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February 1966
FEDERAL RE
ANK OF ST. LOUIS
eview
Is Total Demand Too High?
CONTENTS
Poge
Is Total D em and Too
H ig h ? ............................
1
A nnual Report, Federal
Reserve Bank of St.
Louis, 1 9 6 5 ...................
4
M o n e t a r y , f i s c a l , a n d d e b t m a n a g e m e n t actions
since mid-1965 have been stimulative to the economy. Produc
tion, employment, income, and sales have risen substantially, and
since October price mark-ups have accelerated. Since movements
in monetary and fiscal policy variables usually influence the econ
omy with some lag, the full force of the recent policy mix may yet
be felt.
When an economy is at less than full employment, economic ex
pansion can stem from the use of idle resources as well as from
increases in the labor force and capacity. However, when full
employment is approximated, economic growth can come only
from additions to resources.
Since early 1961 economic expansion has been made possible
by utilization of idle resources, by additions to the labor force
and capital stock, and by technological progress. In early 1966
unemployment and idle capacity are low, implying that unless
resource growth accelerates the rate of growth of real output that
took place from 1961 to 1965 may now be unsustainable.
Volume 48
•
Number 2
FEDERAL RESERVE B A N K
O F ST. LOUIS
P.O.Box 442, St. Louis, Mo. 63166
Labor resources will probably increase less rapidly in 1966 than
in 1965. The number of persons of working age (18 to 64 years)
will increase at a somewhat slower rate than in 1965. In addition,
the armed forces may be expanding, and college attendance,
rising.
Given the state of the economy, the expansionary actions tak
en since mid-1965 may put a further strain on the economy. In
the near future any rapid increase in spending could
be reflected more in price increases than in increased
output of goods and services.
Policy V a r i a b l e s
Com po und ed A n n u a l Rates of C h a n g e in the M o n e y Supply
P er C e n t
Monthly Averages of Daily Figures
Seasonally Adjusted
P er C e n t
F in a n c ia l D e v e lo p m en ts
Monetary actions have been very expansionary since
mid-1965. Money supply growth accelerated from
what was already a rapid rate of expansion. Bank re
serves grew sharply, and bank credit expanded con
siderably.
The nation’s money supply (demand deposits plus
currency) has grown at a 7 per cent annual rate since
June. This was the fastest rate of expansion for a
seven-month period in thirteen years. Money increased
at a 4 per cent rate from September 1962 to June
1965 and at a 1.5 per cent rate from 1953 to 1962.
Full E m plo ym e nt B udge t Surplus
10
10
V/'J
5
Historically, sustained periods of strong monetary
growth have been accompanied, with a lag, by a rise
in spending.1 Since the economy is now fairly taut,
an exceptionally rapid increase in spending, which
could follow recent monetary growth, might result
more in price rises than in expansion of real output.
The increase in money in the past half year has
been facilitated by an expansion in the volume of bank
reserves. The growth of reserves that member banks
have available to support private demand deposits, the
largest component of the money supply, has been at
an advanced 6 per cent annual rate since mid-1965.
This recent rate compares with a 2.0 per cent rate
from September 1962 to mid-1965 and a 1.3 per cent
rate from 1951 to 1962. A major factor in the recent
gain of reserves was net Federal Reserve purchases
of Government securities.
0
5
0
....the ful employnlent surp us has d(dined,....
-5
-5
-10
-10
M o n th s
A ve rage Maturity of P u b lic Debt
M o n th s
. ..and th ? average maturity of the piib/ic debt
has sh )rtened.
70
60
50
1961
1962
1963
~
1964
=
1965
~
1966
Bars on money supply chart are periods of no marked and sustained
changes in the rates of change. Percentages are annual rates of
change between months indicated.
Sources: Board of Governors of the Federal Reserve System, Council of
Economic Advisers, and U.S. Treasury Department
Latest data plotted: Money Supply-January estimated
Full Employment Budget-4th quarter estimated
Public Debt-December estimated
Banks have expanded their holdings of loans and
investments at an estimated 10 per cent annual rate
since last July. This is significantly greater than the
5.6 per cent annual rate of growth from 1953 to 1964.
excise taxes on automobiles and telephone service,and built-in increases in income tax receipts. The
Government’s fiscal actions are expected to provide a
stronger stimulus to the economy in 1966 than in the
latter half of 1965.
T h e F is c a l S itu a t io n
Fiscal actions are somewhat less flexible than mon
etary actions, which can be altered quickly. It is
commonly thought that Government expenditures, es
pecially those concerned with national defense, are
not easily adapted to the goals of economic stabiliza
tion policy. Changes in tax rates are perhaps the
primary way by which fiscal operations can be ad
justed to the economic environment. However, since
tax changes must be enacted by Congress, they may
The Government’s spending and taxing actions in
the last half of 1965 were the most stimulative in many
years. Expansionary steps during 1965 included excise
tax cuts, increased social security outlays, expanded
domestic social welfare programs, and higher than an
ticipated outlays necessitated by the escalation of
activity in Vietnam.
In 1966 rising Government expenditures may more
than offset increased social security taxes, reinstated
l See “Money Supply and Time Deposits, 1914-1964” in the
September 1964 issue of this Review.
Page 2
2 If the President’s recommendations are adopted, excise taxes
on automobiles and telephone service reduced on January 1,
1966 will be reinstated. Excise tax cuts on admissions, auto
mobile parts and accessories, documentary stamps, and other
minor items will remain in effect.
be subject to a considerable “administrative” lag be
tween need and execution.
Economic Indicators
R eal GN P
B illio n s o f D o lla r s
70 0
B illio n s o f D o lla rs
70 0
Quarterly Totals at Annual Rates
Seasonally Adjusted
D e b t M a n a g e m e n t P olicy
The legal interest ceiling has had an effect on the
term structure of interest rates as well as on the ma
turity structure of the national debt. Yields on Treas
ury bills and intermediate-term Government securi
ties have risen abnormally relative to yields on long
term Government bonds.
T h e E c o n o m ic S e t t in g
Since summer a broadly based rise in aggregate
demand, encouraged by expansionary policy develop
ments, has resulted in a large increase in output. While
current dollar GNP rose at an 8 per cent annual rate
from the second to the fourth quarter of 1965, real
GNP rose at a 6 per cent rate. Total demand has
been so great that resource markets have tightened
and prices, including interest rates, have risen.
The jump in the nation’s real output of goods and
services at a 6 per cent annual rate from the second
to the fourth quarter of 1965 compares with a 4.3
per cent rate from 1960 to 1964 and a 2.4 per cent rate
from 1953 to 1960.
