greenbooks · September 14, 1970

Greenbook/Tealbook

Prefatory Note

The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.

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Content last modified 6/05/2009.

CONFIDENTIAL (FR)

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors of the Federal Reserve System

September 11,

1970

SUPPLEMENTAL NOTES

The Domestic Economy Industrial production.

Industrial production in August was

169.0 per cent, compared with 169.2 in July and 174.3 per cent a year earlier.

Since May, when the index was also 169.0, monthly changes in

the total index have been quite small. In August, output of business equipment declined further but production of defense equipment, consumer goods, and materials changed little.

Among consumer goods, auto assemblies were at an annual rate

of 8.5 million units, the same as in July.

Output of television sets

and furniture rose, but production of appliances declined from the July high.

Output declines in business equipment were widespread.

Produc-

tion of steel and construction materials was off, output of crude oil was up sharply, and production of most other industrial materials showed offsetting changes. Retail sales in August declined 0.3 per cent

Retail sales.

from July, according to the advance report.

Sales of durable goods were

about unchanged as improved sales of farm equipment, furniture and appliances offset declines elsewhere.

Sales of nondurable goods were down 0.5

per cent, with all major types of stores except food and gasoline stations declining.

July sales were revised 0.4 per cent on the basis of the more

complete preliminary report. RETAIL SALES (Billions of dollars) 1970

All retail stores Durable Nondurable Total real*

Percentage change from previous month month previous June July Aug. Apr. May

May Apr. Apr.May

June June

July Juy

Aug.

30.5

30.7

30.6

2.5

- .3

9.3

9.4

9.5

2.3

1.0

21.2

21.1

21.3

21.2

2.6

- .1

- .4

- .5

24.4

24.2

24.3

n.a.

1.9

- .6

- .2

n.a.

*Deflated by all commodities CPI.

- 2Inventories.

The book value of business inventories rose at

a $14.5 billion annual rate in July, after a June increase of $5 billion.

The July acceleration of inventory growth occurred at durable

goods manufacturers, repeating last year's pattern of a low June and a high July for this group.

Last year, book value growth at durable goods

manufacturers moderated in August and September. Manufacturers' anticipations also suggest more moderate growth in the quarter as a whole than the reported July rate; durable goods manufacturers anticipate accumulating stocks at a $3.2 billion annual rate, while nondurable goods manufacturers anticipate a $0.8 billion rate.

This anticipated rate is somewhat higher than the

second-quarter actual rate, however, and for the fourth quarter, some further stepup is anticipated.

The fourth quarter acceleration is all

at nondurable manufacturers, with durable growth slowing somewhat. Trade inventory growth in July was well above the secondquarter average, although still below the June rate.

Auto dealers

continued to increase their stocks in July, and their stocks of new cars rose further in August.

Growth of wholesale inventories was

reported down slightly in July, but is likely to be revised upward, as it was in June and most previous months.

Nondurable retailers continued

June's rather high rate of inventory growth, with the bulk of the increase at general merchandise outlets in both months.

- 3-

CHANGE IN BOOK VALUE OF BUSINESS INVENTORIES Seasonally adjusted annual rates, billions of dollars

1970

Manufacturing and trade, Manufacturing, Durable Nondurable

total

Trade, total Wholesale Retail Durable Automotive Nonautomotive Nondurable

July prel.

QII

June

5.4

5.1

3.3 .4 2.9

-2.2 -2.9 .7

9.2 9.8 -.6

2.1 1.2 .9 .3 1.1 -.8 .6

7.3 1.8 5.5 2.6 2.2 .4 2.9

5.3 1.0 4.3 1.6 1.7 -.1 2.7

Sales increased as much as inventories,

14.5

in percentage terms,

and the manufacturing and trade inventory-sales ratio was unchanged in July.

The cyclically significant trade ratio was revised upward in

June and was unchanged in July.

This ratio has been brought down some-

what from earlier highs but remains above the same months in 1967, when economic activity was beginning to recover from the retardation in the first half of that year.

