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business • review october 1968 FEDERA l RESERVE BANK OF. DA IL LAS This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) contents recent financial developments: is banking unique? ..... . . . ... . district highlights . ... . . . ............. ... . 3 9 RECENT FINANCIAL DEVELOPMENTS Is Banking Unique? An Address by Dr. Philip E . Coldwell President Federal Reserve Bank of Dallas at the 27th Texas Bankel's Conference Sponsored and dhected by Texas Bankers Association The University of Texas Austin, Texas August 28, 1968 Over the past five years and, in fact, as almost ~ hallmark of the decade of the 60's, there has een a major change of emphasis in structure ~nd organization of businesses in the United ta~es. Perhaps reflecting prior emphasis upon antitrust action to discourage monopolies, but ~lso the rapid growth of small firms during the ~ll1lhediate postwar period, the recent trend may e a pendulum swing away from the small business and into the larger aggregation of capital COntrol. The forces bringing this about have been the iressure to develop laborsaving and improved eChnO!ogical equipment, the need to extend ~OdUction to utilize fully the new methods and aChines, the heavy capital requirements for both plant and equipment and working capital purposes, and the desire to diversify companies which found their principal product and principal line of endeavor tied to only one segment of industry and, in a few cases, to a volatile defense connection. To some extent, the move toward larger aggregates also reflects the difficulties of obtaining qualified management, the need to innovate in an intensely competitive environment, and the very American characteristic of growth for the sake of bigness and enlargement of corporate influence. Perhaps even the emphasis of the United States tax laws, the possibilities of deferring capital gains and of growing without tax penalty by means of merger with noncom parable product companies, is a factor in the new move toward conglomerates. Some of the recent take-overs and mergers were probably originated to obtain new funds as an alternate to issuing corporate debt instruments or borrowing from banks. This impression is emphasized by the tendency of some companies to reach into the banking industry to obtain control of financial institutions for credit sources. This quick overview of the recent changes in business corporate structure and diversification of product lines has obvious implications for the banking industry. The question we face today is one which we have faced many times, but perhaps in a slightly different fashion: "Is banking a business comparable to steelmaking, aircraft manufacturing, or a host of other industries; or is banking unique and to be treated in an entirely different way in the public inter- business review/ october 1968 3 est?" Perhaps it would be well to begin our discussion of this matter by reviewing some of the same forces impacting upon banking structure that have developed in the business changes referred to above. Certainly, banking has seen a marked change in its focus over the past 20 years. A large number of new units chartered into the banking industry have brought additional competition and intensified the hunt for capable leaders. Management has become a major problem to the banking industry, in both quantity and quality. The significant changes in methods of doing business, the advent of data processing, and the steady encroachment of internal and external banking system competitors have 'brought demands for management talent far exceeding those of banking even 20 years ago. Concurrently, the customer mix has shifted markedly with heavier capital requirements and demands for materially longer and larger loans. Broadened service requirements and enlarged roles of banks in local financing needs, as well as the recent change in deposit mix toward larger proportions of time and savings deposits, have had a real impact upon bank lending and investing policies. These same factors, along with many others, are spurring bank considerations of mergers, consolidations, holding companies, and even product or service diversification. The changes in banking and its responses to those changes focus our attention even more sharply upon the character of tlris industry and its relationship to the public interest which must be served. The fundamentals of the question regarding the character of tllis industry can be stated in a number of different ways. In the traditional sense, are the stockholders and purchasers of corporate debt instruments in a different position from ilie capital ownership and depositors of a commercial bank? Similarly, are the sources of funds available to banks markedly different from tllOse available to busi- 4 ness? Are the uses of these funds sufficiently different to require a distinctly different publiC policy? I submit that the changes over the postwar period have materially blurred some of ~e distinctions formerly made between banking and other types of business, though there :emains a fundamental credit creation by banking which other industries cannot duplicate. Banking today must draw upon funds fof capital growth from markets which are ta~~e~ by otller businesses as well and, in competJ~!O wiili those businesses, must provide a meaOlngful rate of return commensurate with risk suflicient to acquire the needed capital. In many . es tways banks with funds to make loans or JUV raments are not wholly different from the corpo tions which use their funds in both the investment and working capital sense. Even tbe repayment requirements of banking and other industries are not materially different today~ a~ business must make a return on its capital JUs as banks attempt to do for their stockholders, and business must repay its short- and long; term debt just as banks must be ready to rep a uS CD holders and investors in debentures. Tb ; in some areas banking is comparable to o~be_ businesses, but in the basic depositor relatlO~_ ships there is still something unique to the ban ing industry. While the banking industry may have manY ses . . elements ill common With other bUSI'nes sl, there are still elements