The strong increase in output was made possible in
part by marked increases in employment. Payroll em
ployment rose at a 5 per cent annual rate after mid
year compared with an average 1.8 per cent rate from
1960 to 1964. Total employment rose at a 3.5 per cent
rate in the last half of 1965 compared with a 1.4 per
cent rate from 1960 to 1964.
W h o le s a le P rice s
1 9 5 7 -5 9 = 1 0 0
108
-
-
106
104
-
102
100 “\V
106
104
102
100
1
-
/
-
98
98
P er C e n t
Unem plo ym e nt Rate
Per C e n t
8
Seasonall Adjusted
-
—1—
-
1
In recent months the Treasury has, in large meas
ure, lost control of the maturity of the Federal debt
because of the legal interest rate limit of 4.25 per cent
payable on new Government bonds (i.e., securities 5
years or more to maturity). Since this rate is no longer
competitive, Government borrowing has to be in the
form of securities with short or intermediate maturi
ties.
IT o
1957-59=100
108
1
Change in the composition of the Federal debt has
also tended to be stimulative since mid-1965 because
newly issued debt has been relatively short term. Sup
posedly, the shorter the maturity of the public debt,
the more expansionary its influence. This may be be
cause short-term debt is more liquid than long-term
debt, and the more liquid are people’s assets, the
more likely they are to spend. Shortening the debt
also tends to lower long-term interest rates relative to
short-term rates, making plant and equipment invest
ment somewhat more attractive.
-
-
1961
1962
1963
1964
1965
1966
Sources-. U.S. Department of Commerce and U.S. Department of Labor
Latest data plotted: GNP-4th quarter estimated
Wholesale Prices-January estimated
Unemployment Rate-December
At year end the unemployment rate was 4.1 per
cent, its lowest level in nearly a decade. Only 1.8 per
cent of the married men in the labor force were jobless
in December, a surprisingly low figure since it in
cludes those who are changing jobs and seasonally
unemployed, as well as some unemployables.
Tighter labor markets have encouraged wage in
creases, and labor costs per unit of output have risen
slightly over the past year. Nevertheless, price per
unit of output has risen faster than labor cost per unit
in the past year, indicating that rising labor costs have
not been the major cause of price rises.
Part of the strong increase in demand for goods
and services since last summer has spilled over into
price rises. The increase in U. S. wholesale prices dur
ing the last year and a half has been a marked depart
ure from the unusual stability experienced from 1958
to mid-1964. Wholesale prices started to rise in mid1964 and increased at a 2.4 per cent annual rate to
September 1965. Since then these prices have risen
at about a 4 per cent rate. The rise in the price
indexes since mid-1964 has been broadly based and
has been paced by sharp rises in the prices of sensitive
industrial materials and of agricultural commodities.
Consumer prices have gone up at a 2.8 per cent
annual rate since August compared with a 1.4 per cent
rate of increase from 1953 to 1964.
(Continued on page 16)
Page 3
A n n u al R ep o rt
Federal Reserve Bank of St. Louis
1965
T h e f e d e r a l r e s e r v e ba n k o f s t . l o u is
conducts day-to-day operating and supervisory func
tions, as well as participating in the formulation of
monetary policy. As a part of the Federal Reserve Sys
tem it contributes to economic growth, a high level of
employment, and a viable price level. Its policy actions
and the economic information upon which they are
based are frequently discussed in this Review. This
article, however, focuses primarily on the operating
aspects of the bank during 1965. Its operating and
supervisory functions contribute to efficient commer
cial bank and Government financial operations in the
Eighth Federal Reserve District.
Although the basic demand for Reserve Bank serv
ices reflects such factors as the area’s population,
income, and level of business and financial activity,
the size and structure of the commercial banking sys
tem in the district is important in determining the
volume of Reserve Bank activities. Some measures of
the size and structure of commercial banking in the
Eighth District and the nation since 1950 which have
influenced the volume of operations at the Federal
Reserve Bank of St. Louis are discussed in this article.
Structure of Eighth District Banking
As of June 30, 1965 there were 1,500 commercial
banks, with combined assets of nearly $16 billion and
deposits exceeding $14 billion, located in the Eighth
Federal Reserve District. About 11 per cent of all
commercial banks in the nation (7 per cent of all
banking offices) are located in the district. However,
reflecting their smaller average size, Eighth District
banks hold only 4.4 per cent of the nation’s bank assets
and 4.5 per cent of all bank deposits.
The commercial banking system in the United States
at mid-1965 comprised 13,791 banks maintaining a
total of 28,938 banking offices. As in the Eighth Dis
trict, the number of banking offices has increased rap
idly in recent years, rising from 18,964 in 1950. Bank
ing office gains in the nation resulted entirely from new
branches and additional offices, as the number of banks
declined from 14,121 in 1950 to 13,791 in 1965. The
number of branches and additional offices more than
tripled during the period, rising from 4,843 to 15,147.
B a n k in g O ffices
Eighth District banks in mid-1965 maintained 2,054
offices for conducting banking business ( Table I ). The
total number of banking offices has increased substan
tially during the last 15 years, rising from 1,616 in
1950. The gain in banking offices reflects primarily the
establishment of branches and additional offices rather
than organization of new banks. The number of banks
increased by only 30, from 1,470 in 1950 to 1,500 in
1965, while the number of branches and additional
offices increased from 146 to 554.
Page 4
Table I
COMMERCIAL BANKS AN D BANKING OFFICES1
(December 31)
Eighth District
Banks
United States
Banking
Offices
Banks
Banking
Offices
1950
1,470
1,616
14,121
18,964
1955
1,459
1,677
13,716
20,639
1960
1,476
1,826
13,472
23,955
1965 (June 30)
1,500
2,054
13,791
28,938
1Banking offices include banks, branches, and additional offices.
R a tio o f B a n k i n g O ffic e s to P o p u la t io n
The number of banking offices relative to population
may be used as a rough approximation of the avail
ability of banking services. In the Eighth District the
number of banking offices per 100,000 persons was 16.3
in 1965, somewhat above the average of 14.8 for the
nation (Table II).
Table II
RATIO OF BANKING OFFICES TO POPULATION
Population
(Thousands)
Eighth D istrict 2
Banking Offices
per 100,000 Persons1
Change
Number
1950-65
1950
1965
1950
1965
10,472
11,460:i
15.1
16.3
8%
5
4
Arkansas
1,910
1,972
12.3
12.9
Illinois
1,319
1,361
20.6
21.3
Indiana
Kentucky
693
740
19.9
18.2
1,561
1,810
16.0
18.8
17
18
15
Mississippi
1,041
1,050
13.5
Missouri
2,970
3,341
14.9
15.5
14.4
— 3
978
1,186
13.0
15.6
20
152,271
194,583
12.6
14.8
17
Tennessee
United States
ilncludes banks and branches. District data exclude “limited service”
offices and are not precisely comparable with United States data.