However, to a considerable extent this higher

level reflects heavier auto stocks, as the industry appears to be anticipating a more extended work stoppage than they anticipated in 1967.

-4-

INVENTORY RATIOS

1970

1967 June

July

June

July pl prel.

1.57

1.58

1.57

Manufacturing, total Durable Nondurable

1.78 2.08 1.41

1.81 2.15 1.41

1.73 2.11 1.29

1.73 2.10 1.29

Trade, total Wholesale Retail Durable Automotive Nonautomotive Nondurable

1.35 1.20 1.44 1.95 1.43 2.70 1.20

1.35 1.19 1.46 1.99 1.46 2.76 1.21

1.39 1.22 1.50 2.14 1.77 2.65 1.22

1.39 1.22 1.50 2.13 1.78 2.63 1.22

Inventories to sales: Manufacturing and trade,

total

Inventories to unfilled orders, durable manufacturing

.673

.674

.794

.807

The Domestic Financial Situation Mortgage market.

In the most recent FNMA auction, yields on

6-month forward purchase commitments remained virtually unchanged and now appear to have levelled at a yield just above 9 per cent.

However,

there was a rather sharp reduction in the volume of bids received in the September 8 auction--about a third below the level received two weeks earlier.

While the drop-off in the volume of bids received may

tend to confirm trade reports that indicate an increase in the availability of mortgage funds in the government-underwritten sector of the mortgage market, it may also reflect a degree of uncertainty engendered

by the expected reduction in the interest rate ceiling on FHA and VA mortgage loans.

FNMA AUCTION

Amount of total offers

Weekly Auction 1969 high 1970 high

Received Accepted (Millions of dollars) $410 (6/16)

705 (1/5)

$152 (9/8) 151 (1/12)

.mplicit private market yield on 6-month commitments (Per cent) 8.87 (12/29) 9.36 (1/12)

269 300 290 224

102 136 145 114

9.07 9.13 9.18 9.24

581 (1/26)

298 (1/26)

9.33 (6/29)

June 15 29 July 13 27

250 156 286 324

128 99

9.30 9.33 9.21 9.12

Aug. 10 24 Sept. 8

441 575 384

180 215 200

May 11 18 25 June 1 Bi-weekly Auction 1970 high

113

150

9.03 9.03 9.04

NOTE: Average secondary market yield after allowance for commitment fee and required purchase and holding of FNMA stock, assuming prepayment period of 15 years for 30-year Government-underwritten mortgages. Yields shown are gross, before deduction of fee paid by investors to servicers of 50 basis points prior to August 10 auction, and 38 basis points thereafter. At least partially offsetting the effect of the reduction in servicing fees on bid prices and gross yields in the August 10 and following auctions was another FNMA regulatory change permitting mortgage servicers to retain all escrow funds received on mortgages serviced under the reduced fee schedule. Under earlier practice, FNMA had retained most of these funds itself. 1/ If the FHA and VA ceiling rate were reduced, builders would have to absorb higher discounts in order for loans, which were originated at a lower ceiling rate, to be delivered under a FNMA commitment based on the current 8-1/2 per cent limit. In the event that builders would be unable or unwilling to incur the higher discounts, bidders would probably be forced to cancel their current FNMA commitments and forfeit the commitment fee.

GREENBOOK SUPPLEMENT (9/11/70)

- 6 -

CORRECTED COPY INTEREST RATES

1970 Lows

Aug. 17

Sept. 10

9.39 (2/18)

6.34 (8/26)

6.82 9/2

6.64 9/9

(1/6) (1/13) (1/9) (1/9) (1/30)

6.08 (3/24) 7.13 (9/10) 7.69 (8/12)

6.41 6.53 7.13 7.25 7.97 8.23 7.01 (8/14)6.70 7.50 7.75

Highs Short-Term Rates Federal funds (weekly averages) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Second market 6-month Treasury bills (bid) Bankers' acceptances Commercial paper (4-6 months) Federal agencies CD's (prime NYC) Highest quoted new issue Secondary market 1-year Treasury bills (bid) Prime municipals

