by the Senate is uncertain, however, because o f attempts rently is 13 percent with a $1,500 ceiling. The case for fiscal stimulus remained strong, there to add to the bill some further income-tax since unemployment rates for most major labor- cuts as well as welfare-reform provisions. force groups were essentially unchanged between Under the House bill, which differs in some respects from the Administration proposals, busi August and September, although the overall jo b less rate edged down from 6.1 to 6.0 percent. At nesses would get a 7-percent tax credit on equip ment acquired since August 15 or ordered since April 1, while about half the corporate-tax bene the same time, employment rose substantially in September to a record high o f 79-5 million. Manufacturing employment posted its largest fits from the Treasury’s new liberalized deprecia month-to-month gain in over five years, with tion rules would be eliminated. The 7-percent excise tax on autos would be repealed, effective the exception o f several months affected by the aftermath o f major strikes. Local Centers 174 October 1971 MONTHLY REVIEW New Americans from Asia T he United States is a nation o f immigrants. Throughout the nation’s history, men and women and their families have journeyed here and 1924. W ith the discarding o f this earlier legislation and the enlargement o f quotas, there has been a tremendous increase in the inflow o f in search o f opportunity, and in turn have pro Asian immigrants — especially Filipinos, Chi vided the manpower to help build and run our nese, Indians, and Koreans. The W est Coast has long been the point of factories, mines and farms. Since the time o f Columbus, most o f the immi grants have come from Europe, Africa, and (more recently) Latin America, but relatively few were from Asian nations. Over the last sev eral years, however, a sharp shift began to show up in U.S. immigration patterns. Whereas only about one-sixth as many Asians as Europeans came to this country in the first half o f the 1960’s, more than one-half as many immigrated in the second half o f the decade. Altogether, the number o f Asian immigrants jumped from 108,000 in the 1961-65 fiscal period to 323,000 in the succeeding five-year period. (A ll data are on a fiscal-year basis.) This shift is attributable to the Immigration Act o f October 1965, which abolished the 40year-old "national origins” quota system in favor o f a system according equal treatment to all for eign immigrants. Total annual immigration, entry for most Asian immigrants and also the most concentrated area o f their residence. Many newcomers are drawn to where earlier genera tions o f the same nationalities have settled. Thus, the unique Asian contribution to the economy and society o f the Pacific states can be expected to grow in future decades. A sia n im m igration so a rs in wake of new immigration legislation 1 .8 7 M illio n however, is limited to 120,000 from the Western Hemisphere and 170,000 from the Eastern Hemisphere. The Act not only facilitates immi gration by close relatives o f American citizens, but also seeks to attract professional and other needed workers who can contribute their skills to the American economy. The new Act has benefitted particularly the various Asian peoples who faced discrimination under the terms o f the Exclusion Acts o f 1882 19 61 -6 5 1 9 6 6 -7 0 175 FEDERAL RESERVE BANK Shift in legislation For a prolonged period, Asian immigration OF SAN FRANCISCO Filipinos and Chines® lead upsurge in Asian immigrant flow was practically barred under the Exclusion Acts o f 1882 and 1924. For other nations, immigra tion in recent decades was governed by the "na tional origins’ ’ quota system set up in final form under the Immigration and Nationality Act o f 1924, with each nationality’s quota limited to 2 percent o f those residing in the U.S. at the time o f the 1890 Census. (Quota means restriction o f immigrant visas under numerical limitation; non-quota means freedom from numerical limi tation for certain classes o f people.) The shift from an exclusion policy to a quota system for Asians was begun during W orld W ar II. In 1943 Congress repealed the Exclusion Act and granted China a token quota o f 105 persons annually, and in 1946 Congress permitted Chi nese wives o f U.S. citizens to enter the U.S. on a non-quota basis. Further legislation in 1952 granted quotas to each o f the 19 nations in the "Asia-Pacific Triangle’’ -— 185 for Japan, 105 for China, and 100 for each other nation — and also removed all restrictions on the non-quota immigration o f Asian wives, husbands and minor children o f U.S. citizens. The Refugee Act o f 1953 permitted entry for 2,000 non-quota refu gees o f Chinese origin, and an executive order in 1962 permitted entry o f more Chinese refugees from Hong Kong. The 1965 revision o f the Immigration and Nationality Act was a much more radical step, however, since with this legislation Congress Shift in ethnic make-up The new law has changed the ethnic make-up recognized the equal rights o f persons from all nations