of confidence and tr~e required in handling ilie money supply of ' h . VIpIC Nation and an element of credit creation tS distinguish this industry from its counte~P~a_ in other business pursuits. Demand depOSit :be bilities of banks are the major share of, SS Nation's money supply, and no other bUSI~eDg has such liabilities. Moreover, only the baD , en system can multiply iliese deposits on a glV base of excess reserves. b nl<In the use of the lendable funds and the \a s ing industry's competitive position, there oW been a shift of positions which perhapS n should be recognized in the public mind and ill governmental control and regulation of this indUstry. While banks provide a large share of the working funds for business operations and growth, the new world of business has found Other sources and other techniques to meet these same requirements. Banking today is not the only source of funds and, in fact, in some areas is a declining source. The growth of Federal credit sources for agriculture and business, the growth of Euro-dollar financing, the substantial enlargement of the commercial paper tnarket, and the heavy corporate financing issues may all be symptoms of the multiplicity of sources of funds competing with the traditional banking industry. Even within the financial institutional structure there have been changes permitting savings and loan associations, insurance companies, ~redit unions, factoring groups, and even private InVestors to absorb larger and larger roles in the provision of funds for routine lending transactions. To meet the profit impact of this intense competition for their traditional role as lenders in the short run, banks have sought both to merge into larger units and to expand their influence into other industries by onebank holding company relationships, ownership of equities through trust and investment acCOunts, and finally the creation of subsidiary corporations largely devoted to nonbank and eVen nonfinancial pursuits. . One of the central questions of today, then, IS "Should this trend be permitted, encouraged, Or diScouraged in the public interest?" It has ~een a basic tenet of regulation in the banking IndUstry that banks are supervised and regulated because the public interest requires regulation of an industry whose deposits serve as the :oney supply or savings of the people and ecause the depositor needs protection from UnSOund banking practices, mismanagement, ~nd other similar problems of the past. Regulation 1 . ,. las focused upon fostenng competltion among financial institutions and within the banking industry and yet preserving a protected position for banks. The merger cases of today are replete with considerations of the competitive or anticompetitive factors impinging upon a particular situation. Public policy has encouraged new bank formations in specific situations and has broadened the authority of nonbank financial competitors. We must also recognize though that regulation has, to some extent, protected the banking industry, for entrance into this industry must be by charter, approved by a public body, and limits on the cost of the funds are similarly regulated to protect against the banker who seeks a quick profit despite the marginal cost of the funds. Regulation is thus a two-way street for the banking industry, but probably few other industries are required to maintain as detailed records and reports to reflect developments which might impinge upon public policy requirements. Banking is unique in this respect and in respect to national monetary policy, although even here the events of the past 25 years now seem to dictate a much wider scope for policies to be set in the national interest to encompass more of those industries which provide capital and working funds, rather than just strictly the commercial banking industry. Some observers have suggested that the fulcrum upon which monetary policy operates should be widened substantially to include all basic financial institutions, whether of a bank or nonbank character. Such a move, if ever accomplished, may be feasible only through the extension of reserve requirements to all banking institutions. The Nation expects an equitable and efficient monetary policy, but that policy must be effectuated in its primary impact only through the member commercial banks. Other observers have contended that in recent years, because of the small base from which monetary policy must be implemented, the actions of the business review/ october 1968 5 monetary authorities have been accentuated perhaps beyond the needs of the moment in order to have the ramifying effects necessary in other segments of the economy. Recent publicized discussions seem to imply that the nonmember bank responds to monetary restraint in the same way as the member bank and that extension of reserve requirements is, therefore, not needed. In fact, reference was made to the late summer of 1966 as an example demonstrating the overall effectiveness of monetary policy, even with its limited base. In my opinion, the heavy-handed restraint of that period demonstrates both the inequities and the effectiveness of monetary policy. If a much broader base were developed, policy moves might be somewhat more moderate, but broadening the base of monetary action will by no means guarantee perfect timing or results, nor perfect equity in application. Whether a broader base might moderate the excess, s of tightness e or ease in policy actions, the rapid and overcorrecting swings in policy, or provide for quicker impact upon all elements has not yet been proven or accepted. The broadening of authority in nonbank financial institutions, especially the savings and loan associations through the recently passed Housing Act, will further intensify direct competition with the banking industry by institutions which are not subject to the same rules and regulations as banking and which do not have the responsibilities in the field of basic monetary policy implementation for the entire economy. One could say some of the same things about credit unions, insurance companies, mutual savings banks, factoring companies, and even some of tbe major corporations though the direct relationships to banking are much