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MONTHLY
·BUSINESS
REVIEW
of
the
Volume 31
FEDERAL
RESERVE
BANK
of
Dallas, Texas, July 1, 1946
Dallas
Number 7
GUARANTEED AND INSURED LOANS
UNDER THE SERVICEMEN'S 'READJUSTMENT ACT
United States participation in World War II withdrew, for varying periods of time, millions of
young and relatively young Americans from colleges and universities, business and trade schools,
farms, factories, mines, construction and service trades, and mercantile establishments. Service in
the armed forces thus interrupted the civilian careers and the economic progress of great numbers
of industrial workers, farmers, business men, students, and trainees. That the nation should assure
to these millions of its citizens the opportunity of resuming interrupted careers, facilitate rehabilitation and retraining of fighting men who returned from war incapacitated for or dissatisfied with
their former occupations, supplement the credit and borrowing power of honorably discharged
service men wishing to purchase farms or establish small businesses of their own, and help returning
.. veterans to acquire homes for themselves and their families, seemed to Congress and the President
, no more than simple justice and deserved compensation for sacrifices made on behalf of the nation.
The result was the enactment in 1944 and the liberalization in 1945 of the Servicemen's Readjustment Act, popularly known as the "GI Bill of Rights."
The nation as a whole, without concerning itself much with the details of the Act, has more
or less put its faith in this legislation as a sort of guaranty that no veteran of the recent war will
ever be reduced to the necessity of selling apples on street corners or peddling pencils or shoe laces
on the sidewalks. Whether such security will be the lot of veterans in the years ahead depends in
part on the wisdom and efficiency with which the Act is administered and in part on many other
factors, such as general economic developments and individual personalities, beyond the scope of
the law. There are, however, certain basic provisions of the law which are making the return and
readjustment to civilian life and occupations less difficult for veterans of World War II than for
veterans of any previous conflict in the nation's history.
•
Summary of Non-Loan Provisions
Of major and particular interest to most readers of the Monthly Business Review are the provisions in Title III of the Act relating to Government guaranty and insurance of loans made to veterans by banks and other private lenders. For that reason, and because of lack of sp,ace, the loan
provisions only have been selected for detailed discussion in this article. The following brief summary of the non-loan provisions must suffice to reveal the wide scope of benefits and assistance
extended to veterans in varying circumstances by this legislation:
Hospitalization, medical, and surgical care, and, in some instances, out-patient treatment
for ill, disabled, or maimed veterans; prosthetic appliances for those needing them, and training in
the use of such appliances.
Vocational guidance and rehabilitation training for veterans whose service-incurred disabilities have rendered them incapable of engaging in the occupation or occupations in which they
had been trained or employed before induction into the armed forces; with subsistence pay during
the period of training and for two months after employability is determined.
Job counseling through a Veterans' Representative attached to each field office of the United
StatesThisEmployment
Service.
publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
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MONTHLY BUSINESS REVIEW
Readjustment allowances for involuntary unemployment occurring within two years after
discharge or release or after the termination of the war (not yet officially proclaimed), whichever
is later; at the rate of $20.00 per week for a period adjusted up to a maximum of 52 weeks depending upon the length of the veteran's period of active service.
4
Education or training, for one year plus the time the veteran was in active service but not
for more than 4 calendar years without the approval of the Administrator of Veterans' Affairs; in
any qualified and approved educational or training institution or in any business establishment providing on-the-job training chosen by the veteran; to be begun not later than 4 years after the veteran's discharge or the termination of the war, whichever is later, and in no case extending beyond
9 years after the termination of the war; the Government to pay (a) tuition and fees customarily
charged by the institution attended not in excess of a rate of $500.00 per school year, except that
no payor other subsidy shall be paid to establishments giving on-the-job training, and (b) a subsistence allowance during the period of satisfactory work of $65.00 per month to the veteran without a dependent and $90.00 per month to the veteran with one or more dependents.
A few comments in passing regarding on-the-job training for veterans may be justified by the
potential interest and benefit which that program holds for business men as well as veterans. Types
of on-the-job training now in progress in business establishments of this district are reported by
the Veterans' Administration as including auto mechanics, radio, refrigeration, and air-conditioning,
cabinet making, carpentry, electrical work, accounting, salesmanship, and banking. An official of
the vocational rehabilitation and education service estimates that there are approximately 60,000
veterans currently enrolled in on-the-job programs in Texas.'
If administered in keeping with its purpose, this program can help make up the deficit of
skilled workers which every section of the nation needs-carpenters, plumbers, mechanics, tailors,
accountants, and others-and at the same time enable veterans whose start in business or industry
was delayed by war service to combine training with gainful employment, learning with earning.
The program is not intended to provide opportunity for employers to take advantage of the subsistence payment granted the veteran in training to employ young men at less than living wages. Neither
is it intended to subsidize veterans who have no aptitude for or interest other than pecuniary in the
jobs for which they may enlist for training. Some abuses of the program by both employers and
veterans are coming to light. There is no evidence, however, that such chiseling is either practiced
or encouraged by reputable, conscientious employers who desire to enlist and train industrious veterans for permanent employment in their businesses, paying a wage during the training period
which when added to the full or adjusted Government subsistence allowance equals not more than
the regular wage or salary of the position for which the trainee is being prepared.
Loan Provisions: Guaranty2
Eligible veterans. The loan provisions (Title III) of the GI Bill of Rights do not authorize or provide for direct loans by the Government to veterans for any purpose. Instead, the Government, acting through the Administrator of Veterans' Affairs, may guarantee loans made by banks
and other private lenders to eligible veterans." This guaranty benefit is available to the veteran at
any time up to 10 years following the official termination of the war.
' Banks and other employers who have initiated or are considering the initiation of on-the-job training programs to
recruit and train veterans as employees may be interested in the following informative articles regarding such programs :
"On-the-job Training for Veterans" in the March 1946 issue of the Conference Board Manag ement R ceo)'d; "On-the-Job
Veteran Training for Banks," published by the Committee on Service for War Veterans of the America:1 Bankers Association, June 15, 1946. Authorative inf ormation as to how to secure approval for a program of on-the-job training and how
to initiate and conduct such a program may be obtained from the Vocational Rehabilitation and Education Officer at the
nearest regional office of the Veterans' Administration,
2An authoritative analysis of t hese provisions and other procedures and policies developed for their administration will
be found in two official pUblications of the Veterans' Administration entitled : "Outline of General Administrative Procedures
and Policies-Title III, Servicemen's Readjustment Act" and "Regulations under Title III of the Servicemen's Readju stment Act of 1944." These were published in the American Banker (Section Two) for Thursday, March 7, 1946. They are also
included in a pamphlet "Guaranty or Insurance of Loans to Veterans" which may be obtained upon request from the Loan
Guaranty Division of the nearest regional office of the Veterans' Administration, Regional offices serving states in the
Eleventh Federal Reserve Distl'icts are located at Dallas, Houston, Waco, San Antonio, Lubbock, Albuquerque, Tucson,
Muskogee, and New Orleans,
'Wh~n a IO,a,! has )leen completed by a ~rivate lender in accordan~e with the provisions of the Act, and endorsed by the
Veterans Adm)m stratIon for guaranty or msurance, the lender receIves, from the regional disbursing office of the United
States Treasury Department, a check equal to 4 per cent of the amount of the loan guaranty or insurance, This check is
credited to the borrower's account and constitutes the only direct contribution which the Government makes to the veteran
in connection with the loan. This contribution, paid by the Administrator of the Veterans' Admini stration out of available
appropriations, is a form of bonus and is not chargeable to the veteran.
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MONTHLY BUSINESS REVIEW
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Eligibility extends to any veteran-male or female--who has served in the active military or
naval service of the United States at any time on or after September 16, 1940, and prior to the
termination of the war, and who has been discharged or released under conditions other than dishonorable after 90 days or more of such service or because of a service-incurred injury or disability; to
any person who meets the above conditions as to date and duration of service and is on terminal leave
or is undergoing hospitalization pending final discharge; and to any veteran of the active military
service of any government allied with the United States in World War II who meets the above conditions as to date and duration of service, who was a citizen of the United States at the time of
entrance into such service, and who at the time of applying for benefits under the Act is a resident
of the United States and is not applying for and has not received the same or similar benefits from
the nation in whose armed forces he served.
