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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM H.12 June 1951 (For Immediate Release) CHANGES IN COMMERCIAL AND INDUSTRIAL LOANS, BY INDUSTRY AND PURPOSE A new window has j u s t been opened on t h e lending o p e r a t i o n s of commercial banks. This week, United S t a t e s banking s t a t i s t i c s , already t h e most r e v e a l i n g and complete i n the world, were notably improved by a new weekly s e r i e s of changes i n b u s i n e s s l o a n s r e l e a s e d today by t h e Board of Governors of the F e d e r a l Reserve System. At t h e r e q u e s t of t h e Voluntary Credit R e s t r a i n t Committee, t h e Federal Reserve Board and Federal Reserve Banks have been c o l l e c t i n g f o r the p a s t e i g h t weeks r e p o r t s on changes i n many kinds of b u s i n e s s loans a t over 200 of t h e l a r g e s t member banks. These Banks have about 65 per cent of such loans a t a l l banks i n t h e United S t a t e s . Thanks t o t h e i r cooperation i n shouldering the burden of analyzing new business loans and repayments and making t h e s e r e p o r t s a v a i l a b l e s p e e d i l y , t h e Voluntary C r e d i t R e s t r a i n t Committee w i l l now have a barometric r e a d i n g each week of t h e r i s e i n def e n s e l o a n s and of the d i v e r s e t r e n d s i n o t h e r b u s i n e s s l o a n s . A mystery f i g u r e f o r y e a r s has been t h e weekly r e p o r t of "Comm e r c i a l , I n d u s t r i a l and A g r i c u l t u r a l " loans a t r e p o r t i n g member banks. Other kinds of l o a n s a t t h e s e banks have been s e p a r a t e l y r e p o r t e d but the bus in e s s loan t o t a l , c o n s t i t u t i n g more than half t h e loans of t h e s e banks has never been broken down i n t o i t s major components. Now, i n the f i g h t a g a i n s t i n f l a t i o n i t becomes u r g e n t l y necessary to know what kinds of b u s i ness a r e u s i n g bank c r e d i t and f o r what purposes. The new r e p o r t s have been developed over a p e r i o d of r e c e n t weeks. Two hundred of t h e l a r g e s t weekly r e p o r t i n g banks have divided t h e i r l a r g e r loans i n t o i n d u s t r y and purpose c l a s s i f i c a t i o n s . The attached, t a b l e s give t h e r e s u l t s by weeks from A p r i l i; through May 23 and. by Federal Reserve d i s t r i c t s f o r t h e week ending May 23. The non-segregated smaller loans and t h e net changes i n b u s i n e s s loans a t the smaller weekly r e p o r t i n g banks are shown as a b a l a n c i n g item so t h a t t h e aggregate n e t changes w i l l agree with the changes i n "Commercial, I n d u s t r i a l and A g r i c u l t u r a l " loans i n t h e r e g u l a r weekly r e p o r t i n g member bank s e r i e s ; Business l o a n s of a l l weekly r e p o r t i n g banks have followed a s i d e wise movement during the e i g h t week p e r i o d , r e g i s t e r i n g a n e t d e c l i n e of 73 m i l l i o n d o l l a r s . This was l e s s than the s e a s o n a l decrease t o be expected a t t h i s time of year and followed a huge i n c r e a s e of 5 . 