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THE YEAR IN BRIEF

Commercial banks experienced a favorable year in 1969, increasing their assets by more than 12 percent. Operating earnings of insured commercial banks rose about 5.6 percent from 1966, while net income after taxes increased by about 17 percent. The liquidity position of commercial banks and of savings institutions improved significantly in 1967. Investments comprised a larger share of commercial and mutual savings bank assets than a year earlier.

In 1967, the Corporation's disbursements were required in four bank failure cases involving a total of almost $11 million of deposits and approximately 4,700 depositors. By the end of the year, over 98 percent of the depositors had fully recovered their funds, with the aid of Corporation disbursements totaling $7.8 million.

The deposit insurance fund rose by $234 million during the year to a total of $3,485 million. As of December 31, 1967, the fund amounted to 0.78 percent of total deposits in insured banks, and approximately 1.33 percent of insured deposits.

At the end of 1967, there were 14,244 banks in the United States, of which 13,850, or 97.2 percent, were insured. The banks not participating in Federal deposit insurance included 224 commercial banks and nondeposit trust companies and 170 mutual savings banks. During 1967, the total number of banks in operation decreased by 47, and the number of insured banks by 23. A 1,105 net increase in branches raised the total number of banking offices by 1,058.

The Corporation conducted 7,148 examinations of main offices, 4,662 examinations of departments and branches, and 1,767 investigations during the year. Major changes were made in the structure of FDIC Districts in 1967, involving an increase in their number from 12 to 14 and shifts in the boundaries of several Districts. The new alignment of Districts became fully operational on July 1.

Temporary legislation granting the Federal bank supervisory authorities additional flexibility in establishing maximum interest rates payable by insured banks on deposits, which was enacted in 1966, was extended on September 21, 1967, for a one-year period. The Corporation issued new rules and regulations to define and clarify insurance coverage and to carry out the intent of Congress to provide insurance up to $15,000 per depositor.

BANKING

DEVELOPMENTS

PART ONE

3

By most yardsticks 1967 was an excellent year for commercial banks. Deposits and assets increased by about 12 percent, and most banks were able to post sizeable gains in earnings at the same time that they increased their liquidity. A brief review of the principal economic and financial developments in 1967 will help place the principal developments in banking in better perspective.

THE ECONOMY IN 1967

The U.S. economy during 1967 recorded its seventh consecutive year of expansion. The pace of economic activity, however, was not uniform throughout the year or throughout all sectors of the economy. Gross national product (GNP) advanced at an annual rate of only $13 billion during the first half of the year, in contrast to a gain of more than $32 billion during the second half of 1967. About half the overall gain came as a result of price level increases.

Changes in GNP in 1967 were closely tied to fluctuations in the level of inventory accumulation and to changes in the level of Government spending. Inventory accumulation was substantial in 1966 and, partly as a result of a disappointing level of final sales, net inventory accumulation occurred at an $18.5 billion annual rate in the fourth quarter of 1966. Thereafter, inventory accumulation declined sharply, falling to less than $1 billion in the second quarter of 1967. The depressing effect on the economy of inventory behavior during the first half of 1967 was partially offset by an increase in the level of government expenditures, particularly by the Federal Government.

In the second half of 1967, inventory investment began to pick up and, thus, to exert an expansionary influence on the economy, while the advance in Government expenditures moderated. The net influence of changes in inventory accumulation and Government expenditures on changes in GNP is depicted in Chart 1.

Business spending on plant and equipment declined slightly in the first half of 1967 and posted moderate gains in the second half. Spending on residential construction increased throughout 1967, following a sharp decline in the last three quarters of 1966, and by the fourth quarter of 1967 approximately regained the level achieved prior to the 1966 decline (Chart 2).

Consumer expenditures, particularly for durable goods, expanded at a relatively modest pace in 1967. If the effect of increases in the consumer price level is excluded, expenditures on durable and nondurable goods (consumer expenditures exclusive of spending on services) barely increased between the fourth quarter of 1966 and the fourth

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