2Includes all of Arkansas but only portions of the remaining states.
^Estimated by the Federal Reserve Bank of St. Louis, based on county
population data prepared by state health departments or agricultural ex
periment stations.
The rapid growth of branches and other offices in
the district and the nation in recent years has resulted
in a faster rate of increase in total banking offices than
in population. Banking offices per 100,000 people in
the district increased 8 per cent from 1950 to 1965; in
the nation there was a 17 per cent increase.
Prior to the agricultural recession of the 1920’s and
the general depression of the 1930’s substantially more
banking offices existed in the United States relative to
population (Table III). With the advantage of hind
sight it appears that there may have been more banks
Table III
BANKING OFFICES PER 100,000 PERSONS
United States
1915........................................... .... 26.5
1920........................................... .... 28.5
1925........................................... .... 26.2
1930........................................... .... 21.7
1935........................................... .... 14.6
1940........................................... .... 13.5
1945........................................... .... 12.8
1950........................................... ....12.6
1955........................................... .... 12.5
number of offices declined almost 50 per cent. Eco
nomic expansion was slow during the rest of the 1930 s,
and relatively few banking offices were established.
Also, entry into banking was hampered by rules de
signed to prevent abuses caused by an excessive num
ber of banks. The war effort required most of the
nation’s resources in the first half of the 1940’s, and the
ratio of banking offices to population continued rela
tively low.
Since World War II economic conditions have pro
vided a strong demand for new banks or new banking
offices. The rate of increase in banking offices, how
ever, did not exceed that of population until about
1955. The number of banking offices is now almost as
large as at the peak in 1920 but is far less in relation
to population. A lower banking office-population ratio
may be appropriate; first, there may have been an
uneconomically large number of offices in the 1920’s,
and second, increased urbanization and improved
transportation may have decreased the economical
number of banking offices in relation to population.
The banking office-population ratio varies consider
ably within the Eighth District. In 1965 there were
12.9 offices per 100,000 people in Arkansas compared
with 21.3 in Indiana. Since 1950 the ratio of offices
to population has increased rapidly in the district por
tions of the branch banking states of Indiana, Ken
tucky, Tennessee, and Mississippi but has remained
relatively stable in the nonbranching states of Arkan
sas, Illinois, and Missouri.
Several factors may be of importance in explaining
variation in the banking office-population ratio. In
cluded are variations in state banking laws and popu
lation density. State laws pertaining to branch bank
ing apparently exert a strong influence, since those
states which permit branching have had greater bank
ing office-population ratio gains than have unit bank
states. Urban areas have lower banking office-popula
tion ratios than rural areas. For example, there are 5.3
banking offices per 100,000 people in the St. Louis
Metropolitan Area compared with 21.8 offices per
100,000 people in the rest of the district portion of Mis
souri. While rates of population and economic growth,
differences in attitudes of state regulatory agencies in
granting bank charters, and other factors are impor
tant in influencing the ratio of banking offices to popu
lation, the extent of their impact is more difficult to
assess.
1960........................................... ....13.4
1965........................................... .... 14.8
in the 1920’s than were economical. Many failed and
were not replaced. During the four years 1929-33 the
B a n k D ep o sits
Total deposits at commercial banks in both the dis
trict and the nation increased throughout the 1950 s,
Page 5
and since 1960 the growth has accelerated. Deposits
at Eighth District banks rose from $6.7 billion in mid1950 to $14.1 billion on June 30, 1965, an average an
nual rate of 5.1 per cent (Table IV). During this
period deposits in the nation grew at an average rate
of 5.3 per cent. Since 1960 total deposits in the dis
trict have risen 7.7 per cent annually compared with
8.3 per cent for the nation.
Demand deposits at district banks rose from $5.4
billion in 1950 to $8.5 billion on June 30, 1965, an aver
age annual increase of 3.1 per cent. In the nation
such deposits rose from $106.5 billion to $173.2 billion,
a gain of 3.3 per cent annually. Since 1960 such de
posits in the district have increased at a 3.6 per cent
rate compared with 4.3 per cent in the nation.
Total bank deposits per capita increased at an an
nual rate of 3.5 per cent in the Eighth District from
1950 to 1964 compared with 2.9 per cent in the nation
(Table V). Per capita demand deposits in the district
and nation rose at annual rates of 1.5 per cent and 0.4
per cent, respectively, while per capita time and sav
ings deposits rose at rates of 8.9 per cent and 6.0
per cent.
The growth of time and savings deposits has pro
ceeded much faster than the growth of demand de
posits. From 1950 to 1965 time and savings deposits
at district banks rose from $1.4 billion to $5.6 billion,
an annual rate of 9.9 per cent. Since 1960 such depos
its have risen at an annual rate of 16.4 per cent. Time
deposits in the nation increased somewhat less rapidly,
rising at a 9.1 per cent annual rate during the whole
1950-65 period and at a 14.9 per cent rate since 1960.
The substantial growth in time and savings accounts
is the result of increased aggressiveness by commercial
banks in seeking funds to meet a rising demand for
credit. Reflecting this increased competition for funds
were more liberal interest rates paid by banks. Banks
have also developed additional sources of funds by
issuing unsecured notes, subordinated debentures, and
an increasing variety of certificates of deposit.
The higher rate of increase in district per capita de
posits has reduced the disparity between the district
and the national averages. Total deposits per capita
in the district rose from 62 per cent of the national
average in 1950 to 67 per cent in 1964. Per capita de
mand deposits rose from 73 per cent to 84 per cent,
and time deposits, from 34 per cent to 50 per cent.
Although the district has made sizable gains in per
capita deposits relative to the nation, a considerable
Table IV
SELECTED ASSET AN D LIABILITY ITEMS OF COMMERCIAL BANKS
(June 30)
Amount
(Billions)
1950
District
1955
1960
1965
U.S.
District
U.S.
District
U.S.
District
U.S.
Total deposits ....................................
$143.8
$8.3
$181.5
$ 9.7
$209.0
$14.1
$311.6
173.2
Demand ........................................
106.5
6.5
131.5
7.1
139.9
8.5
Time 1 .............................................
37.3
1.8
50.0
2.6
69.1
5.6
138.4
Loans ....................................................
44.8
3.3
75.2
4.8
114.8
7.9
187.9
U. S. Government securities.............. .........
O ther s e c u ritie s .................................. ...........
Total capital a c c o u n ts ....................... .........
Total assets .........................................