The Act provides that an honorable discharge shall be deemed a certificate of eligibility to
apply for a guaranteed loan, and that any veteran who does not have a discharge certificate or who
received a discharge other than honorable may apply to the Administrator of Veterans' Affairs for
a certificate of eligibility. Photostatic, certified, or other copies of the original honorable discharge
or separation papers are not acceptable in determining eligibilty. Because the amounts of guaranty
benefits were increased by the liberalization of the Act which became effective on March 1, 1946,
certificates of eligibility issued before that date will be void after September 30, 1946. Upon surrender to the Veterans' Administration, however, they will be replaced with new certificates on which
may be endorsed the amount of guaranty benefit unused or still available. .
In most cases, the lender receiving a request for a loan to be guaranteed will be able to determine the veteran's eligibility from an examination of the honorable discharge or the separation
papers in possession of the applicant. If, however, the lender prefers not to risk such provisional
determination, he may forward the original discharge or separation papers to the nearest office of
the Veterans' Administration for advice as to eligibility before making the loan.
Eligible lenders. The veteran desiring an eligible loan may make his own choice of an eligible
lender. Such lenders, as defined in the Act, are of two classes: supervised and non-supervised. Supervised lenders include "any Federal land bank, national bank, State bank, private bank, building and
loan association, insurance company, credit union, or mortgage and loan company, that is subject
to examination and supervision by an agency of the United States or any State or Territory, including the District of Columbia." All other lenders are classed as non-supervised.
Supervised lenders may make loans to veterans that will be automatically guaranteed, and evi- .
dence of automatic guaranty will be issued to the lenders when the loans are found to have been
made and reported to the nearest regional office of the Veterans' Administration in accordance with
the Act and the procedures and regulations prescribed for its administration. A loan by a nonsupervised lender may be guaranteed and certificate of guaranty issued to the lender only on the
basis of a certificate of approval obtained from the Administrator prior to the making of the loan.
Loans at least 20 per cent of which are automatically guaranteed may be made by national
banks or Federal savings and loan associations without regard to limitations and restrictions of other
statutes respecting: "Ratio of amount of loan to the value of the property; maturity of loan; requirement for mortgage or other security; dignity of lien; or percentage of assets which may be invested
in real est ate loans.'"
Eligible loans. To be eligible for Government guaranty, loans to veterans must be made for
one or more of three general purposes:
Home loans-for purchasing residential property or constructing a home or for making
repairs, alterations, or improvements in property owned by a veteran and occupied as his
home;
Farm loans-for purchasing any lands, buildings, livestock, equipment, machinery, supplies or implements, or for repairing, altering, constructing or improving any land, equipment, or building, including the farm house, to be used in farm operations conducted by
<The effect of this and other provisions of the amended Servicemen's Readjustment Act upon the authority of national
banks to make r eal estate loans to veterans under Section 24 of the Federal Reserve Act is discussed in instructions issued
March 25, 1946, by the Comptroller of the Currency to all chief national bank examiners and published in the Federal
Rese,.ve B ulletin for May 1946, pages 474-76.
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MONTHLY BUSINESS REVIEW
the veteran involving production in excess of his own needs, or for working capital requirements necessary for such operations, or to purchase stock in a cooperative association where
the purchase of such stock is required by Federal statute as an incident to obtaining the loan;
Business loans-the proceeds to be used for the purpose of engaging in business or pursuing a gainful occupation, or for the cost of acquiring for such purpose land, buildings,
supplies, equipment, machinery, tools, inventory, stock in trade, or for the cost of construction, repair, alteration, or improvement of any realty or personalty used for such
purpose, or to provide the funds needed for working capital.
While loans made for these three basic purposes will generally be principal or primary loans,
related secondary loans on property already covered in part by a guaranteed or insured principal
loan, and loans to refinance delinquent home, farm, or business enterprises not previously covered
by veteran's guaranty benefit are eligible for guaranty under conditions set forth in Sections 505 (a)
and 507 of the Act.
Types of loans and security. Loans for the purchase of real estate or for the construction,
repair, alteration, or improvement of buildings for residential, farming, or business purposes are
referred to as real estate or realty loans; loans for other purposes are non-realty loans. The former must be secured by a lien on the realty, except in the case of loans of less than $1,000 for repairs,
alterations, or improvements. Loans for more than $1,000 for repairs, alterations, or improvements
but less than 40 per cent of the reasonable value of the property prior to the improvement may be
secured by either first or second liens. Secondary real estate loans which may be made in accordance
with Section 505 (a) of the Act must be secured by second liens: All non-realty loans must be
secured by a lien on personalty to the extent legal and practicable. Loans for working capital or
other capital purposes, merchandise stocks, good-will, or other intangible assets may, however be
made without a lien.
Limitations on amount of loan guaranty. Distinction must be made between the amount
of the loan which may be contracted by a veteran and the amount of loan guaranty to which he is
entitled. There are only general limits on the amount of the loan, namely, a proper relation between
the terms of repayment and the veteran's present and anticipated income and expenses, and the
reasonable appraised value of the property or business against which the loan is made. The loan
guaranty, however, is specifically limited to an amount which may be less than but not in excess
of 50 per cent of the loan. Moreover, the maximum loan guaranty to which any eligible veteran is
entitled is $4,000 for real estate loans, or $2,000 for non-realty loans, or a prorated portion of each
of these amounts for loans of both types; provided, that the aggregate amount of guaranty which
may be approved for any veteran shall not exceed $4,000. It is further provided that in the case of
any guaranteed loan the Government's liability under the guaranty shall decrease or increase pro
rata with any decrease or increase in the amount of the unpaid portion of the obligation. For example,
if a loan for $4,000, of which $2,000 was covered by guaranty, has been reduced 25 per cent through
repayments to $3,000, liability under the guaranty is correspondingly reduced to $1,500. If thereafter advances permitted under the loan regulations for improvements or repairs should raise the
amount unpaid to $3,200, the guaranty would be increased proportionately to $1,600. In no event,
however, can the amount payable under the guaranty of a particular loan exceed the original
amount guaranteed.
In the case of a veteran who has used a part of the loan guaranty to which he is entitled on
one or more loans, the amount of unused guaranty available is not increased by repayment of part
or all of such loan or loans. A convenient rule for computing the amount of unused guaranty available for each type of eligible loan may be stated as follows: "To the realty guaranty used on prior
loans add twice the amount of non-realty guaranty used. Subtract this sum from $4,000. The
amount remaining, if within the limitation of the law, is the unused realty guaranty available. To find
the non-realty guaranty available, divide the available realty guaranty by 2."
To illustrate, if a veteran has previously used $1,500 and $500 of his guaranty benefit on realty
and non-realty loans, respectively, the unused guaranty available for realty loans would be $1,500,
determined as follows: to the realty guaranty ($1,500) used on prior loans, add twice the amount
($500) of his non-realty guaranty used, or $1,000. Subtract that total ($1,500 plus $1,000) from
$4,000 to determine the unused guaranty ($1,500) for realty loans. The non-realty guaranty in
this case is $750, determined by dividing the realty guaranty ($1,500) by two. For a second example,
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89
assume previous guaranties of $2,500 on realty and $750 on non-realty loans. In this case there would
be no unused guaranty available for additional loans of either types, since $4,000 less $2,500 less
twice $750 would equal zero.
The unused guaranties thus computed are the maximum amounts available for guaranteeing
either realty or non-realty loans if no additional loan of the other type is involved. In case part of
the remaining guaranty for realty loans is used, the maximum available for guaranty of non-realty
loans will be reduced, and vice v ersa. A recomputation of the guaranty remaining within the limitation of the law for each type of loan can be made by use of the rule stated above after each new
loan of either type has been consummated.
Term, interest rate, and amortization of loans. Subject to the general limitation that
the maturity of a loan should not extend beyond the economic life of the property by which it is
secured, the term of guaranteed loans of different types is more specifically limited to the following
maximum periods: Non-amortized loans, 5 years; non-realty loans, 10 years; home or business realty
loans, 25 years j farm realty loans, 40 years. The interest rate on any guaranteed loan shall not exceed
4 per cent per annum. Any loan for a term in excess of 5 years must be amortized, and, with only
specified exceptions, the schedule of repayments must require approximately equal periodic instalments not less often than annually during the life of the loan. Right is reserved to the borrower to
prepay at any time without premium or fee the entire remaining indebtedness, or any part thereof
not less than the amount of one instalment or $100, whichever is less.