7.92 8.75 10.50 8.30 8.19

6.50 (7/24) 7.25 (4/28)

6.75 7.75

6.75 7.40

7.25 (3/30) 7.38 (9/10) 6.91 (4/17)

6.62 7.38 (e) 8.00 7.32 (8/14

6.58 7.25 (e) 7.38 7.03

7.00 9.15 (1/7)

7.00 7.25 (4/17)

7.00 7.80

7.00

7.59 (1/9)

5.60 (1/9)

6.20 (4/13) 3.80 (3/27)

6.60 6.50 4.20 (8/14)4.10

8.30 (1/7) 7.73 (5/26)

7.05 (3/25) 6.55 (2/27)

7.68 7.28

7.43 7.00

8.60 (6/24) 9.45 (7/8)

7.78 (3/10)

8.11 9.41

8.12 9.44

6.75 9.25 (1/23)

6.75

7.99 8.88 9.13 8.50

(1/5)

6.18 (3/23)

(1/13) (1/8) (1/28)

6.75 (4/10)

7.50

Intermediate and Long-Term

-Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa

Baa

8.57 (3/10)

New Issue Aaa

No call protection Call protection Municipal Bond Buyer Index Moody's Aaa

9.29 (6/17)

8.20 (2/27)

8.53 (8/13)8.52

7.12 (5/28)

5.95 (3/12)

6.30 (8/14)6.30

6.95 (6/18)

5.75 (3/12)

6.10 (8/14)6.00

9.36 (1/2)

9.03 (8/26)

9.03

Mortgage--implicit yield in FNMA auction 1/

9.06 (9/8)

1/ Yield on 6-month forward commitment after allowance for commitment fee and required purchase and holding of FNMA stock. Assumes discount on 30-year e--estimated. loan amortized over 15 years.

SUPPLEMENTAL APPENDIX A:

SURVEY OF BANK LENDING PRACTICES*

The responses of the participants in the most recent Survey of Bank Lending Practices indicate that demand for business loans generally remained strong during the three months ending August 15. Nearly a fourth of the respondents recorded an intensification of loan demand for this period while 70 per cent experienced little change in demand. Most of the participants expected loan demands to be sustained or strengthened further during the next three months. Since financial markets were still showing aftereffects of the Penn Central disturbance at the time the survey was conducted, it is possible that responses may have been influenced in some cases by that development. Lending Terms and Conditions About 18 per cent of the participants reported a firming of interest rates over the three-month period, while 80 per cent did not significantly alter their rates. A significant number of banks also reported a general firming of loan terms, especially for those borrowers returning from the commercial paper market to the banking system. Loan applicants at close to one-fourth of the banks found that compensating or supporting balance requirements and standards of credit worthiness stiffened over the latest report period. Nonlocal service customers again were subjected to additional credit rationing--according to nearly 20 per cent of the banks--while only a few banks firmed policies on lending to local and established customers. There has been progressive decline in the proportion of banks reporting net firming of policies for all three groups of customers in the past 4 surveys, as shown in Table 2A. In part, this reflects the recent appearance of a small number of banks reporting When some easing in policy particulary as regards new customers. reviewing credit applicants, between 10 and 20 per cent of the panel indicated a heavier reliance on such factors as the intended use of the loan and the value of the borrower as a source of deposits or collateral business. Lending to Noncaptive Finance Companies Appreciable numbers of banks reported firming of their policies relating to terms and conditions on loans to finance companies, significantly more than in the May survey. For example, nearly a fourth of those surveyed had stiffened their enforcement of balance requirements and were more restrained in establishing or enlarging credit lines. This trend may have been related in part to publicity regarding financing difficulties encountered by some finance companies following the Penn Central bankruptcy. *Prepared by Marilyn Connors, Research Assistant, Banking Section, Division of Research and Statistics.