2.9
65.8
3.0
63.3
2.9
54.2
3.2
56.8
0.5
11.2
0.7
16.8
1.0
19.9
2.0
42.2
0.5
11.4
0.7
14.9
20.3
1.4
29.2
156.9
9.1
199.3
1.0
10.8
237.0
15.7
353.5
Average Annual Rates of Change
1950-55
District
Total deposits ....................................
1955-60
U.S.
District
4.8%
3.1%
Demand .........................................
4.3
Time 1 ...........................
6.0
1.7
7.4
Loans ................................
U. S. Governm ent securities.............. .........
Other s e c u ritie s ................................ .........
Total capital a c c o u n ts ....................... .........
Total assets .......................................
1 Includes both time and savings deposits.
Page 6
1960-65
U.S.
2 .8 %
1.2
District
7.7%
1950-65
U.S.
District
U.S.
8.3%
5.1%
5.3%
3.6
16.4
4.3
3.1
3.3
6.7
14.9
9.9
9.1
10.9
7.5
8.8
10.7
10.4
9.0
10.1
— 0.6
— 3.1
1.9
1.0
0.6
— 1.0
7.7
— 0.8
8.4
5.3
3.4
15.4
16.3
9.4
9.2
7.1
5.5
6.6
6.3
7.5
7.0
6.5
4.9
3.5
3.5
8.7
7.8
8.4
5.3
5.6
0.6
Table V
DEPOSITS PER CAPITA
Demand Deposits1
Eighth District 3 .................... ................
Arkansas ......................... ................
Illinois
............................. ................
........................... ................
1950
1964
$437
$536
310
432
Annual Rate
of Increase
1.5%
2.4
________ Time Deposits 1
1950
1964
$123
$407
51
295
Annual Rate
of Increase
8.9%
13.4
Total Deposits 2
1950
1964
Annual Rate
o f Increase
$ 712
$1,158
443
867
4.9
3.5%
399
522
1.9
186
473
6.9
743
1,246
3.8
372
484
1.9
200
407
5.2
672
1,072
3.4
......................... ................
Mississippi ....................... ................
455
548
1.3
72
258
9.5
689
1,013
2.8
231
299
1.9
33
216
14.4
317
601
4.7
Missouri ........................... ................
Tennessee ...................... ................
611
698
1.0
180
532
1,498
2.9
490
0.7
126
560
805
1,342
3.7
United S ta te s ......................... ................
598
635
0.4
361
818
8.0
11.2
6.0
1,001
443
1,151
1,727
2.9
Indiana
Kentucky
1Excluding government and interbank deposits.
2 Including government and interbank deposits.
3Includes all of Arkansas but only portions of the remaining states.
gap still remains. Both demand and time deposits per
capita are below the national average. It is generally
believed that demand deposits are desired as a conve
nient means for settling day-to-day transactions and as
a means of storing wealth. If this is the case, the per
capita level is likely to be related to both per capita
income and wealth in a community. Per capita in
come in the Eighth District is below the United States
average but, like demand deposits, is increasing at a
somewhat higher rate than in the nation. Per capita
time and savings deposits, in addition to their rela
tionship to income and wealth, are perhaps associated
with the convenience and competitive features of
banking versus other savings-type institutions. Banks
in the Eighth District may be less competitive in this
respect than in the nation, due both to the structure
of district banking and to legal restrictions. Four dis
trict states limit the rates paid on time and savings
deposits.
In contrast to Government securities, the relative im
portance of “other” securities (mostly obligations of
state and local governments) in bank asset structure
has been increasing. Such securities held by district
banks increased from $0.5 billion in 1950 to $2.0 bil
lion in 1965, an annual rate of 9.4 per cent. Between
mid-1960 and mid-1965 district bank holdings of these
securities more than doubled. Relative to total assets,
these other securities increased from 7.1 per cent in
1950 to 12.6 per cent in 1965. A similar growth in such
securities has occurred at commercial banks in the na
tion, with holdings increasing at an average annual
rate of 9.2 per cent during the 1950-65 period. Such
securities increased from 7.1 per cent of assets to 11.9
per cent.
B a n k C red it
B a n k C a pita l
Loans at Eighth District banks increased from $2.2
billion in 1950 to $7.9 billion in 1965, an average
annual rate of 9.0 per cent. During this period bank
loans in the nation rose at an annual rate of 10.1
per cent. Since commercial banks have been increas
ing their loans faster than deposits, the loans-to-deposits ratio rose from 32.4 per cent in 1950 to 56.3 per
cent in 1965. In the nation this ratio rose even faster,
from 31.1 per cent to 60.3 per cent.
Total capital accounts of commercial banks in the
Eighth District rose from $0.5 billion in 1950 to $1.4
billion in 1965, an average annual increase of 7.0
per cent. Bank capital has increased at a greater rate
than some other important banking variables over this
period. The 7.0 per cent annual rate of growth in bank
capital compares with an annual increase of 5.1 per
cent in total deposits, 5.8 per cent in bank credit, and
5.3 per cent in total assets. As a consequence, the
capital-to-assets ratio of district banks rose from 6.9
per cent to 8.8 per cent during the period.
A decline in the holdings of U. S. Government secu
rities relative to total bank assets has been a major
complement to the increase of the loans-to-deposits
ratio. While the amount of such securities held by dis
trict banks has remained about unchanged since 1950,
Government securities have declined from 40 per cent
of total assets to 20 per cent. In the nation, Govern
ment securities declined from 42 per cent to 16 per
cent of total bank assets.
In the nation total bank capital rose from $11.4 bil
lion in 1950 to $29.2 billion in 1965, an average annual
increase of 6.5 per cent. The capital-to-assets ratio rose
from 7.3 per cent to 8.2 per cent.
Page 7
Bank capital relative to deposit liabilities has in
creased since 1950 in both the district and nation. Cap
ital accounts at district banks rose from 7.4 per cent of
deposits in 1950 to 9.8 per cent in 1965 (Table V I). In
the nation capital relative to deposits rose from 7.9 per
cent to 9.4 per cent. All of the rise in the ratio of cap
ital to deposits occurred in the 1950-60 period; since
1960 this ratio has been about unchanged.
June 30, 1965, whereas the 10 per cent containing the
smallest banks held less than 1 per cent of total de
posits (Table V II).
Table VII
DISTRIBUTION OF DEPOSITS BY BANK SIZE
Eighth District
Size G roups 1
Table VI
BANK CAPITAL AS A PER CENT OF DEPOSITS
AN D RISK ASSETS
1950
1955
1960
1965
Per Cent of Deposits
1950
1955
1960
1965
Top 10 per cent .........
63.15
64.03
60.88
59.69
12.11
2 nd 10 per cent .........