to immigrate to the U.S. under a broadly uniform system o f regulations. The legislation o f this decade’s new Americans, with an empha sis on the developing nations o f the world. The permits up to 170,000 immigrants from the East ern Hemisphere annually, with a limitation o f once flocked to this country in large numbers, has dropped sharply. Immigration from Asia — 20,000 for any one country, and up to 120,000 immigrants from the Western Hemisphere annu especially China, India, Korea and the Philip pines — meanwhile has shown a dramatic rise. ally, with no limitation by country. N ew Americans from Asia accounted for one o f The new legislation is concerned with family 176 married children o f U.S. citizens plus spouses and unmarried children o f resident aliens. Third preference (10 percent) goes to professionals, scientists and artists, and farther down the list, another 10 percent o f the total goes to workers in short-supply occupations. Parents o f U.S. citi zens are admitted on a non-quota basis. reunification and the selection o f workers who could benefit the U.S. economy. First and second preferences (40 percent o f the total) go to un- flow o f British, Germans and Canadians, who every 15 new immigrants in 1965 but for nearly one o f every four in 1970, as the numbers ad mitted from Asia almost quintupled between those two years. October 1971 MONTHLY Other geographic areas still provide more immigrants than does Asia, however. In 1970, there were 137,000 immigrants admitted from Latin America, with M exico alone accounting REVIEW Immigrants concentrated in a few Western states N u m b e r (T ho usa nds) for 44,000 o f that total. (T h e largest number admitted from any one country in any single year o f the past decade was the 99,000 Cubans admit ted in 1968.) In 1970 also, there were 118,000 immigrants admitted from European nations, with Italians accounting for 25,000 o f that total. Asia in the same year supplied 93,000 immi grants, but that area (unlike the others) showed a striking uptrend over the last half-decade. The Philippine Republic, which ranked second only to Mexico as a source o f immigrants in 1970, led the Asian nations with 86,000 immi grants altogether in the 1966-70 period, while China (including Taiwan) furnished 76,000 immigrants during the period. India and Korea also scored large gains, with 28,000 and 26,000, respectively, during the 1966-70 period. But Japan was somewhat atypical, with hardly any increase over the course o f the decade. The number o f Asians admitted under the quota system jumped from 5,000 to 68,000 be tween fiscal 1965 and 1970. The immigration totals were bolstered, however, by a substantial number o f non-quota immigrants, mostly wives and other relatives o f U.S. citizens. Non-quota immigrants increased from 15,000 to 24,000 between 1965 and 1970. Females accounted for 55 percent o f Asian immigrants last year, as against 52 percent o f the total for non-Asian countries. (India was the only Asian country with a majority o f male immi grants.) This preponderance o f females may be due in large part to the immigration o f the wives trated in the 20- to-39 age group, while Filipino immigrants were disproportionately represented in the under-20 group and Chinese immigrants most heavily represented in the over-40 group. Concentration in the W est Asian immigrants are found throughout the nation, but the largest concentrations are in a few Western states, especially California and Hawaii. According to the traditional pattern o f immigra tion, new immigrants from China, Japan, Korea and the Philippines usually choose the place where their relatives or friends have already set tled, which means the Western states. This con centration will likely continue, since roughly onehalf o f new Asian immigrants last year indicated their intention to settle in this region. Considerably more than half o f the Asian immigrants who had been admitted to perma nent resident status (prior to naturalization) re ported residence in Western states last year, ac o f U.S. citizens as non-quota immigrants; almost cording to the Immigration Service’s annual alien registration. Over one-half o f the 86,000 Chi one-sixth o f all Asian immigrants last year fell into this category. nese, over two-thirds o f the 94,000 Filipinos, Individuals in the prime age brackets (20 to and over two-thirds o f the 59,000 Japanese regis tered in this survey lived in the West. (This 39 years) accounted for 57 percent o f all Asian region had smaller shares o f the 21,000 Indian immigrants last year, as against only 42 percent and 20,000 Korean immigrants.) About 100,000 o f these Asians (40 percent o f the national total) lived in California, mostly in the San Francisco o f the total for non-Asian countries. Indian and Japanese immigrants were most heavily concen- FEDERAL RESERVE BANK OF SAN FRANCISCO and Los Angeles areas, and about 40,000 lived in Hawaii. Washington, Oregon and the M ount Students and their families accounted for al most half o f all the Asians who adjusted their ain States follow