Loan-Making and Guaranty Procedures 5
Appraisals. Of prime importance to any lender in considering a veteran's application for a
Government-guaranteed loan are the specific requirements of the Act that the purchase price paid
by the veteran for any property to be acquired by him for home, farm, or business or the co~t of
construction, alterations, improvements, or repairs made on property owned or acquired by him
shall not exceed the reasonable value of the property as determined by an appraiser designated by
the Administrator of Veterans' Affairs. "Reasonable value" is defined in the administrative regulations as "that figure which represents the amount a designated appraiser, unaffected by personal
interest or prejudice, would recommend as a proper price or cost to a prospective purchaser whom
the appraiser represents in a relationship of trust as being a fai r price or cost in the light of prevailing conditions." The adoption in the amended Act of this standard of "reasonable value in the light
of prevailing conditions" represents a considerable liberalization of the standard of "reasonable normal value" set in the original Act and has permitted the guaranteeing of some loans which were
ineligible prior to the amendment.
Appraisal by a designated appraiser of the reasonable value of property or business to be purchased, or of repairs or improvements to be made, by aid of a loan becomes, therefore, an essential
step in processing loans that are to be guaranteed. Lenders may obtain by request, from the nearest
regional office of the Veterans' Administration, a panel of names and addresses of persons in their
respective communities who have been designated to render appraisal services. The appraiser's fee
is a charge to be borne by the applicant for a loan and may be p,aid out of the proceeds of the loan.
The appriaser's report is intended as an aid to the lender in deciding whether the amount of the proposed loan bears a proper relation to the value of the property or business to be affected by the loan.
The prime responsibility of the designated appraiser to give a right opinion of "reasonable value"
does not, however, relieve the lender of his duty to review the appraiser's report, nor does it preclude
him from exercising his best judgment as to whether the loan should or should not be made.
Procedures for supervised lenders. For supervised lenders willing to assume the risk of
determining the eligibility of the borrower and the eligibility of the loan without prior approval
from the Veterans' Administration, the revised procedures effective March 1, 1946, for making and
guaranteeing loans involve a minimum of "red tape" and paper work. Loans made by supervised
lenders will be automatically guaranteed when made in accordance with the Act and the regulations and reported, within 30 days after full disbursement of the proceeds of the loan, to the regional
office of the Veterans' Administration which serves the area in which the security is located.
"In processing and r eporting loans for guaranty, certain forms prepared by the Veteran s' Administration are n ecessary.
A lender proposing t o make loans to veterans should mail request to his regional Veterans' Administration Office f or a
supply of the fOl'ms appropriate to his status as a supervised or non-supervised lender.
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MONTHLY BUSINESS REVIEW
Such a lender may proceed by methods of his own choosing in counseling with the veteran desiring a loan and in investigating the eligibility, credit, and resources of the applicant and the soundness
of the investment which the veteran proposes to make. These informal procedures call for the
exercise of a high degree of human understanding, tact, and good judgment by the lender. They
are as vital to the successful administration of the loan program as are the formal procedures by
which the lender reports to the Veterans' Administration the making and disbursement of the loan
in order to obtain a certificate of loan guaranty.
In reporting a home loan for automatic guaranty, the lender must transmit: (1) the veteran's
original honorable discharge, or the certificate of eligibility (Form 1870) issued by the Veterans'
Administration, or other separation papers necessary to establish the veteran's term of service;
(2) a Home Loan Report (Form 1820); (3) an Appraisal Report (Form 1803); and (4) the
executed note or other evidence of the indebtedness if the lender desires to have the amount of
guaranty endorsed thereon in lieu of a loan guaranty certificate. In case of a home loan of less than
$1,000 for alterations, repairs, and improvements, a statement of valuation in letter form of the
cost of the work to be done may be made in lieu of the appraisal form.
..
,.
In reporting other types of loans the forms which must accompany the veteran's original honorable discharge or certificate of eligibility vary according to the purpose of the loan. Farm loans
require the use of Farm Loan Report (Form 1840) and Farm Appraisal Report (Form 1823), or
an alternative letter statement of valuation of the work to be performed in case of alterations,
repairs, and improvements costing less than $1,000 . Business loans call for the use of Business Loan
Report (Form 1860) and Appraisal Report for Realty (Form 1803) or Appraisal Report-Nonreal estate Loan (Form 1845). Here again, in case of alterations, repairs, and improvements costing
less than $1,000, a letter of valuation may be submitted in lieu of the Appraisal Report"
If unwilling to proceed at his own risk, a supervised lender may submit the appropriate home,
farm, or business loan report and corresponding appraisal report to the regional office of the Veterans' Administration for prior determination of the three following matters only affecting the
loan: the veteran's eligibility, the amount of guaranty credit available to the veteran, and the
eligibility of the purpose of the loan. If his findings on all three points are favorable, the regional
loan guarantee officer will issue a certificate of approval (VA Form 1866) for the loan to be guaranteed and forward it to the lender with necessary instructions for closing the loan.
Lenders must not, without prior approval of the Veterans' Administration, close a loan where
there is a deviation exceeding 5 per cent of the amount stated in the loan report upon which the
certificate of approval has been issued. When the loan has been closed and fully disbursed the lender
is required to complete the record of the loan within 30 days from the date of disbursement. This
he does by sending to his regional Veterans' Administration Office the Certificate of Loan Disbursement (Form 1876) and the note or other evidence of indebtedness if the lender wishes the amount
of guaranty to be endorsed thereon.
Procedures for non-supervised lenders. Differences in procedure between supervised and
non-supervised lenders are due chiefly to the fact that loans made by the latter class of lenders cannot under any conditions receive automatic guaranty. To be guaranteed, loans by such lenders
must have prior approval of the loan guarantee officer of the nearest regional office of the Veterans'
Administration. In addition to prescribed forms comparable to those submitted by supervised lenders seeking prior confirmation for loans of the various types, the non-supervised lender must obtain
. and submit a credit report regarding the veteran applicant, obtained, when possible, from a reputable credit reporting agency. A Loan Closing Statement (Form 1861) is also required. In some
instances there must be a copy of the offer or contract to sell, and in cases of new construction or
major repairs and improvements, plans and specifications certified by the appraiser must accompany
the appraisal report. The credit report is required as a means of determining, as directed by the
Act, that the terms of payment required in the proposed loan bear a proper relation to the veteran's present and anticipated income and expenses, that the ability and experience of the veteran,
in case of a farm loan or business loan, constitute a reasonable likelihood that farming or business
operations conducted by him will be successful, or that the refinancing of indebtedness, as provided for in Section 507 of the Act, will aid the veteran in his economic readjustment.
"Procedures for guaranty of secondary loans and of loans to finance delinquent indebtedness, provided for in Sections
505 (a) and 507, respectively, of the Act , var y slight ly from those prescribed in t he case of prima ry home. far m, and bu siness
loans. Lenders concerned with making such loans should consult the sources of official information cited in footnote 2.
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91
Approval by the regional loan guarantee officer of a loan proposed by a non-supervised lender
clears the way for closing and full disbursement of the loan. In no case should such a lender close
a loan where there is a deviation in excess of 5 per cent of the amount stated in the application for
loan guaranty, unless such deviation has been approved by the Veterans' Administration. Within
30 days after full disbursement, the lender meets the final requirements for obtaining guaranty of
the loan by sending in a final, completed Loan Closing Statement, the note or other evidence of
indebtedness if the lender desires to have the amount of guaranty endorsed thereon in lieu of a
loan guaranty certificate, and in the case of a loan of more than $1,000 for new construction,
alteration, improvement, or repairs, a letter from the appraiser that the work has been completed
according to plans and specifications.
Insurance of Loans
To supervised lenders only, Section 508 of the amended Act offers the alternative of loan insurance in lieu of guaranty on loans of any type which might be guaranteed under the provisions of
the loan title. Under this plan the Veterans' Administration will set up in the name of the lending
institution an account to which will be credited a sum not in excess of 15 per cent of the principal
of the loan to be insured. There are the same limitations on the total amount of insurance which
may be placed upon realty and non-realty loans made to an individual veteran as in the case of
loan guaranty; and the total of guaranty and insurance benefit cannot exceed $4,000 for realty or
$2,000 for non-realty loans, or a prorated portion of such amounts for loans of bot~ types. Loans
in excess of $15,000 which are to be offered for insurance must be submitted to the regional Veterans' Administration Office for prior approval. Insured loans on realty must bear interest not
exceeding 4 per cent per annum; on non-realty loans the maximum interest rate cannot be in excess
of a 3 per cent discount rate or an equivalent straight interest rate of 5.7 per cent. Limitations on
the term of loans and requirements as to amortization of loans to be insured are the same as in the
case of guaranty. The processing of loans for insurance follows the same steps as outlined above for
• loans presented by supervised lenders for guaranty protection .