11.27
11.14
11.69
3rd 10 per c e n t .........
7.01
6.87
7.40
7.61
4th 10 per c e n t .........
5.20
5.06
5.59
5.76
5th 10 per c e n t .........
4.03
3.85
4.34
4.45
6th 10 per c e n t .........
3.08
2.95
3.31
3.46
7th 10 per c e n t .........
2.35
2.26
2.55
2.64
2.00
Eighth District ...........................
7.4
8.4
9.9
9.8
8th 10 per cent .........
1.83
1.76
1.93
United States .............................
7.9
8.2
9.7
9.4
9th 10 per cent .........
1.31
1.30
1.42
1.44
10 th 10 per cent
0.77
0.78
0.89
0.84
100.00
100.00
100.00
100.00
Per Cent of Risk Assets1
Eighth District ...........................
18.0
16.8
16.6
13.7
United States .............................
19.7
15.7
14.5
12.3
1 Total assets less cash assets and U. S. Government securities.
Relative to certain risk assets, bank capital has de
clined, both from 1950 to 1960 and since 1960. Capital
relative to all assets less cash assets and U. S. Govern
ment securities declined from 18.0 per cent in 1950 to
13.7 per cent in 1965 at district banks. Most of this
decline has occurred since 1960. Similarly, the capitalto-risk assets ratio in the nation declined from 19.7
per cent in 1950 to 12.3 per cent in 1965.
These data do not necessarily indicate that commer
cial banks are becoming more risky or that coverage
for loan and security losses has declined. Many bank
loans are guaranteed by agencies of the United States
Government, which in effect makes the risk equiva
lent to that of Government bonds. Also, foreclosures
and forced sales are at a very low rate compared with
some historical periods. Furthermore, most banks
maintain a sizable bad debt reserve which is deducted
from loans and not reflected in the capital account.
C o n c e n tr a t io n in D istrict B a n k in g
Another important aspect of the banking structure
in the district is the degree of concentration of bank
ing activity. Other factors equal, it is generally as
sumed that a greater concentration of banking activity
indicates less competition. To determine the level of
concentration in the Eighth District, all insured banks
were divided by volume of total deposits into 10
groups, each containing an equal number of banks.
This array of groups revealed that the 10 per cent con
taining the largest banks in the district accounted for
nearly 60 per cent of total deposits of all banks on
Page 8
Total
....................
1A11 insured banks grouped by total deposits. Each group in 1950 con
tained 141.9 banks; in 1955, 142.4 banks; in 1960, 145.2 banks; and
in 1965, 148.3 banks.
Since 1950 the percentage of total deposits held by
the various groups of banks has changed somewhat.
From 1950 to 1955 the share held by the group of
largest banks rose slightly, from 63.15 per cent of all
deposits to 64.03 per cent, while the share of each
other group, except the smallest size group, declined.
Since 1955 this trend has been reversed; total deposits
of the group of largest banks declined from 64.03 per
cent in mid-1955 to 59.69 per cent on June 30, 1965.
The diminution since 1955 in the percentage of total
deposits held by the group of largest banks has per
mitted a small increase in the relative share of all other
groups. Thus, it appears that, based on total deposits,
the banking industry in the Eighth District since 1955
has become less, rather than more, concentrated.
However, in a particular state or city the situation may
be considerably different than in the district as a whole.
The trends in relative amounts of most other vari
ables held by banks in the various groups are similar
to the trend in total deposits. The proportion of total
assets, time deposits, loans, and Government securi
ties all declined for the group of largest banks and
increased for all other groups. An exception to this
generalization was the trend in total capital accounts.
The proportion of capital in the first and the sixth
through tenth groups increased slightly between 1950
and 1965, while the second through fifth groups
showed declines.
C l if t o n
W il l ia m
B.
L u ttrell
E . P e t t ig r e w
Operations
a t t h e F e d e r a l R es erv e B a n k o f S t. L o u is
M o n e y H a n d lin g
Operations in the Money Department of the bank1
rose rapidly in 1965, primarily as a result of increased
coin counting. Following three successive years of
coin shortage, supplies began to gain on demand in
Coin Counted
nickel. These cupronickel faces are bonded to a core
of pure copper. Nonsilver dimes, scheduled to go
into circulation in early 1966, will be made of the
same materials and in the same manner. Later in the
year half dollars of reduced silver content will be
introduced. They will be faced with layers ot 80 per
cent silver and 20 per cent copper, bonded to a core of
79 per cent copper and 21 per cent silver, giving them
an overall 40 per cent silver content. All of the new
coins have the same designs and are of the same size
as their silver counterparts; however, the dime and
quarter are 9.3 per cent lighter and the half dollar is
8 per cent lighter. The traditional dimes, quarters, and
half dollars, all containing 90 per cent silver, are to
remain in circulation with the new coins.
Currency counting at the Federal Reserve Bank of
St. Louis rose to 219 million pieces in 1965 from 201
million pieces in 1964, an increase of 9.0 per cent. The
dollar value rose to $1.4 billion, an increase of 9.4 per
cent. Currency counting has shown little net change
1965. By the end of the year most
requests for coin, with the excep
tion of half dollars, could be filled
on schedule. During the shortage
member banks seldom had excess
coin to return to the Federal Re
serve, and counting operations de
clined drastically. In 1965, how
ever, coin counting rose to 318
million pieces from 227 million in
1964, a gain of 40 per cent. The
dollar value rose from $24.5 mil
lion to $27.0 million, an increase
of 10 per cent. This, however, was
still substantially below the 1961
peak when 490 million pieces val
ued at $48.3 million were counted.
Introduction of a nonsilver quar
ter in early November contributed
to increased supplies of coin. The
new quarter is a three-layer coin
with outer faces of the same alloy
as is used for the five cent piece75 per cent copper and 25 per cent
Table V III
VOLUME OF OPERATIONS1
Dollar Amount
(M illions)
1960
Currency counted ......................................
Checks handled 2 ......................................
Transfers of funds ...................................
1965
43.3
24.5
27.0
1,186.0
1,300.2
1,421.9
68,537
391.1
Noncash collection item s..........................
1964
61,434
91,837
466.7
94,453
102,900
566.2
109,066
U. S. Savings Bonds handled 3 ................
685.9
615.5
624.3
O ther Government securities h a n d le d '.
10,933.3
16,015.5
16,282.6
U. S. Government coupons p a id .............
123.1
144.9
136.6
17.4
5.8
15.3
Loans to member banks—
d a ily average outstanding..................
Number
(M illions)
1960
1964
1965
Coin counted ............................................
426.6
226.8
317.5
Currency c o u n te d ......................................
201.4
201,2
218.8
Checks handled 2 ......................................
