Federal Reserve Bulletin, 1979-09

SEPTEMBER 1979 FEDERAL RESERVE BULLETIN Operating Guides in U.S. Monetary Policy: A Historical Review Insured Commercial Bank Income in 1978 New Measures of Commercial Bank Credit and Bank Nondeposit Funds Survey of Standby Letters of Credit Treasury and Federal Reserve Foreign Exchange Operations Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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VOLUME 65 □ NUMBER 9 □ SEPTEMBER 1979 FEDERAL RESERVE BULLETIN Board of Governors of the Federal Reserve System Washington, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman □ Stephen H. Axilrod □ John M. Denkler Janet O. Hart □ James L. Kichline □ Neal L. Petersen □ Edwin M. Truman Michael J. Prell, Staff Director The Federal Reserve Bulletin is issued monthly under the direction of the statt publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. Direction for the art work is provided by Mack R. Rowe. Editorial support is furnished by the Economic Editing Unit headed by Mendelle T. Berenson. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 679 The Role of Operating Guides in 738 Statements to Congress U.S. Monetary Policy: A Historical Chairman Paul A. Volcker testifies on the Review current economic difficulties facing the Review of the operating techniques used nation in light of our need to deal con­ by the Federal Reserve to implement vincingly with the problem of inflation, monetary policy since the end of World before the House Committee on the Bud­ War II. get, September 5, 1979. 742 Governor Nancy H. Teeters discusses a 692 Insured Commercial Bank Income recent study by the Internal Revenue in 1978 Service on unreported income and the dif­ Net income of insured commercial banks ficulties in measuring its extent, before the reached more than $10 billion during Subcommittee on Oversight of the House 1978. Committee on Ways and Means, Sep­ tember 10, 1979. 707 New Measures of Commercial Bank Credit and Bank Sources of Funds 744 Announcements The commercial bank credit series and Increase in the discount rate. estimates of assets and liabilities of all Increase in swap arrangement with the commercial banks have been revised to Bank of Mexico. reflect both conceptual and statistical im­ provements. Changes in staffs of the Board and of the Federal Open Market Committee. 716 Survey of Standby Letters of Credit Publication of four educational pamphlets. Admission of five state banks to member­ Banks in the large size group (total assets ship in the Federal Reserve System. of more than $18 billion each) account for about three-fourths of all standby letters Establishment of mailing list for the Staff of credit issued. Studies. 720 Treasury and Federal Reserve 747 Record of Policy Actions of the Foreign Exchange Operations Federal Open Market Committee According to the semiannual report, At its meeting on July 11, 1979, the progress was being made in early 1979 in Committee decided to retain the ranges for resolving the disparities in economic per­ growth of the monetary aggregates for formance among industrial countries. 1979 that it had established in February. Thus, for the period from the fourth quar­ 737 Industrial Production ter of 1978 to the fourth quarter of 1979, Output fell 1.1 percent in August. the Committee reaffirmed ranges of 1 Vi to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4V2 percent for M-l, 5 to 8 percent for over the July-August period would exceed M-2, and 6 to 9 percent for M-3. The the upper limits of their ranges and with associated range for commercial bank the objective for the federal funds rate at credit remained IV2 to 10V2 percent. Hav­ the upper limit of its range, the Committee ing established the range for M-l in Feb­ voted to modify the directive adopted at ruary on the assumption that expansion of the meeting on July 11. Specifically, the ATS and NOW accounts would dampen Committee raised the upper limit of the growth by about 3 percentage points over intermeeting range for the federal funds the year, the Committee also agreed that rate to 103A percent and instructed the actual growth in M-l might vary in rela­ Manager to aim for a rate within a range tion to its range to the extent of any of IOV2 to 10% percent, depending on deviation from that estimate. The Com­ subsequent behavior of the monetary ag­ mittee anticipated that for the period from gregates, on conditions in foreign ex­ the fourth quarter of 1979 to the fourth change markets, and on the current Treas­ quarter of 1980, growth might be within ury financing. the same ranges, depending upon emerg­ ing economic conditions and appropriate 759 Law Department adjustments that might be required by leg­ Amendment to Regulation E, various bank islation or judicial developments affecting holding company and bank merger orders, interest-bearing transactions accounts. and pending cases. With respect to policy for the period immediately ahead, the Committee de­ Al Financial and Business Statistics cided that ranges of tolerance for the an­ nual rates of growth in M-l and M-2 over A3 Domestic Financial Statistics the July-August period should be 2 xh to A46 Domestic Nonfinancial Statistics 6!/2 percent and 6V2 to 10V^ percent re­ A54 International Statistics spectively. The Manager was instructed to direct open market operations initially A69 Guide to Tabular Presentation toward maintaining the weekly average and Statistical Releases federal funds rate at about the current level, represented by a rate of IOV4 per­ A70 Board of Governors and Staff cent. Subsequently, if the two-month growth rates of M-l and M-2 (given ap­ A72 Federal Open Market Committee proximately equal weight) appeared to be and Staff; Advisory Councils close to or beyond the upper or lower limits of the indicated ranges, the objec­ A73 Federal Reserve Banks, Branches, tive for the funds rate was to be raised and Offices or lowered in an orderly fashion within a range of 9% to IOV2 percent. A74 Federal Reserve Board Publications On July 27, with the projections sug­ gesting that growth of both M-l and M-2 A76 Index to Statistical Tables Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

679 The Role of Operating Guides in U. S. Monetary Policy: A Historical Review This article was prepared by Henry C. Wallich, that policy must be decided and carried out. Member, Board of Governors of the Federal Policy decisions are made by the Federal Open Reserve System, and Peter M. Keir, Assistant Market Committee (FOMC), which consists of to the Board, Office of Staff Director for Mone­ five of the twelve presidents of the regional tary and Financial Policy. An earlier version Federal Reserve Banks, along with the seven appeared in Kredit und Kapital, vol. 11 (Jan­ members of the Board of Governors. The seven uary 1978). All notes and references cited ap­ presidents who at any one time are not members pear at the end of the article. nevertheless participate in these meetings. The logistics of bringing this group together is one The operating techniques employed by the Fed­ reason meetings ordinarily are limited to ten a eral Reserve to implement monetary policy year. since the end of World War II have undergone Between the regular Federal Open Market substantial evolution. This process has been Committee meetings, which are held in Wash­ guided by a number of important developments: ington, policy is implemented by the Manager (1) the “rediscovery of money,” following an of the System Open Market Account at the extended period in the 1930s and 1940s during Federal Reserve Bank of New York. The com­ which monetary policy played a relatively minor plex and decentralized nature of this policy role; (2) the breaking away of the Federal Re­ mechanism has made it necessary to develop serve from Treasury control in 1951; (3) various explicit and rather formal procedures, both for new analytical insights into the workings of expressing policy decisions reached at meetings monetary policy; and (4) the advent of inflation and for delegating their execution between as a persisting—though presumably not perma­ meetings to the Manager. nent—fact of life. The shift away from the gold exchange standard toward floating rates, on the World W ar II: Pegging other hand, had little effect on the choice of the Yield C urve on Federal Reserve operating techniques. U.S. Government Securities The focus of this essay is on the operating techniques used to implement Federal Reserve In connection with the financing of the Second open market policy. It does not deal with sec­ World War, the Federal Reserve, at the request ondary instruments, such as the discount mech­ of the Treasury, had undertaken to maintain anism and changes in reserve requirements. Nor approximately the level and term structure of does it seek to evaluate the successes and fail­ interest rates prevailing when the war began. ures of open market operations in achieving While this decision was critical to the efficient their ultimate policy goals—for employment, financing of the war, it hampered the central prices, economic growth, and the balance of bank in pursuing its traditional function of payments. managing the nation’s supply of money and The Federal Reserve’s approach to open credit. market policy has been substantially influenced To fulfill its commitment to “peg” interest by the organizational structure through which rates, the Federal Reserve had to buy Treasury Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

680 Federal Reserve Bulletin □ September 1979 securities in the secondary market when offer­ of this type. Fears were voiced that upon with­ ings by other investors threatened to force yields drawal of official buying, prices of government to rise relative to the “pegged” structure.1 The bonds might drop drastically, forcing heavy Federal Reserve did not buy securities directly losses on financial institutions that had invested from the Treasury, but its support operations in longer-term bonds on the assumption that in the secondary market in effect guaranteed the their prices would be stabilized. In addition, Treasury a ready demand for the new securities there was considerable concern that, in the wake issued to finance the war. of the pegging experience, the secondary market During the war, investors—individuals, fi­ for U.S. government securities might not be nancial intermediaries, nonfinancial corpora­ sufficiently broad and active to accommodate the tions, and all the rest—had willingly acquired substantial volume of transactions needed to Treasury securities because many alternative implement an effective monetary policy. uses of their funds were circumscribed by war­ To help resolve these questions the Federal time controls. After the war, however, many Open Market Committee, in early 1952, ini­ investors sought to dispose of these holdings; tiated a broad study of the U.S. government still adhering to a pegged rate structure the securities market and its relation to Federal Federal Reserve had to acquire all offerings that Reserve operations. While this study was in threatened to push yields above these official progress and the support of Treasury financings pegs. In the process, bank reserves, bank credit, was continuing, questions concerning the selec­ and the money supply were all expanded. tion of appropriate operating targets for the This abdication of Federal Reserve control management of monetary policy were not con­ over the supplies of money and credit had its sidered in any systematic way. To some extent most serious consequences during the Korean the limited focus on explicit operating targets War. Since the public could cover its war- in this period probably reflected a presumption inflated needs for funds simply by dumping among the old hands on the Committee that the excess holdings of marketable Treasury debt on operating approach used prior to the pegging the Federal Reserve at pegged prices, the Fed­ episode would simply be reinstituted. This, in eral Reserve became—in the words of its own effect, is what happened. Chairman—“an engine of inflation.” After a difficult and prolonged confrontation between the administration and the Federal Reserve, an Results of 1952 Study “accord” was reached with the Treasury in March of 1951 that finally freed the Federal The 1952 study concluded that, if the Federal Reserve from its lingering World War II com­ Reserve’s open market transactions were to be mitment to pegging. carried out effectively, they would consistently have to represent only a relatively small share of total dealer transactions with all participants in the government securities market.2 Only Transition from 6"Pegging99 when this condition prevails can open market Although the 1951 accord with the Treasury operations be transacted with little direct impact ended the Federal Reserve’s commitment to on market prices. Because the bulk of the Fed­ maintain rigid interest rate pegs, official support eral Reserve’s transactions are of a “defensive” of the government securities market was with­ type, it was (and still is) considered important drawn gradually. In particular, support of the for the FOMC to influence bank reserves with­ issues involved in Treasury financings continued out significantly disturbing securities prices. until nearly the end of 1952. Defensive operations are designed to keep the Not surprisingly, there were differences of posture of monetary policy essentially un­ judgment within the Federal Reserve System as changed by offsetting fortuitous fluctuations in to how rapidly and how completely the Federal bank reserves that result from other factors, such Reserve should pull back from market support as currency flows, adjustments in float, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Operating Guides in U.S. Monetary Policy 681 changes in the Treasury’s balance at Federal Modifications of 1953 Restrictions Reserve Banks. The 1952 study concluded that the govern­ The 1953 “bills only” doctrine was viewed by ment securities market at that time did not some members of the Federal Open Market adequately satisfy these conditions for effective Committee as essentially a temporary measure implementation of monetary policy. Because to ease the transition from pegging. Actually, market professionals did not have a clear per­ the constraint was maintained until early 1961. ception of the reasons why the System might Moreover, during the intervening period System act in the market, or of the magnitude of trans­ operations were extended to longer-term securi­ actions that might be undertaken in given market ties, to help “correct disorderly markets,” only sectors, they were reluctant to take investment twice—and then only briefly. positions in government securities or to carry The 1961 decision to end this procedure was the inventories needed to promote and accom­ prompted by special developments during the modate an active volume of private investor 1960-61 recession. System efforts to combat the trading. recession through an easy monetary policy had Acting on these findings, the Federal Open exerted downward pressure on U.S. short-term Market Committee, in March 1953, introduced interest rates at a time when higher short-term several new operating procedures. First, to re­ rates abroad were encouraging capital outflows duce market uncertainties about Federal Reserve and tending to augment a large U.S. balance intentions, the Federal Open Market Committee of payments deficit. To help minimize the announced that henceforth operations would be downward pressure on U.S. short-term rates, initiated solely “to effectuate the objectives of the Federal Reserve sold Treasury bills in vol­ monetary and credit policy” and “not to impose ume from its portfolio and then offset the re­ on the market any particular pattern of prices sulting drain on bank reserves with market pur­ or yields.” 3 To bolster the credibility of this chases of longer-term government securities. In promise, the Federal Open Market Committee addition, when a need arose to add to the overall also stated that it would confine its market supply of bank reserves, the System often met transactions to securities of very short term, it through purchases of intermediate- and long­ preferably bills—except for the rare situation in term securities rather than bills. The U.S. which intervention over a broader maturity Treasury bolstered this System effort to maintain range might be needed to correct disorderly the bill rate by concentrating the bulk of its cash market conditions. In market circles this came borrowing during the period in Treasury bills. to be known as the “bills only” doctrine. Many analysts outside the Federal Reserve Additional constraints were imposed on System interpreted this abrupt 1961 shift in transactions of the System Account Manager at operating technique to an emphasis on purchases times of Treasury financings: he was not to of longer-term securities as evidence that the purchase (1) maturing Treasury issues for which Federal Open Market Committee was trying to an exchange was being offered, (2) new issues “twist” the yield curve on U.S. government being offered in an exchange, and (3) out­ securities. Actually, in the view of the Federal standing issues with maturities comparable with Open Market Committee, avoiding a depressing those of the new issues. effect on bill rates was the primary consid­ When it announced these modifications of its eration. In any event, econometric studies sug­ approach to Treasury financings, however, the gest that the power of open market operations Federal Open Market Committee stated that it to twist the yield structure—raising short and was still prepared to maintain an “even keel” lowering long rates—is minimal. Moreover, any in monetary policy during financing periods. In temporary effect the System “swaps” may have other words, at times of Treasury financings the exerted on long-term rates in 1961 was Federal Reserve would refrain from any action swamped by the offsetting influence from the that might be interpreted as a change in mone­ massive Treasury advance refundings under­ tary policy. taken at the same time. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

682 Federal Reserve Bulletin □ September 1979 Since 1961, the Federal Reserve has engaged mine the price once the Treasury has set the in periodic transactions in longer-term U.S. volume to be sold, the possibility that a financ­ government securities. And in August 1971, its ing will not be fully subscribed because of operations were extended to the full maturity last-minute shifts in market rates has been min­ spectrum of the market for federal agency se­ imized. Auctioning and other debt-management curities as well. However, these transactions in innovations have thus reduced the need to con­ longer-term securities have been restricted ex­ strain monetary policy initiatives close to clusively to purchases; they have occurred only Treasury financing periods. when the Federal Reserve needed to supply reserves; and they typically—though not Return to Traditional always—have been limited to situations in which dealers were willing sellers of securities Operating Targets at close to prevailing market prices. After the spring of 1953—when the major tran­ Since these constraints on System operations sitional questions raised by the abandonment of in longer-term securities are now well under­ pegging were fairly well resolved—the Federal stood by market participants, such transactions Open Market Committee began to focus on the no longer create the types of uncertainties that question of appropriate operating targets.4 It prevailed just after the 1951 accord. Moreover, soon became clear that the general terms like as economists have come to understand the “neutrality,” “active ease,” and “restraint” overriding importance of expectations about that members had been using to characterize market interest rates in determining the maturity their policy preferences needed explicit defini­ structure of security yields, outside pressures on tion to be meaningful. the Federal Reserve to step up its purchases of To help meet this need, some Committee longer-term securities as a means of twisting the members began to support their expression of yield curve at times of economic recession have policy preferences at Federal Open Market diminished. Committee meetings with a more complete spelling out of the analytical reasoning behind them. Usually, they then specified an explicit 6‘Even Keeling99 Today set of near-term financial conditions that they The importance of the System’s “even keel” believed would be consistent with their desired commitment on Treasury financings—originally policy approach. The particular conditions an avoidance of changes in monetary policy specified usually included desired levels or during roughly three weeks, four times a changes in key short-term interest rates, plus year—has also diminished in recent years. In related totals for member bank borrowing and the late 1950s and early 1960s this commitment excess reserves at Federal Reserve Banks. Over was particularly important because Treasury re­ time the relationship between excess reserves funding operations were concentrated in large and member bank borrowing began to be ex­ quarterly financings, and the prices and coupon pressed as a desired range of “net free” or “net rates on new issues involved were set several borrowed” reserves.5 days in advance of the offering dates. In those While the staff furnished supporting detail on circumstances, the refundings were vulnerable recent economic and financial events, no inte­ to any updrift in market interest rates that de­ grated projections were provided to suggest how veloped between their announcement and offer­ alternative specifications of net reserves and ing dates. money market rates were likely to be reflected During recent years, however, virtually all of in the behavior of money, bank credit, and bond the Treasury’s new marketable debt offerings yields, and how, under their influence, the have been auctioned. Since auctions set the rates economy itself might evolve. Each Committee of new issues on the actual date of offering, member was left to judge for himself the likely rather than on the announcement date, and allow results of his proposals. the market, rather than the Treasury, to deter­ In the late 1950s and early 1960s some mem­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Operating Guides in U.S. Monetary Policy 683 bers began to question the Committee’s empha­ whether money and credit are behaving coun­ sis on money market conditions and net reserves tercyclical^ or not. Thus there was concern that as operating targets for open market policy. emphasis on interest rate targets could induce They noted, in particular, that the same level inappropriate behavior of the monetary and of net reserves could mean rather different credit aggregates. During the early 1960s, things about the effects of policy depending on operating targets actually used nevertheless whether credit demands at banks were strong continued to be net reserves and money market or weak. An effort by the Federal Reserve to conditions. maintain a given level of free reserves at a time As the 1960s progressed, Committee mem­ when the banks, facing strong credit demands, bers began to shift their focus to the perform­ were trying to use up their free reserves through ance of the aggregates, especially the volume credit expansion would lead to monetary and of bank credit. This heightened Committee in­ credit expansion. An effort to hold free reserves terest in the aggregates was supported by im­ constant when banks, facing weak credit de­ provements in the available data and by contin­ mands, were willing to see their free reserves uing staff reviews and analyses of their behav­ rise would lead to contraction. ior. In addition, the Committee began to reflect This point was driven home when the money its increased attention to the importance of the supply and total reserves at banks contracted monetary and credit aggregates through revi­ appreciably during the initial phase of the sions in the structure and wording of the policy 1960-61 recession. In that period the Federal directives given monthly to the Manager. Reserve was reluctant, for balance of payments reasons, to reduce the System discount rate in Experimentation with line with declines in short-term market rates. Q uantitative Targets With the relative cost of market sources of funds thus declining, banks elected to repay borrow­ Around the mid-1960s the Federal Open Market ings from the Federal Reserve as their custom­ Committee and its staff began to study and ers’ loan demands dropped off. The Manager experiment with more precise ways of choosing of the System Open Market Account, following and expressing relevant targets for open market the Federal Open Market Committee’s instruc­ policy. As the discussion proceeded, two types tions to hold net reserves in a given range, did of targets were differentiated. not permit net borrowed reserves to decline as First, it was recognized that the net reserve rapidly as banks wanted. Thus the Manager held and money market rate variables that the Com­ back on the provision of nonborrowed reserves, mittee had stressed up to that point were essen­ and total reserves at banks contracted. This tially “operating targets,” suitable for express­ episode contrasted sharply with some earlier ing immediate operating objectives and instruc­ ones at times when general demands for bank tions. Data on these measures were available credit had been strong and the Committee’s almost immediately, and System open market tendency to hold to a given net reserve target operations could exert an immediate impact on had contributed to very rapid growth in total their behavior.6 For this reason, the Manager reserves, money, and bank credit. of the System Account could be held responsible The Federal Open Market Committee’s focus for reaching such targets during the period be­ on interest rate targets, a corollary of the free tween Committee meetings. reserves approach, also came into more general The second type of target variable—repre­ question at this time, on the grounds that it sented by the money supply and bank credit— tended to minimize the Committee’s attention was of an intermediate character, less closely to the performance of money and credit aggre­ related to Federal Reserve operations. Data for gates. Since interest rates are procyclical, in that these variables were available with longer time they move up and down with swings in eco­ lags. Moreover, because they responded with nomic activity, they generally tend to make a lag to changes in operating targets of the first monetary policy appear countercyclical, type, they had to be influenced indirectly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

684 Federal Reserve Bulletin □ September 1979 through adjustments in those targets. As a re­ termediate targets—especially the monetary ag­ sult, the Manager did not have much chance, gregate targets—into its actual operating proce­ through adjustments in the operating variables dures evolved gradually, starting in the spring he could control, to correct target variables of of 1966. The first step was to add a proviso the intermediate type when they deviated from clause to the policy directive the Committee the Committee’s desired ranges between meet­ used to control the Manager’s operations be­ ings. tween meetings. Prior to 1966, the operating Despite these limitations on the Committee’s clause of the policy directive had directed the short-run ability to control the intermediate tar­ Manager simply to gear his intermeeting actions get variables, Committee members began to either to the maintenance of roughly the condi­ place a higher premium on them—initially tions then prevailing in money markets, or to stressing bank credit and then, as time passed, some modest tightening or easing of those con­ the monetary aggregates. This change of attitude ditions. The record of the Committee’s discus­ reflected the developing view that bank credit sion at the meeting was relied on to guide the and money provided a more predictable link to Manager as to how the term “prevailing condi­ the ultimate policy goals of output, prices, and tions” should be interpreted, or how much con­ employment. In particular, as inflation increas­ ditions should be modified if the Committee had ingly separated real from nominal interest rates, decided on some policy tightening or easing. many analysts began to view nominal rates as With the introduction of the proviso clause, seriously flawed for target purposes and turned the Committee’s policy directive continued to to the financial aggregates as substitutes. direct the Manager to seek either prevailing, or The Federal Open Market Committee thus somewhat tighter or easier, money market con­ began to focus more explicitly on the linkages ditions, but with the qualification that he modify in the monetary process—running from the ini­ this objective if bank credit (or some other tial impacts on the money market and marginal aggregate measure) deviated significantly from reserves (borrowed, excess, and free reserves) some recent or anticipated general pattern of through growth in money and bank credit and behavior. The following operating directive changes in long-term interest rates, to the ulti­ voted at the Federal Open Market Committee mate behavior of output, prices, and employ­ meeting of November 22, 1966, provides an ment. For its ongoing analysis of these linkages, example: the Committee needed not only studies of past To implement this policy, System open relationships but also projections of future rela­ market operation's until the next meeting of tionships. Thus, in addition to the usual reports the Committee shall be conducted with a on recent economic and financial developments, view to attaining somewhat easier conditions in the money market, unless bank credit the staff began providing an integrated economic appears to be resuming a rapid rate of ex­ projection of future developments. pansion. As time passed, the forecasting procedures used and the types of documentation provided This experiment with proviso clauses was part by the staff became increasingly sophisticated. of a more general Committee effort during the Basically, judgmental projections made by staff late 1960s to exert more effective control over experts with long experience in forecasting were the management of open market policy. While melded with results obtained from econometric the language of the policy directive itself re­ models. Two types of models were used: the mained broad, its general wording began to be Board’s basic model of the U.S. economy (de­ linked through staff documents prepared for the veloped initially in conjunction with consulting Committee to an explicit set of money market economists from the University of Pennsylvania conditions and expected growth ranges for the and the Massachusetts Institute of Technology); aggregates. and smaller models that focused more explicitly At the November 1966 meeting, for example, on the relationships of the money supply and supporting staff documents indicated that the interest rates to national income. directive language quoted would be consistent Efforts by the Committee to incorporate in­ with net reserves fluctuating around zero, a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Operating Guides in U.S. Monetary Policy 685 three-month Treasury bill rate around 5 percent, ing to counter deviations in money growth rates; and bank credit expansion in a range of 2 to moreover, as noted earlier, the aggregates re­ 4 percent at an annual rate. These specifications, sponded to his actions with a lag. of course, were linked to the directive language A special subcommittee of the Federal Open actually adopted by the Committee. Similar Market Committee charged with suggesting specifications had been provided to support al­ means of improving control of the monetary ternative directives, which the Committee ma­ aggregates recommended in 1972 that the Com­ jority had discarded. mittee experiment with total or nonborrowed The Committee’s decision to provide explicit bank reserves as an operating target. The sub­ specifications of the financial conditions thought committee acknowledged that past efforts to to be consistent with the general language of realize specified growth ranges for the money alternative directives had essentially two pur­ supply had often been frustrated by an unwill­ poses: to improve communication among Com­ ingness of the Committee to set a federal funds mittee members themselves as they deliberated constraint that permitted sufficient movement in on policy choices; and to tighten control over rates. It concluded that a shift of emphasis to the intermeeting actions of the Committee’s reserves might help the Federal Open Market agent. Committee to overcome this evident reluctance. For the four years that the Federal Open Responding to this suggestion, the Committee Market Committee qualified its operating direc­ experimented first with total reserves as an tive with proviso clauses, the operations of the operating target. They were quickly discarded, Manager were actually modified in accordance however, because wide month-to-month fluctu­ with such clauses on only a few occasions—and ations in Treasury balances at banks (which are then only slightly. Thus, while monetary and not included in the money supply) would often credit aggregates played a role, money market have resulted in negative growth rates in the conditions continued to be the dominant operat­ target for total reserves which risked misleading ing targets for open market policy during those outside observers. To avoid this problem, the years, and there was no explicit linkage of the Committee adopted “reserves against private proviso clause to any view of a desired longer- deposits” (RPD) as its target variable. run trend in the aggregates. The RPD measure also proved difficult to At the beginning of 1970 the Federal Open work with. Shifts within the deposit structure— Market Committee began to change its empha­ from demand to time deposits, and from demand sis. During the succeeding two to two and deposits at large banks to demand deposits at one-half years, operating directives usually smaller banks—created marked changes in re­ stressed bank credit and money as primary tar­ quired reserves for given totals of private de­ gets, subordinating money market conditions to posits. These variations reflected the widely a proviso. Average growth ranges were speci­ differing structure of reserve requirements that fied for both the bank credit proxy and the apply to deposits of different types and sizes. money supply. The time span chosen for this As a result of these differences, the multiplier specification became the two-month period en­ between RPD and the money supply proved to compassing the current and succeeding meet­ be highly unstable. Consequently, the Federal ings. These target growth ranges were to be Open Market Committee soon concluded that achieved provided that in the process key money money market conditions were preferable as its market rates, chiefly the federal funds rate, did immediate operating target. not move outside their own stated ranges. Even with this general emphasis on money and credit Operating Targets Now In Use as primary targets, actual growth in these meas­ ures often continued to deviate significantly Pursuant to the Federal Reserve Reform Act and from the Committee’s specified ranges. Since the Full Employment and Balanced Growth Act the Committee remained reluctant to authorize (Humphrey-Hawkins), the Federal Reserve now wide ranges for possible change in money mar­ reports semiannually to the banking committees ket rates, the Manager was constrained in mov­ of the Congress on its prospective targets for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

686 Federal Reserve Bulletin □ September 1979 the annual growth of various measures of the So long as the funds rate remains within its money supply (M-l, M-2, and M-3) and of bank specified range, the Manager has leeway to credit.7 The initial report is due in mid-February respond to evidence that weighted growth rates after the President has presented his annual for M-l and M-2 are approaching or moving budget and economic messages to the Congress. outside the limits of'their ranges. The FOMC In this report the Federal Reserve states its may instruct him to begin offsetting market policy targets for the current calendar year and action when the aggregates move substantially indicates how they are related to the short-term into the upper or lower halves of their ranges. goals set forth in the President’s Economic Alternatively, the Committee may instruct him Report. to take action only when growth rates for M-l The second Federal Reserve report is made and M-2 are already close to or exceeding the to the Congress in July. In it, the System ex­ limits of the ranges. In either case, these plains (1) the record of actual money growth operating procedures encourage the Manager to during the first half of the year, (2) any devia­ respond more sensitively to deviations in growth tions that appear to be developing from the of the aggregates from desired rates than was annual targets specified in February, and (3) its the case in the late 1960s and early 1970s. Of current growth targets for both the present and course, the full effect on M-l and M-2 of a subsequent calendar years. change in the funds rate occurs, not within the At each of its monthly meetings the Federal one-month intermeeting period, but cumula­ Open Market Committee sets two-month ranges tively over a period of roughly six months. of tolerance for growth in M-l and M-2. These shorter-run ranges are intended to be broadly consistent with the calendar-year targets re­ Operating Problems With ported semiannually to the Congress;8 but they M onetary Targets are not completely constrained by those targets With its increased emphasis on the monetary and may exceed or fall short of them. Since aggregates as policy targets, the Federal Reserve the Committee can change its calendar-year has had to decide how to deal operationally with ranges in light of the economic outlook, it difficult conceptual and statistical questions. A retains considerable discretion to adjust the committee of academic experts from which the two-month ranges at its monthly meetings.9 Federal Reserve solicited advice on the meas­ Actions linked to these short-run ranges thus urement of money described the essential re­ continue to be the focus of open market policy. quirements for an effective aggregates target:10 When the performance of the money supply appears to be deviating from the Committee’s In conducting monetary policy, the Fed­ eral Reserve should use as an intermediate stated two-month ranges, the Manager of the target that monetary total (aggregate), or System Account is still constrained in his efforts those totals, through which it can most re­ to offset these deviations by a federal funds rate liably affect the behavior of its ultimate proviso. He can initiate countering open market objectives—the price level, employment, purchases or sales only so long as these opera­ output, and the like. Which total or totals best satisfy that requirement depends in turn tions, or other market factors, do not push the on (1) how accurately the total can be meas­ weekly average federal funds rate outside its ured; (2) how precisely, and at what costs specified range, generally 50 to 100 basis points including unwanted side effects, the Fed can wide. If growth rates for M-l and M-2 (occa­ control the total; and (3) how closely and sionally weighted unequally to minimize the reliably changes in the total are related to the ultimate policy objectives. impact of known distortions in the series) appear to be remaining outside the Committee’s desired The Committee identified three conceptual ranges, and the Manager’s actions to counter bases for defining money. One takes money as this deviation have moved the funds rate to the those assets that correspond to the non-interestupper or lower limit of its range, he must request bearing fiat issues of the ultimate monetary new instructions from the Committee. authority—or the “monetary base.” In the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Operating Guides in U.S. Monetary Policy 687 United States this base consists of circulating the delay in receiving the benchmark data, they currency plus reserves (deposits) held at Federal have had to be estimated. Deposit data from Reserve Banks by commercial banks that are a sample of nonmember banks are now being members of the Federal Reserve System. collected to fill this gap, but they are still being The second concept views money as assets tested and are not yet fully incorporated into that are used as media of exchange. Tradition­ the money supply measures. ally, this definition has included currency in While these problems have introduced uncer­ circulation plus demand deposits at commercial tainty into measurement of the aggregate supply banks (or M-l). The third concept defines of money, their impact on short-run changes in money as assets that serve as a temporary abode that supply generally appears to have been quite of purchasing power and are, or are readily limited. Consequently, they have not hindered convertible into, media of exchange; it thus the choice of a policy target. encompasses both the transactions and store-ofliquidity functions of money. The report noted Control of the Aggregates that many scholars view this third basis as more closely and reliably related to ultimate policy On the more critical question of effective man­ objectives than the other two. The report also agement of the aggregates, the Federal Reserve noted, however, that this basis has the most has found it difficult to exert close short-run ambiguous empirical content of the three, in the control over M-l and M-2 without risking un­ sense that it could correspond to a wide range wanted side-effects on interest rates. In addition, of possible broader aggregates.11 relationships between the monetary targets and Under existing arrangements for data collec­ the ultimate objectives of policy have proved tion, constraints imposed by the time lag with to be substantially less predictable than desired. which statistics become available have led the Federal Reserve efforts since 1972 to control Federal Reserve to express its two-month inter­ growth in the monetary aggregates have placed meeting policy targets exclusively in terms of the greatest emphasis on M-l.13 These efforts M-l and M-2, with related information provided have sometimes been frustrated because the on the monetary base. While data on the broader ratio (or multiplier) between bank reserves and aggregates and bank credit are available only M-l tends to vary, depending on the form that with significantly longer lags, M-3 and bank growth in M-l takes. credit are also used when the Committee sets Growth of M-l in the form of an expansion its 12-month growth ranges. of currency in circulation creates a dollar-fordollar drain on the supply of reserves available to the banking system. This one-for-one drain Accuracy of Measurement does not occur, however, when the increase in The accurate measurement cited by the aca­ M-l reflects growth in member bank demand demic experts as necessary for a good policy deposits because the banking system is subject target is better satisfied by the monetary base, to fractional reserve requirements. Similarly, which poses few measurement ambiguities, than since existing regulations call for a higher re­ by M-l and M-2. Measurement of the monetary serve requirement at the margin as the total aggregates is complicated because public hold­ deposits of a given member bank expand, the ings of money cannot be identified directly; they volume of reserves needed by the banking sys­ have to be estimated from bank records, which tem to support a given growth in demand de­ are not always reported consistently and pose posits will differ depending on the sizes of the problems of definition and consolidation. More­ banks at which that growth occurs. Finally, if over, deposit data for banks that are not mem­ banks as a group change their relative desire bers of the Federal Reserve System have been to hold excess reserves, the ratio between re­ available only for limited benchmark periods serve growth and money growth will change. (semiannually until December 1972, quarterly Even if the Federal Reserve could accurately since then).12 Between benchmarks and during forecast the currency and deposit mix the public Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

688 Federal Reserve Bulletin □ September 1979 is likely to demand, and hence the reserve mittee believes that the accentuated volatility in growth needed to accommodate some specified short-term interest rates likely to result from expansion in M-l, it would be reluctant to force efforts at instantaneous fine tuning of the aggre­ the financial system to conform to this rigid gates poses a greater risk. This belief has been pattern. Demands for M-l also tend to vary bolstered by Federal Reserve research that sug­ considerably in the short run, due to institutional gests that temporary aberrations in money considerations that often are not very responsive growth rates create few difficulties for the econ­ to short-term changes in interest rates; thus a omy so long as desired growth rates are attained rigid Federal Reserve commitment simply to over periods of two to four quarters. supply the reserves its projections of the deposit mix showed would be needed for a desired rate of growth in M-1 could be expected to produce Relationships to Ultimate Objectives marked short-run fluctuations in market interest rates. Relationships between the monetary aggregates In practice, the Federal Open Market Com­ and measures of ultimate economic activity have mittee has been unwilling to seek such close proved to be substantially looser in practice than short-run control over growth in the money is typically implied by economic theory. This supply. This reluctance reflects the Committee’s discrepancy between theory and practice ap­ belief that the short-run volatility in market pears to have been particularly wide for the interest rates likely to result from such a policy monetary base. The ratios of M-l and M-2 to would risk greater disruption to the economy the gross national product (that is, the income than the short-run instability in money growth velocity of money) have been somewhat more rates the policy was seeking to avoid. stable, but they have shifted significantly at When incoming data show a sudden marked critical times. acceleration or slowing in money growth rates, The growth of M-l relative to GNP has the Committee must decide whether the change changed in the 1970s as important institutional is a temporary aberration likely soon to be innovations have encouraged the public to shift reversed, or a more fundamental change in transactions balances from the non-interestmoney demands that stems from a basic adjust­ bearing demand deposits that are included in ment in the performance of the economy. If the M-l to the interest-bearing accounts that are Committee acted immediately to counter an included in M-2 and M-3. In New England and observed change in money growth, and the New York, savings and loan associations, sav­ change then proved to be temporary, the action ings banks, and commercial banks have all been could be destabilizing and require a subsequent authorized to promote interest-bearing accounts offsetting adjustment. Since Committee actions that permit holders to use “negotiable orders affect the public’s willingness to hold money of withdrawal” much as they would checks. with a lag through their influence on interest Credit unions are offering “share draft” ac­ rates, such attempts at fine tuning could produce counts that serve much the same function. perverse results. In the face of these developments, the Federal To minimize this risk, the Federal Open Reserve and the Federal Deposit Insurance Cor­ Market Committee typically has adopted an poration have sought to maintain the balance intermediate position. Confronted with an un­ of competition among banks and other types of expected overshoot or undershoot of its money thrift institutions by relaxing some of the re­ growth targets, the Committee has taken action straints on offerings of savings deposits by that neither fully ignores nor fully responds to commercial banks. For example, commercial the miss, until the underlying growth tendency banks have been authorized to offer savings can be differentiated from the “noise” of aber­ accounts to businesses and state and local gov­ rations in the data. This approach poses some ernments as well as to individuals and nonprofit risk that needed countercyclical policy actions institutions. Holders of savings accounts have will be less timely than desired. But the Com­ been permitted to transfer funds from savings Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Operating Guides in U.S. Monetary Policy 689 to demand deposits by telephone as well as by the distortions that interest rate ceilings on time mail or in person. Finally, depositary institu­ and savings accounts sometimes introduce into tions have been authorized to offer overdraft deposit flows. When yields on competing mar­ privileges on checking accounts that involve an ket securities rise to levels appreciably above automatic transfer of funds from savings ac­ ceiling rates on deposit accounts, growth in M-2 counts.14 and M-3 may slacken abruptly. Not only are All of these innovations encourage the public current savings flows diverted to the higherto economize on M-l by holding more of their yielding market securities but also some thrift transactions balances in various interest-bearing accounts accumulated at lower rates may be forms of M-2 and M-3. Moreover, instruments redirected into market securities. When rates on have been developed that, although not defined liquid market securities drop through official as money, fulfill its liquidity function and to ceilings to levels significantly below those that extent help the public to economize on available on thrift accounts, flows to depositary holdings of M-2 and M-3 as well. Mutual funds, institutions are typically augmented. For this for example, are now offering shares in pools reason, observed changes in growth rates for of money market assets that can be liquidated M-2 and M-3 have to be carefully evaluated to on demand, while depositary institutions have judge how much of the indicated shift may be increased their emphasis on security repurchase attributable simply to changes in market yields agreements with large customers. Since these relative to depositary rate ceilings. RPs are secured by Treasury and federal agency The sensitivity of the broader aggregates to debt, they are a relatively safe and liquid alter­ changes in relative market yields has been tem­ native to deposits. pered during the past year by the introduction The public’s resort to interest-bearing trans­ of money market CDs. Starting in June 1978, actions accounts has strengthened the case for commercial banks and thrift institutions were use of a relatively broad measure of money as authorized to offer nonnegotiable certificates a policy target. The particular broader measures having a 26-week maturity, a minimum denom­ that have been available, however, pose impor­ ination of $10,000, and a maximum rate of tant practical operating problems of their own. interest linked to the average rate paid on six- For one thing, large negotiable certificates of month Treasury bills in the latest Treasury auc­ deposit at large banks—on which there are no tion prior to issuance of the certificates.15 Thus interest rate ceilings—are excluded from M-2 holders of deposits with fixed-rate ceilings who on the grounds that they behave more like wish to take advantage of rising market interest securities than deposits; those issued by smaller rates now have an alternative to a shift to market banks and all large nonnegotiable certificates securities. And, while there were large shifts remain in M-2 because historical data are lack­ from savings accounts to the money market CDs ing. Since CDs at smaller banks are similar in at intermediaries following their inauguration, function to those at large banks, a strong case overall growth in thrift accounts slowed sub­ can be made for excluding them from M-2 as stantially less than it had in earlier periods of well. sharp advances in market rates. Second, M-2 and M-3 also include certain Because the quickened pace of regulatory smaller CD-type accounts that are subject to change and financial innovation has fundamen­ interest rate ceilings, offer higher yields in re­ tally altered the character of the public’s mone­ turn for extended maturities (out to seven years), tary assets, the economic meaning of traditional and carry substantial penalties for early with­ measures of money has changed. In view of drawal. These accounts, too, are more compa­ these marked changes, the Federal Reserve re­ rable with market securities than they are with cently published a set of staff proposals designed the transactions and savings-type deposits typi­ to facilitate a discussion of possible revisions cally viewed as money. in the definition of money.16 These proposed Relationships between changes in the broader definitions group together similar kinds of de­ aggregates and GNP can be further clouded by posits held at different types of institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

690 Federal Reserve Bulletin □ September 1979 Although they are designed to make the mone­ to any given operating target, constantly check­ tary aggregates more meaningful under current ing performance of the target and other relevant institutional arrangements, they recognize that economic variables to determine whether the no one aggregate or group of aggregates can presumed linkage between them is working as meet all current analytical needs or even serve expected. The future of Federal Reserve mone­ particular needs indefinitely. tary policy techniques is unforeseeable, de­ The many practical difficulties of selecting a pending as it does in large measure upon devel­ monetary target with predictable links to GNP opments in the economy, especially the degree reinforces a persisting strand of Federal Reserve to which inflation can be overcome. But the thought: that no single formula or operating deeply rooted practice of eclectic choice among target can be relied on to work effectively in operating techniques and policy targets, rather all circumstances. For this reason the Federal than exclusive commitment to one, is likely to Reserve has typically hedged its commitment continue. □ Footnotes 1. The characteristics of this wartime yield structure Reserve discount rate. Member banks often elected to were a three-month rate of 3/8 percent, a seven- to borrow such funds too, typically for one day at a time, twelve-month rate of 7/8 percent, and a twenty-year apparently in order to avoid the close surveillance of rate of 2Vi percent. This structure was broadly believed their operations by Federal Reserve discount officers to reflect liquidity preference—the fear that long-term that traditionally accompanies borrowing from the Sys­ rates might rise and the consequent desirability for tem for any extended period. As a result of this prefer­ investors seeking to avoid capital losses of staying with ence, a national market for federal funds developed short-term assets. rapidly. And since Federal Reserve operations to ease It was widely recognized that pegging of such a rate or tighten the bank reserve base are reflected immedi­ structure was internally inconsistent. If long-term se­ ately in the federal funds quotation, this rate began to curities were expected to remain truly pegged until be viewed as the bellwether of Federal Reserve policy in­ maturity, there was no point in holding any security tentions, superseding the 90-day Treasury bill rate. with a lower yield but no lower risk. Anyone who acted 7. M-l includes (1) demand deposits at all commer­ on this theory and bought the 2Vi percent bonds of cial banks other than those due domestic commercial September 1972 on the presumption that pegging by banks and the U.S. government, less cash items in the the Federal Reserve had removed the risk of investing process of collection and Federal Reserve float; (2) at the long end of the market would have seen his bonds foreign demand balances at Federal Reserve Banks; and depreciate to a low of 7824/32 in early 1960. (3) currency outside the Treasury, Federal Reserve 2. Federal Open Market Committee report of ad hoc Banks, and vaults of all commercial banks. subcommittee on the government securities market, M-2 includes M-l plus time and savings deposits at November 12, 1952; reprinted in The Federal Reserve commercial banks other than negotiable certificates of System After Fifty Years, Hearings before the Subcom­ deposit of $100,000 or more issued by large weekly mittee on Domestic Finance of the Committee on reporting commercial banks. Banking and Currency, House of Representatives, 88 M-3 includes M-2 plus deposits at mutual savings Cong. 2 Sess., vol. 3 (Government Printing Office, banks and savings and loan associations, and shares at 1964), pp. 2005-55. credit unions. 3. See Fortieth Annual Report of the Board of Gov­ Bank credit includes total bank loans and investments ernors of the Federal Reserve System Covering Opera­ (measured on a monthly average basis) less interbank tions for the Year 1953 (1954), p. 89. loans. 4. The ultimate “target” of policy is a favorable 8. When commercial banks were authorized to make performance of the economy as reflected in output, automatic transfers from savings to demand deposits in prices, and employment. The financial variables used November 1978, the Federal Open Market Committee to define desired policy ranges, and referred to as targets for a short time also monitored two-month ranges for in this article, are merely means to achieve this broader an additional aggregate, known as M-1 + , which con­ end and not targets in any final sense. sists of M-l plus savings deposits at banks. Data are 5. When excess reserves exceed member bank bor­ not available on a sufficiently timely basis for M-4 and rowings, the net position of the banking system shows M-5 and the bank credit proxy. free reserves; when borrowings exceed excess reserves, 9. Prior to the Full Employment and Balanced there are net borrowed reserves. Growth Act, the Federal Reserve made quarterly reports 6. Starting in the mid-1960s, large U.S. commercial to the Congress on its 12-month growth targets for banks with temporary reserve deficiencies began to press money and credit. At each reporting the base periods more actively to borrow excess reserves (called federal for the ranges were moved ahead one quarter. This funds) from banks with temporary reserve surpluses, moving-base procedure was sometimes criticized be­ even when the interest cost was above the Federal cause the possibility of “base drift” tended to compli­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Operating Guides in U.S. Monetary Policy 691 cate comparisons of growth performance over time. for the District of Columbia Circuit invalidated the Furthermore, since new 12-month growth targets were regulations of the Board and the FDIC that permitted always related to the latest base quarter, the FOMC did insured banks to transfer funds from a depositor’s sav­ not explicitly account for deviations from targeted ings account to a demand deposit account to cover growth ranges in earlier quarters. Under the Humphrey- overdrafts or to maintain a specified balance. The court, Hawkins reporting procedure, there is no longer a mov­ however, delayed the effective date of its decision until ing base because the focus at successive congressional January 1, 1980, to allow the Congress time to review reviews is to be on given calendar years. Thus the the matter. On August 21, 1979, the Board petitioned Federal Reserve is now required to make an explicit the U.S. Supreme Court to review the decision of the accounting and adjustment for deviations from its tar­ Court of Appeals. geted growth ranges as the calendar year progresses. 15. Commercial banks may issue certificates with a 10. Improving the Monetary Aggregates: Report of maximum rate of interest equal to the average discount the Advisory Committee on Monetary Statistics (Board rate on six-month Treasury bills in the most recent of Governors of the Federal Reserve System, 1976), Treasury auction. Before March 15, 1979, thrift institu­ p. 7. tions were permitted to offer 1/4 of 1 percent more on 11. The possibilities cited in the report included M-2, the certificates than commercial banks, regardless of the M-3, M-4 (M-2 plus large CDs), and M-5 (M-3 plus level of the six-month bill rate. Regulatory changes that large CDs), and a number of permutations that combine went into effect on March 15, 1979, prohibited com­ deposit-type instruments with liquid market securities. pounding of interest on subsequent issues of the certifi­ 12. Until March 1976, the benchmark period was a cates and authorized a full 1/4-point differential for thrift single day. But starting with that month, weekly average institutions only when the six-month bill rate is 8 3A data for the week ending on the Wednesday that includes percent or less. When the six-month bill rate is between the call date have been available for benchmarking. 83A and 9 percent, commercial banks may pay the actual 13. While the Manager of the System Open Market bill rate, while thrift institutions may pay 9 percent and, Account has most frequently been directed to weigh M-1 thus, experience less than a 1/4-point differential. When and M-2 equally when evaluating their actual growth the six-month bill rate is 9 percent or greater, both banks patterns in relation to the Committee’s desired ranges, and thrift institutions may pay the actual bill rate. the fact that M-2 includes M-l still places the greatest 16. See “A Proposal for Redefining the Monetary effective weight on M-l. Aggregates,” Federal Reserve Bulletin, vol. 65 (Jan­ 14. On April 20, 1979, the U.S. Court of Appeals uary 1979), pp. 13-42. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

692 Insured Commercial Bank Income in 1978 This article was prepared by Barbara Negri to acquire high-yielding assets, while regulatory Opper of the Board’s Division of Research and ceilings limited increases in the interest cost on Statistics. savings and most small-denomination time de­ posits. This disparity in the interest rate sensi­ Net income of insured commercial banks tivity of assets and liabilities had its greatest reached $10.7 billion during 1978.1 The 20 impact on banks with less than $1 billion in percent profit increase over the preceding year assets, which rely most heavily on savings and outpaced the 12.5 percent expansion in the small time deposits as a source of funds; their assets of insured commercial banks, and return gross interest income and expense increased less on assets increased substantially for the second than the industry averages while their net inter­ consecutive year, to a level higher than in any est margin increased 25 basis points—double other year since 1973. Because of this vigorous the rise for all other banks (chart 1). By contrast, profit growth and a modest further increase in the major money center institutions—very large the leverage of assets with respect to equity, banks a substantial portion of whose assets and returns on average equity capital also reached liabilities carry returns that are highly sensitive a post-1973 high of 12.9 percent. The increase to movements in market yields—experienced in profits during 1978 was widespread among above-average increases in gross interest income insured commercial banks, although medium and large regional-type banks, which tend to be 1. Income and expenses as percent of average retail-oriented but which have flexible access to assets, all insured commercial banks, 1976-781 funds, experienced the largest gains. Insured U.S. banks with foreign offices at­ Item 1976 1977 1978 tributed more than one-fourth of their total 1978 Gross interest earned................................ 6.39 6.47 7.24 net income to international business, according Gross interest expense....:................... 3.47 3.54 4.17 Net interest margin............................... 2.92 2.93 3.07 to new reports on domestic and foreign opera­ Noninterest income................................... .71 .70 .74 Loan-loss provision.................................. .32 .26 .25 tions at those institutions. The profitability of Other noninterest expense....................... 2.44 2.45 2.50 these banks, based on data first reported for Income before tax.................................. .88 .92 1.06 .21 .23 .29 1978, is discussed later. Other 3.................................................. .03 .01 -.02 The most important source of improvement Net income.............................................. .70 .71 .76 Cash dividends declared.................. .27 .26 .26 in return on assets at nearly all size classes of Net retained earnings................................ .43 .45 .50 banks was the increase in net interest margins, Memo which are the difference between gross interest Taxable equivalent net interest 3.33 3.33 3.48 income adjusted for taxable equivalence and Average assets, billions of dollars i......... 1,131 1,257 1,419 gross interest expense. Table 1 summarizes in­ 1. Average assets are fully consolidated and net of loan-loss reserves; dustry return on average assets. Rising short­ averages are based on amounts outstanding at the beginning and end of each year. term market yields during 1978 allowed banks 1976 and 1977 interest and noninterest income have been restated slightly to conform with a 1978 definitional change that adds dividends on stock to interest income. 2. Includes all taxes estimated to be due on income, on extra­ 1. Detailed income and expense data for all insured ordinary gains, and on securities gains. 3. Includes securities and extraordinary gains or losses (—) before and all member banks from 1970 through 1978 appear taxes. in appendix tables A.l and A.2. 4. For each bank with profits before tax of at least $25,000, income from state and local obligations was increased by the lesser of that The data base was developed by Nancy Pittman, and interest income or profits before tax. For banks with profits before research assistance was provided by Mary McLaughlin. tax between zero and $25,000, one-third of the lesser of profits or state and local interest income was added. This adjustment approxi­ Peter Lloyd-Davies prepared the Technical Note. mates the equivalent pre-tax return on state and local obligations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

693 and expense but a below-average increase in net Yields on securities held in bank portfolios interest margins. At these banks, reductions in also increased during 1978, although the loan-loss provisions contributed about as much gain—46 basis points on a taxable-equivalent to improvement in net earnings as did the in­ basis—was less than half that for loans. As loan crease in net interest margins. demand accelerated during 1978, bank securi­ ties holdings as a proportion of interest-earning assets declined by about as much as higher- In t e r e st In c o m e yielding loans increased (table 3). The strong growth in gross interest income The dollar value of industry holdings of U.S. during 1978 is attributable to both the general government obligations remained unchanged increase in market interest rates and a portfolio over the year despite some increased need for shift by banks from lower-yielding securities those instruments arising from their use as col­ into loans. As a percentage of average assets, lateral for bank repurchase agreements (RPs), gross interest earned adjusted to a taxable- which increased rapidly during 1978, as well equivalent basis increased 78 basis points, after as for government deposits. In contrast with the only a negligible rise in 1977. pattern for federal obligations, some net new The gross portfolio yield on loans at all in­ funds were invested in state and local govern­ sured commercial banks increased 117 basis ment issues during 1978, although not in points—119 basis points net of loan-loss provi­ amounts large enough to maintain the share of sions (table 2). In addition to the influence of bank assets in such obligations. Demand for the general rise in market yields during the year, those tax-exempt instruments probably stemmed loan portfolios were reallocated toward loans from the rapid growth in taxable profits at banks. with higher returns. Growth in real estate and At the end of 1978, all government obligations personal loans accounted for about two-thirds held by banks had a longer average maturity of the addition to domestic loan portfolios at than was the case a year earlier. There had been all insured commercial banks. Even on a fully a shift out of U.S. government obligations ma­ consolidated basis, such loans accounted for turing within one year and an increase in long­ half of the aggregate increase in loan portfolios term state and local government obligations, of all insured U.S. banks. With yields on con­ including those with maturities of ten years or sumer loans ranging between 11 and 13 percent more. in 1978, returns on these loans substantially The sensitivity to the credit cycle of the gross exceeded average gross yields on the loan port­ interest income of banks is influenced strongly folios at most banks, and were well above the by the maturity of loan and investment portfo­ average business-loan prime rate prevailing lios and by the use of floating-rate loan agree­ during the year. ments. Real estate and consumer loans tend to remain outstanding longer than business loans, for example, and interest rates on such loans 2. Rates of return on fully consolidated have been less responsive than the business-loan portfolios, all insured commercial banks, prime rate to cyclical shifts in market yields. 1976-781 Moreover, floating or variable interest rates are Percent more prevalent on bank business loans than on Item 1976 1977 1978 real estate or consumer loans. Banks with a preponderance of the latter two types of loans Securities, total.......................................... 6.26 6.22 6.47 U.S. government.................................... 7.09 6.98 7.37 consequently have tended to experience rela­ State and local government................. 5.15 5.08 5.24 Other......................................................... 7.68 8.92 8.80 tively low cyclical volatility in gross interest Loans, gross................................................ 8.89 9.15 10.32 Net of loan-loss provisions................. 8.24 8.63 9.82 income. To illustrate, more than one-third of Taxable equivalent2 Total securities...................................... 8.43 8.43 8.89 the loan portfolios of banks with assets less than State and local........................................ 10.11 10.18 10.62 Total securities and gross loans......... 8.72 8.96 9.95 $100 million is in real estate loans and nearly another third is in personal loans. Since 1970, 1. Calculated as described in the Technical Note. 2. See note 4 to table 1. gross interest income of this class of bank has Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

694 Federal Reserve Bulletin □ September 1979 3. Portfolio composition as percent of total assets including loan-loss reserves, all insured commercial banks, 1976-781 Average during year Domestic Fully consolidated Item 1976 1977 1978 1976 1977 1978 Interest-earning assets......................................................................................... 80.9 80.3 79.2 83.4 83.3 82.4 Loans.................................................................................................................. 52.0 52.1 53.3 53.1 53.4 54.6 Securities............................................................................................................ 23.9 23.2 21.3 20.8 20.0 18.4 U.S. Treasury............................................................................................... 9.2 9.2 7.7 7.9 7.8 6.5 U.S. government agencies......................................................................... 3.5 3.3 3.2 3.0 2.8 2.7 State and local governments......................................................................... 10.6 10.2 9.8 9.1 8.7 8.3 Other bonds and stock............................................................................... .6 .5 .6 .8 .8 .9 Gross federal funds sold and reverse RPs................................................. 4.0 4.2 4.0 3.4 3.6 3.3 Interest-bearing deposits2.............................................................................. 1.0 .8 .6 6.1* 6.3e 6. le Memo Average gross assets (billions of dollars)........................................................ 958 1,056 1,198 1,116 1,244 1,406 1. Percentages are based on aggregate data and thus reflect the reported in 1976. Reporting of those balances on a fully consolidated heavier weighting of large banks. Data are based on averages for call basis began in December 1978, and the number shown for 1978 is dates in December of the preceding year and March, June, September, an average based upon the reported December amount and estimates and December of the current year. for earlier call report dates. Fully consolidated interest-bearing de­ 2. Interest-bearing deposits held by domestic offices first were posits are estimated for 1976 and 1977. shown far more secular uptrend, but less cycli­ depending upon the nature of the bank. The cal variability, than that of larger banks (top six-month money market certificate, authorized panel of chart 1). in June 1978, allowed banks, for the first time, The increase in the rate of gross interest to offer a relatively small-denomination deposit income received by the banking industry as a with a ceiling on new accounts that varied whole during 1978 primarily reflects the experi­ regularly with market yields.2 This instrument ence of the larger banks. These institutions on permitted banks to compete with market instru­ average have a greater concentration of loans ments for funds of rate-conscious consumers, with shorter maturities or floating rates and thus but at the same time it introduced some cyclical with yields that respond quickly to changes in responsiveness to the interest cost of consumer money market conditions. Money center banks, deposits. as shown in chart 1, are the extreme example. Because of the general stability in regulatory Of their loans except loans to individuals and ceilings affecting the bulk of these deposits, the those secured by single-family homes, 55 per­ effective annual interest rate paid by banks on cent matured within one year and 32 percent savings and small time deposits increased only of the longer maturities carried floating interest slightly during the year. (See table 4.) The rates. Since the two exceptions amount to only relatively slight increase in effective yields on about 10 percent of their loans, a minimum of consumer-type interest-bearing deposits is at­ 80 percent of the loan portfolios of money center tributable principally to the impact of the money banks is structured to respond readily to changes market certificates, since most banks already in open market yields. In 1978, interest income offered regulatory ceiling rates on other savings per dollar of average assets at these banks in­ and small time deposits. Average rates paid for creased 99 basis points, well above the average large negotiable certificates of deposit (CDs), amount. RPs, and federal funds increased more than 200 basis points, on the other hand; deposit funds raised in foreign offices of U.S. banks also cost In t e r e st E x p e n se over 200 basis points more than in 1977. The stability in the interest rate ceilings on savings and most small-denomination time de­ 2. An examination of profit and portfolio impacts of posits restrained increases in the overall cost of the money market certificate on small banks appears funds to banks in 1978—to varying degrees later. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Insured Commercial Bank Income in 1978 695 1. Components of interest margins outstanding in 1978 at all insured banks that was financed by domestic demand, savings, and Percent of average assets small time deposits decreased 2.1 percentage GROSS INTEREST INCOME Below $100 million points (line 2 plus line 7 of table 5), and measured from year-end 1977 to year-end 1978 (not shown), it fell 4 points to 59 percent. The shift to higher-cost funds and the increase in yields on those sources raised gross interest 'N $1 o b n il m lio o n n o e r y m c o e re nter expense as a percentage of average assets 63 basis points for all banks (table 1). Accentuating the increase in interest expenses was the shift of some consumer funds from non-interestbearing demand deposits to interest-bearing 5 transactions accounts—automatic transfer serv­ ice (ATS) and negotiable order of withdrawal 4 (NOW) balances. In addition, the U.S. Treasury tax and loan account was instituted, whereby 3 banks holding Treasury balances were required to pay interest on them; the rate paid was a 2 money market yield. As would be expected, banks that relied most heavily on liabilities sheltered by regulatory NOT INTEREST MARGINS ceilings experienced an increase in gross interest 5 expense far below the average (middle panel of chart 1). For instance, banks with less than $100 4 million in assets, with 88 percent (down from 90 percent in 1977) of their financial liabilities 3 in demand, savings, and small time deposits, paid only 22 basis points more interest per dollar 2 of average assets in 1978 than in 1977. Con­ versely, interest expense as a percent of average assets rose 93 basis points at money center 1. Size categories are based on year-end consolidated assets. banks, at which deposits with relatively stable Gross interest income is adjusted for taxable equivalence. interest costs represented only 29 percent of Net interest margins are gross interest income adjusted for taxable equivalence minus gross interest expense. total financial claims. Data are for domestic operations until 1976, when foreign office operations of U.S. banks were consolidated into the totals. 4. Rates paid for fully consolidated liabilities, Although fixed-rate deposit interest ceilings all insured commercial banks, 1976-78 1. limited the effective interest cost of most savings Percent and small time deposits, they also limited the Item 1976 1977 1978 ability of banks to compete for depositors’ funds against small-denomination open-market instru­ Time and savings accounts..................... 5.74 5.72 6.76 Negotiable CDs2................................... 5.97 5.58 7.85 ments, such as money market mutual funds and Deposits in foreign offices................... 5.97 5.94 8.04 Other deposits........................................ 5.58 5.67 5.81 Treasury securities. As a consequence, banks Subordinated notes and debentures___ 7.43 7.38 7.77 Gross federal funds purchased and RPs 5.57 6.10 8.68 seeking to attract loanable funds had to issue Other liabilities for borrowed money.. 7.96 7.56 7.00 5.77 5.79 6.81 an increased proportion of liabilities with mar- Memo Not covered by regulatory ceilings2.... 5.96 5.92 8.02 ket-determined interest rates, such as CDs and nondeposit instruments. For example, the 1. Calculated as described in the Technical Note. 2. Does not include nonnegotiable time deposits of $100,000 or proportion of average fully consolidated assets more. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

696 Federal Reserve Bulletin □ September 1979 5. Composition of financial liabilities as percent of total assets including loan-loss reserves, all insured commercial banks, 1976-781 Average during year Domestic Fully consolidated Item 1976 1977 1978 1976 1977 1978 Financial claims................................................................................................... 89.1 89.4 89.1 90.1 90.4 90.2 Demand deposits............................................................................................. 32.6 32.1 31.9 28.0 27.2 26.9 Interest-bearing claims.................................................................................... 56.5 57.3 57.2 62.1 63.2 63.3 Time and savings accounts........................................................................ 49.2 49.0 48.3 55.5 55.6 55.2 Large time2............................................................................................... 14.8 13.3 15.0 13.8 11.4 12.7 In foreign offices...................................................................................... 13.2 14.1 14.5 Other domestic......................................................................................... 34.4 35.7 33.3 28.5 30.1 28.1 Subordinated notes and debentures...................................................... .5 .5 .5 .4 .4 .4 .5 .6 1.1 .8 .9 1.5 Gross federal funds purchased and RPs..................................................... 6.3 7.2 7.3 5.4 6.2 6.2 Memo Managed liabilities 3............................................................................................. 22.1 21.6 23.9 33.6 33.1 35.3 Average gross assets (billions of dollars)........................................................ 958 1,056 1,198 1,116 1,244 1,406 1. Percentages are based on aggregate data and thus reflect the 2. Of $100,000 and over issued by domestic offices. heavier weighting of large banks. Data are based on averages of call 3. Large time deposits issued by domestic offices plus gross deposits dates for December of the preceding year and March, June, September, at foreign offices, subordinated notes and debentures, RPs, gross and December of the current year. federal funds purchased, and other borrowings. By 1978, net interest margins at most classes N e t In t e r e st M a r g in s of banks had returned from their recent cyclical Net interest margins widened substantially at lows almost to the higher levels registered ear­ most commercial banks, and on the whole, this lier in the decade (chart 1). The major money expansion provided by far the single most im­ center institutions, however, had experienced a portant source of growth in industry rates of substantial and relatively persistent narrowing return during 1978. Small- and medium-sized in net interest margins during the 1970s for banks experienced below-average increases in several reasons. First, foreign operations are interest income but even smaller increases in relatively important to the money center institu­ interest expense, so their net interest margins tions.3 Since net interest margins tend to be expanded more than those at larger banks (bot­ narrower at foreign offices than at domestic tom panel of chart 1). That growth was by far offices—in 1978 by one-third—the relatively the largest factor contributing to the increase in rapid growth of the foreign-office business of before-tax returns on average assets at these the money center banks probably has tended to banks. The impact of deposit-rate ceilings was narrow the consolidated interest margins, al­ not so decisive for banks other than the money though not necessarily the overall profitability, center institutions with $1 billion or more in of these banks. Second, between 1970 and 1976 assets; only about half of their consolidated non-interest-bearing demand deposits as a year-end financial liabilities were in demand, proportion of total liabilities declined more rap­ savings, and small time deposits. Instead, the idly at money center banks than at other banks. increase in rates of return on their loan portfolios Third, major multinational corporations—im­ outpaced the additional interest expense paid portant loan customers of these money center during the year; as with the two smaller classes banks—have increased their reliance on such of banks, this widened margin was the most alternative short-term sources of funds as the important component of growth in profitability domestic commercial paper market and banking over the 1977 rate. At money center banks, by institutions abroad; this competition for loans contrast, the large increase in the rate of interest expense nearly matched that of gross interest income and the resulting small increase in net 3. As the note to the chart indicates, interest margins reflect only domestic-office business until 1976, when interest income was not an overwhelming ele­ fully consolidated income and expenses first were re­ ment in their profit growth. ported. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Insured Commercial Bank Income in 1978 697 probably has induced money center banks to reduce their own differential between loan rates and cost of funds. Although money center banks have operated with a far smaller net interest margin than have other banks, this difference has been offset partially by lower noninterest expenses per dollar of assets; perhaps econo­ mies of scale coupled with relatively low serv­ icing costs on the small proportion of demand deposit liabilities at money center banks account for the lower expense. Moreover, returns on equity at these banks, with their higher asset- 1970 1972 1974 1976 1978 to-capital leverage, have not been consistently 1. As percent of average consolidated assets net of loanabove or below those at other banks. loss reserves, all insured commercial banks. as a share of average assets were lower at money Loan Losses and Other center banks than at other banks. Noninterest Expense and Income The decline in loan-loss provisions associated Most insured commercial banks experienced a with lower actual net chargeoffs added nearly continued reduction in loan portfolio credit as much to the improvement in profitability at losses from the peak in those chargeoffs asso­ money center banks as did net interest gains. ciated with the 1973-75 recession (chart 2). By In contrast, loan-loss provisions of small banks 1978 such charges net of recoveries, expressed actually increased during 1978 both in dollar as a share of average assets, had fallen to terms (table 6) and as a percentage of both pre-recession levels. At banks with assets less average assets and average loans. than $1 billion, most of the improvement had Noninterest income and noninterest expenses occurred during 1977, and during 1978 they other than loan-loss provisions both tended to experienced only a small additional decline in increase only slightly faster than asset growth. net loan losses. At larger banks, however, net The acceleration, minimal as it was, centered loan losses abated considerably further during in income from nondeposit service charges, 1978; for the first time since 1974, those losses commissions, and fees, and in expenses for 6. Loan portfolio losses and recoveries, insured commercial banks, 1977 and 1978 Millions of dollars, except as noted Net losses Losses Loan-loss Year and size of bank1 charged Recoveries provision Dollar Percent of amount loans2 1977 All banks............................................................................................................. 3,549 809 2,740 .41 3,244 Less than $100 million..................................................................................... 720 210 510 .33 632 $100 million to $1 billion................................................................................ 674 177 497 .37 609 $1 billion or more Money center................................................................................................. 1,147 218 929 .45 1,025 1,009 204 804 .46 978 1978 All banks............................................................................................................. 3,537 1,073 2,464 .32 3,499 782 240 542 .32 748 $100 million to $1 billion................................................................................ 689 194 495 .32 667 $1 billion or more 995 335 660 .28 972 Not money center......................................................................................... 1,068 303 765 .36 1,112 1. Size categories are based on year-end fully consolidated assets. 2. Average of beginning- and end-of-year loan balances. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

698 Federal Reserve Bulletin □ September 1979 salaries and employee benefits. The increase in 3. Net income as percent of average equity1 income items approximately offset the increase Percent of banks in expenses, however, so these factors had no impact on growth in commercial bank earnings (table 1). Profitability and Dividends Given the strong gains in net interest income, 1978 was a year of robust expansion in profits at most banks. Small, though widespread, losses on sales of securities occurred throughout the industry, but did not materially depress profits. The sharp increases in market yields led to a widespread erosion of capital values of securi­ ties held in portfolio, and banks may have chosen to realize losses to offset in part growth which are affiliated with holding companies, fell in their taxable profits and to provide funds for from about 45 percent of after-tax income in reinvestment at higher current yields. For all 1977 to 40 percent in 1978. Because cash divi­ classes of banks except the large money center dends grew more slowly than earnings, income institutions, the increase in net income relative retained showed an unusually large increase to average assets and average equity was siz­ during 1978 (table 8). The equity capital of able, bringing returns above those in any pre­ commercial banks expanded by nearly $8 billion ceding year since 1973 (table 7). The profita­ in 1978, with an exceptionally large portion of bility of money center banks also improved, and that increase derived from earnings retention. although their returns on assets remained below Growth in equity capital, though unusually pre-1974 levels, their 1978 return on equity— strong, nevertheless did not keep pace with now more highly leveraged—was commen­ growth in assets during 1978, and at banks with surate with profitability in those earlier years. assets above $100 million, the average ratio of Most banks allocated a smaller share of in­ equity capital to assets diminished slightly fur­ come to cash dividends on common and pre­ ther from 1977 levels. ferred stock during 1978 than in 1977. Cash The increase in the rate of return on equity dividends declared by large banks, most of appears to have been widespread among banks. 7. Profit rates of insured commercial banks, 1973-78 Percent Type of return and size of bank* 1973 1974 1975 1976 1977 1978 Return on assets2 All banks........................................................................................................... .76 .72 .69 .70 .71 .76 Less than $100 million.................................................................................... 1.00 .97 .89 .94 .98 1.04 $100 million to $1 billion............................................................................... .84 .79 .75 .78 .82 .90 $1 billion or more Money center................................................................................................ .60 .56 .56 .54 .50 .53 Not money center........................................................................................ .62 .58 .59 .60 .62 .68 Return on equity3 All banks........................................................................................................... 12.9 12.6 11.8 11.5 11.8 12.9 Less than $100 million.................................................................................. 13.5 12.7 11.5 11.8 12.4 13.2 $100 million to $1 billion............................................................................... 12.6 11.9 11.1 11.1 12.0 13.2 $1 billion or more Money center................................................................................................ 13.2 14.1 13.8 12.3 11.4 12.8 Not money center. — ................................................................................ 12.0 11.7 11.2 10.6 11.2 12.5 1. Size categories are based on year-end fully consolidated assets. 3. Net income as a percent of the average of beginning- and end-of- 2. Net income as a percent of the average of beginning- and end-of- year equity capital, year fully consolidated assets net of loan-loss reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Insured Commercial Bank Income in 1978 699 8. Sources of increase in total equity capital, all insured commercial banks, 1973-781 Millions of dollars, except as noted Net increase Increase in equity capital Net retained income2 in equity capital from retained income (percent) Year Large Large Total banks3 Total banks3 (l)/(3) (2)1(4) (1) (2) (3) (4) (5) (6) 1973................................................................................................. 4,131 1,491 5,455 1,849 76 81 4,307 1,666 5,631 1,977 76 84 1975................................................................................................. 4,224 1,690 5,526 2,396 76 71 1976................................................................................................. 4,834 1,909 7,254 3,371 67 57 1977................................................................................................. 5,599 2,157 7,094 2,939 79 73 1978................................................................................................ 7,019 2,947 7,961 3,304 88 89 1. In 1976, equity capital was affected by one-time accounting 2. Net income less cash dividends declared on preferred and comchanges in the treatment of loan-loss and valuation reserves. The data mon stock. shown for 1976 have been adjusted to correct for that definitional 3. Banks with fully consolidated assets of $1 billion or more, change. The distribution of individual rates of return on / yields on market instruments open a large gap equity has shifted noticeably from 1976 to 1978; over fixed interest rate ceilings on other smallfar more banks now record high rates of return denomination deposits. By year-end, MMCs and far fewer experience losses (chart 3). outstanding at insured banks had grown to $22 billion, with small banks having issued a dis­ proportionately large two-fifths of that amount. G o v e r n m e n t P r o f it G u id e l in e s By the end of 1978, as indicated in table 9, In early 1979, the President’s Council on Wage MMC balances averaged only 1.6 percent of and Price Stability (COWPS) implemented bank total financial liabilities of the biggest banks, profit guidelines as a counterpart to the overall compared with about 2.5 percent of those claims wage and price guidelines already set for unions at small and medium-sized banks. Because these and nonfinancial firms. Those profit guidelines smaller banks had limited ability to issue largerecognized the central role that interest rates denomination money market liabilities, the play in an anti-inflationary effort and, further, MMCs played an important part in sustaining acknowledged the decisive impact of policy their asset growth during 1978 as market yields regarding deposit-rate ceilings on profit growth rose above fixed deposit-rate ceilings. at most banks. Instead of formulating interest To assess the effects of this new deposit on rate restrictions, as the Committee on Interest and Dividends had done in 1973-74, CO WPS 9. Use of money market certificates, insured devised a profits measure and set as a guideline commercial banks, by size of bank, the average of such returns in the three most December 31, 1978 profitable years in the period 1973 through 1978. As many as one-third of all insured com­ Lowest value in Measure of MMCs and quartile2 mercial banks are estimated to have to reduce size of bank1 Mean Mode profits from 1978 levels or to adopt the alterna­ Sec­ ond Third Fourth tive restrictions on dividends and service fees applicable to banking institutions that do not MMCs as percent of total fiancial liabilities meet the profit constraint. Less than $100 million............... 2.5 0 0 2.1 3.9 $100 million to $1 billion......... 2.7 0 1.6 2.6 3.5 $1 billion or more....................... 1.6 0 .1 1.4 2.1 MMCs as percent of M o n e y M a r k e t C e r t if ic a te s Le s s m s t a h l a l n ti m $1 e 0 d 0 e p m o i s l i l t i s on.............. 9.6 0 0 6.8 13.7 $100 million to $1 billion......... 15.0 0 8.8 13.5 19.6 Money market certificates (MMCs), introduced $1 billion or more....................... 15.9 0 11.2 14.7 19.2 in June 1978, provided banks a new opportunity 1. Size categories are based on year-end fully consolidated assets. to compete for consumers’ funds when rising 2. In all cases, zero was the lowest value in the first quartile. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