ed in importance. status to permanent residents last year. M ore The only other concentrations o f Asian immi over, this group accounted for the vast bulk o f grants are in N ew York and Illinois. N ew York last year had about one-tenth o f the total regis trants, including more than one-fifth o f the Chi all status adjustments among foreign students in this country. Chinese students and their families nese, and Illinois had about one-twentieth o f the were most prominent in this group, followed by Indians and then Koreans. total. The great bulk o f these people lived in New York City and Chicago. Professionals immigrating Students shifting status year were classified by occupational status; most Less than half o f all Asian immigrants last Asian non-immigrants — temporary visitors o f those listed were housewives, children or un who come to this country for business, study or classified. Nonetheless, the available occupational pleasure — totalled 429,000 last year, and a large data show a heavy concentration o f professional proportion o f these temporary residents may eventually wind up in the immigration totals. More than 26 percent o f all Asian immigrants, as (T he number has increased sharply from 160,000 in 1965.) In 1970, for example, 23,000 o f the 93,000 Asian immigrants were not new arrivals, but rather were earlier temporary residents who had adjusted to immigrant status. About 43 per cent o f Chinese immigration and 38 percent o f Indian immigration last year fell in this category. This type o f immigration is more common among Asians than among non-Asians; Asians accounted for two-fifths o f all status adjustments last year. Professional-technical workers make up large share of total P e rc e n t AS1A O T H E R N A T IO N S and technical workers among Asian workers. against less than 8 percent o f immigrants from other nations, fell into this category. Conversely, non-Asian nations provided a much larger pro portion o f immigrants with experience in bluecollar work. In actual numbers, Asian professional-techni cal workers soared from 2,000 in 1965 to 24,000 in 1970. Filipinos accounted for the largest share o f the 1970 total, but Indians and Chinese were also heavily represented in this group. Indeed, Indian professional and technical workers made up more than one-half o f all Indian immigrants last year, and Filipinos in this category made up almost one-third o f all Filipino immigrants. Asian immigrants dominate the picture even more when comparisons are limited to the most highly skilled categories — scientists, engineers, and physicians. In 1970, over 9,000 Asian imigrants were numbered in these categories, or more than one-half o f the total inflow from all countries. (In 1965, Asia supplied less than 1,000 scientists, engineers, and physicians.) Heavily represented in this elite category were Indian and Filipino engineers, Filipino physi cians, and Chinese and Indian scientists. Many o f the professional and technical immi grants from Asian countries are almost certainly not new arrivals, although the exact share is un- MONTHLY October 1971 REVIEW Asian immigrants dominate its scientists, engineers, and other skilled work highly skilled categories ers at home. Professional and technical workers accounted for only about one-tenth o f Japanese immigrants last year, as against a one-fourth Nu m be r (Thousands) share o f all Asian immigrants. Furthermore, Japan showed a far smaller share o f students changing to permanent immigrant status than did other Asian nations. Result: brain drain These statistics paint a picture o f a significant "brain drain” from Asian nations. In many cases, highly skilled cerebral workers get their training in their native countries and then come to this country to apply their skills. Just as fre quently, Asian students come to this country for certain; the statistics do not afford a direct meas ure o f the occupation o f students and other tem porary visitors who change advanced education and then remain after their their status to schooling is completed. During most o f the last decade, the American permanent residents. A great number o f Asian labor market was largely a seller’s market for students settle permanently in this country, as people o f this type. Asian professional and tech was noted earlier. Indeed, the National Science nical workers, along with Asian students trained here, contributed their skills to the U.S. economy Foundation estimates that over 80 percent o f Asian students in science and engineering may not leave this country after finishing their studies, and that the percentage may be even higher for Indian, Chinese, and Korean students. These foreign students thus are not merely temporary residents, but rather a new type o f immigrant. Japan, however, stands out in striking con trast to this trend, since Japan’s booming econ omy has generated the effective demand to keep — particularly the Western economy — and reaped the benefits in higher income and in the chance to use their advanced training. The U.S. in return offered them — at least