6 b i l l i o n d o l l a r s from June 30, 1950 t o March 28, 1951. The new f i g u r e s r e v e a l t h a t i n r e c e n t weeks defense loans and loans f o r p l a n t expansion, as w e l l a s loans t o t r a d e and t o s a l e s f i n a n c e companies, have been r i s i n g , whereas commodity loans have been d e c l i n i n g . The l a r g e s t change was a seasonal decrease i n l o a n s to commodity d e a l e r s of 276 m i l l i o n d o l l a r s . Closely a l l i e d t o t h i s movement was the decre a s e of 179 m i l l i o n d o l l a r s i n loans t o food, l i q u o r and tobacco manufact u r e r s . These l o a n s t y p i c a l l y i n c r e a s e when the major new crops a r e h a r v e s t e d i n t h e f a l l and d e c l i n e through t h e r e s t of t h e crop year a s the farm p r o d u c t s are consumed. Other l o a n s t o manufacturers and p u b l i c u t i l i t i e s i n c r e a s e d during t h e e i g h t weeks a s f o l l o w s : T e x t i l e s , a p p a r e l , and l e a t h e r Metals and metal products Petroleum, c o a l , chemicals, and rubber Other manufacturing Public u t i l i t i e s and t r a n s p o r t a t i o n 5b m i l l i o n 88 " h3 " 13 " 63 " - 2 - H.12 There i s a s t r o n g defense and d e f e n s e - s u p p o r t i n g element i n these manufacturing l o a n s . A c r o s s - c l a s s i f i c a t i o n of those loans t h a t can be i d e n t i f i e d as i n t h e s e c a t e g o r i e s r e v e a l s t h a t new loans or n e t i n c r e a s e s of defense and d e f e n s e - s u p p o r t i n g loans during t h e e i g h t weeks t o t a l e d 138 m i l l i o n d o l l a r s . This u n d e r s t a t e s the bank aid t o defense f o r t h e f o l l o w ing r e a s o n . Most companies w i t h defense c o n t r a c t s a r e engaged a l s o i n c i v i l i a n b u s i n e s s . At times, t h e i r borrowings a r e f o r both purposes combined and, p a r t i c u l a r l y i n the e a r l i e r weeks, the r e p o r t i n g banks did not attempt t o e s t i m a t e t h e defense p o r t i o n s of such l o a n s . The e i g h t week i n c r e a s e i n loans t o wholesale and r e t a i l t r a d e was 95 m i l l i o n d o l l a r s , and t h e r e was a steady r i s e week by week except f o r a small decrease i n t h e May 23 r e p o r t s . This comes a t a time when r e t a i l i n v e n t o r i e s were a l r e a d y h i g h . Probably the explanation i s t w o f o l d : t h e d e l i v e r y of merchandise ordered on an expanded s c a l e during t h e abnormally high s a l e s p e r i o d which ended b e f o r e E a s t e r , and i n t e n s e s a l e s promotion by manufacturers. The i n c r e a s e of 70 m i l l i o n d o l l a r s i n loans t o s a l e s f i n a n c e companies i s t o be explained i n p a r t by a r i s e i n holdings of wholesale and automotive paper and i n p a r t by some r i s e i n o t h e r types of b u s i n e s s loans of t h e s e f