weaker. If monetary policy is to continue to accept the primary burden of stabilization control - and it would appear that this is a logical conclusion from the most recent difficulties of obtaining fiscal action - then I submit that monetary 6 policy should be based as broadly as is needed for effective control, with equitable impacts on all elements of tlle economy and with as prompt reflection of action in these elements as can be achieved. As can be seen by the matters heretofore mentioned, I believe there remains a unique character to the banking industry which requires more than usual public surveillance and even regulation in the public interest. Perhaps we should recapitulate the elements which set this industry apart from other businesses. First, the banking industry operates in. a manner which creates credit with a multiplier tbrough lending and deposit creation. No other industry can achieve this, and the power to do this warrants careful attention. Secondly, the power of creation and the element of expans~on tbrough credit are fundamental to the well- betng of the Nation's economy and must be closely controlled to avoid the excesses of expansion and contraction which are inherent in the system. Thirdly, banking represents a part of th~ financial structure of the Nation which, throug 1 its efforts, must retain the confidence of the people in the integrity and safety of their currency. Thus, it is in the public interest to regulate banking, supervise its operations, and ref quire its adherence to bOtll basic principles :t conduct and rules to set the aggregate of cr~ I wtng use in the best interests of a sound and gro economy. . n of There still remains a debatable questi O h how many restraints are required, ho,: ~u~ S regulation is needed, and whether the pnnclP. e g and implementation of regulation are keepl~ I pace with the changing economic and finan~lag sln . envIronment. We could spend hours d'IS cus d . . nan , the need for each regulation or restrl ctlo .. of similarly, many hours debating the O1ell.ts 1 the present structure of regulatory agenCI~S. s on . would rather dISCUSS the last of th ese qu estJ ts, for I believe it contains most of the elemen which can answer the first two questions. In a slightly different wording, then, I proPose to look at the question of whether regulation is keeping pace or is unduly restricting the growth and diversification of banking. While I Would insist upon the basic tenet that regulation is required, I am convinced that it need not be repressive and, in fact, should encourage SOUnd expansion and better service to a steadily wider range of customers. It seems to me tI1at a wider range of opportunities could be opened to the banking indust:y, in keeping with some of those opportunibes which other industries and corporations have developed in diversifying their sources of funds and possibilities for profit. The opportunities for diversification are apparent even in bank-related activities. The overseas or foreign investment, lending, and servicing activities represent a broad field ?f endeavor which offers possibilities inherent III the Euro-dollar, Euro-bond, and other Euro~Urrency transactions, opportunities in financ109 foreign manufacturing and trade outlets, ~lld increasing opportunities for export financIng. These would appear to be a natural concOmitant of domestic banking activities, and I Would encourage the banks of this District to lOok toward such foreign connections, especially With Our neighbors to the South. At present, of course, I must reserve my encouragement to those who can enter these fields through branches, Edge Act corporations, and equity ~Wnership of foreign banks within the guide;lles of the Voluntary Foreign Credit Restraint rogram. Even within this program, however, there are elements of opportunity which only a few of you have started to explore. Other opportunities in bank-related areas inClUde the computer servicing of customer acCOunts, insurance relationships for loan acCOunts, the entire range of computer handling ?f billings, and the resultant closer ties to such I~dustries as utilities, department stores, and 011 companies. It does not seem unreasonable to me to permit banks to utilize fully tlle potentials of their computer installations in any way which retains an arm's-length dealing with customers. Even the on-line real-time applications and rentals look like possibilities where bank computer capacity exceeds that needed for routine operations. Certainly, the concentrations of bookkeeping and check handling are ideal uses for bank computers for both other banks and even nonbank financial institutions. In fact, I can visualize the central handling of checks as a step in the direction of direct funds transfers, either as an initial collecting point or as ultimate checkless operations. So much progress has been made along these lines that the mechanism for remittances has fallen out of step and needs updating to a modern automatic charge plan for all banks. We hope to introduce such a plan for District-wide use by early 1969. The remaining point in our discussion of bank expansion and diversification concerns bank ownership or participation in nonfinancial enterprises in a manner similar to conglomerates. Some qualified observers of the banking industry argue that if nonbank holding companies can purchase banks, then banks should be permitted equal rights in purchasing nonbank enterprises. This assumes that it is in the public interest to permit bank ownership by such holding companies. I suggest that there are at least a few undesirable elements to such ownership. If, as we contended previously, tlle banking industry retains a unique flavor by position, authorities, and operations, entry into this field must be carefully controlled. We do limit the establishment of new banks, but the transfer of ownership of existing banks is almost unregulated. I have previously spoken about the abuses I see in the bank stock loan arrangements. There are similar potential abuses in the holding company purchases of banks. Let me hasten to say that I do not favor a legislative prohibition on business review/ october 1968 7 such transfers, but merely regulation to limit the abuses