Review

The proportion of commercial banks belonging to the Federal Reserve System has been declining for more than three decades. The percentage of banks in the Federal Reserve System decreased from 49.1 percent of all commercial banks in 1945 to 39.3 percent at the end of 1976. The percentage of total bank deposits held at Federal Reserve member banks declined from 86.3 percent to 73.8 percent over the same period.

One of the more novel approaches to the problem of assessing the impact of the Federal budget on economic activity was the development of the concept of the high-employment budget. The purpose of this concept was to standardize the budget position on some high-employment norm amid thereby remove the effect of variations in economic activity on the measured budget surplus or deficit. Proponents of the high-employment budget argue that estimation of the Federal budget at an assumed full—employment level of activity provides a better measure of tile impact of the budget on the economy than the actual surplus or deficit.

Member banks of the Eighth District experienced a moderate increase in net income in 1976. Net income of District member banks increased 9 percent from 1975 to 1976, about the same rate as it did the previous year. However, unlike 1975 in which operating income and expenses posted slight gains, both operating income and expenses registered increases exceeding ten percent in 1976. Loans outstanding, the major factor contributing to the higher income, posted a solid increase, after rising slightly in 1975. Increases in the amount of interest paid on deposits, the principal factor in the rising expense, reflected a large inflow of time and savings deposits.