i n a n c i n g companies. Regulation W has reduced t h e amount of r e t a i l i n s t a l m e n t o u t s t a n d i n g s during t h i s p e r i o d . Like a l l o t h e r l e n d e r s , s a l e s f i n a n c e companies have been asked by t h e Federal Reserve Board t o abide by t h e p r i n c i p l e s of t h e Voluntary Credit R e s t r a i n t Program. CHANGES IN COMMERCIAL AND INDUSTRIAL LOANS OF A SAMPLE OF WEEKLY REPORTING MEMBER BANKS BY INDUSTRY AND PURPOSE, FOR THE EIGHT WEEKS ENDING WEDNESDAY, MAY 2 3 , 1951 (In m i l l i o n s of d o l l a r s ) Week ended. 8 weeks' B u s i n e s s o f Borrower May 2 | May 9 | May 1 6 | May 23 A p r i l 18 1 A p r i l 25 A p r i l k | A p r i l 11 totals E.12 Manufacturing and mining $ Food, l i q u o r , and tobacco T e x t i l e s , a p p a r e l , and l e a t h e r Metals and metal products ( i n c l u d i n g machinery and t r a n s p o r t a t i o n equipment) P e t r o l e u m , c o a l , c h e m i c a l s , and rubber Other manufacturing and mining Trade $ Wholesale and R e t a i l Commodity d e a l e r s S a l e s f i n a n c e companies Public u t i l i t i e s (including transportation) Construction All o t h e r types of business Net change o f c l a s s i f i e d l o a n s To balance w i t h n e t change i n w e e k l y reporting s e r i e s Net change in commercial, i n d u s t r i a l , and a g r i c u l t u r a l loans -178.6 + 53.6 -23.2 + 88.1 +19.8 - 3» 2 + 1.1 + 1*3.1 + 12.5 + 95.1 -276.2 + 69.9 + 62.7 | + 10.2 + .5 + 2.1+ -17.1+ +16.0 +12.5 - 7.1 +22.6 - .2 + 2.1 + 7.7 +26.0 -26.3 -12.2 - 6.3 -33.7 - 1.8 -25.3 + 1.3 - 9.5 + 2.9 + 8.8 -12.3 +19.U - 54.1 .1 -25.0 +13.1+ +16.7 + 5.9 + 2.1 +29.7 —28.8 +12.1+ +16.7 +36.5 + 10.2 +21.5 - .9 + l.l -1+9.0 +19.5 -23.7 + 5.9 - 7.3 - 1.3 -13.4 +12.1 + 1.0 +30.7 -^8.9 +10.0 - 2.1 - .8 - 1.2 + 7.7 -1+2.5 + 3.9 +15.0 - 3.1+ +66.6 .1+ + 6,7 + 8.5 -32.1+ +19.9 + 1+.2 +10.0 + 6.8 - l+.o - ll.o - 30.9 + .1+ - 3.5 + + 5.9 - 6.1 + 1+.9 - 5.1+ + 6.7 - 19.6 +13.U + .9 —26.0 -L3.I+ +81.0 -16.9 +65.1 - 93.7 - 53-U -19.1+ +65.1 -38.0 -27.6 -22.0 - 5.1 + 3.9 - 10.3 - 73.0 - 6.0 +66.0 —61+.0 -71.0 +59.0 -22.0 +69.0 -10I+.0 +129.1 +18.3 +17.5 +10.1 +21.9 + 9.3 +11+.6 +23.8 + 13.6 + 2.6 + 3.6 + + 1.6 13.6 Purpose C l a s s i f i c a t i o n * Defense contracts Defense-supporting a c t i v i t i e s s P l a n t and equipment A l l other Non-defense a c t i v i t i e s t I n v e n t o r y and working c a p i t a l P l a n t and equipment R e t i r e m e n t o f non-bank debt and p r e f e r r e d s t o c k A l l other ( f o r loans c l a s s i f i e d ) Net change o f c l a s s i f i e d l o a n s * + + 3.2 5.2 - 15.8 + 61.5 - 16.9 - 33.5 +132.8 - 1+.9 + 1.5 - 1.2 - 3.3 +10.4 - 1+.9 -1.1+ +25.7 + 7.3 -11.9 - 2.9 +33-7 +28.3 +21.5 + 1.0 -16.3 + 3.5 3.1+ + 2.2 + 7.7 I n t h e e a r l i e r w e e k s , many o f t h e banks c l a s s i f i e d o n l y t h e new l o a n s , and n o t repayments, as t o purpose, "For f i n a n c i n g d e f e n s e - s u p p o r t i n g a c t i v i t i e s " was n o t g e n e r a l l y used p r i o r to the week of May l 6 . +30.6 +37.3 + 1.7 - 3.9 +75.0 + + 9.6 2.8 3.7 .8 3.3 .6 +30.8 - 93.6 .2 +11+.9 + - .2 .1 - 8 . 