and to keep the most dedicated, competent bank management free from stockholder pressures to accommodate loans which are questionable credits. Of course, we cannot indict all holding company ownership nor all owners who obtain bank stock loans, but there are sufficient evidences of abuse which appear to warrant some control. Where does this leave us with regard to bank diversification into nonbank-related activities? Can we establish a significant difference between the bank as the parent versus the bank as the subsidiary? I am hard pressed to draw too fine a line of demarcation, but I believe there is a gray area within which it would still be in the public interest to permit bank expansion and diversification while limiting, in like fashion, bank take-overs by nonfinancial holding companies. Stated in another way, I can see possibilities of bank investment and ownership of industries related to banking and industries which require the management talent and credit sources available at banking institutions; but I suggest that there are sufficiently unique characteristics in banking to limit the willingness of supervisors and legislators, to permit only a smaller and more restrictive range of acquisition of these outside corporations. The apparent trend toward a departmentstore concept of financial institution which could offer the services of all present types suggests a reconsideration of the separation of banking and investment functions in our economy. In my opinion, we have already come a long way toward the blending of certain functions, though I will readily admit that the deposit creation powers of the banking system have not as yet been passed to the other, nonbank financial institutions. I am prepared to agree to a restudy of this relationship to see if the abuses and dangers which brought separation in the 1930's 8 are still present in the environment of the 1960's. We have come a long way in modifying our financial structure in tlle past 30 years, and perhaps this separation is one of those carryover restraints which need no longer exist. I do not know the answer but suggest that a reappraisal after 30 years is not unreasonable. Another area in which change has outdated regulation is in the Federal Reserve discount window. Fortunately, a study has been made of this regulation, and the suggested changes are in your hands. I hope you will study them ca~~ fully and send to us your comments and c[1tJcisms. We want to make the discount mechanism as useful and helpful a tool as possib)~ within the requirements of maintaining ove~al monetary control. I think the new mechaDlS01 will do just that, but we need your thoughts about it. . to A part of the new discount approach IS d help the banks meet short-run adjustments an enable them to devote most of their lendable funds to helping their communities. Certainly, the banking community needs to grow with the commercial community, for if units of the ban)c~ ing industry do not keep pace with the size 0 thei r customers, then the servicing of these . to customers must be steadily concentrated In . the hands of only a few very large banks. ThIS would represent to me a greater hazard f~r competition and be farther away from the pu lic interest than if banking were permitted to ex~and into other fields or, certainly, groW bY mergers and holding companies. 'f the It would seem unfortunate to me 1 VI banks of the Eleventh District could not gr~e to meet their customers' needs and handle h'J1 credit requirements of these customers wit I . . future, thiS regIOn. In terms of the near-term . n . ' 'd ex pan slOte this must obvlOusly mean some rapl u of a sizable number of banks by whatever ro he is determined feasible and will best serve t public interest. district highlights Industrial production in Texas during August is estimated at 170.0 percent of its 1957-59 base, up fractionally from the July level but about the same as in June. In manufacturing, tbe production of both durable and nondurable goods held slightly above the respective July levels. Most of the month-to-month changes in output of the manufacturing industries were Stnall and largely offsetting. Mining output rose about 1 percent, with strength especially evident in the metal, stone, and earth minerals industry. As compared witll August 1967, total industrial production in the State was up 4.5 percent. Tbe output of durable manufactures was 11 percent larger; and nondurables, nearly 8 perCent higher. The strong performance in manufacturing was partially offset by a year-to-year decrease of 5 percent in mining output, due entirely to the lower level of crude petroleum Production. Crude petroleum output last year Was quite high as a result of the demands steml11ing from the Middle East oil crisis. In August, nonagricultural wage and salary el11ployment in the five soutllwestern states tOtaled 5,958,000, down fractionally from the previous month. The month-to-month easing ~as about as seasonally expected. ManufacturIng employment also decreased seasonally in AUgust, but nonmanufacturing employment declined slightly more than is usual for this time of the year. Within the nonmanufacturing sectOr, construction and government employment each showed a little less than the usual strength. Total southwestern nonagricultural employl11ent in August was 3.8 percent above a year earlier, with the manufacturing work force ShoWing a gain of nearly 5 percent. The number o£ Workers in nonmanufacturing industries ex- ceeded a year ago by 3.5 percent; mining and services posted the largest increases among the non manufacturing categories. In the Eleventh District, daily average production of crude oil declined 1 percent during August and was almost 8 percent below output in the same month last year. Texas posted a larger monthly decrease than the District as a whole, with east Texas having a decrease of 2.4 percent. Southeastern New Mexico and northern Louisiana showed very little change for the month. Production in virtually every area in the District declined on a year-to-year basis. As was true during July, comparison of August output with a year earlier reflected the extraordinarily high levels of output last year stemming from the Middle East crisis. The