700 Federal Reserve Bulletin □ September 1979 10. Comparison of operating results, second half two groups were significant at the 1 percent of 1978, small insured commercial banks with level. greatest and least reliance on MMCs1 On balance, however, the profitability of the Means in percent except as indicated more intensive users of MMCs was lower than that of banks with none. Part of this difference, Quartile Item also statistically significant at the 1 percent Highest Lowest level, can be related to MMC use. Banks in the top MMC quartile paid 57 basis points more Growth Total domestic assets........................................... 8.5 5.7 per dollar of assets for funds, as would be Domestic liabilities............................................... 9.0 6.0 expected, but they only partly recovered that Income and expense scaled to average consolidated assets2 difference by earning 40 basis points more in Interest income..................................................... 7.97 7.62 Interest expense..................................................... 3.83 3.26 interest. Net interest margins, consequently, Net interest margin.......................................... 4.14 4.35 Taxable equivalent....................................... 4.64 4.81 were lower for banks in the top quartile than Noninterest income.............................................. .55 .48 Loan-loss provisions............................................ .33 .28 for those in the lowest. Although noninterest Other noninterest expense.................................. 3.17 3.24 Profit before tax................................................ 1.20 1.32 expenses also were lower and noninterest in­ Net income......................................................... .90 .97 Dividends........................................................... .28 .31 come was higher at small banks in the top MMC Changes in asset allocations quartile, those differences were too small to (percentage points)3 Short term assets *................................................. .12 -.24 offset fully the lower net interest margins. Real estate loans................................................... .53 .53 Whereas small banks in the top quartile had 1. Top and bottom quartiles, as determined by share MMCs repre­ substantially higher interest expense relative to sented of total financial claims at the end of 1978, of all banks with year-end assets below $100 million. average assets, most of which went to deposi­ The differences between means of the two groups are statistically significant below the 1 percent level except the value for noninterest tors, they paid 3 basis points less to stockholders expense, which is significant below the 2 percent level, and the pro­ portion of assets allocated to real estate loans, which is not statis­ than did those in the lowest quartile. tic 2 a . l ly T h si e g s n e i f a ic r a e n a t. nnual rates calculated by doubling rate for second A combination of factors may help to account hal 3 f . . The percent of total domestic assets represented by the indicated for the higher asset yield earned by banks in item in December minus that percent in June. A value of 3.5 per­ the top quartile. For one, the increase in market cent indicates a drop in the proportion of assets so invested by about on 4 e . - h U al . f S . o f g 1 o v p e e r r n c m en e t n a t g , e T p r o e i a n s t u . ry, and agency securities maturing yields during the second half of 1978 probably within one year plus federal funds sold and reverse RPs. brought returns on new loans and investments above average portfolio yields. With their faster smaller banks in greater detail, a special analysis asset growth, banks in the top quartile probably of banks with less than $100 million in assets acquired, on net, more loans and investments was undertaken. Those banks were grouped yielding high current returns than did their according to the percentage of their total finan­ slower-growing counterparts that did not use cial liabilities represented by MMCs as of De­ MMCs. In addition, during the second half of cember 1978. Statistical tests of the differences 1978, banks in the top MMC quartile increased between certain operating characteristics were their share of assets invested in short-term in­ performed on small banks in the lowest and struments including U.S. government and highest quartiles. The lowest quartile had no agency obligations maturing within one year, MMCs outstanding, and the highest had at least reverse RPs, and federal funds; banks in the 3.9 percent of total financial claims from MMCs lowest quartile reduced that proportion. As (table 9). market yields increased, the term structure of Higher use of MMCs clearly was associated yields shifted so that returns on short-term in­ with more rapid growth rates of assets and vestments exceeded those on long-term assets; liabilities during the second half of 1978, after other things being equal, portfolios with more the MMC was instituted (table 10). The mean short-term assets during the second half of 1978 growth rates of assets and liabilities of the top were likely to experience the higher yields. No quartile—8V2 and 9 percent respectively—were difference between the two groups of banks was half again as fast as those of the lowest quartile, shown in the share of assets allocated to real and the differences between the means of these estate loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Insured Commercial Bank Income in 1978 701 U.S. Insured Commercial began to supply income and expense data on the operations of their domestic and foreign Banks with Foreign Offices offices separately. These institutions also began The rapid growth of business in foreign offices to provide substantially more balance-sheet in­ of U.S. banks has been an important develop­ formation for their domestic and foreign opera­ ment in commercial banking during this decade. tions, including detail on selected balances ac­ In 1970, 61 U.S. banks had foreign offices, cording to whether or not the customer was which together held less than $50 billion in domiciled within the United States. assets; by the end of 1978, 155 banks had The new data illustrate some dissimilarities foreign-office assets of $260 billion. Eight of between the foreign and domestic business of the ten largest commercial banks held at least these multinational banks. Foreign offices relied one-third of their consolidated assets at their heavily on interest-bearing deposits, which foreign offices by year-end 1978 and one bank amounted to three-fourths of their liabilities held more than half. Although virtually all (table 11). They also relied on funds supplied banks with foreign offices are large institutions, by their domestic affiliates, which amounted to foreign-office business is concentrated at 13 6 percent of their total December 1978 liabili­ money center banks, which at year-end held 80 ties. At the end of 1978, sources of funding percent of total foreign-office assets. for domestic offices were primarily from nonaf­ In 1978, domestic banks with foreign offices filiates and were much more varied: nondeposit 11. Assets and liabilities of U.S. insured commercial banks with foreign offices, December 31,1978 Domestic offices Foreign offices Item Billions of Percent of Billions of Percent of dollars total dollars total Total assets................................................................................................................................ 608 100 259 100 Cash and due from banks................................................................................................ 107 18 96 37 Federal funds sold and reverse RPs............................................................................... 24 4 * * Securities............................................................................................................................... 87 14 7 3 318 52 144 56 721 12 1 5 Total liabilities......................................................................................................................... 569 100 250 100 Deposits................................................................................................................................ 440 77 220 88 Noninterest bearing2...................................................................................................... 198 35 19 8 Interest-bearing............................................................................................................... 242 43 201 80 Savings and small time.............................................................................................. 115 20 n.a. n.a. Time over $100,000.................................................................................................... 127 22 n.a. n.a. Nondeposit financial claims.............................................................................................. 90 16 11 4 Federal funds purchased and RPs.............................................................................. 70 12 * * Subordinated notes and debentures........................................................................... 3 1 1 * Other liabilities for borrowed money......................................................................... 17 3 10 4 39 7 201 8 Memo: Remaining maturities Total assets................................................................................................................................ 608 100 259 100 Selected assets3................................................................................................................... 418 69 241 92 One year or less............................................................................................................... 260 43 168 64 One to five years............................................................................................................. 90 15 54 21 Over five years................................................................................................................. 67 11 19 7 Total liabilities......................................................................................................................... 569 100 250 100 Selected liabilities4.............................................................................................................. 480 84 201 80 Subject to call.................................................................................................................. 197 35 20 8 Other three months or less........................................................................................... 205 36 154 62 Over three months.......................................................................................................... 78 14 29 12 1. Of this amount, $15 billion represents net funds advanced by process of collection, demand deposits held at other banks, and domestic offices to their own foreign branches. currency. 2. Demand deposits in domestic offices, noninterest-bearing deposits 4. For foreign offices, maturity detail is provided for all interestin foreign offices. bearing deposits. For domestic offices, deposits subject to call are 3. For foreign offices, maturity detail is provided for all loans and demand deposits. Other domestic-office liabilities maturing within 3 interest-bearing balances due from banks. Maturity detail is not re­ months include all savings and 4 percent of small time deposits, large ported for domestic-office holdings of consumer loans and single­ negotiable CDs with that remaining maturity, RPs, and federal funds. family home mortgages, which amounted to $53 billion and $42 Over 3 months includes 96 percent of small time deposits, subor­ billion respectively and which tend to have relatively long original dinated notes and debentures, and all other large negotiable CDs. maturities. Maturities represent all other loans and all securities at domestic offices; included in the shortest category also are federal * Less than $500,000 or 0.5 percent. funds sold and reverse RPs as well as $80 billion of cash items in n.a. Not available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

702 Federal Reserve Bulletin □ September 1979 12. Customers of U.S. insured commercial banks than those of foreign offices, especially with with foreign offices, December 31, 1978 respect to type of borrower (table 12). At the Billions of dollars end of 1978, about 40 percent of domestic-of­ fice loans had been extended to commercial and Item Domestic Foreign industrial borrowers, about 25 percent was se­ offices offices cured by real estate, and about 10 percent each 323 145 was allocated to financial institutions and indi­ 75 4 39 23 viduals. By contrast, commercial and industrial In the United States............................... 19 3 Outside the United States..................... 10 16 loans accounted for about 60 percent of Not specified........................................... 9 5 Commercial and industrial...................... 128 86 foreign-office loans, and nearly all of the re­ To U.S. addressees................................. 119 3 To non-U.S. addressees......................... 9 82 mainder was divided equally between financial To individuals.............................................. 53 5 To foreign governments............................ 2 23 institutions and foreign governments. As might Other............................................................. 26 4 be expected, loans at foreign offices were ex­ Memo To U.S. addressees..................................... 138 6 tended predominantly to borrowers domiciled To non-U.S. addressees............................. 21 121 Not specified................................................ 162 18 outside the United States, while those at do­ Total deposits.................................................. 437 220 mestic offices were extended to borrowers Individuals, partnerships, and corporations............................................ 340 68 within the United States. More than three- U.S. federal, state, and local governments............................................. 28 fourths of the depositors at domestic offices were Foreign governments and official institutions................................................ 8 34 individuals, partnerships, or corporations, Commercial banks in the United States.. 42 16 Banks in foreign countries....................... 9 100 whereas less than one-third of foreign-office Certified and officers’ checks................... 9 3 deposits came from those sources. Banks in foreign countries supplied nearly half of the funds accounted for 16 percent of total liabilities deposits at foreign offices, but at domestic of­ at year-end, and deposits themselves were an fices, both U.S. and foreign banks supplied only amalgam of interest-bearing and non-interest- slightly more than 10 percent of total deposits. bearing, demand and fixed-term accounts. With Differences between the effective rates of demand deposits amounting to 35 percent and return at foreign and domestic offices reflect the deposit-rate-regulated savings and small time dissimilarities in the composition of their assets deposits amounting to another 20 percent, more and liabilities and probably differences in lend­ than half of the liabilities of domestic offices ing and borrowing practices as well (table 13). carried constraints on their ability to respond Although loan portfolios at both sets of offices to rising market yields. At both sets of offices, grew 16 percent during 1978, the apparently about two-thirds of total liabilities matured in greater concentration of short-term and variless than three months. able-rate loans at foreign offices provided the Almost two-thirds of foreign-office assets opportunity for more rapid portfolio response matured within one year, and only 7 percent to the marked escalation of yields during 1978. in five or more years. Although less maturity Average loan portfolio yields consequently were detail is available for domestic offices of these much higher at foreign offices than at domestic banks, it appears that their asset term structure was more varied, with perhaps as much as 13. Rates of return and rates paid for funds, one-fifth maturing in five or more years.4 U.S.-insured commercial banks with foreign offices, 19781 Customers of domestic offices of U.S. banks with foreign offices also were more diversified Item Domestic offices Foreign offices 4. Eleven percent of assets are reported to mature 9.93 10.59 Interest-earning assets2............. 9.67 9.38 in five or more years; not reported are maturities for Interest-bearing deposits........... 6.54 7.95 single-family home mortgages and consumer loans, Interest-bearing liabilities......... 6.97 8.01 amounting to $42 billion and $53 billion respectively. Home mortgages, in particular, tend to carry original 1. Calculated as described in the Technical Note. maturities of well over five years. 2. Converted to a taxable equivalent basis for domestic offices according to the approximation method described in table 1, note 4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Insured Commercial Bank Income in 1978 703 14. Interest income and expense as percent of interest-bearing deposits—inconsequential at average assets, U.S. insured commercial foreign offices, but representing more than onebanks with foreign offices, 1978 third of domestic office liabilities—reduced stated interest costs of domestic offices to three- Item Domestic offices Foreign offices fifths of that in foreign offices, despite a dif­ Gross interest income............... 6.50 8.34 ferential of only 15 percent in the effective rates Gross interest expense............... 3.78 6.33 Net interest margin............... 2.72 2.00 paid for interest-bearing liabilities. As a result Taxable equivalent1........... 3.10 2.00 of all these factors, the net interest margins of 1. Approximated for domestic offices as described in table 1, note 4. domestic offices were 50 percent above those in foreign offices. On a fully allocated basis, reflecting all in­ offices in 1978. Rates paid for funds also come and expenses attributable to international averaged substantially higher in foreign than in business whether conducted in domestic or in domestic offices. One factor in that difference foreign offices, U.S. banks with foreign offices was that deposit-rate ceilings, affecting some of earned $2.4 billion before taxes from their in­ the liabilities of domestic offices but none of ternational business out of total pretax income those in foreign offices, were substantially of $7.3 billion (tables A.3 and 15). International below market yields during 1978. Another, a business contributed 0.16 percent, or about counterpart to loan portfolio behavior, was the one-fourth, to the total 0.59 percent rate of relatively greater influence of rising market return on assets earned by these banks during yields in 1978 on the higher proportion of 1978. □ short-term rate-sensitive liabilities at foreign of­ fices. In addition, nominal market yields pre­ vailing on Eurodollar deposits were higher than 15. Consolidated income and expenses of insured those on domestic large certificates of deposit. commercial banks with foreign offices, 1978 Rates of gross interest income and expense on average office assets were influenced not only Item Percent of by effective interest rates but also by differences average assets in the proportion of assets and liabilities that Gross interest income................................................... 7.09 did not bear interest (table 14). The rate of gross Gross interest expense.................................................. 4.58 Net interest margin....................................................... 2.51 interest income at foreign offices was above that Taxable equivalent1.............................................. 2.77 in domestic offices, for example, partly because Noninterest income....................................................... .82 Loan loss provisions..................................................... .25 domestic offices tend to have a larger portion Other noninterest expense.......................................... 2.14 Income before tax..................................................... .93 of assets that do not bear interest than do foreign Foreign offices2..................................................... .25 Domestic offices2.................................................. .68 offices. At year-end, for example, 18 percent .59 of assets at domestic offices was allocated to International business2............................................ .16 Domestic business2.......................................... .43 non-interest-earning reserves of member banks, premises, and fixtures. Only 5 percent of foreign 1. Approximated as described in table 1, note 4. 2. See table A.3. Reflects amounts attributed, giving full allocation office assets was so allocated. Similarly, non­ of income and expenses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

704 Federal Reserve Bulletin □ September 1979 A.l Report of income for all insured commercial banks Amounts shown in millions of dollars Item 1970 1971 1972 1973 1974 1975 1976 1977 1978 Operating income—Total................................................... 34,574 36,204 40,065 52,794 67,872 66,285 80,388 90,069 113,170 Interest Loans.................................................................................... 22,859 22,954 25,498 35,213 46.942 43,197 51,471 58,881 75,948 Balances with banks....................................................... n.a. n.a. n.a. n.a. n.a. n.a. 4,459 4,860 6,662 Federal funds sold and securities purchased under resale agreement........................................................ 1,004 870 1,023 2,474 3,695 2,283 1,979 2,471 3,664 Securities (excluding trading accounts) Total interest income................................................... 6,523 7,660 8,329 9,138 10,344 12,201 14,333 15,140 16,432 U.S. Treasury securities.......................................... 3,069 3,384 3,376 3,436 3,414 4,415 5,952 6,369) U.S. government agencies and corporations.... 686 914 1,144 1,469 2,014 2,343 2,410 2,466I 9,335 States and political subdivisions......................... 2,617 3,124 3,490 3,861 4,449 4,911 5,116 5,338 6,003 151 238 319 372 467 532 750 858) Dividends on stock................................................... 0) (1) 0) 0) 0) 0) 105 109) 1,094 Trust department................................................................... 1,132 1,258 1,366 1,460 1,506 1,600 1,795 1,980 2,138 Direct lease financing........................................................... n.a. n.a. n.a. n.a. n.a. n.a. 534 699 862 Service charges on deposits................................................ 1,174 1,226 1,256 1,320 1,450 1,547 1,629 1,797 2,039 Other charges, fees, etc......................................................... 839 981 1,079 1,247 1,405 1,647 2,175 2,404 2,930 Other operating income....................................................... 1,043 1,256 1,512 1,942 2,530 3,811 2,011 1,903 2,495 On trading account (net)................................................. 348 344 257 341 430 508 717 420 n.a.2 Other.................................................................................... 695 912 1,255 1,601 2,100 3,303 1,205 1,350 n.a.2 Equity in return of unconsolidated subsidiaries .... n.a. n.a. n.a. n.a. n.a. n.a. 89 133 n.a.2 Operating expenses—Total.................................................. 27,465 29,511 32,836 44,113 58,645 57,313 70,466 78,484 98,104 Interest Time and savings deposits.............................................. 10,444 12,168 13,781 19,747 27,777 26,147 34,894 38,701 50,054 Time CD’s of $100,000 or more issued by domestic offices..................................................... n.a. n.a. n.a. n.a. n.a. n.a. 7,083 6,732 11,693 Deposits in foreign offices.......................................... n.a. n.a. n.a. n.a. n.a. n.a. 8,745 10,216 14,559 Other deposits............................................................... n.a. n.a. n.a. n.a. n.a. n.a. 19,066 21,753 23,802 Federal funds purchased and securities sold under repurchase agreements............................................ 1,396 1,093 1,425 3,883 5,970 3,313 3,305 4,536 7,247 Other borrowed money3................................................. 464 139 115 499 912 374 665 816 1,452 Capital notes and debentures......................................... 104 142 212 253 280 292 343 391 445 Salaries, wages, and employee benefits............................ 7,683 8,355 9,040 10,076 11,526 12,624 14,686 16,276 18,654 Occupancy expense............................................................... 1,547 1,721 1,915 2,141 2,424 2,739 3,247 3,587) Less rental income............................................................ 1,2 2 4 9 9 9 1,4 3 0 1 3 8 1,5 3 7 4 5 0 1,7 3 7 6 4 7 2,0 3 4 8 1 3 2,3 4 1 2 2 7 2,7 4 5 9 2 4 3,0 5 3 5 6 1 5,559 Furniture and equipment..................................................... 905 1,014 1,083 1,196 1,355 1,525 1,712 1,923 Provision for loan losses..................................................... 695 860 964 1,253 2,271 3,578 3,650 3,244 3,499 Other operating expenses..................................................... 4,525 4,337 4,640 5,432 6,514 7,149 8,456 9,561 11,194 Minority interest in consolidated subsidiaries............ 1 1 29 24 n.a.2 Other.................................................................................... 4,525 4,337 4,639 5,431 6,514 7,149 8,427 9,537 n.a.2 Income before taxes and securities gains or losses........ 7,109 6,693 7,229 8,681 9,227 8,973 9,922 11,585 15,067 Applicable income taxes.................................................. 2,173 1,688 1,708 2,120 2,084 1,790 2,287 2,829 4,155 Income before securities gains or losses....................... 4,936 5,005 5,522 6,560 7,143 7,182 7,635 8,756 10,911 Net securities gains or losses (—) after taxes............. -105 210 90 -27 -87 35 190 95 -225 Extraordinary charges ( —) or credits after taxes.... -13 -1 18 22 12 32 24 47 45 Net income.............................................................................. 4,818 5,213 5,630 6,555 7,068 7,249 7,849 8,898 10,731 Cash dividends declared...................................................... 2,036 2,227 2,191 2,423 2,760 3,025 3,029 3,299 3,714 Memo Number of banks.................................................................. 13,502 13,602 13,721 13,964 14,216 14,372 14,397 14,397 14,380 Average fully consolidated assets (billions of dollars)............................................................................ 570 646 738 857 987 1,052 1,123 1,257 1,418 1. Included in income from other bonds, notes, and debentures. 3. Includes interest paid on U.S. Treasury tax and loan account 2. Because of an abbreviation in the income report filed by small balances, which were begun in November 1978. banks, these items will not be available on an aggregated basis after n.a. not available. 1977. Bracketed items similarly indicate combinations made for small bank reporting. Note. For “Notes on comparability of commercial bank income data before 1976,” see Bulletin, June 1978, page 446. TECHNICAL NOTE In order to calculate the rates of return presented in this article, it was assumed that the value of the portfolios These two equations may then be solved for r in terms under consideration always grew at a constant percentage of total interest and beginning-of-year and year-end rate throughout the year. Mathematically, if A(t) asset values. represents the value of the assets at time t, where t is Finally, the rate may be converted into a simple the fraction of the year that has elapsed, then interest rate (that is, by using annual rather than con­ tinuous compounding). The resulting formula, which is used in the article, may be written thus: *> -**[% ]■ l If interest is compounded continuously at rate r, total [>1)-U(1)-A(0) interest is given by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Insured Commercial Bank Income in 1978 705 A.2 Report of income for member commercial banks Amounts shown in millions of dollars Item 1970 1971 1972 1973 1974 1975 1976 1977 1978 Operating income—Total..................................................... 27,902 28,665 31,344 41,616 53,837 51,368 63,639 70,514 89,130 Interest Loans.................................................................................... 18,698 18,315 20,053 28,266 38,063 33,749 40,901 46,060 59,925 Balances with banks......................................................... n.a. n.a. n.a. n.a. n.a. n.a. 4,263 4,671 6,387 Federal funds sold and securities purchased under resale agreement....................................................... 781 676 794 1,847 2,724 1,716 1,511 1,918 2,808 Securities (excluding trading accounts) Total interest income................................................... 4,832 5,661 6,087 6,532 7,237 8,559 10,111 10,584 11,328 U U. . S S . . T G r o e v a e s r u n r m y e se n c t u a r g i e ti n e c s i . e .. s .. . a .. n .. d ... . c .. o ... r . p ... o .. r .. a .. t . i .. o .. n ... s . . .. . . . . 2,2 4 0 1 9 5 2,4 5 3 7 4 8 2,4 7 1 3 2 1 2,3 9 9 4 3 3 2 1 , , 3 2 4 6 3 8 3 1 , , 1 4 6 6 6 3 4 1 , , 2 4 4 7 8 5 4 1 , , 4 5 7 09 8'I> £0 , 1I 7/0y States and political subdivisions........................... 2,090 2,467 2,710 2,928 3,300 3,576 3,686 3,794 4,255 Other bonds, notes, and debentures..................... 118 182 234 268 326 354 612 712'I fiQA Dividends on stock................................................... (!) 0) 0) 0) 0) 0) 90 91; Trust department................................................................... 1,073 1,180 1,269 1,344 1,379 1,457 1,625 1,776 1,912 Direct lease financing........................................................... n.a. n.a. n.a. n.a. n.a. n.a. 508 664 806 Service charges on deposits................................................. 867 895 905 940 1,023 1,086 1,122 1,206 1,334 Other charges, fees, etc......................................................... 682 796 864 998 1,152 1,359 1,808 1,967 2,400 Other operating income....................................................... 970 1,130 1,372 1,789 2,261 3,442 1,789 1,662 2,230 On trading account (net)................................................. 346 340 254 338 425 497 696 407 n.a. 2 Other.................................................................................... 624 800 1,118 1,451 1,836 2,945 1,009 1,124 n.a.2 Equity in return of unconsolidated subsidiaries........ n.a. n.a. n.a. n.a. n.a. n.a. 86 131 n.a.2 Operating expenses—Total.................................................. 22,184 23,342 25,648 35,037 46,815 44,410 55,924 61,706 77,783 Interest Time and savings deposits.............................................. 8,189 9,426 10,518 15,382 21,812 19,800 27,745 30,363 39,808 Time CD’s of $100,000 or more issued by domestic offices..................................................... n.a. n.a. n.a. n.a. n.a. n.a. 5,895 5,461 9,586 Deposits in foreign offices........................................... n.a. n.a. n.a. n.a. n.a. n.a. 8,672 10,124 14,401 Other deposits................................................................ n.a. n.a. n.a. n.a. n.a. n.a. 13,178 14,778 15,821 Federal funds purchased and securities sold under repurchase agreements............................................. 1,365 1,073 1,387 3,765 5,714 3,151 3,150 4,322 6,803 Other borrowed money 3................................................. 444 127 103 473 871 336 638 790 1,403 Capital notes and debentures......................................... 90 123 184 204 217 228 273 303 334 Salaries, wages, and employee benefits............................. 6,154 6,638 7,096 7,808 8,834 9,624 11,301 12,395 14,116 Occupancy expense............................................................... 1,275 1,408 1,556 1,724 1,929 2,155 2,564 2,8041 Less rental income............................................................ 263 278 296 316 325 363 418 459 A O^A 1,012 1,130 1,260 1,408 1,603 1,792 2,146 2,345 Furniture and equipment..................................................... 722 797 848 924 1,037 1,154 1,305 1,456 Provisions for loan losses.................................................... 534 682 768 994 1,858 3,050 3,042 2,633 2,771 Other operating expenses..................................................... 3,674 3,346 3,484 4,079 4,870 5,275 6,323 7,100 8,324 Minority interest in consolidated subsidiaries............ 28 22 n.a.2 Other.................................................................................... 6,295 7,078 n.a.2 Income before taxes and securities gains or losses........ 5,718 5,322 5,696 6,679 7,022 6,958 7,715 8,807 11,347 Applicable income taxes.................................................. 1,774 1,348 1,356 1,653 1,591 1,453 1,929 2,311 3,327 Income before securities gains or losses....................... 3,942 3,974 4,340 5,025 5,431 5,505 5,786 6,496 8,020 Net securities gains or losses (—) after taxes............. -107 144 47 -30 -69 17 111 40 -185 Extraordinary charges (—) or credits after taxes----- -15 -3 14 15 3 23 17 38 27 Net income.............................................................................. 3,821 4,116 4,401 5,011 5,365 5,546 5,914 6,576 7,863 Cash dividends declared....................................................... 1,753 1,907 1,804 2,019 2,271 2,476 2,451 2,640 2,928 Memo Number of banks.................................................................. 5,767 5,727 5,704 5,735 5,780 5,787 5,758 5,668 5,565 Average fully consolidated assets (billions of dollars)............................................................................. . 468 530 606 705 788 857 907 1,003 1,128 1. Included in income from other bonds, notes, and debentures. 3. Includes interest paid on U.S. Treasury tax and loan account 2. Because of an abbreviation in the income report filed by small balances, which were begun in November 1978. banks, these items will not be available on an aggregated basis after n.a. not available. 1977. Bracketed items similarly indicate combinations made for small bank reporting. Note. For “Notes on comparability of commercial bank income data before 1976,” see Bulletin, June 1978, page 446. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

706 Federal Reserve Bulletin □ September 1979 A.3 Income attributable to international business of U.S. commercial banks with foreign offices, 1978 Millions of dollars Item Amount Pre-tax income attributable to foreign offices1............................................................................. 1,946 Plus: Pre-tax income attributable to international business conducted in domestic offices 567 Less: adjustment amount2................................................................................................................ 72 Pre-tax income attributable to international business............................................................. 2,441 Less: All income taxes attributable to international business.................................................. 1,166 Net income attributable to international business................................................................... 1,275 Memo Provision for possible loan losses attributable to international business................................ 419 Noninterest income attributable to foreign offices1................................................................. 1,126 Noninterest income attributable to international business......................................................... 1,299 Noninterest expense attributable to foreign offices..................................................................... 2,467 Noninterest expense attributable to international business........................................................ 2,828 Intra-company interest income attributable to international business.................................... 1,764 Intra-company interest expense attributable to international business.................................... 3,140 Interest income of domestic offices from foreign-domiciled customers.................................. 1,973 Fully consolidated Pre-tax income.................................................................................................................................. 7,333 Total applicable taxes..................................................................................................................... 2,511 Net income3...................................................................................................................................... 4,690 Average total assets......................................................................................................................... 796,151 1. Including Edge and Agreement subsidiaries. This may reflect, as an example, net income in foreign offices derived 2. Reflects the amount necessary to reconcile the preceding two from business with U.S.-domiciled customers. amounts with pre-tax income attributable to international business. 3. After gains and losses from securities transactions and extra­ ordinary items. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

707 New Measures of Commercial Bank Credit and Bank Nondeposit Funds This article was prepared by Edward R. Fry The need for revision of U.S. banking statis­ of the Board’s Division of Research and Statis­ tics has become increasingly apparent in view tics. of the exceptionally rapid growth of banking assets of foreign-related institutions, the large The series on commercial bank credit and esti­ revisions in estimated components of non­ mates of assets and liabilities of all commercial member banks, and the volatility of the single­ banks that are published each month in the date observations. Over the past year, reporting statistical section of the Federal Reserve and estimating procedures have been changed Bulletin have been revised. The revised series to improve monthly estimates for both domesti­ reflect both conceptual and statistical improve­ cally chartered banks and U.S. branches of ments. The series have been expanded to cover foreign banks covered by the bank credit series. more banking institutions operating in the The additional coverage of foreign-related insti­ United States, and lease financing receivables tutions in the new series provides a more com­ have been included for the first time. With the prehensive measure of commercial banking in addition of U.S. agencies of foreign banks, New the United States, and the conversion from a York investment company subsidiaries of last-Wednesday-of-month to a monthly average foreign banks, and Edge Act corporations, the basis reduces the volatility of the series. The U.S. banking system is defined for purposes of inclusion of lease financing operations in the these series to include all institutions located in bank credit series is in accordance with the the 50 states and the District of Columbia that generally held view that such business is a form are engaged in commercial banking activities. of credit extension. The revised bank credit series measures credit The revised series have been estimated for extended by such banking institutions to all U.S. the period from December 1972 to date. From or foreign customers other than commercial now on, the revised bank credit series and data banks in the United States and other than di­ on assets and liabilities will be published rectly related institutions. monthly in the Bulletin and respectively in Among the statistical changes in the revised the Board’s monthly G.7 statistical release and series are improved blowup procedures for esti­ in the weekly H.8 statistical release, which will mating data for domestically chartered banks, resume publication on a revised basis. A new more frequent benchmarking of current esti­ series on nondeposit funds—which includes es­ mates, and substitution of monthly averages for timates of bank borrowings in domestic and data for the last Wednesday of the month. In addition, the revised series provide new detail branches, agencies, and New York investment company on loan components, separate data for domesti­ subsidiaries of foreign banks, and Edge Act corpora­ cally chartered banks and foreign-related insti­ tions. Edge Act banking subsidiaries of commercial banks are chartered as U.S. banking corporations, but tutions, and a new measure of nondeposit funds in the new series they are grouped with the foreignof commercial banks.1 related component because of the international character of their business. Among foreign-related institutions, 1. Domestically chartered banks are those with na­ only the branches have been included in U.S. banking tional or state charters whether incorporated or unincor­ statistics in the past. A fuller description of the institu­ porated, insured or uninsured, foreign or domestically tional structure and activities of foreign banks in the owned. Foreign-related banking institutions are U.S. United States will appear in next month’s Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

708 Federal Reserve Bulletin □ September 1979 foreign markets—will be published in the Bul­ 1. Growth in commercial bank credit letin and in a new statistical release, “Major Seasonally adjusted annual rates of change, in percent nondeposit funds of commercial banks,” G.10. These banking data, together with the data on Total loans and Total loans investments bank deposits published with the monetary ag­ Period gregates, will facilitate analysis of develop­ Old Revised Old Revised series series series series ments in commercial bank credit and the sources of funding used by banks in maintaining their 13.8 14.7 18.8 19.5 1974........................... 9.3 10.3 11.5 13.1 credit operations. 4.3 4.3 -.7 -.6 1976........................... 8.6 7.9 8.2 7.1 1977........................... 11.0 10.9 14.6 14.0 1978........................... 12.1 13.6 15.9 18.0 1979 HI.................. 14.3 12.8 15.5 14.9 Revised Bank Credit Series 10.6 12.8 12.7 16.8 Q2................... 17.0 13.2 19.1 16.7 The principal effects of this revision of the bank Q3................... 11.1 13.3 14.2 15.9 Q4.................. 7.9 12.7 14.1 18.2 credit series have been to raise the level of total 1979 Ql................... 14.1 13.2 15.5 15.1 Q2................... 14.0 11.9 14.9 14.2 loans and investments and to smooth somewhat 1979 Jan.................. 25.3 18.7 28.0 20.6 fluctuations in the series (chart 1). Estimated Feb................. 10.9 13.1 9.6 16.1 Mar................ 5.8 7.4 8.2 8.2 total loans and investments were raised $24 Apr................. 13.8 14.1 15.4 17.3 May............... 12.1 8.3 10.6 9.5 billion in June 1979 as a result of the expanded June............... 15.7 12.8 18.2 15.1 July................ 13.0 13.2 13.5 15.0 institutional coverage and another $8 billion Aug................ 11.1 10.1 15.6 12.5 through the addition to the series of lease fi­ nancing receivables. While the addition of lease higher proportion of the loan portfolios of receivables increased the trend rate of growth agencies than of domestic banks. Agencies in­ of the revised series only slightly on average— creased their total loans in 1973-74 at an 0.1 percent per year—the additional coverage average annual rate of about 35 percent, more of agencies, New York investment companies, than twice the rate of expansion at domestically and Edge Act corporations tends to accelerate chartered banks. In 1975, when business loan growth in expansion periods. As table 1 shows, demands subsided, U.S. agencies of foreign yearly growth rates are higher fof the new series banks as well as domestically chartered banks than the old in 1973-74 and 1978; they tend to be slightly lower in intervening years. This experienced reductions in loan growth. The largest reduction in loans of agencies occurred difference arises largely from variations in loan after loan growth at domestically chartered growth at U.S. agencies of foreign banks, espe­ banks began to increase again in 1977, reflect­ cially in loans to commercial and industrial ing conversion of a number of agencies to firms. Such loans account for a substantially branch status. Thus, the inclusion of agencies in the bank credit series removes an upward bias in growth rates for 1977 that had resulted from 1. Total loans and investments1 including branch data that were inflated by the Billions of dollars agency conversions. The revised series again shows greater ex­ pansion in loans and investments in 1978 than the old series, with most of this difference due to sharply higher loan growth. Faster loan ex­ pansion at agencies was a major source of the increase in the growth rate shown by the new series.2 Agencies expanded their loans to non- 2. Revisions in previous estimates of loans at U.S. branches of foreign banks also raised the growth rate of the revised series. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

New Measures of Bank Credit and Nondeposit Funds 709 financial businesses about 60 percent during the range—12% to 13lA percent compared with year, nearly four times the relatively rapid rate fluctuations in growth rates on the old basis in of advance at domestically chartered banks, and a range of 8 to 17 percent for the same period. they also sharply expanded their loans to unaf­ But the new series displays significantly slower filiated banks in foreign countries. growth in the first half of 1979 as a result of In the first half of 1979, the revised series reduced growth of Treasury securities and, to indicates slightly slower bank credit expansion a lesser extent, loans. Formerly, the seasonally than the old series—a \23A percent seasonally adjusted Treasury security component of bank adjusted annual rate of growth compared with credit was derived as a residual because of the an estimated 141A percent on the old basis. This extreme volatility of the end-of-month data. revised growth rate is just under the rapid pace This procedure was changed with conversion of of 1978, in contrast with the further acceleration the series to monthly averages. On the revised that had been indicated by the old series. In basis, Treasury securities are seasonally ad­ the old series, growth in the first half had justed directly, and total bank credit is derived exceeded the high rate of expansion in 1973, by summing securities and loan components. but according to the revised series it was 2 percentage points below that in 1973. The shift to monthly averages from monthend observations and the differences in seasonal N e w B a n k C r e d it D e t a il adjustments tended to smooth fluctuations in the The new information on loans and investments total bank credit series. Over the past year and by type of institution and by type of lending a half, annualized quarterly growth rates for the allows analysis of current developments in bank new series stayed within a relatively narrow credit in greater depth. Table 2 indicates major 2. Assets of all commercial banks in the United States, June 1979 Monthly averages, not seasonally adjusted Loans and investments1 Number Total Securities Loans and leases Type of banks assets Total Commercial To U.S. Other Total and foreign All Treasury industrial banks other Amounts outstanding, billions of dollars All commercial banks................................. 14,959 1,383.0 1,083.2 95.1 182.7 805.3 272.1 21.6 511.6 Domestically chartered2......................... 14,620 1,274.8 1,024.8 93.7 181.3 749.8 239.2 6.8 503.8 Foreign-related3........................................ 339 108.2 58.4 1.5 1.4 55.6 32.9 14.8 7.9 U.S. branches........................................ 123 60.5 34.4 .6 .6 33.1 17.9 10.5 4.7 U.S. agencies and agreement corporations...................................... 150 34.9 19.6 .7 .5 18.4 12.8 3.0 2.6 New York investment company subsidiaries........................................ 6 2.2 1.4 .1 .1 1.2 .8 .2 .3 Edge Act corporations....................... 60 10.7 3.0 0 .2 2.8 1.5 1.1 .2 Share of total outstanding, percent All commercial banks.................................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Domestically chartered2......................... 92.2 94.6 98.5 99.2 93.1 87.9 31.5 98.5 Foreign-related3........................................ 7.8 5.4 1.6 .8 6.9 12.1 68.5 1.5 U.S. branches........................................ 4.4 3.2 .6 .3 4.1 6.6 48.6 .9 U.S. agencies and agreement corporations...................................... 2.5 1.8 .7 .3 2.3 4.7 13.9 .5 New York investment company subsidiaries........................................ .2 .1 .1 .1 .1 .3 .9 .1 Edge Act corporations......................... .8 .3 0 .1 .3 .6 5.1 0 1. Excludes loans to commercial banks in the United States. company subsidiaries of foreign banks and Edge Act corporations 2. Banks with national or state charters located in the SO states and engaged in international banking business in the 50 states and the the District of Columbia. District of Columbia. 3. Includes U.S. branches, agencies, and New York investment Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

710 Federal Reserve Bulletin □ September 1979 3. Portfolios of domestically chartered and foreign-related institutions Monthly averages, June 1979 Foreign-related Type of asset or ratio All banks Domestically chartered Share of total Amount (percent) Loans and investments (in billions of dollars except as noted) Total i................................................................................................. 1,083.2 1,024.8 58.4 5.4 U.S. Treasury securities................................................................. 95.1 93.7 1.5 1.6 Other securities................................................................................. 182.7 181.3 1.4 .8 Total loans1...................................................................................... 805.3 749.8 55.6 6.9 Business......................................................................................... 272.1 239.2 32.9 12.1 Acceptances............................................................................. 7.5 3.6 3.9 52.0 Other U.S.......................................................................................... 248.2 229.5 18.8 7.5 Foreign.................................................................................. 16.6 6.3 10.3 62.0 Real estate..................................................................................... 225.5 225.5 (2) (2) Individuals.................................................................................... 176.8 176.8 (2) (2) Agricultural.................................................................................. 29.2 29.2 (2) (2) Security loans............................................................................... 23.2 21.4 1.8 7.8 Nonbank financial institutions................................................. 28.1 27.3 .8 2.8 Lease financing receivables........................................................ 8.1 8.1 (2) (2) All other........................................................................................ 42.3 22.2 20.1 47.5 Foreign banks.......................................................................... 21.6 6.8 14.8 68.5 Other.......................................................................................... 20.7 15.4 5.3 25.6 Portfolio ratios (in percent) Total loans to total loans and investments................................ 74.3 73.2 95.2 Business loans to total loans......................................................... 33.8 31.9 59.1 Foreign business loans to total business loans......................... 6.1 2.6 31.3 Acceptances to total business loans............................................ 2.8 1.5 11.9 Foreign bank loans to total loans................................................ 2.7 .9 26.6 1. Excludes loans to commercial banks in the United States. 2. Not available separately. Small amounts are included in all other loans. asset holdings of domestically chartered banks of agencies. Edge Act corporations are interna­ and foreign-related institutions and the relative tional banking subsidiaries of commercial banks importance of each type of institution. Domes­ that are chartered in the United States under tically chartered banks have either national or provisions of the Federal Reserve Act. Although state charters, and most have federal deposit New York investment companies and Edge Act insurance. Domestically chartered banks whose corporations are chartered in the United States, majority owners are foreign banks are included they have been grouped with branches and in the domestically chartered component rather agencies of foreign banks because of the inter­ than with foreign-related institutions. These national character of their business. Among the foreign-owned banks operate in the same statu­ institutions in the foreign-related group, tory and regulatory environment as other do­ branches and agencies account for the bulk of mestically chartered banks, and their portfolios loans and investments (93 percent), and they are more like those of other domestically char­ have been most sensitive to changing loan de­ tered banks than of institutions included in the mands. foreign-related component. Foreign-related institutions as a group ac­ U.S. branches of foreign banks are institu­ count for only about 8 percent of banking assets tions that have been licensed to do a full banking in the United States (table 3). Their security business by the states in which they are located. holdings are relatively small, and their lending U.S. agencies of foreign banks also have operations are more specialized than those of operated under state banking statutes with domestically chartered banks. Most of their loan unrestricted lending and investment activities, portfolios are concentrated in loans to foreign but they are not permitted to hold deposits— and domestic nonfinancial business and to only credit balances that arise in the course of foreign banks. Although they account for only their business. New York investment company 7 percent of total loans of the banking system, subsidiaries of foreign banks are corporations foreign-related institutions hold 12 percent of chartered by New York State with lending ac­ outstanding total business loans, 62 percent of tivities and deposit restrictions similar to those loans to foreign businesses, and 69 percent of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

New Measures of Bank Credit and Nondeposit Funds 711 loans to foreign banks. As a group they have siderably by loan component because of varia­ a high proportion of acceptances and loans to tions in the share of loans held by reporting foreign businesses in their portfolios. banks. Reporting banks account for the highest Foreign-related institutions are also charac­ percentage of total amounts outstanding in se­ terized by greater dependence on nondeposit curity loans, loans to nonbank financial institu­ funds. Statutory and regulatory restrictions have tions, and lease financing receivables. Large been important in limiting the scope of the weekly reporting banks hold from three-quarters lending and funding by these institutions. In to seven-eighths of total outstandings in these some cases, lending has been restricted to fi­ categories. Small additional amounts of security nancing of international transactions, and de­ loans and loans to nonbank financial institutions posits and credit balances of some institutions are reported monthly by foreign-related institu­ have been restricted to those arising in the tions. Estimates of commercial and industrial course of international business. In addition, loans, the largest loan component, are derived these institutions have been hampered in their from weekly reports of large banks and from ability to attract deposit funds, especially at the a weekly report of a sample of small banks retail level, by lack of familiarity and by the covering 56 percent of total business loans; absence of federal deposit insurance. Conse­ another 12 percent of total business loans is quently, they have tended to rely more on fund­ available from monthly reports of foreigning from directly related institutions. However, related institutions. Real estate loans reported the International Banking Act has altered the weekly by domestically chartered banks repre­ statutory and regulatory environment for these sent 45 percent of total real estate loans at all institutions in the direction of greater equality commercial banks. Loans to individuals at of treatment, and they may become more similar present are derived from month-end reports to domestically chartered banks. As they expand covering about 24 percent of the total for all into retail banking activities such as lending to banks; later, weekly coverage will be increased consumers and competing for consumer depos­ to about 43 percent of the total. Agricultural its, the new series will make it possible to loans are based on the thinnest sample, 17 measure such developments. percent, reflecting the relatively small amounts The expanded detail on loans, shown in table of such loans at large weekly reporting banks. 3, provides considerably more information on Blowup factors derived from quarterly call loan developments for the banking system as reports are applied to the data reported weekly a whole than had been available previously. In to estimate nonreporting domestically chartered the past, only total loans and commercial and banks in the totals for each component. This industrial loans were published for the last procedure requires revisions in the estimated Wednesday of each month in the Bulletin; series when new blowup factors become avail­ weekly detail on loans for large banks and able at the end of each quarter. quarterly data for all commercial banks also The growth rates shown in table 4 cover two were published. The new estimates based on periods of rapid loan expansion and the inter­ monthly averages were derived from these vening period of slack loan demands. The larg­ sources, from weekly data that have been re­ est loan components—commercial and indus­ ported by small member banks since the begin­ trial, real estate, and individual—are dominant ning of 1979, from month-end data reported by in the trend-cycle variation of the total. Follow­ U.S. agencies and New York investment com­ ing extremely rapid expansion in 1973, growth pany subsidiaries of foreign banks, and from of real estate loans and loans to individuals a combination of month-end and quarterly re­ slowed abruptly, which led to a sharp reduction ports of Edge Act corporations. in growth of total loans. Business loans contin­ Table 4 shows growth rates for the most ued to increase rapidly in 1974, but demand fell significant components of loans as estimated off after 1974 as businesses responded to de­ from the revised series on monthly averages. clining economic activity and also as they began The degree of estimation required varies con­ to fund their short-term debt in the capital mar­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

712 Federal Reserve Bulletin □ September 1979 4. Loans at all commercial banks, by type of loan1 Seasonally adjusted annual rates of change, in percent Commercial and industrial Nonbank Real Individ­ Agri­ financial Security Foreign Lease Period Total Other estate uals cultural institu­ loans banks financing Total Accept­ tions ances U.S. Foreign 1973............................. 19.2 21.5 6.6 22.0 17.0 20.3 15.2 20.4 31.1 -17.0 59.6 46.0 1974............................. 12.9 19.4 45.8 19.0 20.0 10.7 3.8 6.4 21.9 -2.6 34.2 53.7 1975............................. -.6 -3.8 68.1 -6.4 30.3 3.1 2.3 9.9 -16.0 4.9 8.3 23.5 1976............................. 7.3 1.4 31.2 -.4 17.4 10.2 10.9 15.5 -9.2 30.1 28.1 27.8 1977.............................. 13.9 10.5 -3.1 11.8 -2.0 17.8 18.9 11.3 -2.1 17.8 17.6 13.5 1978............................. 18.3 16.8 -9.6 17.0 32.3 20.0 19.4 9.3 5.4 -5.9 57.1 29.4 1979 HI.................... 15.0 19.3 21.2 17.4 55.0 14.1 15.0 5.9 8.6 38.3 -4.4 18.4 1978 Ql.................... 17.1 18.7 -61.1 20.6 52.3 18.1 17.9 1.6 -7.1 1.7 57.7 14.4 Q2.................... 16.9 16.7 -1.1 18.1 0 18.3 20.5 9.3 6.0 15.7 1.3 20.0 Q3.................... 15.9 12.7 21.4 11.5 32.1 20.4 17.9 15.1 8.9 -17.8 40.0 25.9 Q4.................... 18.7 14.9 6.4 14.1 33.1 17.8 15.9 10.2 12.1 -22.5 97.7 46.8 1979 Ql.................... 15.4 21.4 24.3 16.2 97.7 14.6 16.3 8.5 -1.7 31.9 3.6 14.3 Q2.................... 14.1 17.1 17.0 17.3 9.8 13.0 12.4 4.2 13.3 40.0 -12.2 20.8 1979 June................. 15.3 16.6 42.4 15.3 14.5 14.0 10.3 0 -12.0 10.5 54.3 29.6 July.................. 15.0 20.0 80.0 20.0 43.1 15.4 6.1 4.1 55.9 31.2 -11.5 29.6 August............. 12.5 16.8 -30.0 18.2 41.6 16.3 n.a. 4.1 12.3 -35.4 -29.1 28.9 Memo: Percent of total loans............... 100.0 33.7 .9 30.7 2.1 28.1 22.1 3.6 3.5 2.9 2.6 1.0 1. Excludes loans to commercial banks in the United States. n.a. Not available. kets. This slack demand for business loans was Thus, for example, bank loans to these institu­ responsible for the relative weakness in growth tions indirectly finance inventories, con­ of total loans that continued after real estate and struction, and consumer outlays, and they re­ individual loans began to expand again in 1976. flect such events as outflows of thrift deposits Growth in business loans lagged the upturn of and inability of nonbank financial institutions to real estate and individual loans, which were obtain funds in the commercial paper or longerexpanding rapidly by 1977. With all three major term capital markets. Security loans are made loan components increasing rapidly in 1978 and primarily by large banks to brokers and dealers with loans to foreign banks also up sharply, total to finance trading positions in securities, often loan growth returned nearly to the 1973 pace. the portion that the dealers have not been able In the first half of 1979, business loan expansion to finance elsewhere. Security loans at banks accelerated further, but total loan growth slowed fluctuate widely with the dates of major Treas­ somewhat as real estate loans and loans to ury financings, according to the relative cost or individuals increased more slowly. availability of dealers’ nonbank funds. While other types of loans have less impact Loans to foreign banks have shown large on movements in total loans, they are of con­ shifts over the period covered by the new series. siderable importance in financing particular eco­ As noted previously, about two-thirds of such nomic and financial activities. Agricultural loans are held by the foreign-related banking loans are loans other than those secured by real institutions. Foreign banks often perform an estate that are made to finance agricultural pro­ intermediary function in channeling funds ad­ duction, including the growing, storage, and vanced by banking offices in the United States marketing of agricultural products, as well as to foreign nonbank borrowers. to finance family and other household expendi­ Lease financing receivables, a new and still tures of farmers. Loans to nonbank financial minor component of the bank credit series, have institutions include loans to many types of fi­ been expanding rapidly for many years. These nancial intermediaries such as finance compa­ receivables reflect the residual value of property nies, factors, thrift institutions, real estate in­ acquired by banks for the purpose of leasing vestment trusts, mortgage companies, bank to customers who otherwise might borrow to holding companies, and insurance companies. purchase the property directly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

New Measures of Bank Credit and Nondeposit Funds 713 related foreign institutions (net Eurodollar bor­ N e w S e r ie s o n N o n d e p o sit F u n d s rowing). Measures of bank sources of funds are of inter­ The series on nondeposit funds has the same est because they indicate how banks finance institutional coverage as the revised bank credit their credit operations in terms of suppliers of series discussed earlier. For domestically char­ funds, cost of funds, and maturity structure. tered banks, borrowings from nonbank custom­ They also help to track responses of banks to ers and loans sold to affiliates are monthly monetary policy and to other factors affecting averages of Wednesday data, and net Eurodollar deposit growth. Deposits remain the most im­ borrowings are monthly averages of daily fig­ portant sources of funds for banks; but when ures.3 For foreign-related institutions, the market interest rates rise above regulatory de­ monthly estimates reflect averages of current posit ceiling rates, deposits so constrained flow and previous month-end observations. out of the banks. The cost of reserve require­ Federal funds, RPs, and other borrowings ments further affects the cost of deposits relative from nonbank customers together constitute the to alternative sources of funds. In recent years, largest component of the nondeposit funds series banks have turned more to nonreservable bor­ (Table 5). Federal funds purchases most often rowings (mainly federal funds and security RPs) are unsecured, are for one day only, and are supplementing deposit flows with these nonre­ settled in immediately available funds. In some servable and other borrowings. instances, federal funds purchases are secured, As a supplement to current measures of bank and they may be arranged for more than one deposits, such as deposit components of the day or renewed on a “continuing contract” monetary aggregates and negotiable certificates basis until terminated by either party. An RP of deposit, a new measure of estimated is an agreement by means of which a borrower nondeposit funds has been developed from sev­ sells securities but contracts with the purchaser eral data sources. This measure includes federal to repurchase them at a stated price at some funds purchased, sales of securities under agreements to repurchase (RPs), and other bor­ 3. A small and relatively stable amount of nonrowings from nonbanks, as well as loans sold member bank net balances due to own foreign branches to affiliates and net balances due to directly is derived from quarterly call reports. 5. Commercial bank nondeposit funds1 Monthly averages, billions of dollars Net balances due to directly related Federal funds, foreign institutions, NSA Total RPs, and Loans sold Period nondeposit borrowings from to affiliates, funds nonbanks, SA2*3 NSA2 Domestically Foreign-related Total chartered banks4 institutions3 December 1972 ........................... 28.0 16.5 2.6 8.9 1.9 7.0 1973 ........................... 45.5 34.0 4.4 7.2 1.3 5.9 1974 ........................... 49.1 35.4 4.8 8.9 .9 8.0 1975 ........................... 43.0 33.2 4.5 5.4 -2.1 7.5 1976 ........................... 55.4 47.1 3.8 4.5 -5.2 9.7 1977 ........................... 62.7 58.4 4.8 -.5 -11.6 11.1 1978 ........................... 84.9 74.8 3.8 6.3 -10.2 17.0 1979 Jan................................. 83.1 73.2 3.6 6.3 -10.1 16.4 Feb................................. 95.8 80.2 3.6 12.0 -6.3 18.3 Mar................................ 100.7 80.9 3.5 16.3 -4.5 20.8 Apr................................ 104.8 82.3 3.6 18.9 -1.9 20.8 May ............................. 111.2 84.3 3.7 23.2 2.5 20.6 June ............................. 115.8 84.5 3.8 27.5 5.8 21.7 July ............................. 119.4 86.5 3.7 29.1 6.3 22.8 Aug.e .......................... 127.7 91.2 3.7 32.7 8.9 23.8 1. Includes national and state-chartered banks plus foreign-related banking institutions in the United States (branches, agencies, and New York investment company subsidiaries of foreign banks) and Edge Act corporations. 2. Wednesday data for domestically chartered banks. 3. Current and preceding month-end data for foreign-related institutions. 4. Daily data, e Estimated. SA Seasonally adjusted. NSA Not seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

714 Federal Reserve Bulletin □ September 1979 specified future date. RPs typically have short 2. Commercial bank deposits and maturities, often one day; however, they may nondeposit funds be continuing contracts that can remain in effect Billions of dollars until canceled. Federal funds borrowing and lending transactions are exempt from explicit interest rate ceilings and reserve requirements, but the market participants are restricted by regulation to banks in the United States, savings and loan associations, savings banks, U.S. government agencies, and a few other institu­ tions. RP borrowings that are secured by U.S. Treasury and federal agency securities also are exempt from interest rate ceilings and reserve requirements. Federal funds and RP transactions may result in the transfer of balances at Federal Reserve Banks from one member bank to an­ other, or they may simply reflect the conversion Loans sold to affiliates are a measure of the of deposit balances at a commercial bank to a utilization by domestically chartered banks of nonreservable borrowing. funds raised by affiliates—for example, in the Other borrowings are funds raised on prom­ commercial paper and Eurodollar markets. This issory notes, bills and notes rediscounted, due component specifically measures the funds ob­ bills, and other instruments given for the pur­ tained through bank holding company affiliates pose of borrowing money for use in the bank’s or foreign branches only by means of the sale business. These include term federal funds and of loans to these institutions. It does not include borrowings from Federal Reserve Banks, over­ proceeds of commercial paper sales by bank drawn “due from” bank balances, loans sold affiliates that are channeled to the banks through under RPs, sales of participations in pooled direct deposits. loans, and direct borrowings from unrelated As shown in chart 2, nondeposit funds have foreign banks. Such borrowings from nonbanks become increasingly important to banks, sup­ are a relatively small part of total borrowings. plementing—and at times replacing—deposit Net balances due to directly related foreign funds. In the 1973-74 period, when credit de­ institutions consist of the net liabilities of do­ mands were high and flows into deposits subject mestically chartered banks due to their own to interest rate ceilings were disrupted, U.S. foreign branches plus the net liabilities of banks obtained additional funds through bor­ foreign-related U.S. banking institutions due rowings that were exempt from interest ceilings. both to their parent banks or holding companies Eurodollar borrowings, which were subject to and to other directly related institutions in reserve requirements at the time, changed little; foreign countries. These net due-to balances are but other borrowings from nonbank sources a measure of the extent to which the U.S. increased sharply (chart 3). banking system uses the Eurodollar market in The use of nondeposit funds decreased in late funding credit activities in the United States.4 1974, as credit demands eased and market in­ terest rates generally remained lower than the 4. Changes in net due-to balances reflect changes in fixed-deposit ceiling rates. Net utilization of either balances due from or liabilities due to related funds from the Eurodollar market declined as foreign institutions. Foreign-related institutions gener­ ally maintain net due-to positions with directly related large domestically chartered banks advanced foreign institutions, while U.S. member banks moved funds to their foreign branches for use abroad. into large net due-from positions during the period from These banks continued to advance funds net to 1975 to 1978, which reduced the level of net Eurodollar borrowings and total nondeposit funds measured by this branches until 1978. In the same period, series. foreign-related institutions behaved differently, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

New Measures of Bank Credit and Nondeposit Funds 715 3. Nondeposit funds at commercial banks due to foreign-related institutions to finance Billions of dollars rapid expansion in business and foreign bank loans. Domestically chartered banks increased their net balances due to foreign branches mod­ erately in 1978 while depending primarily on other borrowings and deposit flows to fund strong credit expansion. However, their net due-to balances have spurted at an unprece­ dented rate in the first half of 1979 in response to continued strong bank credit demands in the United States, to relatively small deposit inflows early this year, and to changes in reserve re­ quirements that affected the relative costs of alternative sources of funds in late 1978.5 Back data for the series on bank credit and nondeposit funds are available from December increasing their net balances due to related 1972 to date. Requests for these data or for the foreign institutions moderately through 1977 to statistical releases for these series may be sent fund their U.S. operations. U.S. banks resumed to Publications Services, Division of Support the expansion of their domestic borrowings in Services, Board of Governors of the Federal late 1975, and these borrowings have remained Reserve System, Washington, D.C. 20551. an important source of funds. In 1978, with loan demands in the United States strengthening, 5. Reserve requirements on member banks’ net lia­ both domestically chartered banks and foreign- bilities to their own foreign branches were reduced to zero from 4 percent in August 1978, and a supplemental related institutions began to raise more funds reserve requirement of 2 percentage points was added abroad. Since early 1978, foreign-related insti­ to the existing requirements on large time deposits in tutions have sharply increased their net balances November 1978. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

716 Survey of Standby Letters of Credit Peter R. Lloyd-Davies of the Board’s Division lying contracts, the use of collateral, and the of Research and Statistics prepared this ar­ bank’s takedown and loss experience.2 The re­ ticle.1 sults indicate that, although standby letters of credit have the same risk potential as a direct Standby letters of credit issued by U.S. banks loan of funds, in practice they result in much have increased rapidly during the last six years. lower losses. Takedowns are fairly rare, but, The amount of such letters of credit issued by more important, the amounts disbursed are al­ U.S. insured commercial banks (consolidated most always recovered promptly by the bank with their domestic and foreign branches and from its customer. The bank may facilitate this subsidiaries) was about $5 billion in December recovery by requiring its customers to post col­ 1973, when these data were first collected. By lateral. The smaller banks in the survey tended December 1978, the amount had risen above to have more takedowns than the larger banks $25 billion. and at the same time to have higher collateral A standby letter of credit is issued by a bank requirements. The survey found no obviously to assure the beneficiary of the credit that he imprudent uses of the instrument, and conse­ will not suffer loss should the bank’s customer quently no additional regulations or legislation fail to fulfill a contractual obligation to him. If was recommended. such a loss should occur, the beneficiary is entitled to obtain reimbursement from the bank; The Sample the bank’s customer is then liable to the bank for amounts disbursed. The underlying contrac­ The 28 commercial banks surveyed, which were tual obligation of the bank’s customer to the all members of the Federal Reserve System, beneficiary may be either financial or nonfinan­ included the 11 largest issuers of standby letters cial; examples include construction contracts, of credit. These large banks (each with total contracts to ship merchandise, borrowing in the assets over $18 billion) each had more than $200 commercial paper market, and commodity fu­ million outstanding as of September 30, 1978; tures contracts. as a group they accounted for about three-quar­ In December 1978, Senators William Prox­ ters of all standby letters of credit issued by mire and Edward W. Brooke expressed their insured commercial banks. The remaining 17 concern that these instruments might constitute banks in the sample were smaller banks that undue risk for banks and the banking system issued large amounts of this instrument relative and asked the Federal Reserve to prepare a to their size; they accounted for 4 percent of report on them. In response to this request, a the total outstanding. The smaller banks fulfilled questionnaire was sent to a sample of 28 banks two conditions: (1) they had at least $20 million to gather information about the types of under­ of standby letters of credit outstanding as of September 30, 1978; and (2) their total out­ 1. Valuable assistance in preparing the survey was standing was at least 2 percent of their fully provided by Messrs. John J. Mingo, Michael G. Mar­ consolidated assets. tinson, Benjamin Wolkowitz, Stanley J. Sigel, Oscar B. Barnhardt, and Ms. Arlene E. Lustig. Thanks are also due to the staff of the Reserve Banks who adminis­ 2. The survey was conducted jointly by the Division tered the survey and to the staff of the participating of Research and Statistics and the Division of Supervi­ banks. sion and Regulation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

717 The bulk of the total amount outstanding was ately from their customers, whereas the large in the New York Federal Reserve District. The banks reported that on average 1.83 percent of eight respondents located in that district reported amounts disbursed were not immediately recov­ $15 billion in standby letters of credit out of ered. Performances differed, too, among the the survey total of $21 billion. Three banks, large banks. One bank reported that immediate with a total of $3.5 billion outstanding, were recoveries were as low as 62 percent of take­ from the San Francisco District; four, with $2 downs, while others reported recoveries of up billion outstanding, were from the Chicago to 100 percent. The percentage of takedowns District; and the other thirteen, all smaller banks showed surprisingly little correlation with and accounting for only a small proportion of amounts not immediately recovered; for the the total outstanding, were located in the Rich­ sample as a whole, this correlation was nega­ mond, Minneapolis, Kansas City, and Dallas tive, reflecting the higher takedown and lower Districts. loss experience of the smaller banks.4 T a k e d o w n a n d L o ss E x p e r ie n c e C o l l a t e r a l a n d Banks were asked to provide data on total drafts T ype s o f C o n t r a c t paid under standby letters of credit during 1978 The table shows total standby letters of credit and also on amounts that were not recovered classified by the type of underlying contract.5 immediately from the bank’s customer follow­ It also gives the amount of collateral or other ing such disbursements. The responses revealed indemnification against loss for each type iden­ that losses resulting from takedowns of standby tified.6 Collateral was used in connection with letters of credit were extremely small compared almost all types of underlying contracts, al­ with losses from ordinary loans. For the 28 though the size of collateral requirements banks, about 0.41 percent of average loans depended on the size of the bank. The 11 large outstanding were charged off against reserves banks reported collateral amounting on average during 1978.3 This contrasts sharply with their to 18 percent of the value of standby letters of experience with standby letters of credit. Al­ credit outstanding; the comparable figure for the though takedowns represented 2.03 percent of standby letters of credit outstanding, more than 98 percent of the amounts paid out were recov­ 4. Although the coefficient of correlation between takedowns and losses among the 11 large banks was ered immediately by the banks from their cus­ positive, it was only 0.08, implying that a relatively tomers, leaving only about 0.03 percent of high takedown experience was not strongly associated standby letters of credit as potential losses to with large losses. 5. Because the detailed information on collateral and the bank. Even this percentage may exaggerate on the nature of the underlying contract normally is not the loss: amounts not immediately recovered are readily available in machine-readable form, banks were typically booked as loans to the bank’s cus­ given the option of responding to these questions on the basis of a sample of standby letters of credit covering tomer, a part of which is probably recovered at least 80 percent of their total outstanding. Most of as the loan is repaid. the large banks took advantage of this opportunity and Banks had different experiences, depending selected a sample either by dropping certain overseas branches or by eliminating all credits under a certain on their size. The 11 large banks had signifi­ dollar limit. The numbers reported on a sample basis cantly lower takedown rates than the smaller were then grossed up so as to correspond with the total banks: 1.86 percent compared with 4.65 per­ outstanding for the bank. This procedure probably in­ troduced certain minor biases into the results. Standby cent. But all of the smaller banks reported that letters of credit to foreign beneficiaries were somewhat all amounts disbursed were recovered immedi- understated, as were those issued for small dollar amounts, which are perhaps more likely to be collat­ eralized. 3. This figure is obtained by dividing 1978 gross loan 6. Collateral and other idemnification include cash; chargeoffs (before deducting recoveries) by the average marketable securities; readily marketable commodities; of total loans outstanding at the beginning and end of and guarantees or standby letters of credit issued by 1978. the government, insurance companies, and other banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

718 Federal Reserve Bulletin □ December 1979 Standby letters of credit: uses and collateral1 Millions of dollars U.S. beneficiary Non-U.S. beneficiary Type of underlying contract and purpose of letter of credit Amount Collateral or Amount Collateral or outstanding indemnification outstanding indemnification Full sample 2,344 208 8,304 1,643 To ensure contract performance associated with construction projects.................................................................... 759 57 5,676 1,268 To ensure merchandise delivery..................................................... 456 41 1,621 257 Other nonfinancial............................................................................. 1,129 110 1,007 119 Financial................................................................................................... 7,362 1,766 3,376 458 To back commercial paper.............................................................. 1,102 286 98 7 To back other loans.......................................................................... 1,873 289 1,904 249 To ensure performance on options or futures contracts........... 1,077 120 174 28 Other financial.................................................................................... 3,310 1,072 1,200 174 9,706 1,974 11,680 2,101 11 large banks Nonfinancial............................................................................................ 2,033 91 8,198 1,620 To ensure contract performance associated with construction projects................................................................... 653 23 5,630 1,259 To ensure merchandise delivery.................................................... 397 20 1,592 253 Other nonfinancial............................................................................. 983 49 975 108 Financial................................................................................................... 6,657 1,482 3,306 427 To back commercial paper............................................................... 960 206 98 7 To back other loans.......................................................................... 1,696 204 1,869 247 To ensure performance on options or futures contracts........... 1,001 108 174 28 Other financial.................................................................................... 3,001 964 1,165 144 8,691 1,573 11,504 2,046 17 smaller banks 310 116 106 24 To ensure contract performance associated with construction projects..................................................................... 106 34 46 9 To ensure merchandise delivery..................................................... 59 21 29 4 Other nonfinancial............................................................................. 146 61 32 10 Financial.................................................................................................. 705 284 70 31 To back commercial paper.............................................................. 142 81 0 0 To back other loans.......................................................................... 177 84 35 2 To ensure performance on options or futures contracts........... 77 12 0 0 Other financial.................................................................................... 310 108 35 29 1,015 401 176 55 1. Details may not sum to totals because of rounding. smaller banks was 38 percent. The smaller smaller banks this percentage was 57 percent. banks required more than 40 percent collateral These collateral requirements significantly alter for financial contracts and 34 percent for non­ the character of the overall transaction from the financial contracts. Small banks may anticipate point of view of the borrower, since borrowing their somewhat higher incidence of takedowns in the commercial paper market is normally on and protect themselves by requiring additional an unsecured basis. collateral. The largest single category of standby letters Standby letters of credit issued in support of of credit, accounting for more than a quarter commercial paper had a relatively high level of of the total, served to ensure performance of collateral. The 11 large banks reported that on construction projects abroad. These were issued average 21 percent of the value of letters of almost exclusively by the largest banks, gen­ credit in favor of holders of U.S. commercial erally for the account of large multinational paper was supported by collateral; for the corporate customers that expose the bank to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Standby Letters of Credit 719 relatively little risk despite the low level of subsidiaries and affiliates of the issuing bank. collateral. In some cases, the issuance of a letter Credits totaling almost $1 billion were issued of credit may be little more than a pro forma in favor of governmental units, mostly to guar­ step to satisfy the requirements of the govern­ antee payment of financial obligations. About ment of the country in which the project is $725 million in credits were issued for the located. account of subsidiaries and affiliates, almost all Data were also collected on the extent to of this amount for the account of consolidated which standby letters of credit are used in con­ subsidiaries overseas to enable them to use the nection with transactions with the U.S. and local credit standing of the parent bank to borrow in governments and to support the activities of their local market areas. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

720 Treasury and Federal Reserve Foreign Exchange Operations This 35th joint report reflects the Treasury- vember 1 measures by the U.S. and foreign Federal Reserve policy of making available ad­ authorities to correct what had become an ex­ ditional information on foreign exchange cessive decline of dollar rates. The followoperations from time to time. The Federal Re­ through on those measures included heavy in­ serve Bank of New York acts as agent for both tervention in the exchange market by the U.S. the Tresury and the Federal Open Market authorities in coordination with the central Committee of the Federal Reserve System in the banks of Germany, Switzerland, and Japan, the conduct of foreign exchange operations. maintenance of a firm monetary policy by the This report was prepared by Scott E. Pardee, Federal Reserve, and the sale of foreign cur­ Manager of Foreign Operations of the System rency notes by the U.S. Treasury in the German Open Market Account and Senior Vice Presi­ and Swiss capital markets. These actions helped dent in the Foreign Function of the Federal to restore a sense of two-way risk in the market, Reserve Bank of New York. It covers the period and with interest rate differentials strongly fa­ February through July 1979. Previous reports voring the United States, funds began to flow have been published in the March and Sep­ back into dollars. This reflux took the form of tember Bulletins of each year beginning with unwinding previously adverse leads and lags, September 1962. covering of speculative positions, and the re­ versal of portfolio shifts out of the dollar, which By early 1979, progress was clearly under way had built up last year. in resolving the disparities in economic per­ 1. Federal Reserve formance among industrial countries that had reciprocal currency arrangements been of concern to policymakers and exchange- Millions of dollars market participants alike for several years. The U.S. economy was beginning to cool down Amount of facility, Institution July 31, 1979 under policies of restraint, while the economies Austrian National Bank....................... 250 of several other industrial countries were pick­ National Bank of Belgium.................. 1,000 Bank of Canada..................................... 2,000 ing up steam under policies of stimulus. These National Bank of Denmark................ 250 shifts in relative demand conditions, coming on Bank of England.................................... 3,000 top of the long-awaited adjustments in trade Bank of France..................................... 2,000 German Federal Bank ......................... 6,000 volumes as a result of previous exchange-rate Bank of Italy........................................... 3,000 changes, were reducing the serious trade and Bank of Japan ....................................... 5,000 Bank of Mexico .................................... 3601 current-account imbalances of recent years. The Netherlands Bank.................................. 500 sharp drop in Japan’s trade surplus and the Bank of Norway.................................... 250 Bank of Sweden.................................... 300 further narrowing of the U.S. trade deficit were Swiss National Bank............................ 4,000 especially encouraging. Nevertheless, those Bank for International Settlements processes were far from complete, and inflation Swiss francs/dollars......................... 600 Other authorized European in the United States remained uncomfortably currencies/dollars ....................... 1,250 high. Total ............................................................ 29,760 In the early months of 1979, the exchange markets were responding favorably to the No­ 1. Increased to $700 million effective August 17, 1979. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 721 While progress was being made on past advanced fairly sharply in most countries. In problems, market participants and policymakers addition, to avoid the inflationary effects of a had to contend with new shocks to the interna­ depreciation, the authorities intervened forcetional economy. A shortfall in world oil supplies emerged abruptly in early 1979, following the 2. Foreign exchange operations: political upheavals in Iran, which temporarily Summary, January 1-July 31, 1979 cut off crude oil exports from that country. The Millions of dollars equivalent ensuing scramble for spot crude pushed spot market prices to astronomical highs and Transactions with Type of transaction German Federal Bank prompted individual members of the Organi­ Reciprocal currency arrangement1 zation of Petroleum Exporting Countries to jack Commitments outstanding, January 1, 1979 ................................ 4,434.2 up their posted prices. Drawings, or repayments (-) These events favored the dollar in two ways. 1979 Ql .............................................. / 334.2 1-1,762.82 The bidding up of the spot oil price had the direct 1979 Q2................................................ / 790.8 I-3,020.8 2 effect of generating additional demand for dol­ July 1979 ............................................ / 1,377.1 I -114.6 lars in the exchange market to pay for the oil. Commitments outstanding, In addition, markets for individual currencies July 31, 1979 ..................................... 2,053.3 were influenced by assessments by traders of U.S. Treasury swap arrangement1 Commitments outstanding, the relative impact of the oil supply and price January 1, 1979 ................................ 889.4 strains on different countries. Currencies of Drawings, or repayments (-) 1979 Ql................................................ -878.23 countries that were most heavily dependent on 1979 Q2................................................ 0 July 1979 ............................................ 0 oil imports for their energy needs, such as Japan Commitments outstanding, and several continental European countries, July 31, 1979 ..................................... 0 came under selling pressure. By contrast, the Transactions with Swiss National Bank currencies of countries with near self-suffi- Reciprocal currency arrangement1 ciency in oil, such as the United Kingdom Commitments outstanding, and Canada, came into demand. The United January 1, 1979 ................................ 786.3 Drawings, or repayments (-), States was viewed as better able than most 1979 Ql .............................................. / 74.1 1-860.5 others to cope with short-term oil supply prob­ 1979 Q2................................................ 36.2 lems, and so long as the scramble for oil per­ July 1979 ............................................ / 31.7 \ -36.2 sisted the dollar was also in demand. Commitments outstanding, July 31, 1979 ..................................... 31.7 The surge in world oil prices aggravated Special swap arrangement1 inflation pressures generally, since it came at Commitments outstanding, a time when a number of important international January 1, 1979.................................. 157.3 Repayments commodity prices were also advancing. The 1979 Ql................................................ -156.5 1979 Q2................................................ -.9 economies of Japan and continental Western July 1979 ............................................ 0 Europe were no longer shielded from these price Commitments outstanding, July 31, 1979 ..................................... 0 increases as they had been earlier when their Transactions with currencies were appreciating against the dollar. Bank of Japan Consequently, wholesale and consumer prices Reciprocal currency arrangement1 abroad jumped sharply. Since inflation had also Commitments outstanding, January 1, 1979 ................................ 106.5 accelerated in the United States, this jump raised Drawings, or repayments (-) 1979 Ql .............................................. -106.5 concern over the possibility of a renewed 1979 Q2................................................ 0 worldwide price spiral such as that in the early July 1979 ............................................ 0 Commitments outstanding, 1970s. July 31, 1979 ..................................... 0 For their part, foreign central banks moved 1. Data are on a value-date basis. to tighten monetary conditions to avoid further 2. Repayments include revaluation adjustments from swap renewals, which amounted to $15.2 million for drawings on exacerbation of inflationary pressures as a result the German Federal Bank renewed during the period. of domestic credit demand or international in­ 3. Repayments include revaluation adjustments from swap renewals, which amounted to $11.3 million for drawings on fluences, and short- and long-term interest rates the German Federal Bank during the period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