Willingness to Make Other Types of Loans About 17 per cent of the respondents became moderately more receptive to making single-family mortgage loans. Term loans to business and loans to brokers were treated with increased restraint while willingness to grant consumer installment loans or participations with correspondents was relatively unchanged. Size of Bank Variation There was little variation by size of bank in responses with respect to either current and anticipated loan demand. However, the larger banks, with deposits of $1 billion or more, showed a greater tendency to firm compensating balance requirements while smaller banks, with deposits of less than $1 billion showed a greater tendency to become more selective when reviewing loan applications, particularly for new and nonlocal customers, and to rely more heavily on the borrower's potential value when establishing or enlarging credit lines to finance companies. The smaller banks were generally less willing to make most other types of loans--especially term loans and mortgages for larger-unit dwellings. Several banks making supplemental comments reported that the inflow of funds from CD's was not enough to sustain the continued and increasing demand for money. Consequently, these banks were unable to ease their lending practices significantly but maintained the already restrictive policies in effect in the past few surveys. Uncertainties in the commercial paper market also were indicated to be a factor encouraging a closer scrutiny of potential borrowers.

NOT FOR QUOTATION OR PUBLICATION

PAGE 01

TABLE 1

QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. 1/ (STATUS OF POLICY ON AUGUST 15, 1970 COMPARED TO THREE MONTHS EARLIER) (NUMBER OF BANKS & PERCENT OF TOTAL BANKS REPORTING) MUCH STRONGER

TOTAL 3ANKS

PCT

BANKS

PCT

MODERATELY STRONGER

ESSENTIALLY UNCHANGED

BANKS

PCT

MODERATELY WEAKER BANKS

PCT

MUCH

WEAKER BANKS

PCT

STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) COMPARED

TO THREE

MONTHS

ANTICIPATED DEMAND

AGO

IN NEXT 3 MONTHS

125

100.0

22.4

68.0

125

100.0

23.2

67.2

MUCH FIRMER POLICY

ANSWERING QUESTION BANKS LENDING TO NONFINANCIAL TERMS

PCT

BANKS

PCT

MODERATELY FIRMER POLICY

ESSENTIALLY UNCHANGED POLICY

BANKS

PCT

MODERATELY EASIER POLICY BANKS

PCT

BUSINESSES

AND CONDITIONS:

INTEREST

RATES

CHARGED

COMPENSATING

STANDARDS OF

CREDIT

MATURITY REVIEWING

WORTHINFSS

TERM LOANS

CREDIT

ESTABLISHED

SUPPORTING BALANCES

LINES

OR LOAN

CUSTOMERS

SERVICE

NONLOCAL

1/ SURVEY AS OF

AREA

CUSTOMERS

SERVICE AREA CUSTOMERS

OF LENDING PRACTICES AUGUST 15, 1970.

17.6

80.0

100.0

24.8

73.6

100.0

20.8

77.6

100.0

13.6

84.0

100.0

4.8

92.0

100.0

12.1

74.2

100.0

4.0

88.8

100.0

12.9

APPLICATIONS

NEW CUSTOMERS LOCAL

100.0

125

LARGE

BANKS

REPORTING

THE

FEOFRAL

RESERVE

80.7

QUARTERLY

INTEREST RATF

SURVEY

MUCH EASIER POLICY BANKS

PCT

NOT

FOR QUOTATION

PUBLICATION

TABLE 1

ANSWERING QUFSTION BANKS FACTORS

PCT

MUCH FIRMER POLICY BANKS

PAGE 02

(CONTINUED)

PCT

MODFRATELY F IRMER POLICY

ESSENTIALLY UNCHANGED POLICY

BANKS

PCT

124

100.0

16.9

101

81.5

INTENDED USE OF THE

125

100.0

10.4

111

88.8

TERMS

PCT

BANKS

MUCH EASIER POLICY BANKS

PCT

RELATING TO APPLICANT 2/

VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS

LENDING

MODERATELY EASIER POLICY

LOAN

TO "NONCAPTIVE"

FINANCE

COMPANIES

AND CONDITIONS:

100.0

1.6

8.1

90.3

BALANCES

100.0

0.8

11.3

87.9

ENFORCEMENT OF BALANCE REQUIREMENTS

100.0

4.0

19.4

76.6

ESTABLISHING

100.0

12.9

11.3

74.2

INTEREST RATES CHARGED COMPENSATING OR

NEW

SUPPORTING

LARGER

CREDIT LINES

ANSWERING QUESTION PCT

BANKS

CONSIDERABLY LESS WILLING BANKS

PCT

MODERATELY LESS WILLING

ESSENTIALLY UNCHANGED

BANKS

PCT

MODERATELY MORE WILLING PCT

BANKS

CONSIDERABLY MORE WILLING BANKS

PCT

WILLINGNESS TO MAKE OTHER TYPES OF LOANS

102

81.6

4.8

0.0

6.5

108

87.0

6.5

0.0

100.0

4.1

78.6

16.5

0.0

MULTI-FAMILY MORTGAGE LOANS

100.0

5.8

101

83.4

8.3

0.0

ALL OTHER MORTGAGE LOANS

100.0

7.4

104

85.2

4.9

0.0

TERM LOANS TO BUSINESSES

100.0

CONSUMER INSTALMENT LOANS

100.0

SINGLE FAMILY MORTGAGE LOANS

12.0

PARTICIPATION LOANS WITH CORRESPONDENT BANKS

124

100.0

0.0

0.8

119

96.0

0.0

LOANS TO BROKERS

123

100.0

0.8

10.6

108

87.8

0.0

FOR THESE FACTORS, FIRMER MEANS THE FACTORS WERE CREDIT REQUESTS, AND EASIER MEANS THEY WERE LESS

CONSIDERED MORE IMPORTANT.

IMPORTANT

IN MAKING

DECISIONS

FOR

APPROVING

NOT

FOR QUOTATION OR COMPARISON

PUBLICATION

TABLE

PAGE 03

OF QUARTERLY CHANGES IN BANK LENDING PRACTICES AT BANKS GROUPED BY SIZE OF TOTAL (STATUS OF POLICY ON AUGUST 15, 1970, COMPARED TO THREE MONTHS EARLIER) (NUMBER OF BANKS IN EACH COLUMN AS PER CENT OF TOTAL BANKS ANSWERING QUESTION)

SIZE

TOTAL l$ & OVER

UNDER $1

BANK

MUCH STRONGER $1 & OVER

UNDER $1

TOTAL

DEPOSITS

IN BILLIONS

MODERATELY STRONGER

ESSENTIALLY UNCHANGED

MODERATELY WEAKER

$1 & OVER

C $1 OVER

UNDER $1

MUCH WEAKER $1 & OVER

UNDER $1

STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) COMPARED

TO THREE MONTHS AGO

ANTICIPATED

DEMAND IN

NEXT 3 MONTHS

100

TOTAL

$1 & OVER

UNDER $1

MUCH FIRMER

$1 & OVER

UNDER $1

MODERATELY FIRMER

ESSENTIALLY UNCHANGED

MODERATELY WEAKER

$1 & OVER

UNDER $1

MUCH

WEAKER

UNDER

OVER

LENDING TO NONFINANCIAL BUSINESSES TERMS AND CONDITIONS: INTEREST RATES CHARGED

100

COMPENSATING OR SUPPORTING BALANCES

100

STANDARDS OF CREDIT WORTHINESS

100

MATURITY OF TERM LOANS

100

REVIEWING CREDIT LINES OR LOAN APPLICATIONS ESTABLISHED CUSTOMERS NEW CUSTOMERS LOCAL SERVICE AREA CUSTOMERS NONLOCAL SERVICE AREA CUSTOMERS

AND $$ BILLION OR MORE) 47 LARGE BANKS (DEPOSITS OF SURVEY OF LENDING PRACTICES AT $1 BILLION) REPORTING IN THE FEDERAL RESERVE QUARTERLY INTEREST RATE SURVEY AS OF