170.7
226.1
244.6
Noncash collection item s..........................
.560
.528
Transfers of funds ...................................
.152
.188
.587
.200
U. S. Savings Bonds handled 3 ...............
7.534
8.155
8.784
O ther Government securities handled3 .
.457
.554
.564
U. S. Government coupons p a id .............
.872
.791
.733
1 Total for the St. Louis office and the Louisville, Memphis, and Little Rock branches.
1 Including the L ittle Rock, Louisville,
and Memphis branches.
2 Excludes Government checks and money orders.
3Issued, exchanged, and redeemed.
Page 9
since the early 1950’s. Both dollar value and number
of pieces declined from 1953 to 1961 but recovered
the loss by 1965.
Relative to personal income, coin and currency in
circulation rose rapidly during World War II but has
declined fairly steadily since the early postwar years.
From 10.0 per cent of personal income in 1940 the vol
ume of coin and currency in circulation rose to 15.6
per cent in 1945 but has since declined to 7.6 per cent
(Table X ). All the relative coin and currency de
cline has occurred in the currency component, which
dropped from 14.9 per cent of personal income in 1945
to 6.9 per cent in 1965. Coin totaled about 0.7 per cent
of personal income in 1945, the same as in 1965.
Currency Counted
Table X
COIN A N D CURRENCY IN CIRCULATION
A S A PER CENT OF PERSONAL INCOME
Coin
The amount of coin and currency in circulation in
the country has risen rapidly since 1960. Coin in cir
culation has risen at a rate of 9.4 per cent in the last
five years compared with a 4.5 per cent annual rate
during the 1945-60 period (Table IX ). Currency in
circulation rose at an average annual rate of 3.9 per
cent from 1960 to 1965 after increasing at a 1.0 per
cent rate from 1945 to 1960.
Total in circulation 1
Total currency
Coin and
Currency
1940.........................
0.8%
9.2%
10.0%
1945.........................
0.7
14.9
15.6
1950.........................
0.6
11.3
11.9
1955.........................
1960.........................
0.6
0.6
9.1
7.4
9.7
8.0
1965.........................
0.7
6.9
7.6
C h e c k C o llectio n s
Progress toward automated check collection con
tinued during 1965. A third computer for check han
dling was installed at the St. Louis office in September.
Plans for automation were made and computer equip
ment ordered for delivery to the Memphis and Little
Rock branches. Target dates for delivery are mid-1966
for Memphis and early 1967 for Little Rock. Such
equipment at the branches will be used for numerous
other operations in addition to check collections.
Coin and currency counting at the Federal Reserve
Bank is related to the volume in circulation. In turn,
the volume in circulation is associated with the amount
of transactions paid for by coin and currency. An indi
vidual has the choice of holding money either in the
form of coin and currency or demand deposits. Since
1950 the amount of coin and currency held has totaled
about 30 per cent of the amount of demand deposits.
Coin has increased somewhat relative to demand de
posits, while currency has declined slightly.
Total coin
Currency
About 83 per cent of all checks received at the St.
Louis office in recent months were sorted through
electronic check processing equipment. This compares
with about two-thirds of all
Table IX
checks similarly processed a
year earlier. At the Louisville
C OIN AN D CURRENCY IN CIRCULATION
branch, automated in mid-1964,
June 30
about 90 per cent of all checks
(Millions)
received in recent months were
1940
1945
1950
I960
1965
1955
SOrted thrOUSh elec‘’ ° “ c equip$7,848
$26,746
$27,156
$30,229
2,338
3,662
ment. This compares with about
599
1,205
1,496
1,858
25,542
7,250
25,662
28,372
29,727
36,059
70 per cent a year earlier.
Currency denom inations:
1,440
1,752
$1
$2
546
981
73
1,307
61
1,226
35
72
84
116
$5
1,015
2,215
1,966
2,061
$10
$20
1,791
6,515
5,891
6,471
2,141
2,447
1,599
8,193
8,363
9,625
$50 and above
2,264
7,565
8,344
8,917
1 Outside the Treasury and Federal Reserve Banks.
Page 10
6,604
10,363
9,095
7,489
12,723
n,532
The Federal Reserve Bank of
St. Louis may receive checks
from each of the 483 member
banks2 in the Eighth District,
other Federal Reserve Banks and
2Number as of D ecem ber 31, 1965.
their direct-sending member banks, and Government
agencies. Checks are sent to member banks and non
member par-remitting banks in the Eighth District and
to other Federal Reserve Banks for collection.
The number of checks cleared through the Federal
Reserve Bank of St. Louis, including the branches, rose
from 226.1 million in 1964 to 244.6 million in 1965. The
dollar volume of these collections rose from $91.8 bil
lion in 1964 to $102.9 billion in 1965.
N o n ca sh C o llectio n s
In addition to maintaining facilities for check collec
tion, Federal Reserve Banks handle numerous other
items for collection. Included are drafts, promissory
notes, bonds and bond coupons, and various other
documents. The combined dollar value of these non
cash collections was up 21.3 per cent in 1965 from
1964, while the number of items was up 11.2 per cent.
N o n ca sh Collection Items
Millions
Millions
Checks Collected*
The growth in check collections at this bank and in
the Federal Reserve System has generally paralleled
the growth in gross national product. Since 1953 the
Checks Collected and G N P
T ra n sfers o f F u n d s
Transfers of funds are largely movements of mem
ber bank balances between Federal Reserve Banks,
which for the most part result from Federal funds
transactions, check collection settlement, and transfers
in connection with transactions in U. S. Treasury ob
ligations. Such transfers by this bank in 1965 totaled
Transfers of Funds
Billions
dollar value of checks collected at the Federal Reserve
Bank of St. Louis increased at an annual rate of 5.9
per cent, while such collections in the System rose at
a 5.6 per cent rate, and GNP rose at a 5.3 per cent
rate. From 1964 to 1965 checks collected at the Fed
eral Reserve Bank of St. Louis rose 12.0 per cent and in
the System rose 10.6 per cent compared with a 7.5 per
cent increase in GNP.
Billions
200,000, up 6.4 per cent from a year earlier. The dol
lar value of transfers, totaling $109 billion, was up 15.5
per cent.
Page 11
D ir e c to r s
and
O ffic e r s
Directors
Chairman of the Board and Federal Reserve Agent
Raymond Rebsamen, Chairman of the Board
Rebsamen & East, IncLittle Rock, Arkansas
Deputy Chairman of the Board
Smith D. B roadbent, J r.
Broadbent Hybrid Seed Co.