722 Federal Reserve Bulletin □ September 1979 fully in the exchange markets whenever their 3. Drawings and repayments by foreign central currencies came on offer. banks and the Bank for International Settle­ ments under reciprocal currency arrangements 1 In an effort to attain greater stability of ex­ change rates within the European Community Millions of dollars; drawings, or repayments (-) (EC), the member countries launched the Euro­ pean Monetary System (EMS), which included Bank drawing on Out­ Out­ Federal Reserve standing, 1979 1979 1979 standing, new intervention arrangements and a partial System Jan. 1, Ql Q2 July July 31, 1979 1979 pooling of reserves. As some strains developed among the EMS currencies, the arrangements Bank for Interna­ tional Settle­ provided the context in which some countries ments (against 31.0\ German marks)2.. 0 0 {■-31.0/ 0 0 stepped up their intervention or tightened mon­ 1. Data are on a value-date basis. etary policy when their currencies came under 2. BIS drawings and repayments of dollars against European selling pressure. The U.K. authorities had de­ currencies other than Swiss francs to meet temporary cash requirements. cided not to join the intervention arrangements of the EMS for the time being, and when sterling came into heavy demand in the spring, trade deficit was widening again somewhat, and rather than create substantial new domestic li­ in view of the prospective sharp increase in our quidity through intervention, they allowed the oil import bill, private forecasts were being rate to rise. revised to show larger deficits than had been With the dollar in generalized demand predicted earlier. through much of the spring, the U.S. authorities Indeed, just when the bidding for dollars by had acquired sufficient currencies to repay by other major countries to pay for spot oil began the end of April all of their previous foreign to slacken, the United States was encountering currency indebtedness to other central banks. serious gasoline shortages and an uncertain out­ Subsequently, considerable progress was made look for heating oil supplies. These develop­ in rebuilding balances drawn out of the re­ ments, plus the continuing debate over energy sources acquired under the various parts of the policy generally in this country, led many mar­ November 1 program. Most of the currencies ket participants to question whether the United purchased during the period came out of direct States was better able to cope with oil price and transactions with correspondents, but the Trad­ supply problems after all. In addition, interest ing Desk also bought currencies in the market rate trends internationally had become a matter on occasion when the bidding for dollars was of concern. Even though inflation had acceler­ particularly strong. ated in the United States and the Federal Re­ In sum, by mid-June the U.S. authorities had serve had firmed interest rates somewhat further purchased a total of $8,123.5 million of curren­ in April, widespread talk of recession led market cies and had repaid $6,126.5 million of out­ participants to expect that interest rates might standing debt, holding the rest in balances. In not be raised in line with those abroad and might addition, $1,351.5 million equivalent of marks even decline somewhat. was acquired by a further medium-term issue By mid-June, following further interest rate in the German capital market. Aside from hikes in several major foreign countries, these $628.1 million of foreign currency sales during various concerns came to a head. The dollar some days of market nervousness in early Feb­ suddenly came on offer in the exchanges, and ruary, the Desk did not intervene as a seller many market participants hastened to shift out of foreign exchange from late February to mid- of dollars on the expectation of an even greater June. decline. In these highly unstable market condi­ By late spring, however, the balance of mar­ tions, the U.S. authorities intervened forcefully ket sentiment began to swing against the dollar. to check the decline, particularly on days sur­ Traders saw that the reflux of last year’s outflow rounding the OPEC meeting and the Tokyo was coming to an end, leaving the dollar vul­ summit in late June. The intervention operations nerable on the downside. Moreover, the U.S. by the United States were mainly in marks, but Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 723 4. U.S. Treasury securities, foreign currency inflationary pressures in the United States. denominated, January 1-July 31, 19791 Those operations, conducted both in New York Millions of dollars equivalent; issues, or redemptions (-) and in the overnight markets in the Far East, were coordinated with those of the German Out­ Out­ standing, Ql Q2 July standing, Federal Bank in Frankfurt and helped to blunt Issues Jan. 1 July 31 the immediate pressures on the dollar. In addi­ Government series tion, on July 20 the Federal Reserve raised the Swiss National Bank .............. 600.4 -597.2 -3.2 discount rate 1/2 percent to a record 10 percent Public series and moved to firm money market rates as well. Switzerland___ 0 1,203.0 0 0 1,203.0 Once the new appointments were made, with Germany .......... 1,595.2 1,351.5 0 0 2,946.7 G. William Miller moving to the Treasury as Total................... 0 4,149.7 Secretary and Paul A. Volcker becoming Chairman of the Federal Reserve Board, the 1. Data are on a value-date basis. market quieted down and dollar rates firmed also in Swiss francs. The German and Swiss somewhat at the end of July. central banks intervened in their own markets. From the end of January to the end of July, The outcome of the OPEC meeting, which the U.S. dollar declined a net 2lA percent resulted in an agreement that set the average against the continental Western European cur­ OPEC price some 60 percent over last year’s rencies, 2V2 percent against the Canadian dollar, levels, gave rise to expectations of a strong and 13 percent against the pound sterling. It rose policy response by the United States and other a net IV2 percent against the Japanese yen. countries, and the communique from the Tokyo Intervention sales of foreign currencies by summit reinforced those expectations. But the the U.S. authorities in June and July totaled tide of market sentiment was running so strongly $5,414.4 million equivalent. The bulk of this against the dollar that political and economic total was in marks, of which $2,758.9 million events in the United States over the next few was sold by the Treasury out of balances and weeks were interpreted bearishly. The dollar $2,537.6 million was sold by the Federal Re­ came under repeated bouts of selling pressure, serve out of balances and through drawings on especially following the President’s energy the swap line with the German Federal Bank. speech on July 15 and over subsequent days Drawings of marks by the Federal Reserve dur­ during which the President made several ing June and July amounted to $2,167.9 million, changes in the Cabinet. of which $2,053.3 million was outstanding on The U.S. authorities intervened vigorously in July 31. In addition, the System sold $117.9 German marks to head off a possible generalized million of Swiss francs in June and July, and decline of the dollar, which might exacerbate at the end of July $31.7 million of swap draw- 5. U.S. Treasury and Federal Reserve foreign exchange operations1 Millions of dollars; net profits, or losses (-) On liquidations of foreign currency Related to current operations debts outstanding as of Aug.15,1971 Period U.S. Treasury Federal Exchange Reserve Exchange General Federal Stabilization Stabilization Account Reserve Fund Fund 1979 Q l............................................................ .7 5.7 17.3 -139.1 -531.0 1979Q2............................................................ 30.8 4.6 21.7 -.7 -2.8 July 1979.......................................................... -.2 22.5 20.7 0 0 Valuation profits and losses on out­ standing assets and liabilities as of July 31, 1979 ....................................... 5.6 -209.1 -62.0 1. Data are on a value-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

724 Federal Reserve Bulletin □ September 1979 ings on the Swiss National Bank was still out­ a decline. The resolve of the authorities had standing from that series of operations. From been put to a severe test in November and mid-June through the end of July, the U.S. December, and intervention—particularly by authorities purchased $670.6 million equivalent the U.S. authorities—had been very heavy. But of marks and Swiss francs, mainly from corre­ pressures eased off on the dollar in early 1979. spondents. Already in January a reflux of funds had begun, During the first half of 1979 both the Federal and the U.S. authorities were able to begin Reserve and the Treasury realized net profits acquiring marks from correspondents and in the on liquidations of current swap debt and sales market to reduce their swap debt to the German of currencies out of balances held by the Sys­ Federal Bank. At the end of January, the Federal tem, the Exchange Stabilization Fund (ESF), Reserve’s swap debt in marks amounted to and the Treasury General Account. The figures $4,168.2 million equivalent, and the U.S. appear in table 5. During July the System real­ Treasury’s swap debt in marks was $613.0 ized a small net loss on its operations, but the million equivalent. With the exchange markets ESF and the General Account earned profits. in better balance, the German Federal Bank The valuation profits and losses for all three moved cautiously to absorb the excess liquidity accounts reflect revaluation of System and generated by the late-1978 intervention. Treasury assets and liabilities as of July 31. The fragility of this balance was underscored Table 5 also shows losses on the final liquidation when the dollar came under a brief bout of of pre-August 1971 Swiss franc debts. selling pressure in early February, as the market responded nervously to political developments in Iran. The spot mark was quickly bid up from G e r m a n M a r k around DM 1.86 to DM 1.83 to the dollar, but For some time the German authorities had heavy intervention again helped to contain the sought to generate a more rapid rate of domestic immediate pressures. In New York, the Desk growth without undercutting the clear progress sold $507.1 million equivalent of marks over they had made in slowing inflation in recent three trading days through February 8. Of this years. Much of the stimulus had come from total, $317.3 million equivalent was from U.S. fiscal policy, with a substantial increase in the Treasury balances and $189.8 million equiva­ budget deficit by the public sector. Although lent was for the Federal Reserve, of which Germany’s growth rate had advanced in 1978 $145.5 million was drawn under the swap line to 3.4 percent, the solidity of the expansion was with the German Federal Bank and the rest was still in question late in the year when huge from balances. amounts of hot money flowed into the mark Meanwhile, as a further follow-up to the from the dollar and from other EC currencies. November 1 program, the U.S. Treasury an­ The rise in the mark rate in the exchange mar­ nounced that it would issue a second markket, particularly against the dollar, had threat­ denominated note, equivalent to $1,351.5 mil­ ened to impede real growth as German busi­ lion in the German capital market, with the nessmen became apprehensive of their ability to payment date on March 1. Following these compete in their own or in foreign markets. At actions, the exchange market came into better the same time, intervention by the German balance again, and the process of unwinding Federal Bank and foreign authorities to counter resumed. the mark’s rise was swelling liquidity in Ger­ As the exchanges became more settled, mar­ many, thereby threatening to unleash serious ket participants attempted to assess the implica­ inflationary pressures from the monetary side. tions for monetary policy and interest rates of The German authorities joined with those of the changing conditions in Germany’s domestic the United States, Switzerland, and Japan in the economy. A harsh winter and a metal workers’ coordinated effort starting last November 1 to strike had temporarily depressed production, but correct what had been an excessive decline of most analysts expected fairly strong growth to the dollar and to avoid the recurrence of such continue through 1979. At the same time, how­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 725 ever, with the exchange rate no longer appreci­ term and easily reversible manner so as not to ating and thereby not shielding the domestic signal any change in their efforts to resist infla­ economy from rising prices of international oil tionary pressures. In particular, they raised and raw materials, Germany was hit by the same banks’ rediscount quotas with the central bank burst of inflation as other industrial countries. by DM 5 billion on April 1, and subsequently With the mark on offer in the exchanges, the engaged in foreign exchange swaps with com­ German Federal Bank took advantage of the mercial banks, mostly for three-month maturi­ opportunity to intensify its efforts to absorb ties. But in response to continuing expansion liquidity, to signal its intention that funds would in bank lending, the Federal Bank also acted no longer be so readily available, and otherwise to raise the cost of credit, increasing both its to bring down the growth of central bank money discount and its Lombard rates 1 percentage to its target range of 6 to 9 percent. In the point to 4 percent and 5 percent respectively. market, concerns that interest rates would rise By the spring months, it was becoming clear sharply in Germany prompted investors to shift that the adjustment of Germany’s external posi­ funds from marks into higher-yielding assets in tion was under way, as the trade and currentdollars, sterling, and currencies linked to the account surpluses were sharply reduced from mark in the EMS. last year’s levels. Imports were being boosted These outflows occurred at a time when the both by a sharp rebound in domestic demand dollar was in demand in the exchanges for other and by the higher prices of oil and other inter­ reasons. It was benefiting from evidence of a national commodities. Uncertainties over en­ slowdown in the U.S. economy, news of a sharp ergy continued to weigh on the mark. Since improvement in the U.S. trade deficit in Febru­ Germany is almost wholly dependent on im­ ary, and some expectation of a moderation of ported oil for its petroleum needs, the further inflationary pressures. Moreover, because of its escalation of oil prices threatened to inflate the role as a transaction currency, the dollar was oil import bill even more. Moreover, the nuclear being increasingly well bid as the scramble for accident in the United States raised concern that oil and other dollar-based commodities intensi­ Germany’s efforts to shift toward greater reli­ fied. As a result, the selling of marks at times ance on nuclear power might be undercut and put considerable pressure on the mark rate. By that large contracts to export nuclear plants early April the mark dropped to trade as low might be delayed or canceled. as DM 1.9050. In addition, the mark was on By contrast, the United States was seen as offer against other European currencies. being better able to cope with oil price and As the mark came on offer, the German supply problems than most other countries. Federal Bank sold increasingly large amounts Thus, the offering of marks was increasingly of dollars to maintain orderly trading conditions being reinforced by commercial selling and ad­ and to absorb some of the excess liquidity in verse reactions to each news report suggesting the domestic money market. For their part, the yet another price hike for oil. In addition, U.S. authorities continued to take advantage of through April and early May, the exchange the opportunity to cover outstanding swap com­ markets were reacting favorably to the further mitments and to replenish foreign currency re­ firming of interest rates by the Federal Reserve sources, largely on the basis of direct transac­ in response to the rapid rise in the monetary tions with official correspondents. But as pres­ aggregates and to evidence of a further narrow­ sure against the mark intensified in early April, ing of the U.S. trade deficit. the Trading Desk also intervened by buying Selling pressure on the mark continued and marks in the market to maintain orderly trading pushed the mark to a low of DM 1.9220 at one conditions. Before long, these combined opera­ point late in May, some 3Vi percent below levels tions had drained so much liquidity in Germany in early February. In the four and one-half as to exert strains on the banks’ reserve posi­ months to mid-June, the German Federal Bank tions. Accordingly, the German monetary au­ was a substantial seller of dollars. The U.S. thorities acted to provide liquidity in a short­ authorities also purchased a total of $5,963.2 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

726 Federal Reserve Bulletin □ September 1979 million equivalent of marks. These purchases cations for the relatively new intervention ar­ permitted the System and the Treasury to liqui­ rangements in the EC should monetary policy date, respectively, their remaining $4,355.2 be tightened further in Germany. At the same million equivalent and $613.3 million equiva­ time, many market participants felt there was lent of swap debt to the German Federal Bank little downside risk for the mark in view of by the end of April. In addition, they provided continuing sales of dollars by the German Fed­ the U.S. Treasury the opportunity to make sub­ eral Bank and purchases of marks by the U.S. stantial progress in restoring its resources under authorities. the November 1 package so as to be available Under these circumstances, the mark imme­ to finance future operations. diately became the focus of heavy demand when By early June, however, the balance of mar­ the dollar suddenly came on offer on June 15; ket forces was beginning to shift. After nearly in one day it jumped 1 percent through DM six months, the process of unwinding commer­ 1.90, even as the Trading Desk stepped in to cial leads and lags and other types of foreign contain the rise. By comparison with the rela­ exchange positions was virtually completed. tively limited rate fluctuations of previous The scramble for oil was tapering down, as months, market participants were impressed by many of the important importers abroad had by the magnitude of the mark’s rise, and the bid­ now made alternative arrangements to secure ding for marks quickly cumulated even in the their supplies. Meanwhile, the political scrap face of stiff resistance by the authorities who over energy policy in the United States cast continued to intervene in sizable volume. doubts in the market over this country’s ability Moreover, as the OPEC meeting in late June to deal effectively with the oil supply and price approached, the feeling in the market strength­ situation. Moreover, interest rate differentials ened that the German authorities might welcome were narrowing. U.S. interest rates had leveled an appreciation of the mark to cushion the off since April or eased somewhat, and talk of inflationary impact of rising oil prices. Also, a possible recession gave rise to expectations news of a worsening in both the U.S. trade that rates might begin to decline significantly. deficit for April and our consumer price index In Germany by that time most of the earlier for May had heightened concerns in the market strains that had generated such large capital about the performance of the U.S. economy. outflows had disappeared, but interest rates were In these market conditions, the Trading Desk some 1 to 2 percentage points higher than be­ at the Federal Reserve Bank of New York fore. And the market was concerned that, to intervened almost daily for the rest of the prevent rising oil and other commodity prices month, operating not only in New York but also from further exacerbating inflation in Germany, in the overnight markets in the Far East during the authorities in that country would tighten the week of the OPEC meeting and the Tokyo monetary policy sharply. Indeed, German banks summit, June 25-29. In all, the Desk sold were facing seasonal liquidity pressures during $2,429.9 million equivalent of marks by the end June and, in any case, the German Federal Bank of the month, of which $842.1 million equiva­ raised the Lombard rate a further 1/2 percentage lent was financed by new drawings by the Sys­ point, tempering these immediate pressures by tem on its swap line with the German Federal offering a new repurchase-agreement type of Bank and the rest was drawn out of System and facility for the banks based on interest rates Treasury balances. On several days, the German close to those prevailing in the market. Federal Bank also intervened forcefully. By the As money market rates in Germany rose, the end of the month the spot rate had advanced German mark advanced to the upper interven­ above DM 1.84. tion point against other currencies in the EMS. Early in July, the results of the OPEC pricing Already the participating central banks had sold meeting and the Tokyo summit set up expecta­ a sizable amount of marks, and some had in­ tions in the market that there would be strong creased their own official lending rates. The official reactions to the higher-than-expected in­ market was therefore uncertain about the impli­ creases in new oil prices. In fact, participants Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 727 at the Tokyo summit committed themselves to that lower inflation and a stable dollar would limit oil imports. The market responded nerv­ continue to be of the highest priority for eco­ ously to the postponement of President Carter’s nomic policy in the United States. In addition, energy speech. Meanwhile the German Federal in late July statistics were released showing a Bank, following up on the rise in domestic widening in the German current-account deficit interest rates in Germany, raised its discount and and a narrowing in the U.S. trade deficit during Lombard rates on July 12 to 5 percent and 6 June. The mark eased back to DM 1.8335 on percent respectively. This action had been an­ July 31. At this level the mark was up a net ticipated, but it nonetheless reinforced concerns 2 percent over the six-month period. in the market over the further narrowing interest In July the Desk’s intervention sales of marks differentials between Germany and the United amounted to $2,866.6 million equivalent, of States. which $1,225.6 million was out of Treasury Even before the President had completed his balances and $1,641.0 million was for the Fed­ energy address on Sunday evening, July 15, the eral Reserve. The System’s operations were mark advanced sharply in the overnight markets mainly financed by an additional $1,325.8 mil­ in Singapore and Hong Kong, and the Desk lion equivalent of drawings on the swap line intervened vigorously in those markets through with the German Federal Bank, with the re­ banks in the United States with offices in those mainder coming out of balances. Toward the countries. Subsequently, the announcement that end of the month the Desk was able to acquire the entire U.S. Cabinet and senior White House some marks from correspondents and to liqui­ staff had offered their resignations to President date some $114.6 million equivalent of swap Carter distressed the market. The dollar came drawings. At the month-end, System swap debt under a renewed burst of selling pressure and with the German Federal Bank totaled $2,053.3 the Desk stiffened its resistance. On July 20, million equivalent. the Federal Reserve raised its discount rate 1/2 During the period, German reserves were percentage point to 10 percent and short-term influenced by a revaluation of some of Ger­ money market rates were moved up as well. many’s gold holdings when, during March, 20 The mark nevertheless remained in heavy percent of all gold and foreign exchange was demand, as commercial and professional market transferred into the European Monetary Fund participants undertook a hard reassessment of against the receipt of claims denominated in the the dollar’s prospects. Over subsequent days, European currency unit (ECU). Germany’s re­ U.S. corporate interests that had previously serves were also affected when the German been hesitant to turn their positions began to Federal Bank executed foreign exchange swaps unwind their forward mark sales and to cover during April and May to provide temporary future mark needs in the spot market. In this liquidity to the domestic market. Excluding the unsettled environment, reports that central impact of these transactions, Germany’s foreign banks were diversifying out of dollar-denomi- exchange reserves declined $6.6 billion from the nated assets spread throughout the market. end of January through May, reflecting almost In response to such pressures, U.S. authori­ equally the German Federal Bank’s intervention ties provided heavy and sustained support in in dollars and in EMS currencies. By contrast, both the U.S. and the Far Eastern markets, and foreign exchange reserves rose $5 billion during the German Federal Bank also bought dollars June and July. in Frankfurt. This intervention blunted the im­ mediate selling pressures, and the mark rate, Swiss Franc which briefly reached DM 1.80, dropped back on some covering of short dollar positions. Coming into 1979, the persistent rise in the Moreover, the appointments of G. William Swiss franc was finally blunted. Concerned that Miller as Secretary of the Treasury and of Paul excessive appreciation might drive the economy A. Volcker to replace him as Chairman of the into recession, the Swiss National Bank had Federal Reserve helped to reassure the market intervened massively in the exchanges and had Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

728 Federal Reserve Bulletin □ September 1979 accepted the huge injection of liquidity that established as that in Germany, and the Swiss resulted from the heavy intervention. As part authorities repeatedly reaffirmed that economic of the November 1 dollar-support package, the policy was still focused on the need to stabilize Federal Reserve also sold large amounts of exchange relationships. Swiss francs in its efforts to correct an excessive By early March the relatively comfortable decline in the dollar, and the U.S. Treasury had conditions in Switzerland’s money and capital arranged a $1,203.0 million equivalent place­ markets were in clear contrast to the tightening ment of Treasury notes in the Swiss capital taking place in Germany. As a result, Switzer­ market. The market had been impressed by land emerged as one of the most favorable these initiatives and by the priority that the markets for placing new loans. Indeed, bor­ Swiss government was giving to stabilizing the rowers from Asia, Europe, and North America franc. As a result, the franc had started coming flocked to Zurich to take advantage of the at­ on offer in January, enabling the Federal Re­ tractively low interest rates for as long as they serve to reduce its outstanding swap debt in­ might last. Thus, the buildup of a heavy calen­ curred last year with the Swiss National Bank dar of new foreign issues weighed on the Swiss to $446.7 million equivalent by the time the franc for some time. As the near-term outlook period began. for the franc faded, nonresidents also shifted In early February the franc was again bid up some of their funds out of francs into higherwhen the dollar came briefly on offer following yielding assets in other currencies, and the leads the cancellation of large military contracts with and lags built up last year continued to be Iran. The rate jumped 3% percent above its SF unwound. 1.70 opening, prompting the Swiss National These various developments kept the franc on Bank and the U.S. authorities to intervene. The offer against both the dollar and the mark during System sold $45.8 million equivalent of francs most of the spring months. Between mid-Febfinanced by drawings of $40.4 million on the ruary and early May, the franc declined 3 per­ swap line with the Swiss National Bank and cent to SF 1.7228 against the dollar and had from balances while the Treasury sold $24.8 slipped to trade around SF 0.9060 against the million equivalent of francs out of the proceeds German mark. As the franc eased, Swiss au­ of its recent borrowing. These operations thorities became more concerned that a sharp quickly brought the market into better balance decline in the franc would magnify the effect and reaffirmed to the market the authorities’ of rising oil prices and otherwise exacerbate determination to contain any further rise in the inflationary pressures. The Swiss National Swiss franc. Thus, the franc settled back to SF Bank, therefore, came into the market to support 1.67 by midmonth while trading around SF the franc and to absorb domestic liquidity by 0.9000 against the German mark. selling large amounts of dollars in the market Meanwhile, the turnaround in the Swiss franc while also continuing with its dollar sales under was generating fears that the sharp rise in oil its capital export conversion program. and other international commodity prices would For its part the Federal Reserve bought francs be transmitted more rapidly to the Swiss econ­ in the market and directly from the Swiss omy. Also, an improved business outlook had National Bank to repay the remaining $487.1 set in as new orders recovered somewhat from million equivalent of market-related swap debt the depressed condition of earlier months. incurred with that bank last year and during Against this background, market participants, February. The Treasury also purchased francs looking for parallels between developments in to restore its Swiss franc balances. In addition, Germany and Switzerland, were sensitive to the the U.S. authorities accelerated the program for possibility that the Swiss authorities would orderly payment of the pre-August 1971 Swiss tighten liquidity, just as the German Federal franc debt, so that the System and the Treasury Bank had done, should the recovery in activity were able to repay $139.3 million equivalent threaten domestic price stability. But, in fact, of special swap debt and $531.2 million equiv­ the Swiss expansion was not nearly so well alent of Treasury securities respectively. Con­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 129 sequently, by early April the United States had rencies in response first to the postponement and no outstanding obligations to the Swiss National then to the disappointment in the market over Bank for the first time since August 1970. Once President Carter’s energy speech and the subse­ the debt was repaid the Federal Reserve ac­ quent resignation of the U.S. Cabinet. But the quired modest balances in Swiss francs. franc did not lead this rise, and its advance was During May the unwinding of commercial contained with only modest intervention by the leads and lags and the heavy volume of capital Swiss authorities and by the System, which sold outflows gradually tapered off. But the heavy $31.7 million equivalent of francs in the market intervention to moderate the franc’s decline had financed by swap line drawings. generated severe strains in the Swiss money Once the President had completed the reor­ market. To some extent, the authorities had ganization of his economic team, the franc fell offset these strains by lending francs against back more rapidly than the mark. The Swiss dollars through foreign exchange swaps with National Bank sold dollars in the market, and maturities of up to six months. By this time, the Federal Reserve was able to buy directly they had also allowed Swiss interest rates to rise from the Swiss National Bank a sufficient to contain monetary growth and to reduce infla­ amount of the proceeds of this intervention to tionary pressures. In addition, during May the repay $36.2 million equivalent of swap debt Swiss National Bank liberalized its exchange with the Swiss National Bank. At month-end, controls by removing requirements that non­ System swap debt with the Swiss National Bank residents convert franc borrowings with the was $31.7 million equivalent. By the close of Swiss central bank, that commercial banks bal­ the six-month period under review, the franc ance foreign currency claims and liabilities at had eased back to SF 1.6610 for a net gain of the end of each day, and that nonbank residents 2lA percent on balance. Meanwhile, during the receive official approval for placing loans first four months of this period, Switzerland’s abroad. These regulatory changes were well re­ foreign exchange reserves declined $3.6 billion. ceived in the market and contributed to a bot- In June and July foreign exchange reserves toming-out of the franc around the end of May. declined a further $500 million as the effect of As a result of the relaxation of the exchange money market operations more than offset spot controls and some narrowing in interest dif­ foreign exchange market intervention for a net ferentials between the United States and Swit­ decline of $4.1 billion over the six-month pe­ zerland, the Swiss franc was poised for a recov­ riod. ery at the time the dollar started its decline in mid-June. Bidding for francs put the rate under strong upward pressure. Leading the rise in Ja p a n e se Y e n foreign currencies against the dollar, the franc By early 1979 the Japanese economy had en­ soared almost 414 percent to as high as SF tered a period of strong recovery, spurred first 1.6475 on June 22. To avoid an excessive by public investment, then by private invest­ appreciation of the franc, the Swiss National ment and personal consumption. Progress was Bank reacted by intervening massively both in being made in reducing Japan’s massive trade Zurich and through the Trading Desk in New and current-account surpluses as export growth York. In addition, during June the Federal Re­ had slackened for several months while imports serve sold $86.2 million equivalent of francs expanded briskly in response to rising domestic with $36.2 million equivalent drawn on the demand, to last year’s sharp appreciation of the swap line with the Swiss National Bank and the yen, and to government programs to encourage remainder financed from balances. imports. This forceful and concerted operation by the The yen had fallen back more sharply than Swiss and U.S. authorities impressed the mar­ most other major currencies after the an­ ket, and the franc eased back to SF 1.6565 nouncement of the November 1 measures and around the month-end. Thereafter, the franc concerted intervention by U.S. and Japanese moved up again with the other European cur­ authorities and was trading at ¥202 on February Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

730 Federal Reserve Bulletin □ September 1979 1. Even so, economic policy under the new rise in the spot rate had been broken, the ad­ Ohira government continued to focus on the justment in Japan’s trade position was no longer need to cut the current-account surplus further. masked in the monthly figures by a continuous The government’s budget for the fiscal year improvement in the terms of trade. At the same beginning April 1979 contained another sub­ time, the oil shortage triggered by the protracted stantial increase in spending to maintain real shutdown of Iranian production was high­ growth at 6.3 percent even if production for lighted, even more in Japan than elsewhere, foreign markets slowed further. On this basis, when multinational oil companies phased out the government forecast an impressive 50 per­ shipments to their nonaffiliates, thereby sharply cent fallback in the current-account surplus to reducing deliveries of crude oil to Japan’s re­ $7.5 billion for the fiscal year. Meanwhile, fineries. Fears over the availability of supplies, monetary policy remained accommodative, so as well as concern over rapidly rising interna­ as to provide support to the economic recovery tional prices, led to an increase in imports of and to an outflow of capital that would offset oil and other commodities. This increase was the continuing current-account surplus. But ex­ reflected in a scramble for dollars in the ex­ pansion of bank credit had become a matter of change market, which added to the pressure concern. against the yen. While other major currencies As a followup to the November 1 actions, were weakening only slightly against the dollar, the U.S. authorities remained prepared to inter­ the spot yen dropped a full 4l/z percent below vene in yen. And so, on one occasion when levels in early February to ¥211.60 by early the dollar came under selling pressure in early April. February, the Desk sold $50.4 million equiva­ With the yen on offer and declining almost lent of yen in the New York market, of which daily, the Japanese authorities acted to moderate $33.8 million equivalent was from Federal Re­ the selling pressures, in part, through the con­ serve balances and $16.6 million equivalent tinued liberalization of exchange controls on from Treasury balances. But for the most part capital inflows. Limitations on nonresident pur­ the yen was under selling pressure over the late chases of yen bonds were progressively elimi­ winter and early spring. The U.S. authorities nated, a marginal reserve requirement on in­ thus took advantage of the opportunity to ac­ creases in nonresident free-yen accounts was quire yen to add to balances of the System and phased out, and the period for converting the the Treasury. proceeds of nonresident issues of yen-denomi- Much of the flow out of yen continued to nated bonds was extended. The Bank of Japan reflect the reversal of commercial leads and lags also intervened massively in the exchange mar­ that had built up in 1978 when the yen had been ket, selling dollars and thereby absorbing yen. appreciating rapidly. In addition, with interest As the pressures continued to build, the au­ rates in Japan well below those in the U.S. and thorities became concerned that the decline in Eurodollar markets, capital moved out of yen the yen would undercut the progress already once the spot rate began to decline. Japanese achieved in reducing the large trade and cur­ residents shifted funds abroad and nonresidents rent-account surpluses of recent years. At the ran down their free-yen deposits in Japan. same time, the sharp depreciation of the yen Moreover, a number of foreign borrowers took magnified the effect of rapidly rising commodity advantage of both favorable rates and ample prices, thereby aggravating domestic inflation­ liquidity in the Tokyo market to issue bonds ary pressures. With these concerns in mind, on and to place syndicated loans denominated in April 17 the Bank of Japan raised its discount yen. The continued conversion of the proceeds rate 3/4 percentage point to 4lA percent. Selling of sizable issues over a short period of time also pressure on the yen nevertheless continued into weighed on the exchange market. early May at which point the rate had fallen In addition, the decline in the rate reflected to ¥225.25, some IIV2 percent below the level a deterioration in market sentiment toward the in early February and fully 27% percent below yen during the early spring. Now that the sharp its peak just before the November 1 program. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 731 By May, expressions of concern by senior tion arrangement in the EMS, it would seek to Japanese and U.S. officials that the yen may keep sterling relatively stable vis-a-vis the cur­ have reached excessively low levels sparked a rencies of its major trading partners. The com­ sudden scramble for yen. In a surge of profit fortable level of foreign exchange reserves, taking and short covering, the spot rate shot up which were at $15.6 billion at the end of Jan­ more than 6 percent to ¥211.50 toward mid­ uary, gave credibility in the market to this month. Once these immediate demands passed, pledge. Moreover, Britain’s near self-suffi­ however, the yen came on offer again and the ciency in oil was seen as insulating the U.K. rate eased to around ¥218 to ¥220 by early economy from the disruption in Iranian oil sup­ June. The Japanese authorities did not intervene plies and its balance of payments from the as heavily as before in the market, but reflecting effects of skyrocketing oil prices. Thus, the the sustained heavy intervention over the early pound traded comfortably around the $2.00 months of the year, Japan’s foreign exchange level in early February, and on the effective reserves declined $8.7 billion from January trade-weighted basis used by the U.K. authori­ through May. ties, it remained around 63 percent of its In early June, selling pressure on the yen Smithsonian parity. gradually tapered off, but the yen did not par­ Meanwhile, Britain’s economic performance ticipate in the generalized rise against the dollar was falling short of market expectations. The that set in at midmonth. The market remained recovery of the domestic economy had run out cautious about the outlook for Japanese trade of steam, inflationary pressures were acceler­ and current-account positions, with the further ating, and the current account was showing little rise in the oil prices adding to Japan’s oil-import improvement despite the increasing contribution bill and a possible slowdown in the United of North Sea oil to the balance of payments. States cutting into Japanese exports. Not until Looking ahead, a public-sector borrowing re­ selling pressure on the U.S. dollar intensified quirement that was larger than expected, labor in July, amid concern over the management of union demands for large pay increases to make U.S. energy policy and of economic policy up for four years of wage restraint, and spiraling more generally, did the yen begin to advance. commodity prices all aggravated the outlook for By that time, the pickup of inflationary pressures inflation. Interest rates continued to move up in Japan and the rapid growth in the money in London’s financial markets, and on February supply prompted the Bank of Japan to raise its 8 the Bank of England raised its minimum discount rate 1 percentage point to 5lA percent. lending rate from HV2 percent to 14 percent. The market responded favorably to this action, During February a massive reflow of German and the yen edged higher to close around ¥217. marks, Swiss francs, and Japanese yen was At this level, the yen showed a net IV2 percent getting under way. Much of this reflux was into decline over the six-month period under review. dollars. But with so much money on the move Japan’s foreign exchange reserves posted little at a time when interest rates in the United further change in June and July, closing the Kingdom were higher than in other major coun­ period at $21 billion, compared with $28.8 tries, including the United States, there was a billion at the end of January. tendency for some of these funds to gravitate into sterling. In addition, sterling was buoyed by Britain’s near self-sufficiency in oil. In re­ Sterling sponse to a continuing inflow of funds, the Bank Coming into 1979, sterling was firm in the of England cut its minimum lending rate 1 exchange markets. Underpinning the pound percentage point to 13 percent on March 1. The were the relatively high yields available on sterling rate was allowed to rise gradually, and British gilt-edged securities and other instru­ it advanced to nearly $2.06 by late March. The ments denominated in sterling. Also, the U.K. Bank of England moderated the rise in the rate government had indicated that, even though it by intervening fairly heavily, and this interven­ would not initially join the exchange interven­ tion was reflected in the $1.3 billion increase Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

732 Federal Reserve Bulletin □ September 1979 in U.K. foreign exchange reserves in February against the dollar and to nearly 68 percent in and March. effective terms. The demand for sterling then On March 28 the Labour government lost a ran out of steam and the rate eased back as no-confidence vote in Parliament, thereby traders sensed that interest rates would not be opening the way for a general election in early allowed to fall further in the United Kingdom, May. Coming into the campaign, the two major particularly following evidence that domestic parties offered clearly different approaches for inflation was accelerating. Moreover, the market bolstering the British economy. The Labour turned cautious ahead of the general election, Party pointed to its record in gaining trade union as the public opinion polls indicated a narrowing acceptance of wage restraint and its plans to use of the margin in favor of the Conservatives. North Sea oil earnings to strengthen British Spot sterling fluctuated rather widely over the industry. The Conservative Party put emphasis last weeks before the election. The immediate on restoring incentives for long-term recovery reaction to the May 3 election results, a clear by stimulating the private sector, reducing the majority for a new Conservative government led government’s role in the economy, and lowering by Prime Minister Margaret Thatcher, was some inflation by setting firm limits on the growth of further bidding for pounds, and the spot rate the money supply. Public opinion polls, show­ advanced to as high as $2.0843. Although the ing the Conservative Party to be heavily fa­ Bank of England remained prepared to intervene vored, were viewed by many market partici­ to counter excessively disorderly conditions in pants as a bullish factor for sterling. Thus, the the market, it continued to allow sterling to injection of election uncertainties at first gave move rather widely in response to market little pause to the bidding for sterling. forces. Sterling soon settled back somewhat as The persistent inflows of funds into sterling the market assessed the prospects for the Con­ raised a serious policy dilemma for the U.K. servative Party program, to be laid out in some authorities. Exchange-market intervention to detail in a budget message on June 12. keep spot sterling from rising sharply risked By this time, available evidence suggested generating a substantial burst in the monetary that output had fallen during the first quarter aggregates beyond the targeted levels. Cuts in and that both the trade and the current accounts interest rates aimed at reducing the attrac­ had been in uncomfortably large deficit. Wage tiveness of sterling investments could instead increases had been much higher than antici­ spark additional demand from investors on ex­ pated, which, together with the upsurge of raw pectations of capital gains and undermine efforts material and oil prices, contributed to the accel­ to rein in monetary expansion. eration of inflation. The pace of monetary ex­ Complicating matters further was the lack of pansion had quickened substantially, largely reliable data on current economic developments because of strong demands for bank credit. in the United Kingdom as a result of a civil Some tightening measures were therefore ex­ servants’ strike affecting data collection and of pected. a series of strikes elsewhere in the economy, The market was nonetheless caught by sur­ which were having imponderable effects on prise by the boldness of the initiatives an­ overall employment and production levels. On nounced by Chancellor Howe in the budget April 5 the Bank of England once again cut its address, which adhered closely to the principles minimum lending rate 1 percentage point to 12 set forth in the campaign. The projected publicpercent. At the same time, concerned that con­ sector borrowing requirement for the current tinued heavy intervention to restrain the rise of fiscal year was to be cut nearly £1 billion below sterling was generating excessive growth of the its current level to £8XA billion. Substantial re­ money supply, the U.K. authorities decided to ductions in income taxes were to be financed scale back the magnitude of their intervention. by large cuts in public spending, increases in The initial response in the market to these the value-added tax, and the sale of some gov­ steps was a further rush into sterling. By mid- ernment holdings to the private sector. April, the spot rate had been bid up above $2.10 In the meantime, to keep inflation in check, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 733 the authorities imposed stricter monetary re­ porations, OPEC members, and market profes­ straints. They reduced the money growth target sionals continued to flow heavily into London. to a range of 7 percent to 11 percent. To bring The perception that the Bank of England, reluc­ the actual growth of sterling M-3 down into the tant to compromise its control of the money middle of this range, the minimum lending rate supply, would restrain its intervention in the was raised 2 percentage points to 14 percent; exchanges also propelled sterling higher. In and the supplementary special deposit scheme, these circumstances, the authorities accelerated which had been imposed last summer to restrict their policy of relaxing exchange controls by the growth of commercial bank interest-bearing lifting totally all restrictions on overseas direct eligible liabilities, was extended for a further investment and easing those on outward portfo­ three-month period. With the intention of al­ lio investment. lowing U.K. residents much freer use of sterling But these measures had little immediate im­ resources, certain capital controls were also pact and the pound rocketed up to a four-year liberalized. These changes included freer avail­ high of $2.3324 on July 26. By that time, ability of official exchange for outward direct British manufacturers were expressing open investment, abolition of the requirement that alarm over a possible loss of competitive posi­ two-thirds of overseas profits be repatriated, the tions that could result with sterling at such a end to controls on dividends, and the relaxation high level. Once the immediate concern over of controls on travel and emigration allowances. U.S. economic policy eased in late July, the The exchange market’s response was exceed­ flow into sterling suddenly dried up. Spot ster­ ingly bullish, with the pound coming into heavy ling dropped away as sharply as it had risen, commercial and professional demand from fi­ receding to $2.2480 by the month-end. Never­ nancial centers the world over. The jump in theless, compared with six months earlier, ster­ interest rates had particularly marked effects as ling had risen on balance 13 percent against the foreign investors joined in the scramble to buy dollar and 14% percentage points to 72.7 per­ government securities, and several issues of cent on the trade-weighted index. government tap stocks were sold out quickly. During the period, the government took ad­ Rumors of a large new oil find in the North vantage of sterling’s strength in the exchanges Sea reinforced favorable market sentiment to repay previously incurred external debt while toward sterling at a time when the world oil also extending the maturities of remaining ex­ price and policies were under active debate ternal public debt. These repayments included within OPEC and among the major industrial the prepayment of $1 billion to the International countries. With the increased volume of funds Monetary Fund (IMF), liquidating Britain’s re­ flowing into sterling, the British authorities maining credit tranche drawings with the Fund, continued to intervene to avoid excessively dis­ as well as the repayment of a large portion of orderly markets but allowed the exchange rate public-sector debt that was coming up for early to take the brunt of the demand pressures. As maturity. Even so, reserves rose another $2.3 a result, the pound shot up to $2.21 by early billion above levels at the end of March to $19.2 July, some 6 percent above levels in early May. billion at the end of July, reflecting the accu­ Sterling rose against other major currencies as mulation of dollar intervention by the Bank of well, advancing to 70.8 percent in effective England. terms. The relatively high level of U.K. interest European M onetary S ystem rates, the security of British oil supplies, and the depth and diversity of the U.K. money On March 13 the EMS was formally inaugu­ market all benefited sterling when the dollar rated. Aimed at achieving greater exchange-rate came on offer during July. In response to the stability in Europe, the new system supplanted uncertainties surrounding U.S. energy policy the EC snake, which had been in existence since and the general outlook for energy policy in the 1972 but by this time had lost more than half United States, funds from multinational cor­ its membership. Within the EMS the new joint Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

734 Federal Reserve Bulletin □ September 1979 floating arrangement included the currencies still where interest rates were much higher. Among remaining in the EC snake, together with the the beneficiaries of these flows was the French French franc, the Italian lira, and the Irish franc, which settled into the middle of the new pound. As in the EC snake, the member nations band. It benefited also from an improved exter­ agreed to maintain their currencies in a 2lA nal position and favorable market reaction to percent band against each other, except for the sustained commitment of the French gov­ Italy, which was allowed a wider 6 percent ernment to fight inflation and to increase the margin for the lira. The United Kingdom de­ competitiveness of French industry. The Italian cided not to bring the pound sterling into the lira also was well bid, moving quickly to its exchange-rate arrangement at this stage, though 6 percent upper limit, as higher interest rates, participating in other aspects of the EMS. restrictions on domestic credit expansion, and The launching of the EMS was the culmina­ the market’s awareness of the sizable foreign tion of nearly a year’s intensive efforts by offi­ exchange reserves that the Bank of Italy had cials of the nine participating nations. The new amassed over the previous two years encouraged system was designed to promote monetary sta­ Italian companies to satisfy their financing needs bility by appropriate and timely policy measures through external borrowings. and by a strengthening of existing financing The lira was buoyed, too, by Italy’s currentarrangements, including the creation of ECUs account position, which remained in sizable (European currency units) against central bank surplus even after a rebound in economic activ­ deposits of gold and dollars. In addition, the ity over the winter and early spring. In addition, participating governments agreed to limit fluc­ the Danish krone, as well as the Irish pound, tuations in their currencies against the ECU, a which remained tied to sterling, moved to the weighted basket of all currencies. A nation top of the 2 lA percent band as capital inflows whose currency deviates beyond an agreed limit were attracted by the exceptionally high interest from the ECU is expected either to intervene, rates in Denmark and the United Kingdom. In to apply domestic monetary measures, to adjust fact, when interest-sensitive funds continued to other economic policies, or to explain to the pour into sterling, the Central Bank of Ireland other members why none of these actions would was forced on March 30 to suspend its cur­ be sufficient or adequate to bring its currency rency’s longstanding link with sterling in order back into line. to keep the Irish pound from bursting through Initially, the exchange market had been the top of the joint float. skeptical about the practicality of a joint floating By contrast, the commercial Belgian franc, arrangement, given the persistently wide after having already reached its lower interven­ disparities in the inflation and trade perform­ tion limit against the Danish krone during April, ances of the respective economies. Expectations weakened against the mark. In part, this weak­ of a realignment prior to or just after the EMS ening reflected the deterioration in Belgium’s got under way had generated large movements current-account deficit from an upsurge in im­ of funds between member currencies. But once ports associated with the expansion in Belgian the monetary authorities of the EC snake coun­ economic activity. But in addition, with German tries let it be known that the bilateral central interest rates rising, the mark moved up to the rates then in force between the “snake” cur­ top of the 2lA percent band in the second half rencies would be maintained in the new system, of May. Once the mark hit its upper intervention tensions eased and most speculative positions limit against the Belgian franc, rumors circu­ were unwound before the EMS was finally lated of a possible realignment within the joint launched. float. As a result, the Netherlands guilder moved In this context, interest differentials increas­ down close to the Belgian franc amid signs of ingly dominated exchange-rate movements a widening in the Dutch trade deficit. At the within the EMS as elsewhere. Funds flowed same time, the Danish krone dropped to the heavily out of the German mark, where interest bottom of the band as earlier capital inflows rates were low, into assets of other currencies dried up and were even reversed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 735 As German interest rates rose higher, pres­ $500 million and $900 million equivalent in the sures within the EMS intensified. However, in Japanese and Swiss capital markets respec­ this first test of the durability of the new ar­ tively. rangement, the participating central banks pro­ Exchange-market pessimism toward the Ca­ vided strong support for their currencies through nadian dollar was deeply entrenched, however, sales of dollars and marks both at the interven­ following the extended slide of the exchange tion limits against the mark and within the rate, and this mood was reinforced by uncer­ margins. Moreover, the authorities were quick tainties in advance of the national election to to raise domestic interest rates to maintain in­ be held in 1979. The Canadian currency there­ terest differentials against the mark. In mid- fore remained on offer in the early weeks of June, when the mark started to rise against the the year and reached Can.$1.2019, a 46-year dollar, other EMS currencies had difficulty low, on February 1. Against the U.S. dollar, keeping pace. But once the mark’s advance was this low represented a cumulative decline of checked, pressures within the joint float were 20!/2 percent since November 1976 and an even alleviated. As a result, the weaker EMS curren­ greater fall against currencies of many of its cies moved above their lower intervention other trading partners. points, and tensions eased within the EMS dur­ In early February, the Canadian dollar began ing July. to rally, partly in response to the worldwide scramble for oil and other commodities. Canada with its rich supplies of natural gas, oil, and Canadian D ollar other minerals was considered less vulnerable By early 1979, Canada’s current account re­ than other industrial countries to energy short­ mained in substantial deficit despite the sharp ages. Moreover, in March, Canada’s role as an depreciation of the Canadian dollar over the energy producer was highlighted when the Na­ previous two years. The growth of export earn­ tional Energy Board determined that Canada’s ings was insufficient to offset rising imports and natural gas reserves were sufficient to warrant the increasing burden of Canada’s interest pay­ an increase in exports. Once it was clear that ments on external debt. Long-term capital in­ the spot exchange rate had bottomed out, the flows from abroad were not large enough to adverse leads and lags and short trading posi­ close the payments gap left by the current-ac- tions that had been built up began to be un­ count deficit. Moreover, the persistent decline wound, and favorable short-term interest rates in the Canadian dollar was complicating the task also helped to draw liquid funds into Canadian of winding down inflation, since the foreign dollars. sector had become a principal source of upward The higher yields on government bonds also pressure on Canadian prices and costs. There­ attracted investment funds from abroad, includ­ fore, the authorities had intensified their efforts ing substantial amounts from Europe, Japan, to check the decline of the exchange rate. and the OPEC countries. By late April, the The Bank of Canada had intervened substan­ Canadian dollar had been bid up to as high as tially at times. It had also increased its discount Can.$1.1401, some 5 percent above lows in rate in several stages to 11 lA percent by early early February. During the advance the Bank January and acted to firm up yields in the bond of Canada bought substantial amounts of U.S. market, thereby maintaining favorable interest dollars on days when the Canadian dollar was rate differentials vis-a-vis the United States. To in demand, in accordance with the approach of replenish Canada’s reserves and to supplement the Canadian authorities of intervening to mod­ long-term capital inflows, the government had erate exchange-rate movements in either direc­ previously borrowed large sums in the U.S. and tion. German capital markets and had drawn $2.7 Meanwhile, Canada’s external position had billion under two revolving standby credit facil­ failed to improve. Export growth turned slug­ ities with foreign commercial banks. In addi­ gish, and the possibility of a slowdown in the tion, early this year the government raised about United States worsened prospects for the near Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

736 Federal Reserve Bulletin □ September 1979 term, while imports continued to grow more the release of recent trade figures confirmed than expected. With respect to capital flows, Canada’s disappointing trade performance. the expansion of the domestic economy was Also, the $1.1 billion decline in Canada’s generating sufficient liquidity in the corporate foreign exchange reserves during May sug­ sector to provide for the financing of new in­ gested that there had been more support for the vestment out of internal sources rather than Canadian dollar than the market had realized. depending so heavily on foreign borrowing. At The Canadian dollar dropped off to Can. the same time, there were prospective outflows $1.1780, almost 3l/z percent below the high in in connection with takeovers by Canadian com­ mid-April. panies of U.S.-owned operations. Moreover, in As attention again shifted to world energy assessing the prospects for the Canadian dollar, problems in advance of the OPEC meeting and many market participants viewed the sizable Tokyo summit in late June, market sentiment intervention purchases of U.S. dollars as an toward the Canadian dollar improved some­ indication that the Canadian authorities were what, and reports of several large natural gas resisting an appreciation of the rate in order to discoveries in Canada prompted some bidding maintain the competitiveness of Canadian ex­ up of the Canadian dollar. Therefore the ex­ ports and to build up reserves. change market came into better balance over the These uncertainties reinforced existing rest of June and through July. Following the bearish sentiment in the exchange market, and further advance of interest rates in the United the Canadian dollar came increasingly on offer. States and in European centers, the Bank of Also, with the approach of the May 22 general Canada raised its discount rate 1/2 percentage election, market participants became concerned point to 11% percent on July 23. At the end over the possibility that a weak minority gov­ of July the Canadian dollar was trading at ernment might emerge, which many thought Can.$1.1700, up a net 2Vi percent against the would be unable to deal effectively with Can­ U.S. dollar over the six-month period. After the ada’s economic problems. The spot rate fell large reserve swings earlier in the period, there back to as low as Can.$1.1626 in mid-May, was little change in June and July. At the close with the Bank of Canada intervening to moder­ of the period Canada’s reserves totaled $2.1 ate the decline. billion, down a net $60 million from the level The election provided a near majority to the of January 31, after official borrowings of $1.4 Progressive Conservative Party under Joseph billion and repayments of $2.2 billion under the Clark and helped to clear the air somewhat. But standby facilities with commercial banks. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

737 Industrial Production Released for publication September 14 Production of durable goods materials in Au­ gust was reduced 1.8 percent, as widespread Industrial production declined an estimated 1.1 declines occurred in all components, particu­ percent in August after an increase of 0.1 per­ larly in parts for consumer durable goods and cent in July and no change in June. Output of in basic metals, such as raw steel. Output of durable consumer goods was reduced sharply nondurable goods materials declined moder­ in August for the third successive month, as the ately. Energy materials increased 0.7 percent as production of autos and personal-use trucks and coal production rose. vans was cut further. Business equipment and materials declined 0.8 percent and 1.0 percent respectively. Reductions in output apparently Seasonally adjusted, ratio scale, 1967=100 occurred in most other components of the index as well. At 150.9 percent of the 1967 average, the total index was 1.4 percent below the peak level of March 1979 and 2.0 percent above that of a year earlier. Output of consumer durable goods fell 5.4 percent in August, as auto assemblies were reduced about 15 percent and the production of home goods, such as carpeting, furniture, and appliances, was cut back. Auto assemblies, at a 7.5-million-unit annual rate in August, are tentatively scheduled to increase in September, but are expected1 to remain well below the an­ nual rate of 8.9 million units in the first half of 1979. Output of consumer nondurable goods also declined. Production of business equipment was lower in August than in July because of declines in business vehicles and a strike-related cut in power equipment. Output of construction Federal Reserve indexes, seasonally adjusted. Latest figures: supplies was about unchanged. August. Auto sales and stocks include imports. 1967 = 100 Percentage change from preceding month to Percentage change Industrial production 1979 1979 8/78 to Julyp Aug.e Mar. Apr. May June July Aug. 8/79 Total ............................................. 152.6 150.9 .7 -1.4 1.1 .0 .1 -1.1 2.0 Products, total .......................... 149.8 148.0 .6 -1.6 1.3 -.1 -.2 -1.2 1.0 Final products ...................... 147.2 145.1 1.0 -1.9 1.7 -.1 -.3 -1.4 .6 Consumer goods ............ 150.9 147.7 .9 -2.5 1.9 -.2 -.5 -2.1 -1.9 Durable ........................ 155.8 147.4 1.6 -7.3 5.9 -1.2 -1.7 -5.4 -8.7 Nondurable .................. 148.9 147.9 .6 -.4 .5 .2 -.1 -.7 1.1 Business equipmen t ... 171.6 170.3 1.1 -1.2 1.6 .1 .0 -.8 4.2 Intermediate products ___ 159.4 159.1 -.6 -.4 -.1 -.2 .1 -.2 2.2 Construction supplies... 156.8 156.9 -1.4 -.7 .3 -.1 .4 .1 2.0 Materials ...................................... 156.9 155.3 .7 -1.2 .8 .2 .6 -1.0 3.4 p Preliminary. e Estimated. Note. Indexes are seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

738 Statements to Congress Statement by Paul A. Volcker, Chairman, and the weakness of the dollar appeared to be Board of Governors of the Federal Reserve one factor contributing to the OPEC pricing System, before the Committee on the Budget, decision. Moreover, part of the challenge to U.S. House of Representatives, September 5, economic policy today is to avoid to the extent 1979. possible a kind of “leap-frogging” process whereby rising prices and costs in one sector— I am pleased to be able to participate in these energy is the notable case—set off a whole hearings on the Second Concurrent Budget sequence of adjustments in wages and prices in Resolution for fiscal 1980. I might say that on other sectors, as workers and businesses engage receiving your invitation, I felt it a bit incon­ in a vain attempt to achieve and maintain levels gruous that my first appearance before a com­ of real purchasing power that s imply cannot be mittee of the House as Chairman of the Federal sustained in an economy experiencing higher Reserve Board would occur in the context of real energy costs and virtually no growth in consideration of fiscal, rather than monetary, productivity. policy. But the plain fact is that our nation faces To be sure, the impact of inflation is uneven. serious problems that require interrelated gov­ Those on fixed incomes suffer, while some ernmental action, involving all of the main people who are well positioned—either by instruments of economic policy. In no place are clever design or by good luck—do manage to the interrelationships more important than in the increase their wealth. Even for the fortunate, area of fiscal and monetary policy. I hope that however, such a result is at best precarious, our dialogue this afternoon will help throw light frequently built on heavy indebtedness or highly on the proper role for those policy instruments speculative investments. In an environment of in today’s setting. virulent inflation, such as we find ourselves in Surveys and other evidence indicate that the today, there are no reliable haivens, and so the most pressing economic concern of the Ameri­ discomfort of our citizens is hardly surprising. can people today is the persistent and rapid rise Even these capricious effects on individuals of prices. In my judgment, that concern is not and the related concern reflected in the surveys misplaced. do not capture the insidious and debilitating As you know, the acceleration of inflation effects of inflation and inflationary expectations this year can be traced in considerable part to on our economic performance and growth pros­ so-called exogenous forces—the rise in food pects. It is not entirely a coiincidence that we prices, and much more importantly the decision can observe in these recent inflationary years of the Organization of Petroleum Exporting a declining tendency in the profitability of in­ Countries to raise oil prices in an amount that, vestment. Calculations differ because of the in absolute terms, approaches the increase in accounting problems associated with changing 1973 and 1974. But even in appraising these prices. However, one estimate indicates that the sources of inflationary pressure, I believe it annual after-tax return on corporate net worth, would be wrong to consider them independent measured, as it reasonably should be, against of more general inflationary pressures in the the replacement cost of inventories and fixed United States and elsewhere. For instance, the assets, has averaged 3.8 percent during the desire of oil suppliers to recover losses in real 1970s, a period characterized by rapid inflation, income implied by rising prices of other goods as compared with 6.6 percent in the 1960s. At Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 739 the same time, the uncertainty about future aggravate inflationary forces. Policies of mone­ prospects associated with high and varying tary and fiscal restraint were directed toward that levels of inflation tends to concentrate the new aim. Now it is apparent that the drain of pur­ investment that does take place in relatively chasing power implicit in the sudden runup in short, quick payout projects. Or firms may sim­ our oil import bill and in energy prices gener­ ply delay investment commitments until the ally—combined with the actual and feared pressures of demand on capacity are unambig­ shortages of gasoline—has led to a contraction uously compelling—with the result that capac­ of real incomes and final demands. During the ity pressures can become strong even before the second quarter, real gross national product fell, labor force is fully utilized. primarily reflecting a drop in consumer spend­ In other areas, inflationary expectations are ing, and further declines in some areas of busi­ reflected in a diversion of energies into essen­ ness activity continued into the summer. With tially speculative activities—ranging from the sales falling, businesses have experienced some “froth” of investing in art objects to the con­ involuntary accumulation of inventories—most sidered purchase, at the expense of heavy in­ strikingly in the auto industry, but to a lesser debtedness, of larger or second homes as an degree in other sectors as well. inflation hedge. When returns from these activi­ Our reading of the most recent economic ties are often judged greater than those from indicators suggests that a correction of these usual patterns of work and saving, normal in­ inventory imbalances is well under way. Orders centives are plainly distorted in a manner in­ have been reduced, production schedules have consistent with orderly growth. been cut back, and hiring has slowed. These Another obvious result of our distressingly adjustments need not by themselves set in mo­ poor price performance has been the recurrent tion a deep or prolonged contraction in activity. weakness of the dollar in foreign exchange Indeed, while the inflationary process itself has markets. During much of 1978, the cumulating introduced important new uncertainties, some of decline in the value of the dollar abroad added the economic and financial dislocations and im­ an important further element of uncertainty and balances that usually have presaged severe cy­ instability to the economies of the United States clical declines have been avoided. To be sure, and other countries. Following the vigorous the transfer of income to foreign oil producers program introduced in November of last year, will continue to exert a depressing effect on the dollar rose somewhat against other major aggregate demand over the near term. But the currencies, helped by an improvement in our position taken in the Board’s midyear report to current account and by indications of a relative the Congress—that the economy should grow strengthening of economic expansion abroad. moderately in 1980—still seems reasonable. But the value of the dollar internationally began In the present circumstance, we need to be to be questioned again as the trend of U.S. especially cautious in interpreting any business inflation worsened noticeably and as many of forecast; there are vulnerabilities in the present our trading partners acted forcefully to retard situation on the downside, and there is also the inflationary tendencies in their own economies. possibility that the downturn will prove shorter Although the situation in exchange markets ap­ and shallower than many now expect. The pears to have stabilized recently, that stability shaping of policy must appreciate and take ac­ ultimately rests on our ability to cope with count of the risks on both sides. For instance, inflation. the traditional response throughout the postwar We need to deal with inflation and a vulnera­ period to any prospect of declining production ble dollar in the context of the slowing in do­ and rising unemployment has been a sharp shift mestic economic activity that has developed in in monetary and fiscal policy toward expansion recent months. A moderation in the growth of and the enhancement of aggregate demand— aggregate demand was welcome this year—even even at the risk of adding to inflation. A decade essential—if the economy was to avoid the or two ago, with prices historically fairly stable, kind of pressures on capacity that could only that risk was discounted. But now we have to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

740 Federal Reserve Bulletin □ September 1979 face squarely the adverse consequences of pre­ dangers would extend beyond the domestic mature or unduly large moves to stimulate the economy. Because of the dollar’s role as an economy. In exacerbating the already serious international store of value and medium of ex­ problems of inflation and the dollar, such moves change—a role we cannot simply shrug off or would also feed back on the underlying prob­ dismiss consistent with our own interests and lems of investment, productivity, and growth. those of our trading partners—its instability Some observers have suggested that this situ­ could pose a major threat to the world system ation presents an intractable dilemma for poli­ of finance and commerce and even to our politi­ cymakers: the need to sacrifice one set of eco­ cal leadership. nomic goals in the pursuit of another. But this Obviously, then, our current economic diffi­ dilemma seems to me more apparent than real. culties are tightly interwoven. They will not be Even in the relatively short run, premature resolved unless we deal convincingly with in­ stimulative actions could well prove ineffective flation. Progress won’t come easily or suddenly; rather quickly, and even counterproductive, as among other things the adjustment in prices of their force is dissipated in higher prices rather energy and petroleum-based products is far from than real growth—in more uncertainty, rather complete. But what we can do—what we must than less. Ultimately the perceived “trade off” do—is begin the process and prevent the inevi­ between unemployment and inflation would table rise in real energy prices from fanning out only be worsened—the lesson of the 1970s, not into an acceleration of general inflation. just in the United States but elsewhere. Monetary and fiscal policies are not the only I think we would all agree that, over the tools we should bring to bear. But both mone­ years, labor and product markets have devel­ tary discipline and fiscal discipline—policies oped an increasing sensitivity to inflation. Ex­ that are seen to be disciplined—are absolutely pectations about inflation are an important factor basic to restoring and maintaining a greater in wage bargaining, in price setting for many sense of stability. goods and services, and certainly in interest For its part, the Federal Reserve intends to rates. The plain danger is that actions rightly continue its efforts to restrain the growth of interpreted as doing little or nothing toward money and credit, a growth that in recent dealing with our underlying persistent problems months has been excessive in terms of our own of productivity and investment, but all too likely 1979 objectives—objectives that have only re­ to produce more inflation, will in fact have only cently been reviewed by our congressional a small and short-lived expansionary effect, oversight committees. Those efforts, combined regardless of their intent. Our ability to avoid with heavy credit demands, have had the visible future instability in employment, or to deal with consequence of some increases in short-term chronic unemployment in urban areas and interest rates as the availability of reserves has among our young, would be damaged, not en­ been limited through open market operations. hanced. But I would also note that the impact on Similar behavior dominates the foreign ex­ longer-term securities markets, generally con­ change markets: exchange rates usually respond sidered more important for business decisions, quickly—and sometimes excessively—when has been small. We seem to have here an incoming economic data or news about policy illustration of the more general proposition that actions alter the outlook for inflation. Adverse actions to deal with the sources of inflationary repercussions on the dollar generate in turn new pressure should over time have a constructive uncertainty and inflationary pressures, partly influence in restoring more stable and healthier because of the direct effects on costs of imports financial and economic conditions. and partly through the reduced competitive re­ I frankly do not know whether needed re­ straints on prices of domestically produced straint on monetary growth will be reflected in goods. We have tasted too much of the vicious further increases in short-term rates; that will circle of domestic inflation and external depre­ depend on the course of economic activity, ciation to want to see that pattern repeated. The credit demand, and other factors. But I do know Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 741 that credit flows at present are generally well As I noted earlier, a broad range of uncer­ maintained, and no sustained decline in nominal tainty must be assigned to any forecast of eco­ interest rates can reasonably be expected in the nomic events, particularly in view of the obvi­ absence of a discernible slowing in the underly­ ous vulnerability of the economy to a variety ing trend of inflation. of exogenous forces. In that connection, we Meanwhile, the moves in the direction of cannot entirely exclude the possibility of reces­ fiscal restraint by the Congress and the adminis­ sionary tendencies cumulating and intensifying, tration have been a key ingredient in setting the even if it would be wrong to have current policy stage for a successful anti-inflationary effort. decisions dominated by that single possibility. Substantial progress has been made in the past There is much more danger—in terms of aggra­ year toward reduction of the federal budget vating the inflationary momentum—in prema­ deficit. Potentially more significant, in terms of turely anticipating the most unfavorable the longer-range outlook, is the sense of greater hypothesis than in dealing in the most orderly control on spending that has been achieved by and effective way we can with the clear and the efforts of this committee and others. present fact of inflation. Of course, the deficit has remained high, even Should economic trends develop in a clearly after years of business expansion, and reduc­ unfavorable direction and action come to be tions in spending relative to GNP have been needed to deal with sharp declines in output and modest so far. Moreover, with the economy employment, it would be crucially important likely to be sluggish in the months ahead, the that those actions be integrated with the longeroperation of automatic stabilizers could lead to term needs of the economy. Specifically, any a temporary widening of the gap between ex­ fiscal actions should be designed to minimize penditures and receipts. That in itself need not any inflationary impact in the short run while be disturbing—if budgetary decisions do not helping to deal positively with some of the seem to throw us off the track of restoring sources of inflationary pressures in the long run. budgetary balance and restraining expenditures Cost-cutting and incentive-building tax reduc­ as the economy picks up. However, legitimate tions broadly meet this criterion; few spending doubts would be raised by sizable new spending programs do. We need to give much more programs not matched by savings elsewhere; weight than in the past to the need for both indeed, such an approach would directly chal­ tangible capital formation and research and de­ lenge our ability to eliminate future deficits and velopment, for these activities underlie produc­ could only add to skepticism over the commit­ tivity growth. ment to contain inflation. Similar doubts would I need not emphasize that even well-designed be aroused by a premature commitment to tax tax reduction—reduction that could have im­ reduction—welcome as such reductions would portant payoffs over time in improved produc­ be over a period of time. I believe that we tivity and reduced cost pressures—has a cost should be particularly wary of tax reductions in terms of transitional deficits and increased that might have a transitory effect in adding to competition in the credit markets. Tax reduc­ the purchasing power of consumers but that tion, however desirable over time, needs to be would accomplish little or nothing toward stim­ earned by a sustained commitment to spending ulating investment, cutting costs, or improv­ restraint. Prematurely timed or poorly struc­ ing work incentives. For these reasons, the tured, the potential gains could be swamped by members of the Federal Reserve Board believe adverse effects in an inflation-prone economy. that both the administration’s budget proposals The monetary and budgetary policies that I and the Second Concurrent Budget Resolution have discussed seem to us in the Federal Re­ recommended by the Senate Budget Committee serve to be essential if our commitment to represent a broadly appropriate and desirable controlling inflation and stabilizing the dollar is commitment to hold the line on spending, to to have meaning. They would lay the ground­ avoid premature tax cuts, and to contain the size work for changing expectations about inflation of the deficit. in the short run and for renewed growth and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

742 Federal Reserve Bulletin □ September 1979 stability over a longer period of time. I would Public concern is high—but out of that concern emphasize that other efforts, in the areas of grows awareness of the pressing need to solve wage-price policy, regulatory reform, and the our inflationary problem. Therein lies our op­ encouragement of market competition, are im­ portunity. I would suggest that the American portant as well. We also must deal with our people are coming to understand that there are energy situation, one that today leaves us vul­ no easy answers, but that failure to act consist­ nerable to foreign sources of supply. But none ently and forcefully can only lead to worse of these policies, important as they are, can results, both for the vitality of our economy and substitute for commitments to fiscal prudence for our world leadership. Your budget making and restraint on the money supply. is quite clearly a key element in the process. Statement by Nancy H. Teeters, Member, to demand deposits to extract estimates of the Board of Governors of the Federal Reserve size of underground economic activity. Accord­ System, before the Subcommittee on Oversight ing to this approach, movements in this ratio of the Committee on Ways and Means, U.S. from its value in the years 1937-41 have been House of Representatives, September 10, 1979. interpreted as reflecting changes in the under­ ground economy exclusively. However, there I appreciate the opportunity to appear before this are significant analytical and measurement subcommittee to discuss the recent study by the problems in drawing inferences about under­ Internal Revenue Service (IRS) on unreported ground activity on the basis of movements in income. In view of the technical issues involved the ratio of currency to demand deposits. in this study, I have asked some staff members First of all, even though the Federal Reserve’s from the Federal Reserve System to be present data on currency and demand deposits are highly today. Mr. Chairman, I would like to introduce accurate and measured on a consistent basis over to you and the other members of the subcom­ time, there are no reliable estimates on what por­ mittee, Mr. Jared Enzler, Mr. Richard Porter, tion of the U.S. currency in circulation is held Mr. James Stull, and Mr. William Wallace from in the United States and what portion is held the Board staff, and Mr. Robert Laurent from abroad. U.S. currency balances may be held the Federal Reserve Bank of Chicago, who will abroad as a store of wealth, and in a few answer any of your technical questions. countries, such balances evidently serve even Activities giving rise to unreported income, as a major medium of exchange. Therefore, whether earned from legal or illegal sources, fluctuations in the currency ratio may reflect have been called the underground economy. The changes in economic and political conditions scope and nature of the underground economy abroad. have an important bearing on U.S. tax policy Apart from variations resulting from currency and also may be relevant to the understanding held abroad, movements in the currency-deposit of developments in the economy and financial ratio also reflect domestic aboveground eco­ markets. For these reasons, the Board welcomes nomic activity. In fact, as the IRS study noted, any efforts that may be made to measure the research by the Federal Reserve staff indicates extent of the underground economy. that both the trend and cyclical movements in Underground activity by its very nature is the currency-deposit ratio over most of the difficult to measure directly. As a result, econo­ 1960s and 1970s can be explained adequately mists have resorted to various indirect methods by movements in real income and consumption of estimation. One much-discussed method that expenditures, prices, and interest rates—vari­ is evaluated in the IRS study—and one that I ables that are recognized as important deter­ understand you would like us to comment minants of currency and deposit holdings. upon—uses the ratio of currency in circulation Since mid-1974, however, the currency- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 743 deposit ratio has moved up more sharply than exist or that currency is not used more exten­ can be accounted for by movements in those de­ sively as a medium of exchange for underground terminants. The increase in the ratio appears to transactions. The point is that other factors be a result of a downward shift in the demand affect the currency-deposit ratio, and they must for demand deposits and not an upward shift be taken into account when separating above­ in the demand for currency. Currency holdings ground currency holdings from underground continue to be predicted accurately by move­ currency holdings. ments in real consumption expenditures, prices, Moreover, even if this separation could be and interest rates. The weakness in growth of accomplished with precision, it is by no means demand deposits, on the other hand, appears to clear what magnitude of underground GNP is be associated with a variety of new develop­ associated with underground currency holdings. ments in the money market. For households, Presumably, underground currency holders are innovations such as negotiable order of with­ somewhat restricted from exchanging currency drawal accounts, automatic transfer service ac­ for demand deposits or for interest-bearing counts, and money market mutual funds have assets. Therefore, it is quite possible that the become increasingly important substitutes for income velocity of underground currency is less demand deposits. For business firms, sluggish than that of aboveground currency, when there deposit growth has reflected the growing use of are no restrictions on such exchanges. cash management techniques and deposit sub­ Finally, whatever the advantages and prob­ stitutes such as security repurchase agreements. lems with the currency-based approach to esti­ Thus, there are plausible explanations of the mating the underground activity, it is obviously rise since World War II in the ratio of currency useful to try to estimate underground activity to deposits, which do not rely on the growth directly, as the IRS has done in its study. The of an underground economy. I do not mean to approach taken by the IRS appears to be helpful imply that the underground economy does not and merits careful consideration. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

744 Announcements Change in Discount Rate rangements, the Federal Reserve Bank of New York acts on behalf of the Federal Reserve The Board of Governors announced an increase System under the direction of the Federal Open in the discount rate from 10 percent to 10 V2 Market Committee. percent, effective August 17, 1979. The Federal Reserve’s reciprocal currency Action was taken against the background of arrangements are now as follows (in millions the continuing strong inflationary forces that are of dollars): evident in the economy and in recognition of the relatively rapid rate of expansion in the Austrian National Bank ..........................250 monetary aggregates. National Bank of Belgium .................1,000 In making the change, the Board acted on Bank of Canada .....................................2,000 National Bank of Denmark ..................250 requests from the directors of the Federal Re­ Bank of England ...................................3,000 serve Banks of New York, Philadelphia, Cleve­ Bank of France .......................................2,000 land, Richmond, St. Louis, Minneapolis, and German Federal Bank ..........................6,000 Kansas City. The discount rate is the interest Bank of Italy ..........................................3,000 rate that member banks are charged when they Bank of Japan .........................................5,000 borrow from their district Federal Reserve Bank of Mexico .........................................700 Banks. Netherlands Bank .....................................500 The Federal Reserve Board subsequently ap­ Bank of Norway .......................................250 proved actions by the directors of the Federal Bank of Sweden .........................................300 Reserve Banks of Boston, Atlanta, Chicago, Swiss National Bank ............................4,000 Dallas, and San Francisco to increase the dis­ Bank for International Settlements count rate at those banks from 10 to IOV2 Swiss francs/dollars ..............................600 Other European currencies/dollars 1,250 percent, effective August 20. Total ...............................................30,100 Increase in Reciprocal C urrency A rrangements Changes in Federal Open M arket Committee Staff The Federal Reserve announced on August 17, 1979, that its reciprocal currency (swap) ar­ The Federal Open Market Committee has an­ rangement with the Bank of Mexico had been nounced the following promotions, effective increased from $360 million to $700 million. August 17, 1979. The increase enlarges the System’s swap net­ Alan R. Holmes, who has been Manager of work with 14 central banks and the Bank for the System Open Market Account, has been International Settlements to $30.1 billion. named Adviser for Market Operations to the A swap arrangement is a renewable, short­ Committee. term facility under which a central bank agrees Peter D. Sternlight, who has been Deputy to exchange on request its own currency for the Manager for Domestic Operations, has been currency of the other party up to a specified named Manager for Domestic Operations, Sys­ amount over a limited period of time. tem Open Market Account. The Federal Reserve swap network was ini­ Scott E. Pardee, who has been Deputy Man­ tiated in 1962. In all reciprocal currency ar­ ager for Foreign Operations, has been named Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

745 Manager for Foreign Operations, System Open The four pamphlets, which describe the or­ Market Account. ganization and functions of the major policy­ The Committee is the System’s chief policy­ making units of the nation’s central banking making body for monetary policy. It is com­ system, are: “The Board of Governors of the prised of the seven members of the Board of Federal Reserve System,” “The Federal Open Governors and five of the twelve presidents of Market Committee,” “Federal Reserve the Federal Reserve Banks. The Committee’s Banks,” and “Federal Reserve Bank Board of directives are put into effect through operations Directors.” in the System Open Market Account, carried Copies of the pamphlets may be obtained out on behalf of the System as a whole by the singly or in limited quantity free of charge from Federal Reserve Bank of New York. Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Changes in B oard Staff The Board of Governors has announced the following official staff promotions and appoint­ System M embership: ment. A dmission of State Banks Robert E. Mannion, Associate General Counsel, Legal Division, has been promoted to The following banks were admitted to member­ Deputy General Counsel, effective September ship in the Federal Reserve System during the 3, 1979. period August 11 through September 10, 1979: Edward T. Mulrenin, Assistant Controller, Kansas Office of the Controller, has been promoted to Lenexa ...................Country Hill State Bank Assistant Staff Director, Office of Staff Director Oklahoma for Management, also effective September 3. Mustang ............Mustang Community Bank William N. McDonough has been appointed Oregon temporary Assistant Secretary, Office of the Springfield ............Emerald Empire Banking Secretary, effective October 1. Mr. McDonough Company is Assistant General Counsel and Assistant Sec­ Virginia retary of the Federal Reserve Bank of Boston. Fisherville ...................Jefferson Bank of the Mr. McDonough, who joined the staff of the Valley Federal Reserve Bank of Boston in 1969, holds Mechanicsville .. Peoples Bank of Hanover an LL.B. and an LL.M. from Boston Univer­ County sity. The Board has also announced the resignation of Albert R. Hamilton, Director, Division of M ailing List for Staff Studies Federal Reserve Bank Examinations and Bud­ gets, effective September 1, 1979. The Board of Governors has established a mail­ ing list for all papers in the Staff Studies series. Requests to be added to the mailing list may New Educational Pamphlets be sent to Publications Services, Division of A series of educational pamphlets on the struc­ Support Services, Board of Governors of the ture of the Federal Reserve System are now Federal Reserve System, Washington, D.C. available for public distribution. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