78 SMALL BANKS (DEPOSITS OF LESS THAN AUGUST 15, 1970.

NOT

FOR

QUOTATION

PUBLICATION

TABLE

SIZE

OF BANK MUCH FIRMER POLICY

NUMBER ANSWERING QUESTION $1 & OVER FACTORS

UNDER $1

TOTAL DEPOSITS

MODERATELY FIRMER POLICY $I & OVER

UNDER $1

IN BILLIONS

ESSENTIALLY UNCHANGED POLICY $I G OVER

UNDER $1

MODERATELY EASIER POLICY $1 & OVER

UNDER $1

MUCH EASIER POLICY $1 & OVER

UNDER $1

RELATING TO APPLICANT 2/

VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS

100

INTENDED USE OF THE

100

LENDING

$1 & OVER

PAGE

(CONTINUED)

LOAN

TO "NONCAPTIVE"

FINANCE

COMPANIES

TERMS AND CONDITIONS: INTEREST

RATES CHARGED

COMPENSATING OR ENFORCEMENT OF

SUPPORTING

BALANCES

BALANCE REQUIREMENTS

ESTABLISHING NEW OR LARGER CREDIT LINES

NUMBER ANSWERING QUESTION $1 & OVER WILLINGNESS TO MAKE OTHER TYPES

l$ & OVER

UNDER $1

MODERATELY LESS WILLING

ESSENTIALLY UNCHANGED

$1 & OVER

$I & OVER

UNDER $1

100

MULTI-FAMILY MORTGAGE LOANS

100

ALL OTHER

100

CONSUMER SINGLE

BUSINESSES

INSTALMENT LOANS

FAMILY MORTGAGE

MORTGAGE LOANS

PARTICIPATION LOANS CORRESPONDENT BANKS LOANS

LOANS

TO BROKERS

UNDER $1

MODERATELY MORE WILLING SL & OVER

UNDER $1

OF LOANS

100

TERM LOANS

UNDER $1

CONSIDERABLY LESS WILLING

WITH

FOR THESE FACTORS, FIRMER MEANS THE FACTORS AND EASIER MEANS THEY WERE CREDIT REQUESTS,

WERE CONSIDERED LESS IMPORTANT.

IMPORTANT

98 89

MAKING DECISIONS

FOR

APPROVING

CONSIDERABLY MORE WILLING $1 & OVER

UNDER $1

TABLE 2A NET RESPONSES OF BANKS IN LENDING PRACTICES SURVEYS (In per cent)

Strength of loan demand-/ (compared to 3 months ago) Anticipated demand in next 3 months