.,
The maximum insurance which will be credited to a supervised lending institution's account
is 15 per cent (or as much thereof as other limitations in the law will permit) of all eligible GI loans
made or purchased by such institution. Thus the insurance credit is cumulative and, from a practical standpoint, applies to the institution's insured loan portfolio rather than, as in the case of loan
guaranty, to the individual loan. The reduction in the amount of an insured loan or the final payment of it does not reduce the institution's reservoir of insurance credit. Experience with similar
insurance under Title I of the National Housing Aet suggests that institutions doing a large volume
of insured lending to veterans may in the course of time accumulate insurance coverage equivalent
to 100 per cent of the unpaid balance of loans held in their portfolios. This possibility, when generally understood by lending institutions, may lead to a wider use than has been made so far of the
loan insurance plan by banks and other supervised lenders.
Summary of Miscellaneous Provisions Regarding Loans
•
The foregoing discussion of the loan provisions of the GI Bill of Rights has necessarily been
limited to basic considerations connected with the making, guaranteeing, and insuring of loans.
Many details relating to these matters have been omitted from consideration, for example: costs and
charges payable in connection with the making of loans; protection of the lender's rights through
hazard insurance or life insurance paid for by the borrower in the case of certain loans; the application of the general rules to loans made to joint obligors, one or all of whom are veterans; and effects
on loan guaranty of sale or transfer of property by the borrower. Nor has it been possible to detail
the provisions and procedures applicable in the case of defaults in repayment of guaranteed or
insured loans.
All such details, however, are covered in "The Outline of General Administrative Procedures
and Policies" and in the Administrator's " Regulations," to which earlier reference has been made .
An understanding of these official statements should supply the answers to many questions arising
in connection with the making, guaranty, insurance, and collection or liquidation of veterans' loans.
There will likely be some questions of legal interpretation, however, on which the advice of the
lender's attorney will be required, particularly in situations where state laws or other governmental
agencies have imposed limitations or restrictions on lenders' policies and practices which general
regulations cannot deal with in particular terms.
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Review of Business. Industrial. Agricultural. and Financial Conditions
DISTRICT SUMMARY
Preliminary reports of the wheat harvest, now near completion, strongly support the revised estimate made by the United
States Department of Agriculture on June 14 that the yield of
the 1946 Texas wheat crop will approximate 46,0 00,000 bushels, exceeding the crop of 1945 by about 10 per cent. An oat
crop near the 1935 -44 yearly average but about 25 per cent under last year's yield was in prospect at the beginning of June.
Cultivation and harvesting of crops in the eastern and southern
parts of the district, which had been seriously interfered with by
excessive rains in many sections during May, went forward
rapidly in the drier, more open weather of June except in low
lands which had been inundated by floods. Cotton and corn
made generally good progress everywhere except in the drought
stricken western part of the district. Local rains in most of the
Panhandle and parts of \'fest Texas during the latter part of
June encouraged the planting of feed and late cotton crops
and brought some improvement in the ranges. Many areas,
however, in the west and northwest are still suffering from
a deficiency of moisture which is reflected in shortages of range
feed and stock water and in a deterioration in the condition of
cattle and sheep. Outside the drought areas, pastures are good
and the condition of live stock generally satisfactory. Prices of
most farm products continue to rise, with wheat recently reaching the highest price level since 1925.
In response to the heavy demand for petroleum products,
the. Texas Railroad Commission set the June net crude production allowable for the State at an all-time high of IIlDre than
2,250,000 barrels per day. The oil industry's response is revealed in new well completions, which, during the first 4
months of this year, exceeded those of the comparable period
last year by 800 in the nation as a whole and by 250 in the
district. Some improvement in the rate of lumber production
and restrictions imposed at the end of May 'by the Civilian
Production Administration upon approvals for new commercial and industrial construction projects offer hope that the
Veterans' Housing Program, which to date has achieved much
in contract awards but li~tle in aompleted housing, may
gradually obtain a better supply of the vital building materials
essential to the achievement of its goal.
Sales during May in department and furniture stores of the
district showed strong gains in dollar volume over the same
month last year and, due partly to one more shopping day in
May than in the preceding mon th, exceeded by small margins
the high totals achieved in April. Inventories in both types
of stores also showed moderate improvement.
BUSINESS
Sales by dollar volume of reporting department stores in the
district during May were 3 1 per cent above sales for the same
month last year, and fractionally above the figure for April
of this year. May with one more business day than April showed
an index of daily average sales less than 3 per cent below that
for the preceding month, in which sales had been dominated
by pre-Easter shopping. Analysis of the sales of weekly report ing stores reveals that, following a sharp post-Easter c!ecline in
the last week of April, sales rose rapidly during the first two
weeks in May in general conformity with the seasonal pattern
in other years, except that the peak of the rise was reached
this year in two weeks after the lowest point of the post-Easter
slump, whereas in 1944 and 1945 the climb from post-Easter
low to May peak required four weeks. During the third week
of May this year, as in other recent years, sales declined moderately to a level which was maintained during the remainder
of the month. The 31 per cent increase in sales in the district
during the whole of May over the same month last year was
only slightly below the 35 per cent increase in the country a t .
large, and exceeded the percentage increase shown in four other
Federal Reserve Districts.
Preliminary figures for the first two weeks in June indicate
that department store sales were running, as in previous years,
at the same level as during the last half of May and were approaching the period when sales may be expected to show the
seasonal decline which normally begins in the latter part of
June.
By comparison with the May sales increase in the district of
31 per cent over May 1945, sales in April this year had increased 53 per cent over April a year ago. The sma ller percentage gain in May, however, over the corresponding month in
1945 does not reflect a decline in dollar volume of sales as
compared with the previous month, but rather a leveling off
of the general upward trend of sales which characterized the
first four months of this year. The high level of sales in April
had brought the cumulative increase for the first four months
of this year over the same months last year to 27 per cent, in
comparison with a cumulative fir st-quarter increase of 18 per
cent. The continued large volume of sales in May lifted the
cumulative increase for the first five months of this year over
the same period last year very slightly to 28 per cent.
Cash sales of reporting department stores in May constituted
44 per cent of total sales. This ratio indicates the continuation
of a downward trend which began immediately after V-J
Day in the relation of cash to credit transactions in department
store sales. This trend progressed slowly from August 1945
through January of this year, moving downward from a high
point of 54 per cent at the beginning of the period to 51 per .
cent in November and 52 per cent in January. Then it quick- . .
ened its pace, dropping to 46 per cent in February, 47 per
cent in March and April, and 44 per cent in May. This t rend
clearly indicates an increasing use of credit by consumers who
WHOLESALE AND RETAIL TRADE STATISTICS
Number
Retail trade:
Department stores:
Total 11 th Diat.. ...
~UB
Da
Christ.i . ....
88 . .. . . . . . . . . .
Fort Worth . .. ... . .
Houston .... ..... . _
San Antonio .. . . . . .
Shreveport, La .. . . .
Other eitiCl .. ......
Retail rumiture:
Total 11 tb Diat.....
Dallas ...... ..... .
Houston ..... ..... .
'tIort Arthur . ... ...
San Antonio . ..... .
Percentage change in
7
5
3
18
Net sales
May 1946 from
Jan. 1 to
Ma.y
April
May 31. 1946
1948
{rom 1945
1945
+31
+28
+ t
-3
+29
+20
+36
+ 2
+33
-8
+30
+21
+ 35
+ 2
+30
- 5
H3
+29
H6
+3
+23
+26
HI
+1
50
4
5
3
3
+53
+65
+34
+78
+46
of
nporting
firm!
48
4
7
4
+5
+9
-9
-2
+5
Stoe",1
May 1946 from
May
1945
+13
+20
+12
+ 19
+17
+ 15
April
194.
+13
+4
+7
+9
+ 7
+48
+3
+9
+25
+23
+10
+ 7
Wbolesale trade:'
Machillery eqp't &:
-24
+ 6
+ 22
+ 8
+ 52
+ 9
H7
+ 8
- 3
-7
H7
+26
+ 11
- 5
Electrical supplies . .
+85
Grooerie!!l .. .. . ... ..
+ 13
-6
+ 4
+20
+ 6
Hardware ..... . .. .
-I
8
+ 46
H5
H5
+ 5
Tobacco & product.!
- 13
3
+4
· Compiled by United States Bureau of Census (wholesale trade fiKUrU preliminary).
tStoeks at end of month.
tlndicatea change less than one·ha1f of OQe per cent.
luppiie! . ....... .
6
5
Drug.ll . . ..•.•...•••
5
3
30
Automotive supplies
INDEXES OF DEPARTMENT STORE SALES AND STOCKS
Daily average 881cs-(I935-1939-IOO)
Unll.djusted t
Adjusted
April
March
May
May
May
April
M:neD
1946
194.