until the econ omy turned sluggish — ■not only an opportunity to use their skills, but also a general improvement in living standards, and in many cases a refuge from political instability at home. Adelle Foley and Paul Ma Publication Staff: Karen Rusk, Editorial Assistant; Janis Wilson, Artwork. Single and group subscriptions to the Monthly Review are available on request from the Administrative Service Department, Federal Reserve Bank of San Francisco P.O. Box 7702, San Francisco, California 94120 179 FEDERAL RESERVE BANK OF SAN FRANCISCO Tim@“D®posit Pendulum T welfth District member banks had a mass contrast to a $401-million decline in the preced ive $4.8-billion (19 percent) increase in ing 12-month period. (In calendar 1969, the decline was $1,060 m illion.) During the late individual and corporate time deposits in the twelve months ended July 1971. This inflow was 1960’ s, this traditional form o f savings had lost more than double the amount o f the outflow much o f its appeal, as banks began to offer con during the 1969 period o f disintermediation, according to Federal Reserve survey data. The sumers an array o f time-deposit instruments at rates above those offered on regular passbook upsurge was marked by a comeback in regular passbook-savings accounts and by a show o f rate accounts. The attrition in passbook deposits was even greater in the West than elsewhere, as the flexibility for both savings and other consumer- 1969 disintermediation was followed in early 1970 by large transfers o f funds to consumertype deposits. By May 1970, however, the attrition was stemmed. After mid-year, passbook savings in creased rapidly and culminated in a $1-billion gain in the period February-April 1971. (That three-month period posted one-half o f the gain for the entire 12-month period.) Influenced by type deposits. A very high personal saving rate contributed strongly to the upward swing in the time-deposit pendulum during the recent 12-month period. Other contributing factors were the June 1970 suspension o f the ceiling rate on short-term, large-denomination time certificates, and the downward movement in money-market rates in the latter half o f 1970 and early 1971. Subsequent to the July 1971 survey, there has been only a small expansion in individual savings at District banks. Savings deposits increased somewhat, but most o f this represented quarterly crediting o f interest in September, while the Mc§s$ii¥@ tim e -d e p o sit increase recorded over past year J a n u a ry 1 9 6 9=100 growth in other consumer-type deposits deceler ated. On the other hand, increased corporate funds available for short-term investment led to a sizable expansion in large-denomination time certificates. Savings— return to popularity The most unexpected feature o f the turn around in time-deposit flows from July 1970 to 1971 was the behavior o f regular passbook 180 savings, which increased by $1,959 million in 196 9 1 97 0 1971 October 1971 MONTHLY the uncertainties surrounding the national (and regional) economic outlook — including fears about unemployment — large numbers o f indi viduals utilized this traditional, readily acces sible, form o f savings as a repository for funds REVIEW . . . with strong upturn in all deposit categories January 1969=100 (including U.S. Government securities) and as a repository for the increased savings from their current income flows. This large influx o f savings deposits, coming at a time o f rapidly declining loan rates, led many major banks to reduce (as o f April 1) the rate they paid on passbook savings. This rate reduction, from 41/ 2 to 4 percent, along with the usual seasonal withdrawals to meet income tax payments, helped bring about a slight decline in savings in the April-June period. But then, as business-loan and mortgage rates began climbing again, banks that had reduced their rate on sav ings announced a return to the 4 y 2-percent ceil ing, effective August 1. the 70-percent increase in 2-year and over ma Consumer-type— continued expansion Consumer-type certificates and open-account deposits increased by $1,867 million between July 1970 and July 1971, as against a $3 16-mil lion increase in the preceding 12-month period. These categories had expanded at Western banks during 1969 ($612 million) and early 1970, but the gain was not enough to offset the attrition in regular passbook savings. In early 1970, after higher rates on consumer-type deposits were authorized under Federal Reserve Regulation Q, most Western banks began to pay ceiling rates o f 5, 51/ 2 , and 5 % percent on maturities under one year, 1 to 2 years, and 2 years and over, respectively. But it was not until mid-1970, when money-market rates began their downward slide, that these rates became favorable in comparison to those on other investment instruments. turities, which carried a 5 % -percent interest rate during most o f the period. In late January 1971, after a sharp decline in bank loan rates, some large Western banks re duced their offering rates on customer certificates and open accounts to 5 percent