Cadiz, Kentucky
H. Lee Cooper, President, Ohio Valley National Bank of
Henderson, Henderson, Kentucky
Harryr> F.. Harrington
? tvt • ,i Chairman
d i c oof the
r •Board,
Q*. t The•
Boatmen s INationai Bank oi ot. Louis, St. Louis,
Missouri
Harry E. Rogier, President, The First National Bank of
Vandalia, Vandalia, Illinois
W
ttxt.,,
-j .. Riverside
-j Industries,
•
William
King Self, d
President,
, » . . . .
Marks, Mississippi
Roland W. Richards, Senior Vice President, Laclede Steel
Company, St. Louis, Missouri
S herwood J. S mith, Vice President, Whirlpool Corporation, Evansville, Indiana
t
Mark T ownsend, Chairman of the Board
Townsend Lumber Company, Inc.
Stuttgart, Arkansas
Member of Federal Advisory Council
A. M. Brinkley, J r., Chairman of the Board
and Chief Executive Officer
Citizens Fidelity Bank and Trust Company
Louisville, Kentucky
Officers
Darryl R. Francis, President
Dale M. Lewis, First Vice President
Marvin L. Bennett, Vice President
John F. Breen, Vice President
Donald L. Henry, Vice President
Homer Jones, Vice President
Stephen Koptis, Vice President
John W. Menges, Vice President
Howard H. Weigel, Vice President and Secretary
Joseph C. Wotawa, Vice President
Orville 0. Wyricic, Vice President
George W. Hirshman, General Auditor
Gerald T. Dunne, General Counsel and
Assistant Secretary
Page 12
Norman N. Bowsher, Assistant Vice President
Earl H. Chapin, Assistant Chief Examiner
Edgar H. Crist, Assistant Chief Examiner
George W. Dennison, Assistant Vice President
J. M. Geiger, Assistant Vice President
Woodrow W. Gilmore, Planning Officer
John J. Hofer, Assistant Vice President
Wilbur H. Isbell, Chief Examiner
W illis L. Johns, Assistant Vice President
Richard 0. Kaley, Assistant Vice President
Eugene A. Leonard, Assistant Vice President
William R. Mueller, Assistant General Auditor
F. Garland Russell, Jr., Assistant Counsel
Paul Salzman, Assistant Vice President
W. E. Walker, Assistant Vice President
j
«.
LITTLE ROCK BRANCH
Ross E. Anderson, Chairman of the Board, The
mercial National Bank of Little Rock, Little
Arkansas
Frederick P. Blanks, Planter, Parkdale, Arkansas
Cecil W. Cupp, President & Chairman, Arkansas
and Trust Company, Hot Springs, Arkansas
D ir e c to r s
Louis E. Hurley, President, The Exchange Bank & Trust
Com
Company, El Dorado, Arkansas
Rock,
R. M. LaGrone, J r., President, The Citizens National
Bank of Hope, Hope, Arkansas
R eeves E. Ritchie, President, Arkansas Power & Light
Company, Little Rock, Arkansas
Carey V. Stabler, President, Little Rock University,
Bank
Little Rock, Arkansas
O f f ic e r s
John F. Breen, Vice President and Manager
John K. Ward, Cashier
Howard J. Jensen, Assistant Cashier
Michael T. Moriarty, Assistant Cashier
LOUISVILLE BRANCH
D ir e c t o r s
Lisle Baker, J r., Executive Vice President & General
Manager, The Courier-Journal & Louisville Times
Company, Louisville, Kentucky
Ray A. Barrett, President, The State Bank of Salem,
Salem, Indiana
Wm. G. Deatherage, President, Planters Bank & Trust
Co., Hopkinsville, Kentucky
C. Hunter Green, Vice President and General Manager,
Southern Bell Telephone and Telegraph Company,
Louisville, Kentucky
J ohn H. Hardwick, President, The Louisville Trust
Company, Louisville, Kentucky
J. E. Miller, Executive Vice President, Sellersburg State
Bank, Sellersburg, Indiana
R ichard T. S mith, Farmer, Madisonville, Kentucky
O f f ic e r s
Donald L. Henry, Vice President and Manager
James E. Conrad, Cashier
Louis A. Nelson, Assistant Cashier
Clarence J. Woertz, Assistant Cashier
MEMPHIS BRANCH
D ir e c t o r s
Leon C. Castling, President, First National Bank at
Marianna, Marianna, Arkansas
Sam Cooper, President, HumKo Products Division,
National Dairy Products Corporation, Memphis,
Tennessee
W. W. Hollowell, President, The First National Bank
of Greenville, Greenville, Mississippi
E dw ard B . L e M a s t e r , President, E d w ard L eM a ste r C o.,
In c ., M em p h is, T en n essee
A l l e n M organ , President, T h e First N atio n al B a n k of
M em ph is, M em p h is, T en n e sse e
W e l c h , President, Citizens Bank, Savannah,
Tennessee
J ames S. Williams, Plant Manager, American Greetings
Corporation, Osceola, Arkansas
C on T .
O f f ic e r s
John W. Menges, Vice President and Manager
Benjamin B. Monaghan, Cashier
Paul I. Black, Jr., Assistant Cashier
Joseph P. Garbarini, Assistant Cashier
Page 13
F is c a l A g e n c y O p era tio n s
U.S. Government Coupons Paid
Millions
To facilitate orderly Government financial transac
tions in all parts of the country, the Reserve Banks act
as fiscal agents of the United States Government. They
carry the principal checking accounts of the Govern
ment, issue and redeem Government securities, admin
ister the Treasury tax and loan deposit accounts at
commercial banks, and perform various other Govern
ment financial duties.
15 0 r
The Federal Reserve Bank of St. Louis issued, ex
changed, and redeemed 8.8 million United States Sav
ings Bonds in 1965 compared with 8.2 million in 1964.
The dollar value of such bonds was up 1.4 per cent
from a year earlier.
50
U.S. Savings Bonds Issued, Exchanged,
Millions
and Redeemed
Millions
140
130
ollar Volume
120
110
100
90
80
70
60
/
/
6T=-
mouse
Number o Coupons
650
600
T h e D is c o u n t R a te a n d L e n d in g
O p era tio n s
The interest rate charged on loans to member banks
(commonly called the discount rate) was raised from
4 to 4/2 per cent in December 1965.3 This increase,
which followed rising market rates, was the highest
rate charged on such loans since early 1929. The cur
rent uptrend in the discount rate began in mid-1963
with an increase from 3 to 33* per cent. The rate was
increased to 4 per cent in late 1964.
Discount Rate
Other Government securities issued, serviced, or re
tired in 1965 totaled 564,000, valued at $16.3 billion.
Other Government Securities Issued, Serviced,
and Retired
on_i_2c.