3 - 15.1 +67.2 - 92.8 The new purpose c l a s s i f i c a t i o n CHANGES IN COMMERCIAL AND INDUSTRIAL LOANS OF A SAMPLE OF WEEKLY REPORTING MEMBER BANKS BY INDUSTRY, PURPOSE, AND FEDERAL RESERVE DISTRICT WEEK ENDING WEDNESDAY, MAY 23, 1951 Net change of c l a s s i f i e d loans To b a l a n c e w i t h net change i n weekly reporting series Net change i n commercial, i n d u s t r i a l , and a g r i c u l t u r a l loans -5b.i - .1 - 2.1 3.7 -31.2 + + - .3 .it + +10.2 + 6.8 - it.o + 1.0 1.3 .2 + 7.7 + 7.1 + 2.1; - .5 .2 + - - + .1 - (+ . 8 (- 1.3 + 2.7 - 2.9 + .3 - 1.1 - 1.2 -18.1 + 9.8 - 3.It - 1.0 - 1.7 + + -11.0 -30.9 + .h - 3.5 + 6.1 -13,6 6.7 + .2 + ,2 -11.3 -93.7 - 6.3 -29.6 -10.3 - .7 -lGit.O - 7.0 +13.6 + .7 + 8.6 + .6 + 1.6 - 2.6 - 2.5 + it.2 + it.7 -93.6 4* #2 — 1.8 —32.lt — - 3.3 3.0 .1 .2 —— .1 - ,1 -15.1 -^.8 - .3 - 6.5 - .6 .7 - 1,8 + .it + .3 1.2 - .1 + - .3 .it .8 .3 .5 + 3.1 .9 - + .1 + .9 1.7 -10,7 - 1.1 - .6 .2 + Uk + 1.2 - - .3 + 1.0) .3) 1.2 .2 .6 - - 1.0 - .8 + .2 + .1 - .1 - 1.0 - .9 .6 2.5 - 1.3 - 3.6 + a - 2.3 - it.l -l6.lt + .6 - 2.1 - it. 7 - .9 -lt6. - 3.0 - 2.0 - 7.0 - 5.0 -23.0 + .5 -11.9 -2*975 .6 .6 - 1.6 .3 1.0 - 1.0 *»•» + -19.0 .5 — .5 — .7 w 2.2 + si - + .6 - 1,8 + .1 - + —— + e6 + — ~ - .8 .3 - 3.7 + 1.0 si - 1*1 •7 .2 - .6 - .1 - .1 + l.it - 2.0 (- -7 ( - 1.3 +lit.2 +13.0 5.0 + 9.0 - 7. it - it.8 - - 6.6 - 2.2 - .5 Lit. 0 - 7.0 - luO .1 - .2 + .it .5 — - .1 - .8 - .1 ell .it 5.0 -20.0 + •3 -+ 1 . 5 - 3.Q + #T - .3 1.7 it.i .it + - • 6) - 1,3 .5) 3 . 5 - 5.3 2 . 2 + .2 • 1 + .6 1,7 - . 1 • 3 - 1.3 3 - 5 - 9.2 - - it. 1 - 3.2 .2 •it — .3 - 2.1 .7 + .1 + .k - + 2.h •1 (- .8 .3 ( - .6 + l.it 2.8 - 8.2 .8 + .1 + 1.0 + .1 + 1.0 + - 2.8 .It - - 0 - + + Purpose C l a s s i f i c a t i o n Defense c o n t r a c t s Defense-supporting a c t i v i t i e s * Plant and equipment All other Non-defense a c t i v i t i e s t Inventory and working c a p i t a l P l a n t and equipment Retirement of non-bank debt and preferred stock All o t h e r ( f o r loans c l a s s i f i e d ) > Net change of c l a s s i f i e d loans S t . Minne- Kansas San Atlanta Chicago Louis a p o l i s City- Dallas Francisco O Jt 1 Manufacturing and mining$ Food, l i q u o r , and tobacco T e x t i l e s , a p p a r e l , and l e a t h e r Metals and metal products (including machinery & t r a n s p o r t a t i o n equipment) Petroleum, c o a l , chemicals, and rubber Other manufacturing and mining Trade: Wholesale Retail Commodity d e a l e r s Sales f i n a n c e companies P u b l i c u t i l i t i e s (including t r a n s p o r t a t i o n ) Construction A l l other types of b u s i n e s s Richmond + + - .2 + .it — 1.6 + .it + 2.it - it. 0 .7 - #1 —— + .3 .2 + .2 + .6 vn £r- Business of Borrower ( i n m i l l i o n s of d o l l a r s ) New P h i l a - CleveHT D i s t r i c t s Boston York d e l p h i a land 11 H.12 -19.0 -11.0 - it. 0 + + - 6.3 - 3,5 + .2 - .1 + l.it — lc 0 .it - a — 2-> 6 9.2 - ho 8 - 1.0 - 7.4 .2 - 1.9 .1 - 1.6 .5 — it. 0
@FedFRASER