Texas allowable was set at 44.8 percent and 41.3 percent of the Maximum Efficient Rate of production for August and September, respectively. For October, tlle Texas allowable is unchanged, and iliere is a small reduction in the Louisiana allowable. Capline, the Nation's largest crude oil pipeline, has begun to deliver oil from southern and offshore Louisiana to ilie Middle West; and throughput at the end of September is estimated at 300,000 barrels per day. Eventually, the pipeline is expected to deliver 1 million barrels per day. Many connecting pipelines need to be completed before Capline can reach full capacity. Yet to be resolved is the problem of the allocation of the middle western crude oil market between Canadian and southwestern crude oil suppliers. August registrations of new passenger automobiles in the major market areas of Dallas, Fort Worth, Houston, and San Antonio were business review/ october 1968 9 6 percent lower than in the previous month but 18 percent higher than in the same month a year ago. Cumulative registrations were up in each of the markets, and the total for the four areas was 18 percent above the January-August period last year. Department store sales in the Eleventh District in the 4 weeks ended September 21 were 15 percent more than in the corresponding period in 1967; both periods included the Labor Day holiday. Cumulative sales were 13 percent stronger than in the comparable period last year. Cotton conditions in the five Eleventh District states have improved; and, as of September 1, production in 1968 is expected to be around 5 million bales, or 1 million bales greater than the 1967 crop. Estimates of sorghum grain production and rice output have been reduced slightly, but outturns for both crops are indicated to be higher than their respective 1967 figures . Much of the increased production of these two crops can be attributed to the abovenormal moisture conditions that have prevailed over most of the District. Range and livestock conditions are about normal; the eastern section has been receiving adequate rainfall, while the western half of the District is experiencing dry weather and deteriorating grazing conditions. On September 1, there were 855,000 head of cattle and calves on feed in Texas for slaughter market, which is 39 percent above the number on feed a year ago. Placements during August totaled 215,000 head. Prices received by Texas farmers and ranchers for all farm products during January-August averaged 2 percent above the corresponding period last year. Prices for crops were up 1 percent, and those for livestock and livestock products were 4 percent higher. In August, the monthly index of prices received by Texas farmers and ranchers for all farm products ad- 10 vanced 9 percent over the previous month. A sharp increase in the price for cotton was the primary reason for the August gain. Cash receipts from farm marketings in the District states during the first 7 months of 1~68 were about unchanged from the corresponding period in 1967. The increase in livestock receipts offset the decline in crop receipts. Changes in the major balance sheet ite~S were mixed at the District's weekly reportIng commercial banks in the 4 weeks ended September 11 . Total investments and total delnan~ deposits advanced, but loans adjusted and tata time and savings deposits declined. In mo.s~ cases the changes suggest less strength than 1 , . b~ the comparable year-earlier period. NegotJ~ time certificates of deposit issued in denominations of $100,000 or more decreased nOOlinall~ - in sharp contrast to the previous 4-~ee period, when they rose sharply, $103 million . Loans adjusted declined $39 million during the 4 weeks ended September 11, or. almost . d double the reduction in the comparable peno in 1967, as loans to nonbank financial institu~ tions and business loans fell $29 million an $26 million, respectively. A year ago, loans ;~ nonbank financial institutions advanced $ iImillion, while business loans decreased $4 m I lion. In contrast to the decline in loans, t?t;. investments showed a sharp rise of $91 milli o ; a $110 million increase in U.S. Governmen s security holdings, attributable entirely to n~te and bonds, more than offset a slight reduCtiOn in non-Government holdings. Among the liability items, total demand d;~ posits rose $112 million as increases of $1 million and $48 million, respectively, in int~r bank deposits and in deposits of individua;~ partnerships, and corporations more th~n 0 d set declines in U.S. Government depoSl~S. aus in deposits of states and political subdiVIS1:~ The rise in IPC demand deposits was less. t d a one-half the gain in the comparable peno year ago. Total time and savings deposits declined slightly, $21 million, primarily because of a $15 million dip in time deposits of states and political subdivisions. The nominal decrease in negotiable time certificates of deposit issued in denominations of $100,000 or more indicated tl1at tl1e large banks in tl1e District apparently had built tl1eir CD position up to a satisfactory level, given tl1e state of current and expected loan demand. ELEVENTH FEDERAL RESERVE DISTRICT OKLAHOMA NEW MEXICO DALLAS HEAD OFFICE TERRITORY HOUSTON BRANCH TERRITORY SAN ANTONIO BRANCH TERRITORY EL PASO BRANCH TERRITORY business review/october 1968 11 STATISTICAL SUPPI!EMENT to the BUSINESS REVIEW October 1968 FEDERAL RESERVE BANK OF DALLAS CONDITION STATISTICS OF WEEKLY REPORTING COMMERCIAL BANKS RESERVE POSITIONS OF MEMBER BANKS Eleventh Federal Reserve District (Averages of da ily flgures. In thousands of doliars) Eleventh Federal Reserve District ==- (In thou sands of doliars) 5 weeks ended Aug.7,1968 5 weeks ended Sept. 4, 1968 720,918 670,071 50,847 715,179 5,739 10,286 -4,547 711,608 660,633 50,975 707,397 4,211 18,497 -14,286 661,632 616,140 45,492 658,437 3,19~ 708,047 535,1 10 172,937 674,339 33,708 17,339 16,369 703,935 532,203 171,732 670,432 33,503 9,862 23,641 646,906 488,321 158,585 608,925 37,98 1 2785 35:196 1,428,965 1,205,181 223,784 1,389,518 39,447 27,625 11,822 1,415,543 1,192,836 222,707 1,377,829 37,714 28,359 9,355 4 weeks en ded Sept. 25, 1968 It em Aug. 28, 1968 Sept. 27, 1967 ASSETS Net loans and discounts ...... ............ .... Valuation resorves . ........... ..... ....... ... Gross loon s and di scoun ts ... . . ........ . •. ..... 5,917,128 105,52 1 6,022,649 5,830,024 105,491 5,935,515 5,195,267 93,935 5,289,202 2,757,522 2,715,407 2,523,7 43 89,824 95,893 100,334 36,107 21,478 8,639 23,746 15,01 2 59,832 573 351,963 592 337,647 604 324,555 142,152 340,211 581,487 473,224 5,917 606,941 138,659 338,450 572,602 495,72 2 5,478 604,226 188,524 266,952 504,505 186,346 5,686 537,527 0 615,250 0 598,454 ecc U.S. Government securities ... .... ......... Oth er securities ......................... Other loans for purchasing or carry ing: U.S. Government sec urities ... ...... ...... . Oth er securities ........•..... . .......... loan s to nonbank financial institutions: Sales flnance, p ersonal flnance, factors, and other business credit companies •••.... Other .•...... ··••·•••• •··•• · ··•·• ·· •• . Real estate loans ... .... ......... .......... loans to dom estic commercial banks....... .... Loans to foreign banks .•.. •... . ... ... ..... . Consumer instalment loans •.•................ loans to foreign governments, offlcial institutions, central banks, international institutions..•.. ........ . ·· ··· ··•·· ·· •• · . Other loans .............................. Sept. ~ RESERVE CITY 8ANKS Total reserves held .. .. .. .. .... With Federal Reserve Bank ... . Currency and coin ........... Require d reserves ............. El(cess reserves ............... Borrowings . ..........• . ...... Free res erves ............ . .... 0 575,582 ---- Comm ercia l and industrial loan s•............. Agricultural loon s, excluding certificates of interest .................... Loons to brokers and d ealers for purcha sing or carrying: Item Total investments ..................•......... 2,683,273 2,495,899 1,260,63 1 30,490 0 1,107,134 20,650 0 1,249,736 190,322 0 Total re se rves held ... .... ... .. With Fed eral Res erve Bank .• .. Currency and coin ....... .. .. Require d reserves .. .... ....... El(cess reserves ••...•......•.. Borrowings .... ... .. .......... Free reserves ....•............ ALL MEMBER 8ANKS Tota l reser ves hel d .. ..... ..... With Federal Rese rve Bank . ... Curr ency and coin ..... ...... Required reserves •. ...... ..... Excess reserves .........•...•. Borrowings •................•. Free reServes . •.. .. . .. ....•... 1 308,53 8 1'104,46 1 '204,077 1 267,36 2 , 41,176 2,785 38,391 ------- 2,565,390 Total U.S. Governm ent securitie s...•.......... Treasury bills .. .. .......•.........•..... Trea sury certiflcates of indebtedness •.. ..... Treasury note s and U.S. Government bond s maturing: Within 1 year ..•..••................. 1 year to 5 years .......... ..... ...... 3,195 COUNTRY 8ANKS Afte r 5 years •••.• •••.••. •..••••...... Obligation s of states and political su bdivisions: Tax warrants and s hort~term notes and bills • • All ather • •• •.•••••. ••••••••..• • •.••... . Other bonds, corporote stocks, and sec uriti es: Participation certiflcat es in Federal agency loans ....•...• . . ............. . 353,547 597,761 278,833 205,538 582,809 298,137 162,675 658,423 238,316 29,762 1,200,339 26,362 1,168,660 35,280 1,057,728 124,471 69,272 883,350 736,260 84,550 420,065 5,307 355,749 TOTAL ASSETS •..••. •••••.... .• •• .• •• • • 11 ,308,086 10,811,204 Cash items in proc ess of collection .............. Reserves with Fed eral Reserve Bank ... . .. •...... Currency and coin ............•••......••.... Balanc es with banks in the United States •...... .. Balanc es with bonks in foreign countries ......... Other a sse ts. . .. . ..... . ........ •.• '" ... .... (In thousands of doliars) ~ = = = = = = = = = = = = = = = = = = = = = = = = Sept. 27, Aug. 28, 967 Sept. 25, Item 1968 1968 ~ - - -a-I-g-a-dc-er-ti-fl--t-e-r-e-s-er--e-s.- .-.-.- .- .- .-.-.-.-.-. - • -3-8-6-,7-1-5 -- 3 ,9 To t Ica v . •-5-4--0-8- - 127,221 65,320 968,782 787,908 85,384 502,282 4,845 358,484 All other (including corporate stocks) ••.••••• CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS ---- 151,479 71,167 863,915 723,540 78,923 470,887 6,318 337,589 ---10,241,829 Disco unts for member banks.. .... .. ... ..... 29,010 16,859 Oth er discounts and advance s. . . . . . . . . . . . . . 0 2,198,030 2,227,040 1,228,837 2,189,030 21,2106~'m 1',480',757 Federal Reserve notos in actual circulation.... . ' 0 1 967033 1:968:32f~ 1,118'63 1,343, 1 0 U.S. Government securities. • • . • . . . • . . • • • • • • Total earn ing assets......... . ....... . . .. .. Member bank reserve de posits... ......... .. 43 ~,m 1,502,818 CONDITION STATISTICS OF ALL MEMBER BANKS Eleventh Federal Reserve District LIABILITIES Total deposits .•••••..••••...••.•.•..•...••• (In miliions of dollars) 9,155,083 8,732,800 3,899,020 240,859 267,740 1,200,053 3,750,581 267,282 114,903 1,139,343 5,317,770 3,657,638 273,971 173,616 1,124,938 9,374 21,431 72,458 3,778,772 5,676 20,759 79,318 3,777,221 2,461 22,342 62,804 3,415,030 1,045,983 2,057,084 635,631 12,835 22,539 1,043,301 2,049,270 646,098 10,206 22,646 1,121,636 1,749,345 505,512 12,340 24,197 LIA81LITIES AND CAPITAL ACCOUNTS Demand deposits of banks .. •. . ••. •.•..•• 4,500 200 5,500 200 800 1,200 Tota l deposits ...••..• • •..•• •.• ...•.. Other 110 bilities •.•.•.•..•••••••..•.•••••...• 651,949 240,394 506,614 222,446 424,917 195,050 CAPITAL ACCOUNTS ••••....••....•........• 926,036 ---10,811 ,204 Total demand deposits •••••...•••••.•...•.• Individuals, partnorshlps, and corporations . ... State s and political subdivi sion s . •.... .... .. U.S. Gov ernm ent ......••............ Banks in the United Stat es ........... .. . ::: Foreign: Governments, offlcial institutions, central banks, international institutions ......... Commercial banks......... ••.. ... ... .. CertiA e d and ofAc ers' checks, etc ....•. ..... Total time and saving s d epo sits ........... ... Individual s, pa rtn erships, and corporation s: Saving s d e posits ....... ....... ........ Oth er tim e d eposits •................... States and political subdivisions .............. U.S . Governm ent (including po stal savings) ..... Banks in the Unitod States ...............•... Foreign: Governm ents, offlcial in stitutions, central banks, int ernational institution s ......... . . Commercial banks........ •..... . •.. ..... Bills payabl e, re discounts, and other liabiliti es for borrowed mon ey •... ........... ---- ---5,710,935 5,377,862 TOTAL LIABILITIES AND CAPITAL ACCOUNTS 11,308,086 2 927,061 889,062 ---10,24 1,829 ~ ====================== AUg· 30, Aug. 28, Ju ly 31, 1967 1968 1968 ~ Item 9,489,707 ------------------------------------ASSETS Loans and discounts...... " ....... •.. ... U.S. Governm ent obligations.....•.•...... Other securities ••....•.•.... . ....••.... Reserves with Federal Rese rve Bank ....... . Ca sh in vault .. .. .. .. ... . . ............ . Balances with bank s in th e United States . .. . Balances with banks in foreign countri es e ... . Cash items in proc ess of coll ection ........ . Other a ssets e •. •. .. . ... .. .. .•. ... .....• 10,191 2,380 2,814 1,165 252 1,129 7 1,002 463 TOTAL ASSETse •••••.•.•....••...•.• 19,403 Other demand deposits.. . . . . ........... . Time de po sits.•.....................•.• Borrowings ........................... . Oth er liabilities e .........•............. Totol capital accounts 8 •.• • • • • • • • • • • • • • • • TOTAL lIA81L1TIES AND CAPITAL ACCOUNTSe ..•...••••••...•...... 1,419 8,282 7,233 16,934 527 329 1,613 10,029 2,366 2,810 1,104 247 1,12~ 1,063 477 - ~ 1,410 8,305 7,160 - 16,875 453 300 1,596 - 89 91 2'439 2'55 1 1'0 49 '23 4 1 , 10~ -861 383 ~ I 36 6 7'7 30 6:3 91 ---: 7 15,48 359 248 1,5 21 --17 615 ~~ -----------------------------e - Estimated. BANK DEBITS, END-Of-MONTH DEPOSITS, AND DEPOSIT TURNOVER IDoliar amounts in thousands, seasonally adiusted) ~~~==================================================================================== DEBITS TO DEMAND DEPOSIT ACCOUNTS' DEMAND DEPOSITS' Percent change 1968 (Annual-rate basis) Standard metropolitan '----- statistical area I.RllONA'. Tucson................................... IOUI SlANA, Monroe . • • • . . • • . . . . • . . • . • . . . . • . • • • • • • • • NEW Shreveport.. ............... ............. lEXA MEXICO. Roswell ' . • . . • • • . • . . • • • • • • . . . • . • • • . • • • S, $ 4,399,020 2,188,356 6,252,480 726,072 ~~~~~~:':':::::::::::::::::::::::::::::::::: ~:m:m 8eoumont-Port Arthur-Orange. • • . . • • • . • • • . . . . • • c'0wnsville-Harling en-San Benito. • . • • • . • . • • • . • • • ~~$:T . . . · .· ·.· . .·· .· . ·· ·. . H alvoston-Texa s City. • • .. . . . • . • . . . . . .. • • • .. . . 5,766,060 1,086,036 2,365,368 ~~~~~~':::::::::::::::::::::::::::::::::::: 7::w:m Mf~~~n-Phorr-Edinburg.... . • . . • • . . . • • • • • • • • • . . 1,286,700 r:1]~;{SU ••••.• ·•· ••• ·•·•·•••••••••.• .l.m.!!! T"jarkana (Texas-Arkansas).... • • . • . • • • • • • • . • . • ~;~~::::::::::::::::: ::: ::: :::::: ::::: :: :: 1 '1'1 Ichita Falls. • • • • • • • • . • • . • . • . • • • • • . • . • • . . • • • ~nt"rs •••••.• ••••. .••...•••....•• ••• •.... '0 2 C:poslts July 1968 -9 -7 1,447,776 W~:m 2,274,480 ----$268,464,408 August 1967 8 months, 1968 from 1967 2 4 1 8 18 10 18 45 2 -8 10 -2 15 6 17 10 15 13 -8 -6 6 3 17 13 12 10 9 2 3 -2 13 August 31, 1968 14 -3 4 1 9 -4 -23 o -3 -2 6 -1 -1 -8 -7 -12 -8 1 5 -4 -5 -2 -5 -4 4 5 7 August 1968 July 1968 August 1967 $ 186,257 84,655 232,794 33,656 94,159 149,199 247,735 235,271 65,608 193,265 28,395 1,956,692 217,490 578,172 110,467 2,334,696 35,904 149,659 77,972 133,676 68,052 63,762 584,413 55,018 65,475 89,494 117,978 117,157 -2 13 25 4 9 11 9 19 6 17 13 14 13 3 6 7 6 10 16 10 11 9 12 6 -I -12 :i:lililll Annual rate of turnover August 1968 from August 23.5 26.3 27.1 21.5 20.0 35.2 27.1 24.3 16.5 22.2 13.6 45.3 28.1 33.5 22.0 34.5 20.4 27.5 15.9 13.0 20.1 16.9 24.1 17.1 21.9 20.6 20.3 19.6 26.1 28.7 26.7 22.1 19.5 35.5 25.5 25.6 21.0 22.4 15.8 46.6 30.1 31.7 23.2 34.6 22.4 29.3 17.5 14.4 20.1 15.8 25.1 17.8 22.7 22.0 21.3 20.2 25.8 27.9 26.2 18.1 18.6 32.1 22 .8 25.1 18.6 20.6 12.9 42.8 27.9 31.2 22.1 32.8 20.0 30.5 16.8 13.3 20.7 16.4 23.2 15.8 21.6 19.6 21.1 20.0 32.4 33.0 30.9 $8,307,071 of individuals, partners hips, and corporations and of states and political subdivisions. Unly ba.ls . GROSS DEMAND AND TIME DEPOSITS Of MEMBER BANKS Eleventh Federal Reserve District (Averages of daily flgures. In millions of dollars) TIME DEPOSITS GROSS DEMAND DEPOSITS BUILDING PERMITS ~ Date Total cily banks Counlry banks 1966, August. •• • 1967, August •• • • 1968. March ..... April ...... May •••••• 8,637 9,178 9,510 9,655 9,460 9,548 9,742 9,732 3,982 4,26B 4,388 4,486 4,382 4,453 4,554 4,523 4,655 4,910 5,122 5,169 5,078 5,095 5,188 5,209 Reserve VALUATION (Dollar amounls in thousands) Percent change Aug. 1968 NUMBER ~ ~lONA t \Jeso n OUIS ........ 1.\ IANA I ~rO.-West °nro 1 Sh,......... EXAS Port .... Abilene A~orill .... •· . ~Uslin 0 •••••• 8~Q\J~~n·t: : • •• ~~r~~"iII •• : : : 0'" 0 s Christl .. EI Po:~'''' ~O'I W··· .... ~ 'Ives~rlh .... l OUston on . .... l'redo • '. ' " ~b bock' ••..• Oidl ond ' ...•• pdeha '" " . S·'I Arlh· .. ••• Qn A.n ur .... S" A 9.lo •.• le_ nlOOio WOrkan ..• W Oco a . ... IChll~' F·· ... from 1968 July 1968 Aug. 1967 8 months, 1968 from 1967 1,895 $ 24,074 -59 -22 2,570 3,452 15,363 17,813 81 61 101 25 216 1,059 12,633 747 149 5,443 28,911 4,219 8,508 292 35,401 273 1,920 543 1,545 1,695 388 7,641 340 1,440 976 5,767 14,317 84,563 11,522 3,758 30,896 183,957 44,879 60,458 8,360 262,894 1,741 23,457 9,445 4,593 4,106 6,999 87,322 12,364 11,997 8,683 -63 -61 59 -49 -88 18 7 -12 -5 6 35 279 -79 -83 487 148 -25 43 -96 38 - 14 -27 -64 91 -67 -85 174 -29 -7 -26 -93 -47 -72 -62 -32 279 514 -39 -46 19 -44 -70 -27 - 11 1 -10 43 47 16 14 -7 -10 -13 -47 3 - 10 1 60 - 14 15 334 13 -46 73,963 $122,256 $939,328 -1 -31 Aug. 1968 8 mos. 1968 683 4,134 69 459 45 113 419 124 93 413 1,804 367 570 81 2,117 41 102 39 61 103 61 1,201 37 262 75 1'1 I ails • • Q....... 24 c:itj as . . 9,339 Country banks 5,764 6,394 6,935 6,973 6,950 6,964 7,059 7,208 2,670 2,742 2,863 2,869 2,840 2,847 2,921 3,049 3,094 3,652 4,072 4,104 4,110 4,117 4,138 4,159 Reserve 6 -19 362 928 3,208 1,110 858 3,258 14,232 3,668 4,311 655 17,767 284 922 547 529 666 522 9,458 326 2,014 571 city banks 42 562 3,071 Total Aug. 1968 $ 8 mos. June ••••• • July .. .. ... August •••• VALUE OF CONSTRUCTION CONTRACTS (In millions of dollars) January-August Area and Iype August 1968 July 1968 June 1968 1968 1967 FIVE SOUTHWESTERN STATES' ................ Residentia l building ..• •••• Nonresidential building ... . Nonbuilding construction . .. UNITED STATES ............ Residential building •••.... Nonresidential building . ... Nonbuilding construction . .. 806 240 175 392 6,318 2,295 2,128 1,895 636 253 186 196 5,956 2,287 2,414 1,255 563 233 185 146 5,589 2,243 2,030 1,316 4,444 1,849 1,283 1,313 41,347 16,660 14,631 10,056 3,966r 1,559r 1,390 1,017 36,223r 13,915r 13,472 8,837 Arizona, lou is iana, New Mexico, Oklahoma, and Texas. Revised. NOTE. - Details may nol add to totals becauso of rounding . SOURCE, F. W. Dodge, McGraw-HIli, Inc. 1 r- 3 DAILY AVERAGE PRODUCTION OF CRUDE OIL INDUSTRIAL PRODUCTION (In thousands 01 barrels) (Seasonally adiusted indexes, 1957-59 Percent change from August 1968p Area ELEVEN~H DiSTRiCT •••. ••.• Texas ........ . .. . .. ··· . Gull Coast ••••••.•••.• West Texas .......... . East Texas (prope r) ••••• Panhandle ••..••.•••.• Rest 01 Stat •••••• ••• •• Southeastern New Mexico .. Northern Louisiana ••• • .••• OUTSIDE ELEVENTH DISTRICT UNITED STATES ••••..••...• July 1968p August 1967 Jul y 1968 3,591.0 3,135.1 623.0 1,462.4 150.2 91.0 808.5 315.9 140.0 5,635.8 9,226.8 3,627.6 3,171.9 633.2 1,475.2 153.8 91.5 818.2 315.4 140.3 5,607.4 9,235.0 3,893.3 3,397.4 629.0 1,610.6 157.3 99.7 900.8 315.2 180.7 5,514.7 9,408.0 -1.0 -1.2 -1.6 -.9 -2.4 - .6 -1.2 .2 -.2 .5 -.1 August 1967 -7.8 -7.7 - 1.0 -9.2 -4.5 -8.7 - 10.3 .2 -22.5 2.2 -1.9 Pre liminary, SOURCES I American Petrol eum In stitute . U.S. Bureau of Mines. p _ = 100) ========================================~~ ~ August July Jun e August _____A_r_e_a_a_n_d_t_y~p_e_o_f_in_d_e_x________ ~p______l 9~6_8________6~8____---~ l_96_8 _ 19 TEXAS' .N.0ndurable .... .... ......... . MInIng ... . . ....... . ........ . . Utilities •.........•........... . 170.0 193.9 208.2 184.4 127.3 210.0 169.2 193.4 207.5 184.0 126.0 210.0 170.1r 191.3 206.7 181.0 129.1 r 224.9r 162.7r 177. 6r 187.6r 171. 0r 133.9 r 201.3 UNITED STATES M Total I industrial production...... anu acturing. . . . . . • • • . • . . • . • . Durab/. ... .................. .~ondurablo.. .. . . . . . . . . . . . . . . M,ning. • • . . . . . . . • . . . . . . . . . . . . Utilities ... . .. .. . ...... . . ...... 164.0 165.1 168.1 161.4 130.3 197.7 165.6 166.9 17 1.2 161.5 130.5 198.2 165.2 166.7 170.7 161.6 128.9 197.7 163.6 154.0 127.8 165.4 Total industrial pro duction ... . . . Manufacturing . . . . . .... . ...... . Durobl• .... .• ...... .. .... ... l~~:l ~ Reflecting th e use of improved mon-hour productivity factors a s of May 1968, the Texas industri al production index ha s been revi sed slightly bock through 1958. p Preliminary. rRevised . 1 Fede ral Reserve Bank 01 Dallas. SOURCES, Soard 01 Governors 01 th e Fede ral Reserve System. Federal Reserve 8ank 01 Dallas. CROP PRODUCTION NONAGRICULTURAL EMPLOYMENT (In thousands 01 bushels) TEXAS FIVE SOUTHWESTERN STATES' 1968, Average estimated 1967 S.pt.l Crop 3,450 24,232 Corn •. • •... ••. . 85,806 Winter wh ea t .. •• 20,876 Oats • • ••• •• •••. 3,584 Barl.y •• •.••••• 475 Ry •••••••.. • ••• 29,280 Rice' .... ... ... . Sorghum grain ... 367,198 744 Flaxseed •. . .•. . 4,362 Hay· ••• . .•••••• Peanuts5 • ••• •••• 378,300 4,382 Irish potatoes!) . .. 960 Sweet rotatooso .. 50,000 Pecans ... • ... .. Cotton' • • ••••••• 2,767 18,658 53,216 6,615 1,350 350 25,908 343,485 150 3,774 333,450 4,329 810 34,000 1962-66 4,223 23,729 60,621 17,217 3,497 417 19,394 253,013 741 3,Q93 262,338 3,082 842 39,400 1968, estimated Sept. 1 5,040 34,460 222,015 26,754 26,158 1,240 56,400 432,327 744 10,076 617,500 7,616 5,546 84,000 Average 1967 4,000 27,5 15 150,903 11,533 18,007 909 47,943 409,267 150 9,568 558,470 7,892 5,008 111,400 Five Southwestern States' ==============================~ hangPercent 66 Ira m 6,110 33,434 162,145 23,946 22,249 1,267 37,094 294,492 741 8,128 455,310 6,069 4,807 94,000 Arizona, Louisiana, New Mexico, Oklahoma, and Texas. In thou sands of bales. n In thousands of bags contoining 100 pounds each. 1 Total nonagricultural wage and salary workers .. Manufacturing . . ..•. ..... Nonmanufacturing . ..•.... Mining ..... ..... . ... . Cons truction . .......... Transportation and public utilities .. . ..... Trad e ........ . .. . . . . . Finance .... ........... Service . .. . ... ...... . . Government • .......... 5,740,500 1,062,100 4,678,400 226,500 380,600 _0.1 _.1 .4 .3 3. 5 447,200 1,357,900 290,900 925,100 1,189,600 446,700 1,354,200 290,700 922,700 1,202,200 438,100 1,319,500 282,500 880,400 1,150,800 .1 .3 .1 .3 2.1 2.9 3.0 5.1 3.4 Arizona, louisiana, New Mexico, Oklahoma, and Texas . Prelimi nary. Revised. SOURCE, State employment agencies. COTTON PRODUCTION Texas Crop Reporting Districts (In thousands 01 bales -- 500 pounds gross weight) 1968, 1968 a s perc ent of S. pt.l 1967 1966 10·N - South Texas Plains • •••.••••• • 10·S - Lower Ria Grande VaHey ••••.. 270 1,375 260 360 20 370 25 40 160 50 70 95 85 30 240 258 937 218 234 12 264 19 39 158 23 54 98 117 20 316 260 1,085 177 338 18 484 29 42 127 27 95 134 82 33 251 105 147 119 154 167 140 132 103 101 217 130 97 73 150 76 State ••• •.• ••..•••• ••• •••. • .•.. 3,450 2,767 3,182 125 l-N l-S 2-N 2-S 3 4 5-N 5·S 6 7 - North.rn Southern R. d Sed Red Sed Hig h Pla ins •• ••..• ••• High Plains •.•••••••. Plains ••.•••..•••••• Plains •••.•• •• .••••. - Western Cross Timbers •.. . , ... - 81ack and Grand Prairi.s • •• ••• - East Te xa s Timbered Plains. •• • - East Texas Timb e re d Plains ••• , - Tran s· Pecos•.. . .... .••.. .... - Edwards Plateau • • • . ••• ••••. • 8·N - Southern Texa s Prairie s •••.•.• 8·5 - Southern Texa s Prairies . •• . • . • 9 - Coa stal Prairies ••• . .......... SOURCE, U.S. Department 01 Agriculture. 4 _.4 4.9 3. 5 S.7 ~ -------------------------------------p - indicated 3. 8 5,965,700 1,118,000 4,847,700 238,400 392,800 6 In thousands 01 hundredweight. SOURCE , U. S. Department 01 Agriculture. Area t;ti 5,958,000 1,113,900 4,844, 100 239,300 394,100 r- In thousands of ton s. G In thousand s of pounds. 4 9 july August July August Type 01 em plo ymen t __~____~~________~___________________ 1968p 1968 1967r 1~ 1 !l ~ Number of persons 1962-66 1967 CROP REPORTING DISTRICTS OF TEXAS