Tho
550
500
Num
ber of Pieces
450
—-—
550
/
500
450
400
400
350
350
300
300
250
200
o~c-
250
_200
This was an increase of 1.8 per cent in number and 1.7
per cent in dollar value from 1964. Government cou
pons paid were down 7.3 per cent in number and 5.7
per cent in dollar value.
Page 14
Federal Reserve credit is generally extended on a
short-term basis to a member bank to enable it to ad
just its asset position when necessary because of devel
opments such as a sudden withdrawal of deposits or
seasonal requirements for credit beyond those which
can reasonably be met by use of the bank’s own re
sources. Federal Reserve credit is also available for
3 T he rate charged under Sections 13 and 13a of the Fed eral
Reserve Act on advances secured by U. S. Government securi
ties and discounts of and advances secured by eligible paper.
longer periods when necessary to assist member banks
in meeting unusual situations resulting from national,
regional, or local difficulties or from exceptional cir
cumstances involving only particular member banks.
Lending operations at the Federal Reserve Bank of
St. Louis during 1965 approached the average of the
1954-60 period, following four years at relatively low
levels. Average daily outstandings to member banks
in the Eighth District in 1965 were $15.3 million, up
from $5.8 million in 1964. In comparison, average
daily borrowings were about $17 million for the seven
years 1954-60.
L oans to M e m b e r B a n k s
Millions of Dollars
(DailyAverageOutstanding! Millions of Dollars
F u n c t io n a l C ost A na ly sis
The Federal Reserve Bank of St. Louis, in coopera
tion with other Reserve Banks, in 1965 instituted a
functional cost analysis program as a service to mem
ber banks in assessing their operations. This program
is designed to provide participating banks a detailed
breakdown of income and expenses by various func
tions. It also provides a comparative measure of each
participating bank’s performance with the average ex
perience of a group of banks of similar functional size.
Member banks provide the Reserve Bank with in
come and expense data, certain item counts, and asset
and liability averages for the year. The data is comput
er processed and each of the participating banks is
given a report in which costs and income are allocated
among the functions of loans and investments, demand
deposits, time deposits, safekeeping, and trust depart
ment. The loan function is further broken into install
ment, real estate, and others, and the demand deposits
function, into regular and special checking accounts.
The program is provided without charge to member
banks and is strictly on a voluntary basis for those
banks which have expressed a desire to participate.
Statements
o f t h e F e d e r a l R eserv e B a n k o f S t. L o u is
Net earnings, before payments to the United States
Treasury, rose to $47.2 million in 1965, up 13.5 per
cent from 1964. Dividends to member bank stock
holders, limited by law to 6 per cent of paid-in capital,
were up 5.3 per cent. Payments to the Treasury (in
terest on Federal Reserve notes) of $44.9 million, were
less than a year earlier, when the remainder of current
earnings, after dividends, was augmented by a $16.3
million withdrawal from surplus.
Table XI
COMPARATIVE PROFIT AN D LOSS STATEMENT
Table XII
COMPARATIVE STATEMENT OF CONDITION
(Thousands)
Assets
Gold certificate re se rve s................................
Federal Reserve notes of other banks . . . .
December 31, December 31,
1965
1964
$ 527,575
$ 636,030
42,029
32,033
7,128
6,401
Discounts and a d v a n c e s ...............................
1,394
1,220
U. S. Government s e c u ritie s .........................
1,546,710
1,436,374
Uncollected items ...........................................
412,676
409,868
Other assets ...................................................
40,003
26,543
Total a s s e ts .............................................
$2,577,515
$2,548,469
(Thousands)
1965
1964
Total e a rn in g s ...............................................................
$58,246
$52,073
N et e xp enses.................................................................
11,053
10,488
$47,193
$41,585
N et earnings
..........................................................
Net additions { + ) or deductions (— ) ....................
~f~ 39
~t~ 27
Net earnings before payments to U. S. Treasury. .
$47,232
$41,61 2
Distribution o f net earnings:
Dividends .................................................................
Interest on Federal Reserve n o te s .......................
Transferred to s u rp lu s .............................................
Total
.............................................................
$ 1,110
$ 1,054
44,935
56,863
1,187
— 16,305
$47,232
$41,612
Liabilities and Capital Accounts
Federal Reserve notes (net) .........................
$1,450,866
$1,409,903
Deposits:
Member banks— reserve a c c o u n ts .........
690,741
694,156
U. S. Treasurer— general account...........
55,282
56,288
Deferred a va ila b ility cash ite m s ................
14,589
11,497
320,883
318,377
Other lia b ilities and accrued dividends .
6,894
22,362
Total capital a cco u n ts..................................
38,260
35,886
$2,577,515
$2,548,469
Total liab ilitie s and capital accounts. . .
Page 15
I s T o t a l D e m a n d T o o H i g h ? —(Continued from page 3)
The vigorous buying in the U. S. economy has also
put upward pressure on interest rates. With an opti
mistic outlook and with production nearing capacity,
Selected Y ie lds
funds. These rising credit demands have put pres
sure on banks and capital markets, and higher interest
rates have resulted despite a large volume of saving
and the rapid monetary expansion.
C o n c lu s io n
Sharp rises in money and bank reserves, a decrease
in the full employment budget surplus, and a reduction
in the average maturity of the public debt have helped
to amplify a strong rise in economic activity which be
gan early in 1961. These increasingly stimulative ac
tions have occurred since last June, even though the
economy is nearing capacity.
1961
1962
1963
1964
1965
1966
Latest data plotted: January preliminary
business plant and equipment expenditures have in
creased rapidly. These increased expenditures have
caused corporations to turn increasingly to outside
sources for investment funds. State and local govern
ments have continued to borrow heavily in long-term
capital markets. Federal budget developments have
recently increased the Government’s demand for
Output cannot be expected to grow so rapidly as
when there were large pools of unused resources. Fur
ther growth in output must spring primarily from addi
tions to resources.
Since fiscal policy cannot always be quickly changed
to suit the needs of stabilization, and since debt man
agement policy has become less flexible because of the
legal interest rate ceiling on Government bonds, a
large part of the burden of maintaining balanced
growth appears to rest currently on monetary policy.
piJB LIC A TIO N S of this bank include the weekly U.
and the monthly
M
o n ey,
of
M
U.
R ates
S. E
is s is s ip p i
of
R e v ie w , R a t e s
C hange
c o n o m ic
Valley.
D ata,
in
N
and
C
of
a t io n a l
E
hange
in
c o n o m ic
Selec t ed E
c o n o m ic
S. F
in a n c ia l
D
B an k R eserv es
I n d ic a t o r s , T
ata
and
r ia n g l e s
I n d ic a t o r s , C e n t r a l
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