for all maturities, and a few banks stopped offering certificates o f over one year maturity. But in early June, follow ing several increases in mortgage loan rates, these banks again offered ceiling rates on consumer time deposits as well as the full maturity range o f certificates. Rate flexibility The recent introduction o f greater flexibility in offering rates on savings and other consumertype time-deposit instruments has been a major development in rate policy for Western banks. For many years, the offering rates o f large D is From mid-1970 until April 1971, consumer trict banks, and most small banks as well, had time deposits increased at a rapid rate, and in the follow ing three months they rose at a some what slower pace. For the entire 12-month been at the highest levels permitted under Regu lation Q. Thus, these rates had been relatively stable, changing only when Regulation Q ceil period, the largest gain by maturity category was ings were altered. But during the past year, as a 181 FEDERAL RESERVE BANK gap developed between the higher Regulation Q ceilings and the falling rates on market instru ments, Western banks began to operate within OF SAN FRANCISCO The suspension o f rate ceilings on large C D ’s o f 30-89 days maturity in late June 1970 led to that gap, adjusting rates on savings and time an unusually large inflow o f CD money in the July-October period. Because o f this step, banks deposits to align them more closely with rate were able to bid competitively for corporate de movements in business loans and mortgages. This greater flexibility in rates was most preva posits lent among California banks, but it was evident among other District banks as well. On regular passbook savings, many Washington and Oregon banks, along with California banks, reduced their rates below the 4 y 2-ipercent ceiling in April, and later returned to 4l/2 percent. On consumer time certificates and open accounts, some member to replace funds previously ment was imposed effective September 17. From last October to this July, the CD pendulum swung both up and down. Rates on large C D ’s have always moved closely with money-market rates, and banks generally have been able to control the flows o f this source banks in all District states except Utah first o f funds through rate adjustments — except lowered their rates and then pushed them back up to the ceiling again. when Regulation Q ceiling rates were held below This move toward more flexible rates, particu to direct the flow o f CD money have been espe money-market rates, as in 1969. Rate adjustments larly on savings, substantially enhances Western cially noteworthy this year. In the January-April banks’ control o f interest expense on deposits, period, Western banks lowered their CD offering and thus on net income. Regular passbook sav rates, in an attempt to reduce their outstanding ings account for 55 percent o f total time-and- holdings o f these instruments as they acquired savings deposits in the District, and constitute the largest portion o f the banks’ interest expense on deposits, which is by far their greatest single less costly deposits from individuals. Conversely, as the inflow o f individual deposits tapered off in the follow ing three months, banks actively bid for corporate funds. expense item. The impact o f any rate change is much greater for passbook savings than for time certificates. Aside from the larger base involved, the fact that a change in the rate on regular pass book savings applies immediately to the total amount o f such deposits, while a change in rate on certificates initially affects only the new inflow P a ssb o o k s a v in g s account for two-fiflhs of total increase o f deposits, accounts for the differential aspect. Total C h a n g e — $4.8 Billion July 197 0— July 1971 Large C D 's— rate-responsive Large-denomination ($100,000 and over) negotiable time certificates increased by $933 million between July 1970 and July 1971, as against a $63-million increase in the preceding 12-month period. (D uring 1969, however, C D ’s declined by $1,224 m illion.) The upturn in these deposits occurred in January-April 1970, a quar ter before the turn-around in individual savings deposits, and the gain since then more than re 182 obtained through issuance o f commercial paper by their affiliates — funds on which a reserve require covered ground lost in the earlier period o f disintermediation. October 19.71 MONTHLY REVIEW limits set by Regulation Q. Effect of NEP The current wage-price freeze does not apply directly to interest rates. However, Western banks are already paying the ceiling rates allowed under Regulation Q on their savings and con sumer-type time deposits, and therefore would not be able to increase these rates anyway. O f course, there would be no prohibition against a downward revision in rates. Rates on large C D ’s recently have been lower than in the pre-freeze period, but these rates normally fluctuate in line with money-market rates, and they can be ex pected to continue to move in alignment with such rates, except