Aug. 1968

Nov. 1968

Feb. 1969

May 1969

Aug. 1969

Nov. 1969

Feb. 1970

May Aug. 19 70 1i70

-2.4

25.6

54.4

60.0

30.6

28.0

-1.6

12.1 16.0

20.8

49.2

41.8

5.7

8.9

-8.0

11.2 13.6

0.8 4.8 4.8 1.6

-27.2 10.4 4.8 1.6

86.2 64.3 32.8 30.3

91.0 75.6 41.4 42.3

78.3 68.3 40.6 42.2

49.6 57.6 36.0 35.2

34.4 38.4 22.4 17.6

12.8 15.2 18.424.8 208 22.4 10.4 14.4

-5.6 -5.6 -5.6 10.6

-1.6 6.4 -4.1 15.4

32.5 61.7 30.9 49.5

47.2 80.2 46.7 71.3

51.6 81.4 48.8 68.8

36.8 60.8 32.0 56.5

18.4 34.4 14.4 31.4

56 1.6 17.6 6.4 561-3.2 22.616.1

12.8 8.1

16.0 6.4

58.6 54.5

67.2 71.6

65.0 68.5

46.0 39.2

29.9 21.6

18.5'18.5 12.01 9.6

2.4 2.4 8.1 15.3

-26.4 2.4 3.2 4.8

53.3 22.9 29.5 54.9

50.8 27.9 42.6 62.4

48.0 35.0 42.3 62.0

19.3 26.7 34.7 48.4

14.5 21.7 30.7 32.2

-1601 9.7 6/.412.1 16023.4 21.622.6

4.8 11.3 -14.1 8.2 3.4

-0.8 45.3 -3.3 4.1 1.7

48.8 4.2 30.8 40.1 42.5

64.3 17.2 45.5 57.5 62.0

65.9 26.9 49.7 58.3 62.5

48.0 24.2 30.4 36.3 42.3

21.6 17.7 19.7 21.8 22.2

128 1 8.8 --4. -8 -11.6 3A -9.9 5.0

1.6 6.5

-1.6

18.7 34.2

38.4 40.0

48.4 59.3

31.5 36.1

10.6 20.5

LENDING TO NONFINANCIAL BUSINESSESTerms and Conditions

Interest rates charged Compensating or supporting balances Standards of credit worthiness Maturity of term loans Reviewing Credit Lines Established customers New customers Local service area customers Nonlocal service area customers Factors Relating to Applicant (Net percentage indicating more important) Value of depositor as source of business Intended use of loan LENDING TO NONCAPTIVE FINANCE COMPANIES-2 Terms and Conditions Interest rates charged Compensating or supporting balances Enforcement of balance requirements Establishing new or larger credit lines WILLINGNESS

TO MAKE OTHER LOANS- 3

Term loans to businesses Consumer instalment loans Single-family mortgage loans Multi-family mortgage loans All other mortgage loans Participation loans with correspondent banks Loans to brokers

.6 2.4 20. 10.6

1/ Per cent of banks reporting stronger loan demand minus per cent of banks reporting weaker loan demand. Positive number indicates net stronger loan demand, negative number indicates net weaker loan demand. 2/ Per cent of banks reporting firmer lending policies minus per cent of banks reporting weaker lending policies. Positive number indicates net firmer lending policies, negative indicates net easier lending policies. 3/ Per cent of banks reporting less willingness to make loans minus per cent of banks more willing to make loans. Positive number indicates less willingness, negative number indicates more willingness.

SUPPLEMENTAL APPENDIX B:

SURVEY OF BANK LOAN COMMITMENTS*

The reports of the 43 banks participating in the July 31 survey of bank loan commitments indicate that during the preceding three months these banks made new commitments to lend totaling nearly $22 billion. This is slightly more than $3 billion above the volume of new commitments reported in the April survey. The volume of takedowns, expirations, and cancellations on previously existing commitments (hereafter referred to simply as takedowns) totaled nearly $21 billion during the current report period--about $1.5 billion more than the volume for the preceding report period. With new commitments exceeding takedowns, the level of unused commitments increased by about $1 billion to more than $50 billion during the latest report period. This modest advance contrasts with the declines recorded in the preceding April and January report periods. The current volume of unused commitments remains about $5 billion below the high for this series reported in the October Survey last year. Difficulties encountered by borrowers in the commercial paper market following bankruptcy of the Penn Central Railroad probably contributed importantly to the rise in the volume of both new commitments and takedowns, as some firms were forced to utilize their bank lines to replace maturing commercial paper while others found it necessary to bolster their bank lines in order to maintain the attractiveness of their paper in the market. New commitments. Most of the increase in new commitments reported in the latest survey was in commitments to commercial and industrial firms, with commitments under confirmed lines of credit accounting for nearly three-fifths of the increase for these borrowers. However, a relatively large rise also occurred in new commitments to nonbank financial institutions. New extensions to finance companies were responsible for the largest portion of this increase. New commitments for real estate mortgages remained at about the same level as in the past four surveys. Commitment policies for the majority of respondents generally were reported as unchanged during the quarter. More restrictive policies were reported by 5 banks and less restrictive policies were reported by 6 banks. Those banks indicating a less restrictive commitment policy attributed this change to increased availability of funds.

* Prepared by Frederick M. Struble, Economist, Banking Section, Division of Research and Statistics.

B - 2

Takedowns, expirations, and cancellations. Although takedowns by commercial and industrial firms increased somewhat during the July reporting period, nonbank financial institutions were responsible for the major part of the total advance. Takedowns by these institutions amounted to more than $4 billion or nearly a third of their total available commitments from April to July--unused commitments in April plus new commitments during the period. Takedowns for real estate mortgages were relatively unchanged from April and were about the same as in July of 1969.