1946
1945
194.
)946
1946
District .... . 322
335
316
246r
342
3521'
336r
Dalla•.•. ...
331
336
315
247
352
3541'
335r
Houston .... . 320
326
297
237
333
3291'
3451'
Stoeka-(1935-1939- IOO)
Unadjust«l·
May
April
March
1946
1946
1946
District . .. .. 227
186r
203
·Unadjusted for &e88Onal variation,
r-Reviaed.
May
1945
262r
263
247
Adjusted
May
1945
186
May
1946
239
April
1946
209
March
1946
196r
May
1945
19.
•
MONTHLY BUSINESS REVIEW
93
are finding in the stores slowl y expanding stocks of many goods of barley was forecast on June 1, compared with a 3,857,000
which were in short supply during the war.
bushel harvest in 1945 and the 1935-44 yearly average of
Merchandise stock~ of district department stores at the 4,166,000 bushels.
end of May showed the same increase, 13 per cent, over April
Although excessive rains during May damaged corn in the
of this year and May of last year. Orders outstanding, however, lowlands, the crop elsewhere in the eastern part of the district
were practically unchanged as compared with April, but were was in good condition, and prospects were generally improved
43 per cent greater than in May '1945. During May this year by drier weather in June. A very good corn crop is also practhere was a noticeable increase in quantities received of some tically assured in most of the southern part of the district.
items of soft goods which have been in short supply, snch as Some improvement in district grain sorghum prospects has
men's furnishings and women's summer apparel, but inven- occurred in recent weeks, and an excellent crop is being comtories are still uneven and poorly assorted. The flow of con- bined in the south Texas commercial area.
Stlmer durable goods to dealers, which was showing signs of
Cotton prospects in the eastern part of the district were
acceleration in March and early April, was reduced sharply by improved in June as weather conditions permitted the resumpthe protracted shutdown of the soft coal mines and the re- . tion of field work interrupted by excessive moisture in May.
sulting reduction in output of st eel and other industrial Considerable planting and replanting was done, but many fields
products.
originally planned for cotton were being diverted to the producFurniture sales of reporting stores in the district showed an tion of late feed crops. In the High Plains, moisture was still
increase during May of 5 per cent over the previous month insufficient in mid-June for seeding cotton except on irrigated
and of 53 per cent over May 1945 . Cash sales increased 6 per lands and in some local areas visited by light rains. The rains
cent and credit sales 5 per cent over April of this year, and 57 which visited some parts of that area during the latter part of
pef cent and 51 per cent, respectively, over Maya year ago. the month improved planting prospects and furnished sufficient
Cash and credit sales maintained the same ratios to total sales moisture to germinate seed planted in the dust. Flea hoppers, boll
during May, namely, 24 per cent and 76 per cent, as in April. weevils, and leafworms were reported in the southern part of
Comparison of these figures with ratios of 23 per cent and 77 the district in the latter part of May, but cotton was generally
per cent for May 1945 suggests that no significant change has making good progress in both southern and central Texas.
taken place in the types of furniture sales transactions during
Crop and harvest conditions improved generally during June
the past year. Continuing the trend observable in April, furniin the commercial vegetable areas, where hail, winds, heavy rains,
ture stocks increased percentage-wise during May more rapidly
and floods in May had caused considerable damage and delay.
than sales, showing a gain of 10 per cent over the previous
The indicated production on June 1 of 2,613,000 bushels
month's inventories and 25 per cent over those of Maya year
of peaches in Texas this year falls below the unusually large
ago.
production of last year by about 160,000 bushels but exceeds
AGRICULTURE
•
Excessive rainfall in the eastern paft of the district in May the 1935-44 yearly average by about 1,000,000 bushels. Early
•
interrupted field work and caused considerable damage to grow- varieties of peaches were making their appearance in the
ing crops. Severe hailstorms resulted in crop losses in many markets by mid-June. Pear production for the State, forecast
rocal areas scattered through the eastern part of the district. on June 1 at 524,000 bushels, is above the 496,000 bushels
Growing conditions were geJ;lerally improved in this area by ha rvested in 1945 and the 1935-44 yearly average production
the open weather during the middle and latter part of June. of 421,000 bushels. Prospects for the new citrus crop in Texas
Drought conditions persisted during most of JW1e Over the were favorable on June 1. The fruit had made satisfactory
western part of the district except for the northern and eastern growth, and trees were in good condition. Rainfall was abundant
Panhandle counties and some other scattered local areas, inter- in May, and the volume of water available now for irrigation
fering with the planting of spring crops and further reducing is much greater than it was a year ago.
Egg production in Texas during May was estimated by the
the quantity and quality of range feeds. During the last week
of June, however, rains covered most of the Panhandle, inter- United States Department of Agriculture at 31,250,000 dozen,
fering temporarily with the wheat harvest, but generally im- compared with 35,250,000 dozen in April and 34,417,000
proving moisture conditions for late feed crops, cotton, and dozen in May 1945. Unfavorable weather and the shortage of
poultry feed were said to account for the greater than seasonal
ranges.
\Vheat prospects were improved in Texas during May, and decline in May.
Except for parts of the Panhandle where effective rainfall
a crop of 46,156,000 bushels was forecast on June 14 by the
United States Department of Agriculture. This represents an was received, ranges in the western part of the district continued
increase of about 10,500,000 bushels and 4,200,000 bushels dry, with very short range feeds and low supplies of stock water.
above the forecasts of May 1 and June 1, respectively, but falls Ranges in New Mexico at the time of the June 1 report were
almost 14,000,000 bushels below the initial estimate as of the poorest for that date since 1934. Range conditions in the
April 1. The June 14 estimate places this year's crop well eastern part of the district were materially improved in May,
above the 41 ,778,000 bushel crop harvested in 1945, and and prospects for summer grazing in that area are very good.
about 32 per cent above the 1935-44 yearly average of 34,Cattle in the dry, western area underwent some shrinkage
863,000 bushels. Harvesting operations were about finished in during May and June, but made satisfactory gains in the
north Texas and the Low Rolling Plains by the end of June eastern part of the district. The average condition of cattle in
and were well advanced in rhe northern Panhandle. Yields were Texas on June 1, while slightly above that of a year ago, was
higher than had been expected throughout most of the wheat below the 20-year (1923-42) average for that date. The congrowing area.
dition in Arizona and New Mexico was reported on June 1
The Texas oat crop was estimated at 31,433,000 bushels as considerably below that of a year ago and below the 20n June 1, compared with the unusually large crop of 42,441,- year average. In Oklahoma the condition was below that of
000 bushels harvested in the State in 1945 and the 1935-44 a year ago, but somewhat above average. Sheep were in genyearly average of 33,557,000 bushels. Drought in the west erally good condition at the beginning of June, except on some
and northwest oat areas and excessive rains and early green dry, short ranges in the northwest part of the Edwards Plateau.
bug infestations in the Blackland counties considerably re- The average conditions of sheep in Texas was the same on June
duced the earlier prospects. A production of 3,000,000 bushels 1 as a year ago, but below the 20 -year average condition. In
t
l
MONTHLY BUSINESS REVIEW
94
New Mexico and Arizona, sheep were in better condition on
June 1 than a year ago, but below the yearly average for that
date.
gram is completed later this year,
TREASURY WAR LOAN DEPOSITS
(Balances in thousands ot dollars)
•
Depositary
De positary Banks . .
Banks In
in Eleventh Federal
United States
Reserve District
CASH FARM INCOME
(Thousands of dolL-its)
.....- February 1946 ~--,----, Total rece! P t 8 - - - ~Rccei pts from~ February February
Jau. 1 to Feb. 28
t~i~~;~",·.:: ..... .
Cropa
, 4.005
1046
'7,042
1945
I 8,607
10-46
4 19,371
1945
I 21,391l
7,118
1,985
3,656
1,752
10,774
3,737
10,851
5,275
26,411
8,638
29,382
12,1 69
9,605
31,949
15,452
31,172
25,057
63,121
28 ,660
78,045
52,120
135,610
61,762
156,479
.. 154,662
155,669
1109,731
1131,438
1242,150
1281,191
New Mexion . . . .... .
Oklahoma ....... .
. ...
Texas ........ ,
Tot"l...
Livestoek, 3,037
-Includes receipts from the sale of livestock and livestock products.
SOURCE: United States Department of Agriculturo.
LIVESTOCK RECEIPT8-(Numbe,)
- - - F o r t Worth
May
May
Cattle ... . .....• . . .