747 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON JULY 11, 1979 Domestic Policy Directive The information reviewed at this meeting suggested that real output of goods and services had declined somewhat in the second quarter when a slackening in demands was intensified by reduced supplies of motor fuels and higher energy prices; in the first quarter the expansion in economic activity had slowed sharply, to an annual rate of 0.8 percent. The rise in average prices, as measured by the fixed-weight price index for gross domestic business product, appeared to have accelerated somewhat further in the second quarter, from an annual rate of about 10 percent in the first quarter and around 8 % percent during 1978. Staff projections suggested a further contraction in economic activity over the next few quarters and an upturn beginning in 1980. Over the year ahead the increase in average prices was projected to be moderately below its pace in the first half of 1979. The rate of unemployment was expected to rise substantially. In June the dollar value of retail sales fell for the third consecutive month, and in real terms such sales were estimated to be about 6V2 percent below their December 1978 peak. Unit sales of new automo­ biles declined further in June despite continued strength in sales of small domestic and foreign models. In April and May total private housing starts were at an average annual rate of about 1% million units, up somewhat from the first quarter, when starts were depressed by unusually adverse weather conditions, but well below total starts in both 1977 and 1978. Com­ bined sales of new and existing single-family homes in April and May were also above their first-quarter pace, but substantially below the peak rate in the fourth quarter of 1978. The expansion in total nonfarm payroll employment slowed consid­ erably during the second quarter to a pace well below that in the previous six months. Payroll employment in manufacturing declined in each month of the quarter, and the length of the average workweek Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

748 Federal Reserve Bulletin □ September 1979 fell appreciably from its relatively high first-quarter level. Never­ theless, the unemployment rate edged down in June to 5.6 percent, its lowest level since August 1974. The index of industrial production rose 1.3 percent in May. The increase about offset a drop in April that was induced largely by a work stoppage in the trucking industry. The expansion in industrial production over the first five months of the year was less than 1 percent, compared with an increase of about 4 percent in the second half of 1978. The latest survey of business plans taken by the Department of Commerce in late April and May suggested that spending for plant and equipment would expand 12.7 percent in 1979 as a whole; the survey taken three months earlier had suggested an increase of 11.3 percent. The new survey, like the earlier one, implied considerably more growth in the second half of the year than in the first half. Manufacturers’ new orders for nondefense capital goods picked up somewhat in May after having declined substantially in April. The machinery component of such orders—generally a good indicator of underlying trends in demand for business equipment—was up only slightly in May following a very large drop in April. Contract awards for commercial and industrial buildings—measured in terms of floor space—declined in May for the third consecutive month to a level well below the February peak. Producer prices of finished goods and of materials rose much more rapidly in the first half of 1979 than during 1978. The increase in these indexes moderated in the second quarter, however, when prices of food products declined after having advanced at exceptional rates earlier in the year. Increases in prices of energy items were very rapid, especially in the second quarter. The rise in the consumer price index accelerated to an annual rate of 13!/2 percent over the first five months of 1979 compared with a rise of 9 percent in 1978. Price increases were widespread but were especially pronounced among energy-related items. Homeownership costs and food prices also increased sharply, although the rise in foods moderated in May. The index of average hourly earnings of private nonfarm production workers rose at an annual rate of about 5V2 percent during the second quarter, down from increases averaging about SV2 percent during the prior two quarters. The moderation was concentrated in the trade and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of FOMC 749 service sectors. Recent collective bargaining agreements in two major industries provided for large increases in worker compensation. In foreign exchange markets the dollar came under downward pressure in mid-June following several months of relative strength; since then its value against major foreign currencies had fallen about 3 percent and central banks had made large purchases of dollars. The dollar’s weakness appeared to have been related to expectations of easier monetary conditions in the United States at a time when money market conditions were being tightened in key foreign countries and to concerns about the effects of sharply rising oil prices. The U.S. trade deficit for April and May had widened somewhat from the first-quarter rate, reflecting a sizable increase in the value of oil and other imports and little change in the value of exports. Total credit outstanding at U.S. commercial banks continued to expand rapidly in May and June, but the rate of growth for the two months combined was down somewhat from the average pace in earlier months of the year. Increases in bank loans during May and June were concentrated in the business and real estate categories. Commer­ cial paper issued by nonfinancial firms rose considerably further over the two months. The narrowly defined money supply, M-l, increased sharply in June and the broader measures of money, M-2 and M-3, also grew rapidly; expansion in all three measures, especially M-l, had slowed markedly in May following a surge in April. In June, inflows to commercial banks of interest-bearing deposits included in M-2 were large, as money market certificates expanded rapidly for the third consecutive month and savings deposits increased for the first time since September 1978. At nonbank thrift institutions, net inflows of funds were esti­ mated to have picked up somewhat in June from a sharply reduced pace in May, even though net issuance of money market certificates by these institutions weakened further. On a quarterly average basis, M-l grew at an annual rate of about IVi percent in the second quarter after a decline at a rate of about 2 percent in the first quarter; M-2 and M-3 grew at rates of about 8V2 percent and 13A percent respectively in the second quarter, com­ pared with rates of about 1 % percent and 4% percent in the previous quarter. In the second quarter, banks increased considerably further their reliance on nondeposit sources such as repurchase agreements and Eurodollars to supplement their loanable funds. At the same time, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

750 Federal Reserve Bulletin □ September 1979 they reduced the outstanding volume of large-denomination time deposits by more than the increase in funds from nondeposit sources. At its meeting on May 22 the Committee had decided on ranges of tolerance for the annual rates of growth in M-l and M-2 during the May-June period of 0 to 5 percent and 4 to 8V2 percent respectively. The Committee had agreed that early in the coming intermeeting period, the Manager of the System Open Market Account should continue to direct operations toward maintaining the weekly average federal funds rate at around 10lA percent. Subsequently, if the twomonth growth rates of M-l and M-2, given approximately equal weight, appeared to be close to or beyond the upper or lower limits of the indicated ranges, the objective for the funds rate was to be raised or lowered in an orderly fashion within a range of 93A to IOV2 percent. Subsequent to the meeting, incoming data on the monetary aggre­ gates led to progressively higher projections of growth in M-l and M-2 over the May-June period. By mid-June the projections suggested growth rates that were above the ranges specified by the Committee. The behavior of the aggregates would have called for an increase in the objective for the federal funds rate toward the IOV2 percent upper limit of its specified range. However, on June 15 the Committee modified the domestic policy directive adopted on May 22 and called for open market operations directed at maintaining the weekly average federal funds rate at about 10lA percent. Federal funds traded somewhat above the Committee’s objective in late June and early July, in response to pressures associated with unusual churning in the money market around the midyear bank statement date and the July 4 holiday. Most interest rates other than the federal funds rate fell substantially on balance during the intermeeting period. The declines appeared to be in response to the growing evidence that economic activity had been weakening. Declines in Treasury bill rates were accentuated by large cash redemptions of maturing bills and by the resumption of sizable net purchases by foreign central banks as the dollar came under pressure in foreign exchange markets. During June most banks reduced their loan rate to prime business borrowers from 11% to IIV2 percent. Despite relatively sizable declines in most interest rates, including bond yields, rates on conventional home mortgages in the primary market rose further during the intermeeting period. Thrift and other institutions continued to tighten their lending terms on residential mortgages in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of FOMC 751 apparent response to relatively strong demands for credit and to uncertainty about prospective inflows of savings. At this meeting, in conjunction with its discussion of the economic situation and outlook, the Committee reviewed its longer-run ranges for growth of the monetary aggregates. The Full Employment and Balanced Growth Act of 1978 (the Humphrey-Hawkins Act) requires the Board of Governors to transmit to the Congress by February 20 and July 20 of each year written reports concerning the objectives and plans of the Board and the Committee with respect to the ranges of growth or diminution of the monetary and credit aggregates for the calendar year during which the report is transmitted and, in the case of the July report, the objectives and plans with respect to ranges for the following calendar year as well. Accordingly, the Committee reviewed the ranges for the period from the fourth quarter of 1978 to the fourth quarter of 1979 that it had established at its meeting on February 6, 1979, and for the first time considered preliminary ranges for the period from the fourth quarter of 1979 to the fourth quarter of 1980.1 At its meeting on February 6 the Committee had specified ranges of IV2 to 4V2 percent for M-l, 5 to 8 percent for M-2, and 6 to 9 percent for M-3. The associated range for commercial bank credit was IV2 to IOV2 percent. The range for M-l had been established on the assumption that shifts in funds from demand deposits to savings accounts with automatic transfer facilities and to NOW accounts would dampen growth of measured M-l by about 3 percentage points. With respect to the economic situation and outlook, no member of the Committee expressed disagreement with the staff appraisal that real gross national product had declined somewhat in the second quarter and that further declines were likely for the remaining two quarters of the year. The suggestion was made that the recession was most likely to be mild and short-lived. However, it could prove to be more severe than currently expected because the recent increases in prices of energy items and inflation generally were reducing dispos­ able income and eroding the financial position of the household sector. 1. The act also requires that the written reports set forth a review and analysis of recent developments affecting economic trends in the nation and the relationship of the plans and objectives for the aggregates to the short-term goals set forth in the most recent Economic Report of the President and to any short-term goals approved by the Congress. The Board’s second report under the act was transmitted to the Congress on July 17, 1979. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

752 Federal Reserve Bulletin □ September 1979 Another reason advanced for thinking that the recession could be more severe was the possibility that the downturn in economic activity would become widespread among industrial countries. Members continued to express great concern about inflation. It was suggested that the unexpectedly large increases in OPEC oil prices in late June had seriously harmed the government’s anti-inflation efforts. Thus, winding down the rate of increase in prices might well take considerably longer than had been thought earlier and would be more costly in terms of its impact on output, employment, and real income. In that connection it was noted that time would be required to implement the new policies with respect to energy that the President was expected to announce within a few days. On the other hand, the public’s perception of the urgency of the problem had increased, leading to a growing awareness that in the short run some loss of real income would have to be accepted for the sake of reestablishing growth in real income over the longer term. In reviewing ranges for the monetary aggregates for the current year and contemplating ranges for 1980, the Committee continued to face unusual uncertainties concerning the forces affecting monetary growth. A staff analysis had suggested that shifts in funds from demand deposits to savings accounts with automatic transfer services and to NOW accounts had retarded the annual rate of growth of M-l by the assumed amount of about 3 percentage points in the first quarter of 1979 but by only about iVi percentage points in the second quarter; thus, from the fourth quarter of 1978 to the second quarter of 1979, the dampening effects of ATS and NOW accounts on growth of M-l averaged about 2lA percentage points. The outlook for the effects of these accounts on growth of M-l was clouded, moreover, by a federal court decision handed down in April barring ATS and certain other payments services as of January 1, 1980, and by the possibility of further judicial review and of legislation concerning such services. The demand for M-l was unusually weak in the first quarter of 1979, even after allowance for the effects of the growth of ATS and NOW accounts, but money demand appeared to strengthen in the second quarter. Still, at an annual rate of about 23A percent from the fourth quarter of 1978 to the second quarter of 1979, growth of M-l was just below the midpoint of the longer-run range established by the Committee in February, as the high level of interest rates reached in late 1978 and the continued tautness of markets in 1979 prompted Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of FOMC 753 the public to economize on non-interest-earning holdings of cash. The high level of market interest rates also induced the public to divert funds from deposits subject to fixed ceiling rates into market instru­ ments, thereby further retarding growth of M-2 and M-3 over the first two quarters of 1979; their annual rates of growth, at 5% percent and 6V4 percent respectively, were just above the lower limits of their ranges. As a result of these developments, growth of all three monetary aggregates, which had moderated over the four quarters of 1978 from the pace of the preceding four quarters, slowed appreciably further in the first half of 1979. However, growth of commercial bank credit in the first half of 1979, at a rate of IIV2 percent, was slightly above its range and little different from the year before. In the Committee’s discussion, most members favored ranges for both 1979 and 1980 that would represent essentially a continuation of the policy posture adopted in early February. One member advo­ cated a more restrictive policy for the balance of the current year. Some sentiment was expressed for narrowing the ranges for the period from the fourth quarter of 1978 to the fourth quarter of 1979, because passage of half of the year had reduced uncertainty about rates of growth over the whole period. It was suggested that the ranges for 1980 might well be slightly lower than those for 1979, in recognition of the Committee’s long­ standing objective to move gradually toward rates of monetary expan­ sion consistent with general price stability. The suggestion also was made to adopt slightly higher ranges for 1980 than for 1979, in view of the decline in activity that had just begun. It was observed, however, that any increase in the ranges for 1980 would not now be timely and that the Committee would reconsider the 1980 ranges next Febru­ ary in the light of the information then available about economic conditions. In any event, it was recognized that the current reexami­ nation of the definitions of the monetary aggregates, which was being undertaken in light of the major institutional changes in the payments system, might in the near future lead to a new and improved set of money stock measures. At the conclusion of the discussion, the Committee decided to retain the ranges for 1979 that it had established in February. Thus, for the period from the fourth quarter of 1978 to the fourth quarter of 1979, the Committee reaffirmed ranges of IV2 to 4Vi percent for M-l, 5 to 8 percent for M-2, and 6 to 9 percent for M-3. The associated Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

754 Federal Reserve Bulletin □ September 1979 range for commercial bank credit remained IV2 to IOV2 percent. Having established the range for M-l in February on the assumption that expansion of ATS and NOW accounts would dampen growth by about 3 percentage points over the year, the Committee also agreed that actual growth in M-l might vary in relation to its range to the extent of any deviation from that estimate. The Committee anticipated that for the period from the fourth quarter of 1979 to the fourth quarter of 1980, growth might be within the same ranges, depending upon emerging economic conditions and appropriate adjustments that might be required by legislation or judicial developments affecting interestbearing transactions accounts. It was understood that the longer-run ranges, as well as the particular aggregates for which ranges were specified, would be reconsidered at any time that conditions might warrant. It was also understood that short-run factors might cause growth rates from one month to the next to fall outside the ranges anticipated for the year. The Committee adopted the following ranges for rates of growth in monetary aggregates for the period from the fourth quarter of 1978 to the fourth quarter of 1979: M-l, IV2 to 4V2 percent; M-2, 5 to 8 percent; and M-3, 6 to 9 percent. Actual growth in M-l might vary in relation to its range to the extent that the dampening effect of expansion in ATS and NOW accounts deviates from an estimate of about 3 percentage points. The associated range for bank credit is 7V2 to 10y2 percent. Votes for this action: Messrs. Miller, Volcker, Balles, Black, Coldwell, Kimbrel, Mayo, Partee, Rice, and Mrs. Teeters. Vote against this action: Mr. Wallich. Mr. Wallich dissented from this action because, with the Commit­ tee’s objective of slowing the rate of inflation in mind, he believed that the range adopted for M-l, after allowance for the effects of ATS and NOW accounts, was too high. In his opinion, growth of the money stock, after allowance for the expansion in repurchase agreements and Eurodollars as well as for the effects of ATS and NOW accounts, had been considerably more rapid than indicated by the behavior of M-l. The Committee agreed that for the period from the fourth quarter of 1979 to the fourth quarter of 1980, growth of M-l, M-2, and M-3, and of commercial bank credit, might be within the ranges adopted for 1979, depending upon emerging economic conditions and appropriate adjust­ ments that may be required by legislation or judicial developments affecting interest-bearing transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of FOMC 755 Votes for this action: Messrs. Miller, Volcker, Balles, Black, Coldwell, Kimbrel, Mayo, Partee, Rice, Mrs. Teeters, and Mr. Wallich. Votes against this action: None. In the discussion of policy for the period immediately ahead, members of the Committee in general favored directing open market operations initially toward maintaining the money market conditions currently prevailing, as indicated by a federal funds rate of about IOV4 percent, on the expectation that over the July-August period growth of M-l and M-2 would be both moderate and consistent with their longer-run ranges. Some sentiment was expressed for a near-term reduction in the federal funds rate because of the downturn in economic activity, but it was agreed that current conditions in foreign exchange markets militated against a prompt reduction. With respect to operations later in the period before the next regular meeting, most members thought that the objective for the federal funds rate should be moved up or down within its specified range only if growth of M-l and M-2 appeared to be close to or beyond the upper or lower limits of their ranges. Most members favored specification of an intermeeting range of 93A to IOV2 percent for the federal funds rate, the same range that had been specified at the three preceding meetings. A range of 10 to 103A percent was also suggested, coupled with an instruction to the Manager to move the objective for the funds rate up within that range should the dollar come under severe down­ ward pressure in foreign exchange markets. It was recognized, how­ ever, that the Committee could consult during the intermeeting period to consider giving additional instructions to the Desk in response to any new developments, including reactions to the President’s forth­ coming address on energy policy as well as to the behavior of the foreign exchange markets. The suggestion was made that, in assessing the implications of the behavior of the aggregates for the Desk’s objective for the federal funds rate, the Manager be instructed to give more weight to M-2, rather than approximately equal weight to M-l and M-2, because of uncertainties about the interpretation of M-l. It was noted, however, that the course of M-2 was subject to considerable uncertainty because the six-month Treasury bill rate was hovering around the 9 percent trigger point that affects the relationship between the maximum rates that commercial banks and savings and loan associations may pay on money market certificates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

756 Federal Reserve Bulletin □ September 1979 At the conclusion of the discussion the Committee decided that ranges of tolerance for the annual rates of growth in M-l and M-2 over the July-August period should be 2Vfe to &h percent and 6V2 to IOV2 percent respectively. The Manager was instructed to direct open market operations initially toward maintaining the weekly average federal funds rate at about the current level, represented by a rate of IOV4 percent. Subsequently, if the two-month growth rates of M-l and M-2 appeared to be close to or beyond the upper or lower limits of the indicated ranges, the objective for the funds rate was to be raised or lowered in an orderly fashion within a range of 93A to IOV2 percent. It was also agreed that in assessing the behavior of the aggregates, the Manager should give approximately equal weight to M-l and M-2. As is customary, it was understood that the Chairman might call upon the Committee to consider the need for supplementary instruc­ tions before the next scheduled meeting if significant inconsistencies appeared to be developing among the Committee’s various objectives. The following domestic policy directive was issued to the Federal Reserve Bank of New York: The information reviewed at this meeting suggests that real output of goods and services declined somewhat in the second quarter, as slackening in demands was intensified by reduced supplies and sharply higher prices of motor fuels. During the quarter, the dollar value of retail sales declined, and in real terms, sales in June were substantially below those of last December. Growth in nonfarm payroll employment slowed during the quarter to a pace considerably below that in the preceding six months, but the unemployment rate in June, at 5.6 percent, was somewhat lower than earlier in the year. Industrial production recovered in May, after having declined in April in large part because of a work stoppage. Over the first half of this year, broad measures of prices increased at a much faster pace than during 1978, although producer prices of foods declined in the second quarter. The rise in the index of average hourly earnings has slowed in recent months. Downward pressure on the dollar in foreign exchange markets emerged in mid-June after several months of strength, and since then the tradeweighted value of the dollar against major foreign currencies has declined about 3 percent. The U.S. trade deficit for April and May combined widened somewhat from the first-quarter rate. M-l expanded sharply in June, after having increased little in May, and M-2 and M-3 also grew rapidly. Inflows of interest-bearing deposits included in M-2 grew rapidly in June, as net flows into money market certificates at commercial banks expanded further and savings deposits Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of FOMC 757 increased for the first time since last September. At nonbank thrift institutions, inflows of deposits picked up from the sharply reduced pace in May. On a quarterly average basis, M-l grew at an annual rate of about IVi percent in the second quarter, compared with a decline at a rate of about 2 percent in the first quarter; M-2 and M-3 grew at rates of about 8V2 percent and 13A percent respectively in the second quarter, compared with rates of about 13A percent and 43A percent in the first quarter. Market interest rates in general have declined substantially over the past several weeks, but mortgage interest rates have risen further. Taking account of past and prospective developments in employment, unemployment, production, investment, real income, productivity, inter­ national trade and payments, and prices, it is the policy of the Federal Open Market Committee to foster monetary and financial conditions that will resist inflationary pressures while encouraging moderate economic expansion and contributing to a sustainable pattern of international trans­ actions. The Committee agreed that these objectives would be furthered by growth of M-l, M-2, and M-3 from the fourth quarter of 1978 to the fourth quarter of 1979 within ranges of W2 to 4Vi percent, 5 to 8 percent, and 6 to 9 percent respectively, the same ranges that had been established in February. Having established the range for M-l in February on the assumption that expansion of ATS and NOW accounts would dampen growth by about 3 percentage points over the year, the Committee also agreed that actual growth in M-l might vary in relation to its range to the extent of any deviation from that estimate. The associated range for bank credit is IV2 to IOV2 percent. The Committee anticipates that for the period from the fourth quarter of 1979 to the fourth quarter of 1980, growth may be within the same ranges, depending upon emerging economic conditions and appropriate adjustments that may be required by legislation or judicial developments affecting interest-bearing transac­ tions accounts. These ranges will be reconsidered at any time as conditions warrant. In the short run, the Committee seeks to achieve bank reserve and money market conditions that are broadly consistent with the longer-run ranges for monetary aggregates cited above, while giving due regard to the program for supporting the foreign exchange value of the dollar and to developing conditions in domestic financial markets. Early in the period before the next regular meeting, System open market operations are to be directed at maintaining the weekly average federal funds rate at about the current level. Subsequently, operations shall be directed at maintaining the weekly average federal funds rate within the range of 93A to 10y2 percent. In deciding on the specific objective for the federal funds rate the Manager shall be guided mainly by the relationship between the latest estimates of annual rates of growth in the July-August period of M-l and M-2 and the following ranges of tolerance: 2V2 to 6V2 percent for M-l and 6V2 to \0V2 percent for M-2. If, with approximately equal weight given to M-l and M-2, their rates of growth appear to be close to or beyond the upper or lower limits of the indicated ranges, the objective Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

758 Federal Reserve Bulletin □ September 1979 for the funds rate is to be raised or lowered in an orderly fashion within its range. If the rates of growth in the aggregates appear to be above the upper limit or below the lower limit of the indicated ranges at a time when the objective for the funds rate has already been moved to the corre­ sponding limit of its range, the Manager will promptly notify the Chair­ man, who will then decide whether the situation calls for supplementary instructions from the Committee. Votes for this action: Messrs. Miller, Volcker, Balles, Black, Coldwell, Kimbrel, Mayo, Partee, Rice, Mrs. Teeters, and Mr. Wallich. Votes against this action: None. About a week after the meeting, on July 19, projections suggested that over the July-August period M-l would grow at an annual rate moderately above the upper limit of the range of 2lA to 6!/2 percent that had been specified by the Committee and that M-2 would grow at a rate about equal to the upper limit of its range of 6!/2 to 10!/2 percent; in those circumstances, the Manager began to aim for a weekly average federal funds rate at about the lO1^ percent upper limit of its range. On July 27, with the projections suggesting that growth of both M-1 and M-2 over the July-August period would exceed the upper limits of their ranges and with the objective for the federal funds rate at the upper limit of its range, the Committee voted to modify the directive adopted at the meeting on July 11. Specifically, the Committee raised the upper limit of the intermeeting range for the federal funds rate to 10% percent and instructed the Manager to aim for a rate within a range of IOV2 to 10% percent, depending on subsequent behavior of the monetary aggregates, on conditions in foreign exchange markets, and on the current Treasury financing. On July 27, the Committee modified the domestic policy directive adopted at its meeting on July 11, 1979, by raising the upper limit of the intermeeting range for the federal funds rate to 103A percent and by instructing the Manager to aim for a weekly average rate within a range of IOV2 to 10% percent, depending on subsequent projections of growth of M-l and M-2 over the July-August period, on conditions in foreign exchange markets, and on the current Treasury financing. Votes for this action: Messrs. Miller, Volcker, Black, Coldwell, Partee, Rice, Wallich, Guffey, Roos, and Winn. Vote against this action: Mrs. Teeters. Absent: Messrs. Balles, Kimbrel, and Mayo. (Messrs. Guffey, Roos, and Winn voted as alternates for Messrs. Balles, Kimbrel, and Mayo respec­ tively.) * * * * * Records of policy actions taken by the Federal Open Market Committee at each meeting, in the form in which they will appear in the Board’s Annual Report, are made available a few days after the next regularly scheduled meeting and are subsequently published in the Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

759 Law Department S tatu tes, reg u latio n s, in terp retatio n s, and d ecisio n s Amendment to Regulation E holding company by acquiring 99.1 percent of the voting shares of the Bank of Caney ville, Caney- The Board of Governors has adopted an ville, Kentucky (“Bank”). amendment to section 205.5(c) of Regulation Notice of the application, affording opportunity E, which implements the Electronic Fund for interested persons to submit comments and Transfer Act, to provide that written notice of views, has been given in accordance with section loss or theft of an access device or possible 3(b) of the Act. The time for filing comments and unauthorized electronic fund transfers is effec­ views has expired, and the Board has considered tive at the time the consumer mails or otherwise the application and all comments received in light of the factors set forth in section 3(c) of the Act. sends the notice to the financial institution. Applicant, a nonoperating corporation with no Effective September 10, 1979, paragraph (c) of subsidiaries, was organized for the purpose of section 205.5 of Regulation E is amended by becoming a bank holding company by acquiring deleting the third sentence and substituting the Bank. Upon acquisition of Bank, Applicant would following sentence, to read as follows: control the 289th largest commercial bank in Ken­ Section 205.5—Liability of tucky, with .06 percent of the total commercial Consumer for Unauthorized Transfers. bank deposits in the state.1 Bank holds deposits of $7.1 million, repre­ jfc * * * senting approximately 10.1 percent of total market deposits in commercial banks and is the smallest (c) ***Notice in writing is considered given of four banks in the relevant banking market.2 The at the time the consumer deposits the notice in subject proposal involves a restructuring of Bank’s the mail or delivers the notice for transmission by ownership from individuals to a corporation owned any other usual means to the financial institu­ tion.*** by those same individuals. The facts of record indicate that one of Applicant’s principals also s|c sfc sfe % j|c holds significant voting interests in Leitchfield De­ posit Bank and Trust Company, Leitchfield, Ken­ tucky (“Leitchfield Bank”), one of three other Bank Holding Company banking organizations located in the relevant and Bank Merger Orders banking market. In addition, one of Applicant’s Issued by the Board of Governors principals serves as chairman of the board of directors of Leitchfield Bank. Leitchfield Bank Orders Under Section 3 (deposits of $20.1 million) controls 28.5 percent of Bank Holding Company Act of total market deposits and is the third largest bank in the relevant banking market. Caneyville Bancshares, Inc., Applicant contends that Bank and Leitchfield Caneyville, Kentucky Bank operate in distinct banking markets. In sup­ Order Denying port of this contention, Applicant has submitted Formation of a Bank Holding Company data concerning the respective service areas for loans and deposits of each of the banks. Applicant Caney ville Bancshares, Inc., Caney ville, Ken­ tucky, has applied for the Board’s approval under section 3(a)(1) of the Bank Holding Company Act 1. All banking data are as of June 30, 1978. 2. The relevant banking market is approximated by Grayson (12 U.S.C. § 1842(a)(1)) of formation of a bank County, Kentucky. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

760 Federal Reserve Bulletin □ September 1979 also alleges that there is little commercial interac­ or more of the other banks in the same market.5 tion between Caneyville and Leitchfield.3 When Applicant’s principals acquired control of Applicant’s contention that Bank and Leitch­ Bank in 1977, one of Applicant’s principals also field Bank operate in distinct banking markets is held the above described interest in Leitchfield not supported by the facts. In addition to Appli­ Bank, and served as an officer and/or a director cant’s submissions, the Board has reviewed the of Leitchfield Bank. Together, Bank and Leitch­ results of a telephone survey of the area, as well field Bank controlled, as of December 1977, total as commuting data and advertising, com­ deposits of $25.6 million, representing approxi­ munications and other service patterns. In particu­ mately 38.2 percent of total deposits in the market. lar, it appears that a significant percentage of the The Board finds that the effect of Bank’s acquisi­ work force in Leitchfield is from Caneyville. Fur­ tion by Applicant’s principals was to eliminate thermore, one newspaper and hospital and two significant competition that existed at that time radio stations serve the entire county.4 Based on between Bank and Leitchfield Bank, increase the its careful review of the entire record of this concentration of banking resources within the application, the Board is of the view that the Grayson County banking market, and eliminate an relevant banking market for purposes of analyzing independent banking competitor in the market. the competitive effects of the transaction is an area In the Board’s view, the subject proposal in­ that includes both Leitchfield and Caneyville. volves the use of the holding company form to Thus, it appears that Bank and Leitchfield Bank further an anticompetitive arrangement. On the are located in the relevant banking market as basis of all the facts of record, including the sizes described above. of the organizations involved, and their collective Under section 3(c) of the Bank Holding Com­ position in the relevant market,6 the Board con­ pany Act, the Board is precluded from approving cludes that this proposal should be denied since any proposed acquisition of a bank that, in any approval of this application would serve to perpet­ part of the country, (1) would result in a monop­ uate a substantially adverse competitive situation. oly, or would be in furtherance of any combination As part of the subject proposal, Applicant would or conspiracy to monopolize or attempt to monop­ assume the debt incurred by Applicant’s principals olize the business of banking; or that (2) may in acquiring shares of Bank and would issue pre­ substantially lessen competition or tend to create ferred stock with debt-like characteristics. Appli­ a monopoly or be in restraint of trade in any cant proposes to service this debt over a 12-year banking market, unless the Board finds that such period. In the Board’s view, Applicant’s financial anti-competitive effects are clearly outweighed by projections over the debt-retirement period appear the convenience and needs of the community to to be somewhat optimistic and, in light of all the be served. facts of record, it does not appear that the financial As part of its analysis of the competitive effects factors provide any weight for approval of the of a proposal involving the restructuring of a application. bank’s ownership into corporate form, the Board No significant changes in Bank’s operations or takes into consideration the competitive effects of in the services offered to its customers are antici­ the transaction whereby common share ownership pated to follow from consummation of the pro­ and/or an interlocking director/officer relationship posed acquisition. Consequently, convenience and were established between the subject bank and one needs factors lend no weight toward approval of this application. On the basis of the facts of record, and in light 3. The Board notes that the Supreme Court has indicated of the factors set forth in section 3(c) of the Act, that the competitive effects of a proposed merger or acquisition should be judged in a localized market. However, the Court it is the Board’s judgment that consummation of has stated that “the proper question is not where the parties the proposal to form a bank holding company to the merger do business or even where they compete, but would not be in the public interest and that the where, within the area of competitive overlap, the effect of the merger on competition will be direct and immediate.” United States v. Philadelphia National Bank, 374 U.S. 321 (1963). In determining the extent of this area, the Supreme 5. See the Board’s Order denying the application to become Court sought to delineate the area in which bank customers a bank holding company of Mahaska Investment Company, that are neither very large nor very small find it practical to 63 Federal Reserve Bulletin 579 (1977) and the Board’s do their banking business. United States v. Philadelphia Na­ Order denying the application to become a bank holding tional Bank, supra. See also, First State Bancorporation, 65 company by Citizens Bancorp, Inc., 63 Federal Reserve Federal Reserve Bulletin 256 (1979). Bulletin 1083 (1977). 4. The Board notes that Bank’s advertising is not directed 6. As of June 1978, the two banks together held 38.6 toward any specific area in Grayson County. percent of the market’s total commercial bank deposits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 761 application should be and is hereby denied for the cant, Eagle River State Bank, Eagle River, Wis­ reasons summarized above. consin (“Eagle River Bank”), ranks as the fifth By order of the Board of Governors, effective largest of eight banks, controlling 10.5 percent of August 13, 1979. total market deposits. The proposed site of Bank is approximately 21 miles south of Eagle River Voting for this action: Vice Chairman Schultz and Bank, Applicant’s closest subsidiary bank. With Governors Wallich, Coldwell, Partee, Teeters, and respect to the competitive aspects of this proposal, Rice. Absent and not voting: Chairman Volcker. Protestant asserts that consummation would sub­ (Signed) Griffith L. Garwood, stantially lessen competition in the relevant bank­ [seal] Deputy Secretary of the Board. ing market and foreclose the likelihood of addi­ tional entrants into the market. Since Bank would be a de novo bank, Applicant’s acquisition of Bank Central Wisconsin Bankshares, Inc., would not have any immediate effect on Appli­ Wausau, Wisconsin cant’s market share, or eliminate any existing competition. Moreover, based upon all the facts Order Approving Acquisition of Bank of record, it is the Board’s opinion that the pro­ jected economic and population growth within the Central Wisconsin Bankshares, Inc., Wausau, market will support additional entrants, thereby Wisconsin, a bank holding company within the assuring that consummation of the proposal would meaning of the Bank Holding Company Act, has not foreclose future competition, preempt a bank­ applied for the Board’s approval under section ing site, or have any other adverse competitive 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to consequences. Accordingly, competitive consid­ acquire 98.6 percent or more of the voting shares erations are consistent with approval of the appli­ of Northern Security National Bank of Rhine­ cation. lander, Pelican, Wisconsin (“Bank”), a proposed Protestant also contends that Applicant lacks new bank. sufficient financial resources to consummate the Notice of the application, affording opportunity subject proposal. The Board, however, regards the for interested persons to submit comments and financial and managerial resources and future views, has been given in accordance with section prospects of Applicant and its subsidiary banks as 3(b) of the Act. The time for filing comments and generally satisfactory.3 Bank, as a proposed de views has expired, and the Board has considered novo bank, has no financial or operating history; the application and all comments received, in­ however, its prospects as a subsidiary of Applicant cluding those of First National Bank of Rhine­ appear favorable. Accordingly, considerations re­ lander, Rhinelander, Wisconsin (“Protestant”), in lating to banking factors are consistent with ap­ light of the factors set forth in section 3(c) of the proval of this application. Act (12 U.S.C. § 1842(c)). Protestant claims that approval of this applica­ Applicant, the twelfth largest commercial bank­ tion would not be consistent with the convenience ing organization in Wisconsin, controls four banks and needs of the community to be served. Under with aggregate deposits of approximately $222.7 the proposal, however, Bank would be the only million, representing 1.2 percent of the deposits commercial banking facility located in a develop­ in commercial banks in the state.1 Since this ap­ ing suburban shopping area, thereby providing a plication involves the acquisition of a proposed new and convenient full-service banking alterna­ de novo bank, consummation of the proposal tive for the residents of the community. Accord­ would not immediately increase Applicant’s share ingly, it is the Board’s judgment that consumma­ of deposits in commercial banks in Wisconsin, nor tion of the proposal would be in the public interest would it increase the concentration of banking and that the application should be approved. resources in the state. On the basis of the record, the application is Bank is to be located in the Vilas-Oneida bank­ approved for the reasons summarized above. The ing market,2 in which a subsidiary bank of Appli­ transaction shall not be made (a) before the thir­ tieth calendar day following the effective date of this Order or (b) later than three months after that 1. All banking data are as of June 30, 1978, and reflect bank holding company formations and acquisitions approved as of June 30, 1979. 3. The Board notes that on July 16, 1979, Applicant fulfilled 2. The Vilas-Oneida banking market is approximated by all a capital commitment made in connection with its application of Vilas and Oneida Counties, Wisconsin. to acquire Community State Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

762 Federal Reserve Bulletin □ September 1979 date, and (c) Bank shall be opened for business ownership interests since Applicant is controlled not later than six months after the effective date by three individuals who also own 95.3 percent of this Order. Each of the periods described in of the outstanding voting shares of Bank. More­ (b) and (c) may be extended for good cause by over, Bank and Rock Port Bank are located in the Board, or by the Federal Reserve Bank of separate banking markets, and consummation of Chicago, pursuant to delegated authority. this proposal would not eliminate any significant By order of the Board of Governors, effective competition. Accordingly, competitive consid­ August 6, 1979. erations are consistent with approval. The financial and managerial resources and fu­ Voting for this action: Vice Chairman Schultz and ture prospects of Applicant, Rock Port Bank, and Governors Wallich, Partee, Teeters, and Rice. Absent and not voting: Chairman Miller and Governor Cold- Bank are regarded as generally satisfactory, par­ well. ticularly in view of Applicant’s commitment to raise additional equity capital of $337,500 prior (Signed) Griffith L. Garwood, to consummation of the proposal.3 Accordingly, [seal] Deputy Secretary of the Board. considerations relating to banking factors are con­ sistent with approval of the application. Although the proposed acquisition is essentially Citizens Ban-Corporation, a restructuring of Bank’s existing ownership inter­ Rock Port, Missouri ests, and consummation of the proposal would not result in an immediate change in the service pro­ Order Approving Acquisition of Bank vided by Bank, considerations relating to the con­ Citizens Ban-Corporation, Rock Port, Missouri, venience and needs of the community to be served a bank holding company within the meaning of are consistent with approval. Accordingly, it is the the Bank Holding Company Act, has applied for Board’s judgment that the proposed acquisition is the Board’s approval under section 3(a)(3) of the consistent with the public interest and that the Act (12 U.S.C. § 1842(a)(3)) to acquire 95.3 application should be approved. percent of the voting shares of Farmers and Mer­ On the basis of the record, the application is chants Bank of Elmo (“Bank”), Elmo, Missouri. approved for the reasons summarized above and Notice of the application, affording opportunity subject to the condition that the transaction shall for interested persons to submit comments and not be consummated until Applicant has satisfied views, has been given in accordance with section its capital commitment. In addition, the transaction 3(b) of the Act. The time for filing comments and shall not be made before the thirtieth calendar day views has expired, and the Board has considered following the effective date of this Order or later the application and all comments received in light than three months after the effective date of this of the factors set forth in section 3(c) of the Act Order, unless such period is extended for good (12 U.S.C. § 1842(c)). cause by the Board or by the Federal Reserve Bank Applicant, a one-bank holding company, con­ of Kansas City pursuant to delegated authority. trols The Citizens Bank of Atchison County By order of the Board of Governors, effective (“Rock Port Bank”), Rock Port, Missouri. The August 24, 1979. acquisition of Bank would increase Applicant’s Voting for this action: Vice Chairman Schultz and share of total deposits in commercial banks in Governors Wallich, Coldwell, Partee, Teeters, and Missouri from 0.08 percent to 0.11 percent,1 and Rice. Absent and not voting: Chairman Volcker. would not have an appreciable effect on the con­ centration of banking resources in the state. (Signed) Griffith L. Garwood, Bank, with deposits of $7.2 million, is the [seal] Deputy Secretary of the Board. fourth largest of six commercial banks in its bank­ ing market and controls 5.5 percent of deposits in commercial banks in that market.2 The proposed transaction is primarily a reorganization of existing 3. On January 19, 1979, the Board denied an earlier appli­ cation by Applicant to acquire Bank, based on financial con­ siderations. Citizens Ban-Corporation, 65 Federal Reserve 1. All banking data are as of June 30, 1978. Bulletin 162 (1979). Applicant’s commitment to raise addi­ 2. The relevant banking market is approximated by Nod­ tional equity capital has sufficiently strengthened Applicant’s away County, Missouri, and the southern one-third of Page financial resources and future prospects to permit approval of County, Iowa. this application. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 763 County National Bancorporation, the St. Louis banking market.2 County National’s Clayton, Missouri four subsidiaries, with total deposits of $315.6 million or 3.2 percent of the market total, and T.G.B. Co., TG’s subsidiaries, with total deposits of $225.6 St. Louis, Missouri million or 2.3 percent of the market total, are, respectively, the sixth and tenth largest banking Order Denying Acquisition and organizations in the St. Louis banking market. The Formation of Bank Holding Companies proposed merger would increase County Na­ tional’s share of total market deposits to 5.6 per­ County National Bancorporation (“County Na­ cent, and County National would become the tional”), Clayton, Missouri, a bank holding com­ fourth largest banking organization in the market. pany, has applied for the Board’s approval to Because the effects on competition of elimi­ acquire control of TG Bancshares, Co. (“TG”), nating a direct viable competitor from a market St. Louis, Missouri, an unaffiliated bank holding are more immediately felt and less subject to future company. This would be accomplished by the uncertainties, the Board believes proposals in­ merger of TG into County National’s subsidiary, volving the elimination of existing competition T.G.B. Co., Clayton, Missouri, a nonoperating require particular scrutiny and care. In the past company formed to facilitate the proposed acqui­ the Board has authorized combinations of rela­ sition. T.G.B. Co. has applied to become a bank tively substantial competitors in various markets holding company as a result of this transaction. when it was persuaded that the effects of the Both applications were filed pursuant to section combinations would be minimal, that offsetting 3(a) of the Bank Holding Company Act (12 benefits of value were likely to be achieved, or U.S.C. § 1842(a)). that less anticompetitive means of expansion were Notice of the applications, affording opportunity not reasonably available to the organizations. It for interested persons to submit comments and is the Board’s view that a proposed combination views, has been given in accordance with section of two banking organizations that are direct com­ 3(b) of the Act. The time for filing comments and petitors of similar orientation within a metropolitan views has expired, and the Board has considered market and are both of a size to have achieved the applications and all comments received in light economies of scale and have management, or of the factors set forth in section 3(c) of the Act sufficient resources to attract capable management, (12 U.S.C. § 1842(c)). that will permit each to continue independently as County National, the tenth largest banking or­ an aggressive competitor in that market, normally ganization in Missouri, controls five banks with would have serious anticompetitive effects and aggregate deposits of approximately $333.7 mil­ should not be approved except in compelling cir­ lion, representing 1.6 percent of the total deposits cumstances. in commercial banks in the state.1 TG, the thir­ The increase in concentration of banking re­ teenth largest banking organization in Missouri, sources in the St. Louis banking market resulting controls three subsidiary banks with aggregate from consummation of this proposal is of some deposits of approximately $225.6 million, repre­ concern to the Board. However, of even more senting 1.1 percent of the total commercial depos­ concern is the degree to which County National its in the state. Upon consummation of the pro­ and TG are direct and immediate competitors in posed acquisition, County National will become the market. Both are relatively large banking or­ the seventh largest banking organization in the ganizations in the competitive context of that mar­ state with 2.7 percent of total statewide commer­ ket, fairly matched in strength and each is well cial bank deposits. By combining the tenth and represented by a sizable lead bank subsidiary. In thirteenth largest banking organizations, the pro­ addition, both County National and TG are largely posal would have an effect on the concentration oriented to the provision of a similar range of of banking resources in the state that is not insig­ commercial banking services, and have both dem­ nificant. onstrated the inclination and ability to compete Four of County National’s five subsidiary banks and all three subsidiary banks of TG operate in 2. The St. Louis banking market is approximated by the St. Louis Ranally Metropolitan Area (“RMA”), which in­ cludes the city of St. Louis and St. Louis County, portions 1. Unless otherwise noted, banking data are as of June 30, of Franklin, Jefferson, Lincoln, and St. Charles Counties in 1978, and reflect holding company acquisitions approved Missouri, and portions of Jersey, Macoupin, Madison, through April 25, 1979. Monroe, and St. Clair Counties in Illinois. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

764 Federal Reserve Bulletin □ September 1979 effectively for a similar range of customers for and their subsidiaries are regarded as generally those services.3 Under the circumstances the Board satisfactory and consistent with approval. How­ believes that a significant beneficial competitive ever, the Board believes the proposed merger influence within the St. Louis market would be would not result in any significant or necessary lost by the combination of these two competitors.4 enhancement of the resources or prospects of the Furthermore, the proposed merger would result in organizations. the elimination of a lead bank and its independent Moreover, the Board finds in this proposal no holding company organization from the market, sufficiently important benefits to the convenience foreclosing the possibility of increased competition and needs of the communities to be served to between County National and TG in the future that warrant approval. With a few exceptions the Board could result in greater benefits to the public and considers of minor significance, the justification the customers served by each organization. In view advanced for this merger is essentially premised of the nature of the competitors involved, their on the proposition that as a larger organization respective positions in the market, and other facts County National may provide services larger or­ of record, the Board concludes that the competitive ganizations in the market typically provide. This effects of the proposed merger are so seriously is an argument that can be advanced in defense adverse as to warrant denial of these applications. of all mergers and acquisitions that do not involve Considerations of the financial and managerial a market’s largest organization, and the Board resources and future prospects of Applicants, TG, does not consider it a compelling consideration in this case where the banking organizations to be combined are already among the market’s largest 3. The combined organization, with $541.2 million in de­ posits, would displace Commerce Bancshares, Inc. (“Com­ and most capable competitors. Accordingly, the merce”), Kansas City, Missouri, which holds market deposits Board finds considerations relating to the conven­ of $459.1 million, as the fourth largest banking organization ience and needs of the community to be served in the St. Louis banking market. Commerce assumed that position upon its merger with Manchester Financial Corpora­ are insufficient to outweigh the anticompetitive tion (“Manchester”), St. Louis, Missouri, which the Board effects that would result from consummation of approved in 1978. 64 Federal Reserve Bulletin 576 this proposal. Based upon the foregoing and other (1978). The Board concluded that merger would not have eliminated significant competition. The Commerce merger, considerations reflected in the record, it is the however, did not involve, as does the present proposal, banking Board’s judgment that consummation of the pro­ organizations comparably balanced and poised as natural com­ petitors for the same range of business within the market. Both posed transaction would not be in the public inter­ organizations in this case are active, successful, and aggressive est and the applications are hereby denied. competitors in the market, and the combined organization that By order of the Board of Governors, effective would result from the present proposal would not only be somewhat larger than Commerce in the St. Louis market, even August 27, 1979. allowing for the divestiture of Continental Bank & Trust Company, but it would combine two banks in the market Voting for this action: Governors Wallich, Coldwell, significantly larger than any bank involved in the Commerce Teeters, and Rice. Voting against this action: Vice merger. St. Louis County Bank (Applicant’s lead bank) is the Chairman Schultz and Governor Partee. Absent and not market’s fourth largest bank, with $258.5 million in deposits, voting: Chairman Volcker. and Tower Grove Bank and Trust Co. (TG’s lead bank) has $171.3 million in deposits and is the sixth largest bank in the market. In contrast, the largest of Commerce’s banks in the (Signed) Griffith L. Garwood, St. Louis market before the merger, Commerce Bank of [seal] Deputy Secretary of the Board. University City, now has deposits of only $55.9 million, and Manchester Bank, which was Manchester’s lead bank, has deposits of $127.6 million. Finally, Commerce from its market base of eight relatively small retail bank subsidiaries, had attempted for some years without success to establish de novo FirstBancorp, Inc., an effective presence in the midtown commercial area and in the wholesale banking business in which Manchester Bank was New Haven, Connecticut principally engaged. But for the Board’s perception that com­ plementary weaknesses inhibited Commerce and Manchester, Order Approving Acquisition of Banks as independent organizations, from realizing their potential as effective competitive forces in the market, the Board might FirstBancorp, Inc., New Haven, Connecticut, have viewed the competitive implications of that merger dif­ a bank holding company within the meaning of ferently. 4. Applicants have agreed, if required by the Board, to the Bank Holding Company Act, has applied for divest within one year after the merger Continental Bank & the Board’s approval under section 3(a)(3) of the Trust Company, TG’s subsidiary most clearly and immediately positioned to attract small customers from County National’s Act (12 U.S.C. § 1842(a)(3)) to acquire 100 per­ lead bank. However, this bank accounted for only 7.5 percent cent of the voting shares (less directors’ qualifying of the combined organization’s assets at year-end 1978, and shares) of New Britain Bank and Trust Company, its divestiture would not materially alter the Board’s assessment of the competitive effects of this proposal. New Britain, Connecticut (“New Britain Bank”), Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 765 and The Terry ville Trust Company, Plymouth ing organizations, Hartford National Corporation (P.O. Terry ville), Connecticut (“Terry ville and CBT Corporation, control 73.4 percent of total Bank”), both of which are presently wholly- commercial bank deposits and operate 69 offices owned subsidiaries of The Connecticut BancFed- in the market. The third largest banking organi­ eration, Inc., Hartford, Connecticut (“BancFed- zation in the market, (First Connecticut Bancorp, eration”).1 Inc.), controls 9.4 percent of market deposits and Notice of the application, affording opportunity operates 27 offices in the market. New Britain for interested persons to submit views and recom­ Bank, operating seven offices in the market, and mendations, has been given in accordance with Terryville Bank, operating five offices in the mar­ section 3(b) of the Act. The time for filing views ket, respectively, the fifth and eighteenth largest and recommendations has expired, and the appli­ of 27 banks located in the relevant market, hold cation and all comments received have been con­ respectively only 2.4 and 0.6 percent of the mar­ sidered in light of the factors set forth in section ket’s commercial bank deposits. Although the 3(c) of the Act (12 U.S.C. § 1842(c)). nearest branch office of Applicant’s banking sub­ Applicant, a one-bank holding company by vir­ sidiary is located 11.5 miles from a BancFedera­ tue of its control of First Bank ($407.5 million tion subsidiary’s branch office, Applicant’s sub­ in deposits), is the eighth largest banking organi­ sidiary operates in the New Haven banking mar­ zation in Connecticut and controls approximately ket,5 and has no branch office within the Hartford 4.5 percent of total commercial bank deposits in market. Therefore, since Applicant’s subsidiary the state.2 BancFederation, the eleventh largest and BancFederation’s subsidiaries operate in sep­ commercial banking organization in Connecticut, arate markets, no significant existing competition with three subsidiary banks (aggregate deposits of will be eliminated upon consummation. With re­ $111.6 million), controls approximately 1.4 per­ spect to potential competition, it appears that Ap­ cent of total commercial bank deposits in the state. plicant has the capability of entering the Hartford Consummation of the overall proposal will in­ banking market through de novo branching into crease Applicant’s share of commercial bank de­ any of the open towns in the market.6 Therefore, posits in Connecticut to approximately 6.0 percent Applicant’s entry into the Hartford market through and will make Applicant the seventh largest bank­ acquisition instead of de novo branching would ing organization in the state, without having any have a slightly adverse effect on probable future significant adverse effect upon the concentration competition. However, the slightly adverse effects of banking resources in Connecticut. of the proposal are mitigated by the fact that the BancFederation’s subsidiaries are all located in proposed acquisition could have a procompetitive the Hartford banking market3 and it currently effect by strengthening a medium-sized competitor ranks as the fourth largest commercial banking in the highly concentrated Hartford banking mar­ organization in the market, controlling 4.1 percent ket, and since after consummation of the proposal of market deposits.4 The Hartford banking market there would still remain other points of entry into is highly concentrated since the two largest bank­ the Hartford market. Thus, on the basis of the foregoing and all the facts of record, it is the Board’s judgment that the overall competitive ef­ 1. In addition to the subject acquisitions, Applicant proposes fects of the proposal are consistent with approval. to merge its subsidiary bank, First Bank, New Haven, Con­ The financial and managerial resources and fu­ necticut (“First Bank”), with BancFederation’s other subsidi­ ture prospects of Applicant, its subsidiary bank, ary bank, The Guaranty Bank and Trust Company, Hartford, Connecticut (“Guaranty Bank”). Upon consummation of that New Britain Bank, and Terryville Bank are re­ merger, which is subject to FDIC approval, First Bank will garded as generally satisfactory, particularly in acquire the assets and assume the deposits and certain other liabilities of Guaranty. In light of the total proposal and since Applicant considers the merger of First Bank with Guaranty Bank and its acquisition of New Britain Bank and Terryville Bank integrated and contractually inseparable, the analyses of ($68.6 million in deposits), Terryville Bank ($17.3 million in competitive and banking factors take into account the overall deposits), and Guaranty Bank ($31.8 million in deposits), as transaction. of March 31, 1979. 2. All state banking data are as of September 30, 1978, 5. The New Haven banking market is contiguous with the and reflect bank holding company formations and acquisitions Hartford market’s southern boundary. approved as of June 30, 1979. 6. Connecticut law permits statewide branching by com­ 3. The Hartford banking market includes the Hartford mercial banks except in “closed” towns, which are towns SMSA, the New Britain SMSA, and the towns of Somers, where another commercial bank has its home office. Although Ashford, Lebanon, and Barkhamsted. Hartford itself is closed, 33 of the 48 towns and cities in the 4. All market data are as of June 30, 1977, unless otherwise Hartford market are open, including nine open towns in the indicated. BancFederation’s subsidiaries are New Britain Bank immediate vicinity of Hartford. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

766 Federal Reserve Bulletin □ September 1979 light of certain commitments made by Applicant. Otto Bremer Company, Moreover, Applicant appears to have the ability St. Paul, Minnesota to offer assistance to Guaranty Bank to enable Order Approving Acquisition of Banks Guaranty Bank to become a more meaningful banking alternative in the market. To insure that Otto Bremer Company, St. Paul, Minnesota, a bank holding companies serve as sources of bank holding company within the meaning of the strength to subsidiary banks, the Board generally Bank Holding Company Act, has applied for the expects an applicant proposing to acquire a bank Board’s approval under section 3(a)(3) of the Act to be able to retire its acquisition debt within 12 (12 U.S.C. § 1842(a)(3)) to acquire from an af­ years. Although Applicant’s debt-retirement filiate the following stock interests in four Wis­ schedule extends beyond 12 years, based upon consin banks (“Banks”): 60.9 percent of the vot­ financial projections and historical performance, it ing shares of Union State Bank (“Amery Bank”), appears that Applicant would have sufficient fi­ Amery, Wisconsin; 77.5 percent of the voting nancial flexibility to retire its acquisition debt shares of Peoples State Bank (“Colfax Bank”), within 12 years while maintaining adequate capital Colfax, Wisconsin; 91.1 percent of the voting ratios in its subsidiary banks. Thus, banking fac­ shares of Farmers State Bank (“Frederic Bank”), tors lend weight toward approval. Following con­ Frederic, Wisconsin; and 92.7 percent of the vot­ summation of the proposal, Applicant proposes to ing shares of Washburn State Bank (“Washburn assist New Britain Bank and Terryville Bank in Bank”), Washburn, Wisconsin. offering a variety of new services and expanding Notice of the applications, affording opportunity the scope of existing ones, so as to make such for interested persons to submit comments and services uniformly available among all its subsidi­ views, has been given in accordance with section aries. In addition, Applicant proposes to extend 3(b) of the Act. The time for filing comments and banking hours and increase the interest paid on views has expired, and the Board has considered time and savings deposits at New Britain Bank the applications and all comments received in light and Terryville Bank. Therefore, considerations of the factors set forth in section 3(c) of the Act relating to the convenience and needs of the com­ (12 U.S.C. § 1842(c)). munities to be served lend weight toward approval Applicant is a wholly-owned subsidiary of Otto and, together with the financial considerations Bremer Foundation (“Foundation”), St. Paul, present in the subject proposal, are sufficient to Minnesota, a private foundation that now owns outweigh whatever slightly adverse competitive the shares Applicant proposes to acquire. The Otto effects are associated with the proposal. Accord­ Bremer organization controls 29 subsidiary banks ingly, it is the Board’s judgment that the proposed located in Minnesota, North Dakota, and Wiscon­ transaction would be consistent with the public sin.1 Foundation is the 32nd largest banking orga­ interest and that the application should be ap­ nization in Wisconsin, controlling the four banks proved. that are the subject of this application. These banks On the basis of the record, the application is have total deposits of approximately $72 million, approved for the reasons summarized above. The transaction shall not be made before the thirtieth calendar day following the effective date of this 1. Section 3(d) of the Bank Holding Company act prohibits the approval of an application which will permit any bank Order or later than three months after the effective holding company to acquire voting shares of an additional bank date of this Order, unless such period is extended located outside of the state where the holding company’s banking operations are principally conducted. The Board be­ for good cause by the Board, or by the Federal lieves that approval of these applications is not barred by Reserve Bank of Boston pursuant to delegated section 3(d), although Applicant’s banking operations are authority. principally conducted in Minnesota. Applicant and Foundation were organized by Otto Bremer 35 years ago and have func­ By order of the Board of Governors, effective tioned together as a single, integrated banking system. Mr. August 10, 1979. Bremer acquired dominant interests in Banks or their prede­ cessor banks between 1917 and 1933, and Foundation held its interests in Banks in 1966, when it became a bank holding Voting for this action: Vice Chairman Schultz and company by operation of law. Accordingly, no application is Governors Coldwell, Partee, Teeters, and Rice. Present necessary for the retention by Foundation of those interests. It is the Board’s opinion that Applicant and Foundation should and abstaining: Governor Wallich. Absent and not vot­ be viewed as a single bank holding company system and that ing: Chairman Volcker. the proposed transactions, being an internal reorganization of that system, would have the effect of maintaining rather than expanding an existing interstate bank holding company, and (Signed) Griffith L. Garwood, would not represent the acquisition of any additional bank for [seal] Deputy Secretary of the Board. purposes of section 3(d). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 767 representing 0.4 percent of the total deposits in ties to be served are consistent with approval of commercial banks in the state.2 The proposal rep­ the applications. Accordingly, the Board con­ resents a reorganization of the Otto Bremer group, cludes that these acquisitions would be in the designed to facilitate Foundation’s compliance public interest and that the applications should be with provisions of the Internal Revenue Code approved. applicable to private foundations. It does not ap­ On the basis of the record, the applications are pear that consummation of the transactions would approved for the reasons summarized above. The increase the concentration of banking resources in transactions shall not be made before the thirtieth any relevant area. calendar day following the effective date of this Banks are all located in separate banking mar­ Order or later than three months after the effective kets in Wisconsin.3 They hold the following posi­ date of this Order, unless such period is extended tions in their respective markets: for good cause by the Board, or by the Federal Reserve Bank of Minneapolis pursuant to dele­ Percentage Rank gated authority. of among By order of the Board of Governors, effective commercial banking bank organi­ August 31, 1979. Deposits deposits zations Voting for this action: Chairman Volcker and Gover­ Amery Bank $21 million 12.8 2nd of 14 nors Schultz, Wallich, Coldwell, Partee, and Teeters. Colfax Bank 11 million 1.7 18th of 21 Absent and not voting: Governor Rice. Frederic Bank 19 million 15.7 3rd of 5 (Signed) Griffith L. Garwood, Washburn [seal] Deputy Secretary of the Board. Bank 20 million 18.7 3rd of 4 Neither Applicant nor Foundation controls any other bank in any of the four markets relevant to Savings Banks Shares, Inc., this application, and section 3(d) of the Act pre­ Franklin, New Hampshire vents Applicant from acquiring any additional banks in the state. The Board concludes that the Order Approving proposed acquisitions would have no adverse ef­ Formation of Bank Holding Company fects on competition. Savings Banks Shares, Inc., Franklin, New The financial and managerial resources of Ap­ Hampshire, has applied for the Board’s approval plicant, Foundation, their subsidiaries, and Banks under section 3(a)(1) of the Bank Holding Com­ are regarded as generally satisfactory. Restrictions pany Act (12 U.S.C. § 1842(a)(1)) of formation of the Internal Revenue Code applicable to it of a bank holding company by acquiring 93.8 inhibit Foundation from supporting Banks fully percent or more of the voting shares of The and actively, and this reorganization is part of a Franklin National Bank (“Bank”), Franklin, New plan designed to resolve some of the difficulties Hampshire. those restrictions have caused. To that extent the Notice of the application, affording opportunity future prospects of Banks are likely to be enhanced for interested persons to submit comments and by consummation of this proposal. Accordingly, views, has been given in accordance with section the Board considers that banking factors lend some 3(b) of the Act. The time for filing comments and weight toward approval of the applications. views has expired, and the Board has considered Although Applicant does not propose that Banks the application and all comments received, in­ will introduce any new services in connection with cluding those of protestants,1 in light of the factors the proposed reorganization, considerations relat­ set forth in section 3(c) of the Act (12 U.S.C. ing to the convenience and needs of the communi­ § 1842(c)). Twenty New Hampshire mutual savings banks 2. All banking data are as of September 30, 1978. 3. The relevant markets are approximated by St. Croix 1. The protestants to the application are the New Hampshire County and the southern third of Polk County for Amery Bank; Bankers Association (“NHBA”) and the following New Eau Claire, Chippewa, and Dunn Counties for Colfax Bank; Hampshire banking organizations: Indian Head Banks, Inc. the northern two-thirds of Polk County and the western two- (“Indian Head”), Nashua; The Souhegan National Bank, thirds of Burnett County for Frederic Bank; and, Ashland Milford; Pemigewasset National Bank, Plymouth; and National County and the eastern half of Bayfield County for Washburn Bank of Lebanon, Lebanon. No protestant to this application Bank. has requested a hearing. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

768 Federal Reserve Bulletin □ September 1979 and one guaranty savings bank recently organized are similar to those the Board has previously Applicant, each acquiring 4.76 percent of Appli­ imposed in approving similar applications:5 cant’s shares, for the purpose of becoming a bank 1. That no savings bank will hold more than holding company by acquiring Bank. Bank holds 5 percent of Applicant’s voting shares; total deposits of approximately $6.4 million, rep­ 2. That Applicant’s shareholders will not par­ resenting 6.2 percent of total deposits in commer­ ticipate in the business of Applicant or Bank cial banks in the relevant banking market, and is except to the extent of voting as shareholders of the sixth largest of eight commercial banks in the Applicant; market.2 3. That Applicant’s shareholders will not enter In the past the Board has expressed concern that into any formal or informal agreements or under­ where a bank holding company is formed by standings among themselves, or between or among shareholders, each of whom owns less than 5 any two or more of them, concerning the manner percent of the bank holding company’s shares, the in which they may vote their shares of Applicant; shareholders’ participation in the management or and business of the bank holding company or its sub­ 4. That no management official of any savings sidiary bank might be so extensive as to support bank-shareholder located within the Laconia the conclusion that each shareholder is engaging banking market will serve as a management offi­ as an entrepreneur in the business of the other cial of Applicant or Bank. company or bank. In this instance there is no On the basis of these conditions and other facts evidence that any savings bank-shareholder would of record, the Board concludes that no savings exercise control or a controlling influence over bank-shareholder of Applicant would become a Applicant, and the Board finds that no individual bank holding company upon consummation of the savings bank-shareholder of Applicant would be proposed transaction, and it appears that no com­ engaging as an entrepreneur in the business of bination of them would constitute a company as Applicant or Bank.3 Furthermore, the Board finds defined in section 2(b) of the Act.6 that the savings bank-shareholders would not be As noted, the Board has received comments engaged collectively as an entrepreneur in the opposing this proposal, on competitive, manage­ business of Applicant or Bank, since there is no rial, and legal grounds. NHBA and several of the evidence indicating the existence of a “formalized protesting banking organizations chiefly contend structure” for control that might cause them col­ that consummation of the proposal would lead to lectively to be considered a “company” within a decrease in the willingness of Bank to compete the meaning of section 2(b) of the Act and conse­ with other commercial banks in the provision of quently, because together the savings bank-share- commercial banking services similar to those holders own more than 25 percent of Applicant’s services provided by savings banks, and would shares, a bank holding company.4 In this regard, lessen competition between Bank and other com­ Applicant has submitted its application subject to mercial banks in the provision of commercial the following conditions, the first three of which banking services, such as correspondent services, to savings banks. NHBA also contends that be­ cause bank holding companies may not acquire shares of a savings and loan association, savings 2. The relevant banking market is approximated by the banks should not be permitted to acquire shares Laconia banking market, which is comprised of Belknap County, except for the town of Barnstead and part of Alton, of banks or bank holding companies. plus the city of Franklin and the towns of Northfield, Andover, NHBA has also challenged several aspects of and Hill in Merrimack County, and the towns of Bristol, Ashland, and Holderness in Grafton County. All banking data Applicant’s managerial resources. NHBA prin­ are as of September 30, 1978. cipally argues that the savings bank-shareholders 3. Under section 2(a) of the Act, a company owning or are so decentralized they cannot provide Applicant controlling, directly or indirectly, less than 5 percent of the voting securities of a bank or company may not be held to have control over that bank or company unless that it is found, after notice and opportunity for hearing, to exercise a control­ 5. See, e.g., SYB Corporation, 63 Federal Reserve ling influence over the bank or company. Bulletin 587 (1977). 4. For a discussion of considerations involved in determin­ 6. Should the Board have reason to believe at any future ing whether a group of unaffiliated noncontrolling shareholders time that Applicant’s savings bank-shareholders, or any of of a proposed bank holding company constitutes a “company” them, are not acting independently of each other, or that its within the meaning of section 2(b), see the Board’s Order of conclusions should be reexamined for some other reason, or August 21, 1979, approving an application by WISCUB, Inc., that additional conditions should be imposed, it will take Milwaukee, Wisconsin, to become a bank holding company, appropriate steps to ensure that the regulatory purposes of the 65 Federal Reserve Bulletin 773 (1979). Act are not evaded. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 769 with appropriate managerial guidance; that Appli­ Since the individual savings banks located in cant’s principals violated federal securities laws the market would not control or be capable of in making their initial offering for Bank’s shares controlling Bank, Bank would continue to operate and this reflects so adversely on Applicant’s man­ as an independent competitor in the Laconia agerial resources as to require denial of the appli­ banking market. Consummation of the proposal cation; and that Applicant’s managerial resources would not eliminate an existing competitor within are deficient in that Applicant has not named that market.11 To the extent commercial banks and Bank’s new chief executive officer.7 savings banks compete, the transaction may, in While the Board is concerned about the com­ fact, enhance competition between Bank and one petitive issue raised by the protests,8 on balance of the savings bank-shareholders in the Laconia the Board finds that this acquisition would not market, Franklin Savings Bank. Until July 1, result in a significantly adverse effect on competi­ 1973, Bank was wholly owned by Franklin Sav­ tion between Bank and the savings bank-share- ings Bank and the two did not compete. Since holders of Applicant in any relevant market.9 Bank that time there has been some increased competi­ and four of Applicant’s savings bank-shareholders tion between them, but Franklin Savings Bank operate in the Laconia banking market.10 Each of continues to be Bank’s largest shareholder, hold­ these four shareholders owns 4.76 percent of Ap­ ing 24.76 percent of Bank’s voting shares. Upon plicant’s voting shares and none of them will share consummation of this proposal, Franklin Savings any management officials with Bank. Bank would surrender its interest in Bank in ex­ change for less than 5 percent of Applicant’s shares. 7. In addition, Indian Head has challenged the legality of NHBA has also contended that consummation the proposal under New Hampshire law, contending that the of the proposal would lessen competition between acquisition of more than 25 percent of the capital stock of Bank and other commercial banks in the provision a national bank or a New Hampshire bank holding company by a combination of savings banks would violate state law of commercial banking services to savings banks. which provides that “the amount of capital stock held by any This might in fact be the result if Bank were to state chartered bank . . . shall not exceed one-fourth of the operate as a captive source of correspondent serv­ total capital stock of such New Hampshire bank holding company.” N.H. Rev. Stat. Ann. § 387.13. That section also ices for Applicant’s shareholders or engage in contains a parallel limitation on ownership of a national bank’s unfair pricing. However, Applicant has stated, and stock by any savings bank. Indian Head has not disputed Applicant’s assertions that competent state authorities have the Board requires as a condition of this Order, adopted a contrary interpretation of the law and that Applicant’s that each savings bank-shareholder will remain organizers were advised by the New Hampshire Banking entirely free to contract for correspondent services Department that this transaction was permissible under state law. The Board considers the State Banking Department’s from any available source, and no shareholder will interpretation of that law to be reasonable and believes this be required or expected to take any service or any transaction will not violate New Hampshire law. combination of services from Bank. The Board 8. The Board also has serious concerns about the public policy implications of any combination of commercial banks further requires Applicant to ensure that Bank will and thrift institutions. These concerns were addressed in D.H. not limit the availability of its services or the terms Baldwin Company, 63 Federal Reserve Bulletin 280 (1977). However, as the Board has previously stated, that on which they are offered on any basis or in any decision has only limited relevance to a transaction in which manner that might tend to discriminate between each shareholder acquires less than 5 percent of the voting institutions that are shareholders of Applicant and shares of a bank holding company. WISCUB, Inc., 64 Fed­ eral Reserve Bulletin 40 (1978). In addition, the public those that are not. Subject to those conditions, it policy of New Hampshire permits any savings bank, within appears more likely that Applicant’s acquisition specified prudential limits, to acquire a noncontrolling interest in a New Hampshire bank holding company. N.H. Rev. Stat. of Bank may have a positive competitive effect Ann. § 387.13. On balance, the Board concludes that the as a result of Bank’s introduction as an aggressive concerns it expressed in D.H. Baldwin Company do not require competitor for services performed by commercial denial of this specific application. 9. Applicant has no operations or subsidiaries, so that apart from considerations relating to Applicant’s shareholders, con­ summation of the proposed transaction would not have any 11. If greater weight is attached to the possible restraining adverse effect on existing or potential competition, nor would influence of Applicant’s association with savings banks in the it increase the concentration of banking resources in any Laconia banking market, the elimination of competition be­ relevant area. comes a matter of greater concern. However, in evaluating 10. The four are Franklin Savings Bank, Franklin; Laconia competitive aspects of this proposal and in declining to deny Savings Bank, Laconia; Meredith Village Savings Bank, this application, the Board has noted that Bank is a very small Meredith; and New Hampshire Savings Bank, Concord, which institution both in absolute terms and relative to other institu­ has a branch in Laconia. The remaining shareholders do not tions in its market, and that Applicant has undertaken that its compete in the Laconia market, and competition among them chief priorities will be the maintenance of Bank’s capital is significantly limited by New Hampshire branching laws. adequacy and the reinvigoration of Bank as a competitor for N.H. Rev. Stat. Ann. § 384-B. retail banking services in the market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

770 Federal Reserve Bulletin □ September 1979 banks for savings banks. Accordingly, the Board Hampshire corporation’s business are committed concludes that the proposal involves no competi­ by law to their respective directors, not to their tive effects that require denial of this application. shareholders. 12 U.S.C. §71; N.H. Rev. Stat. In acting upon applications, the Board must Ann. § 294.89. Applicant’s initial directors have consider the managerial resources of the acquiring been identified, as has the process for filling va­ bank holding company, including all the factors cancies in Applicant’s board of directors as they that bear upon the competence, quality, and integ­ occur. The initial directors are experienced indi­ rity of an applicant’s management. NHBA’s pro­ viduals with a background in financial manage­ test contends that the managerial resources of ment, and there is no basis in the record for Applicant do not support approval of this applica­ concluding that these directors or future directors tion. NHBA argues that the initial offering letter so chosen may not competently and honestly by Applicant’s principals contained material manage Applicant’s business, or that they may not omissions constituting a violation of the federal select experienced and capable officers.13 On the securities laws, reflecting adversely on Applicant’s basis of the record the Board finds that the mana­ managerial resources; that there is no identifiable gerial resources of Applicant and Bank are satis­ chief executive officer for Bank; and that by limit­ factory. ing their active participation in Applicant’s affairs, Applicant would incur no debt incident to this the shareholders are precluded from giving Appli­ proposal, and the Board regards the financial re­ cant sufficient managerial guidance. sources and future prospects of Applicant and NHBA contends that the initial offering letter Bank as satisfactory. The Board concludes that omits material facts without which the letter was banking factors are consistent with approval of the misleading to holders of Bank’s shares. Such application. omissions, according to NHBA, constituted a vio­ Applicant has indicated that upon consumma­ lation of federal securities laws, which violation, tion of its proposal it would make changes in the in turn, reflects so adversely on Applicant’s man­ customer services provided by Bank. Among the agement that the Board must deny this applica­ new services Applicant intends to cause Bank to tion.12 However, on the basis of memoranda sub­ offer to the public are NOW accounts, IRA and mitted by Applicant and NHBA, the offering letter Keogh accounts, money market certificates of de­ itself, and appropriate consultation with staff of posit, payroll checking accounts, overdraft privi­ the Securities and Exchange Commission, the leges and business and commercial loans secured Board has concluded that the record contains no by accounts receivable and inventories. In addi­ evidence establishing conduct on the part of Ap­ tion, Applicant expects to improve Bank’s physi­ plicant’s proposed management that could support cal facilities. Bank would also function as a corre­ an adverse finding with respect to this application. spondent for thrift institutions, although this serv­ NHBA also contends that Applicant’s failure to ice would be phased-in on a gradual basis. Appli­ name a new chief executive officer for Bank raises cant has given assurances that such services will serious questions as to Applicant’s managerial not be provided at the expense of Bank’s capital soundness, and that by assuming limited interests adequacy, and that its implementation of these and limited roles, Applicant’s shareholders will correspondent services will be slowed as necessary not give Applicant sufficient managerial direction. to maintain Bank as a sound financial institution As stated, in recognition of the Board’s concerns at all times. Accordingly, considerations relating regarding their status under the Act, Applicant’s to the convenience and needs of the communities shareholders will not participate in the business to be served lend weight toward approval of this affairs of Applicant and Bank except to elect application. Based upon the foregoing and other Applicant’s directors and vote on other matters considerations reflected in the record, it is the properly before the shareholders, without coordin­ ation among themselves. The Board does not believe that either of these 13. The advance identification of proposed principal officers aspects of this proposal reflects adversely on Ap­ of an institution may, of course, be of critical importance in plicant’s managerial resources. The management applications involving institutions having doubtful or deficient of a national bank’s affairs and that of a New financial or managerial resources or future prospects. It may be impractical, however, for a company to employ a suitable chief executive for a bank, or to announce that individual’s employment publicly, before it is known whether the company 12. The Association also argues that this alleged securities will be permitted to acquire the bank. In this case, Applicant law violation renders this proposal clearly contrary to the public has prescribed satisfactory intentions regarding its search for convenience and needs of the community to be served. a qualified and experienced officer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 111 Board’s judgment that this application should be justified by the banking needs of the local custom­ approved. ers Bank was chartered to serve. For reasons stated On the basis of the record and subject to the in the Board’s D. H. Baldwin Company Order, conditions recited in this Order, the application I believe it is contrary to the public interest to is approved for the reasons summarized above. permit commercial banks and separately regulated The transaction shall not be made before the thir­ thrift institutions, by affiliation with one another tieth calendar day following the effective date of through a bank holding company, to acquire and this Order, or later than three months after the exercise wider powers than the law would other­ effective date of this Order unless such period is wise allow them, and to blur distinctions estab­ extended for good cause by the Board or by the lished by law among those institutions. This prin­ Federal Reserve Bank of Boston pursuant to dele­ ciple precludes a savings bank from acquiring 25 gated authority. percent of a bank holding company’s voting By order of the Board of Governors, effective shares, and there is no basis on which I can August 21, 1979. conclude that it is more in the public interest for 94 percent of those shares to be acquired by a Voting for this action: Chairman Volcker and Gover­ combination of savings banks. nors Schultz, Wallich, Partee, Teeters, and Rice. Voting Second, I have earlier expressed my fundamen­ against this action: Governor Coldwell. tal objections to domestic joint ventures by finan­ (Signed) Theodore E. Allison, cial institutions,2 and this case is a concrete illus­ [seal] Secretary of the Board. tration of the problem these joint ventures entail. The savings bank-shareholders in this case have agreed not to participate actively in the manage­ Dissenting Statement of Governor Coldwell ment of Applicant or to coordinate the exercise of their ownership rights among themselves. This The Board has the flexibility under the Bank agreement is not designed in any way to help Bank; Holding Company Act to deny applications to its sole purpose is to attempt to position the share­ form bank holding companies on the basis of the holders artificially beyond the reach of the nonbank public interest as the Board perceives it. It is my prohibitions of the Act and to frustrate the Board’s opinion that the public interest requires that this legitimate scrutiny of their nonbank activities. application be denied. The Board has long insisted that bank holding First, I am concerned not only that this proposal companies be sources of strength to their subsidi­ violates principles the Board has established re­ ary banks. But in this case the Board will permit garding affiliations between commercial banks and the formation of a bank holding company that is thrift organizations, but that approval may en­ likely not to be a source of strength, because of courage other organizations to combine in order conditions limiting shareholder involvement. to accomplish an expansion of activities that would These conditions do not in any way serve the be impermissible to any one of them. In connec­ public interest but only weaken the organization’s tion with an application by D. H. Baldwin Com­ resources and prospects by fragmenting necessary pany to retain Empire Savings, Building and Loan responsibility and accountability for the enterprise. Association,1 the Board determined that the po­ I see no reason to be sympathetic to the dilemma tentially adverse effects of generally allowing af­ Applicant’s shareholders faced in devising this filiations of banks and savings and loan associa­ proposal. If they assumed active or joint manage­ tions are sufficiently strong to outweigh benefits ment roles, the proposal would more clearly rep­ that might result in individual cases. That decision resent an impermissible combination of commer­ should govern the disposition of this case, which cial banking with the operation of savings banks. would affiliate a bank holding company not only By instead refraining from full participation in with one thrift institution but with two-thirds of management, they handicap the resources and fu­ all mutual savings banks in New Hampshire. ture prospects of Applicant and Bank to an extent The sole purpose of this proposed affiliation is that in my opinion would warrant denial of this to permit the participating savings banks to obtain application, without effectively curing the funda­ correspondent banking services that they cannot mental objection I have to control of commercial perform themselves directly. The proposal is not banks by thrift institutions. 2. SYB Corporation, 63 Federal Reserve Bulletin 587, 1. 63 Federal Reserve Bulletin 280 (1977). 589 (1977). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