where they encounter upper Nonetheless, the President’s program could have an effect on the volume o f banks’ savings and time deposits. I f consumers step up their spending at a faster rate than their income in creases, the saving rate will decline and banks’ inflows o f individual deposits will decrease. There might even be net withdrawals o f bank savings by individuals. In addition, if corpora tions increase their inventories and their expendi tures on plant and equipment, corporate time deposits also would be less available and, in some cases, outstanding C D ’s might be allowed to run off at maturity. Ruth Wilson and Sharon Byrne Publications Available W a ll Street: B efore the Fall (3 6 pp. 1970) — An analysis o f basic stock-market devel opments o f the past 15 years. The booklet describes the supply and demand factors under lying general price trends, and analyzes the industry’s operational problems and the expanded role o f institutional buying in recent years. Silver: End o f an Era (32 pp. 1969) — An historical study o f silver legislation and silver market developments o f the past century. The booklet describes the coinage and industrial uses o f silver, with emphasis on the recent demonetization o f the metal. A lum inum : Past and Future (6 4 pp. 1971) — An analysis o f the long-term growth o f the aluminum industry, with its eight-fold expansion in consumption over the past quartercentury. The study describes the locational factors responsible for the national and inter national spread o f the industry, and analyzes the reasons for recent fears over the industry’s sharp expansion o f capacity. C opp er: R ed M etal in Flux (5 6 pp. 1968) — An historical study o f the copper industry, with emphasis on the growth o f Western producers. The report describes copper’s response to the competitive inroads o f other materials in traditional copper-using industries. Law o f the River (1 6 pp. 1968) — An analysis o f present and future sources o f water for the Pacific Southwest. The report describes how Southern California and Arizona are look ing beyond the Colorado River to meet their 21st-century needs for water. Calibrating the Building Trades (20 pp. 1971) — An analysis o f the unique features o f the construction industry and their effect on construction wage trends. The study describes the Administration’s development o f an "incomes policy” tailored to that specific industry. Individual copies o f each publication are available on request, and bulk shipments are also available free to schools and nonprofit institutions. Write to the Administrative Service Department, Federal Reserve Bank o f San Francisco, P. O. Box 7702, San Francisco, California 94120. FEDERAL RESERVE BANK OF SAN FRANCISCO Western Dogest Prime Rate Drops Major commercial banks lowered their prime business-loan rate, from 6 to 5 % per cent in late October, reflecting the recent sharp drop in money-market rates. The prime rate had been raised to 6 percent in July, as a consequence o f the tightening o f rates last spring and early summer . . . In a parallel development, several major New York banks adopted a floating prime rate, tied to the charge on 90-day commercial paper. The rate initially will be set a half percentage-point above the commercial-paper rate, but will be reviewed weekly. Bank Credit Expands Total credit at large District banks rose a hefty $1.2 billion in September, outpacing credit expansion nationally. Business loans, augmented by mid-month tax borrowing, rose $259 million. The $ 120-million increase in real estate loans was below the pace o f recent months and, although consumers stepped up their borrowing in the latter part o f the month, the gain in instalment loans still was not robust . . . District banks increased their liquidity substantially during September by adding to their holdings o f Treasury notes under one year and acquiring over $400 million in short-term municipals . . . A $222-million increase in demand deposits was partially offset by a reduction in U.S. Government deposits. Time deposits soared $941 million, reflecting an expansion in large corporate C D ’s and the crediting o f quarterly interest on savings deposits. Aerospace Employment Increases California aerospace firms added 1,100 to their payrolls between August and Septem ber. This September gain marked the second consecutive monthly advance and brought aerospace employment in California to 437,000. Some o f the increases were due to rehirings at Lockheed facilities in the Los Angeles-Long Beach area, but gains were recorded in the San Diego and San Jose areas as well. Western Steel Stronger The Western steel market, despite a substantial decline, has remained stronger than markets elsewhere follow ing the recent labor settlement. In the West, production in August was 26 percent below July’s pace, while national production was 42 percent below the July figure. In September and early October the pickup in Western steel production was greater than in the rest o f the nation.
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