Calves ....
.l:::iogs .•• ••••• • ••• .•..
Sheep ..............
1946
60,328
18,174
37,686
433,027
1945
127,626
26.379
45,312
603,763
April
1946
88,004
14,83 6
67,M9
259,019
May
1946
19,722
12,256
7,496
76,691
San Antonio - -May
1946
33,757
25,095
5,382
131,529
April
1946
31,703
21,991
8,011
77,801
COMPARATIVE TOP LIVESTOCK PRICES
(Dollars per hundred weight)
_ - - F o r t Worth
San Antonio - - May
April
May
.May
April
May
1946
1946
1946
1945
1946
1946
116
.00
16.25
$16.50
Beef steers . . ... . .. .
117.35
116.25
1\7.36
Stocker steers .......
16 .00
14 .00
16.50
.
i6:25
'i5:
50
Heifers and yearlings.
i6:50
16 .25
17.35
17.35
13 .60
12 . 50
15 .00
14. 00
Butcher cows ..... .
14 .25
13.00
15 .75
14 .50
16.50
16 .60
16.00
Calves .....
14 .50
14.65
14 .55
1-4 .65
Hogs ... . .. . ... .
14 .60
14 .65
14.65
\(
.50
Hi,50
14
.50
15 .50
13 .75
16.00
Lambs ... ......
Receipts of cattle and calves at the Fort Worth and San
Antonio markets in May fell below those of the previous month
and far below receipts for the same month last year. The movement of sheep into the Fort Worth market, increasing seasonally during May, was about 60 per cent greater than in April,
but receipts at San Antonio declined slightly. Receipts at both
markets fell far below those of a year ago,
The May 15 price report of the United States Department
of Agriculture showed further rises in the prices of most
Texas field crop and livestock items. Prices of grain crops
and beef cattle underwent the most significant increases, with
wheat reaching the highest price level since 1925, Peanut,
sweet potato, hog, and egg prices rose moderately, while cotton,
cottonseed, wool, and poultry remained unchanged, Prices of
lambs, sheep, and wholesale milk declined slightly, and potatoes
and hay were significantly lower.
FINANCE
The Treasury's policy of debt redemption from its large cash
balances has resulted in heavy withdrawals from war loan accounts since February of this year, At the end of February,
Treasury war loan deposits at all depositary banks in the United
States amounted to $24,447,000,000, of which $7 83 ,540,000
was held by depositary banks in the Eleventh Federal Reserve
District.
Between March 1 and July 1, inclusive, the Treasury redeemed in cash approximately $12,200,000,000 of securities
which had matured or had been called for redemption, and
for that purpose utilized its war loan deposits at depositary
banks, During this period, war loan deposits at all depositary
banks in the United States decreased approximately $12,300,000,000, leaving an estimated balance on July 1 of $12,100,000,000. Simultaneously war loan deposits at depositary banks
in the Eleventh Federal Reserve District decreased approximately $416,500,000 to an estimated balance of $367,000,000
on July 1.
If the Treasury should continue the debt retirement program in accordance with general expectations, war loan deposits at depositary banks may drop to about 15 per cent of
the February 28, 1946, total by the time the retirement pro-
December 31, 1945 ........................
January 31, 1946.........................
February 28, 1946........................
March 30, 1946..............................
April 30, 1946...............................
May 31, 1946 ................................
June 30, 1946 ................ ................
24,044,000
24,030,000
24,447,000
21,776,000
19,502,000
16,949,000
12,100,000*
781,765
767,655
783,540
702,658
624,420
547,325
367,000*
-Estimated.
The continued heavy withdrawals by the Treasury from its
war loan acounts at depositary banks was the principal factor
contributing to a $36,500,000 decline during May in the
daily average of combined gross demand and time deposits of
member banks in this district. 111e May average of these deposits amounted to $5,448,000,000, which was $962,000,0 00
above the average for May 1945.
The average reserve balances of member banks increased
$13,400,000 during May, reaching the highest level since
January of this year, However, an increase in required reserves, as a consequence of the shift of some reserve-exempt warloan deposits to reserve-required deposit accounts, held the increase in excess reserves to $7,000,000.
In contrast with the downward trend during the preceding
five months, Federal Reserve notes of this bank in actual circulation increased $5,000,000 between May 15 and June 15.
Notes in actual circulation during the first half of June, though
at the highest daily average since March of this year, were
$33,000,000 less on June 15 than in mid-December 1945, when
the peak was reached.
•
Continuing the trend that began in mid-January of this.
year, gross deposits of weekly reporting member banks in the
district declined $14,800,000 in the five-week period ended
June 12, bringing the total decline for five months in these
deposits to approximately $231,000 ,000, Between May 8 and
June 12, increases of $41,300,000 in adjusted demand and time
deposits and of $8,200,000 in interbank deposits were more than
off"'t by a decrease of $64,300,000 in Government deposits,
. During this same period a decrease of $28,400 ,000 in total
CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS
(Tbousand. of dollars)
Total gold dertificate reserves..
D iscounts for member banks....
Foreign loans on gold . . . . . . . . .
U. S. Goyernment securities. .
Total earning assets.........
Member bank reserve deposits . ...............
Federal Reserve Notes io. actual circulat ion....
June 15,
1946
1503,325
144
3,840
896,879
900,863
7fJ2,792
693,713
June 15,
1945
1521,427
None
None
748.151
74 8,161
673,r.87
t.73,255
May IS,
1946
1476,044
1,1 44
1,440
895.880
898,464
747,266
688,828
CONDITION STATISTICS OF WEEKL Y REPORTING MEMBER BANKS
IN LEADING CITIES-Ele\'enth Federal Rt:eerve DWricl
(Tbousands of dollars)
Total loalUl and investments. ... . . . .. . . . . .. . .... ..
Totalloana . .. . . .. .. .. .. . . . . . . . . . . . . . . . . . . . . . . .
Commercial , industrial, and agricultural loans. .
Loaru to brokers and dealers in securities.. ......
Other loac..s (or purcha"iog or carrying securities . .
Real esta~ loana. . . .. . . .. . .. . .. . . . . . . . .. .
Loans to bank! .... .. .... .. .. .. .. .. .. . .
All other loaUJ... .... .................. . ... .
Total investments . .. . .. . . .. . . . . . . .. . .. . . . . . . . ..
U B. Tr....",. billio ......... ... ........ .......
U' 8. Treaaury certificates of indebtedness.......
U. 8. Tk-eaaury notes .... . .
U. 8. Government bonds . .......... . ..........
ObJilatioll8 guaranteed by United States Gov'. . •
Other 116ouritiea.. .................. .. ..
Resarv6!I with Federal Reservo Bank......... .. .... .
Balances with dome:!tio br.oks .... . . .. .. . . . . . . . . . . . .
June 12.
June 13,
1946
12,060,427
680,394
40] ,261
7,667
141.874
'" t .SS9
288
87,545
1,389,033
43 ,530
414,928
215,808
647,285
145
67,337
400,931
235,546
1945
",752 ,584
442 ,561
275,949
5,077
74,964
22,982
214
63,375
~~rr:d~:~i~~~~":.'.,.,.:::::::::,.:,.:,.:::: ll~~:rs~
United States Government depoelu .................
Interbank deposit. ..... .. .. . . .... .. . .. . . . . . .
Borrowings (rom Federal Reeerve Bank . ~.. . . . . .
288,525
556,836
None
1,310,023
73,719
376,003
249,698
561,821
100
48,592
379,136
279,856
1,295,044
249,274
222,788
569,249
None
May 8.
1946
$2,097,853
682,741
403 ,867
7,553
14 6,389
39,521
285
85,126
1,415,112
55,053
437,156
211,363
642,762
145
67,793 •
401,948
225,087
1,422,443
302,870
352,830
048,607
2,000
·Jncludes all demAnd deposits other than interbank: and United State. Government. leu
ealh ileml reported on band 01' in Pl'DCeII of eolillOtion.
MONTHLY BUSINESS REVIEW
DEBITS TO INDIVIDUAL ACCOUNTS
(Thousands of dollanl)
It
May
1946
Abilene ••...........•.•. $ 23.171
Amarillo ..............••
55.207
Austin ..................
82.249
Beaumont .... ..... .... ..
57,324
Corpus Christi. ...... . ...
tl3.809
Corsicana ...•.........•.
7.958
DaUM ........... . ..•...
683.332
EIPaso" ...............
87.600
Fort Worth ....... _•.....
223.428
GalVe!ton ••••••..•.••..
53.235
HOIlston ....• ........... .