772 Federal Reserve Bulletin □ September 1979 Finally, I believe the effect of this proposal on ices for themselves, there is little incentive for competition in the Laconia banking market is them to encourage Bank to be a vigorous compet­ incompatible with approval. If this proposal is itor in the local market for other banking services. consummated, Bank will be controlled by a group For the foregoing reasons, I would deny this that includes four savings banks in the Laconia application. banking market, which together hold approxi­ August 21, 1979 mately 65 percent of time and savings deposits held by depository institutions in that market. To the extent that commercial banks and savings banks compete, consummation of this proposal Thomson Investment Company, Inc., would not only eliminate Bank as an independent Savanna, Illinois competitor with three larger savings banks in the Order Approving Retention of Bank Shares market, but would also effectively preclude the likelihood that Bank’s existing savings bank affil­ Thomson Investment Company, Inc., Savanna, iation may be broken in the future. Illinois, a bank holding company within the Empirical studies have established to my satis­ meaning of the Bank Holding Company Act, has faction that New Hampshire commercial banks applied for the Board’s approval under section affiliated with mutual savings banks in that state 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to have not operated as independent competitors, but retain 56 voting shares of Thomson State Bank have significantly restricted their participation in (“Bank”), Thomson, Illinois. the residential real estate and time and savings Notice of the application, affording opportunity deposits market.3 In the face of that evidence, for interested persons to submit views and recom­ which includes surveys of commercial banks as­ mendations, has been given in accordance with sociated with mutual savings banks by very small section 3(b) of the Bank Holding Company Act shareholdings and relatively few common officers (12 U.S.C. § 1842(b)). The time for filing views and directors, I believe this proposal to form a and recommendations has expired, and the Board bank holding company wholly controlled by sav­ has considered the application and all comments ings banks and drawing its officers and directors received in light of the factors set forth in section almost exclusively from the management of sav­ 3(c) of the Act (12 U.S.C. § 1842(c)). ings banks will necessarily have at least an adverse Applicant, a one-bank holding company,1 owns effect on competition in the Laconia banking mar­ 54.8 percent of the outstanding voting shares of ket. Bank. From 1973 through June 1977, Applicant In this connection, I draw little comfort from acquired 56 shares of Bank, representing 11.2 Applicant’s representations that it will not obtain percent of the outstanding voting shares of Bank, management officials from savings banks operating without the prior approval of the Board in violation in the local market, and I do not attach importance of the Act and the Board’s Regulation Y. Appli­ to Applicant’s argument that the savings bank- cant now seeks the Board’s approval to retain these shareholders operating outside that market would shares.2 have no motive to restrain Bank from offering Bank (approximately $4.2 million in deposits) services similar to those offered by savings banks is one of the smaller commercial banks in Illinois, in the market. The first representation is little more holding approximately 0.01 percent of total com­ than Applicant’s affirmation that it will comply mercial bank deposits in the state.3 Bank is the with laws prohibiting management interlocks smallest of eleven banking organizations in the among unaffiliated local depository institutions, relevant banking market,4 holding approximately without which this application could not be prop­ erly considered. With respect to the savings bank- 1. Applicant is engaged in certain nonbanking activities that shareholders operating outside the market, to me are subject to 10-year grandfather privileges. the crucial fact is that, so long as they are able 2. Additionally, in June 1977, Applicant redeemed 40 of its shares, representing more than 10 percent of Applicant’s to secure a captive source of correspondent servnet worth, without giving prior notice to the Federal Reserve Bank of Chicago as required by section 225.6(a) of Regulation 3. Eisenbeis and McCall, “The Impact of Legislation Pro­ Y (12 C.F.R. § 225.6(a)). Applicant has requested approval hibiting Director-Interlocks Among Depository Financial Insti­ to retain these shares. tutions,” 2 Journal of Banking and Finance 323 (1978); 3. All banking data are as of June 30, 1978. Eisenbeis and McCall, “Some Effects of Affiliations Among 4. The relevant banking market is the Clinton Area banking Mutual Savings and Commercial Bank,” 27 Journal of Finance market, which is approximated by Clinton County, Iowa, excluding the northern portion of the county lying within an 865 (1977). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 773 1.7 percent of total commercial bank deposits in Board has determined that the circumstances of the market. Since Applicant has no other banking the violations do not reflect so adversely on the subsidiaries and since the proposal involves only managerial factors as to warrant denial of this the retention of shares of Bank, which at all times application. pertinent hereto was controlled by Applicant, ap­ Thus, banking factors are regarded as consistent proval of the application will not result in any with approval of the application. Although there adverse effects on existing or potential competi­ will be no immediate increase in the services tion, nor increase the concentration of banking offered by Bank, convenience and needs consid­ resources in any relevant area.5 Thus, competitive erations are regarded as consistent with approval. considerations are regarded as consistent with ap­ It is the Board’s judgment that retention of the proval of the application. subject shares is consistent with the public interest Where principals of an applicant are engaged and that the application should be approved. in operating a chain of banking organizations, the On the basis of the record, the application to Board, in addition to analyzing the one-bank retain shares of Bank, as well as the request to holding company proposal before it, also considers retain the redeemed shares of Applicant, is ap­ the total chain and analyzes the financial and proved for the reasons summarized above. managerial resources and future prospects of the By order of the Board of Governors, effective chain within the context of the Board’s multi-bank August 17, 1979. holding company standards. Based upon such an­ Voting for this action: Chairman Volcker and Gover­ alysis in this case, the financial resources and nors Schultz, Wallich, Coldwell, Partee, Teeters, and future prospects of Applicant and Bank appear to Rice. be satisfactory. Under section 3 of the Bank Holding Company (Signed) Theodore E. Allison, Act, the Board must consider the managerial re­ [seal] Secretary of the Board. sources of an applicant and a bank to be acquired. As indicated above, the subject application is an after-the-fact request for the Board’s approval to WISCUB, Inc., retain shares of Bank that were purchased without Milwaukee, Wisconsin the prior approval of the Board; Applicant has also requested approval to retain shares of Applicant Order Approving Formation of that were redeemed in violation of Regulation Y. WISCUB, Inc., a Bank Holding Company Upon examination of all the facts surrounding the On December 30, 1977, the Board approved the violations, the Board concludes that the violations application of WISCUB, Inc. (“WISCUB”), do not warrant denial of the application. In acting Milwaukee, Wisconsin, to become a bank holding upon the application, the Board has taken into company by acquiring approximately 86 percent consideration the fact that Applicant promptly filed of the voting shares of Cleveland State Bank this application after the violations were brought (“Bank”), Cleveland, Wisconsin.1 WISCUB’s to its attention and that Applicant’s management application had been protested by the Wisconsin has taken action to prevent violations from occur­ Bankers Association (“WBA”), which subse­ ring in the future, including the initiation of an quently petitioned for judicial review of the affirmative program under the direction of one of Board’s Order. its officers to ensure compliance with the Act and On October 27, 1978, the United States Court Regulation Y. The Board expects that these actions of Appeals for the District of Columbia Circuit will assist Applicant in avoiding future violations. remanded the matter of WISCUB’s application to In consideration of the above and other informa­ the Board for further development of evidence tion in the record evidencing Applicant’s intent regarding the managerial resources of WISCUB to comply with the requirements of the Bank and a possible control relationship between the Holding Company Act and Regulation Y, the Wisconsin Credit Union League (“WCUL”) and WISCUB.2 In response to the Court of Appeals’ eight-mile radius of Maquoketa, Iowa, and including the area in Illinois immediately across the Mississippi River from Clin­ ton County. 1. 64 Federal Reserve Bulletin 40 (1978). 5. Principals of Applicant are also principals of other banks 2. Wisconsin Bankers Association v. Board of Governors located in Illinois, Iowa, and Indiana. Each of these banks of the Federal Reserve System, No. 78-1083 (D.C. Cir. Oct. competes in a separate market from Bank. 27, 1978), unreported. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

11A Federal Reserve Bulletin □ September 1979 remand, the Board directed WISCUB to supple­ serve as trustee for the voting trust) might consti­ ment the record with information on these issues tute a bank holding company under the Bank and afforded WBA the opportunity to comment Holding Company Act of 1956, as amended (the on these issues and on WISCUB’s submissions. “Act”). The Board also felt that, since the voting The Board has reexamined the record on the ap­ trustee was to be a trade association of credit plication, including the submissions of WISCUB unions, the trade association’s responsibilities to and WBA following the remand and, based upon its 650 credit union members might conflict with that review, makes the following findings as to its trustee responsibilities to the 173 credit union the facts, and the conclusions drawn therefrom. beneficiaries of the voting trust. In response to the Board’s conditions for ap­ 1. Background proval, WISCUB notified the Board, by letter WISCUB was originally organized by WCUL dated January 5, 1978, that the entire voting trust to acquire Bank (deposits of $7.9 million as of arrangement had been eliminated from the pro­ March 31, 1979) for the stated purpose of provid­ posal and that each credit union-shareholder of ing better and more efficient service to the financial WISCUB would vote its own shares. WISCUB and banking needs of Wisconsin credit unions. also advised the Board that WISCUB had amended WISCUB is wholly owned by 173 of WCUL’s its by-laws to prohibit any director or employee credit union members, no one of which owns or of WCUL from serving as a director or officer controls 5 percent or more of WISCUB’s out­ of WISCUB, and that its directors would instead standing voting shares. be selected from among the officers, directors or Under the proposal originally presented to the members of its credit union-shareholders. Board, the credit union-shareholders agreed to On January 27, 1978, WBA requested that the enter into a voting trust agreement with WCUL, Board stay and reconsider its Order. WBA also designating WCUL as voting trustee for the shares filed a petition for judicial review of the Board’s of WISCUB. WISCUB’s board of directors was Order in the Court of Appeals. On February 1, to be made up of the members of the executive 1978, the Board denied WBA’s request for a stay; committee of the WCUL board of directors, and and, on March 2, 1978, the Board denied peti­ the chief executive officer of WCUL was to serve tioner’s request for reconsideration. as president of WISCUB. Each credit union- On October 27, 1978, the Court remanded the shareholder, however, was to retain the right to case to the Board, after finding WBA’s arguments direct the voting of its shares of WISCUB’s stock. meritorious with respect to two aspects of the WBA vigorously protested the application on Board’s December 30, 1977 Order. Because WIS­ the grounds that (1) consummation of the proposal CUB had eliminated the trust altogether, rather would be anti-competitive; (2) approval of the than comply with the Board’s condition to select application would be inconsistent with the Board’s a bona fide independent voting trustee, the Court finding in D. H. Baldwin Company, 63 Federal found the administrative record inadequate to Reserve Bulletin 280 (1977), that a bank hold­ demonstrate whether the Board had given consid­ ing company may not acquire a savings and loan eration to the implications of WISCUB being association or similar thrift institution; and (3) the operated without a voting trust agreement. The credit unions and WCUL would constitute an Court found it was possible that, in the absence illegal bank holding company. WBA also re­ of an independent voting trustee, WISCUB would quested a formal hearing on the application. be controlled in fact by WCUL as the only cen­ On December 30, 1977, the Board denied tralized policy-making body of the credit union- WBA’s request for a hearing and approved WIS­ shareholders, thus frustrating the Board’s condi­ CUB’s application. The Board conditioned its tion that WCUL not participate in any way in approval upon the selection of a bona fide inde­ WISCUB’s management. The Court further in­ pendent trustee for the voting trust and upon structed the Board to consider whether, if WCUL WCUL’s refraining from any role by any means did not exercise de facto control over WISCUB, in the management of Bank or WISCUB. These WISCUB would be operated without centralized conditions were imposed because the Board was direction and would therefore function less effi­ of the view that the trade association might exer­ ciently than contemplated by the Board when it cise control over WISCUB’s and Bank’s manage­ conditioned approval upon selection of an inde­ ment and that the shareholders of WISCUB (united pendent voting trustee. The Court also concluded through both a voting trust agreement and common that, by excluding WCUL officers and directors membership in the trade association that would from serving WISCUB in any capacity, the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 775 had approved WISCUB’s application without evi­ from its credit union-shareholders is a positive dentiary support in the record with respect to factor in the Board’s evaluation of the managerial WISCUB’s managerial resources. resources of WISCUB. Indeed, in its post-remand In response to the Court’s remand, the Board submissions to the Board, WBA did not claim any requested WISCUB to submit information regard­ inadequacy in WISCUB’s managerial resources. ing WISCUB’s current officers and directors, in­ On the basis of the record as amplified by submis­ cluding all the information on managerial re­ sions of WISCUB, WBA, WCUL and the credit sources requested by the Board’s bank holding union-shareholders, the Board finds that WIS­ company application form, to describe how these CUB’s managerial resources are satisfactory and officers and directors had been selected and would consistent with approval of this application.3 be selected in the future, and to comment upon 3. The relationship of WCUL to WISCUB the legal and practical effects of the elimination As indicated, the Board’s December 30, 1977 of WISCUB’s voting trust arrangement and the Order conditioned approval of the application upon substitution of an arrangement under which each a complete separation of WCUL from any role WISCUB credit union-shareholder votes its own in the management of WISCUB. The Board be­ shares. The Board also asked WISCUB to respond lieved such a separation could be accomplished to a series of specific questions, posed by WBA, by substituting an independent trustee for WCUL regarding WCUL’s continued involvement, if any, as the voting trustee. Because WISCUB eliminated in WISCUB’s affairs, the operation of WISCUB the voting trust arrangement altogether, the Court in the absence of the voting trust, the procedures of Appeals questioned whether, in the absence of for handling WISCUB’s shareholder matters, and an independent voting trustee, WISCUB would the process for selecting officers and directors for controlled in fact by WCUL as the only centralized WISCUB and Bank. The Board afforded WBA op­ policy-making body of the credit union share­ portunity to comment upon these issues and upon holders. WISCUB’s submissions. WBA fully availed itself In its review of the application on remand, the of this opportunity. As indicated, the Board also Board has solicited information from WISCUB directed WISCUB to answer specific questions and WBA with respect to the management and raised by WBA concerning the remand issues. control of WISCUB and Bank and the role, if any, 2. WISCUB’s managerial resources of WCUL therein. WISCUB has furnished infor­ In response to the Board’s request, WISCUB mation to demonstrate that it is in complete com­ submitted the information requested in the Board’s pliance with the purpose and intent of the Board’s bank holding company form regarding the mana­ December 30, 1977 Order; that no officer or gerial resources of an applicant, including bio­ graphical data on each of WISCUB’s officers and 3. In its remand order, the Court expressed concern that directors. WISCUB stated that each of its current the elimination of the voting trust might have so decentralized five directors was elected to a one-year term of control of WISCUB that WISCUB might operate less effi­ ciently than contemplated by the Board in its December 30, office by direct election by its credit union-share- 1977 Order. WISCUB’s commitments have satisfied the Board holders. These directors also serve as WISCUB’s that WISCUB’s day-to-day management and overall policy officers. WISCUB has assured the Board that at direction will be derived from its officers and board of directors and that the substitution of direct voting by the credit unioneach future annual meeting of WISCUB, each of shareholders for WISCUB’s directors will have no adverse its directors and officers will be subject to election effect on the efficiency with which WISCUB is operated. by the same procedure and will be drawn from Control of WISCUB will be centralized in, and exercised by, WISCUB’s five directors and officers. the officers, directors, and employees of WIS­ The Board’s direction for selection of an independent voting CUB’s credit union-shareholders. The record trustee in its December 30, 1977 Order was designed to eliminate the control problems raised by WCUL’s proposed shows that each current director and officer of service as voting trustee. The Board concluded that, if a voting WISCUB is an officer of one of WISCUB’s credit trust were used by WISCUB’s shareholders, the trustee should union-shareholders and has held long-term full­ be independent. The Board did not require that a voting trust be used to hold WISCUB’s shares. Elimination of the voting time employment as an officer of a credit union; trust and trustee and the prohibition against WCUL’s partici­ that each has substantial financial experience and pation in any manner in WISCUB’s affairs fully accomplishes is responsible, knowledgeable, and capable of pro­ the Board’s goal of separating WCUL from WISCUB. In its March 2, 1978 Order denying WBA’s request for recon­ viding direction and leadership to WISCUB; and sideration, the Board, at least impliedly, viewed WISCUB’s that none of these individuals is affiliated with revision of its proposal (i.e., its elimination of the voting trust) WCUL. The Board is also of the view that the as acceptable compliance with the Board’s December 30, 1977 Order and consistent with the Board’s goal of separating pool of managerial talent available to WISCUB WCUL from WISCUB and Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

776 Federal Reserve Bulletin □ September 1979 director of WISCUB is an officer or director of Both WBA and WISCUB have had ample op­ WCUL, or has any affiliation with WCUL other portunity to make inquiries, submissions, counter­ than as an officer of a credit union that is a member submissions and responses regarding the relation­ of WCUL; that no director or officer of Bank is ship between WCUL and WISCUB. WISCUB has affiliated with WCUL;4 that WCUL is providing responded fully and fairly to every question that to WISCUB and Bank only limited administrative WBA has raised. WBA has not in any way services (such as typing and mailing) that are disputed the facts presented by WISCUB. The reimbursed by WISCUB; that WCUL has worked Board finds that the record adequately establishes with Bank only to the extent that WCUL has that WISCUB is complying with, and is committed assisted other Wisconsin banks developing share- to complying with, the condition in the Board’s draft clearing programs; that, at the annual meet­ December 30, 1977 Order requiring WCUL to ing of WCUL’s delegates, there have not been, refrain from any role in the management of Bank nor will there be, any committee meetings, other or WISCUB, and that WISCUB is not controlled actions or documents relating to the management in fact by WCUL. or policy decisions of WISCUB or Bank; that 4. The “company99 issue proxies for shareholder meetings of WISCUB will WBA contends that, on the present record and not indicate the views of WCUL or its directors in the absence of an independent trustee, the credit and officers; that the WCUL district system plays union-shareholders might, as a group, constitute no role in the selection of WISCUB’s officers or a bank holding company. WBA claims that, be­ directors; that WCUL will have no role in the cause the credit union-shareholders have a com­ solicitation of additional subscribers to WISCUB’s mon purpose and objective in their acquisition of stock; and that WCUL plays no role in the selec­ WISCUB, they are not acting separately or inde­ tion of officers or directors for either WISCUB pendently of one another but are engaged in an or Bank. WISCUB has further assured the Board alleged entrepreneurial activity to control a com­ that WISCUB’s shareholders will elect its board mercial bank. Accordingly, WBA argues, the of directors which, in turn, on behalf of the credit union-shareholders constitute a “company” principal shareholder of Bank, will determine the within the meaning of section 2(b) of the Act and, composition of Bank’s management. WBA has because the credit union-shareholders together disputed none of these submissions of fact. own more than 25 percent of WISCUB’s shares, WCUL has submitted assurances to the Board a bank holding company. that WCUL will not exercise, or attempt to exer­ On several occasions, the Board has addressed cise, control or any controlling influence over the the legal issues involved in ownership of a bank management or policies of WISCUB or Bank, or holding company by a number of individual, non­ attempt to influence the credit union-shareholders controlling shareholders. The Board has approved in the voting of their shares of WISCUB. The the formation of three bank holding companies Board has received from the credit union-share­ each owned by credit unions and of a bank holding holders of WISCUB written assurances that they company owned by sixteen one-bank holding have no agreements with WCUL concerning either companies. In each of these instances, the share­ the manner in which their shares of WISCUB will holders purchased less than 5 percent of the shares be voted or the management, operation or control of the new bank holding company.6 The Board of WISCUB or Bank.5 found these acquisitions to be consistent with the purposes of the Act, particularly since, under section 2(a)(4) of the Act, a company owning or 4. Only one of the seven directors of Bank serves as an officer of a credit union member of WCUL. 5. WBA’s claim that WCUL exercises a controlling influ­ ence over the management of Bank and WISCUB is based control or a controlling influence over WISCUB, or that the on information provided by WISCUB that the original directors current directors of WISCUB are representatives of WCUL of WISCUB (who were also members of WCUL’s executive or subject to its control. committee) selected the present group of WISCUB directors, 6. See CUbanc Corporation, 62 Federal Reserve Bulle­ who in turn appointed themselves as WISCUB’s officers. tin 792 (1976)(bank holding company owned by 24 Ohio However, the record shows that, shortly after the selection credit unions); CU Bank Shares, Inc., 62 Federal Reserve of the replacement directors, the annual meeting of WISCUB Bulletin 364 (1976)(bank holding company owned by 150 was held, and at that meeting each of the WISCUB share­ Texas credit unions); Business Administrative Needs of holders was afforded the opportunity to participate in the Kansas, 39 Federal Register 26,068 (1974)(bank holding election of directors. The WISCUB shareholders reelected the company owned by 27 Kansas credit unions); SYB Corpora­ replacement directors. The Board believes the evidence prof- tion, 63 Federal Reserve Bulletin 587 (1977)(bank holding erred by WBA is inadequate to show that WCUL exercises company owned by 16 one-bank holding companies). 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Law Department 111 controlling, directly or indirectly, 5 percent or less In its 1977 evaluation of WISCUB’s applica­ of the voting securities of a bank or company may tion, the Board considered WBA’s comments and not be held to have control over that bank or concluded that approval of WISCUB’s application company (unless the company is found, after no­ should be conditioned upon an absence of control tice and opportunity for hearing, to exercise a by the trade association, WCUL, over WISCUB.9 controlling influence over the bank or company— By eliminating the voting trust entirely and deter­ an exception not relevant here).7 mining instead that the 173 credit union-share­ The Board has taken the position that there must holders should each vote directly and inde­ be a “formalized structure” for control among the pendently for the directors of WISCUB, WISCUB shareholders of a bank or bank holding company eliminated the trust and trustee as a possible basis in order for the shareholders collectively to con­ for “company” status. As indicated earlier, the stitute a bank holding company within the meaning Board finds that elimination of the voting trust of the Act. The U.S. Court of Appeals for the from the proposal is consistent with the Board’s D.C. Circuit has endorsed the Board’s position.8 requirement that WCUL shall not control WI­ There is, in WISCUB’s case, no evidence of any SCUB or Bank and that WCUL shall no longer formalized structure or unifying force for control be associated in any way with the management that would cause the credit union-shareholders of or operation of WISCUB or Bank. WISCUB to be considered a bank holding com­ The Board believes that the record in this case pany. The ownership and control of WISCUB is does not warrant a finding that WISCUB’s credit widely dispersed among 173 separate and inde­ union-shareholders, each of which owns or con­ pendent credit unions. The evidence of record trols less than 5 percent of the shares of WISCUB, shows that there are no agreements between or individually or collectively constitute a company among the, formal or informal, as to how WIS- or a bank holding company under the Act. CUB’s shares would be voted or with respect to control of WISCUB or Bank in any manner. 5. WBA’s hearing request The individual credit union-shareholders have In remanding this case to the Board for further submitted assurances to the Board that they have development of evidence, the Court stated, “[i]f not entered, and will not enter, into any agree­ necessary to supplement the existing administra­ ments, formal or informal, with any or all of the tive record, the Board should in its discretion hold other shareholders of WISCUB or with WCUL a hearing in this matter.” WBA had requested a concerning either the voting of WISCUB’s shares hearing before the Board on WISCUB’s original or the management, operations or policies of WIS­ application, and renewed its request for a hearing CUB or Bank. in submissions to the Board dated November 20, 1978, December 26, 1978, and April 4, 1979. WBA contends that the issues raised before the 7. The Board believes its position is supported by the legislative history of the Act. The original House version of Court, and for which the Court requested the the 1970 Amendments to the Act contained a provision bring­ development of further evidence, turn on questions ing within the coverage of the Act a company “acting in of “intent, purpose and understanding,” and that concert with one or more persons.” H.R. 6778, 91st Cong., 1st Sess. (1969). The Senate rejected the “acting in concert” these issues cannot be determined from corre­ language and substituted the phrase now contained in section spondence between the parties. 2(a)(2)(A) of the Act, “acting through one or more other WBA’s submissions are directed only to persons.” H.R. 6778, 91st Cong., 2d Sess. (1970). 8. Central Bank v. Board of Governors of the Federal whether WISCUB is or will be controlled by Reserve System, No. 77-1937 (D.C. Cir. Feb. 1, 1979), WCUL and whether the credit union-shareholders unreported. There has been only one instance in which the Board has concluded that a proposed acquisition of a bank of WISCUB constitute a “company”. However, holding company, where each of the acquiring companies WBA has not disputed any of WISCUB’s detailed would acquire less than 5 percent of the shares of the company, statements of fact regarding the disaffiliation of would result in those shareholders being collectively a bank holding company. In that situation, the Board found that the WCUL from WISCUB or the relationships among six companies involved, each of which was owned by an individual and members of his immediate family, would be acting “with a single purpose and at the direction and under the control of [the individual]/4 and that “because of their common ownership and the control exercised over them by 9. In CUbanc Corporation, CU Bank Shares, Inc., and [this individual], are incapable of independent action.” Letter Business Administrative Needs of Kansas, where the Board of November 17, 1978, from the Secretary of the Board to had found acceptable a voting trust arrangement with the credit William C. Beaman, regarding a proposed acquisition of 24 union trade association as the voting trustee, the bank holding percent of the voting shares of Wyoming Bancorporation, companies were required by the Board to modify their opera­ Cheyenne, Wyoming. tions to conform to the standards set for WISCUB. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

778 Federal Reserve Bulletin □ September 1979 the credit union-shareholders.10 In the absence of WISCUB warrants approval. The application of any disputed facts and any reason to disbelieve WISCUB is again approved. the commitments made in this matter, the Board By order of the Board of Governors, effective finds that a hearing is neither necessary nor appro­ August 21, 1979. priate in this case.11 There is no statutory12 or due Voting for this action: Chairman Volcker and Gover­ process13 requirement for a hearing in this situa­ nors Schultz, Wallich, Coldwell, Partee, Teeters, and tion. Rice. 6. Conclusion (Signed) Theodore E. Allison, The Board has thoroughly considered the issues [seal] Secretary of the Board. that formed the basis of the Court’s remand, WBA’s claims and submissions, and all the evi­ dence of record. Based upon this review, the Order Under Section 4 Board concludes that the steps taken by WISCUB of Bank Holding Company Act in eliminating the independent voting trustee were consistent with the Board’s December 30, 1977 Charles Stewart Mott Foundation, Order; that the evidence of record shows that Flint, Michigan WISCUBs managerial resources are adequate; that WISCUB has satisfactorily demonstrated its inde­ Order Approving pendence from WCUL; that the evidence of record Exemption of Nonbanking fails to show that WCUL has control of, or exer­ Activities of Bank Holding Company cises a controlling influence over, WISCUB or Charles Stewart Mott Foundation (“Appli­ Bank; that the evidence of record fails to show cant”), Flint, Michigan, a bank holding company any “formalized structure” or agreement or un­ within the meaning of the Bank Holding Company derstanding among the credit union-shareholders Act with respect to The Wayne Oakland Bank for control of WISCUB or Bank; and that there (“Bank”), Royal Oak, Michigan, has applied to are no disputed operative facts for which a hearing the Board of Governors, pursuant to section 4(d) would be appropriate or useful in this matter. of the Act (12 U.S.C. § 1843(d)), for an exemp­ Accordingly, on the basis of the entire record, tion from the prohibitions of section 4 of the Act including the record and findings made with re­ (relating to nonbanking activities of, and acquisi­ spect to the Board’s December 30, 1977 Order, tions by, a bank holding company). it is the Board’s judgment that the application of Notice of receipt of the application, affording opportunity for interested persons to submit com­ ments regarding this application, has been pub­ 10. On the basis that the original WISCUB board of directors lished in the Federal Register (44 Federal Register (composed of WCUL officers and directors) selected its suc­ 25,692 (1979)). The time for filing comments has cessor, WBA contends that WCUL might continue to control expired and the Board has considered the applica­ WISCUB. The Board believes, as discussed above, that this process of selecting WISCUB’s board of directors is not tion and all comments received in light of the sufficient evidence of control by WCUL, particularly since (a) factors set forth in section 4(d) of the Act. these directors were reelected at WISCUB’s annual shareholder Section 4(d) of the Act provides that, to the meeting by the individual independent credit unions and (b) WCUL and the shareholders of WISCUB, respectively, have extent such action would not be substantially at assured the Board that WCUL does not and will not control variance with the purposes of the Act and subject WISCUB and that the shareholders vote their shares as they please and without any agreements or understandings or influ­ to such conditions as the Board considers neces­ ence from WCUL or among themselves. sary to protect the public interest, the Board may 11. The Board regards these commitments and assurances grant an exemption from the prohibitions in section as conditions of the Order of approval. Any departure from these commitments and assurances may result in invalidation 4 of the Act to a bank holding company that of the Order or the initiation of other remedies. controlled one bank prior to July 1, 1968, and 12. Section 3(b) of the Act requires the Board to hold a has not thereafter acquired the control of any other formal hearing when the primary supervisor of the bank to be acquired recommends disapproval of the application (12 bank, in order (1) to avoid disrupting business U.S.C. § 1842(b)). In WISCUB’s case, no such disapproval relationships that have existed over a long period was recommended. 13. See Farmers and Merchants Bank of Las Cruces v. of years without adversely affecting the banks or Board of Governors of the Federal Reserve System, 567 F. communities involved, (2) to avoid forced sales 2d 1082 (D.C. Cir. 1977); Grandview Bank and Trust Co. of small locally owned banks to purchasers not v. Board of Governors of the Federal Reserve System, 550 F. 2d 415 (8th Cir.), cert, denied, 434 U.S. 821 (1977). similarly representative of community interests, or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 779 (3) to allow retention of banks that are so small demand deposits with Bank, but neither Applicant in relation to the holding company’s total interests nor USS has ever borrowed from Bank. There is and so small in relation to the banking market to no evidence of any misuse of Bank by Applicant, be served as to minimize the likelihood that the nor any evidence to suggest that the continued bank’s powers to grant or deny credit may be ownership of Bank by Applicant will jeopardize influenced by a desire to further the holding com­ the financial soundness of Bank. pany’s other interests. As stated, Bank controls about two percent of Applicant is a charitable foundation established the aggregate deposits in the Detroit banking mar­ in 1926 by Charles Stewart Mott, to fund educa­ ket. Applicant’s total assets of approximately $396 tional and religious programs and to promote the million are smaller than those of Bank, and by public welfare. Applicant has investment interests this standard, Bank cannot be said to be small in in several banking and nonbanking companies, but relation to Applicant. However, the Board notes it holds more than five percent of the voting shares that Applicant’s investment in Bank constitutes 3.3 of only two organizations: a 24.9 percent interest percent of its total investments, and its income in United States Sugar Corporation (“USS”), from Bank in 1977 approximated 2.5 percent of Clewiston, Florida, which is engaged primarily in its total income.2 growing sugar cane and raising cattle, and a 55 On the basis of the entire record, the Board percent interest in Bank. concludes that the business relationships between Bank’s predecessors survived the bank failures Applicant and Bank have existed over a long of the 1930’s, partially as a result of the efforts period of years without adversely affecting the of Mr. Mott. These predecessor institutions were banks or communities involved, and it appears merged in the early 1940’s, and Applicant has unlikely that Bank’s powers to grant or deny credit owned a majority of Bank’s shares since 1944, would be influenced by a desire to further Appli­ a period of affiliation comprehended by section cant’s other interests. Granting an exemption to 4(d)(1) of the Act. With deposits of approximately Applicant would not be substantially at variance $374 million as of June 30, 1978, Bank is the with the purposes of the Act nor adverse to the ninth largest bank located in the Detroit banking public interest; and an exemption is warranted market1 and holds about two percent of the aggre­ under the provisions of section 4(d) of the Act. gate deposits in commercial banks in that market. Accordingly, an exemption pursuant to section Bank appears to be in satisfactory condition, its 4(d) of the Act is hereby granted subject to the management capable, and its prospects good. condition that this determination may be revoked The Board has found no evidence that the own­ if the facts upon which it is based change in any ership and control of Bank by Applicant has had material respect. Further, the provision of any an adverse effect on Bank or the communities credit, property, or service by Applicant or any involved. Rather it appears that Applicant has subsidiary thereof shall not be subject to any undertaken substantial charitable endeavors in the condition which, if imposed by a bank, would areas of education, religion, and public welfare constitute an unlawful tie-in arrangement under for the benefit of those communities and the United section 106 of the Bank Holding Company Act States generally. For example, between 1967 and Amendments of 1970. This determination is sub­ 1977, Applicant made charitable grants totaling ject to the Board’s authority to require modifi­ approximately $165 million. Moreover, to assist cation or termination of the activities of Applicant in Bank’s growth and to strengthen its capital or any of its nonbanking subsidiaries as the Board position, Applicant approved Bank’s policy of not finds necessary to assure compliance with the paying cash dividends, a policy that continued for provisions and purposes of the Act and the Board’s approximately 30 years. At the time Applicant regulations and orders issued thereunder, or to acquired it, Bank’s total assets were $17 million, prevent evasions thereof. and its capital and reserves approximated $750,- 000. By 1978, Bank’s total assets had grown to $425 million and its capital and reserves exceeded 2. Although as a general rule it may not be appropriate to $30 million. Applicant has maintained substantial grant a section 4(d) exemption to a bank holding company that controls a bank as large as Bank in absolute terms, Applicant’s charitable nature and its exemplary record vis a vis Bank persuade the Board that Bank’s size should not bar 1. This market is approximated by all of Macomb, Oakland, the granting of an exemption in this case. Moreover, the Board and Wayne Counties and portions of the five surrounding notes that as a private foundation, Applicant’s activities and counties of St. Clair, Lapeer, Livingston, Washtenaw, and investments are substantially limited by provisions of the Monroe. Internal Revenue Code. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

780 Federal Reserve Bulletin □ September 1979 By order of the Board of Governors, effective Bank to 99 percent of the outstanding voting shares August 6, 1979. of Bank. 3. GATX became a bank holding company on Voting for this action: Vice Chairman Schultz and December 31, 1970, as a result of the 1970 Governors Wallich, Partee, Teeters, and Rice. Absent Amendments to the BHC Act, by virtue of its and not voting: Chairman Miller and Governor Coldwell. ownership and control at that time of more than 25 percent of the outstanding voting shares of (Signed) Griffith L. Garwood, Bank, and it registered as such with the Board [seal] Deputy Secretary of the Board. on November 8, 1971. GATX would have been a bank holding company on July 7, 1970, if the BHC Act Amendments of 1970 had been in effect Certification Pursuant to the Bank on such date, by virtue of its ownership and control Holding Company Tax Act of 1976 on that date of more than 25 percent of the out­ standing voting shares of Bank. GATX presently GATX Corporation, owns and controls 582,591 shares, representing 84 Chicago, Illinois percent of the outstanding voting shares, of Bank.2 4. GATX holds property acquired by it on or Prior Certification Pursuant to the Bank Holding before July 7, 1940, the disposition of which Company Tax Act of 1976 would be necessary or appropriate under section [Docket No. TCR 76-102] 4 of the BHC Act if GATX were to remain a bank holding company beyond December 31, 1980, and GATX Corporation (formerly General Ameri­ which property is “prohibited property” within can Transportation Corporation), Chicago, Illinois the meaning of section 1103(c) of the Code. (“GATX”) has requested a prior certification pur­ 5. On March 31, 1971, GATX filed with the suant to section 6158(a) of the Internal Revenue Board an irrevocable declaration pursuant to sec­ Code (“Code”), as amended by section 3(a) of tion 225.4(d) of the Board’s Regulation Y that it the Bank Holding Company Tax Act of 1976 would cease to be a bank holding company prior (“Tax Act”), that its proposed sale of 582,591 to January 1, 1981, by divesting itself of all of shares of common stock (“Bank Shares”) of La­ its interest in Bank. In accordance with that portion Salle National Bank, Chicago, Illinois (“Bank”), of the regulation and GATX’s commitment, to A.B.N.-Stichting, a wholly-owned subsidiary GATX has been permitted to expand its nonbank­ of Algamene Bank Nederland, both of Amster­ ing activities without seeking the Board’s prior dam, The Netherlands (together referred to as approval. “ABN”) for cash, is necessary or appropriate to 6. GATX has committed to the Board that no effectuate the policies of the Bank Holding Com­ person holding an office or position (including an pany Act (12 U.S.C. § 1842 et seq.) (“BHC advisory or honorary position) with GATX or any Act”). of its subsidiaries as a director, policy-making In connection with this request, the following employee or consultant, or who performs (directly, information is deemed relevant for purposes of or through an agent, representative or nominee) issuing the requested certification:1 functions comparable to those normally associated 1. GATX is a corporation organized on July with such office or position, will hold any such 5, 1916, under the laws of the State of New York. office or position or perform any such function 2. On November 20, 1968, GATX completed with Bank or ABN. GATX has further committed an exchange offer whereby it acquired ownership that the officers of GATX presently serving as and control of 614,243 shares, representing 91 per­ directors of Bank will terminate their positions cent of the outstanding voting shares, of Bank. with Bank. On July 1, 1969, GATX completed a second On the basis of the foregoing information, it exchange offer whereby it acquired ownership and is hereby certified that: control of an additional 68,838 shares of Bank, (A) GATX is a qualified bank holding corpora­ thereby increasing its percentage of ownership in tion within the meaning of section 1103(b) of the 2. On February 21, 1978, the Board issued a prior certifi­ 1. This information derives from GATX’s correspondence cation pursuant to the Tax Act relating to the sale by GATX with the Board concerning its request for this certification, of 100,000 shares of the stock of Bank on November 30, 1973. GATX’s Registration Statement filed with the Board pursuant The instant certification relates to the divestiture by GATX to the BHC Act, and other records of the Board. of all of its remaining interest in Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 781 Code, and satisfies the requirements of that sec­ material to this certification are otherwise than as tion; represented by GATX, or that GATX has failed (B) Bank Shares covered by the instant request to disclose to the Board other material facts or are part of the property by reason of which GATX to fulfill any commitments made to the Board in controls (within the meaning of section 2(a) of the connection herewith, it may revoke the certifi­ BHC Act) a bank; and cation. (C) the sale of such shares is necessary or By order of the Board of Governors, acting appropriate to effectuate the policies of the BHC through its Acting General Counsel, pursuant to Act. delegated authority (12 C.F.R. 265.2(b)(3)), ef­ This certification is based upon the repre­ fective August 13, 1979. sentations and commitments made to the Board by GATX and upon the facts set forth above. In (Signed) Griffith L. Garwood, the event the Board should determine that facts [seal] Deputy Secretary of the Board. Orders Approved Under Bank Holding Company Act By the Board of Governors During August 1979 the Board of Governors approved the applications listed below. Copies are available upon request to Publications Services, Division of Support Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Board action (effective Applicant Bank(s) date) Akron Financial, Inc., Akron Exchange State Bank, August 20, 1979 Akron, Indiana Akron, Indiana Apple wood Bankcorp, Inc., Bank of Apple wood, August 3, 1979 Wheat Ridge, Colorado Wheat Ridge, Colorado First Alabama Bancshares, Inc., The Conecuh County Bank, August 20, 1979 Montgomery, Alabama Evergreen, Alabama First Security Corporation, First Security Bank of Richfield, N.A., August 27, 1979 Salt Lake City, Utah Richfield, Utah Frankfort Bancorporation, Inc., The Bank of West Frankfort August 24, 1979 West Frankfort, Illinois West Frankfort, Illinois Gibson Investment Company, Gibson Savings Bank, August 9, 1979 Gibson, Iowa Gibson, Iowa Goodenow Bancorporation, Wall Lake Savings Bank, August 28, 1979 Wall Lake, Iowa Wall Lake, Iowa Kupka’s, Inc., The First Community Bank and Trust, August 20, 1979 Traer, Iowa Traer, Iowa Southern Bancorporation of Alabama, First National Bank of Etowah County, August 31, 1979 Birmingham, Alabama Attalla, Alabama Stanley Bancorporation, Inc., Farmers and Merchants State Bank, August 3, 1979 Stanley, Wisconsin Stanley, Wisconsin TALEN, INC., First State Bank of Edgerton, August 8, 1979 Edgerton, Wisconsin Edgerton, Wisconsin Texas American Bancshares, Inc., Fredericksburg National Bank, August 10, 1979 Fort Worth, Texas Fredericksburg, Texas Tuscumbia Bancshares, Inc., Bank of Tuscumbia, August 6, 1979 Kansas City, Missouri Tuscumbia, Missouri Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