QUARTERLY SURVEY LOAN OF COMMITMENTS AT SELECTED LARGE U.S. BANKS 1/BANK QUARTERLY SURVEY OF BANK LOAN COMMITMENTS AT SELECTED LARGE U.S. BANKSNEW AND UNUSED COMMITMENTS Table 1: (Billions of dollars, not seasonally adjusted)

New commitments made during 3-months ending Jan. 31 Apr. 30 July 31 Grand total commitments Total- Comm. & Indust. Total- Nonbank Finan. Institutions Total- Real Estate Mortgages MEMO: Const. Loans (Included above) Total- Comm. & Indust. Term Loans Revolving Credits Total Term & Revolving 2/ Confirmed Lines of Credit Other Commitments

Takedowns, expirations, and cancellations during 3-months ending Jan. 31 Apr. 30 July 31

Unused commitments OutstandChange during 3-months ing on ending Jan. 31 IApr. 30 Juy 31 July 30

13.8

18.6

21.8

19.0

19.3

20.8

-5.3

-0.7

1.0

50.3

10.4 2.3

14.5 3.0

17.0 3.8

14.4 3.0

15.3 2.8

15.6 4.0

-4.0 -0.7

-0.8 0.1

1.4 -0.2

38.7 9.0

1.1

1.0

1.6

1.2

-0.5

-0.1

-0.2

2.6

0.8

0.9

0.8

1.1

0.8

1.0

-0.4

0.1

-0.3

2.2

0.7 2.9

0.8 2.9

1.2 3.8

1.1 4.1

0.8 2.9

1.3 3.5

-0.3 -1.2

0.1 1/

-0.1 0.2

1.3 10.6

3.7

3.9

5.1

5.3

4.0

4.8

-1.6

-0.1

0.2

12.6

6.3 0.4

10.0 0.6

11.4 0.5

8.4 0.7

11.0 0.3

10.8 -0.1

-2.2 -0.3

-1.0 0.3

0.5 0.6

23.3 2.8

Total- Nonbank Finan. Institutions Finance Companies For Mortgage Warehousing All Other

1.3

1.9

2.5

2.2

1.6

2.7

-0.9

0.4

-0.3

5.6

0.4 0.5

0.5 0.6

0.5 0.8

0.4 0.4

0.4 0.8

0.5 0,7

3/ 0.2

3/ -0.3

-0.1 0.1

1.4 1.9

Total- Real Estate Mortgages Residential Other

0.3 0.8

0.3

0.4

0.5

0,3

-0.2

0.8

D.8

0.6-

1.1

0.7

0.8

-4,.3

0.1

-0.1

Participants in Quarterly Interest Rate Survey with total deposits of more than $1 billion (43 banks). Tnis item may exceed sum of previous two items because some banks report combined total only. Less than $50 million. ROTE :: Figures may not add to total due to rounding. 2/ 3/

1.8

B-4 Table 2:

VIEWS ON COMMITMENT POLICY Number of Banks

Total number of banks responding:

Jan. 31 1969

Apr. 30 1969

July 31 1969

Oct. 31 1969

Jan. 31 1970

Apr. 30 1970

July 31 1970

Unused commitments in the past three months have: Risen rapidly Risen moderately Remained unchanged Declined moderately Declined rapidly Takedowns in the next three months will: Rise rapidly Rise moderately Remain unchanged Decline moderately Decline rapidly Commitment policies in the past three months were: Much more restrictive Somewhat more restrictive Unchanged Less restrictive Much less restrictive

Table 3:

Indicated Change

EXPLANATION OF RECENT CHANGE IN NEW COMMITMENT POLICIES AS INDICATED IN THE CURRENT SURVEY

Number of Banks Indicating Change

Reasons for Change (Number of Banks) Reduced Both Increased Availability Demand Loan Demand of Funds And Funds

More restrictive

Less restrictive

Decreased Loan Demand

Increased Availability of Funds

Both Demand And Funds

Cite this document

APA

Federal Reserve (1970, September 14). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19700915_part3

BibTeX

@misc{wtfs_greenbook_19700915_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1970},
  month = {Sep},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19700915_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}