656.098
Laredo •.......... . •.•.. .
16.379
Lubbock ................
36.856
Monroe. La ...... .... ....
24,560
Port Arthur ......... ....
24,671
Roawell. N. M........ . ...
11,353
San Anlelo ..... .........
22,812
Sao Antonio ........ _....
205,475
Shreveport, La ........ . . .
93.707
Texarkana· ......... .....
19,891
Tucson, Aril. .......•....
49.333
30,279
37,837
Wicnita Falh ............
39,043
~/~~::::: : :::::::::::::
Ma.y
1945
17.975
49.680
tl3.495
58,094
55,121
7.264
';90,-147
64,342
224.200
43.577
588,885
14,024
30,593
18.697
23.506
9,280
17,595
173,716
68.583
22,759
36.313
25,181
27.923
33.386
~~J;I
Pct.g.change
over year
+20
+11
+30
-
22.001
54.442
84,1 42
55,627
67.56-1
7,402
690,336
79.646
209.835
50,697
624,524
16.495
38,599
I
+16
+10
+16
+36
-\
+22
+11
+17
+20
+31
+5
+22
+30
+18
+6
-13
+36
+20
+36
+17
22,472
25.855
11.424
23,929
201,146
86,752
20,489
46.889
31,021
37,193
37,912
Pdg .change
over month
+1
+ 1
-2
+3
-6
+8
- 2
+10
+6
+5
+5
+6
- 5
+9
- 5
- I
- 5
+2
+8
- 3
+5
-2
+2
+3
+
Total·24citiea . ... . .. . . .. $2,605,097 $2,284,G30
+14
12,665,192
2
·Includes the figures of two banka in Tenrkana, ArkanSNI, loeated in the Eighth District.
tCbMge less than one-haU of one per cent.
GROSS DEMAND AND TIME DEPOSITS OF MEMBER BANKS
Eleventh Federal R.eatne District
(Average of daily figures-Thousands of dollan)
Reserve cib blUlka
Combiued tota.l
0",..
G,...
1944,.
1945
January 1946 .....
February 1946 .. ,.
March
1946 ..
1946 ....
~dl
1946 ....
May
May
•
dema.Dd
. . 13,275,467
.. 4,092,587
.. 5,215,222
5,097.096
5,101,702
5,012,062
4,966,772
Country baokl
0"",
Time
demand
Time
demand
Time
$291,239 $1,694,017 1180,464 1I,s81,4SO 1110.77•
393,000 2,044,524 249,140 2,048,Otl3 143,950
452.353 2,681.476 286.583 2,533,746 165.770
457,348 2,620,309 293,575 2,476,787 163.773
465,564 2,592,431 296,725 2,S09,27\ 168.830
472,155 2,s20,721 300,908 2,491,341 171.247
480,926 2,480,288 305,520 2,486,484 175,406
ay
SAVINOS DEPOSITS
May 31, 1946
Number
re~rting
,
of
I&VUlgs
..............
.nb
3
8
2
3
4
8
2
2
5
3
3
3
57
depositon
12,558
130,138
29,252
40,406
24,181
103,5tl3
909
S,9tl3
36,148
33,340
9,405
7,337
60 ,744
Total .........
103
493,944
Beaumont ....... . ...... .
Dallas .• ... ••...•. ......
El P8.I)() ............
Fort Worth ..... .... .....
Galveston , . ..... . , . , ••.•
IlollHton, ........ . , ... .. .
Lubbock . , ., ......... .. ,
Port Arthur, ........ .. •.
San Antonio . ... . . . . .....
Shreveport. La .... •. • • • • •
Waco . . "." . .....•.•••.
Wichita Falls ............
AU other.
Num~r
Percent,e change in
IAvinp epoaita from
.o\mo~t
of
savmgl
deposita
I 7,839,230
71,449,711
23.103,.24
32.104,139
20,141,077
70,tl39,257
2,520,608
5,518,702
42,874,313
25,817,222
May 31,
1945
+ 16.6
+ 24.9
+ 31.9
+ 2l.6
+ 18 .0
+ 17.3
+312 .5
+ 18 .6
+ 23.5
+ 20.7
8.935,200 + 25.7
4,74 1,006 + 9.2
50,601,885 + 22.1
1366,285,883
+ 22.3
Apri130,
1946
+ .7
+1.4
+ .9
+1.3
+1.3
+ 2.5
+
+ .4
+ 1.6
+ .6
+ .9
.1
+ 1.3
..
+1.4
loans and investments of these banks provided funds to counterbalance the decrease in deposits and enabled these banks to
repay $2,000,000 in borrowings from the Federal Reserve
Bank, to increase reserves at the Reserve Bank by $1,000,000,
and to increase their balances with correspondent banks by
$10,500,00(). 1'his increase in balances with correspondent
banks represents a modification of the rather steady downward
trend of such balances which had been in evidence since the
first of the year. The net decline in these balances from the
~ginning of the year to June 12 totaled $77,500,000,
There was a net decline in total loans of $2,400,000 during
this five-week period, A decrease of $4,500,000 in loans for
carrying securities to others thao brokers and dealers, and a
decrease of $2,600,000 in commercial, industrial, and agricultural loans were partially offset by an increase of $2,300,000
~n real estate loans and an increase of $2,400,000 in "all other"
~ans, which includes personal and instalment loans, The $22,200,000 decline in holdings of certificates of indebtedness Was
associated with the redemption in cash of part of the issue
maturing on June 1. Holdings of Treasury bonds and notes
each increased by $4, 500,000, while there was a decline of
$12,400,000 in holdings of Treasury bills for this period. The
95
amount of all other stocks, bonds, and securities held declined
by more than $400 ,000, although holdings of these securities
have shown a net increase of $5,000,000 since the first of the
year.
INDUSTRY
Construction activity in the United States, as measured by
the dollar value of contracts awarded, has increased almost
without interruption since the end of the war in Europe, attaining levels appreciably above prewar peaks. The value of
contract awards in the nation in April reached the highest total
since October 1942 and was substantially larger than in any
month prior to the war. Construction activity in the Eleventh
District has followed a similar trend, The value of district contract awards in April, which totaled $69,510,000, was approximately twice as great as in any month prior to 1941.
In comparing present and prewar levels of construction activity, however, it is necessary to make some allowance for the
pronounced increase in building costs which has occurred since
1940, Furthermore, since the end of the war, apprehension felt
from time to time that additional restrictions on building activity would be imposed may have induced builders to apply for
building permits and to award contracts in much larger volume
than could be expected to be completed without abnormal delays
in view of the acute shortages of building materials. The
volume of permits and awards is, therefore, a less adequate index
of the level of construction activity at this time than it was
before the war. Even when these factors arc taken into account, however, it appears that construction activity is CUfrently being carried on more inrensely than at any time prior
to 1941.
Awards for residential constmction in the United States
and in the Eleventh District were larger during the first 4
months of 1946 than during the first 4 months of any previous
year of record. Nevertheless, schedules for new housing established by the Veterans' Housing Program were not maintained,
in part because of diversion of scarce materials to non-residential building. In order to speed up the housing program by
giving residential construction access to larger supplies of materials, the Civilian Production Administration on May 29 ordered a reduction of two-thirds in the dollar value of approvals
for non-housing projects for a period of at least 45 days. Except where denial of applications would impose severe hardship, the district and regional CPA offices will approve only
the following commercial and industrial construction projects:
projects vitally necessary to public healch and safety;
projects which will increase production of critical products;
projects which are essential to increased food production or
preservation;
projects which will provide minimum community facili ties
absolutely necessary for new residential areas developed as
part of the Veterans' Housing Program;
projects which will provide urgently needed veterans' educational facilities;
essential and non-deferrable maintenance and repair;
projects which will have no impact whatsoever on the housing
program,
The order docs not apply to federal government projects, to
repair and construction projects whose costs are not in excess
of specified amounts, or to roads, streets, sidewalks, boardwalks,
breakwaters, bridges, bulkheads, canals, dams, utility facilities,
mines, tanks, pipelines, oil derricks, fences, silos, and other
stmctures which do not draw heavily upon materials required
for construction of houses.