782 Federal Reserve Bulletin □ September 1979 Section 4 Nonbanking company Effective Applicant (or activity) date Rainier Bancorporation, Insurance agency activities August 31, 1979 Seattle, Washington Swift County Financial Corporation, Swift County Agricultural Credit August 13, 1979 Benson, Minnesota Association, Benson, Minnesota Wesbanco, Inc., Ohio Valley Finance Company, August 31, 1979 Wheeling, West Virginia Wheeling, West Virginia By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies of the orders are available upon request to the Reserve Banks. Section 3 Reserve Effective Applicant Bank(s) Bank date First International Bancshares, San Jacinto State Bank, Dallas August 15, 1979 Inc., Dallas, Texas Pasadena, Texas National City Corporation, The Fairfield National Bank, Cleveland August 23, 1979 Cleveland, Ohio Lancaster, Ohio Valley Bancorporation, The Wisconsin National Bank Chicago August 16, 1979 Appleton, Wisconsin in Watertown, Watertown, Wisconsin Orders Approved Under Bank Merger Act Reserve Effective Applicant Bank(s) Bank date Cortland Savings & Banking Western Reserve Bank of Portage Cleveland August 14, 1979 Company, Cortland, Ohio County, Windham, Ohio The Union Savings Bank and Trust Scio Bank Company, Cleveland August 27, 1979 Company, Steubenville, Ohio Scio, Ohio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Law Department 783 Pending Cases Involving the Board of Governors Does not include suits against the Federal Reserve Banks in which the Board of Governors is not named a party. September 1978, U.S.C.A. for the District of Donald W. Riegel, Ir. v. Federal Open Market Columbia. Committee, filed July 1979, U.S.D.C. for the Beckley v. Board of Governors, filed July 1978, District of Columbia. U.S.C.A. for the Northern District of Illinois. Connecticut Bankers Association, etal., v. Board Independent Bankers Association of Texas v. First of Governors, filed May 1979, U.S.C.A. for National Bank in Dallas, et al., filed July 1978, the District of Columbia. U.S.C.A. for the Northern District of Texas. Ella lackson et al., v. Board of Governors, filed Mid-Nebraska Bancshares, Inc. v. Board of Gov­ May 1979, U.S.C.A. for the Fifth Circuit. ernors, filed July 1978, U.S.C.A. for the Dis­ Memphis Trust Company v. Board of Governors, trict of Columbia. filed May 1979, U.S.C. A. for the Sixth Circuit. United States League of Savings Associations v. U.S. Labor Party v. Board of Governors, filed Board of Governors, filed May 1978, U.S.D.C. April 1979, U.S.C.A. for the Second Circuit. for the District of Columbia. U.S. Labor Party v. Board of Governors, filed Security Bancorp and Security National Bank v. April 1979, U.S.C.A. for the Second Circuit. Board of Governors, filed March 1978, Independent Insurance Agents of America, et al., U.S.C.A. for the Ninth Circuit. v. Board of Governors, filed May 1979, Wisconsin Bankers Association v. Board of Gov­ U.S.C.A. for the District of Columbia. ernors, filed January 1978, U.S.C.A. for the Independent Insurance Agents of America, et al., District of Columbia. v. Board of Governors, filed April 1979, Vickars-Henry Corp. v. Board of Governors, filed U.S.C.A. for the District of Columbia. December 1977, U.S.C.A. for the Ninth Cir­ Independent Insurance Agents of America, et al., cuit. v. Board of Governors, filed March 1979, Investment Company Institute v. Board of Gover­ U.S.C.A. for the District of Columbia. nors, filed September 1977, U.S.D.C. for the Credit and Commerce American Investment, et District of Columbia. al., v. Board of Governors, filed March 1979, Roberts Farms, Inc. v. Comptroller of the Cur­ U.S.C.A. for the District of Columbia. rency, et al., filed November 1975, U.S.D.C. Consumers Union of the United States, v. G. for the Southern District of California. William Miller, et al., filed December 1978, David R. Merrill, et al., v. Federal Open Market U.S.D.C. for the District of Columbia. Committee of the Federal Reserve System, filed Manchester-Tower Grove Community Organi­ May 1975, U.S.D.C. for the District of Colum­ zation/ACORN v. Board of Governors, filed bia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Al Financial and Business Statistics Contents Domestic Financial Statistics Weekly Reporting Commercial Banks A3 Monetary aggregates and interest rates Assets and liabilities A4 Factors affecting member bank reserves A20 All reporting banks A5 Reserves and borrowings of member A21 Banks in New York City banks A22 Banks outside New York City A6 Federal funds transactions of money A23 Balance sheet memoranda market banks A24 Commercial and industrial loans A25 Gross demand deposits of individuals, Policy Instruments partnerships, and corporations A8 Federal Reserve Bank interest rates A9 Member bank reserve requirements Financial Markets A10 Maximum interest rates payable on A25 Commercial paper and bankers dollar time and savings deposits at federally acceptances outstanding insured institutions A26 Prime rate charged by banks on All Federal Reserve open market short-term business loans transactions A26 Terms of lending at commercial banks A27 Interest rates in money and capital Federal Reserve Banks markets A12 Condition and Federal Reserve note A28 Stock market—Selected statistics statements A13 Maturity distribution of loan and A29 Savings institutions—Selected assets and liabilities security holdings Monetary and Credit Aggregates Federal Finance A13 Bank debits and deposit turnover A30 Federal fiscal and financing operations A14 Money stock measures and components A31 U.S. budget receipts and outlays A15 Aggregate reserves and deposits of A32 Federal debt subject to statutory member banks limitation A15 Loans and investments of all A32 Gross public debt of U.S. Treasury— commercial banks Types and ownership A33 U.S. government marketable securities—Ownership, by maturity Commercial Bank Assets and Liabilities A34 U.S. government securities dealers— A16 Last-Wednesday-of-month series Transactions, positions, and financing A17 Call-date series A35 Federal and federally sponsored credit A18 Detailed balance sheet, September 30, 1978 agencies—Debt outstanding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A2 Federal Reserve Bulletin □ September 1979 Securities Markets and International Statistics Corporate Finance A54 U.S. international transactions— A36 New security issues—State and local Summary governments and corporations A55 U.S. foreign trade A37 Open-end investment companies—Net A55 U.S. reserve assets sales and asset position A56 Foreign branches of U.S. banks— A37 Corporate profits and their distribution Balance sheet data A38 Nonfinancial corporations—Assets and A58 Selected U.S. liabilities to foreign liabilities official institutions A38 Business expenditures on new plant and equipment Reported by Banks in the United States A39 Domestic finance companies—Assets and liabilities; business credit A58 Liabilities to and claims on foreigners A59 Liabilities to foreigners A61 Banks’ own claims on foreigners Real Estate A62 Banks’ own and domestic customers’ A40 Mortgage markets claims on foreigners A41 Mortgage debt outstanding A62 Banks’ own claims on unaffiliated foreigners A63 Claims on foreign countries— Combined domestic offices and Consumer Installment Credit foreign branches A42 Total outstanding and net change A43 Extensions and liquidations Securities Holdings and Transactions A64 Marketable U.S. Treasury bonds and Flow of Funds notes—Foreign holdings and transactions A44 Funds raised in U.S. credit markets A64 Foreign official assets held at Federal A45 Direct and indirect sources of funds to Reserve Banks credit markets A65 Foreign transactions in securities Domestic Nonfinancial Statistics Reported by Nonbanking Business A46 Nonfinancial business activity— Enterprises in the United States Selected measures A66 Liabilities to unaffiliated foreigners A46 Output, capacity, and capacity A67 Claims on unaffiliated foreigners utilization A47 Labor force, employment, and Interest and Exchange Rates unemployment A48 Industrial production—Indexes and A68 Discount rates of foreign central banks gross value A68 Foreign short-term interest rates A50 Housing and construction A69 Guide to Tabular Presentation and A51 Consumer and wholesale prices Statistical Releases A52 Gross national product and income A53 Personal income and saving Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Domestic Financial Statistics A3 1.10 MONETARY AGGREGATES AND INTEREST RATES 1978 1979 1979 Item Q3 Q4 Ql Q2 Mar. Apr. May June July Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent)13 Member bank reserves 1 Total................................................................................................ 8.6 2.3 -2.9 -4.9 1.8 -4.9 -4.9 -1.8 12.0 2 Required......................................................................................... 8.6 2.1 -2.8 -4.8 3.3 -5.5 -3.9 -4.1 12.3 3 Nonborrowed................................................................................ 6.6 4.6 -3.3 -8.8 1.3 -2.9 -30.6 8.9 20.0 4 Monetary base1............................................................................ 9.3 8.4 5.7 4.0 4.6 4.9 3.1 6.1 10.9 Concepts of money 2 5 M-l.................................................................................................. 7.9 4.1 -2.1 7.6 1.3 17.7 .7 14.8 10.1 6 M-1 + .............................................................................................. 6.1 2.7 -5.0 3.6 -1.0 11.4 -2.3 12.1 10.0 7 M-2.................................................................................................. 9.8 7.6 1.8 8.6 3.8 14.1 5.4 14.2 12.7 8 M-3................................................................................................... 10.3 9.3 4.7 7.9 6.2 10.5 4.9 11.9 11.3 Time and savings deposits Commercial banks 9 Total............................................................................................ 11.3 12.3 8.4 1.2 -1.4 2.1 -1.4 .8 12.2 10 Savings........................................................................................ 2.9 0.2 -9.6 -3.1 -4.9 0 -7.2 7.8 9.4 11 Other time.................................................................................. 17.9 18.2 15.6 18.5 13.6 19.8 19.9 17.6 18.1 12 Thrift institutions 3....................................................................... 11.1 11.6 8.8 6.8 9.5 5.6 4.1 8.8 9.3 13 Total loans and investments at commercial banks4............. r13.3 *■12.7 *■13.2 rll.9 r7.3 *■14.1 *■8.3 *•13.0 13.2 1978 1979 1979 Q4 Ql Q2 Mar. Apr. May June July Aug. Interest rates (levels, percent per annum) Short-term rates 9.58 10.07 10.18 10.09 10.01 10.24 10.29 10.47 10.94 15 Federal Reserve discount6......................................................... 9.09 9.50 9.50 9.50 9.50 9.50 9.50 9.69 10.24 16 Treasury bills (3-month market yield)7................................... 8.57 9.38 9.38 9.48 9.46 9.61 9.06 9.24 9.52 17 Commercial paper (90- to 119-day)7.8.................................... 9.83 10.04 9.85 9.90 9.85 9.95 9.76 9.87 10.43 Long-term rates Bonds 18 U.S. government9..................................................................... 8.78 9.03 9.08 9.08 9.12 9.21 8.91 8.92 8.97 19 State and local government10.............................................. 6.28 6.37 6.22 6.33 6.29 6.25 6.13 6.13 6.20 20 Aaa utility (new issue)11........................................................ 9.23 9.58 9.66 9.62 9.70 9.83 9.50 9.58 9.48 21 Conventional mortgages12......................................................... 10.12 10.33 10.35 10.35 10.55 10.80 10.90 10.95 11.10 1. Includes total reserves (member bank reserve balances in the current 6. Rate for the Federal Reserve Bank of New York. week plus vault cash held two weeks earlier); currency outside the U.S. 7. Quoted on a bank-discount basis. Treasury, Federal Reserve Banks and the vaults of commercial banks; 8. Beginning Nov. 1977, unweighted average of offering rates quoted and vault cash of nonmember banks. by at least five dealers. Previously, most representative rate quoted by 2. M-l equals currency plus private demand deposits adjusted. these dealers. M-l-f equals M-l plus savings deposits at commercial banks, NOW 9. Market yields adjusted to a 20-year maturity by the U.S. Treasury. accounts at banks and thrift institutions, credit union share draft ac­ 10. Bond Buyer series for 20 issues of mixed quality. counts, and demand deposits at mutual savings banks. 11. Weighted averages of new publicly offered bonds rated Aaa, Aa, M-2 equals M-l plus bank time and savings deposits other than large and A by Moody’s Investors Service and adjusted to an Aaa basis. negotiable certificates of deposit (CDs). Federal Reserve compilations. M-3 equals M-2 plus deposits at mutual savings banks, savings and 12. Average rates on new commitments for conventional first mortgages loan associations, and credit union shares. on new homes in primary markets, unweighted and rounded to nearest 3. Savings and loan associations, mutual savings banks, and credit 5 basis points, from Dept, of Housing and Urban Development. unions. 13. Unless otherwise noted, rates of change are calculated from average 4. Quarterly changes calculated from figures shown in table 1.23. amounts outstanding in preceding month or quarter. Growth rates for 5. Seven-day averages of daily effective rates (average of the rates on member bank reserves are adjusted for discontinuities in series that result a given date weighted by the volume of transactions at those rates). from changes in Regulations D and M. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics □ September 1979 1.11 FACTORS AFFECTING MEMBER BANK RESERVES Millions of dollars Monthly averages of daily figures Weekly averages of daily figures for weeks ending— Factors 1979 1979 June July Aug.p July 18 July 25 Aug.l Aug. 8 Aug. 15 Aug. 22? Aug. 29 ? Supplying Reserve Funds 1 Reserve Bank credit outstanding......... 129,035 131,585 131,497 132,930 131,745 131,272 129,831 131,144 132,470 131,894 2 U.S. government securities i............... 106,865 109,921 111,639 110,986 110,338 111,103 110,105 110,829 112,394 112,887 3 Bought outright................................. 105,825 108,673 111,044 109,382 108,848 110,321 110,008 110,362 111,446 111,967 4 Held under repurchase agree­ ments ............................................... 1,040 1,248 595 1,604 1,490 782 97 467 948 920 5 Federal agency securities..................... 7,788 8,377 8,519 8,572 8,512 8,553 8,267 8,366 8,729 8,757 6 Bought outright................................. 7,537 7,854 8,243 7,761 7,761 8,243 8,243 8,243 8,243 8,243 7 Held under repurchase agree­ ments ............................................... 251 523 276 811 751 310 24 123 486 514 8 Acceptances............................................ 310 717 388 711 940 834 73 411 572 429 9 Loans....................................................... 1,396 1,179 1,097 1,182 1,292 946 762 1,023 1,386 1,116 10 Float......................................................... 6,383 5,758 4,940 5,575 5,154 4,575 5,214 5,241 4,861 4,228 11 Other Federal Reserve assets............. 6,293 5,633 4,915 5,904 5,509 5,261 5,410 5,274 4,527 4,475 12 Gold stock.............................................. 11,328 11,299 11,266 11,291 11,291 11,291 11,286 11,259 11,259 11,259 13 Special drawing rights certificate 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 14 Treasury currency outstanding........... 12,357 12,446 12,529 12,448 12,456 12,486 12,488 12,501 12,551 12,564 Absorbing Reserve Funds 15 Currency in circulation........................ 115,819 117,701 118,244 118,082 117,480 117,371 117,962 118,512 118,362 118,051 16 Treasury cash holdings......................... 369 335 265 353 320 282 265 267 266 265 Deposits, other than member bank reserves, with Federal Reserve Banks 17 Treasury................................................... 3,271 3,303 3,021 3,307 3,182 3,095 2,719 2,957 3,183 2,986 18 Foreign..................................................... 284 288 294 279 248 282 306 294 293 277 19 Other........................................................ 661 761 634 857 826 716 677 608 562 607 20 Other Federal Reserve liabilities and capital................................................... 4,294 4,551 4,572 4,510 4,618 4,917 4,189 4,387 4,718 4,856 21 Member bank reserves with Federal Reserve Banks.................................... 29,822 30,191 30,062 31,082 30,616 30,185 29,286 29,680 30,696 30,476 End-of-month figures Wednesday figures 1979 1979 June July Aug.? July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22^ Aug. 29* Supplying Reserve Funds 130,972 131,474 132,213 135,755 129,946 131,822 127,243 131,667 131,097 135,828 23 U.S. government securities 1............... 109,737 111,445 113,027 111,387 108,104 110,290 105,579 109,801 111,222 115,135 24 Bought outright................................. 106,432 109,366 112,635 109,265 107,383 110,015 105,579 109,801 111,222 113,028 25 Held under repurchase agree­ ments. ............................................ 3,305 2,079 392 2,122 721 275 0 0 0 2,107 26 Federal agency securities..................... 8,587 8,881 8,395 8,599 8,482 8,409 8,243 8,243 8,243 8,999 27 Bought outright................................. 7,761 8,243 8,242 7,761 7,761 8,243 8,243 8,243 8,243 8,242 28 Held under repurchase agree­ ments ............................................... 826 638 153 838 721 166 0 0 0 757 29 Acceptances............................................ 1,400 1,159 475 1,064 824 588 0 0 0 699 30 Loans....................................................... 1,558 852 1,572 1,501 1,168 1,348 887 2,707 1,509 917 31 Float......................................................... 3,924 3,896 4,123 7,434 6,086 5,719 7,082 6,456 5,649 5,498 32 Other Federal Reserve assets............. 5,766 5,241 4,621 5,770 5,282 5,468 5,452 4,460 4,474 4,580 33 Gold stock.............................................. 11,323 11,290 11,259 11,291 11,291 11,290 11,260 11,259 11,259 11,259 34 Special drawing rights certificate account................................................ 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 35 Treasury currency outstanding........... 12,525 12,599 12,600 12,456 12,456 12,475 12,493 12,521 12,560 12,589 Absorbing Reserve Funds 36 Currency in circulation........................ 116,575 117,896 118,786 118,089 117,587 117,864 118,607 118,834 118,427 118,708 37 Treasury cash holdings......................... 370 262 272 343 311 257 265 268 264 272 Deposits, other than member bank reserves, with Federal Reserve Banks 38 Treasury................................................... 3,290 2,765 3,542 3,668 2,336 4,012 2,498 3,805 2,851 3,176 39 Foreign..................................................... 326 373 325 269 239 226 258 312 262 308 40 Other......................................................... 813 636 663 656 675 1,161 644 674 534 541 41 Other Federal Reserve liabilities and capital................................................... 4,836 4,951 4,876 4,491 4,741 4,938 4,272 4,510 4,717 4,993 42 Member bank reserves with Federal Reserve Banks.................................... 30,407 30,279 29,407 33,785 29,604 28,929 26,252 28,844 29,661 33,479 1. Includes securities loaned—fully guaranteed by U.S. government Note. For amounts of currency and coin held as reserves, see table securities pledged with Federal Reserve Banks—and excludes (if any) 1.12. securities sold and scheduled to be bought back under matched salepurchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Member Banks A 5 1.12 RESERVES AND BORROWINGS Member Banks Millions of dollars Monthly averages of daily figures Reserve classification 1978 1979 Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug.® All member banks Reserves 1 At Federal Reserve Banks............... 29,853 31,158 31,935 30,485 30,399 30,675 30,208 29,822 30,191 30,062 2 Currency and coin............................ 9,794 10,330 11,093 10,074 9,776 9,737 10,044 10,154 10,552 10,521 3 Total held i.......................................... 39,728 41,572 43,167 40,703 40,316 40,546 40,382 40,105 40,900 40,738 39,423 41,447 42,865 40,494 40,059 40,548 40,095 39,884 40,710 40,502 5 Excess1............................................ 305 125 302 209 257 -2 287 221 190 236 Borrowings at Federal Reserve Banks2 722 874 994 973 999 897 1,777 1,396 1,179 1,097 7 Seasonal.............................................. 185 134 112 114 121 134 173 188 168 176 Large banks in New York City 6,682 7,120 7,808 6,995 6,892 6,804 6,658 6,346 6,605 6,358 6,658 7,243 7,690 6,976 6,845 6,837 6,544 6,415 6,586 6,427 24 -123 118 19 47 -33 114 -69 19 -69 48 99 117 0 45 61 150 78 97 79 Large banks in Chicago 1,791 1,907 2,011 1,824 1,822 1,801 1,730 1,726 1,709 1,731 1,765 1,900 2,010 1,823 1,809 1,824 1,712 1,697 1,713 1,706 26 7 1 1 13 -23 18 29 -4 25 4 10 23 10 26 18 60 64 45 7 Other large banks 15,547 16,446 16,942 16,055 15,844 15,948 15,926 15,989 16,374 16,216 15,447 16,342 16,923 16,018 15,802 16,014 15,893 15,877 16,339 16,327 100 104 19 37 42 -66 33 112 35 -111 194 276 269 275 215 271 721 586 517 481 All other banks 20 Reserves held.......................................... 15,708 16,099 16,406 15,829 15,758 15,993 16,068 16,044 16,212 16,108 15,553 15,962 16,242 15,677 15,603 15,873 15,946 15,895 16,072 16,042 22 Excess................................................... 155 137 164 152 155 120 122 149 140 66 476 489 585 688 713 547 846 668 520 530 Weekly averages of daily figures for weeks ending 1979 June 27 July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22p Aug. 29* All member banks Reserves 24 At Federal Reserve Banks............... 29.942 30,885 28,614 31,082 30,616 30,185 29,286 29,680 30,696 30,476 25 Currency and coin............................ 10,110 10,439 10,736 10,334 10,427 10,804 10,813 10,888 9,848 10,473 26 Total held i.......................................... 40,181 41,448 39,476 41,572 41,200 41,146 40,256 40,727 40,695 41,102 27 Required.......................................... 40,030 40,802 39,513 41,205 41,214 40,856 40,115 40,428 40,670 40,750 28 Excess1............................................ 151 646 -37 367 -14 290 141 299 25 352 Borrowings at Federal Reserve Banks 2 29 Total..................................................... 1,586 1,677 941 1,182 1,292 946 762 1,023 1,386 1,116 194 186 162 160 167 173 176 169 175 185 Large banks in New York City 6,334 6,717 6,201 6,931 6,573 6,608 6,349 6,482 6,386 6,461 6,301 6,657 6,264 6,868 6,624 6,544 6,323 6,489 6,448 6,418 33 60 -63 63 -51 64 26 -7 -62 43 59 416 39 54 7 0 24 209 14 50 Large banks in Chicago 1,615 1,755 1,656 1,789 1,735 1,691 1,694 1,761 1,891 1,690 1,600 1,737 1,645 1,782 1,743 1,663 1,691 1,749 1,696 1,687 15 18 11 7 -8 28 3 12 195 3 105 185 0 0 7 64 0 0 0 29 Other large banks 16,008 16,535 15,788 16,700 16,479 16,478 16,170 16,388 16,089 16,352 16,003 16,274 15,864 16,561 16,524 16,438 16,181 16,297 16,395 16,447 5 261 — 76 139 -45 40 -11 91 -306 -95 676 476 485 642 694 308 256 360 848 430 All other banks 43 Reserves held.......................................... 16,224 16,441 15,831 16,152 16,413 16,369 16,043 16,096 16,062 16,295 16,126 16,134 15,740 15,994 16,323 16,211 15,920 15,893 16,131 16,198 45 Excess................................................... 98 307 91 158 90 158 123 203 -69 97 746 600 417 486 584 574 482 454 524 607 1. Adjusted to include waivers of penalties for reserve deficiencies in nonmember bank joins the Federal Reserve System. For weeks for which accordance with Board policy, effective Nov. 19, 1975, of permitting figures are preliminary, figures by class of bank do not add to total transitional relief on a graduated basis over a 24-month period when a because adjusted data by class are not available, nonmember bank merges into an existing member bank, or when a 2. Based on closing figures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics □ September 1979 1.13 FEDERAL FUNDS TRANSACTIONS Money Market Banks Millions of dollars, except as noted 1979, week ending Wednesday Type July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 Total, 46 banks Basic reserve position 1 Excess reserves1.................................... 297 -31 101 -41 58 69 82 39 173 Less: 2 Borrowings at Federal Reserve Banks................................................... 828 285 137 342 173 64 238 318 174 3 Net interbank federal funds transactions........................................ 19,195 23,670 20,926 20,175 18,066 22,235 21,508 20,972 17,549 Equals: Net surplus, or deficit (—) 4 Amount.................................................. -19,726 -23,986 -20,962 -20,558 -18,181 -22,231 -21,663 -21,251 -17,549 5 Percent of average required reserves............................................... 115.5 145.5 118.4 118.7 106.2 132.3 126.4 124.6 102.8 Interbank federal funds transactions Gross transactions 6 Purchases........................................... 29,014 31,723 29,583 27,484 26,167 29,858 30,034 28,941 26,823 7 Sales.................................................... 9,819 8,053 8,657 7,308 8,101 7,623 8,527 7,969 9,275 8 Two-way transactions2....................... 6,716 6,786 6,378 6,372 6,312 6,386 6,075 5,846 6,460 Net transactions 9 Purchases of net buying banks..., 22,298 24,937 23,205 21,112 19,854 23,473 23,959 23,095 20,346 10 Sales of net selling banks.............. 3,102 1,267 2,280 937 1,789 1,237 2,452 2,123 2,815 Related transactions with U.S. government securities dealers 11 Loans to dealers 3......................... 3,628 4,919 2,738 2,492 2,529 3,959 2,730 3,246 2,646 12 Borrowings from dealers4......... 1,868 1,344 1,843 2,088 2,146 1,814 1,883 2,240 1,980 13 Net loans........................................ 1,760 3,575 895 404 383 2,144 847 1,007 666 8 banks in New York City Basic reserve position 14 Excess reserves1.................................... 63 -6 35 -42 7 47 17 39 85 Less: 15 Borrowings at Federal Reserve Banks................................................... 413 29 54 7 0 0 205 14 0 16 Net interbank federal funds transactions........................................ 5,833 7,082 4,159 5,383 5,412 6,539 5,505 5,378 3,675 Equals: Net surplus, or deficit (—) 17 Amount................................................... -6,183 -7,116 -4,178 -5,432 -5,405 -6,492 -5,693 -5,353 -3,591 18 Percent of average required reserves............................................... 103.5 126.5 67.9 91.6 92.0 114.0 97.5 92.0 62.0 Interbank federal funds transactions Gross transactions 19 Purchases............................................ 6,999 7,905 6,252 6,497 6,359 7,453 6,509 6,225 5,174 20 Sales.................................................... 1,166 823 2,093 1.114 946 914 1.004 847 1,499 21 Two-way transactions2....................... 1,057 823 1,052 1.114 947 914 1.005 847 1,336 Net transactions 22 Purchases of net buying banks.... 5,942 7,082 5,200 5,383 5,412 6,539 5,505 5,377 3,838 23 Sales of net selling banks............... 109 0 1,041 0 0 0 0 0 163 Related transactions with U.S. government securities dealers 24 Loans to dealers 3........................... 2,165 3,478 1,652 1,630 1,613 2,735 1,732 2,199 1,615 25 Borrowings from dealers4........... 628 633 686 632 727 783 823 667 789 26 Net loans.......................................... 1,537 2,844 966 999 886 1,952 909 1,532 826 38 banks outside New York City Basic reserve position 234 -25 66 1 50 22 66 0 89 Less: 28 Borrowings at Federal Reserve 416 256 84 335 173 64 33 304 174 29 Net interbank federal funds transactions.......................................... 13,362 16,588 16,767 14,792 12,654 15,696 16,003 15,595 13,874 Equals: Net surplus, or deficit (—) 30 Amount..................................................... -13,543 -16,869 -16,784 -15,126 -12,777 -15,739 -15,970 -15,898 -13,958 31 Percent of average required 121.9 155.3 145.4 132.7 113.7 141.6 141.4 141.4 123.7 Interbank federal funds transactions Gross transactions 22,015 23,819 23,331 20,986 19,808 22,405 23,525 22,716 21,649 8,653 7,231 6,564 6,194 7,154 6,709 7,522 7,121 7,776 34 Two-way transactions2......................... 5,659 5,964 5,326 5,258 5,366 5,472 5,070 4,998 5,124 Net transactions 35 Purchases of net buying banks........ 16,356 17,855 18,005 15,729 14,442 16,934 18,455 17,718 16,525 36 Sales of net selling banks................. 2,993 1,267 1,238 937 1,789 1,237 2,452 2,123 2,652 Related transactions with U.S. government securities dealers 37 Loans to dealers 3.................................... 1,463 1,441 1,087 861 916 1,224 998 1,048 1,031 1,240 711 1,158 1,456 1,419 1,031 1,060 1,572 1,190 224 731 -71 -595 -502 192 -63 -525 -160 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Funds A7 1.13 Continued 1979, week ending Wednesday Type July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 5 banks in City of Chicago Basic reserve position 40 Excess reserves1.................................... 71 21 19 2 34 17 17 0 18 Less: 41 Borrowings at Federal Reserve Banks................................................... 181 0 0 7 62 0 0 0 29 42 Net interbank federal funds transactions........................................ 6,541 7,965 8,063 6,944 5,968 6,729 8,076 8,130 7,961 Equals: Net surplus, or deficit (—) 43 Amount................................................... -6,652 -7,944 -8,045 -6,949 -5,996 -6,713 -8,059 -8,130 -7,972 44 Percent of average required reserves............................................... 423.0 519.2 483.5 427.5 388.0 426.0 493.7 514.4 507.9 Interbank federal funds transactions Gross transactions 45 Purchases............................................ 8,033 9,327 9,280 8,252 7,377 8,308 9,314 9,535 9,073 46 Sales..................................................... 1,491 1,363 1,216 1,309 1,409 1,579 1,238 1,405 1,112 47 Two-way transactions2....................... 1,491 1,355 1,216 1,309 1,409 1,579 1,238 1,405 1,112 Net transactions 48 Purchases of net buying banks___ 6,541 7,972 8,063 6,944 5,968 6,729 8,076 8,130 7,961 49 Sales of net selling banks............... 0 7 0 0 0 0 0 0 0 Related transactions with U.S. government securities dealers 50 Loans to dealers 3.................................. 291 387 162 120 127 144 120 184 230 51 Borrowings from dealers4................. 89 28 55 8 54 6 6 42 81 52 Net loans................................................ 202 359 107 112 73 138 115 142 149 33 other banks Basic reserve position 53 Excess reserves1...................................... 163 -46 48 -1 16 5 49 0 71 Less: 54 Borrowings at Federal Reserve Banks..................................................... 234 256 84 328 111 64 33 304 145 55 Net interbank federal funds transactions.......................................... 6,821 8,623 8,703 7,848 6,686 8,967 7,927 7,465 5,913 Equals: Net surplus, or deficit (—) 56 Amount..................................................... -6,892 -8,926 -8,739 -8,178 -6,781 -9,027 -7,912 -7,768 -5,987 57 Percent of average required reserves................................................. 72.3 95.7 88.4 83.7 69.6 94.6 81.9 80.4 61.6 Interbank federal funds transactions Gross transactions 58 Purchases.............................................. 13,982 14,491 14,051 12,734 12,431 14,097 14,211 13,182 12,576 59 Sales....................................................... 7,161 5,868 5,348 4,886 5,746 5,130 6,284 5,717 6,664 60 Two-way transactions2......................... 4,168 4,608 4,109 3,949 3,957 3,893 3,832 3,594 4,012 Net transactions 61 Purchases of net buying banks........ 9,814 9,883 9,942 8,785 8,474 10,204 10,379 9,588 8,564 62 Sales of net selling banks................. 2,993 1,260 1,238 937 1,789 1,237 2,452 2,123 2,652 Related transactions with U.S. government securities dealers 63 Loans to dealers 3.................................... 1,172 1,055 925 742 789 1,080 878 864 800 64 Borrowings from dealers4.................... 1,150 683 1,103 1,448 1,365 1,025 1,055 1,531 1,109 65 Net loans.................................................. 22 372 -178 -707 -576 55 -177 -667 -309 1. Based on reserve balances, including adjustments to include waivers 4. Federal funds borrowed, net funds acquired from each dealer by of penalities for reserve deficiencies in accordance with changes in policy clearing banks, reverse repurchase agreements (sales of securities to of the Board of Governors effective Nov. 19, 1975. dealers subject to repurchase), resale agreements, and borrowings secured 2. Derived from averages for individual banks for entire week. Figure by U.S. government or other securities. for each bank indicates extent to which the bank’s average purchases and sales are offsetting. Note. Weekly averages of daily figures. For description of series, see 3. Federal funds loaned, net funds supplied to each dealer by clearing August 1964 Bulletin, pp. 944—53. Back data for 46 banks appear in banks, repurchase agreements (purchases from dealers subject to resale), the Board’s Annual Statistical Digest, 1971-1975, table 3. or other lending arrangements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics □ September 1979 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Loans to member banks Loans to all others Under s€sc. 10(b)2 under sec. 13, last par.4 Federal Reserve Under secs. 13 and 13a1 Bank Regular rate Special rate 3 Rate on Effective Previous Rate on Effective Previous Rate on Effective Previous Rate on Effective Previous 8/31/79 date rate 8/31/79 date rate 8/31/79 date rate 8/31/79 date rate Boston.................... 10*4 8/20/79 10 11 8/20/79 10*4 11*4 8/20/79 11 13*4 8/20/79 13 New York............. 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Philadelphia.......... 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Cleveland............... 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Richmond............. 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Atlanta................... 10*4 8/20/79 10 11 8/20/79 10*4 11*4 8/20/79 11 13*4 8/20/79 13 Chicago................. 10*4 8/20/79 10 11 8/20/79 11*4 10*4 8/20/79 11 13*4 8/20/79 13 St. Louis................ 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Minneapolis.......... 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Kansas City........... 10*4 8/17/79 10 11 8/17/79 10*4 11*4 8/17/79 11 13*4 8/17/79 13 Dallas..................... 10*4 8/20/79 10 11 8/20/79 10*4 11*4 8/20/79 11 13*4 8/20/79 13 San Francisco.... 10*4 8/20/79 10 11 8/20/79 10*4 11*4 8/20/79 11 13*4 8/20/79 13 Range of rates in recent years5 Range F.R. Range F.R. Range F.R. Effective date (or level)— Bank Effective date (or level)— Bank Effective date (or level)— Bank All F.R. of All F.R. of All F.R. of Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1970., 5*4 5% 1973—July 2. 7 1977—Aug. 30................... 5 %-5 % 5% Aug. 14. 7-7*4 31................... 5%-5% 1971—Jan. 8. 5%-5*4 5% 23. 7*4 Sept. 2................... 5% 15 5% 5% Oct. 26................. 6 6 19. 5-5% 5% 1974—Apr. 25. 7*4-8 22. 5-5% 5 30. 8 1978—Jan. 9................... 6-6*4 6*4 29, 5 5 Dec. 9. 7%-8 20................... 6 *4 6*4 Feb. 13 4%-5 5 16. 7% May 11................... 6*4-7 7 19 4% 4% 12................... 7 7 July 16, 4%-5 5 1975—Jan. 6. 7%-7% July 3................... 7-7% 7% 5 5 10. 7*4-7% 10................... 7% 7% Nov. 11. 4%-5 5 24. 7% Aug. 21................... 7% 7% 19. 4% 4% Feb. 5. 6%-7% Sept. 22................... 8 8 Dec. 13. 4*4-4% 4% 7. 6% Oct. 16................... 8-8*4 8*4 17 4*4-4% 4*4 Mar. 10. 6%-6% 20................... 8*4 8*4 24. 4% 4*4 14. 6% Nov. 1................... 8*4-9*4 May 16. 6-6% 3................... 9*4 38 1973—Jan. 5 5 23. 6 Feb. 26. 5-5 *4 5*4 1979—July 20................... 10 10 Mar. 2 5 *4 5*4 1976—Jan. 19. 5*4-6 Aug. 17................... 10-10*4 10*4 Apr. 23. 5*4-5% 5*4 23, 5*4 20................... 10*4 10*4 May 4. 5% Nov. 22, 5%-5*4 11. 5%-6 I* 26, 5% In effect Aug. 31, 1979... 10*4 10*4 18. 6 6 June 11. 6-6 Vi 6*4 15. 6% 6*4 1. Discounts of eligible paper and advances secured by such paper or by 4. Advances to individuals, partnerships, or corporations other than U.S. government obligations or any other obligations eligible for Federal member banks secured by direct obligations of, or obligations fully Reserve Bank purchase. guaranteed as to principal and interest by, the U.S. government or any 2. Advances secured to the satisfaction of the Federal Reserve Bank. agency thereof. Advances secured by mortgages on 1- to 4-family residential property 5. Rates under secs. 13 and 13a (as described above). For description are made at the section 13 rate. and earlier data, see the following publications of the Board of Governors: 3. Applicable to special advances described in section 201.2(e)(2) of Banking and Monetary Statistics. 1914-1941 and 1941-1970; Annual Regulation A. Statistical Digest, 1971-1975, 1972-1976, and 1973-1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.15 MEMBER BANK RESERVE REQUIREMENTS1 Percent of deposits Requirements in effect Previous requirements August 31, 1979 Type of deposit, and deposit interval in millions of dollars Percent Effective date Percent Effective date Net demand2 0-2................................................................................................................ 7 12/30/76 1ft 2/13/75 2-10.............................................................................................................. m 12/30/76 10 2/13/75 10-100.......................................................................................................... ny4 12/30/76 12 2/13/75 100-400........................................................................................................ 123/4 12/30/76 13 2/13/75 Over 400...................................................................................................... 16V4 12/30/76 16% 2/13/75 Time and savings2-3-4 3 3/16/67 3ft 3/2/67 Times 0-5, by maturity 30-179 days........................................................................................ 3 3/16/67 3ft 3/2/67 180 days to 4 years........................................................................... 2ft 1/8/76 3 3/16/67 4 years or more................................................................................. 1 10/30/75 3 3/16/67 Over 5, by maturity 30-179 days........................................................................................ 6 12/12/74 5 10/1/70 180 days to 4 years........................................................................... 2ft 1/8/76 3 12/12/74 4 years or more................................................................................. 1 10/30/75 3 12/12/74 Legal limits Minimum Maximum Net demand Reserve city banks.................................................................................... 10 22 Other banks................................................................................................ 7 14 3 10 Borrowings from foreign banks............................................................. 0 22 1. For changes in reserve requirements beginning 1963, see Board’s on net balances due from domestic banks to their foreign branches and Annual Statistical Digest, 1971-1975 and for prior changes, see Board’s on deposits that foreign branches lend to U.S. residents were reduced to Annual Report for 1976, table 13. zero from 4 percent and 1 percent, respectively. The Regulation D reserve 2. (a) Requirement schedules are graduated, and each deposit interval requirement on borrowings from unrelated banks abroad was also reduced applies to that part of the deposits of each bank. Demand deposits to zero from 4 percent. subject to reserve requirements are gross demand deposits minus cash (d) Effective with the reserve computation period beginning Nov. 16, items in process of collection and demand balances due from domestic 1978, domestic deposits of Edge corporations are subject to the same banks. reserve requirements as deposits of member banks. (b) The Federal Reserve Act specifies different ranges of requirements 3. Negotiable order of withdrawal (NOW) accounts and time deposits for reserve city banks and for other banks. Reserve cities are designated such as Christmas and vacation club accounts are subject to the same under a criterion adopted effective Nov. 9, 1972, by which a bank having requirements as savings deposits. net demand deposits of more than $400 million is considered to have the 4. The average reserve requirement on savings and other time deposits character of business of a reserve city bank. The presence of the head must be at least 3 percent, the minimum specified by law. office of such a bank constitutes designation of that place as a reserve 5. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 city. Cities in which there are Federal Reserve Banks or branches are also percent was imposed on time deposits of $100,000 or more, obligations reserve cities. Any banks having net demand deposits of $400 million or of affiliates, and ineligible acceptances. less are considered to have the character of business of banks outside of reserve cities and are permitted to maintain reserves at ratios set for banks Note. Required reserves must be held in the form of deposits with not in reserve cities. For details, see the Board’s Regulation D. Federal Reserve Banks or vault cash. (c) Effective Aug. 24, 1978, the Regulation M reserve requirements Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics □ September 1979 .16 MAXIMUM INTEREST RATES PAYABLE on Time and Savings Deposits at Federally Insured Institutions Percent per annum Commercial banks Savings and loan associations and mutual savings banks Type and maturity of deposit In effect August 31,1979 Previous maximum In effect August 31,1979 Previous maximum Percent Effective Percent Effective Percent Effective Percent Effective date date date date 1 Savings......................................... 5% 7/1/79 5 7/1/73 5 Vi 7/1/79 51/4 (7) 2 Negotiable order of withdrawal accounts1................................. 5 1/1/74 (8) 5 1/1/74 (8) Time accounts2 Fixed ceiling rates by maturity 30-89 days......................................... 51/4 9/1/79 5 7/1/73 (8) (8) 90 days to 1 year............................... 5% 7/1/73 5 (9> 35% (7) 5K 1/21/70 2 1 t t o o 2 2 V y i e y ar e s a 3 r . s .. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7/1/73 5 5V V 4 i 1 1 / / 2 21 1/ /7 7 0 0 61/2 (7) 6 5V4 1 1 1 /2 11 1 n /7 o 0 4 2 V to i t 6 o y 4 e y ar e s a 4 r . s . 3 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 71 V /4 i 1 7 1 / / 1 1 / / 7 7 3 3 ( 5 1 Y 0 4 ) 1/21/70 6 m V4 1 ( 1 7 / ) 1/73 ( 6 10) 1 111 110 6 to 8 years4...................................... m 12/23/74 71/4 11/1/73 73/4 12/23/74 7 Vi 11/1/73 8 years or more4............................... 6/1/78 (8) 6/1/78 (8) Issued to governmental units (all maturities)...................................... 6/1/78 m 12/23/74 6/1/78 7% 12/23/74 Individual retirement accounts and Keogh (H.R. 10) plans (3 years or more) 5......................... 6/1/78 1V4 7/6/77 6/1/78 73/4 7/6/77 Special variable ceiling rates by maturity 13 6 months (money market time deposits)6......................................... O1) O1) O1) (u) (n) C11) (n) (n) 14 4 years or more................................... (l2) (12) (l2) (12) (12) (12) (12) (i2) 1. For authorized states only. Federally insured commercial banks, in 4 years or more with minimum denominations of $1,000. There is no savings and loan associations, cooperative banks, and mutual savings limitation on the amount of these certificates that banks can issue. banks in Massachusetts and New Hampshire were first permitted to offer 11. Commercial banks, savings and loan associations, and mutual negotiable order of withdrawal (NOW) accounts on Jan. 1, 1974. savings banks were authorized to offer money market time deposits effec­ Authorization to issue NOW accounts was extended to similar institutions tive June 1,1978. The ceiling rate for commercial banks is the discount rate throughout New England on Feb. 27, 1976, and in New York State on on most recently issued 6-month U.S. Treasury bills. Until Mar. 15, Nov. 10, 1978. 1979, the ceiling rate for savings and loan associations and mutual savings 2. For exceptions with respect to certain foreign time deposits see the banks was V4 percentage point higher than the rate for commercial banks. Federal Reserve Bulletin for October 1962 (p. 1279), August 1965 (p. Beginning Mar. 15, 1979, the V4 percentage point interest differential 1094), and February 1968 (p. 167). is removed when the 6-month Treasury bill rate is 9 percent or more. 3. No minimum denomination. Until July 1, 1979, a minimum of The full differential is in effect when the 6-month bill rate is 8% percent $1,000 was required for savings and loan associations, except in areas or less. Thrift institutions may pay a maximum 9 percent when the 6-month where mutual savings banks permitted lower minimum denominations. bill rate is between 8% and 9 percent. Also effective March 15, 1979, This restriction was removed for deposits maturing in less than 1 year, interest compounding was prohibited on money market time depositeffective Nov. 1, 1973. at all offering institutions. For both commercial banks and thrift institu­ 4. No minimum denomination. Until July 1, 1979, minimum denomina­ tions, the maximum allowable rates in July were as follows: Aug. 2,9.301; tion was $1,000 except for deposits representing funds contributed to an Aug. 9,9.320; Aug. 16,9.481; Aug. 23,9.504; Aug. 30,9.645. Individual Retirement Account (IRA) or a Keogh (H.R. 10) Plan es­ 12. Effective July 1, 1979, commercial banks, savings and loan associa­ tablished pursuant to the Internal Revenue Code. The $1,000 minimum tions, and mutual savings banks are authorized to offer variable ceiling requirement was removed for such accounts in December 1975 and No­ accounts with no required minimum denomination and with maturities of vember 1976, respectively. 4 years or more. The maximum rate for commercial banks is 1 percent­ 5. Accounts maturing in less than 3 years subject to regular ceilings. age points below the yield on 4-year U.S. Treasury securities; the ceiling 6. Must have a maturity of exactly 26 weeks and a minimum denomina­ rate for thrift institutions is lA percentage point higher than that for com­ tion of $10,000, and must be nonnegotiable. mercial banks. In August, the ceiling was 7.95 percent at commercial banks 7. July 1, 1973, for mutual savings bank; July 6, 1973 for savings and and 8.20 percent at thrift institutions. loan associations. 8. No separate account category. Note. Maximum rates that can be paid by federally insured commer­ 9. Multiple maturity: July 20, 1966; single maturity: September 26, cial banks, mutual savings banks, and savings and loan associations are 1966. established by the Board of Governors of the Federal Reserve System, 10. Between July 1, 1973, and Oct. 31, 1973, there was no ceiling for the Board of Directors of the Federal Deposit Insurance Corporation, certificates maturing in 4 years or more with minimum denominations and the Federal Home Loan Bank Board under the provisions of 12 of $1,000; however, the amount of such certificates that an institution CFR 217, 329, and 526, respectively. The maximum rates on time de­ could issue was limited to 5 percent of its total time and savings deposits. posits in denominations of $100,000 or more with maturities of 30-89 Sales in excess of that amount, as well as certificates of less than $1,000, days were suspended in June 1970; such deposits maturing in 90 days or were limited to the 6Vi percent ceiling on time deposits maturing in 2Vi more were suspended in May 1973. For information regarding previous years or more. interest rate ceilings on all types of accounts, see earlier issues of the Effective Nov. 1, 1973, ceilings were reimposed on certificates maturing Federal Reserve Bulletin, the Federal Home Loan Bank Board Journal, and the Annual Report of the Federal Deposit Insurance Corporation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments All 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS Millions of dollars 1979 1976 1977 1978 Type of transaction Jan. Feb. Mar. Apr. May June July U.S. Government Securities Outright transactions (excluding matched salepurchase transactions) Treasury bills 1 Gross purchases........................................................... 14,343 13,738 16,628 0 0 2,012 22,361 0 518 2,252 2 Gross sales...................................................................... 8,462 7,241 13,725 3,758 228 475 100 251 623 0 3 Redemptions.................................................................. 2 5,017 2,136 2,033 500 400 400 21,240 200 0 0 Others within 1 year1 4 Gross purchases........................................................... 472 3,017 1,184 0 48 2,600 0 0 42 218 5 Gross sales...................................................................... 0 0 0 0 0 0 0 0 0 0 6 Exchange, or maturity shift...................................... 792 4,499 -5,170 -673 -30 724 439 4,660 1,152 33 7 Redemptions.................................................................. 0 2,500 0 0 0 0 2 3,240 0 0 0 1 to 5 years 8 Gross purchases........................................................... 2 3,202 2,833 4,188 0 426 0 2 640 0 0 237 9 Gross sales...................................................................... 177 0 0 0 0 0 0 0 0 0 10 Exchange, or maturity shift...................................... -2,588 -6,649 -178 673 2,205 -724 -439 -5,209 -1,152 -33 5 to 10 years 11 Gross purchases........................................................... 1,048 758 1,526 0 134 0 0 0 0 96 12 Gross sales...................................................................... 0 0 0 0 0 0 0 0 0 0 13 Exchange, or maturity shift...................................... 1,572 584 2,803 0 -2,975 0 0 350 0 0 Over 10 years 14 Gross purchases........................................................... 642 553 1,063 0 93 0 0 0 0 142 15 Gross sales...................................................................... 0 0 0 0 0 0 0 0 0 0 16 Exchange, or maturity shift...................................... 225 1,565 2,545 0 800 0 0 200 0 0 All maturities1 17 Gross purchases........................................................... 219,707 20,898 24,591 0 700 4,612 23,000 0 561 2,945 18 Gross sales...................................................................... 8,639 7,241 13,725 3,758 228 475 100 251 623 0 19 Redemptions.................................................................. 25,017 4,636 2,033 500 400 400 24,480 200 0 0 Matched sale-purchase transactions 20 Gross sales................................................................. 196,078 425,214 511,126 64,691 56,291 61,669 62,362 54,343 52,640 40,310 21 Gross purchases....................................................... 196,579 423,841 510,854 60,750 58,426 63,707 61,968 53,692 52,949 40,300 Repurchase agreements 22 Gross purchases....................................................... 232,891 178,683 151,618 3,117 6,931 11,817 5,784 2,188 15,531 18,464 23 Gross sales................................................................. 230,355 180,535 152,436 4,201 6,931 10,137 6,163 3,488 12,226 19,690 24 Net change in U.S. government securities......... 9,087 5,798 7,743 -9,283 2,207 7,454 -2,352 -2,403 3,552 1,708 Federal Agency Obligations Outright transactions 25 Gross purchases....................................................... 891 1,433 301 0 0 0 0 0 371 482 26 Gross sales................................................................. 0 0 173 379 20 0 0 0 0 0 27 Redemptions............................................................. 169 223 235 10 * 23 * 40 33 0 Repurchase agreements 28 Gross purchases....................................................... 10,520 13,811 40,567 713 1,152 2,851 1,173 1,149 4,443 7,247 29 Gross sales................................................................. 10,360 13,638 40,885 846 1,152 2,482 1,392 1,298 3,617 7,434 30 Net change in federal agency obligations........... 882 1,383 -426 -522 -20 345 -219 -189 1,163 295 Bankers Acceptances 31 Outright transactions, net......................................... -545 -196 0 0 0 0 0 0 0 0 32 Repurchase agreements, net..................................... 410 159 -366 -587 0 204 48 -252 1,400 -241 33 Net change in bankers acceptances....................... -135 -37 -366 -587 0 204 48 -252 1,400 -241 34 Total net change in System Open Market Account............................................................. 9,833 7,143 6,951 -10,392 2,187 8,003 -2,524 -2,844 6,115 1,761 1. Both gross purchases and redemptions include special certificates bills. Each of these transactions is treated in the table as both a purchase created when the Treasury borrows directly from the Federal Reserve, and a redemption. as follows (millions of dollars): Sept. 1977, 2,500; Mar. 1979, 2,600. 2. In 1976, the System acquired $189 million of 2-year Treasury notes Note. Sales, redemptions, and negative figures reduce holdings of in exchange for maturing bills. In April 1979, the System acquired $640 the System Open Market Account; all other figures increase such holdings. million of 2-day cash management bills in exchange for maturing 2-year Details may not add to totals because of rounding. notes. New 2-year notes were later obtained in exchange for the maturing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics □ September 1979 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month Account 1979 1979 Aug. 1 Aug. 8 Aug. 15 Aug. 22p Aug. 29p June July Aug.p Consolidated condition statement Assets 1 11,290 11,260 11,259 11,259 11,259 11,323 11,290 11,259 2 Special drawing rights certificate account........... 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 3 398 400 425 429 437 371 397 441 Loans 4 Member bank borrowings.................................... 1,348 887 2,707 1,509 917 1,558 852 1,572 5 0 0 0 0 0 0 0 0 Acceptances 6 0 0 0 0 0 0 0 0 7 Held under repurchase agreements....................... 588 0 0 0 699 1,400 1,159 475 Federal agency obligations 8 8,243 8,243 8,243 8,243 8,242 7,761 8,243 8,242 9 166 0 0 0 757 826 638 153 U.S. government securities Bought outright 10 Bills...................................................................... 41,261 36,825 40,071 41,492 43,298 38,370 40,612 42,905 11 0 0 0 0 0 0 0 0 12 0 0 0 0 0 0 0 0 13 55,055 55,055 55,645 55,645 55,645 54,505 55,055 55,645 14 13,699 13,699 14,085 14,085 14,085 13,557 13,699 14,085 15 Total i.................................................................. 110,015 105,579 109,801 111,222 113,028 106,432 109,366 112,635 16 275 0 0 0 2,107 3,305 2,079 392 17 110,290 105,579 109,801 111,222 115,135 109,737 111,445 113,027 18 Total loans and securities....................................... 120,635 114,709 120,751 120,974 125,750 121,282 122,337 123,469 19 12,513 13,291 13,924 11,918 11,627 10,488 11,712 9,852 20 399 399 400 400 400 397 399 400 Other assets 21 2,189 2,201 2,188 2,209 2,229 2,942 2,182 2,213 22 2,880 2,852 1,872 1,865 1,951 2,427 2,660 2,008 23 152,104 146,912 152,619 150,854 155,453 151,030 152,777 151,442 Liabilities 24 106,044 106,779 107,006 106,560 106,827 104,794 105,957 106,900 Deposits 25 28,929 26,252 28,844 29,661 33,479 30,407 30,279 29,407 26 4,012 2,498 3,805 2,851 3,176 3,290 2,765 3,542 27 226 258 312 262 308 326 373 325 28 1,161 644 674 534 541 813 636 663 29 34,328 29,652 33,635 33,308 37,504 34,836 34,053 33,937 30 6,794 6,209 7,468 6,269 6,129 6,564 7,816 5,729 31 1,845 1,811 1,868 1,887 1,979 1,846 1,884 1,813 32 149,011 144,451 149,977 148,024 152,439 148,040 149,710 148,379 Capital Accounts 33 1,130 1,130 1,130 1,130 1,131 1,126 1,129 1,131 34 1,078 1,078 1,078 1,078 1,078 1,078 1,078 1,078 35 885 253 434 622 805 786 860 854 36 Total liabilities and capital accounts..................... 152,104 146,912 152,619 150,854 155,453 151,030 152,777 151,442 37 Memo: Marketable U.S. government securities held in custody for foreign and international 82,259 81,709 83,010 83,960 81,902 78,140 82,405 82,133 Federal Reserve note statement 38 Federal Reserve notes outstanding (issued to Bank)............................................................... 120,150 120,479 120,697 121,022 121,377 118,148 120,035 121,408 Collateral held against notes outstanding 39 11,290 11,260 11,259 11,259 11,259 11,323 11,290 11,259 40 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 41 921 689 1,644 1,215 669 1,116 652 1,090 42 U.S. government and agency securities.............. 106,139 106,730 105,994 106,748 107,649 103,909 106,293 107,259 43 120,150 120,479 120,697 121,022 121,377 118,148 120,035 121,408 1. Includes securities loaned—fully guaranteed by U.S. government 2. Beginning December 29, 1978, such assets are revalued monthly securities pledged with Federal Reserve Banks—and excludes (if any) at market exchange rates. securities sold and scheduled to be bought back under matched sale- 3. Includes exchange-translation account reflecting, beginning December purchase transactions. 29, 1978, the monthly revaluation at market exchange rates of foreignexchange commitments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Reserve Banks A13 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month Type and maturity 1979 1979 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 June 30 July 31 Aug. 31 1,348 887 2,707 1,509 917 1,558 851 1,572 1,219 742 2,575 1,449 873 1,469 786 1,441 129 145 132 60 44 89 65 131 0 0 0 0 0 0 0 0 588 0 0 0 699 400 1,159 475 588 0 0 0 699 400 1,159 475 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 U.S. government securities...................................... 110,290 105,579 109,801 111,222 115,135 109,737 111,445 113,027 10 Within 15 days*....................................................... 5,223 4,466 3,509 3,449 6,187 5,748 5,851 2,821 19,116 15,624 19,520 21,553 22,632 19,434 19,553 23,419 34,035 33,573 35,464 34,912 35,008 31,928 34,125 35,477 27,685 27,685 26,791 26,791 26,791 28,634 27,685 26,793 14 Over 5 years to 10 years.......................................... 12,321 12,321 12,221 12,221 12,221 12,225 12,321 12,221 11,910 11,910 12,296 12,296 12,296 11,768 11,910 12,296 8,409 8,243 8,243 8,243 8,999 8,587 8,881 8,395 17 Within 15 days1....................................................... 166 0 150 210 885 922 678 281 377 429 279 219 185 401 377 185 19 91 days to 1 year...................................................... 1,225 1,174 1,173 1,173 1,242 915 1,185 1,242 4,340 4,340 4,340 4,340 4,452 4,064 4,340 4,452 21 Over 5 years to 10 years.......................................... 1,505 1,505 1,505 1,505 1,439 1,510 1,505 1,439 796 795 796 796 796 775 796 796 1. Holdings under repurchase agreements are classified as maturing within 15 days in accordance with maximum maturity of the agreements. 1.20 BANK DEBITS AND DEPOSIT TURNOVER Debits are shown in billions of dollars, turnover as ratio of debits to deposit. Monthly data are at annual rates. 1979 Bank group, or type 1976 1977 1978 of customer Mar. Apr. May June July Debits to demand deposits2 (seasonally adjusted) 1 All commercial banks............... 29,180.4 34,322.8 40,300.3 44.920.4 46,612.2 47,545.4 50,388.3 52,102.7 2 Major New York City banks.. 11.467.2 13,860.6 15,008.7 15,644.9 16,898.7 16,960.3 19,747.4 20,480.5 * Other banks............................... 17.713.2 20,462.2 25,291.6 29.275.5 29,713.5 30,585.2 30,641.0 31,622.2 Debits to savings deposits 3 (not seasonally adjusted) 4 All customers............................. 174.0 418.1 598.3 698.0 764.4 658.8 732.8 5 Business1.................................... 21.7 56.7 76.1 71.7 69.4 72.6 74.1 6 Others......................................... 152.3 361.4 522.2 626.4 695.0 586.2 658.8 Demand deposit turnover2 (seasonally adjusted) 7 All commercial banks............... 116.8 129.2 139.4 154.4 156.8 160.3 167.3 171.9 8 Major New York City banks.. 411.6 503.0 541.9 571.8 618.4 619.1 685.4 717.7 9 Other banks............................... 79.8 85.9 96.7 111.1 110.1 113.6 112.5 115.2 Savings deposit turnover3 (not seasonally adjusted) 10 All customers............................. 1.6 1.9 2.8 3.2 3.6 3.1 3.4 11 Business1................................... 4.1 5.1 7.4 7.0 6.8 7.2 7.2 12 Others......................................... 1.5 1.7 2.5 3.0 3.4 2.9 3.2 1. Represents corporations and other profit-seeking organizations (ex­ Note. Historical data—estimated for the period 1970 through June cluding commercial banks but including savings and loan associations, 1977, partly on the basis of the debits series for 233 SMSAs, which were mutual savings banks, credit unions, the Export-Import Bank, and available through June 1977—are available from Publications Services, federally sponsored lending agencies). Division of Support Services, Board of Governors of the Federal Reserve 2. Represents accounts of individuals, partnerships, and corporations, System, Washington, D.C. 20551. Debits and turnover data for savings and of states and political subdivisions. deposits are not available prior to July 1977. 3. Excludes negotiable order of withdrawal (NOW) accounts and special club accounts, such as Christmas and vacation clubs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics □ September 1979 1.21 MONEY STOCK MEASURES AND COMPONENTS Billions of dollars, averages of daily figures 1979 1975 1976 1977 1978 Dec. Dec. Dec. Dec. Item Feb. Mar. Apr. May June July Seasonally adjusted Measures1 1 M-l............................................................... 295.4 313.8 338.7 361.2 358.6 359.0 364.3 364.5 369.0 372.1 2 M-l 4-........................................................... 456.8 517.2 560.6 587.2 580.1 579.6 585.1 584.0 589.9 594.8 3 M-2............................................................... 664.8 740.6 809.4 875.8 876.7 879.5 889.8 893.8 904.4 914.0 4 1,092.4 1,235.6 1,374.3 1,500.1 1,509.7 1,517.5 1,530.8 1,537.0 1,552.3 1,566.9 5 M-4............................................................... 745.8 803.0 883.1 972.4 978.8 978.5 984.8 984.4 989.3 998.7 6 1,173.5 1,298.0 1,448.0 1,596.7 1,611.8 1,616.5 1,625.9 1,627.6 1,637.2 1,651.6 Components 7 Currency...................................................... 73.8 80.8 88.6 97.5 98.9 99.4 100.2 100.7 101.5 102.3 Commercial bank deposits 8 Demand...................................................... 221.7 233.0 250.1 263.7 259.7 259.5 264.1 263.8 267.5 269.8 9 Time and savings..................................... 450.3 489.2 544.4 611.2 620.2 619.5 620.6 619.9 620.3 626.6 10 Savings.................................................... 160.7 202.1 219.7 223.0 218.6 217.7 217.7 216.4 217.8 219.5 11 Negotiable CDs2................................. 81.0 62.4 73.7 96.6 102.1 99.0 95.0 90.6 84.9 84.7 12 Other time............................................. 208.6 224.7 251.0 291.5 299.5 302.9 307.9 313.0 317.6 322.4 13 Nonbank thrift institutions 3................ 427.7 495.0 564.9 624.4 633.0 638.0 641.0 643.2 647.9 652.9 Not seasonally adjusted Measures1 14 M-l............................................................... 303.9 322.6 348.2 371.3 351.9 353.7 367.4 359.1 368.2 374.0 15 M-l + ........................................................... 463.6 524.2 568.0 595.2 572.8 575.6 590.7 580.5 590.8 598.5 16 M-2............................................................... 670.0 745.8 814.9 881.5 871.0 878.2 896.8 892.1 906.0 917.0 17 M-3............................................................... 1,095.0 1,238.3 1,377.2 1,502.8 1,502.1 1,517.4 1,540.8 1,536.4 1,556.3 1,572.9 18 M-4............................................................... 753.5 810.0 890.8 981.0 970.6 975.7 989.5 981.1 990.4 1,001.0 19 M-5............................................................... 1,178.4 1,302.6 1,453.2 1,602.4 1,601.7 1,614.9 1,633.5 1,625.4 1,640.7 1,656.9 Components 20 Currency...................................................... 75.1 82.1 90.1 99.1 97.6 98.6 99.9 100.6 101.8 103.2 Commercial bank deposits 21 Demand...................................................... 228.8 240.5 258.1 272.2 254.2 255.1 267.5 258.5 266.4 270.8 22 Member.................................................. 162.8 169.4 177.5 183.0 169.6 170.4 178.5 171.8 177.1 180.5 23 Domestic nonmember....................... 62.6 67.5 76.2 85.2 80.7 80.6 85.1 82.6 84.8 86.1 24 Time and savings..................................... 449.6 487.4 542.6 609.7 618.7 622.0 622.1 622.0 622.2 627.0 25 Savings.................................................... 159.1 200.2 217.7 220.9 218.0 218.9 220.1 218.2 219.4 221.4 26 Negotiable CDs2................................. 83.5 64.3 75.9 99.5 99.6 97.5 92.6 88.9 84.4 84.0 27 Other time............................................. 207.1 222.9 249.0 289.2 301.1 305.5 309.3 314.9 318.3 321.6 28 Other checkable deposits4..................... .7 1.4 2.1 3.0 2.9 3.0 3.2 3.2 3.1 3.1 29 Nonbank thrift institutions 3................ 424.9 492.5 562.3 621.4 631.1 639.2 644.0 644.3 650.3 655.9 30 U.S. government deposits (all 4.1 4.4 5.1 10.2 8.3 6.5 5.3 8.4 10.8 13.2 1. Composition of the money stock measures is as follows: M-4: M-2 plus large negotiable CDs. M-l: Averages of daily figures for (1) demand deposits at commercial M-5: M-3 plus large negotiable CDs. banks other than domestic interbank and U.S. government, less cash items 2. Negotiable time CDs issued in denominations of $100,000 or more in process of collection and Federal Reserve float; (2) foreign demand by large weekly reporting commercial banks. balances at Federal Reserve Banks; and (3) currency outside the Treasury, 3. Average of the beginning- and end-of-month figures for deposits of Federal Reserve Banks, and vaults of commercial banks. mutual savings banks, for savings capital at savings and loan associations, M-l + : M-l plus savings deposits at commercial banks, NOW accounts and for credit union shares. at banks and thrift institutions, credit union share draft accounts, and 4. Includes NOW accounts at thrift institutions, credit union share demand deposits at mutual savings banks. draft accounts, and demand deposits at mutual savings banks. M-2: M-l plus savings deposits, time deposits open account, and time certificates of deposit (CDs) other than negotiable CDs of $100,000 or Note. Latest monthly and weekly figures are available from the Board’s more at large weekly reporting banks. H.6 (508) release. Back data are available from the Banking Section, M-3: M-2 plus the average of the beginning- and end-of-month deposits Division of Research and Statistics. of mutual savings banks, savings and loan shares, and credit union shares (nonbank thrift). NOTES TO TABLE 1.23: 1. Includes domestic chartered banks, U.S. branches, agencies, and 7. As of Dec. 31, 1978, commercial and industrial loans were reduced New York investment company subsidiaries of foreign banks; and Edge $0.1 billion as a result of reclassification. Act corporations. 8. As of Dec. 31, 1978, commercial and industrial loans sold outright 2. Excludes loans to commercial banks in the United States. were increased $0.7 billion as the result of reclassifications, but $0.1 3. Loans sold are those sold outright to a bank’s own foreign branches, billion of this amount was offset by a balance sheet reduction of $0.1 nonconsolidated nonbank affiliates of the bank, the bank’s holding billion as noted above. company (if not a bank), and nonconsolidated nonbank subsidiaries of 9. As of Dec. 31, 1978, nonbank financial loans were reduced $0.1 the holding company. billion as the result of reclassifications. 4. United States includes the 50 states and the District of Columbia. 10. As of Jan. 3, 1979, as the result of reclassifications, total loans and 5. As of Dec. 31, 1977, as the result of loan reclassifications, business investments and total loans were increased by $0.6 billion. Business loans loans were reduced by $0.2 billion and nonbank financial loans by $0.1 were increased by $0.4 billion and real estate loans by $0.5 billion. Non­ billion; real estate loans were increased by $0.3 billion. bank financial loans were reduced by $0.3 billion. 6. As of Dec. 31, 1978, total loans and investments were reduced by $0.1 billion. “Other securities” were increased by $1.5 billion and total Note. Data are prorated averages of Wednesday data for domestic loans were reduced by $1.6 billion largely as the result of reclassifications chartered banks, and averages of current and previous month-end data for of certain tax-exempt obligations. Most of the loan reduction was in foreign-related institutions. “all other loans.” Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Aggregates A15 1.22 AGGREGATE RESERVES AND DEPOSITS Member Banks Billions of dollars, averages of daily figures 1978 1979 Item 1975 1976 1977 Dec. Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July Seasonally adjusted 34.67 34.89 36.10 41.27 41.48 40.75 40.81 40.65 40.48 M0.42 40.82 2 Nonborrowed.............................................................. 34.54 34.84 35.53 40.40 40.48 39.78 39.82 39.73 38.72 39.00 39.65 3 Required..................................................................... 34.40 34.61 35.91 41.04 41.26 40.54 40.66 40.47 40.34 40.20 40.61 4 Monetary base2......................................................... 106.7 118.4 127.8 142.3 143.4 143.3 143.9 144.5 144.9 r145.6 146.9 5 Deposits subject to reserve requirements 3................. 504.2 528.6 568.6 616.7 621.1 619.7 616.4 618.6 613.9 613.1 618.7 6 Time and savings........................................................ 336.8 354.1 386.7 429.4 433.5 436.1 434.1 432.0 428.7 425.9 429.4 Demand 7 Private..................................................................... 164.5 171.5 178.5 185.1 185.6 181.9 180.5 184.7 183.5 r184.8 187.5 8 U.S. government.................................................... 2.9 3.0 3.5 2.3 1.9 1.8 1.8 1.8 1.7 2.4 1.8 Not seasonally adjusted 9 Monetary base2....................................................... 108.3 120.3 129.8 144.6 144.4 141.9 142.3 144.2 144.4 '145.6 147.9 10 Deposits subject to reserve requirements 3................. 510.9 534.8 575.3 624.0 627.1 614.3 614.3 621.1 610.9 '613.9 619.2 11 Time and savings........................................................ 337.2 353.6 386.4 429.6 433.8 434.2 434.9 432.3 429.8 427.2 429.8 Demand 12 Private..................................................................... 170.7 177.9 185.1 191.9 191.5 178.2 177.5 186.8 179.2 '183.9 187.8 13 U.S. government.................................................... 3.1 3.3 3.8 2.5 1.9 1.8 1.9 2.0 1.8 2.8 1.6 1. Series reflects actual reserve requirement percentages with no adjust- 3. Includes total time and savings deposits and net demand deposits as ment to eliminate the effect of changes in Regulations D and M. There defined by Reguation D. Private demand deposits include all demand are breaks in series because of changes in reserve requirements effective deposits except those due to the U.S. government, less cash items in Jan. 8 and Dec. 30, 1976; and Nov. 2, 1978. In addition, effective Jan. 1, process of collection and demand balances due from domestic commercial 1976, statewide branching in New York was instituted. The subsequent banks. merger of a number of banks raised required reserves because of higher reserve requirements on aggregate deposits at these banks. Note. Back data and estimates of the impact on required reserves 2. Includes total reserves (member bank reserve balances in the current and changes in reserve requirements are shown in table 14 of the Board's week plus vault cash held two weeks earlier); currency outside the U.S. Annual Statistical Digest, 1971-1975. Treasury, Federal Reserve Banks, and the vaults of commercial banks; and vault cash of nonmember banks. 1.23 LOANS AND INVESTMENTS All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1979 1979 Category 1977 1978 1977 1978 Dec. Dec. Dec. Dec. June? July? Aug.? June? July? Aug.? Seasonally adjusted Not seasonally adjusted 1 Total loans and securities2.................... 891.1 61,014.3 101,079.8 1,091.8 1,101.0 899.1 61,023.8 wi,083.2 1,093.3 1,100.4 2 U.S. Treasury securities..................... 99.5 93.4 94.8 95.3 94.1 100.7 94.6 95.1 93.6 92.2 3 Other securities................................... 159.6 6173.1 182.1 183.4 185.3 160.2 6173.9 182.7 183.3 184.9 4 Total loans and leases2...................... 632.1 6747.8 10802.9 813.1 821.6 638.3 6755.4 10805.4 816.5 823.3 5 Commercial and industrial loans.. 5211.2 7246.5 10270.6 275.8 279.8 5212.6 7248.2 10272.1 277.2 279.8 6 Real estate loans............................. 5175.2 210.5 10225.8 228.7 231.8 5175.5 210.9 10225.5 228.9 232.5 7 Loans to individuals....................... 138.2 164.9 176.9 177.8 178.7 139.0 165.9 176.4 178.2 180.3 8 Security loans.................................. 20.6 19.4 23.1 23.7 23.0 22.0 20.7 23.2 20.1 23.0 9 Loans to nonbank financial institutions................................... 525.8 927.1 1027.9 29.2 29.5 526.3 927.6 1028.1 29.5 29.8 10 Agricultural loans........................... 25.8 28.2 29.1 29.1 29.2 25.7 28.1 29.2 29.5 29.8 11 Lease financing receivables............ 5.8 7.4 8.1 8.3 8.5 5.8 7.4 8.1 8.3 8.5 12 All other loans................................ 29.5 643.6 41.4 40.5 41.1 31.5 646.6 42.8 44.7 40.2 Memo 13 Total loans and investments plus loans sold2* 3.............................................. 895.9 61,018.1 «> 1,083.6 1,095.5 1,104.7 903.9 61,027.6 w»l,087.0 1,097.0 1,104.1 14 Total loans plus loans sold2*3........... 636.9 6751.6 10806.7 816.8 825.3 643.0 6759.2 10809.2 820.2 827.0 15 Total loans sold to affiliates 3............. 4.8 3.8 3.8 3.7 3.7 4.8 3.8 3.8 . 3.7 3.7 16 Commercial and industrial loans plus loans sold3................................... 5213.9 8248.5 10273.4 278.6 282.5 5215.3 8250.1 10275.0 280.0 282.5 17 Commercial and industrial loans sold 3............................................ 2.7 81.9 2.8 2.8 2.8 2.7 81.9 2.8 2.8 2.8 18 Acceptances held............................. 7.5 6.8 7.5 8.0 7.8 8.6 7.5 7.5 7.8 7.3 19 Other commercial and industrial loans......................................... 5203.7 239.7 263.0 267.7 272.2 5203.9 240.9 264.6 269.4 272.5 20 To U.S. addressees4................... 5193.8 226.6 246.3 250.4 254.2 5193.7 226.5 248.0 252.2 254.7 21 To non-U.S. addressees.............. 59.9 13.1 16.7 17.3 17.9 510.3 14.4 16.6 17.3 17.8 22 Loans to foreign banks...................... 13.5 21.2 20.8 20.6 20.1 14.6 23.0 21.6 21.5 19.8 23 Loans to commercial banks in the United States................................... 54.1 57.3 67.0 68.9 71.2 56.9 60.3 66.1 65.6 66.7 For notes see bottom of opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics □ September 1979 1.24 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series Billions of dollars except for number of banks 1978 1979 Account Oct. Nov. Dec. Jan.? Feb.p Mar.p Apr.? May2* JuneP July2’ Aug.? Domestically Chartered Commercial Banks1 1 Loans and investments............................. 990.4 1,005.5 1,030.4 1,018.9 1,025.2 1,031.4 1,048.3 1,059.4 1,071.3 1,081.8 1,085.8 2 Loans, gross................................................. 727.0 741.2 761.6 750.4 755.6 759.8 773.9 785.3 797.9 807.6 810.8 3 Interbank................................................... 39.2 41.5 45.3 41.3 42.1 42.3 44.4 45.9 46.3 48.1 50.3 4 Commercial and industrial.................. 215.5 218.0 221.6 221.9 225.3 227.8 233.2 236.8 241.1 242.6 244.7 5 Other.......................................................... 472.2 481.6 494.7 487.2 488.2 489.6 496.3 502.6 510.6 516.8 515.8 6 U.S. Treasury securities........................... 94.0 93.3 93.1 92.1 93.1 93.6 94.2 93.2 91.6 92.1 90.7 169.4 171.0 175.7 176.4 176.5 178.0 180.2 181.0 181.7 182.1 184.3 8 Cash assets, total......................................... 137.7 140.9 177.3 139.8 147.1 135.8 139.9 158.8 146.3 140.2 145.7 9 Currency and coin.................................. 15.1 16.6 15.5 15.2 15.0 15.2 15.6 16.0 16.3 16.1 16.8 10 Reserves with Federal Reserve Banks 34.6 32.6 34.4 29.8 29.7 30.0 33.9 32.8 32.6 29.6 33.7 11 Balances with depositary institutions 36.3 38.3 52.3 40.2 42.5 36.8 39.0 44.6 40.8 41.2 41.1 12 Cash items in process of collection... 51.8 53.5 75.1 54.6 59.9 53.7 51.4 65.4 56.5 53.4 54.1 58.7 62.5 60.9 64.0 62.4 58.9 55.8 52.7 55.1 53.9 62.4 14 Total assets/total liabilities and capital. 1,186.9 1,208.8 1,268.6 1,222.7 1,234.8 1,226.1 1,244.0 1,270.9 1,272.7 1,275.9 1,293.9 939.8 948.5 1,011.3 961.3 969.2 954.9 964.4 975.5 971.3 975.2 982.9 345.2 345.7 399.2 347.5 352.1 335.0 348.0 357.8 352.4 352.6 352.4 594.5 602.8 612.1 613.8 617.1 619.8 616.4 617.8 618.9 622.6 630.5 n.a. n.a. 219.7 215.2 215.2 216.8 215.9 215.5 216.4 218.3 216.7 n.a. n.a. 392.4 398.6 401.9 403.0 400.5 402.3 402.5 404.2 413.8 20 Borrowings.................................................... 109.8 117.4 114.6 110.8 111.9 115.2 123.5 132.0 137.1 137.2 140.1 49.9 54.7 49.1 56.6 59.0 60.9 60.8 65.4 65.5 64.9 69.7 22 Residual (assets less liabilities).............. 87.5 88.2 93.6 94.0 94.7 95.1 95.3 98.1 98.9 98.7 101.1 Memo 23 U.S. Treasury note balances included n.a. 7.5 12.4 12.0 4.0 4.8 5.9 4.9 12.9 11.9 8.6 14,606 14,618 14,602 14,586 14,593 14,597 14,610 14,616 14,620 14,584 14,607 All Commercial Banking Institutions2 25 Loans and investments............................. 1,046.4 1,067.2 1,097.0 1,080.6 1,087.7 1,101.4 1,114.8 1,131.0 1,146.7 1,152.8 780.5 800.2 825.5 809.7 815.6 827.2 837.7 854.0 870.5 875.9 51.5 55.2 57.6 52.1 53.5 56.1 57.3 61.8 60.4 60.7 241.9 246.5 251.2 251.8 255.6 259.8 264.9 269.2 275.2 277.5 29 Other.......................................................... 487.0 498.5 516.8 505.9 506.5 511.3 515.4 523.0 534.9 537.7 95.2 94.6 94.5 93.3 94.3 94.9 95.6 94.6 93.1 93.5 170.7 172.3 177.0 177.6 177.8 179.4 181.5 182.3 183.1 183.5 32 Cash assets, total........................................ 153.9 157.1 196.8 158.2 166.8 157.0 156.4 176.4 168.0 160.8 33 Currency and coin.................................. 15.1 16.6 15.5 15.2 15.1 15.2 15.6 16.1 16.3 16.1 34 Reserves with Federal Reserve Banks 35.1 33.0 35.0 30.2 30.3 30.7 34.5 33.4 33.4 30.4 35 Balances with depositary institutions 50.5 52.5 69.9 56.8 60.3 56.0 53.7 60.1 60.5 59.7 36 Cash items in process of collection... 53.2 55.0 76.4 56.0 61.3 55.1 52.5 66.8 57.7 54.6 71.6 76.3 75.9 78.3 76.8 74.0 70.5 67.3 71.3 69.4 38 Total assets/total liabilities and capital 1,271.9 1,300.6 1,369.7 1,317.1 1,331.4 1,332.4 1,341.6 1,374.6 1,386.0 1,383.0 968.6 979.9 1,049.0 994.3 1,002.5 994.0 997.0 1,012.5 1,015.6 1,012.1 359.0 359.5 418.9 363.2 368.1 355.7 361.7 375.1 376.4 369.6 609.6 620.4 630.0 631.2 634.4 638.3 635.3 637.4 639.2 642.5 n.a. n.a. 220.3 215.9 215.9 218.0 216.9 216.7 217.2 219.1 n.a. n.a. 409.7 415.2 418.4 420.3 418.5 420.6 422.0 423.5 44 Borrowings................................................... 131.9 142.6 144.0 138.0 138.0 141.7 150.4 159.4 165.4 165.8 82.1 88.0 81.2 88.8 94.4 99.7 97.0 102.8 104.0 104.3 46 Residual (assets less liabilities)............... 89.3 90.0 95.5 96.0 96.6 97.1 97.1 100.0 100.9 100.8 Memo 47 U.S. Treasury note balances included in borrowing............................................. n.a. 7.5 12.4 12.0 4.0 4.8 5.9 4.9 12.9 11.9 14,919 14,932 14,923 14,913 14,926 14,930 14,946 14,954 14,968 14,933 1. Domestically chartered commercial banks include all commercial and Agreement corporations, and New York state foreign investment banks in the United States except branches of foreign banks; included are corporations. member and nonmember banks, stock savings banks, and nondeposit trust companies. Note.—Figures are partly estimated except on call dates. They include 2. Commercial banking institutions include domestically chartered all bank-premises subsidiaries and other significant majority-owned commercial banks, branches and agencies of foreign banks, Edge Act domestic subsidiaries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks All 1.25 COMMERCIAL BANK ASSETS AND LIABILITIES Call-Date Series Millions of dollars, except for number of banks 1976 1977 1978 1976 1977 1978 Account Dec. 31 June 30 Dec. 31 June 30 Dec. 31 June 30 Dec. 31 June 30 Total insured National (all insured) 1 Loans and investments, gross............................... 827,696 854,733 914,779 956,431 476,610 488,240 523,000 542,218 Loans 2 Gross....................................................................... 578,734 601,122 657,509 695,443 340,691 351,311 384,722 403,812 3 560,077 581,143 636,318 672,207 329,971 339,955 372,702 390,630 Investments 4 U.S. Treasury securities......................................... 101,461 100,568 99,333 97,001 55,727 53,345 52,244 50,519 5 Other........................................................................ 147,500 153,042 157,936 163,986 80,191 83,583 86,033 87,886 6 Cash assets.............................................................. 129,562 130,726 159,264 157,393 76,072 74,641 92,050 90,728 7 Total assets/total liabilities1................................... 1,003,970 1,040,945 1,129,712 1,172,772 583,304 599,743 651,360 671,166 8 Deposits.................................................................. 825,003 847,372 922,657 945,874 469,377 476,381 520,167 526,932 Demand 9 U.S. government.................................................... 3,022 2,817 7,310 7,956 1,676 1,632 4,172 4,483 10 Interbank................................................................ 44,064 44,965 49,843 47,203 23,149 22,876 25,646 22,416 11 Other........................................................................ 285,200 284,544 319,873 312,707 163,346 161,358 181,821 176,025 Time and savings 12 Interbank................................................................ 8,248 7,721 8,731 8,987 4,907 4,599 5,730 5,791 13 Other........................................................................ 484,467 507,324 536,899 569,020 276,296 285,915 302,795 318,215 14 Borrowings.............................................................. 75,291 81,137 89,339 98,351 54,421 57,283 63,218 68,948 15 Total capital accounts............................................ 75,061 75,502 79,082 83,074 41,319 43,142 44,994 47,019 16 Memo: Number of banks..................................... 14,397 14,425 14,397 14,381 4,735 4,701 4,654 4,616 State member (all insured) Insured nonmember 17 Loans and investments, gross............................... 144,000 144,597 152,514 157,464 207,085 221,896 239,265 256,749 Loans 18 Gross........................................................................ 102,277 102,117 110,243 115,736 135,766 147,694 162,543 175,894 19 99,474 99,173 107,205 112,470 130,630 142,015 156,411 169,106 Investments 20 U.S. Treasury securities......................................... 18,849 19,296 18,179 16,886 26,884 27,926 28,909 29,595 21 Other........................................................................ 22,874 23,183 24,091 24,841 44,434 46,275 47,812 51,259 22 Cash assets.............................................................. 32,859 35,918 42,305 43,057 20,631 20,166 24,908 23,606 23 189,579 195,452 210,442 217,384 231,086 245,748 267,910 284,221 24 Deposits.................................................................. 149,491 152,472 163,436 167,403 206,134 218,519 239,053 251,539 Demand 25 429 371 1,241 1,158 917 813 1,896 2,315 26 Interbank................................................................. 19,295 20,568 22,346 23,117 1,619 1,520 1,849 1,669 27 52,204 52,570 57,605 55,550 69,648 70,615 80,445 81,131 Time and savings 28 Interbank................................................................ 2,384 2,134 2,026 2,275 956 988 973 920 29 75,178 76,827 80,216 85,301 132,993 144,581 153,887 165,502 30 17,310 19,697 21,736 23,167 3,559 4,155 4,384 6,235 31 Total capital accounts............................................ 13,199 13,441 14,182 14,670 17,542 18,919 19,905 21,384 32 1,023 1,019 1,014 1,005 8,639 8,705 8,729 8,760 Noninsured nonmember Total nonmember 33 Loans and investments, gross............................... 