Significant progress in expanding the number of dwellings
constructed and in accelerating the rate of completion of housing, which is necessary if the goals of Veterans' Housing Program are to be attained, cannot be made until production of
96
MONTHLY BUSINESS REVIEW .
construction materials has been substantially increased. March
production of such indispensable building items as gypsum
board, clay tile, hardwood flooring, and plumbing fixtures
was at rates far below the levels necessary to attain goals set
by the program. The prospects of alleviating the acute lumber
shortage are apparently somewhat improved. Lumber production in March was at a rate exceeding minimum requirements for
1946. Lumber production in Texas and the Southwest was
greater during the first quarter of 1946 than during the same period of 1945, according to the Bureau of Census. Data compiled
by the Southern Pine Asociation indicate, however, that current
production at the larger southern pine mills is considerably
less than prior to the war or during 1942 and 1943. Stocks of
lumber at the mills, which were further reduced during the
first 5 months of this year, are currently less than one-third
the size of stocks maintained prior to 1941.
Daily average crude oil production in the United States and
in the Eleventh District is rising to much higher levels during
the first postwar year than had been generally anticipated. Production for roe country as a whole in May was only slightly
less than at the 1945 wartime peak and was substantially greater than during any month prior to the war. Daily average
production in this district of 2,293,000 barrels was 70 per cent
greater than in May 1941, and only 4 per cent less than at the
war peak attained in August 1945.
The heavy demand for crude oil was reflected by the Texas
Railroad Commission's June net production allowable for the
State, which was increased to an all-time high of 2,293,000 barrels per day---exactly the daily average of production for the
district during May.
Total demand for petroleum products is currently about 20
per cent greater than in 1941. This expansion of demand in the
first postwar year above prewar levels is attributable primarily
to larger naval and railroad requirements for fuel oil and increased use of distillates and diesel oils for military, export,
heating, and transportation purposes. Although consumption
of motor fuel during 1946 is expected to be approximately
10 per cent greater than in 1941, the increase will reflect
larger exports of motor fuel and expanded non-automotive uses
rather than an increase in motor vehicle consumption, which
will probably be somewhat smaller in 1946 than in 1941.
The vigorous search for new oil resources is evidenced by intensive drilling activity both in the United States and in the
Eleventh District. Wildcat completions are reported to be at
the highest level of record, and total well completions, which
have not yet regained prewar levels, arc increasing rapidly. Approximately 800 more wells were completed in the United
States during the first four months of 1946 than during the
same period of 1945. Although there were substantially fewer
wells completed during the January-April 1946 period than
during the comparable period of 1941, present drilling is reported to be increasing at such a rate that drilling activity
during 1946 may return to the levels maintained during the
years immediately preceding the war. Drilling activity in the
Eleventh District and in Texas is following approximately the
same trend as in the United States. In the district, 2,765 wells
were completed during the first four months of this year, as
compared with 2,514 during the same months in 1945, and
3,180 during the comparable period in 1941.
Data compiled by the United States Employment Service
covering employment trends in the 17 principal labor market
areas in Texas indicate continued strengthening of the demand
for non-agricultural1abor in the State during April, May, and
June. Employment in non-agricultural establishments, which
increased by 1.2 per cent between March 15 and April 15,
expanded by approximately 2 per cent during the following
60 days, if employers' expectations of hiring activities during
that period, as reported by the United States Employment
Service, were realized. Employment is being expanded somewhat more rapidly in manufacturing than in trade and service. •
Demand for additional labor is apparently strongest on con- ' "
struction jobs, in plants producing construction materials, and
in establishments manufacturing machinery and similar products.
Despite the steady increase of employment since February
1946, the number of persons in Texas seeking work has declined
very slightly because of accessions to the labor force. The
United States Employment Service reports that at the end of
April, 117,000 persons, 60 per cent of whom were veterans,
were seeking work in the 17 principal labor market areas of
the State. Although United States Employment Service data
indicate that job openings are increasing slightly, there are
approximately two job seekers for each job offering in the 17
leading urban areas, and many of the openings require skills
which the applicants do not possess. However, the rate of
accessions to the labor force is declining, reflecting the falling
rate of discharge from the military services, and unemployment
should decline during the summer if the anticipated increase
in employment develops.
COTTONSEED AND COTTONSEED PRODUCTS
Cottonseed
r~ived
----T.ua---_-_Unit&d Statea-------August 1 to May 31
August t to Ma.y 31
This sea.aon
Last season
This season
Last season
at milb
(tona) . ................... .
Cottonseed crushed (toilS). , .. .
Cottonseed on hand (tons) ... . .
Production of produc~:
Crude oil (thousand Ib&.).
Cake and meal (Looa).
Hulls (toms). , . .. ... . ...
Linters (running bales) ..
Stocks on hand May 31:
Crude oil (thousand Ibs.). "
Cake aod meal (tons) . . . .
HulJ. (tons) . . .... . .. . . . . ..
Linters (running bales) ...
618.963
689.502
13,660
935.816
879.711
87.001
3.093,427
3.165,037
146.783
4.288,085
4.001,1172
386.969
207.968
319.224
160.513
217,650
260.740
416.052
205,179
266.392
986.348
1.391.967
760.614
959.577
1.242.009
1.837.861
927.202
1.171,488
6.323
24.807
21,495
10,612
9.392
38,678
51.380
20,001
98,595
73,S04
53,206
595
10.328
4.576
7.909
SOURCE: United States Bureau of CeuUJ,
45.738
DOMESTIC CONSUMPTION AND STOCKS OF COTrON-(BaI..)
May
May
April
August 1 to May 31
1946
19~5
This!eaSOn Last season
1946
Consumption at:
18,783
Teus mills . .•......... . .
United StaLes milIa . ..
871.559
U.S. stock.!---end of month:
In consuming est.abm'ts ... 2,331,841
Public stg. &; compresses.. 6,,410,431
16.642
17.6.16
813.732
839.~14
166.979
7.643.441
•
158.~SO
8.109.914
2,14t,I04
10,105,783
CRUDE OIL PRODUCTlON- (BarrelJ)
May 1946
Increaae or decreaae in daily
average production from
Total
production
production
North Teua .. .. ....... ,.
Weet Texaa ..• . • .. .....•.....
East Te:l.l.l!l .. ' ..••.•...•. •...
8outhwI!II!Jt Te:la.ll •... .•.•.....
Te%U CO&lltal . .... .......... .
7.681.800
16.154.100
521 .100
16,380,400
528.~00
10,276,500
15.966,000
331.500
486,000
Total Te:u.s ••••••.
6.1.558,800
2.968.650
2,480,400
2,114.800
95,763
North Louilliana ............. .
Total Dialrlot......
71.007.850
Nfl" Mexico .............. . . .
Dailyavlt.
May 1945
April 1946
+25.800
-24,150
-77.300
+33.6.17
+26.576
+12,387
+16,637
SO,013
-jil,350
- 8,137
+ 9,266
-
2.290.676
-00,221
+91.854
2~7.800
+ 3.000
+1O.~00
+ 8.143
+97,400
32
5.514
SOURCE: Eetimated Crom Ameriean Petroleum lnatitute weekly report!.
BUILDING PERMITS
May Itl46
Abilene ..........
Amarillo ... ......
No. Valuation
59 $ 217.227
223
688.616
339 1.514.540
226
213.406
266
643.169
1.066 2.5S~.210
136
909.466
767 2.781.073
118
86.069
792 3.616.258
142
237.771
155
111 ,284
Pereenf.age change
Percentag
valua.tion from
Jan. 1 to Ma.y 31, I G46 chan~e
valua.tlOn
May Itl45 Apr,ttl46 No.
Valuation from 1945
459.786
96,545
+180
+978
+204
+ 6
+192
+582
+264
-13
- 26
+ 51
+ 79
+218
+253
+ 9
- 29
Total ...... 6.175 $16.2.7.871
+ 79
Austin ...........
Beaumont ........
~r.~ ?~.t~:: ::
EIPaso ..........
Fort Worth .... ...
Galveston ........
Houston ......... .
Lubbock .........
Port Arthur .... . .
SlLn An ton io .....
1,479
Shreveport, 1..a. ..
297
Waoo .......... . .
Wichita Falls .. ..
159
61
1,521,436
797.016
------
· O..-er 1,000 per eent.
- 53
+ 14
8
+ I
3
- 41
+218
+ 3.
- .5
- 17
- 21
4
-17
+ 56
+ 21
- 52
-
-
-
9
492 $ 2.500,177
1.122
3.008.935
2.042
8.053.335
1.171
1.487.653
1.313
4.16.1.928
6.418 24.016.130
554
2.222.557
3.334 13.377.028
562
958.603
3.662 36.6.14.632
977
2.278.664
1.039,694
906
6.372 12,550,692
1.646
'.886.787
692
1.817.239
356
990.272
+375
+ 82
+216
+219
+718
+573
+410
+292
+188
+213
H95
+465
+418
+162
+3{J8
31.619 $120,966,426
+340
•
@FedFRASER