18,819 22,940 24,415 28,699 225,904 244,837 263,681 285,448 Loans 34 16,336 20,865 22,686 26,747 152,103 168,559 185,230 202,641 35 16,209 20,679 22,484 26,548 146,840 162,694 178,896 195,655 Investments 36 U.S. Treasury securities......................................... 1,054 993 879 869 27,938 28,919 29,788 30,465 37 Other........................................................................ 1,428 1,081 849 1,082 45,863 47,357 48,662 52,341 38 6,496 8,330 9,458 9,360 27,127 28,497 34,367 32,967 39 26,790 33,390 36,433 42,279 257,877 279,139 304,343 326,501 40 Deposits.................................................................. 13,325 14,658 16,844 19,924 219,460 233,177 255,898 271,463 Demand 41 4 8 10 8 921 822 1,907 2,323 42 1,277 1,504 1,868 2,067 2,896 3,025 3,718 3,736 43 3,236 3,588 4,073 4,814 72,884 74,203 84,518 85,946 Time and savings 44 1,041 1,164 1,089 1,203 1,997 2,152 2,063 2,123 45 7,766 8,392 9,802 11,831 140,760 152,974 163,690 177,334 46 4,842 7,056 6,908 8,413 8,401 11,212 11,293 14,649 47 Total capital accounts............................................ 818 893 917 962 18,360 19,812 20,823 22,346 48 275 293 310 317 8,914 8,998 9,039 9,077 1. Includes items not shown separately. For Note see table 1.24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics □ September 1979 1.26 COMMERCIAL BANK ASSETS AND LIABILITIES Detailed Balance Sheet, September 30,1978 Millions of dollars, except for number of banks M[ember banks1 Insured Non­ Asset account commercial Large banks member banks banks1 Total All other New York City of Other City Chicago large 1 Cash bank balances, items in process......................................... 158,380 134,955 43,758 5,298 47,914 37,986 23,482 2 Currency and coin.................................................................... 12,135 8,866 867 180 2,918 4,901 3,268 3 Reserves with Federal Reserve Banks..................................... 28,043 28,041 3,621 1,152 12,200 11,067 3 4 Demand balances with banks in United States..................... 41,104 25,982 12,821 543 3,672 8,945 15,177 5 Other balances with banks in United States.......................... 4,648 2,582 601 15 648 1,319 2,066 6 Balances with banks in foreign countries............................... 3,295 2,832 331 288 1,507 705 463 7 Cash items in process of collection......................................... 69,156 66,652 25,516 3,119 26,969 11,049 2,504 8 Total securities held—Book value.............................................. 262,199 179,877 20,808 7,918 58,271 92,881 82,336 9 95,068 65,764 9,524 2,690 22,051 31,499 29,315 10 40,078 25,457 1,828 1,284 7,730 14,616 14,622 11 States and political subdivisions.............................................. 121,260 85,125 9,166 3,705 27,423 44,831 36,136 12 All other securities.................................................................... 5,698 3,465 291 240 1,048 1,887 2,234 n 94 66 19 47 28 14 6,833 6,681 3,238 708 2,446 290 151 15 4,125 4,103 2,407 408 1,210 78 23 16 825 816 401 82 278 55 9 17 1,395 1,381 363 117 794 107 14 18 All other trading account securities.................................... 394 316 67 101 145 3 78 19 94 66 19 47 28 20 Bank investment portfolios...................................................... 255,366 173,196 17,570 7,210 55,825 92,591 82,185 21 U.S. Treasury........................................................................ 90,943 61,661 7,117 2,282 20,840 31,422 29,293 22 Other U.S. government agencies........................................ 39,253 24,641 1,426 1,201 7,452 14,561 14,613 23 States and political subdivisions.......................................... 119,865 83,745 8,803 3,588 26,629 44,724 36,123 24 All other portfolio securities................................................ 5,305 3,149 224 138 903 1,884 2,156 25 Federal Reserve stock and corporate stock............................... 1,656 1,403 311 111 507 475 253 26 Federal funds sold and securities resale agreement................... 41,258 31,999 3,290 1,784 16,498 10,427 9,365 27 Commercial banks.................................................................. 34,256 25,272 1,987 1,294 12,274 9,717 9,090 28 Brokers and dealers.................................................................. 4,259 4,119 821 396 2,361 541 140 29 2,743 2,608 482 94 1,863 169 135 30 Other loans, gross......................................................................... 675,915 500,802 79,996 26,172 190,565 204,069 175,113 31 17,019 11,355 675 107 3,765 6,809 5,664 32 Reserves for loan loss........................................................ 7,431 5,894 1,347 341 2,256 1,949 1,537 33 Other loans, net............................................................................ 651,465 483,553 77,974 25,724 184,544 195,311 167,912 Other loans, gross, by category 203,386 138,730 10,241 2,938 52,687 72,863 64,656 35 Construction and land development....................................... 25,621 19,100 2,598 685 9,236 6,581 6,521 36 8,418 3,655 23 34 453 3,146 4,763 37 Secured by residential properties............................................ 117,176 81,370 5,362 1,559 31,212 43,236 35,806 38 1- to 4-family residences...................................................... 111,674 77,422 4,617 1,460 29,774 41,570 34,252 39 FHA-insured or VA-guaranteed..................................... 7,503 6,500 508 44 3,446 2,502 1,003 40 104,171 70,922 4,109 1,417 26,328 39,068 33,249 41 Multifamily residences.......................................................... 5,502 3,948 746 99 1,438 1,665 1,554 42 FHA-insured..................................................................... 399 340 132 27 88 92 59 43 5,103 3,609 613 72 1,350 1,573 1,495 44 52,171 34,605 2,258 660 11,786 19,901 17,566 45 Loans to financial institutions.................................................... 37,072 34,843 12,434 4,342 15,137 2,930 2,228 46 REITs and mortgage companies............................................ 8,574 8,162 2,066 801 4,616 680 412 47 Domestic commercial banks.................................................... 3,362 2,618 966 165 1,206 281 744 48 Banks in foreign countries....................................................... 7,359 7,187 3,464 268 2,820 635 171 49 1,579 1,411 290 76 785 261 167 50 Other financial institutions...................................................... 16,198 15,465 5,649 3,033 5,710 1,073 733 51 Loans to security brokers and dealers........................................ 11,042 10,834 6,465 1,324 2,846 199 207 4,280 3,532 410 276 1,860 985 747 28,054 15,296 168 150 3,781 11,196 12,758 213,123 171,815 39,633 13,290 67,833 51,059 41,309 161,599 110,974 7,100 2,562 40,320 60,993 50,624 56 131,571 90,568 5,405 1,711 33,640 49,811 41,003 57 58,908 37,494 1,077 209 11,626 24,582 21,414 58 Residential repair and modernization................................. 8,526 5,543 331 60 2,088 3,064 2,983 59 21,938 19,333 2,268 1,267 9,736 6,062 2,605 60 17,900 16,037 1,573 1,219 8,192 5,053 1,863 61 Check and revolving credit plans.................................... 4,038 3,296 695 47 1,545 1,009 742 62 19,689 13,296 427 57 5,242 7,570 6,393 63 9,642 6,667 179 19 2,563 3,905 2,976 64 10,047 6,629 249 38 2,678 3,664 3,417 65 Other installment loans........................................................ 22,510 14,902 1,302 119 4,948 8,533 7,608 66 30,027 20,406 1,694 851 6,680 11,182 9,621 17,360 14,778 3,545 1,290 6,100 3,844 2,582 956,579 696,833 102,383 35,536 259,820 299,094 259,867 6,717 6,212 1,145 96 3,931 1,041 505 70 Fixed assets—Buildings, furniture, real estate........................... 22,448 16,529 2,332 795 6,268 7,133 5,926 71 Investment in unconsolidated subsidiaries................................. 3,255 3,209 1,642 188 1,282 96 46 16,557 16,036 8,315 1,258 6,054 409 521 34,559 30,408 11,323 1,000 12,810 5,275 4,249 1,198,495 904,182 170,899 44,170 338,079 351,034 294,595 For notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A19 1.26 Continued [ember bankis1 Insured Non­ Liability or capital account commercial Large bankss member banks banks1 Total All other New York City of Other City Chicago large 75 Demand deposits........................................................................ 369,030 282,450 66,035 10,690 100,737 104,988 86,591 76 1,282 1,089 527 1 256 305 194 77 Other individuals, partnerships, and corporations............. 279,651 205,591 31,422 7,864 79,429 86,876 74,061 78 U.S. government.................................................................... 7,942 5,720 569 188 1,987 2,977 2,222 79 17,122 11,577 764 252 3,446 7,116 5,545 80 Foreign governments, central banks, etc.............................. 1,805 1,728 1,436 19 211 62 77 81 Commercial banks in United States..................................... 39,596 38,213 21,414 1,807 10,803 4,189 1,393 82 Banks in foreign countries..................................................... 7,379 7,217 5,461 207 1,251 298 162 83 Certified and officers’ checks, etc.......................................... 14,253 11,315 4,443 352 3,354 3,166 2,937 84 Time deposits............................................................................. 368,562 266,496 38,086 15,954 98,525 113,931 102,066 85 Accumulated for personal loan payments............................ 79 66 0 0 1 65 13 86 Mutual savings banks............................................................ 399 392 177 40 148 27 7 87 Other individuals, partnerships, and corporations.............. 292,120 210,439 29,209 12,074 76,333 92,824 81,680 88 864 689 61 40 356 232 175 89 States and political subdivisions............................................ 59,087 40,010 1,952 1,554 16,483 20,020 19,077 90 Foreign governments, central banks, etc.............................. 6,672 6,450 3,780 1,145 1,401 124 222 91 Commercial banks in United States..................................... 7,961 7,289 2,077 999 3,585 629 672 92 Banks in foreign countries..................................................... 1,381 1,161 829 103 219 9 220 93 Savings deposits......................................................................... 223,326 152,249 10,632 2,604 54,825 84,188 71,077 94 Individuals and nonprofit organizations............................... 207,701 141,803 9,878 2,448 51,161 78,316 65,897 95 Corporations and other profit organizations....................... 11,216 7,672 519 148 3,195 3,809 3,544 96 82 65 2 3 24 35 17 97 States and political subdivisions............................................ 4,298 2,682 215 4 437 2,025 1,616 98 30 27 18 * 8 2 3 960,918 701,195 114,753 29,248 254,087 303,107 259,733 100 Federal funds purchased and securities sold under agreements to repurchase....................................................................... 91,981 85,582 21,149 8,777 41,799 13,857 6,398 101 Commercial banks................................................................. 42,174 39,607 6,991 5,235 21,609 5,773 2,566 102 Brokers and dealers................................................................ 12,787 11,849 2,130 1,616 6,381 1,722 939 103 Others...................................................................................... 37,020 34,126 12,028 1,926 13,809 6,362 2,894 8,738 8,352 3,631 306 3,191 1,225 386 105 Mortgage indebtedness.............................................................. 1,767 1,455 234 27 701 491 316 106 Bank acceptances outstanding.................................................. 16,661 16,140 8,398 1,260 6,070 412 521 107 Other liabilities........................................................................... 27,124 23,883 8,860 1,525 9,020 4,477 3,494 108 Total liabilities............................................................................ 1,107,188 836,607 157,026 41,144 314,868 323,569 270,849 5,767 4,401 1,001 79 2,033 1,287 1,366 110 Equity capital............................................................................. 85,540 63,174 12,871 2,947 21,177 26,178 22,380 Ill 88 36 0 0 5 31 52 112 Common stock........................................................................... 17,875 12,816 2,645 570 4,007 5,594 5,064 113 Surplus......................................................................................... 32,341 23,127 4,541 1,404 8,148 9,034 9,217 114 Undivided profits....................................................................... 33,517 26,013 5,554 921 8,680 10,858 7,509 115 Other capital reserves................................................................. 1,719 1,182 132 52 337 661 538 116 Total liabilities and equity capital............................................. 1,198,495 904,182 170,899 44,170 338,079 351,034 294,595 Memo: 117 Demand deposits adjusted2....................................................... 252,337 171,864 18,537 5,576 60,978 86,774 80,472 Average for last 15 or 30 days 146,283 124,916 36,862 6,030 45,731 36,293 21,379 119 Federal funds sold and securities purchased under agree- 43,873 33,682 4,272 1,887 16,007 11,517 10,307 651,874 483,316 76,750 25,722 184,790 196,054 168,558 121 Time deposits of $100,000 or more.......................................... 183,614 150,160 32,196 13,216 65,776 38,972 33,454 944,593 687,543 107,028 28,922 250,804 300,789 257,062 123 Federal funds purchased and securities sold under agree- 92,685 86,635 22,896 9,473 40,541 13,725 6,053 124 Other liabilities for borrowed money....................................... 8,716 8,326 3,679 370 3,211 1,067 390 18,820 17,658 10,063 1,477 4,820 1,297 1,162 186,837 152,553 32,654 13,486 66,684 39,728 34,284 127 160,227 129,667 27,950 11,590 56,383 33,743 30,560 128 26,610 22,886 4,704 1,896 10,301 5,985 3,724 129 Number of banks....................................................................... 14,390 5,593 12 9 153 5,419 8,810 1. Member banks exclude and nonmember banks include 13 noninsured Note. Data include consolidated reports, including figures for all trust companies that are members of the Federal Reserve System. bank-premises subsidiaries and other significant majority-owned do­ 2. Demand deposits adjusted are demand deposits other than domestic mestic subsidiaries. Securities are reported on a gross basis before deduc­ commercial interbank and U.S. government, less cash items reported tions of valuation reserves. Back data in lesser detail were shown in as in process of collection. previous issues of the Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics □ September 1979 1.27 ALL LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of £750 Million or More on December 31, 1977, Assets and Liabilities Millions of dollars, Wednesday figures 1979 Account July 4 July 11 July 18 July 25 Aug. 1? Aug. 8p Aug. 15p Aug. 22p Aug. 29p 1 Cash items in process of collection..................... 58,575 45,982 47,325 43,256 50,633 41,630 47,118 43,733 44,327 2 Demand deposits due from banks in the United States................................................................. 16,009 16,592 14,902 15,079 15,718 13,492 14,111 13,487 14,560 3 All other cash and due from depositary 27,224 25,601 34,056 29,987 29,358 26,241 28,868 30,248 34,654 488,564 486,177 481,242 482,765 486,520 489,030 490,377 489,230 489,704 Securities 36,399 36,693 35,744 35,636 35,206 34,651 35,064 35,037 34,655 6 Trading account................................................ 4,853 5,142 4,755 5,010 4,199 4,291 4,449 4,570 4,668 7 Investment account, by maturity..................... 31.546 31,551 30,989 30,625 30,408 30,360 30,615 30,467 29,988 8 One year or less............................................ 8,621 8,561 8,559 8,504 8,380 8,505 8,337 8,282 8,045 9 Over one through five years......................... 18,676 18,753 18,222 17,869 17,861 17,685 17,878 17,814 17,571 10 4,250 4,237 4,208 4,252 4,166 4,170 4,400 4,372 4,371 11 67,222 67,930 67,749 67,971 68,383 68,962 69,079 69,200 69,775 12 3,751 4,074 3,806 3,781 4,020 4,287 4,155 4,109 4,214 13 Investment account........................................... 63,471 63,856 63,942 64,190 64,363 64,675 64,924 65,091 65,562 14 U.S. government agencies............................. 13,420 13,842 13,846 13,997 14,024 14,006 14,234 14,274 14,620 15 States and political subdivision, by maturity. 47,230 47,199 47,313 47,412 47,589 47,940 47,962 48,122 48,232 16 One year or less......................................... 6,344 6,177 6,187 6,201 6,150 6,279 6,294 6,366 6,350 17 Over one year............................................ 40,886 41,022 41,126 41,212 41,439 41,662 41,668 41,756 41,883 18 Other bonds, corporate stocks and securities 2,821 2,814 2,782 2,780 2,750 2,728 2,729 2,695 2,709 Loans 19 Federal funds sold1.............................................. 29,843 28,091 24,687 25,080 25,734 28,291 27,522 25,922 25,684 20 To commercial banks....................................... 20,355 18,709 17,932 17,150 18,135 18,136 19,694 18,070 17,713 21 To nonbank brokers and dealers in securities. 7,398 7,214 5,117 5,718 5,912 7,171 5,897 5,851 5,899 22 To others............................................................ 2,089 2,168 1,638 2,212 1,688 2,984 1,931 2,000 2,072 366,210 364,688 364,365 365,414 368,540 368,590 370,218 370,650 371,204 24 145,715 146,256 146,205 146,162 147,436 147,431 147,240 147,676 147,602 25 Bankers’ acceptances and commercial paper....................................................... 4,098 4,184 3,968 3,832 4,236 3,876 3,497 3,654 3,627 26 All other......................................................... 141,616 142,072 142,236 142,330 143,199 143,555 143,744 144,022 143,976 27 135,218 135,696 135,901 136,018 136,895 137,243 137,396 137,672 137,494 28 Non-U.S. addressees.................................. 6,398 6,376 6,336 6,312 6,304 6,312 6,347 6,350 6,481 29 Real estate......................................................... 88,703 89,198 89,796 90,151 90,447 90,796 91,260 91,581 92,017 30 To individuals for personal expenditures........ 65,293 65,281 65,462 65,711 66,053 66,455 66,738 67,082 67,498 To financial institutions 31 Commercial banks in the United States---- 3,496 3,061 2,907 3,136 3,273 2,853 3,048 3,164 3,174 32 Banks in foreign countries........................... 6,811 7,132 6,343 6,509 6,658 6,453 6,411 6,412 6,776 33 Sales finance, personal finance companies, etc................................................................ 9,641 9,678 9,656 9,359 10,026 10,130 9,862 9,770 9,725 34 Other financial institutions....................... 15,579 15,468 15,438 15,217 15,488 15,668 15,747 15,711 15,932 35 To nonbank brokers and dealers in securities. 10,394 8,780 8,835 9,595 9,504 9,324 10,128 9,873 9,066 36 To others for purchasing and carrying securities2...................................................... 2,532 2,511 2,516 2,507 2,512 2,540 2,560 2,570 2,582 37 To finance agricultural production................. 4,867 4,891 4,913 4,913 4,950 4,989 4,947 4,931 4,923 38 13,177 12,431 12,294 12,152 12,193 11,949 12,277 11,879 11,908 6,340 6,424 6,465 6,490 6,453 6,515 6,566 6,629 6,647 40 Loan loss reserve......................................... 4,771 4,801 4,838 4,845 4,891 4,949 4,941 4,950 4,967 41 Other loans, net..................................................... 355,100 353,462 353,063 354,079 357,196 357,125 358,712 359,071 359,589 6,774 6,843 6,846 6,864 6,940 7,023 7,042 7,050 7,080 43 56,425 58,231 55,858 56,578 57,078 56,662 58,174 56,143 56,255 653,572 639,426 640,229 634,530 646,247 634,078 645,690 639,891 646,580 Deposits 45 Demand deDOsits.................................................. 193,342 185,002 183,154 177,218 187,520 174,430 184,066 174,395 177,489 46 Mutual savings banks....................................... 945 747 726 587 783 680 770 602 662 47 Individuals, partnerships, and corporations.. 135,638 129,930 128,149 124,718 130,620 124,471 131,249 124,909 124,276 48 States and political subdivisions..................... 4,848 4,413 4,646 4,510 5,438 4,246 4,888 4,485 4,315 49 937 1,622 2,297 1,666 773 559 1,236 565 590 50 Commercial banks in the United States.......... 31,995 30.721 31,016 29,889 32,275 28,215 29,023 28,129 30,750 51 Banks in foreign countries............................... 8,143 7,475 6,805 7,470 7,432 7,456 7,336 6,932 7,192 52 Foreign governments and official institutions. 1,475 1,748 1,324 1,198 1,365 1,273 1,606 1,376 1,664 53 9,360 8,346 8,192 7,181 8,834 7,529 7,957 7,397 8,039 54 Time and savings deoosits................................... 248,598 246,321 246,862 248,228 249,111 249,833 250,118 251,541 252,105 55 77,916 78,257 78,100 77,915 77,632 77,770 77,615 77,450 77,140 56 Individuals and nonprofit organizations---- 72,805 73,122 73,012 72,830 72,607 72,694 72,533 72,387 72,018 57 Partnerships and corporations operated for 4,183 4,210 4,199 4,259 4,227 4,279 4,257 4,291 4,334 58 Domestic governmental units....................... 911 901 866 802 774 775 801 747 756 59 16 24 23 24 24 22 23 25 30 60 Time................................................................... 170,682 168,064 168,762 170,313 171,479 172,063 172,503 174,090 174,965 61 Individuals, partnerships, and corporations 138,466 136,572 137,345 138,625 139,819 140,388 140,853 142,372 143,058 62 States and political subdivisions................. 21,000 20,757 20,828 21,103 21,172 21,279 21,187 21,422 21,685 63 U.S. government........................................... 455 453 438 444 441 481 481 476 505 64 Commercial banks in the United States---- 4,966 4,694 4,664 4,678 4,570 4,608 4,592 4,514 4,419 65 Foreign governments, official institutions, 5,796 5,587 5,486 5,463 5,477 5,307 5,390 5,306 5,298 66 Federal funds purchased3..................................... 91,559 93,865 94,055 90,779 90,142 94,892 93,490 92,342 95,042 Other liabilities for borrowed money 67 Borrowings from Federal Reserve Banks.... 1,753 829 965 575 810 380 2,100 877 256 68 Treasury tax-and-loan notes............................. 7,118 5,002 5,972 7,350 5,961 3,080 2,220 5,262 4,911 69 All other liabilities for borrowed money........ 14,310 13,112 13,377 14,905 15,876 15,202 15,911 16,901 16,077 70 Other liabilities and subordinated note and 53,320 51,666 52,416 51,954 53,029 52,367 53,916 54,734 56,628 71 Total liabilities...................................................... 610,001 595,798 596,800 591,010 602,450 590,186 601,821 596,051 602,508 72 Residual (total assets minus total liabilities)4... 43,571 43,628 43,429 43,520 43,797 43,892 43,869 43,840 44,072 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy 2. Other than financial institutions and brokers and dealers. analysis or for other analytic uses. 3. Includes securities sold under agreements to repurchase. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Banks A21 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of 51 Billion or More on December 31, 1977 Assets and Liabilities Millions of dollars, Wednesday figures 1979 Account July 4 July 11 July 18 July 25 Aug. Ip Aug. 8* Aug. 15p Aug. 22p Aug. 29* 1 Cash items in process of collection..................... 55,682 43,755 44,947 41,201 48,321 39,707 44,766 41,637 42,373 2 Demand deposits due from banks in the United States................................................................. 15,172 15,891 14,197 14,344 14,966 12,800 13,351 12,799 13,796 3 All other cash and due from depositary institutions......................................................... 25,522 24,055 32,088 28,393 27,800 24,708 27,309 28,552 32,817 457,582 454,844 450,299 451,658 455,300 457,669 459,109 457,779 458,328 Securities 5 U.S. Treasury securities....................................... 34,028 34,320 33,361 33,254 32,846 32,295 32,694 32,690 32,300 6 Trading account................................................ 4,812 5,100 4,703 4,974 4,754 4,256 4,400 4,528 4,621 7 Investment account, by maturity..................... 29,217 29,220 28,658 28,280 28,092 28,039 28,294 28,162 27,679 8 One year or less............................................ 8,064 8,006 8,005 7,942 7,828 7,950 7,803 7,758 7,518 9 Over one through five years......................... 17,224 17,298 16,766 16,395 16,402 16,222 16,396 16,336 16,093 10 Over five years.............................................. 3,929 3,916 3,887 3,943 3,861 3,866 4,095 4,068 4,068 62,065 62,755 62,562 62,705 63,120 63,679 63,817 63,942 64,486 12 Trading account................................................ 3,669 3,993 3,739 3,702 3,938 4,205 4,080 4,030 4,107 13 Investment account........................................... 58,396 58,763 58,823 59,002 59,182 59,474 59,737 59,912 60,379 14 U.S. government agencies............................. 12,435 12,856 12,830 12,965 13,005 12,988 13,203 13,246 13,591 15 States and political subdivision, by maturity. 43,339 43,290 43,382 43,428 43,603 43,935 43,982 44,148 44,255 16 One year or less........................................ 5,811 5,615 5,623 5,620 5,574 5,699 5,730 5,791 5,772 17 Over one year............................................ 37,528 37,674 37,759 37,808 38,029 38,236 38,252 38,356 38,483 18 Other bonds, corporate stocks and securities 2,622 2,616 2,611 2,609 2,573 2,551 2,552 2,518 2,532 Loans 19 Federal funds sold1.............................................. 27,779 25,779 22,800 23,093 23,730 26,179 25,587 23,851 23,768 20 To commercial banks....................................... 18,627 16,760 16,372 15,468 16,471 16,437 18,162 16,362 16,230 21 To nonbank brokers and dealers in securities. 7,102 6,907 4,826 5,446 5,608 6,819 5,562 5,553 5,537 22 To others............................................................ 2,049 2,112 1,602 2,180 1,652 2,923 1,863 1,936 2,002 23 Other loans, gross................................................. 344,017 342,406 342,067 343,127 346,134 346,162 347,694 348,048 348,561 24 Commercial and industrial............................... 138,370 138,851 138,788 138,742 140,021 139,986 139,784 140,198 140,135 25 Bankers’ acceptances and commercial paper....................................................... 4,043 4,130 3,916 3,777 4,171 3,806 3,421 3,567 3,536 26 All other........................................................ 134,327 134,721 134,872 134,965 135,850 136,180 136,363 136,631 136,598 27 U.S. addresses............................................ 127,978 128,392 128,584 128,703 129,596 129,918 130,069 130,330 130,165 28 Non-U.S. addressees.................................. 6,349 6,329 6,288 6,262 6,254 6,262 6,293 6,302 6,433 29 Real estate.......................................................... 83,294 83,780 84,334 84,660 84,946 85,296 85,731 86,053 86,476 30 To individuals for personal expenditures........ 57,923 57,889 57,998 58,182 58,459 58,824 59,055 59,356 59,735 To financial institutions 31 Commercial banks in the United States.... 3,418 2,985 2,826 3,064 3,204 2,782 2,981 3,083 3,102 32 Banks in foreign countries........................... 6,754 7,058 6,281 6,447 6,601 6,408 6,366 6,366 6,723 33 Sales finance, personal finance companies, 9,456 9,487 9,475 9,178 9,847 9,938 9,669 9,579 9,540 34 Other financial institutions........................... 15,102 14,989 14,976 14,769 15,026 15,216 15,304 15,264 15,479 35 To nonbank brokers and dealers in securities. 10,265 8,658 8,711 9,477 9,377 9,197 9,998 9,736 8,939 36 To others for purchasing and carrying 2,298 2,287 2,290 2,286 2,294 2,320 2,338 2,347 2,356 37 To finance agricultural production................. 4,699 4,723 4,752 4,743 4,778 4,817 4,772 4,755 4,747 38 All other............................................................ 12,438 11,698 11,636 11,577 11,583 11,377 11,696 11,312 11,328 5.804 5,883 5,921 5,944 5,909 5,967 6,014 6,074 6,092 4; 503 4,533 4,569 4,576 4,620 4,679 4,669 4,679 4,695 333,710 331,990 331,577 332,606 335,605 335,516 337,011 337,295 337,774 42 Lease financing receivables................................... 6,588 6,658 6,660 6,678 6,751 6,835 6,854 6,862 6,892 43 All other assets...................................................... 54,888 56,746 54,354 55,000 55,529 55,165 56,702 54,653 54,662 615,435 601,950 602,546 597,274 608,667 596,884 608,092 602,283 608,869 Deposits 45 Demand deposits.................................................. 181,582 173,871 172,031 166,507 176,304 163,830 172,974 163,842 166,836 906 713 702 562 742 650 742 574 627 47 Individuals, partnerships, and corporations.. 126,673 121,268 119,554 116,406 122,000 116,131 122,544 116,503 115,911 48 States and political subdivisions..................... 4,258 3,859 3,956 3,873 4,831 3,710 4,344 3,926 3,749 49 U.S. government............................................... 850 1,495 2,114 1,537 702 503 1,137 507 538 50 Commercial banks in the United States.......... 30,320 29,316 29,737 28,600 30,872 26,946 27,677 26,918 29,472 51 Banks in foreign countries............................. 8,082 7,419 6,742 7,410 7,351 7,389 7,269 6,878 7,116 52 Foreign governments and official institutions. 1,474 1,747 1,323 1,191 1,359 1,248 1,574 1,375 1,662 53 Certified and officers’ checks........................... 9,018 8,053 7,902 6,926 8,447 7,252 7,688 7,162 7,761 54 Time and savings deposits................................... 231,364 229,167 229,729 231,146 232,133 232,774 232,972 234,323 234,758 72,311 72,623 72,458 72,313 72,057 72,176 72,030 71,892 71,609 56 Individuals and nonprofit organizations---- 67,596 67,901 67,790 67,628 67,425 67,514 67,370 67,227 66,889 57 Partnerships and corporations operated for 3,866 3,882 3,878 3,935 3,906 3,958 3,936 3,965 4,006 58 Domestic governmental units....................... 833 818 768 727 704 684 701 676 686 59 Allother........................................................ 15 23 21 22 23 21 22 24 29 159,053 156,544 157,271 158,833 160,076 160,598 160,942 162,431 163,149 61 Individuals, partnerships, and corporations 129,082 127,254 128,018 129,291 130,563 131,102 131,507 132,943 133,497 62 States and political subdivisions................. 19,021 18,830 18,912 19,191 19,257 19,330 19,204 19,420 19,657 63 U.S. government........................................... 448 447 432 438 435 474 474 469 498 64 Commercial banks in the United States---- 4,724 4,449 4,430 4,458 4,355 4,395 4,377 4,303 4,207 65 Foreign governments, official institutions, and banks.................................................. 5,778 5,564 5,478 5,455 5,466 5,296 5,379 5,296 5,289 66 Federal funds purchased3..................................... 87,148 89,311 89,541 86,150 85,644 89,956 88,693 87,282 90,114 Other liabilities for borrowed money 67 Borrowings from Federal Reserve Banks.... 1,718 804 856 553 778 358 2,023 790 208 68 Treasury tax-and-loan notes............................ 6,568 4,631 5,513 6,795 5,509 2,863 2,058 4,898 4,595 69 All other liabilities for borrowed money........ 14,006 12,744 12,895 14,553 15,393 14,786 15,501 16,527 15,590 70 Other liabilities and subordinated note and 52,148 50,493 51,249 50,786 51,864 51,180 52,751 53,542 55,474 574,535 561,021 561,814 556,490 567,625 555,747 566,972 561,205 567,575 72 Residual (total assets minus total liabilities)4.. .| 40,900 40,929 40,731 40,783 41,042 41,136 41,120 41,078 41,294 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy 2. Other than financial institutions and brokers and dealers. analysis or for other analytic uses. 3. Includes securities sold under agreements to repurchases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Financial Statistics □ September 1979 1.29 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures 1979 July 4 July 11 July 18 July 25 Aug. \p Aug. 8» Aug. 15? Aug. 22p Aug. 29p 1 Cash items in process of collection..................... 20,411 16,424 16,931 15,785 18,407 14,769 15,759 14,821 16,424 2 Demand deposits due from banks in the United States.................................................................. 9,326 11,197 9,878 10,506 10,691 8,978 9,167 8,837 9,685 3 All other cash and due from depositary 4,811 4,381 6,701 5,931 6,242 6,257 6,262 7,081 8,917 4 Total loans and securities1................................... 107,673 105,056 104,089 103,718 105,142 104,959 105,683 104,973 105,198 Securities 6 7 Investment account, by maturity..................... 6,952 6,903 6,542 6,321 6,265 6,170 6,149 6,087 5,818 8 One year or less............................................ 1,163 1,167 1,188 1,175 1,154 1,237 1,221 1,209 1,128 9 Over one through five years......................... 5,145 5,092 4,717 4,470 4,498 4,340 4,334 4,285 4,115 10 Over five years............................................... 643 644 637 676 613 594 594 593 574 11 12 13 Investment account........................................... 10,978 11,089 11,112 11,100 11,033 11,073 11,164 11,156 11,269 14 U.S. government agencies............................. 1,590 1,715 1,719 1,719 1,746 1,727 1,834 1,814 1,892 15 States and political subdivision, by maturity. 8,776 8,758 8,764 8,755 8,683 8,762 8,745 8,785 8,819 16 One year or less......................................... 1,342 1,355 1,318 1,313 1,242 1,334 1,339 1,334 1,348 17 Over one year............................................. 7,434 7,403 7,446 7,442 7,441 7,428 7,406 7,450 7,471 18 Other bonds, corporate stocks and securities 612 616 628 626 604 584 585 557 558 Loans 19 Federal funds sold 3.............................................. 8,658 6,846 7,019 6,266 6,915 7,140 6,676 6,342 7,292 20 To commercial banks....................................... 4,881 3,927 4,924 3,338 4,439 3,696 3,958 3,757 4,606 21 To nonbank brokers and dealers in securities. 3,070 2,225 1,626 1,835 2,002 2,434 2,095 1,963 2,053 22 To others.......................................................... 706 694 470 1,093 473 1,010 622 622 632 23 Other loans, cross................................................. 83,418 82,568 81,776 82,390 83,301 82,984 84,105 83,814 83,265 24 Commercial and industrial............................... 41,889 42,192 42,143 42,210 42,501 42,540 42,533 42,714 42,712 25 Bankers’ acceptances and commercial paper....................................................... 1,394 1,379 1,249 1,123 1,113 1,007 862 942 1,000 26 All other........................................................ 40,495 40,813 40,893 41,087 41,388 41,533 41,671 41,772 41,712 27 U.S. addressees.......................................... 38,220 38,557 38,651 38,878 39,187 39,350 39,456 39,555 39,485 28 Non-U.S. addressees................................. 2,275 2,255 2,243 2,209 2,202 2,184 2,214 2,216 2,227 29 Real estate.......................................................... 11,115 11,155 11,268 11,390 11,415 11,510 11,556 11,583 11,613 30 To individuals for personal expenditures___ 7,734 7,746 7,761 7,769 7,828 7,859 7,917 7,971 8,012 To financial institutions 31 Commercial banks in the United States.... 1,220 1,006 927 1,114 1,026 861 1,053 1,067 968 32 Banks in foreign countries........................... 3,346 3,618 2,937 2,960 3,069 3,041 2,990 2,911 3,248 33 Sales finance, personal finance companies, etc................................................................ 3,450 3,572 3,534 3,283 3,764 3,919 3,683 3,531 3,506 34 Other financial institutions........................... 4,575 4,459 4,458 4,407 4,450 4,493 4,618 4,756 4,775 35 To nonbank brokers and dealers in securities. 6,544 5,483 5,543 5,977 5,916 5,588 6,244 6,028 4,901 36 To others for purchasing and carrying 439 441 451 453 455 452 450 456 456 37 To finance agricultural production................. 222 222 222 215 205 203 203 203 206 38 2,884 2,675 2,530 2,611 2,673 2,518 2,857 2,595 2,866 39 Less: Unearned income........................................ 849 856 864 862 858 867 870 879 890 40 Loan loss reserve........................................ 1,483 1,494 1,496 1,497 1,514 1,542 1,541 1,547 1,555 41 Other loans, net.................................................... 81,086 80,219 79,416 80,031 80,929 80,575 81,694 81,388 80,819 42 Lease financing receivables................................... 1,280 1,303 1,299 1,306 1,308 1,348 1,354 1,354 1,364 43 All other assets5.................................................... 27,439 29,809 26,871 27,915 27,791 27,818 28,714 26,936 26,424 44 Total assets............................................................ 170,941 168,171 165,770 165,161 169,581 164,130 166,941 164,002 168,013 Deposits 59,200 59,292 57,592 56,317 60,276 54,499 58,027 53,661 56,736 46 Mutual savings banks....................................... 508 395 391 276 410 345 410 297 275 47 Individuals, partnerships, and corporations... 30,041 29,664 28,986 28,408 30,441 27,826 30,669 27,984 27,462 48 States and political subdivisions..................... 481 504 464 412 586 398 538 424 386 49 U.S. government............................................... 92 326 574 364 112 58 208 74 65 50 Commercial banks in the United States.......... 16,343 17,651 17,580 17,215 18,139 15,900 15,750 15,267 17,706 51 Banks in foreign countries............................... 6,195 5,654 4,802 5,579 5,310 5,605 5,451 5,118 5,328 52 Foreign governments and official institutions. 1,126 1,397 1,036 826 987 874 1,242 1,018 1,353 53 Certified and officers’ checks........................... 4,415 3,702 3,758 3,237 4,290 3,492 3,758 3,479 4,161 40,776 40,083 40,298 40,215 40,829 40,939 40,959 41,132 41,066 55 10,104 10,123 10,077 10,044 9,998 9,984 9,962 9,936 9,891 56 Individuals and nonprofit organizations.... 9,481 9,509 9,480 9,450 9,414 9,412 9,393 9,361 9,306 57 Partnerships and corporations operated for profit........................................................... 403 401 403 410 400 406 399 406 401 58 Domestic governmental units....................... 213 199 181 169 169 155 157 153 165 59 7 14 13 14 14 10 12 15 19 60 30,671 29,960 30,221 30,171 30,831 30,955 30,997 31,196 31,175 61 Individuals, partnerships, and corporations. 24,682 24,177 24,402 24,502 25,037 25,164 25,172 25,451 25,521 62 States and political subdivisions.................. 1,262 1,281 1,317 1,353 1,383 1,430 1,472 1,515 1,511 63 U.S. government........................................... 44 45 44 50 56 60 65 69 83 64 Commercial banks in the United States---- 1,412 1,304 1,362 1,262 1,301 1,314 1,309 1,290 1,189 65 Foreign governments, official institutions. 3,271 3,153 3,095 3,003 3,054 2,988 2,979 2,871 2,870 28,154 27,598 25,298 27,236 25,986 27,931 24,776 25,746 26,480 Other liabilities for borrowed money 67 Borrowings from Federal Reserve Banks........ 995 275 375 49 100 1,435 100 68 Treasury tax-and-loan notes........................... 1,255 970 1,154 1,398 1,132 616 433 1,083 1,043 69 All other liabilities for borrowed money........ 7,081 7,183 7,234 7,432 7,661 7,183 7,184 7,922 7,777 70 Other liabilities and subordinated note and 20,116 19,352 20,400 19,121 20,188 19,349 20,575 20,854 21,412 71 157,576 154,754 152,350 151,768 156,072 150,616 153,391 150,499 154,515 72 Residual (total assets minus total liabilities)7.. 13,364 13,417 13,420 13,392 13,509 13,513 13,550 13,503 13,498 1. Excludes trading account securities. 5. Includes trading account securities. 2. Not available due to confidentiality. 6. Includes securities sold under agreements to repurchase. 3. Includes securities purchased under agreements to resell. 7. This is not a measure of equity capital for use in capital adequacy 4. Other than financial institutions and brokers and dealers. analysis or for other analytic uses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Banks A23 1.30 LARGE WEEKLY REPORTING COMMERCIAL BANKS Balance Sheet Memoranda Millions of dollars, Wednesday figures 1979 Category July 4 July 11 July 18 July 25 Aug. 1? Aug. 8? Aug. 15? Aug. 22? Aug. 29? Banks with Assets of $750 Million or More 1 Total loans (gross) and investments adjusted1... 475,824 475,633 471,706 473,813 476,455 479,505 479,141 479,575 480,432 2 Total loans (gross) adjusted 1.................................... 372,202 371,009 368,213 370,207 372,866 375,892 374,998 375,338 376,001 3 Demand deposits adjusted2....................................... 101,836 106,678 102,516 102,407 103,840 104,026 106,689 101,968 101,821 4 Time deposits in accounts of $100,000 or more. 115,474 113,176 113,469 114,945 115,596 116,209 116,390 117,576 118,377 5 Negotiable CDs........................................................ 81,533 79,404 79,522 80,854 81,436 81,995 82,297 83,525 84,234 6 Other time deposits................................................. 33,942 33,772 33,947 34,091 34,159 34,214 34,093 34,051 34,142 7 Loans sold outright to affiliates3............................ 3,682 3,737 3,675 3,734 3,783 3,753 3,626 3,680 3,716 8 Commercial and industrial.................................... 2,738 2,792 2,734 2,794 2,866 2,813 2,706 2,723 2,769 9 Other............................................................................. 944 945 940 940 916 940 920 957 946 Banks with Assets of $1 Billion or More 10 Total loans (gross) and investments adjusted1... 445,844 445,516 441,591 443,646 446,155 449,095 448,650 449,088 449,784 11 Total loans (gross) adjusted1.................................... 349,751 348,441 345,668 347,688 350,190 353,122 352,139 352,455 352,998 12 Demand deposits adjusted2....................................... 94,730 99,304 95,233 95,168 96,410 96,674 99,394 94,780 94,454 13 Time deposits in accounts of $100,000 or more. 107,991 105,821 106,152 107,548 108,302 108,820 108,932 110,044 110,706 14 Negotiable CDs........................................................ 76,496 74,486 74,622 75,873 76,503 76,881 76,928 77,926 78,496 15 Other time deposits.................................................. 31,494 31,335 31,530 31,674 31,799 31,939 32,004 32,118 32,210 16 Loans sold outright to affiliates3............................. 3,638 3,691 3,629 3,691 3,740 3,709 3,581 3,626 3,669 17 Commercial and industrial.................................... 2,718 2,771 2,713 2,776 2,847 2,793 2,686 2,702 2,750 18 Other............................................................................. 919 920 916 915 892 916 894 924 919 Banks in New York City 19 Total loans (gross) and investments adjusted1* 4. 103,904 102,473 100,599 101,625 102,048 102,810 103,083 102,575 102,069 20 Total loans (gross) adjusted1.................................... 85,974 84,481 82,944 84,204 84,750 85,566 85,770 85,332 84,982 21 Demand deposits adjusted2....................................... 22,355 24,892 22,506 22,952 23,617 23,771 26,309 23,499 22,541 22 Time deposits in accounts of $100,000 or more. 24,741 24,035 24,244 24,186 24,660 24,934 24,912 25,019 25,023 23 Negotiable CDs........................................................ 17,484 16,752 16,937 16,853 17,304 17,416 17,304 17,466 17,650 24 Other time deposits.................................................. 7,257 7,283 7,308 7,333 7,356 7,518 7,608 7,553 7,372 1. Exclusive of loans and federal funds transactions with domestic com­ 3. Loans sold are those sold outright to a bank’s own foreign branches, mercial banks. nonconsolidated nonbank affiliates of the bank, the bank’s holding com­ 2. All demand deposits except U.S. government and domestic banks pany (if not a bank) and nonconsolidated nonbank subsidiaries of the less cash items in process of collection. holding company. 4. Excludes trading account securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Financial Statistics □ September 1979 1.31 LARGE WEEKLY REPORTING COMMERCIAL BANKS Domestic Classified Commercial and Industrial Loans Millions of dollars Outstanding Net change during Industry classification 1979 1979 1979 Apr. 25 May 30 June 27 July 25 Aug. 29 p Ql Q2 June July Aug.* 1 Durable goods manufacturing......... 20,699 20,648 20,905 21,450 21,594 1,677 1,324 257 545 144 2 Nondurable goods manufacturing.., 17,589 17,303 17,403 17,423 18,253 311 -86 100 20 830 3 Food, liquor, and tobacco............. 4,753 4,365 4,371 4,252 4,482 11 -440 6 -119 231 4 Textiles, apparel, and leather........ 4,339 4,547 4,701 4,859 5,092 396 495 154 158 233 5 Petroleum refining.......................... 2,113 2,067 1,967 1,929 1,831 -380 -310 -100 -38 -98 6 Chemicals and rubber.................... 3,605 3,496 3,448 3,437 3,644 45 -62 -48 -11 207 7 Other nondurable goods............... 2,779 2,827 2,916 2,946 3,203 236 230 89 30 257 8 Mining (including crude petroleum and natural gas)............................. 10,383 10,888 11,008 11,221 11,445 11 858 120 213 224 9 Trade.................................................. 22,957 23,574 23,976 24,596 23,999 1,327 1,496 402 619 -597 10 Commodity dealers........................ 1,815 1,957 1,917 2,099 1,665 -78 25 -40 182 -434 11 Other wholesale.............................. 11,262 11,401 11,741 12,001 11,946 760 778 340 260 -55 12 Retail............................................... 9,880 10,216 10,318 10,495 10,388 645 693 103 177 -108 13 Transportation, communication, and other public utilities................... 14,474 14,610 15,324 15,387 15,751 437 1,262. 714 62 365 14 Transportation................................ 6,319 6,405 6,451 6,487 6,642 443 185 46 35 155 15 Communication.............................. 1,886 1,886 2,050 2,106 2,148 138 199 164 55 42 16 Other public utilities...................... 6,269 6,319 6,823 6,794 6,961 -146 877 504 -28 167 17 Construction...................................... 5,478 5,744 5,583 5,723 5,701 168 210 -161 140 -22 18 Services............................................... 16,490 16,868 17,250 17,589 17,821 721 1,180 382 339 232 19 All other i.......................................... 14,614 14,847 15,444 15,314 15,602 -1,921 1,481 597 -130 287 20 Total domestic loans.......................... 122,685 124,483 126,894 128,703 130,165 2,731 7,724 2,412 1,462 21 Memo: Term loans (original maturity more than 1 year) included in domestic loans............................. 61,941 63,328 64,474 64,312 65,986 3,740 3,960 1,146 -162 1,673 1. Includes commercial and industrial loans at a few banks with assets with domestic assets of $1 billion or more as of December 31, 1977 are of $1 billion or more that do not classify their loans. included in this series. The revised series is on a last-Wednesday-of-themonth basis. Note. New series. The 134 large weekly reporting commercial banks 1.311 MAJOR NONDEPOSIT SOURCES OF FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars December outstanding Outstanding in 1979 Source 1976 1977 1978 Jan. Feb. Mar. Apr. May June July Aug. Total nondeposit funds 1 Seasonally adjusted2.............................................. 55.4 62.7 84.9 83.1 95.8 100.7 104.8 111.2 115.7 119.4 127.7 2 Not seasonally adjusted......................................... 54.2 61.3 83.9 82.2 93.7 98.4 102.5 113.3 115.5 118.2 129.7 Federal funds, RPs, and other borrowings from nonbanks 3 Seasonally adjusted3.............................................. 47.1 58.4 74.8 73.2 80.2 80.9 82.3 84.3 84.4 86.5 91.2 4 Not seasonally adjusted......................................... 45.8 57.0 73.8 72.3 78.1 78.6 80.0 86.4 84.2 85.4 93.3 5 Net Eurodollar borrowings, not seasonally adjusted. 4.5 -0.5 6.3 6.3 12.0 16.3 18.9 23.2 27.5 29.1 6 Loans sold to affiliates, not seasonally adjusted4.... 3.8 4.8 3.8 3.6 3.6 3.5 3.6 3.7 3.8 3.7 3.7 Memo 7 Security RP borrowings, seasonally adjusted 5........ 27.9 36.3 43.8 43.8 42.9 42.7 43.0 42.0 45.0 42.8 40.9 8 Not seasonally adjusted......................................... 27.0 35.1 42.4 40.8 41.4 42.2 42.5 44.8 44.5 42.5 42.5 9 U.S. Treasury demand balances, not seasonally adjusted6................................................................. 4.4 5.1 10.2 11.9 8.3 6.5 5.3 8.4 10.8 13.2 9.9 10 Domestic chartered banks net positions with own foreign branches, not seasonally adjusted7---- - 6.0 -12.5 -10.7 - 10.1 -6.3 -4.5 -1.9 2.6 5.8 6.3 8.9 11 Gross due from balances....................................... 12.8 21.1 25.5 24.6 23.3 22.5 21.6 19.7 20.0 20.1 19.2 12 Gross due to balances............................................ 6.8 8.6 14.8 14.5 17.0 18.0 19.7 22.3 25.8 26.4 28.1 13 Foreign-related institutions net positions with directly related institutions, not seasonally adjusted 8.............................................................. 9.7 11.1 17.0 16.4 18.3 20.8 20.8 20.6 21.7 22.8 23.8 14 Gross due from balances........................................ 8.3 10.3 14.2 15.4 15.0 15.3 15.7 15.9 17.6 17.6 17.6 15 Gross due to balances............................................ 18.1 21.4 31.2 31.7 33.3 36.0 36.5 36.5 39.3 40.4 41.4 1. Commercial banks are those in the 50 states and the District of Banks and from foreign banks, term federal funds, overdrawn due from Columbia with national or state charters plus U.S. branches, agencies, bank balances, loan RPs, and participations in pooled loans. Includes and New York investment company subsidiaries of foreign banks and averages of daily figures for member banks and averages of current and Edge Act corporations. previous month-end data for foreign-related institutions. 2. Includes seasonally adjusted Federal funds, RPs, and other borrow­ 4. Loans initially booked by the bank and later sold to affiliates that ings from nonbanks and not seasonally adjusted net Eurodollars and are still held by affiliates. Averages of Wednesday data. loans to affiliates. Includes averages of Wednesday data for domestic 5. Based on daily average data reported by 46 large banks. chartered banks and averages of current and previous month-end data for 6. Includes U.S. Treasury demand deposits and Treasury tax and loan foreign-related institutions. notes at commercial banks. Averages of daily data. 3. Other borrowings are borrowings on any instrument, such as a 7. Includes averages of daily figures for member banks and quarterly promissory note or due bill, given for the purpose of borrowing money call report figures for nonmember banks. for the banking business. This includes borrowings from Federal Reserve 8. Includes averages of current and previous month-end data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Deposits and Commercial Paper A25 1.32 GROSS DEMAND DEPOSITS of Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances Commercial banks Type of holder 1977 1978 I9792 1974 1975 1976 Dec. Dec. Dec. Dec. Mar. June Sept. Dec. Mar. June 1 All holders, individuals, partnerships, and 225.0 236.9 250.1 274.4 262.5 271.2 278.8 294.6 270.4 285.6 2 Financial business.................................................. 19.0 20.1 22.3 25.0 24.5 25.7 25.9 27.8 24.4 25.4 118.8 125.1 130.2 142.9 131.5 137.7 142.5 152.7 135.9 145.1 73.3 78.0 82.6 91.0 91.8 92.9 95.0 97.4 93.9 98.6 2.3 2.4 2.7 2.5 2.4 2.4 2.5 2.7 2.7 2.8 11.7 11.3 12.4 12.9 12.3 12.4 13.1 14.1 13.5 13.7 Weekly reporting banks 1978 19793 1975 1976 1977 Dec. Dec. Dec. Aug. Sept. Oct. Nov. Dec. Mar. June 7 All holdere, individuals, partnerships, and 124.4 128.5 139.1 137.7 139.7 141.3 142.7 147.0 121.9 128.8 8 Financial business.................................................. 15.6 17.5 18.5 19.4 18.9 19.1 19.3 19.8 16.9 18.4 69.9 69.7 76.3 72.0 74.1 75.0 75.7 79.0 64.6 68.1 29.9 31.7 34.6 36.8 37.1 37.5 37.7 38.2 31.1 33.0 2.3 2.6 2.4 2.4 2.4 2.5 2.5 2.5 2.6 2.7 12 Other....................................................................... 6.6 7.1 7.4 7.1 7.3 7.2 7.5 7.5 6.7 6.6 1. Figures include cash items in process of collection. Estimates of gross 3. After the end of 1978 the large weekly reporting bank panel was deposits are based on reports supplied by a sample of commercial banks. changed to 170 large commercial banks, each of which had total assets in Types of depositors in each category are described in the June 1971 domestic offices exceeding $750 million as of Dec. 31, 1977. See “An­ Bulletin, p. 466. nouncements,” p. 408 in the May 1978 Bulletin. Beginning in March 2. Beginning with the March 1979 survey, the demand deposit ownership 1979, demand deposit ownership estimates for these large banks survey sample was reduced to 232 banks from 349 banks, and the estima­ are constructed quarterly on the basis of 97 sample banks and are not tion procedure was modified slightly. To aid in comparing estimates comparable with earlier data. The following estimates in billions of dollars based on the old and new reporting sample, the following estimates in for December 1978 have been constructed for the new large-bank panel: billions of dollars for December 1978 have been constructed using the new financial business, 18.2; nonfinancial business, 67.2; consumer, 32.8; smaller sample: financial business, 27.0; nonfinancial business, 146.9; foreign, 2.5; other, 6.8. consumer, 98.3; foreign, 2.8; and other, 15.1. 1.33 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period 1978 1979 1976 1977 Instrument Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July Commercial paper (seasonally adjusted) 1 All issuers................................................................ 52,971 65,101 83,665 85,226 87,358 90,796 92,725 96,106 101,516 102,447 Financial companies1 Dealer-placed paper 2 2 Total.................................................................... 7,261 8,884 12,296 12,915 13,419 14,247 14,961 15,551 16,537 17,042 3 Bank-related........................................................ 1,900 2,132 3,521 4,413 3,969 3,793 4,251 4,141 3,826 3,951 Directly placed paper 3 4 Total.................................................................... 32,511 40,484 51,630 52,880 54,586 55,653 55,313 57,886 61,256 60,532 5 Bank-related........................................................ 5,959 7,102 12,314 12,191 12,166 12,642 12,788 13,799 15,130 14,722 6 Nonfinancial companies4....................................... 13,199 15,733 19,739 19,431 19,353 20,896 22,451 22,669 23,723 24,873 Bankers dollar acceptances (not seasonally adjusted) 7 Total........................................................................ 22,523 25,450 33,700 33,749 34,337 34,617 34,391 35,286 36,989 39,040 Holder 8 Accepting banks.................................................... 10,442 10,434 8,579 7,339 7,715 7,645 7,535 7,844 8,180 9,275 9 Own bills............................................................. 8,769 8,915 7,653 6,214 6,708 6,535 6,685 6,895 6,956 7,499 10 Bills bought........................................................ 1,673 1,519 927 1,125 1,007 1,110 849 950 1,224 1,777 Federal Reserve Banks 991 954 1 0 0 204 252 0 1,400 1,159 375 362 664 765 750 793 861 940 971 952 13 Others...................................................................... 10,715 13,904 24,456 25,646 '25,872 25,975 25,744 26,501 27,837 27,654 Basis 4,992 6,378 8,574 8,869 9,114 9,281 8,679 9,007 9,202 9,499 4,818 5,863 7,586 7,762 7,858 8,104 8,087 8,367 8,599 8,784 16 All other.................................................................. 12,713 13,209 17,540 17,118 17,365 17,232 17,625 17,912 19,189 20,756 1. Institutions engaged primarily in activities such as, but not limited to, 3. As reported by financial companies that place their paper directly commercial, savings, and mortgage banking; sales, personal, and mortgage with investors. financing; factoring, finance leasing, and other business lending; insurance 4. Includes public utilities and firms engaged primarily in activities such underwriting; and other investment activities. as communications, construction, manufacturing, mining, wholesale and Digitized for FR2A. SInEclRud es all financial company paper sold by dealers in the open retail trade, transportation, and services. market. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Financial Statistics □ September 1979 1.34 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Month Average Month Average Effective date Rate Effective date Rate rate rate 1978—June 16............. 8% 1978—Nov. 1........... lOVi 1977—Nov...................... 7.75 1978—Oct....................... 9.94 30............. 9 6........... ioy4 Dec....................... 7.75 Nov...................... 10.94 17........... 11 Dec....................... 11.55 Aug. 31............ 9 % 24........... HV4 1978—jan........................ 7.93 Feb....................... 8.00 1979—Jan....................... 11.75 Sept. 15............. 9% Dec. 26........... uy4 Mar...................... 8.00 Feb....................... 11.75 28............. 9Va Apr...................... 8.00 11.75 1979—June 19........... HV4 May..................... 8.27 Apr....................... 11.75 Oct. 13........... 10 July 27........... 11% June..................... 8.63 May..................... 11.75 27........... io*4 July...................... 9.00 June..................... 11.65 Aug. 16............ 12 Aug...................... 9.01 July...................... 11.54 28............ 121/4 Sept...................... 9.41 Aug...................... 11.91 1.35 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 7-12, 1979 Size of loan (in thousands of dollars) All Item sizes 1,000 1-24 25-49 50-99 100-499 500-999 and over Short-Term Commercial and Industrial Loans 1 Amount of loans (thousands of dollars)........... 8,576,070 949,806 637,101 588,718 1,427,889 673,770 4,298,785 2 Number of loans........................................................ 162,509 122,951 19,944 9,112 8,161 1,061 1,281 3 Weighted average maturity (months)................. 2.9 3.4 3.3 3.2 3.1 3.2 2.5 4 Weighted average interest rate (percent per annum)................................................................. 12.34 12.30 12.69 13.02 12.61 12.68 12.07 5 Interquartile range i............................................. 11.50-13.02 10.67-13.42 11.19-13.83 12.36-13.75 12.00-13.37 12.16-13.17 11.50-12.40 Percentage of amount of loans 6 With floating rate...................................................... 47.6 20.8 25.4 29.2 48.7 65.4 56.2 7 Made under commitment....................................... 47.2 24.0 30.0 44.2 47.6 60.0 53.2 Long-Term Commercial and Industrial Loans 8 Amount of loans (thousands of dollars)........... 1,485,131 423,381 376,270 127,185 558,296 9 Number of loans........................................................ 25,164 22,615 2,161 181 208 10 Weighted average maturity (months)................. 48.2 40.2 58.5 47.3 47.6 11 Weighted average interest rate (percent per annum)................................................................. 12.08 11.57 11.80 12.90 12.48 12 Interquartile range *............................................. 11.30-13.16 10.00-13.24 10.75-13.00 11.75-13.52 11.75-13.00 Percentage of amount of loans 13 With floating rate...................................................... 47.4 13.2 29.2 82.2 77.6 14 Made under commitment....................................... 50.0 38.6 23.4 59.5 74.5 Construction and Land Development Loans 15 Amount of loans (thousands of dollars)........... 1,019,842 96,803 108,609 131,421 307,713 375,295 16 Number of loans........................................................ 18,490 11,506 3,209 1,826 1,680 268 7.6 8.9 6.3 7.7 8.4 6.9 18 Weighted average interest rate (percent per annum)................................................................. 12.23 12.39 11.94 11.89 12.36 12.28 19 Interquartile range 1............................................. 11.25-13.45 11.30-13.35 10.76-12.62 10.00-12.73 10.64-13.72 11.25--13.75 Percentage of amount of loans 20 With floating rate...................................................... 49.3 28.5 19.6 44.5 40.3 72.4 21 Secured by real estate.............................................. 79.5 87.7 96.4 95.1 70.3 74.7 22 Made under commitment....................................... 50.3 45.9 23.4 27.0 41.2 74.9 Type of construction 23 1- to 4-family.............................................................. 43.0 81.5 75.2 76.8 41.9 12.7 24 Multifamily................................................................. 11.6 2.3 2.0 2.5 8.5 22.7 24 Nonresidential............................................................ 45.4 16.1 22.8 20.7 49.7 64.6 All 250 sizes 1-9 10-24 25-49 50-99 100-249 and over Loans to Farmers 26 Amount of loans (thousands of dollars)........... 1,057,427 200,607 181,082 145,374 178,938 157,441 193,955 27 Number of loans........................................................ 74,330 53,495 12,330 4,309 2,717 1,104 375 28 Weighted average maturity (months).................. 7.5 8.1 8.5 6.5 11.4 5.4 5.0 29 Weighted average interest rate (percent per annum)................................................................. 11.20 10.56 10.69 10.73 10.89 11.97 12.35 30 Interquartile range i............................................. 10.21-12.24 9.88-11.19 10.00-11.24 10.00-11.46 10.12-11.30 11.00-13.16 11.41-13.52 By purpose of loan 31 Feeder livestock......................................................... 11.21 10.57 10.68 10.83 10.80 11.52 12.31 32 Other livestock........................................................... 11.74 10.46 10.08 10.11 11.96 12.83 (2) 33 Other current operating expenses........................ 11.20 10.52 10.95 10.87 11.00 12.41 12.50 34 Farm machinery and equipment.......................... 10.61 10.70 10.27 10.40 11.52 (2) (2) 35 Other.............................................................................. 11.15 10.70 10.82 10.95 10.03 11.79 12.70 1. Interest rate range that covers the middle 50 percent of the total 2. Fewer than 10 sample loans, dollar amount of loans made. Note. For more detail, see the Board’s G. 14 (416) statistical release. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets A27 1.36 INTEREST RATES Money and Capital Markets Averages, percent per annum 1979 1979,, week ending Instrument 1976 1977 1978 May June July Aug. Aug. 4 Aug. 11Aug. 18Aug. 25 Sept. 1 Money market rates 1 Federal funds1.............................................. 5.05 5.54 7.94 10.24 10.29 10.47 10.94 10.75 10.67 10.80 11.04 11.16 Prime commercial paper2-3 2 90-to 119-day........................................... 5.24 5.54 7.94 9.95 9.76 9.87 10.43 9.99 10.10 10.37 10.61 10.88 5.35 5.60 7.99 9.98 9.71 9.82 10.39 9.98 10.07 10.32 10.56 10.87 4 Finance company paper, directly placed, 3- to 6-month2 -3................................... 5.22 5.49 7.78 9.75 9.44 9.39 9.82 9.62 9.63 9.79 9.91 10.07 5 Prime bankers acceptances, 90-day3*4....... 5.19 5.59 8.11 9.98 9.79 9.99 10.62 10.11 10.27 10.60 10.82 11.11 6 Large negotiable certificates of deposit, 3-month, secondary market5............... 5.26 5.58 8.20 10.15 9.95 10.11 10.69 10.23 10.25 10.53 10.81 11.08 7 Eurodollar deposits, 3-month6.................. 5.57 6.05 8.74 10.73 10.52 10.87 11.53 11.13 11.00 11.25 11.63 12.10 U.S. Treasury bills3*7 Market yields 4.98 5.27 7.19 9.61 9.06 9.24 9.52 9.23 9.40 9.52 9.55 9.74 5.26 5.53 7.58 9.54 9.06 9.24 9.49 9.31 9.39 9.47 9.53 9.70 5.52 5.71 7.74 9.27 8.81 8.87 9.16 8.93 8.95 9.15 9.28 9.41 Rates on new issue 8 4.989 5.265 7.221 9.592 9.045 9.262 9.450 9.154 9.320 9.495 9.599 9.680 5.266 5.510 7.572 9.562 9.062 9.190 9.450 9.301 9.320 9.481 9.504 9.645 Capital market rates U.S. Treasury Notes and Bonds Constant maturities9 1-yea r 6.09 8.34 10.12 9.57 9.64 9.98 9.72 9.72 9.95 10.14 10.28 2-yea r 6.45 8.34 9.78 9.22 9.14 9.46 9.27 9.27 9.38 9.57 9.75 3-yea r 6.77 6.69 8.29 9.42 8.95 8.94 9.14 9.01 8.98 9.06 9.20 9.40 5-year.................................................. 7.18 6.99 8.32 9.24 8.85 8.90 9.06 8.96 8.93 9.01 9.11 9.27 7-year......................................... 7.42 7.23 8.36 9.23 8.86 8.92 9.05 8.99 8.95 9.00 9.09 9.23 10-year............................................... 7.61 7.42 8.41 9.25 8.91 8.95 9.03 8.97 8.94 9.00 9.06 9.17 20-year............................................... 7.86 7.67 8.48 9.21 8.91 8.92 8.97 8.96 8.92 8.95 8.97 9.04 30-year................................................ 8.49 9.19 8.92 8.93 8.98 8.97 8.93 8.96 9.00 9.05 Remaining maturities10 21 3 to 5 years........................ 6.94 6.85 8.30 9.30 8.89 8.88 9.08 8.98 8.95 9.02 9.12 9.30 22 Over 10 years (long-term). 6.78 7.06 7.89 8.55 8.32 8.35 8.42 8.41 8.36 8.39 8.43 8.51 State and Local Notes and Bonds Moody’s series11 23 Aaa...................................................... 5.66 5.20 5.52 5.81 5.54 5.58 5.72 5.60 5.70 5.70 5.75 5.85 24 Baa....................................................... 7.49 6.12 6.27 6.38 6.19 6.11 6.36 6.30 6.20 6.40 6.40 6.50 25 Bond Buyer series12............................... 6.64 5.68 6.03 6.25 6.13 6.13 6.20 6.14 6.13 6.16 6.23 6.36 Corporate Bonds 26 Seasoned issues, all industries13. 9.01 8.43 9.07 9.96 9.81 9.69 9.74 9.74 9.73 9.72 9.74 9.79 By rating groups 27 Aaa................................................ 8.43 8.02 8.73 9.50 9.29 9.20 9.23 9.24 9.20 9.20 9.23 9.30 28 Aa.................................................. 8.75 8.24 8.92 9.86 9.66 9.49 9.53 9.55 9.52 9.51 9.53 9.57 29 A.................................................... 9.09 8.49 9.12 10.00 9.89 9.75 9.85 9.82 9.84 9.83 9.86 9.91 30 Baa................................................ 9.75 8.97 9.45 10.47 10.38 10.29 10.35 10.34 10.35 10.34 10.35 10.37 Aaa utility bonds14 31 New issue..................... 8.48 8.19 8.96 9.83 9.50 9.58 9.48 9.52 9.40 9.42 9.47 9.62 32 Recently offered issues. 8.49 8.19 8.97 9.84 9.50 9.53 9.49 9.57 9.44 9.45 9.47 9.54 Memo : Dividend /price ratio15 33 Preferred stocks......................... 7.97 7.60 8.25 8.82 8.87 8.93 9.02 9.00 8.97 8.94 9.10 9.09 34 Common stocks........................ 3.77 4.56 5.28 5.58 5.53 5.50 5.30 5.45 5.36 5.25 5.22 5.22 1. Weekly figures are 7-day averages of daily effective rates for the week 9. Yield on the more actively traded issues adjusted to constant ending Wednesday; the daily effective rate is an average of the rates on maturities by the U.S. Treasury, based on daily closing bid prices. a given day weighted by the volume of transactions at these rates. 10. Unweighted averages for all outstanding notes and bonds in maturity 2. Beginning November 1977, unweighted average of offering rates ranges shown, based on daily closing bid prices. “Long-term” includes quoted by at least five dealers (in the case of commercial paper), or all bonds neither due nor callable in less than 10 years, including a num­ finance companies (in the case of finance paper). Previously, most repre­ ber of very low yielding “flower” bonds. sentative rate quoted by those dealers and finance companies. 11. General obligations only, based on figures for Thursday, from 3. Yields are quoted on a bank-discount basis. Moody’s Investors Service. 4. Average of the midpoint of the range of daily dealer closing rates 12. Twenty issues of mixed quality. offered for domestic issues. 13. Averages of daily figures from Moody’s Investors Service. 5. Weekly figures (week ending Wednesday) are 7-day averages of the 14. Compilation of the Board of Governors of the Federal Reserve daily midpoints as determined from the range of offering rates; monthly System. figures are averages of total days in the month. Beginning Apr. 5, 1978, Issues included are long-term (20 years or more). New-issue yields weekly figures are simple averages of offering rates. are based on quotations on date of offering; those on recently offered 6. Averages of daily quotations for the week ending Wednesday. issues (included only for first 4 weeks after termination of underwriter 7. Except for new bill issues, yields are computed from daily closing price restrictions), on Friday close-of-business quotations. bid prices. 15. Provided by Standard and Poor’s Corporation. 8.Rates are recorded in the week in which bills are issued. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics o September 1979 1.37 STOCK MARKET Selected Statistics 1979 Indicator 1976 1977 1978 Feb. Mar. Apr. May June July Aug. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31,1965 = 50). 54.45 53.67 53.76 55.06 56.18 57.50 56.21 57.61 58.38 61.19 2 Industrial............................................................... 60.44 57.84 58.30 60.42 61.89 63.64 62.21 63.57 64.24 67.71 3 Transportation....................................................... 39.57 41.07 43.25 42.27 43.22 45.92 45.60 47.53 48.85 52.48 4 Utility..................................................................... 36.97 40.91 39.23 39.22 38.94 38.63 37.48 38.44 38.88 39.26 5 Finance................................................................... 52.94 55.23 56.74 56.09 57.65 59.50 58.80 61.87 64.43 68.40 6 Standard & Poor’s Corporation (1941-43 = 10)1.. 102.01 98.18 96.11 98.23 100.11 102.10 99.73 101.73 102.71 107.36 7 American Stock Exchange (Aug. 31,1973 = 100). 101.63 116.18 144.56 160.92 171.51 181.14 180.81 196.08 197.63 208.29 Volume of trading (thousands of shares) 8 New York Stock Exchange................................... 21,189 20,936 28,591 25,037 29,536 31,033 28,352 34,662 32,416 35,870 . 2,565 2,5149 Am3,9er2i2can S2to,9c4k4 Exch4a,n10g5e........4..,.2..6..2..........3..,.8..88 5,236 3,890 4,503 Customer financing (end-of-period balances, in millions of dollars) 10 Regulated margin credit at brokers/dealers2 8,166 9,993 11,035 10,989 11,056 11,416 11,314 11,763 T 11 Margin stock 3............................................... 7,960 9,740 10,830 10,790 10,870 11,220 11,130 11,590 12 Convertible bonds........................................ 204 250 205 195 185 194 183 172 13 Subscription issues....................................... 2 3 1 4 1 2 1 1 n.a. Free credit balances at brokers4 14 Margin-account............................................ 585 640 835 775 830 835 840 897 15 Cash-account................................................ 1,855 2,060 2,510 2,430 2,490 2,550 2,590 2,880 Margin-account debt at brokers (percentage distribution, end of period) 16 Total..................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 By equity class (in percent)5 17 Under 40.............................. 12.0 18.0 33.0 29.0 21.0 23.0 22.0 21.0 18 40-49.................................... 23.0 36.0 28.0 31.0 29.0 29.0 30.0 28.0 n.a. 19 50-59.................................... 35.0 23.0 18.0 18.0 25.0 23.0 23.0 26.0 20 60-69.................................... 15.0 11.0 10.0 11.0 12.0 12.0 12.0 12.0 21 70-79.................................... 8.7 6.0 6.0 6.0 7.0 7.0 7.0 7.0 22 80 or more........................... 6.0 5.0 5.0 5.0 6.0 6.0 6.0 6.0 Special miscellaneous-account balances at brokers (end of period) 23 Total balances (millions of dollars)6.. 8,776 9,910 13,092 13,006 13,147 13,218 13,099 13,634 Distribution by equity status (percent) 24 Net credit status................................. 41.3 43.4 41.3 40.5 43.2 42.1 41.3 42.6 Debit status, equity of 25 60 percent or more.................... 47.8 44.9 45.1 47.7 46.8 47.6 48.6 47.3 26 Less than 60 percent..................... 10.9 11.7 13.6 11.8 10.0 10.3 10.1 10.1 Margin requirements (percent of market value and effective date)7 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 27 Margin stocks........................................................ 70 80 65 55 65 50 28 Convertible bonds.................................................. 50 60 50 50 50 50 29 Short sales.............................................................. 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and in­ 5. Each customer’s equity in his collateral (market value of collateral surance companies. With this change the index includes 400 industrial less net debit balance) is expressed as a percentage of current collateral stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public values. utility (formerly 60), and 40 financial. 6. Balances that may be used by customers as the margin deposit re­ 2. Margin credit includes all credit extended to purchase or carry quired for additional purchases. Balances may arise as transfers based stocks or related equity instruments and secured at least in part by stock. on loan values of other collateral in the customer’s margin account or Credit extended is end-of-month data for member firms of the New York deposits of cash (usually sales proceeds) occur. Stock Exchange. 7. Regulations G, T, and U of the Federal Reserve Board of Governors, In addition to assigning a current loan value to margin stock generally, prescribed in accordance with the Securities Exchange Act or 1934, Regulations T and U permit special loan values for convertible bonds limit the amount of credit to purchase and carry margin stocks that may and stock acquired through exercise of subscription rights. be extended on securities as collateral by prescribing a maximum loan 3. A distribution of this total by equity class is shown on lines 17-22. value, which is a specified percentage of the market value of the collateral 4. Free credit balances are in accounts with no unfulfilled commitments at the time the credit is extended. Margin requirements are the difference to the brokers and are subject to withdrawal by customers on demand. between the market value (100 percent) and the maximum loan value. The term “margin stocks” is defined in the corresponding regulation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Thrift Institutions A29 1.38 SAVINGS INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1978 1979 Account 1975 1976 1977 Nov. Dec. Jan. Feb. Mar. Apr. May June July? Savings and loan associations 1 Assets..................................... 338,233 391,907 459,241 520,677 523,649 529,820 534,168 539,715 543,459 549,181 555,571 561,213 2 Mortgages.............................. 278,590 323,005 381,163 429,420 432,858 435,460 437,905 441,420 445,705 451,054 456,629 460,707 3 Cash and investment 30,853 35,724 39,150 45,869 44,855 47,653 49,018 50,130 48,674 48,257 48,231 49,504 28,790 33,178 38,928 45,388 45,936 46,707 47,245 48,165 49,080 49,870 50,711 51,002 5 Liabilities and net worth....... 338,233 391,907 459,241 520,677 523,649 529,820 534,168 539,715 543,459 549,181 555,571 561,213 285,743 335,912 386,800 425,207 431,009 435,752 438,633 446,981 445,831 447,872 454,738 456,757 7 Borrowed money................... 20,634 19,083 27,840 40,981 42,960 42,468 41,368 41,592 43,765 44,380 47,051 48,500 8 FHLBB.............................. 17,524 15,708 19,945 30,322 31,990 31,758 31,004 31,123 32,389 33,003 34,266 35,306 3,110 3,375 7,895 10,659 10,970 10,610 10,364 10,469 11,376 11,377 12,785 13,194 10 Loans in process.................... 5,128 6,840 9,911 11,015 10,737 10,445 10,287 10,346 10,706 11,136 11,278 11,320 11 Other...................................... 6,949 8,074 9,506 14,666 9,918 11,971 14,250 10,919 12,971 15,283 11,703 13,542 19,779 21,998 25,184 28,808 29,025 29,284 29,630 29,877 30,186 30,510 30,801 31,094 13 Memo: Mortgage loan com­ mitments outstanding3.. 10,673 14,826 19,875 20,738 18,911 18,053 19,038 21,085 22,923 23,569 22,777 22,367 Mutual savings banks9 14 Assets..................................... 121,056 134,812 147,287 157,436 158,174 158,892 160,078 161,866 Loans 15 Mortgage........................... 77,221 81,630 88,195 94,497 95,157 95,552 95,821 96,136 4,023 5,183 6,210 7,921 7,195 7,744 8,455 9,421 Securities 17 U.S. government.............. 4,740 5,840 5,895 5,035 4,959 4,838 4,801 4,814 n.a. n.a. n.a. 18 State and local government. 1,545 2,417 2,828 3,307 3,333 3,328 3,167 3,126 19 Corporate and other4....... 27,992 33,793 37,918 39,679 39,732 40,007 40,307 40,658 2,330 2,355 2,401 3,033 3,665 3,274 3,306 3,410 21 Other assets........................... 3,205 3,593 3,839 3,962 4,131 4,149 4,222 4,300 121,056 134,812 147,287 157,436 158,174 158,892 160,078 161,866 n,.a. 23 Deposits................................. 109,873 122,877 134,017 141,155 142,701 142,879 143,539 145,650 145,096 145,056 146,057 109,291 121,961 132,744 139,697 141,170 141,388 142,071 144,042 143,210 143,271 144,161 25 Ordinary savings............ 69,653 74,535 78,005 72,398 71,816 69,244 68,817 68,829 67,758 67,577 68,104 26 Time and other.............. 39,639 47,426 54,739 67,299 69,354 72,145 73,254 75,213 c75,452 75,694 76,057 27 Other.................................. 582 916 1,272 1,458 1,531 1,491 1,468 1,608 C1,886 1,784 1,896 28 Other liabilities..................... 2,755 2,884 3,292 5,411 4,565 5,032 5,485 5,048 c5,050 5,172 4,545 29 General reserve accounts.... 8,428 9,052 9,978 10,870 10,907 10,980 11,054 11,167 C11,085 11,153 11,212 30 Memo: Mortgage loan com­ mitments outstanding 6.. 1,803 2,439 4,066 4,843 4,400 4,366 4,453 4,482 4,449 4,352 n.a. Life insurance companies 31 289,304 321,552 351,722 385,562 389,021 393,402 395,553 399,530 402,426 405,627 Securities 32 Government....................... 13,758 17,942 19,553 19,711 19,579 19,829 19,922 20,119 19,958 20,381 33 4,736 5,368 5,315 4,934 4,795 5,049 5,209 5,324 5,147 5,149 34 4,508 5,594 6,051 6,235 6,250 6,236 6,132 6,106 5,979 6,272 35 4,514 6,980 8,187 8,542 8,534 8,544 8,581 8,689 8,832 8,960 36 Business............................. 135,317 157,246 175,654 197,615 197,342 201,061 201,869 203,971 205,247 207,775 n.a. n.a. 37 107,256 122,984 141,891 162,347 161,923 165,552 166,693 167,625 168,862 171,762 38 28,061 34,262 33,763 34,780 35,419 35,509 35,176 36,346 36,385 36,013 89,167 91,552 96,848 104,106 105,932 106,397 107,137 108,189 109,009 109,614 9,621 10,476 11,060 11,707 11,776 11,841 11,919 11,959 12,071 12,101 24,467 25,834 27,556 29,818 30,202 30,506 30,835 31,224 31,586 31,832 42 Other assets........................... 16,971 18,502 21,051 22,605 24,190 23,768 23,871 24,068 24,555 23,924 Credit unions 43 Total assets/liabilities and 38,037 45,225 54,084 61,614 62,595 61,756 62,319 63,883 63,247 64,372 65,603 66,563 44 Federal................................... 20,209 24,396 29,574 34,215 34,681 34,165 34,419 35,289 34,653 35,268 35,986 36,733 17,828 20,829 24,510 27,399 27,914 27,591 27,900 28,594 28,594 29,104 29,617 29,830 46 Loans outstanding................ 28,169 34,384 42,055 51,103 51,807 51,526 51,716 52,480 52,542 53,100 53,831 54,160 47 Federal............................... 14,869 18,311 22,717 28,031 28,583 28,340 28,427 28,918 28,849 29,109 29,525 29,674 48 State................................... 13,300 16,073 19,338 23,072 23,224 23,186 23,289 23,562 23,693 23,991 24,306 24,486 49 Savings................................... 33,013 39,173 46,832 52,418 53,048 51,916 52,484 54,243 53,745 54,638 r55,948 56,512 17,530 21,130 25,849 28,992 29,326 28,427 28,743 29,741 29,339 29,755 30,563 30,857 51 State (shares and deposits). 15,483 18,043 20,983 23,426 23,722 23,489 23,741 24,502 24,406 24,883 r25,386 25,655 For notes see bottom of page A30. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Financial Statistics □ September 1979 1.39 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year Transition quarter Fiscal Fiscal Type of account or operation (July- year year 1978 1979 1979 Sept. 1977 1978 1976) HI H2 HI May June July U.S. budget 1 Receipts1.............................................. '81,773 357,762 401,997 210,650 206,275 246,574 38,287 53,910 33,268 2 Outlays1................................................ 94,729 402,725 450,836 '222,561 '238,186 245,616 41,618 40,687 40,482 3 Surplus, or deficit (—)......................... -12,956 -44,963 -48,839 p —11,912 -31,912 958 - 3,331 13,223 -7,214 4 Trust funds....................................... -1,952 *•9,497 12,693 4,334 '11,754 4,041 6,274 1,981 3,805 5 Federal funds2................................. -11,004 -54,460 -61,532 p—16,246 -43,666 -4,999 -9,605 11,241 -3,408 Off-budget entities surplus, or deficit ( —) 6 Federal Financing Bank outlays........ '-2,575 *•-8,415 -10,661 '-5,105 -5,082 -7,712 -1,560 -1,723 -809 7 Other 3.................................................. r790 r—264 *•355 -790 1,843 -447 69 -264 -143 U.S. budget plus off-budget, including Federal Financing Bank 8 Surplus, or deficit (—)......................... -14,741 -53,642 -59,145 -17,806 -35,151 -7,201 -4,822 11,236 -8,166 Financed by 9 Borrowing from the public............. 18,027 53,516 '59,115 '23,378 '30,314 6,039 1,806 -1,458 4,831 10 Cash and monetary assets (de­ crease, or increase (—))4.......... -2,899 r—2,247 *•-3,021 -5,098 3,381 -8,878 -16 -13,044 4,711 11 Other 5.............................................. -387 *•2,373 '3,051 '-474 '1,456 10,040 3,032 3,266 -1,376 Memo: 12 Treasury operating balance (level, end of period).............................. 17,418 19,104 22,444 17,526 16,291 17,485 4,657 17,485 13,530 13 Federal Reserve Banks.................... 13,299 15,740 16,647 11,614 4,196 3,290 1,974 3,290 2,765 14 Tax and loan accounts.................. 4,119 3,364 5,797 5,912 12,095 14,195 2,683 14,195 10,765 1. Effective June 1978, earned income credit payments in excess of 5. Includes accured interest payable to the public; deposit funds; mis­ an individual’s tax liability, formerly treated as income tax refunds, are cellaneous liability (including checks outstanding) and asset accounts; classified as outlays retroactive to January 1976. seignorage; increment on gold; net gain/loss for U.S. currency valuation 2. Half-year figures calculated as a residual (total surplus/deficit less adjustment; net gain/loss for IMF valuation adjustment; and profit on trust fund surplus/deficit). the sale of gold. 3. Includes Pension Benefit Guaranty Corp.; Postal Service Fund; Rural Electrification and Telephone Revolving Fund; and Rural Telephone Source. “Monthly Treasury Statement of Receipts and Outlays of Bank. the U.S. Government,” Treasury Bulletin, and the Budget of the United 4. Includes U.S. Treasury operating cash accounts; special drawing States Government, Fiscal Year 1980. rights; gold tranche drawing rights; loans to International Monetary Fund; and other cash and monetary assets. NOTES TO TABLE 1.38 1. Holdings of stock of the Federal Home Loan Banks are included in Note. Savings and loan associations: Estimates by the FHLBB for “other assets.” all associations in the United States. Data are based on monthly reports 2. Includes net undistributed income, which is accrued by most, but not of federally insured associations and annual reports of other associations. all, associations. Even when revised, data for current and preceding year are subject to 3. Excludes figures for loans in process, which are shown as a liability. further revision. 4. Includes securities of foreign governments and international organiza­ Mutual savings banks: Estimates of National Association of Mutual tions and nonguaranteed issues of U.S. government agencies. Savings Banks for all savings banks in the United States. Data are re­ 5. Excludes checking, club, and school accounts. ported on a gross-of-valuation-reserves basis. 6. Commitments outstanding (including loans in process) of banks in Life insurance companies: Estimates of the American Council of Life New York State as reported to the Savings Banks Association of the Insurance for all life insurance companies in the United States. Annual State of New York. figures are annual-statement asset values, with bonds carried on an 7. Direct and guaranteed obligations. Excludes federal agency issues amortized basis and stocks at year-end market value. Adjustments for not guaranteed, which are shown in this table under “business” securities. interest due and accrued and for differences between market and book 8. Issues of foreign governments and their subdivisions and bonds of the values are not made on each item separately but are included, in total, in International Bank for Reconstruction and Development. “other assets.” 9. The NAMSB reports that, effective April 1979, balance sheet data Credit unions: Estimates by the National Credit Union Administration are not strictly comparable with previous months. This largely reflects: for a group of federal and state-chartered credit unions that account for (1) changes in FDIC reporting proceedures; and (2) reclassification of about 30 percent of credit union assets. Figures are preliminary and certain items. revised annually to incorporate recent benchmark data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A31 1.40 U.S. BUDGET RECEIPTS AND OUTLAYS Millions of dollars Calendlar year Transition quarter Fiscal Fiscal Source or type (July- year year 1978 1979 1979 Sept. 1977 1978 1976) HI H2 HI May June July Receipts 1 All sources1.......................................... 81,773 357,762 401,997 210,650 206,275 246,574 38,287 53,910 33,268 2 Individual income taxes, net............... 38,801 157,626 180,988 90,336 98,854 111,603 14,575 25,568 17,086 3 Withheld........................................... 32,949 144,820 165,215 82,784 90,148 98,683 16,736 18,080 16,714 4 Presidential Election Campaign Fund.......................................... 1 37 39 36 3 32 7 4 0 5 Nonwithheld..................................... 6,809 42,062 47,804 37,584 10,777 44,116 5,696 8,424 1,241 6 Refunds1........................................... 958 29,293 32,070 30,068 2,075 31,228 7,864 940 869 Corporation income taxes 7 Gross receipts................................... 9,808 60,057 65,380 38,496 28,536 42,427 1,870 16,016 2,518 8 Refunds............................................. 1,348 5,164 5,428 2,782 2,757 2,889 467 376 499 9 Social insurance taxes and contribu­ tions, net....................................... 25,760 108,683 123,410 66,191 61,064 75,609 18,652 9,375 10,566 10 Payroll employment taxes and contributions 2.......................... 21,534 88,196 99,626 51,668 51,052 59,298 12,932 8,374 8,857 11 Self-employment taxes and contributions 3......................... 269 4,014 4,267 3,892 369 4,616 318 322 0 12 Unemployment insurance................ 2,698 11,312 13,850 7,800 6,727 8,623 4,864 188 1,204 13 Other net receipts 4......................... 1,259 5,162 5,668 2,831 2,917 3,072 538 491 504 14 Excise taxes.......................................... 4,473 17,548 18,376 8,835 9,879 8,984 1,601 1,464 1,659 IS Customs deposits................................. 1,212 5,150 6,573 3,320 3,748 3,682 645 637 647 16 Estate and gift taxes........................... 1,455 7,327 5,285 2,587 2,691 2,657 559 414 463 17 Miscellaneous receipts 5...................... 1,612 6,536 7,413 3,667 4,260 4,501 852 811 828 Outlays 18 All types1............................................. 94,729 402,725 450,836 222,518 238,150 245,616 41,618 40,687 40,482 19 National defense.................................. 22,307 97,501 105,186 52,979 55,129 57,643 9,965 9,973 10,397 20 International affairs............................. 2,197 4,813 5,922 2,904 2,221 3,538 743 482 -427 21 General science, space, and technology..................................... 1,161 4,677 4,742 2,395 2,362 2,461 442 461 433 22 Energy.................................................. 794 4,172 5,861 2,487 4,461 4,417 737 789 713 23 Natural resources and environment.. 2,532 10,000 10,925 4,959 6,119 5,672 969 900 1,154 24 Agriculture........................................... 581 5,532 7,731 2,353 4,854 3,020 69 -525 -369 25 Commerce and housing credit............ 1,392 -44 3,325 -946 3,291 60 16 95 173 26 Transportation..................................... 3,304 14,636 15,444 7,723 8,758 7,688 1,326 1,340 1,552 27 Community and regional development................................. 1,340 6,286 11,000 5,928 6,108 4,499 787 912 702 28 Education, training, employment, and social services........................ 5,162 20,985 26,463 12,792 13,676 14,467 2,559 2,193 2,472 29 Health................................................... 8,721 38,785 43,676 21,391 23,942 24,860 4,258 4,268 4,108 30 Income security1.................................. 32,797 137,915 146,212 75,201 73,305 81,173 13,588 13,595 13,669 31 Veterans benefits and services............ 3,962 18,038 18,974 9,603 9,545 10,127 1,694 2,497 667 32 Administration of justice.................... 859 3,600 3,802 1,946 1,973 2,096 364 323 336 33 General government............................ 883 3,374 3,777 1,803 2,111 2,291 454 405 365 34 General-purpose fiscal assistance........ 2,092 9,499 9,601 4,665 4,385 3,890 160 76 1,800 35 Interest«.............................................. 7,216 38,009 43,966 22,280 24,110 26,934 4,241 7,834 3,491 36 Undistributed offsetting receipts 6*7.. -2,567 -15,053 -15,772 -7,945 - 8,200 -8,999 -755 -4,931 -753 1. Effective June 1978, earned income credit payments in excess oif an Receipts" reflect the accounting conversion for the interest on special individual's tax liability, formerly treated as income tax refunds, are issues for U.S. government accounts from an accrual basis to a cash basis. classified as outlays retroactive to January 1976. 7. Consists of interest received by trust funds, rents and royalties on 2. Old-age, disability, and hospital insurance, and railroad retirement the Outer Continental Shelf, and U.S. government contributions for accounts. employee retirement. 3. Old-age, disability, and hospital insurance. 4. Supplementary medical insurance premiums, federal employee re­ Source. “Monthly Treasury Statement of Receipts and Outlays of the tirement contributions, and Civil Service retirement and disability fund. U.S. Government” and the Budget of the U.S. Government, Fiscal Year 5. Deposits of earnings by Federal Reserve Banks and other miscel­ 1980. laneous receipts. 6. Effective September 1976, “Interest" and “Undistributed Offsetting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Financial Statistics □ September 1979 1.41 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1976 1977 1978 1979 Item Dec. 31 June 30 Sept. 30 Dec. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 1 Federal debt outstanding..................... 665.5 685.2 709.1 729.2 758.8 780.4 797.7 804.6 812.2 2 Public debt securities........................... 653.5 674.4 698.8 718.9 749.0 771.5 789.2 796.8 804.9 506.4 523.2 543.4 564.1 587.9 603.6 619.2 630.5 626.4 4 Held by agencies.............................. 147.1 151.2 155.5 154.8 161.1 168.0 170.0 166.3 178.5 5 Agency securities................................. 12.0 10.8 10.3 10.2 9.8 8.9 8.5 7.8 7.3 10.0 9.0 8.5 8.4 8.0 7.4 7.0 6.3 5.9 7 Held by agencies.............................. 1.9 1.8 1.8 1.8 1.8 1.5 1.5 1.5 1.5 8 Debt subject to statutory limit............. 654.7 675.6 700.0 720.1 750.2 772.7 790.3 797.9 806.0 652.9 673.8 698.2 718.3 748.4 770.9 788.6 796.2 804.3 1.7 1.7 1.7 1.7 1.8 1.8 1.7 1.7 1.7 11 Memo: Statutory debt limit............... 682.0 700.0 700.0 752.0 752.0 798.0 798.0 798.0 830.0 1. Includes guaranteed debt of government agencies, specified participa- Note. Data from Treasury Bulletin (U.S. Treasury Department), tion certificates, notes to international lending organizations, and District of Columbia stadium bonds. 1.42 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1979 Type and holder 1975 1976 1977 1978 Apr. May June July Aug. 1 Total gross public debt.......................................... 576.6 653.5 718.9 789.2 796.4 804.8 804.9 807.5 813.1 By type 2 Interest-bearing debt............................................ 575.7 652.5 715.2 782.4 795.4 803.8 799.9 806.5 812.1 3 Marketable............................................................ 363.2 421.3 459.9 487.5 504.6 506.9 499.3 507.0 509.2 4 Bills.................................................................... 157.5 164.0 161.1 161.7 163.7 163.1 159.9 159.9 160.5 5 Notes.................................................................. 167.1 216.7 251.8 265.8 275.3 276.1 272.1 278.3 277.6 6 Bonds.................................................................. 38.6 40.6 47.0 60.0 65.5 67.7 67.4 68.8 71.1 7 Nonmarketable1.................................................... 212.5 231.2 255.3 294.8 290.8 296.9 300.5 299.5 302.9 8 Convertible bonds2........................................... 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 9 State and local government series................... 1.2 4.5 13.9 24.3 24.0 24.0 24.1 24.2 24.6 10 Foreign issues 3.................................................. 21.6 22.3 22.2 29.6 25.4 25.2 26.8 28.0 27.7 11 Government................................................... 21.6 22.3 22.2 28.0 21.3 21.0 22.7 23.9 23.5 12 Public.............................................................. 0 0 0 1.6 4.2 4.2 4.2 4.2 4.2 13 Savings bonds and notes.................................. 67.9 72.3 77.0 80.9 80.8 80.8 80.8 80.9 80.9 14 Government account series4............................ 119.4 129.7 139.8 157.5 158.2 164.6 166.3 163.9 167.3 15 Non-interest-bearing debt..................................... 1.0 1.1 3.7 6.8 .9 1.0 5.1 1.0 1.0 By holder5 16 U.S. government agencies and trust funds........ 139.1 147.1 154.8 170.0 170.7 177.1 178.6 89.8 97.0 102.5 109.6 108.6 106.2 109.2 18 Private investors.................................................... 349.4 409.5 461.3 508.6 517.1 521.5 516.6 19 Commercial banks................................................ 85.1 103.8 101.4 93.4 97.0 98.5 95.0 4.5 5.9 5.9 5.2 5.2 5.2 5.0 9.5 12.7 15.1 15.0 14.8 14.7 14.5 20.2 27.7 22.7 20.6 23.6 26.2 24.0 n.a. n.a. 34.2 41.6 55.2 68.6 69.1 69.2 68.0 Individuals 67.3 72.0 76.7 80.7 80.6 80.6 80.6 25 Other securities.................................................. 24.0 28.8 28.6 30.0 31.5 31.8 31.8 26 Foreign and international«................................... 66.5 78.1 109.6 137.8 124.8 118.0 119.5 38.0 38.9 46.1 57.4 70.6 77.5 78.3 1. Includes (not shown separately): Securities issued to the Rural 6. Consists of the investments of foreign balances and international Electrification Administration, depositary bonds, retirement plan bonds, accounts in the United States. Beginning with July 1974, the figures exclude and individual retirement bonds. non-interest-bearing notes issued to the International Monetary Fund. 2. These nonmarketable bonds, also known as Investment Series B 7. Includes savings and loan associations, nonprofit institutions, cor­ Bonds, may be exchanged (or converted) at the owner’s option for 1 Vi porate pension trust funds, dealers and brokers, certain government ercent, 5-year marketable Treasury notes. Convertible bonds that have deposit accounts, and government sponsored agencies. een so exchanged are removed from this category and recorded in the 8. Includes a nonmarketable Federal Reserve special certificate for $2.6 notes category above. billion. 3. Nonmarketable dollar-denominated and foreign currency denomin­ ated series held by foreigners. Note. Gross public debt excludes guaranteed agency securities and, 4. Held almost entirely by U.S. government agencies and trust funds. beginning in July 1974, includes Federal Financing Bank security issues. 5. Data for Federal Reserve Banks and U.S. government agencies and Data by type of security from Monthly Statement of the Public Debt of trust funds are actual holdings; data for other groups are Treasury the United States (U.S. Treasury Department); data by holder from estimates. Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A33 1.43 U.S. GOVERNMENT MARKETABLE SECURITIES Ownership, by maturity Par value; millions of dollars, end of period 1979 1979 Type of holder 1977 1978 1977 1978 May June May June All maturities 1 to 5 years 1All holders................................................................................ 459,927 487,546 506,867 499,343 151,264 162,886 161,719 155,150 2 U.S. government agencies and trust funds........................... 14,420 12,695 12,682 12,452 4,788 3,310 2,509 2,503 3 Federal Reserve Banks........................................................... 101,191 109,616 106,185 109,241 27,012 31,283 28,634 28,204 4 Private investors...................................................................... 344,315 365,235 388,001 377,650 119,464 128,293 130,576 124,443 5 75,363 68,890 70,704 67,790 38,691 38,390 38,157 36,028 6 4,379 3,499 3,379 3,287 2,112 1,918 1,811 1,765 7 12,378 11,635 11,792 11,612 4,729 4,664 4,822 4,657 8 Nonfinan cial corporations.................................................. 9,474 8,272 9,925 8,826 3,183 3,635 3,299 3,068 9 Savings and loan associations............................................ 4,817 3,835 3,555 3,669 2,368 2,255 1,989 2,013 10 State and local governments.............................................. 15,495 18,815 18,544 18,023 3,875 3,997 4,385 4,016 11 222,409 250,288 270,101 264,442 64,505 73,433 76,112 72,896 Total, within 1 year 5 to 10 years 12 All holders................................................................................ 230,691 228,516 243,856 243,171 45,328 50,400 47,786 47,561 13 U.S. govern)ment agencies and trust funds........................... 1,906 1,488 2,280 2,280 2,129 1,989 1,989 1,765 14 Federal Reserve Banks........................................................... 56,702 52,801 53,558 56,778 10,404 14,809 12,225 12,436 15 Private inves tors...................................................................... 172,084 174,227 188,018 184,114 32,795 33,601 33,572 33,359 16 29,477 20,608 22,347 21,906 6,162 7,490 7,542 7,363 17 1,400 817 847 804 584 496 457 461 18 Insurance 'Companies........................................................... 2,398 1,838 1,870 1,860 3,204 2,899 2,768 2,750 19 Nonfinanc ial corporations.................................................. 5,770 4,048 5,759 5,069 307 369 470 354 20 2,236 1,414 1,407 1,499 143 89 82 82 21 State and local governments.............................................. 7,917 8,194 6,811 6,682 1,283 1,588 1,669 1,693 22 122,885 137,309 148,978 146,293 21,112 20,671 20,584 20,656 Bills, within 1 year 10 to 20 years 23 All holders................................................................................ 161,081 161,747 163,076 159,890 12,906 19,800 24,968 24,922 24 U.S. government agencies and trust funds........................... 32 2 * * 3,102 3,876 4,524 4,524 25 Federal Reserve Banks............................................................ 42,004 42,397 38,165 40,309 1,510 2,088 3,118 3,127 26 Private investors...................................................................... 119,035 119,348 124,910 119,580 8,295 13,836 17,326 17,271 27 11,996 5,707 6,373 6,036 456 956 1,135 1,093 28 Mutual savings banks.......................................................... 484 150 151 130 137 143 142 139 29 Insurance companies........................................................... 1,187 753 506 412 1,245 1,460 1,488 1,489 30 Nonfinancial corporations.................................................. 4,329 1,792 2,916 2,602 133 86 247 219 31 Savings and loan associations............................................ 806 262 223 248 54 60 61 60 32 State and local governments.............................................. 6,092 5,524 4,177 3,770 890 1,420 1,749 1,762 33 94,152 105,161 110,564 106,382 5,380 9,711 12,505 12,508 Other, within 1 year Over 20 years 34 All holders................................................................................ 69,610 66,769 80,780 83,282 19,738 25,944 28,538 28,538 35 U.S. government agencies and trust funds........................... 1,874 1,487 2,280 2,280 2,495 2,031 1,380 1,380 36 Federal Reserve Banks........................................................... 14,698 10,404 15,393 16,469 5,564 8,635 8,650 8,696 37 Private investors...................................................................... 53,039 54,879 63,108 64,534 11,679 15,278 18,508 18,461 38 Commercial banks.............................................................. 15,482 14,901 15,973 15,870 578 1,446 1,523 1,400 39 Mutual savings banks.......................................................... 916 667 696 674 146 126 121 117 40 Insurance coi npanies........................................................... 1,211 1,084 1,364 1,447 802 774 844 856 41 Nonfinancial corporations.................................................. 1,441 2,256 2,843 2,467 81 135 150 117 42 Savings and loan associations............................................ 1,430 1,152 1,184 1,251 16 17 17 15 43 State and local governments.............................................. 1,825 2,670 2,634 2,912 1,530 3,616 3,930 3,869 44 All others.............................................................................. 28,733 32,149 38,414 39,911 8,526 9,164 11,922 12,088 Note. Direct public issues only. Based on Treasury Survey of Owner­ (1) 5,449 commercial banks, 461 mutual savings banks, and 723 insurance ship from Treasury Bulletin (U.S. Treasury Department). companies, each about 80 percent; (2) 431 nonfinancial corporations and Data complete 1'or U.S. government agencies and trust funds and 485 savings and loan associations, each about 50 percent; and (3) 490 Federal Reserve Bamks, but data for other groups include only holdings state and local governments, about 40 percent. of those institutions that report. The following figures show, for each “All others,” a residual, includes holdings of all those not reporting category, the number and proportion reporting as of June 30, 1979: in the Treasury Survey, including investor groups not listed separately. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Financial Statistics □ September 1979 1.44 U.S. GOVERNMENT SECURITIES DEALERS Transactions Par value; averages of daily figures, in millions of dollars 1979 1979, week ending Wednesdaiy Item 1976 1977 1978 May June July May 23 May 30 June 6 June 13 June 20 June 27 1 U.S. government securities... 10,449 10,838 10,285 13,354 15,284 11,145 15,140 16,942 15,929 16,755 14,476 14,453 By maturity 2 Bills........................................ 6,676 6,746 6,173 7,555 9,286 6,770 7,946 9,556 10,391 9,744 9,546 8,365 3 Other within 1 year.............. 210 237 392 347 *•448 308 361 437 375 408 415 479 4 1-5 years................................ 2,317 2,320 1,889 2,257 2,562 1,979 3,096 3,559 2,147 2,623 21,310 2,968 5 5-10 years.............................. 1,019 1,148 965 1,560 1,472 906 1,970 1,636 1,537 2,064 1 ,106 1,319 6 Over 10 years......................... 229 388 866 1,635 *"1,516 1,092 1,766 1,754 1,479 1,826 1 ,099 1,321 By type of customer 7 U.S. government securities dealers................................ 1,360 1,267 1,135 1,205 1,335 1,060 1,312 1,421 1,860 1,200 1,298 1,063 8 U.S. government securities brokers............................... 3,407 3,709 3,838 5,262 r6,112 4,432 6,495 7,013 5,619 7,517 Si, 645 5,892 9 Commercial banks................ 2,426 2,295 1,804 2,009 r2,447 1,767 2,294 2,507 2,524 2,823 2,121 2,338 10 All others1............................. 3,257 3,568 3,508 4,878 r5,390 3,644 5,040 6,001 5,926 5,214 ii, 412 5,160 11 Federal agency securities.... 1,548 1,729 1,894 2,621 *•3,232 2,509 3,536 3,635 3,295 3,801 31,477 3,061 1. Includes, among others, all other dealers and brokers in commodities Transactions are market purchases and sales of U.S. government and securities, foreign banking agencies, and the Federal Reserve System. securities dealers reporting to the Federal Reserve Bank of New York. The figures exclude allotments of, and exchanges for, new U.S. government Note. Averages for transactions are based on number of trading days securities, redemptions of called or matured securities, or purchases or in the period. sales of securities under repurchase, reverse repurchase (resale), or similar contracts. 1.45 U.S. GOVERNMENT SECURITIES DEALERS Positions and Sources of Financing Par value; averages of daily figures, in millions of dollars 1979 1979, week ending Wednesday Item 1976 1977 1978 May June July May 2 May 9 May 16 May 23 May 30 June 6 Positions* 1 U.S. government securities... 7,592 5,172 2,656 r5,266 7,166 2,980 2,856 4,522 4,708 5,552 8,115 7,919 2 Bills........................................ 6,290 4,772 2,452 r5,100 7,445 3,634 3,384 4,084 4,669 5,376 7,677 7,925 3 Other within 1 year.............. 188 99 260 -34 101 52 -33 9 -175 8 46 -139 4 1-5 years................................ 515 60 -92 -744 -437 -513 -393 -851 -907 -818 -367 -419 5 5-10 years.............................. 402 92 40 377 223 46 -139 458 422 390 354 376 198 149 -4 567 -167 -240 37 823 700 596 405 177 7 Federal agency securities.... 729 693 606 1,660 2,168 1,984 1,165 1,237 1,338 2,056 2,284 2,424 Financing3 8 All sources............................. 8,715 9,877 10,204 14,849 17,111 16,217 13,045 13,151 13,824 15,549 17,211 17,389 Commercial banks 9 New York City................. 1,896 1,313 599 733 1,638 1,266 850 522 51 1,193 1,279 1,252 10 Outside New York City... 1,660 1,987 2,174 2,839 2,883 2,324 1,879 2,417 2,633 2,763 3,615 3,728 11 Corporations1....................... 1,479 2,423 2,370 2,901 3,410 3,434 2,373 2,363 2,489 3,223 3,603 3,761 12 All others............................... 3,681 4,155 5,052 8,377 9,180 9,193 7,943 7,830 8,651 8,370 8,714 8,649 1. All business corporations except commercial banks and insurance firms and dealer departments of commercial banks against U.S. govern­ companies. ment and federal agency securities (through both collat eral loans and sales 2. New amounts (in terms of par values) of securities owned by nonbank under agreements to repurchase), plus internal funds vised by bank dealer dealer firms and dealer departments of commercial banks on a commit­ departments to finance positions in such securities. 'Borrowings against ment, that is, trade-date basis, including any such securities that have securities held under agreement to resell are excluded where the borrowing been sold under agreements to repurchase. The maturities of some re­ contract and the agreement to resell are equal in am ount and maturity, purchase agreements are sufficiently long, however, to suggest that the that is, a matched agreement. securities involved are not available for trading purposes. Securities owned, and hence dealer positions, do not include securities purchased Note. Averages for positions are based on numt>er of trading days under agreements to resell. in the period; those for financing, on the number of calendar days in the 3. Total amounts outstanding of funds borrowed by nonbank dealer period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A35 1.46 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1978 1979 Agency 1976 1977 1978 Dec. Jan. Feb. Mar. Apr. May 1 Federal and federally sponsored agencies1.......... 103,848 112,472 137,063 137,063 138,726 140,999 143,265 145,556 146,429 2 Federal agencies.................................................... 22,419 22,760 23,488 23,488 23,431 23,485 23,507 23,568 23,366 3 Defense Department2....................................... 1,113 983 868 868 864 859 839 822 807 4 Export-Import Bank3•4.................................... 8,574 8,671 8,711 8,711 8,515 8,499 8,326 8,322 8,107 5 Federal Housing Administration5................... 575 581 588 588 582 586 580 576 568 6 Government National Mortgage Association participation certificates6......................... 4,120 3,743 3,141 3,141 3,141 3,141 3,141 3,099 3,099 7 Postal Service7.................................................. 2,998 2,431 2,364 2,364 2,364 2,364 2,364 2,364 2,202 8 Tennessee Valley Authority............................. 4,935 6,015 7,460 7,460 7,620 7,690 7,900 7,985 8,155 9 United States Railway Association7................ 104 336 356 356 345 346 357 400 428 10 Federally sponsored agencies1............................. 81.429 89,712 113,575 113,575 115,295 117,514 119,758 121,988 123,063 11 Federal Home Loan Banks............................. 16,811 18,345 27,563 27,563 27,677 28,447 28,265 28,121 28,577 12 Federal Home Loan Mortgage Corporation.. 1,690 1,686 2,262 2,262 2,262 2,461 2,333 2,330 2,323 13 Federal National Mortgage Association........ 30,565 31,890 41,080 41,080 41,917 42,405 43,625 44,792 44,639 14 Federal Land Banks......................................... 17,127 19,118 20,360 20,360 19,275 19,275 19,275 18,389 18,389 15 Federal Intermediate Credit Banks.................. 10,494 11,174 11,469 11,469 9,978 8,958 7,890 6,994 5,958 16 Banks for Cooperatives................................... 4,330 4,434 4,843 4,843 4,392 3,852 3,351 2,473 1,483 17 Farm Credit Banks1......................................... 2,548 5,081 5,081 8,877 11,134 13,987 17,838 20,597 18 Student Loan Marketing Association8............ 410 515 915 915 915 980 1,030 1,050 1,095 19 Other.................................................................. 2 2 2 2 2 2 2 1 2 Memo: 20 Federal Financing Bank debt7>9........................... 28,711 38,580 51,298 51,298 52,154 53,221 55,310 56,610 58,186 Lending to federal and federally sponsored agencies 21 Export-Import Bank4........................................... 5,208 5,834 6,898 6,898 6,898 6,898 7,131 7,131 7,131 22 Postal Service7...................................................... 2,748 2,181 2,114 2,114 2,114 2,114 2,114 2,114 1,952 23 Student Loan Marketing Association8................ 410 515 915 915 915 980 1,030 1,050 1,095 24 Tennessee Valley Authority................................. 3,110 4,190 5,635 5,635 5,795 5,865 6,075 6,260 6,430 25 United States Railway Association7................... 104 336 356 356 345 346 357 400 428 Other lending10 26 Farmers Home Administration........................... 10,750 16,095 23,825 23,825 24,445 25,160 25,985 26,890 28,050 27 Rural Electrification Administration.................. 1,415 2,647 4,604 4,604 4,680 4,735 4,962 5,122 5,253 28 Other...................................................................... 4,966 6,782 6,951 6,951 6,962 7,123 7,656 7,643 7,847 1. In September 1977 the Farm Credit Banks issued their first consoli­ Department of Housing and Urban Development; Small Business Ad­ dated bonds, and in January 1979 they began issuing these bonds on a ministration; and the Veterans Administration. regular basis to replace the financing activities of the Federal Land Banks, 7. Off-budget. the Federal Intermediate Credit Banks, and the Banks for Cooperatives. 8. Unlike other federally sponsored agencies, the Student Loan Line 17 represents those consolidated bonds outstanding, as well as any Marketing Association may borrow from the Federal Financing Bank discount notes that have been issued. Lines 1 and 10 reflect the addition (FFB) since its obligations are guaranteed by the Department of Health, of this item. Education, and Welfare. 2. Consists of mortages assumed by the Defense Department between 9. The FFB, which began operations in 1974, is authorized to purchase 1957 and 1963 under family housing and homeowners assistance programs. or sell obligations issued, sold, or guaranteed by other federal agencies. 3. Includes participation certificates reclassified as debt beginning Since FFB incurs debt solely for the purpose of lending to other agencies, Oct. 1, 1976. its debt is not included in the main portion of the table in order to avoid 4. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget double counting. thereafter. 10. Includes FFB purchases of agency assets and guaranteed loans; 5. Consists of debentures issued in payment of Federal Housing Ad­ the latter contain loans guaranteed by numerous agencies with the ministration insurance claims. Once issued, these securities may be sold guarantees of any particular agency being generally small. The Farmers privately on the securities market. Home Administration item consists exclusively of agency assets, while the 6. Certificates of participation issued prior to fiscal 1969 by the Govern­ Rural Electrification Administration entry contains both agency assets ment National Mortgage Association acting as trustee for the Farmers and guaranteed loans. Home Administration; Department of Health, Education, and Welfare; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Financial Statistics □ September 1979 1.47 NEW SECURITY ISSUES of State and Local Governments Millions of dollars 1979 Type of issue or issuer, 1976 1977 1978 or use Jan.' Feb.' Mar.' Apr.' May' June 35,313 46,769 48,607 2,854 2,598 4,637 3,360 3,078 4,205 Type of issue 18,040 18,042 17,854 1,310 955 1,059 1,232 1,131 1,511 17,140 28,655 30,658 1,523 1,638 3,570 2,117 1,945 2,675 133 72 95 21 5 8 11 2 19 Type of issuer 6 State........................................................................................ 7,054 6,354 6,632 467 580 436 298 204 642 7 Special district and statutory authority............................... 15,304 21,717 24,156 971 1,177 2,930 1,581 1,528 1,562 8 Municipalities, counties, townships, school districts.......... 12,845 18,623 17,718 1,396 836 1,263 1,468 1,344 1,982 32,108 36,189 37,629 2,825 2,570 4,624 3,332 3,069 3,882 Use of proceeds 4,900 5,076 5,003 492 420 281 447 665 512 2,586 2,951 3,460 248 224 204 134 120 274 12 Utilities and conservation...................................................... 9,594 8,119 9,026 543 734 1,133 498 545 989 13 Social welfare......................................................................... 6,566 8,274 10,494 766 731 2,036 1,489 681 1,037 14 Industrial aid......................................................................... 483 4,676 3,526 277 195 315 170 386 282 15 Other purposes....................................................................... 7,979 7,093 6,120 499 266 655 594 672 788 1. Par amounts of long-term issues based on date of sale. Source. Public Securities Association. 2. Only bonds sold pursuant to the 1949 Housing Act, which are secured by contract requiring the Housing Assistance Administration to make annual contributions to the local authority. 1.48 NEW SECURITY ISSUES of Corporations Millions of dollars 1978 1979 Type of issue or issuer, 1976 1977 1978 or use Dec. Jan.' Feb.' Mar. Apr. May 1 All issues 1.................................. 53,488 53,792 47,230 4,367 3,770 3,170 4,401 4,311 3,963 2 Bonds.......................................... 42,380 42,015 36,872 3,247 3,106 2,257 3,729 3,732 3,372 Type of offering 3 Public.......................................... 26,453 24,072 19,815 1,227 1,282 1,336 1,904 2,984 2,023 4 Private placement....................... 15,927 17,943 17,057 2,020 1,824 921 1,825 748 1,349 Industry group 5 Manufacturing........................... , 13,264 12,204 9,572 1,031 893 278 739 534 1,089 6 Commercial and miscellaneous. 4,372 6,234 5,246 690 494 279 362 26 238 7 Transportation........................... 4,387 1,996 2,007 123 142 266 245 264 177 8 Public utility............................... 8,297 8,262 7,092 364 460 517 721 866 618 9 Communication......................... 2,787 3,063 3,373 285 259 558 517 261 97 10 Real estate and financial............ , 9,274 10,258 9,586 755 858 359 1,145 1,779 1,153 11 Stocks......................................... 11,108 11,777 10,358 1,120 664 913 672 579 591 Type 12 Preferred..................................... 2,803 3,916 2,832 424 171 201 231 155 184 13 Common..................................... 8,305 7,861 7,526 696 493 712 441 424 407 Industry group 14 Manufacturing........................... 2,237 1,189 1,241 42 41 121 24 36 84 15 Commercial and miscellaneous. 1,183 1,834 1,816 303 169 93 114 210 203 16 Transportation........................... 24 456 263 113 55 39 17 Public utility............................... 6,121 5,865 5,140 271 357 669 335 257 237 18 Communication......................... 776 1,379 264 175 65 7 19 Real estate and financial............ 771 1,049 1,631 216 96 29 79 78 21 1. Figures, which represent gross proceeds of issues maturing in more companies other than closed-end, intracorporate transactions, and sales to than one year, sold for cash in the United States, are principal amount or foreigners. number of units multiplied by offering price. Excludes offerings of less than $100,000, secondary offerings, undefined or exempted issues as Source. Securities and Exchange Commission. defined in the Securities Act of 1933, employee stock plans, investment Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Corporate Finance A37 1.49 OPEN-END INVESTMENT COMPANIES Net Sales and Asset Position Millions of dollars 1979 Item 1977 1978 Jan. Feb. Mar. Apr. May June July Investment Companies1 1 Sales of own shares2............................................. 6,401 6,645 648 451 523 594 549 676 744 2 Redemptions of own shares 3............................... 6,027 7,231 607 548 646 761 715 667 706 357 -586 41 -97 -123 -175 -166 9 38 4 Assets4................................................................... 45,049 44,980 46,591 45,016 47,051 47,142 46,431 48,064 48,771 5 Cash position5...................................................... 3,274 4,507 4,624 4,851 4,746 4,862 4,869 5,012 5,052 41,775 40,473 41,967 40,165 42,305 42,280 41,562 43,052 43,719 1. Excluding money market funds. 5. Also includes all U.S. government securities and other short-term 2. Includes reinvestment of investment income dividends. Excludes debt securities. reinvestment of capital gains distributions and share issue of conversions from one fund to another in the same group. Note. Investment Company Institute data based on reports of mem­ 3. Excludes share redemption resulting from conversions from one fund bers, which comprise substantially all open-end investment companies to another in the same group. registered with the Securities and Exchange Commission. Data reflect 4. Market value at end of period, less current liabilities. newly formed companies after their initial offering of securities. 1.50 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1977 1978 1979 Account 1976 1977 1978 Q4 Ql Q2 Q3 Q4 Ql Q2*> 156.0 177.1 206.0 183.0 177.5 207.2 212.0 227.4 233.3 226.9 63.8 72.6 84.5 75.1 70.8 84.7 87.5 95.1 91.3 88.2 3 Profits after tax........................................................ 92.2 104.5 121.5 107.9 106.7 122.4 124.5 132.3 142.0 138.6 4 Dividends.............................................................. 37.5 42.1 47.2 43.4 45.1 46.0 47.8 49.7 51.5 52.3 5 Undistributed profits........................................... 54.7 62.4 74.3 64.5 61.6 76.4 76.8 82.6 90.5 86.3 6 Capital consumption allowances............................. 97.1 109.3 119.8 113.1 116.5 119.1 120.6 123.1 125.5 130.4 7 Net cash flow............................................................ 151.8 171.7 194.1 177.6 178.1 195.5 197.3 205.7 216.0 216.7 Source. Survey of Current Business (U.S. Department of Commerce.) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Financial Statistics □ September 1979 1.51 NONFINANCIAL CORPORATIONS Current Assets and Liabilities Billions of dollars, except for ratio 1977 1978 1979 Account 1975 1976 Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql 1 Current assets......................................................... 759.0 826.3 858.5 881.8 900.9 925.0 954.2 992.6 1,028.1 1,078.2 2 Cash........................................................................ 82.1 87.3 83.3 83.5 94.3 88.8 91.3 91.6 103.5 102.2 3 U.S. government securities.................................. 19.0 23.6 19.9 19.3 18.7 18.6 17.3 16.1 17.8 19.1 4 Notes and accounts receivable............................. 272.1 293.3 313.0 326.9 325.0 337.4 356.0 376.4 381.9 405.0 5 Inventories............................................................. 315.9 342.9 359.9 368.3 375.6 390.5 399.3 415.5 428.3 452.6 6 Other....................................................................... 69.9 79.2 82.5 83.8 87.3 89.6 90.3 92.9 96.5 99.3 451.6 492.7 514.1 533.2 546.8 574.2 593.5 626.3 662.2 701.8 8 Notes and accounts payable................................. 264.2 282.0 295.9 306.1 313.7 325.2 337.9 356.2 375.1 392.6 9 Other....................................................................... 187.4 210.6 218.1 227.1 233.1 249.0 255.6 270.0 287.1 309.2 10 Net working capital................................................ 307.4 333.6 344.5 348.6 354.1 350.7 360.7 366.3 365.9 376.4 11 Memo: Current ratio1........................................... 1.681 1.677 1.670 1.654 1.648 1.611 1.608 1.585 1.552 1.536 1. Ratio of total current assets to total current liabilities. All data in this table have been revised to reflect the most current benchmarks. Complete data are available upon request from the Flow Note. For a description of this series, see “Working Capital of Non- of Funds Section, Division of Research and Statistics, financial Corporations” in the July 1978 Bulletin, pp. 533-37. Source. Federal Trade Commission. 1.52 BUSINESS EXPENDITURES on New Plant and Equipment Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1978 1979 Industry 1977 1978 Ql Q2 Q3 Q4 Ql Q2 Q3 Q42 1 All industries.......................................................... 135.72 153.60 144.25 150.76 155.41 163.96 165.94 170.30 174.74 180.98 Manufacturing 2 Durable goods industries....................................... 27.75 31.59 28.72 31.40 32.25 33.99 34.00 36.60 38.09 39.10 3 Nondurable goods industries................................ 32.33 35.86 32.86 35.80 35.50 39.26 37.56 39.75 41.80 42.88 Nonmanufacturing 4 Mining.................................................................... 4.49 4.81 4.45 4.81 4.99 4.98 5.46 5.40 5.11 5.26 Transportation 5 Railroad.............................................................. 2.82 3.33 3.35 3.09 3.38 3.49 4.02 2.76 3.89 4.62 6 Air....................................................................... 1.63 2.34 2.67 2.08 2.20 2.39 3.35 2.92 2.60 2.66 7 Other................................................................... 2.55 2.42 2.44 2.23 2.47 2.55 2.71 2.93 3.01 3.30 Public utilities 8 Electric................................................................ 21.57 24.71 23.15 23.83 24.92 26.95 27.70 27.63 27.96 27.62 9 Gas and other.................................................... 4.21 4.72 4.78 4.62 4.70 4.78 4.66 4.79 4.83 5.83 1 1 0 1 C C o om m m m e u r n c i i c a a l t a io n n d . . o ... t . h .. e .. r .. 1 . . . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . . 2 1 2 5 . . 9 4 5 3 2 1 5 8 . . 6 1 7 5 2 1 4 7 . . 7 0 6 7 2 1 4 8 . . 7 1 1 8 2 1 6 8 . . 0 9 9 0 2 1 7 8 . . 1 4 2 6 2 1 7 8 . . 7 7 3 5 j 47.51 47.45 49.71 1. Includes trade, service, construction, finance, and insurance. agriculture; real estate operators; medical, legal, educational, and cultural 2. Anticipated by business. service; and nonprofit organizations. Note. Estimates for corporate and noncorporate business, excluding Source. Survey of Current Business (U.S. Dept, of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Corporate Finance A39 1.53 DOMESTIC FINANCE COMPANIES Assets and Liabilities Billions of dollars, end of period 1978 1979 Account 1973 1974 1975 1976 1977 Q2 Q3 Q4 Ql Q2 Assets Account receivable, gross 1 Consumer...................................................................... 35.4 36.1 36.0 38.6 44.0 47.1 49.7 52.6 54.9 58.7 32.3 37.2 39.3 44.7 55.2 59.5 58.3 63.3 66.7 70.1 3 Total.......................................................................... 67.7 73.3 75.3 83.4 99.2 106.6 108.0 116.0 121.6 128.8 4 Less : Reserves for unearned income and losses. 8.4 9.0 9.4 10.5 12.7 14.1 14.3 15.6 16.5 17.7 5 Accounts receivable, net.............................................. 59.3 64.2 65.9 72.9 86.5 92.6 93.7 100.4 105.1 111.1 6 Cash and bank deposits............................................... 2.6 3.0 2.9 2.6 2.6 2.9 2.7 3.5 1 7 Securities........................................................................... .8 .4 1.0 1.1 .9 1.3 1.8 1.3 f 123.8 24.6 8 All other............................................................................ 10.6 12.0 11.8 12.6 14.3 16.2 17.1 17.3 73.2 79.6 81.6 89.2 104.3 112.9 115.3 122.4 128.9 135.8 Liabilities 10 Bank loans........................................................................ 7.2 9.7 8.0 6.3 5.9 5.4 5.4 6.5 6.5 7.3 19.7 20.7 22.2 23.7 29.6 31.3 29.3 34.5 38.1 41.0 Debt 4.6 4.9 4.5 5.4 6.2 6.6 6.8 8.1 6.7 8.8 13 Long-term, n.e.c......................................................... 24.6 26.5 27.6 32.3 36.0 40.1 41.3 43.6 44.5 46.0 14 Other.............................................................................. 5.6 5.5 6.8 8.1 11.5 13.6 15.2 12.6 15.1 14.4 15 Capital, surplus, and undivided profits.................. 11.5 12.4 12.5 13.4 15.1 16.0 17.3 17.2 18.0 18.2 16 Total liabilities and capital.......................................... 73.2 79.6 81.6 89.2 104.3 112.9 115.3 122.4 128.9 135.8 1. Beginning Ql 1979, asset items on lines 6, 7, and 8 are combined. Note. Components may not add to totals due to rounding. 1.54 DOMESTIC FINANCE COMPANIES Business Credit Millions of dollars, seasonally adjusted except as noted Changes in accounts Extensions Repayments Accounts receivable receivable Type outstanding June 30, 1979 1979 1979 19791 Apr. May June Apr. May June Apr. May June 1 Total.................................................................. 70,057 937 892 1,361 17,722 17,432 16,788 16,785 16,540 15,427 2 Retail automotive (commercial vehicles)....... 15,478 60 17 -32 1,210 1,167 1,116 1,150 1,150 1,148 3 Wholesale automotive..................................... 16,766 705 757 655 6,731 6,790 5,919 6,026 6,033 5,264 4 Retail paper on business, industrial and farm equipment............................................ 16,696 -17 -95 449 1,071 1,084 1,075 1,088 1,179 626 5 Loans on commercial accounts receivable2.. 6 Factored commercial accounts receivable2... } 6,685 78 4 -135 6,228 6,191 6,097 6,150 6,187 6,232 7 All other business credit.................................. 14,432 111 209 424 2,482 2,200 2,581 2,371 1,991 2,157 1. Not seasonally adjusted. 2. Beginning January 1979 the categories “Loans on commercial ac­ counts receivable” and “Factored commercial accounts receivable” are combined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Financial Statistics □ September 1979 1.55 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1979 1976 1977 1978 Feb. Mar. Apr. May June July Terms and yields in primary and secondary markets Primary Markets Conventional mortgages on new homes Terms1 1 Purchase price (thous. dollars).................................. 48.4 54.3 62.6 68.3 68.1 75.4 72.3 73.7 74.3 2 Amount of loan (thous. dollars).............................. 35.9 40.5 45.9 49.5 49.9 54.9 51.4 52.5 52.7 3 Loan/price ratio (percent)......................................... 74.2 76.3 75.3 74.5 75.4 75.1 73.2 73.5 73.0 4 Maturity (years)............................................................. 27.2 27.9 28.0 28.6 28.5 29.0 28.2 28.4 28.1 5 Fees and charges (percent of loan amount)2......... 1.44 1.33 1.39 1.56 1.65 1.75 1.59 1.53 1.63 6 Contract rate (percent per annum)....................... 8.76 8.80 9.30 9.94 10.02 10.06 10.20 10.39 10.49 Yield (percent per annum) 7 FHLBB series3............................................................... 8.99 9.01 9.54 10.20 10.30 10.36 10.47 10.66 10.78 8 HUD series4.................................................................... 8.99 8.95 9.68 10.35 10.35 10.55 10.80 10.90 10.95 Secondary Markets Yield (percent per annum) 8.82 8.68 9.70 10.17 10.19 n.a. 10.61 10.49 10.46 10 GNMA securities6........................................................ 8.17 8.04 8.98 9.67 9.70 9.79 9.89 9.78 9.77 FNMA auctions7 8.99 8.73 9.77 10.54 10.42 10.59 10.84 10.77 10.66 9.11 8.98 10.01 11.04 10.94 11.03 11.35 11.57 11.52 Activity in secondary markets Federal National Mortgage Association Mortgage holdings (end of period) 13 Total................................................................................... 32,904 34,370 43,311 45,155 46,410 47,028 47,757 48,206 n.a. 18,916 18,457 21,243 21,967 22,601 22,773 23,008 23,204 n.a. 15 VA-guaranteed........................................................... 9,212 9,315 10,544 10,606 10,616 10,591 10,543 10,502 n.a. 4,776 6,597 11,524 12,582 13,193 13,664 14,206 14,500 n.a. Mortgage transactions (during period) 3,606 4,780 12,303 1,173 1,291 r883 *•1,023 739 n.a. 86 67 5 0 0 0 0 0 n.a. Mortgage commitments* 6,247 9,729 18,960 388 565 1,075 1,400 634 n.a. 3,398 4,698 9,201 7,381 6,573 6,656 6,862 6,476 n.a. Auction of 4-month commitments to buy Government-underwritten loans 21 Offered9........................................................................ 4,929.8 7,974.1 12,978 210.6 508.4 1,322.7 426.3 219.9 133.2 2,787.2 4,846.2 6,747.2 161.2 284.4 638.5 185.0 99.9 69.6 Conventional loans 23 Offered s>........................................................................ 2,595.7 5,675.2 9,933.0 63.0 144.9 661.9 458.6 357.5 93.5 1,879.2 3,917.8 5,110.9 45.4 113.5 363.6 214.3 195.3 69.9 Federal Home Loan Mortgage Corporation Mortgage holdings (end of period)10 25 Total.................................................................................. 4,269 3,276 3,064 3,207 3,510 3,377 3.310 3,334 3,487 26 FHA/VA...................................................................... 1,618 1,395 1,243 1,220 1,260 1,198 1,186 1,171 1,156 2,651 1,881 1,822 1,989 2,250 2,180 2,124 2,163 2,331 Mortgage transactions (during period) 1,175 3,900 6,524 300 350 358 560 447 518 29 Sales................................................................................... 1,396 4,131 6,211 r494 116 364 572 382 321 Mortgage commitments11 1,477 5,546 7,451 357 547 540 652 528 528 333 1,063 1,410 1,177 1,342 1,487 1,541 1,590 1,572 1. Weighted averages based on sample surveys of mortgages originated securities, assuming prepayment in 12 years on pools of 30-year FHA/VA by major institutional lender groups. Compiled by the Federal Home mortgages carrying the prevailing ceiling rate. Monthly figures are Loan Bank Board in cooperation with the Federal Deposit Insurance unweighted averages of Monday quotations for the month. Corporation. 7. Average gross yields (before deduction of 38 basis points for mort­ 2. Includes all fees, commissions, discounts, and “points” paid (by the gage servicing) on accepted bids in Federal National Mortgage Associa­ borrower or the seller) in order to obtain a loan. tion’s auctions of 4-month commitments to purchase home mortgages, 3. Average effective interest rates on loans closed, assuming prepay­ assuming prepayment in 12 years for 30-year mortgages. No adjustments ment at the end of 10 years. are made for FNMA commitment fees or stock related requirements. 4. Average contract rates on new commitments for conventional first Monthly figures are unweighted averages for auctions conducted within mortgages, rounded to the nearest 5 basis points; from Department of the month. Housing and Urban Development. 8. Includes some multifamily and nonprofit hospital loan commit­ 5. Average gross yields on 30-year, minimum-downpayment, Federal ments in addition to 1- to 4-family loan commitments accepted in FNMA’s Housing Administration insured first mortgages for immediate delivery free market auction system, and through the FNMA-GNMA tandem in the private secondary market. Any gaps in data are due to periods of plans. adjustment to changes in maximum permissible contract rates. 9. Mortgage amounts offered by bidders are total bids received. 6. Average net yields to investors on Government National Mortgage 10. Includes participation as well as whole loans. Association guaranteed, mortgage-backed, fully modified pass-through 11. Includes conventional and government-underwritten loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate Debt A41 1.56 MORTGAGE DEBT OUTSTANDING Millions of dollars, end of period 1978 1979 Type of holder, and type of property 1975 1976 1977 1978 Q2 Q3 Q4 Ql 1All holders.................................................. 801,537 889,327 1,023,505 1,172,502 1,092,451 1,133,699 1,172,502 1,204,762 2 1- to 4-family............................................. 490,761 556,557 656,566 761,905 706,230 734,740 761,905 783,500 3 Multifamily................................................ 100,601 104,516 111,841 122,004 116,419 119,442 122,004 124,125 4 Commercial............................................... 159,298 171,223 189,274 212,597 198,926 205,744 212,597 218,042 5 Farm.......................................................... 50,877 57,031 65,824 75,996 70,876 73,773 75,996 79,095 6 Major financial institutions..................... 581,193 647,650 745,011 847,910 794,009 822,184 847,910 865,808 7 Commercial banks1.............................. 136,186 151,326 178,979 213,963 194,469 205,445 213,963 220,063 8 1- to 4-family..................................... 77,018 86,234 105,115 126,966 115,389 121,911 126,966 130,585 9 Multifamily........................................ 5,915 8,082 9,215 10,912 9,925 10,478 10,912 11,223 10 Commercial....................................... 46,882 50,289 56,898 67,056 60,950 64,386 67,056 68,968 11 Farm.................................................. 6,371 6,721 7,751 9,029 8,205 8,670 9,029 9,287 12 Mutual savings banks........................... 77,249 81,639 88,104 95,157 91,535 93,403 95,157 96,136 13 1- to 4-family..................................... 50,025 53,089 57,637 62,252 59,882 61,104 62,252 62,892 14 Multifamily........................................ 13,792 14,177 15,304 16,529 15,900' 16,224 16,529 16,699 15 Commercial....................................... 13,373 14,313 15,110 16,319 15,698 16,019 16,319 16,488 16 Farm.................................................. 59 60 53 57 55 56 57 57 17 Savings and loan associations............. 278,590 323,130 381,163 432,858 407,965 420,971 432,858 441,420 18 1- to 4-family..................................... 223,903 260,895 310,686 356,156 334,164 345,617 356,156 363,200 19 Multifamily........................................ 25,547 28,436 32,513 36,057 34,351 35,362 36,057 36,770 20 Commercial....................................... 29,140 33,799 37,964 40,645 39,450 39,992 40,645 41,450 21 Life insurance companies..................... 89,168 91,555 96,765 105,932 100,040 102,365 105,932 108,189 22 1- to 4-family..................................... 17,590 16,088 14,727 14,449 14,129 14,189 14,449 14,757 23 Multifamily........................................ 19,629 19,178 18,807 19,026 18,745 18,803 19,026 19,431 24 Commercial....................................... 45,196 48,864 54,388 62,086 57,463 59,268 62,086 63,409 25 Farm.................................................. 6,753 7,425 8,843 10,371 9,703 10,105 10,371 10,592 26 Federal and related agencies................... 66,891 66,753 70,006 81,853 73,991 78,672 81,853 86,689 27 Government National Mortgage Assn. 7,438 4,241 3,660 3,509 3,283 3,560 3,509 3,448 28 1- to 4-family..................................... 4,728 1,970 1,548 877 922 897 877 821 29 Multifamily........................................ 2,710 2,271 2,112 2,632 2,361 2,663 2,632 2,627 30 Farmers Home Administration............ 1,109 1,064 1,353 926 618 1,384 926 956 31 1- to 4-family..................................... 208 454 626 288 124 460 288 302 32 Multifamily........................................ 215 218 275 320 102 240 320 180 33 Commercial....................................... 190 72 149 101 104 251 101 283 34 Farm................................................... 496 320 303 217 288 433 217 191 35 Federal Housing and Veterans Admin. 4,970 5,150 5,212 5,419 5,225 5,295 5,419 5,522 36 1- to 4-family..................................... 1,990 1,676 1,627 1,641 1,543 1,565 1,641 1,693 37 Multifamily........................................ 2,980 3,474 3,585 3,778 3,682 3,730 3,778 3,829 38 Federal National Mortgage Association 31,824 32,904 34,369 43,311 38,753 41,189 43,311 46,410 39 1- to 4-family..................................... 25,813 26,934 28,504 37,579 32,974 35,437 37,579 40,702 40 Multifamily........................................ 6,011 5,970 5,865 5,732 5,779 5,752 5,732 5,708 41 Federal Land Banks............................. 16,563 19,125 22,136 25,624 23,857 24,758 25,624 26,893 42 1- to 4-family..................................... 549 601 670 927 727 819 927 1,042 43 Farm................................................... 16,014 18,524 21,466 24,697 23,130 23,939 24,697 25,851 44 Federal Home Loan Mortgage Corp... 4,987 4,269 3,276 3,064 2,255 2,486 3,064 3,460 45 1- to 4-family..................................... 4,588 3,889 2,738 2,407 1,856 1,994 2,407 2,685 46 Multifamily........................................ 399 380 538 657 399 492 657 775 47 Mortgage pools or trusts2....................... 34,138 49,801 70,289 88,633 78,602 82,730 88,633 94,551 48 Government National Mortgage Assn. 18,257 30,572 44,896 24,347 48,032 50,844 54,347 57,955 49 1- to 4-family..................................... 17,538 29,583 43,555 52,732 46,515 49,276 52,732 56,269 50 Multifamily........................................ 719 989 1,341 1,615 1,517 1,568 1,615 1,686 51 Federal Home Loan Mortgage Corp... 1,598 2,671 6,610 11,892 9,423 10,511 11,892 12,467 52 1- to 4-family..................................... 1,349 2,282 5,621 9,657 7,797 8,616 9,657 10,088 53 Multifamily........................................ 249 389 989 2,235 1,626 1,895 2,235 2,379 54 Farmers Home Administration............ 14,283 16,558 18,783 22,394 21,147 21,375 22,394 24,129 55 1- to 4-family..................................... 9,194 10,219 11,379 13,400 12,742 12,851 13,400 13,883 56 Multifamily........................................ 295 532 759 1,116 1,128 1,116 1,116 1,465 57 Commercial....................................... 1,948 2,440 2,945 3,560 3,301 3,369 3,560 3,660 58 Farm.................................................. 2,846 3,367 3,682 4,318 3,976 4,039 4,318 5,121 59 Individuals and others3........................... 119,315 125,123 138,199 154,106 145,849 150,113 154,106 157,714 60 1- to 4-family......................................... 56,268 62,643 72,115 82,574 77,466 80,004 82,574 84,806 61 Multifamily............................................ 22,140 20,420 20,538 21,395 20,904 21,119 21,395 21,645 62 Commercial........................................... 22,569 21,446 21,820 212,830 21,960 22,459 22,830 23,267 63 Farm...................................................... 18,338 20,614 23,726 27,307 25,519 26,531 27,307 27,996 1. Includes loans held by nondeposit trust companies but not bank trust Note. Based on data from various institutional and government departments. sources, with some quarters estimated in part by the Federal Reserve in 2. Outstanding principal balances of mortgages backing securities in­ conjunction with the Federal Home Loan Bank Board and the Depart­ sured or guaranteed by the agency indicated. ment of Commerce. Separation of nonfarm mortgage debt by type of 3. Other holders include mortgage companies, real estate investment property, if not reported directly, and interpolations and extrapolations trusts, state and local credit agencies, state and local retirement funds, when required, are estimated mainly by the Federal Reserve. Multi­ noninsured pension funds, credit unions, and U.S. agencies for which family debt refers to loans on structures of five or more units. amounts are small or separate data are not readily available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Financial Statistics □ September 1979 1.57 CONSUMER INSTALLMENT CREDIT1 Total Outstanding, and Net Change Millions of dollars 1979 Holder, and type of credit 1976 1977 1978 r Jan. Feb.r Mar.r Apr.r May r June r July Amounts outstanding (end of period) 1 Total. 193,977 230,829 275,629 275,337 276,019 278,453 282,575 287,315 291,856 295,052 By major holder 2 Commercial banks 93,728 112,373 136,189 136,452 136,671 137,445 139,843 142,102 144,035 145,169 3 Finance companies 38,919 44,868 54,298 54,995 55,929 56,991 58,334 59,635 60,996 62,463 4 Credit unions............... 31,169 37,605 45,939 45,526 45,661 46,301 46,322 46,832 47,478 47,772 5 Retailers 2...................... 19,260 23,490 24,876 23,962 23,246 22,929 23,097 23,421 23,672 23,713 6 Savings and loans......... 6,246 7,354 8,394 8,427 8,488 8,671 8,833 9,066 9,290 9,425 7 Gasoline companies 2,830 2,963 3,240 3.338 3,274 3,292 3,383 3,537 3,704 3,872 8 Mutual savings banks.. 1,825 2,176 2,693 2.637 2,750 2,824 2,763 2,722 2,681 2,638 By major type of credit 9 Automobile................... 67,707 82,911 102,468 102,890 103,780 105,426 107,186 109,211 110,930 111,952 10 Commercial banks.., 39,621 49,577 60,564 60,682 61,053 61,742 62,866 63,891 64,480 64,826 11 Indirect paper 22,072 27,379 33,850 33,928 34,261 34,592 35,322 35,917 36,251 36,475 12 Direct loans........... 17,549 22,198 26,714 26,754 26,792 27,150 27,544 27,974 28,229 28,351 13 Credit unions............ 15,238 18,099 21,967 21,769 21,834 22,140 22,150 22,394 22,703 22,844 14 Finance companies.. 12,848 15,235 19,937 20,439 20,893 21,544 22,170 22,926 23,747 24,282 15 Revolving..................... 17,189 39,274 47,051 46,516 45,586 45,240 45,781 46,489 47,458 47,894 16 Commercial banks.. 14,359 18,374 24,434 24,677 24,502 24,442 24,767 25,054 25,652 25,927 17 Retailers................... 17,937 19,377 18,501 17,810 17,506 17,631 17,898 18,102 18,095 18 Gasoline companies. 2,830 2,963 3,240 3.338 3,274 3,292 3,383 3,537 3,704 3,872 19 Mobile home.............. 14.573 15,141 16,042 16,004 16,008 16,092 16,198 16,453 16,607 16,719 20 Commercial banks. 8,737 9,124 9,553 9,511 9,495 9,509 9,549 9,702 9,759 9,801 21 Finance companies. 3,263 3,077 3,152 3,149 3,147 3,148 3,159 3,177 3,191 3,212 22 Savings and loans.. 2,241 2,538 2,848 2,859 2,880 2,942 2,997 3,076 3,152 3,198 23 Credit unions.......... 332 402 489 485 486 493 493 498 505 508 24 Other................................ 94,508 93.503 110,068 109,927 110,645 111,695 113,410 115,162 116,861 118,487 25 Commercial banks 31,011 35,298 41,638 41,582 41,621 41,752 42,661 43,455 44,144 44,615 26 Finance companies 22,808 26,556 31,209 31,416 31,889 32,299 33,005 33,532 34,058 34,969 27 Credit unions.............. 15,599 19,104 23,483 23,272 23,341 23,668 23,679 23,940 24,270 24,420 28 Retailers...................... 19,260 5,553 5,499 5,461 5,436 5,423 5,466 5,523 5,570 5,618 29 Savings and loans........ 4,005 4,816 5,546 5,568 5,608 5,729 5,836 5,990 6,138 6,227 30 Mutual savings banks. 1,825 2,176 2,693 2.637 2,750 2,824 2,763 2,722 2,681 2,638 Net change (during period3) 31 Total.................................................... 21,647 35,278 44,810 3,067 3,563 3,625 4,105 3,306 2,558 2,443 By major holder 32 Commercial banks............................. 10,792 18,645 23,813 1,330 1,630 1,465 2,117 1,665 984 662 33 Finance companies............................. 2,946 5,948 9,430 1,347 1,460 1,228 1,378 893 913 1,185 34 Credit unions...................................... 5,503 6,436 8,334 360 402 528 139 124 144 342 35 Retailers1............................................. 1,059 2,654 1,386 -90 -221 143 306 283 288 180 36 Savings and loans.............................. 1,085 1,111 1,041 67 86 173 158 280 240 120 37 Gasoline companies........................... 124 132 276 100 68 20 73 96 39 2 38 Mutual savings banks......................... 138 352 530 -47 138 68 -66 -35 -50 -48 By major type of credit 39 Automobile......................................... 10,465 15,204 19,557 1,680 1,565 1,486 1,387 1,225 690 616 40 Commercial banks.......................... 6,334 9,956 10,987 633 739 617 740 633 123 72 41 Indirect paper............................. 2,742 5,307 6,471 387 530 290 482 389 87 51 42 Direct loans................................. 3,592 4,649 4,516 246 209 327 258 244 36 21 43 Credit unions................................... 2,497 2,861 3,868 187 190 245 64 60 45 183 44 Finance companies......................... 1,634 2,387 4,702 860 636 624 583 532 522 361 45 Revolving............................................ 2,170 6,248 7,776 433 317 742 918 749 796 429 46 Commercial banks.......................... 2,046 4,015 6,060 375 492 588 605 418 494 303 47 Retailers.......................................... 2,101 1,440 -42 -243 134 240 235 263 124 48 Gasoline companies....................... 124 132 276 100 68 20 73 96 39 2 49 Mobile home....................................... 140 565 897 40 56 108 82 234 102 72 50 Commercial banks.......................... 70 387 426 12 15 31 21 125 12 17 51 Finance companies......................... -182 -189 74 7 9 11 6 13 14 11 52 Savings and loans........................... 192 297 310 19 28 59 56 94 74 41 53 Credit unions................................... 60 70 87 2 4 7 -1 2 2 3 54 Other.................................................... 8,872 13,261 16,580 908 1,625 1,289 1,718 1,098 970 1,326 55 Commercial banks.......................... 2,342 4,287 6,340 310 384 229 751 489 355 270 56 Finance companies......................... 1,494 3,750 4,654 474 815 593 789 348 377 813 57 Credit unions................................... 2,946 3,505 4,379 171 208 276 76 62 97 156 58 Retailers.......................................... 1,059 553 -54 -48 22 9 66 48 25 56 59 Savings and loans........................... 893 814 731 48 58 114 102 186 166 79 60 Mutual savings banks..................... 138 352 530 -47 138 68 -66 -35 -50 -48 1. The Board’s series cover most short- and intermediate-term credit Note. Total consumer noninstallment credit outstanding—credit extended to individuals through regular business channels, usually to scheduled to be repaid in a lump sum, including single-payment loans, finance the purchase of consumer goods and services or to refinance charge accounts, and service credit—amounted to $64.3 billion at the end debts incurred for such purposes, and scheduled to be repaid (or with of 1978, $58.6 billion at the end of 1977, $54.8 billion at the end of 1976, the option of repayment) in two or more installments. and $50.9 billion at the end of 1975. Comparable data for Dec. 31, 1979, 2. Includes auto dealers and excludes 30-day charge credit held by will be published in the February 1980 Bulletin. travel and entertainment companies. 3. Net change equals extensions minus liquidations (repayments, chargeoffs, and other credits); figures for all months are seasonally adjusted. 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Consumer Debt A43 1.58 CONSUMER INSTALLMENT CREDIT Extensions and Liquidations Millions of dollars 1979 Holder, and type of credit 1976 1977 1978 ' Jan. Feb. Mar.r Apr. Mayr Juner July Extensions2 1 Total............................... 211,028 254,071 298,351 25,544 26,452 26,533 27,009 27,901 26,139 26,848 By major holder 2 Commercial banks........ 97,397 117,896 142,720 12,153 12,430 12,412 13,111 13,400 12,278 12,292 3 Finance companies........ 36,129 41,989 50,505 4,547 5,072 4,958 5,239 5,186 4,641 5,353 4 Credit unions................. 29,259 34,028 40,023 3,241 3,238 3,250 2,753 3,124 2,986 3,282 5 Retailers1....................... 29,447 39,133 41,619 3,565 3,460 3,611 3,742 3,721 3,853 3,687 6 Savings and loans.......... 3,898 4,485 5,050 481 468 583 559 723 682 592 7 Gasoline companies 13,387 14,617 16,125 1,440 1,486 1,493 1,505 1,613 1,589 1,525 8 Mutual savings banks.., 1,511 1,923 2,309 117 298 226 100 134 110 117 By major type of credit 9 Automobile.................... 63,743 75,641 88,987 7,545 7,756 7,794 7,999 8,260 7,178 7,447 10 Commercial banks... 37,886 46,363 53,028 4,286 4,430 4,424 4,707 4,680 3,952 3,936 11 Indirect paper........ 20,576 25,149 29,336 2,318 2,472 2,449 2,635 2,684 2,146 2,151 12 Direct loans............ 17,310 21,214 23,692 1,968 1,958 1,975 2,072 1,996 1,806 1,785 13 Credit unions............. 14,688 16,616 19,486 1,635 1,624 1,587 1,415 1,566 1,485 1,611 14 Finance companies... 11,169 12,662 16,473 1,624 1,702 1,783 1,877 2,014 1,741 1,900 15 Revolving..................... 43,934 86,756 104,587 9,417 9,357 9,714 9,722 10,039 10,136 9,856 16 Commercial banks.. 30,547 38,256 51,531 4,799 4,860 5,024 4,923 5,154 5,166 5,078 17 Retailers.................... 33,883 36,931 3,178 3,011 3,197 3,294 3,272 3,381 3,253 18 Gasoline companies. 13,387 14,617 16,125 1,440 1,486 1,493 1,505 1,613 1,589 1,525 19 Mobile home.............. 4,859 5,425 6,067 369 454 518 510 668 547 519 20 Commercial banks. 3,064 3,466 3,704 235 295 296 304 411 304 297 21 Finance companies. 702 643 886 33 60 63 59 58 59 71 22 Savings and loans.. 929 1,120 1,239 88 81 139 134 182 167 133 23 Credit unions.......... 164 196 238 13 18 20 13 17 17 18 24 Other................................ 98,492 86,249 98,710 8,213 8,885 8,507 8,778 8,934 8,278 9,026 25 Commercial banks 25,900 29,811 34,457 2,833 2,845 2,668 3,177 3,155 2,856 2,981 26 Finance companies 24,258 28,684 33,146 2,890 3,310 3,112 3,303 3,114 2,841 3,382 27 Credit unions............... 14,407 17,216 20,299 1,593 1,596 1,643 1,325 1,541 1,484 1,653 28 Retailers....................... 29,447 5,250 4,688 387 449 414 448 449 472 434 29 Savings and loans........ 2,969 3,365 3,811 393 387 444 425 541 515 459 30 Mutual savings banks. 1,511 1,923 2,309 117 298 226 100 134 110 117 Liquidations2 31 Total.................................................... 189,381 218,793 253,541 22,483 22,889 22,908 22,904 24,595 23,581 24,405 By major holder 32 Commercial banks............................. 86,605 99,251 118,907 10,823 10,800 10,947 10,994 11,735 11,294 11,630 33 Finance companies........................... 33,183 36,041 41,075 3,206 3,612 3,730 3,861 4,293 3,728 4,168 34 Credit unions..................................... 23,756 27,592 31,689 2,881 2,836 2,722 2,614 3,000 2,842 2,940 35 Retailers1............................................ 28,388 36,479 40,233 3,655 3,681 3,468 3,436 3,438 3,565 3,507 36 Savings and loans............................... 2,813 3,374 4,009 414 382 410 401 443 442 472 37 Gasoline companies........................... 13,263 14,485 15,849 1,340 1,418 1,473 1,432 1,517 1,550 1,523 38 Mutual savings banks........................ 1,373 1,571 1,779 164 160 158 166 169 160 165 By major type of credit 39 Automobile......................................... 53,278 60,437 69,430 5,865 6,191 6,308 6,612 7,035 6,488 6,831 40 Commercial banks......................... 31,552 36,407 42,041 3,653 3,691 3,807 3,967 4,047 3,829 3,864 41 Indirect paper............................. 17,834 19,842 22,865 1,931 1,942 2,159 2,153 2,295 2,059 2,100 42 Direct loans................................. 13,718 16,565 19,176 1,722 1,749 1,648 1,814 1,752 1,770 1,764 43 Credit unions.................................. 12,191 13,755 15,618 1.448 1,434 1,342 1,351 1,506 1,440 1,428 44 Finance companies......................... 9,535 10,275 11,771 764 1,066 1,159 1,294 1,482 1,219 1,539 45 Revolving............................................ 41,764 80,508 96,811 8,984 9,040 8,972 8,804 9,290 9,340 9,427 46 Commercial banks.......................... 28,501 34,241 45,471 4,424 4,368 4,436 4,318 4,736 4,672 4,775 47 Retailers........................................... 31,782 35,491 3,220 3,254 3,063 3,054 3,037 3,118 3,129 48 Gasoline companies........................ 13,263 14,485 15,849 1,340 1,418 1,473 1,432 1,517 1,550 1,523 49 Mobile home....................................... 4,719 4,860 5,170 329 398 410 428 434 445 447 50 Commercial banks......................... 2,994 3,079 3,278 223 280 265 283 286 292 280 51 Finance companies......................... 884 832 812 26 51 52 53 45 45 60 52 Savings and loans........................... 737 823 929 69 53 80 78 88 93 92 53 Credit unions.................................. 104 126 151 11 14 13 14 15 15 15 54 Other.................................................... 89,620 72,988 82,130 7,305 7,260 7,218 7,060 7,836 7,308 7,700 55 Commercial banks.......................... 23,558 25,524 28,117 2,523 2,461 2,439 2,426 2,666 2,501 2,711 56 Finance companies......................... 22,764 24,934 28,492 2,416 2,495 2,519 2,514 2,766 2,464 2,569 57 Credit unions................................... 11,461 13,711 15,920 1,422 1,388 1,367 1,249 1,479 1,387 1,497 58 Retailers........................................... 28,388 4,697 4,742 435 427 405 382 401 447 378 59 Savings and loans........................... 2,076 2,551 3,080 345 329 330 323 355 349 380 60 Mutual savings banks..................... 1,373 1,571 1,779 164 160 158 166 169 160 165 1 Includes auto dealers and excludes 30-day charge credit held by 2 Monthly figures are seasonally adjusted. travel and entertainment companies. 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A44 Domestic Financial Statistics □ September 1979 1.59 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1976 1977 1978 Transaction category, or sector 1973 1974 1975 1976 1977 1978 HI H2 HI H2 HI H2 Nonfinancial sectors 1Total funds raised........................................ 203.1 191.3 210.8 271.9 338.5 400.3 270.6 273.2 298.4 378.7 383.9 416.8 195.4 187.4 200.7 261.1 335.4 398.2 257.0 265.2 297.2 373.6 386.5 410.0 By sector and instrument 8.3 11.8 85.4 69.0 56.8 53.7 79.4 58.7 46.3 67.2 61.4 46.0 4 Treasury securities....................................... 7.9 12.0 85.8 69.1 57.6 55.1 79.3 59.0 46.9 68.4 62.4 47.9 5 Agency issues and mortgages..................... .4 -.2 -.4 -.1 -.9 -1.4 .1 -.3 -.6 - 1.2 -.9 -1.9 194.9 179.5 125.4 202.9 281.8 346.6 191.2 214.6 252.0 311.5 322.5 370.8 7 Corporate equities....................................... 7.7 3.8 10.1 10.8 3.1 2.1 13.6 8.1 1.2 5.1 - 2.6 6.8 8 187.2 175.6 115.3 192.0 278.6 344.5 177.6 206.5 250.9 306.4 325.1 364.0 9 Private domestic nonfinancial sectors. . • • 188.8 164.1 112.1 182.0 267.9 314.4 170.6 193.5 241.3 294.4 301.7 327.0 10 7.9 4.1 9.9 10.5 2.7 2.6 13.3 7.7 .5 4.9 - 1.8 7.0 11 Debt instruments..................................... 180.9 160.0 102.1 171.5 265.1 311.8 157.2 185.8 240.8 289.5 303.5 320.0 12 Debt capital instruments..................... 105.1 98.0 98.4 123.5 175.6 196.6 119.9 127.2 159.3 192.0 187.8 205.3 13 State and local obligations.............. 14.7 16.5 16.1 15.7 23.7 28.3 20.1 11.3 22.0 25.3 27.8 28.7 14 9.2 19.7 27.2 22.8 21.0 20.1 22.3 23.4 16.6 25.4 20.5 19.8 Mortgages 15 46.4 34.8 39.5 63.7 96.4 104.5 57.7 69.7 90.5 102.3 99.8 109.2 16 10.4 6.9 * 1.8 7.4 10.2 .6 3.1 6.4 8.4 9.3 11.2 17 Commercial....................................... 18.9 15.1 11.0 13.4 18.4 23.3 14.3 12.5 14.8 21.9 21.2 25.4 18 Farm.................................................. 5.5 5.0 4.6 6.1 8.8 10.2 5.0 7.3 9.0 8.7 9.3 11.1 19 75.8 62.0 3.8 48.0 89.5 115.2 37.3 58.6 81.5 97.5 115.7 114.7 20 26.0 9.9 9.7 25.6 40.6 50.6 23.6 27.6 36.6 44.5 50.1 51.0 21 37.1 31.7 -12.3 4.0 27.0 37.3 -3.7 11.6 26.2 27.8 42.5 32.0 22 Open market paper.......................... 2.5 6.6 - 2.6 4.0 2.9 5.2 5.7 2.3 3.4 2.4 5.3 5.1 23 10.3 13.7 9.0 14.4 19.0 22.2 11.7 17.1 15.3 22.8 17.8 26.6 24 By borrowing sector................................. 188.8 164.1 112.1 182.0 267.9 314.4 170.6 193.5 241.3 294.4 301.7 327.0 25 State and local governments................ 13.2 15.5 13.7 15.2 20.4 23.6 18.4 12.1 15.4 25.3 21.0 26.1 26 80.1 51.2 49.5 90.7 139.9 162.6 82.9 98.5 130.0 149.9 156.2 169.0 27 9.6 8.0 8.8 10.9 14.7 18.1 10.1 11.7 16.3 13.2 15.2 20.9 28 13.0 7.7 2.0 5.4 12.5 15.7 3.4 7.5 12.6 12.5 16.8 14.5 29 73.0 81.7 38.1 59.8 80.3 94.5 55.8 63.7 67.0 93.5 92.4 96.6 30 Foreign...................................................... 6.1 15.4 13.3 20.8 13.9 32.3 20.7 21.0 10.7 17.1 20.8 43.8 31 Corporate equities................................... -.2 -.2 .2 .3 .4 -.5 .3 .3 .6 .2 -.8 -.2 32 6.3 15.7 13.2 20.5 13.5 32.8 20.4 20.7 10.1 16.9 21.6 44.0 33 1.0 2.1 6.2 8.6 5.1 4.0 7.4 9.7 4.4 5.7 5.0 3.0 34 2.7 4.7 3.9 6.8 3.1 18.3 8.5 5.0 -.1 6.3 9.4 27.1 35 .9 7.3 .3 1.9 2.4 6.6 1.5 2.4 2.7 2.2 3.6 9.6 36 1.7 1.6 2.8 3.3 3.0 3.9 2.9 3.6 3.1 2.9 3.6 4.2 Financial sectors 37 Total funds raised.................................... 44.8 39.2 12.7 24.1 54.0 81.4 18.2 29.9 45.9 62.1 80.7 82.1 By instrument 38 U.S. government related...................... 19.9 23.1 13.5 18.6 26.3 41.4 16.5 20.7 22.6 29.9 38.5 44.3 39 Sponsored credit agency securities.... 16.3 16.6 2.3 3.3 7.0 23.1 2.4 4.3 7.1 6.8 21.9 24.3 40 Mortgage pool securities..................... 3.6 5.8 10.3 15.7 20.5 18.3 14.2 17.2 17.9 23.1 16.6 20.1 41 Loans from U.S. government............ 0 .7 .9 -.4 - 1.2 0 * -.7 -2.3 0 0 0 42 Private financial sectors........................... 24.9 16.2 -.8 5.5 27.7 40.0 1.7 9.3 23.2 32.2 42.2 37.8 43 Corporate equities................................ 1.5 .3 .6 1.0 .9 1.7 -.2 2.3 .9 .8 2.2 1.1 44 Debt instruments................................. 23.4 15.9 -1.4 4.4 26.9 38.3 1.9 7.0 22.3 31.4 40.0 36.7 45 Corporate bonds............................... 3.5 2.1 2.9 5.8 10.1 7.5 6.0 5.7 9.5 10.7 8.5 6.4 46 Mortgages......................................... - 1.2 -1.3 2.3 2.1 3.1 .9 1.4 2.8 3.1 3.0 2.1 -.3 47 Bank loans n.e.c................................ 9.0 4.6 -3.7 -3.7 -.3 2.8 -2.5 -4.9 -2.3 1.8 2.6 3.1 48 Open market paper and RPs.......... 4.9 3.8 1.1 2.2 9.6 14.6 - 1.0 5.4 9.2 10.1 13.5 15.7 49 Loans from FHLBs......................... 7.2 6.7 -4.0 - 2.0 4.3 12.5 -1.9 - 2.0 2.9 5.8 13.2 11.8 By sector 50 Sponsored credit agencies....................... 16.3 17.3 3.2 2.9 5.8 23.1 2.3 3.5 4.7 6.8 21.9 24.3 51 Mortgage pools........................................ 3.6 5.8 10.3 15.7 20.5 18.3 14.2 17.2 17.9 23.1 16.6 20.1 52 Private financial sectors........................... 24.9 16.2 -.8 5.5 27.7 40.0 1.7 9.3 23.2 32.2 42.2 37.8 53 Commercial banks.............................. 1.2 1.2 1.2 2.3 1.1 1.3 2.4 2.1 .8 1.5 1.5 1.1 54 Bank affiliates....................................... 2.2 3.5 .3 -.8 1.3 6.7 -1.3 -.3 1.3 1.2 5.8 7.6 55 Savings and loan associations............. 6.0 4.8 -2.3 .1 9.9 14.3 -.3 .4 8.2 11.7 16.4 12.2 56 Other insurance companies.................. .5 .9 1.0 .9 .9 1.1 .9 .9 .9 1.0 1.0 1.1 57 Finance companies............................... 9.5 6.0 .5 6.4 17.6 18.6 4.4 8.5 15.0 20.2 18.9 18.2 58 REITs.................................................... 6.5 .6 -1.4 -2.4 - 2.2 - 1.0 - 2.1 -2.7 -2.4 - 2.0 - 1.0 - 1.0 59 Open-end investment companies........ —1.2 -.7 -.1 - 1.0 -.9 - 1.0 -2.4 .4 -.6 -1.3 -.5 -1.5 All sectors 60 Total funds raised, by instrument. 248.0 230.5 223.5 296.0 392.5 481.7 288.8 303.2 344.3 440.8 464.6 498.9 61 Investment company shares......... -.7 -.1 - 1.0 -.9 - 1.0 -2.4 .4 -.6 -1.3 -.5 -1.5 62 Other corporate equities.............. 10.4 4.8 10.8 12.9 4.9 4.7 15.8 9.9 2.6 7.2 .1 9.4 63 Debt instruments.......................... 238.8 226.4 212.8 284.1 388.5 478.0 275.4 292.8 342.2 434.9 465.0 491.0 64 U.S. government securities..., 28.3 34.3 98.2 88.1 84.3 95.2 96.0 80.2 71.4 97.2 100.0 90.4 65 State and local obligations.... 14.7 16.5 16.1 15.7 23.7 28.3 20.1 11.3 22.0 25.3 27.8 28.7 66 Corporate and foreign bonds.. 13.6 23.9 36.4 37.2 36.1 31.6 35.7 38.7 30.6 41.7 34.0 29.2 67 Mortgages................................. 79.9 60.5 57.2 87.1 134.0 149.0 78.8 95.3 123.7 144.2 141.6 156.4 68 Consumer credit....................... 26.0 9.9 9.7 25.6 40.6 50.6 23.6 27.6 36.6 44.5 50.1 51.0 69 Bank loans n.e.c........................ 48.8 41.0 - 12.2 7.0 29.8 58.4 2.3 11.7 23.7 35.8 54.5 62.2 70 Open market paper and RPs.. 8.3 17.7 - 1.2 8.1 15.0 26.4 6.2 10.1 15.3 14.6 22.4 30.4 71 Other loans............................... 19.1 22.7 8.7 15.3 25.2 38.6 12.6 18.0 18.9 31.4 34.6 42.6 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A45 1.60 DIRECT AND INDIRECT SOURCES OF FUNDS TO CREDIT MARKETS Billions of dollars, except as noted; quarterly data are at seasonally adjusted annual rates. 1976 1977 1978 Transaction category, or sector 1973 1974 1975 1976 1977 1978 HI H2 HI H2 HI H2 1 Total funds advanced in credit markets to nonfinancial sectors............................... 195.4 187.4 200.7 261.1 335.4 398.2 257.0 265.2 297.2 373.6 386.5 410.0 By public agencies and foreign 2 Total net advances....................................... 31.8 53.7 44.6 54.3 85.1 109.7 46.0 62.5 61.8 108.4 102.4 116.9 3 U.S. government securities.................... 9.5 11.9 22.5 26.8 40.2 43.9 21.4 32.2 23.9 56.5 43.6 44.1 4 Residential mortgages.............................. 8.2 14.7 16.2 12.8 20.4 26.5 10.7 14.9 18.4 22.5 22.2 30.7 5 FHLB advances to S&Ls................. 7.2 6.7 -4.0 - 2.0 4.3 12.5 -1.9 - 2.0 2.9 5.8 13.2 11.8 6 Other loans and securities....................... 6.9 20.5 9.8 16.6 20.2 26.9 15.8 17.5 16.7 23.7 23.4 30.3 Totals advanced, by sector 7 U.S. government......................................... 2.8 9.8 15.1 8.9 11.8 20.4 5.8 12.0 5.4 18.3 19.4 21.5 8 Sponsored credit agencies........................... 19.1 26.5 14.8 20.3 26.8 44.6 18.5 22.2 21.6 32.0 39.4 49.8 9 Monetary authorities................................... 9.2 6.2 8.5 9.8 7.1 7.0 12.0 7.7 8.2 6.1 13.3 .6 10 Foreign.......................................................... .6 11.2 6.1 15.2 39.4 37.7 9.8 20.6 26.6 52.1 30.4 45.1 11 Agency borrowing not included in line 1.. 19.9 23.1 13.5 18.6 26.3 41.4 16.5 20.7 22.6 29.9 38.5 44.3 Private domestic funds advanced 12 Total net advances....................................... 183.6 156.8 169.7 225.4 276.5 330.0 227.5 223.3 258.0 295.1 322.5 337.4 13 U.S. government securities.................... 18.8 22.4 75.7 61.3 44.1 51.3 74.6 48.0 47.6 40.7 56.4 46.3 14 State and local obligations...................... 14.7 16.5 16.1 15.7 23.7 28.3 20.1 11.3 22.0 25.3 27.8 28.7 15 Corporate and foreign bonds.................. 10.0 20.9 32.8 30.5 22.5 22.5 28.8 32.3 18.0 27.0 23.9 21.1 16 Residential mortgages.............................. 48.4 26.9 23.2 52.7 83.3 88.2 47.5 57.8 78.4 88.1 86.8 89.6 17 Other mortgages and loans..................... 98.8 76.8 17.9 63.3 107.3 152.2 54.6 72.0 94.9 119.7 140.8 163.5 18 Less: FHLB advances............................. 7.2 6.7 -4.0 - 2.0 4.3 12.5 -1.9 - 2.0 2.9 5.8 13.2 11.8 Private financial intermediation 19 Credit market funds advanced by private financial institutions............................. 161.3 125.5 122.5 190.3 255.9 296.9 176.9 203.8 242.4 269.3 301.0 292.8 20 Commercial banking................................ 84.6 66.6 29.4 59.6 87.6 128.7 47.8 71.5 79.1 96.1 131.8 125.7 21 Savings institutions................................... 35.1 24.2 53.5 70.8 82.0 75.9 72.8 68.8 82.5 81.5 75.8 75.9 22 Insurance and pension funds.................. 23.7 29.8 40.6 49.9 67.9 73.5 51.8 47.9 65.2 70.6 76.9 70.2 23 Other finance............................................ 17.9 4.8 - 1.0 10.0 18.4 18.7 4.6 15.5 15.7 21.1 16.6 20.9 24 Sources of funds........................................... 161.3 125.5 122.5 190.3 255.9 296.9 176.9 203.8 242.4 269.3 301.0 292.8 25 Private domestic deposits........................ 97.3 67.5 92.0 124.6 141.2 142.5 118.2 131.0 141.4 141.1 138.6 146.4 26 Credit market borrowing......................... 23.4 15.9 -1.4 4.4 26.9 38.3 1.9 7.0 22.3 31.4 40.0 36.7 27 Other sources............................................ 40.6 42.1 32.0 61.3 87.8 116.0 56.8 65.8 78.7 96.9 122.5 109.6 28 Foreign funds....................................... 3.0 10.3 -8.7 -4.6 1.2 6.3 -6.3 - 2.8 1.6 .8 5.7 6.9 29 Treasury balances................................. - 1.0 -5.1 -1.7 -.1 4.3 6.8 4.1 -4.3 1.2 7.4 2.0 11.6 30 Insurance and pension reserves.......... 18.4 26.2 29.7 34.5 49.4 62.7 35.8 33.2 45.3 53.4 66.2 59.2 31 Other, net.............................................. 20.2 10.6 12.7 31.4 32.9 40.3 23.2 39.7 30.7 35.2 48.6 32.0 Private domestic nonfinancial investors 32 Direct lending in credit markets................. 45.7 47.2 45.8 39.5 47.5 71.4 52.5 26.6 37.9 57.1 61.5 81.3 33 U.S. government securities.................... 18.8 18.9 24.1 16.1 23.0 33.2 26.7 5.6 18.3 27.8 32.4 34.1 34 State and local obligations...................... 5.4 9.3 8.4 3.8 2.6 4.5 8.7 - 1.0 -.9 6.0 7.1 2.0 35 Corporate and foreign bonds.................. 2.0 5.1 8.4 5.8 -3.3 -1.4 4.5 7.1 -.7 -5.9 -3.9 1.2 36 Commercial paper.................................... 9.8 5.8 -1.3 1.9 9.5 16.3 1.9 1.9 8.0 11.0 8.5 24.1 37 Other.......................................................... 9.7 8.0 6.2 11.8 15.7 18.7 10.7 13.0 13.2 18.2 17.5 20.0 38 Deposits and currency................................. 101.2 73.8 98.1 131.9 149.5 151.8 124.3 139.5 147.2 151.8 149.0 154.6 39 Security RPs.............................................. 11.0 - 2.2 .2 2.3 2.2 7.5 1.5 3.2 4.3 .2 9.8 5.1 2.4 1.3 * .2 6.9 -.5 .5 -.5 .9 6.1 7.7 41 Time and savings accounts..................... 75.7 65.4 84.0 113.5 121.0 115.2 105.3 121.6 117.6 124.4 110.8 119.6 42 Large negotiable CDs......................... 17.8 18.4 -14.3 -13.6 9.0 10.8 -19.3 -7.8 -4.5 22.6 10.1 11.4 43 Other at commercial banks................. 29.5 25.3 38.8 57.9 43.0 43.3 57.3 58.6 51.4 34.6 42.3 44.4 44 At savings institutions......................... 28.5 21.8 59.4 69.1 69.0 61.1 67.4 70.8 70.8 67.2 58.5 63.8 45 Money....................................................... 14.5 8.2 12.6 16.1 26.1 22.2 18.0 14.2 25.8 26.4 22.2 22.1 46 Demand deposits.................................. 10.6 1.9 6.4 8.8 17.8 12.9 12.0 5.7 20.0 15.7 11.8 14.0 47 Currency................................................ 3.9 6.3 6.2 7.3 8.3 9.3 6.1 8.6 5.8 10.7 10.5 8.1 48 Total of credit market instruments, de­ posits and currency................................... 146.9 121.0 143.9 171.4 197.0 223.2 176.8 166.1 185.2 208.9 210.5 235.9 49 Public support rate (in percent)............ 16.3 28.7 22.2 20.8 25.4 27.5 17.9 23.6 20.8 29.0 26.5 28.5 50 Private financial intermediation (in per­ cent) ....................................................... 87.9 80.0 72.2 84.4 92.5 90.0 77.8 91.2 94.0 91.3 93.3 86.8 51 Total foreign funds................................... 3.6 21.5 - 2.6 10.6 40.5 44.0 3.5 17.8 28.2 52.9 36.1 52.0 Memo: Corporate equities not included above 52 Total net issues............................................. 9.2 4.1 10.7 11.9 4.0 3.7 13.4 10.3 2.1 5.9 -.4 7.9 53 Mutual fund shares.................................. - 1.2 -.7 -.1 - 1.0 -.9 - 1.0 -2.4 .4 -.6 -1.3 -.5 -1.5 54 Other equities........................................... 10.4 4.8 10.8 12.9 4.9 4.7 15.8 9.9 2.6 7.2 .1 9.4 55 Acquisitions by financial institutions......... 13.1 5.8 9.6 12.3 7.4 7.6 12.7 11.8 6.8 8.1 .4 14.7 56 Other net purchases..................................... -3.9 -1.7 1.1 -.4 -3.4 -3.8 .7 -1.5 -4.7 - 2.2 -.8 - 6.8 Notes by line number. 29. Demand deposits at commercial banks. 1. Line 2 of p. A-44. 30. Excludes net investment of these reserves in corporate equities. 2. Sum of lines 3-6 or 7-10. 31. Mainly retained earnings and net miscellaneous liabilities. 6. Includes farm and commercial mortgages. 32. Line 12 less line 19 plus line 26. 11. Credit market funds raised by federally sponsored credit agencies, 33-37. Lines 13-17 less amounts acquired by private finance. Line 37 and net issues of federally related mortgage pool securities. Included includes mortgages. below in lines 3, 13, and 33. 45. Mainly an offset to line 9. 12. Line 1 less line 2 plus line 11. Also line 19 less line 26 plus line 32. 46. Lines 32 plus 38, or line 12 less line 27 plus line 45. Also sum of lines 27, 32, 39, and 44. 47. Line 2/line 1. 17. Includes farm and commercial mortgages. 48. Line 19/line 12. 25. Sum of lines 39 and 44. 49. Sum of lines 10 and 28. 26. Excludes equity issues and investment company shares. Includes 50. 52. Includes issues by financial institutions. line 18. Note. Full statements for sectors and transaction types quarterly, 28. Foreign deposits at commercial banks, bank borrowings from foreign and annually for flows and for amounts outstanding, may be obtained branches, and liabilities of foreign banking agencies to foreign af­ from Flow of Funds Section, Division of Research and Statistics, Board filiates. of Governors of the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics □ September 1979 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures 1967 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1979 Measure 1976 1977 1978 Jan. Feb. Mar. Apr. May' June' July' Aug. 1 Industrial production1................................................ 130.5 138.2 146.1 151.5 152.0 153.0 150.8 152.4 152.4 152.6 150.9 Market groupings 2 Products, total............................................................ 129.7 137.9 144.8 149.2 149.9 150.8 148.4 150.3 150.1 149.8 148.0 3 Final, total.............................................................. 127.6 135.9 142.2 146.1 146.8 148.2 145.4 147.8 147.6 147.2 145.1 4 Consumer goods................................................. 137.1 145.3 149.1 150.6 151.5 152.9 149.1 152.0 151.7 150.9 147.7 5 Equipment.......................................................... 114.6 123.0 132.8 139.9 140.4 141.7 140.4 141.9 142.0 142.1 141.4 6 Intermediate............................................................ 137.2 145.1 154.1 160.8 161.4 160.4 159.7 159.5 159.2 159.4 159.1 7 Materials..................................................................... 131.7 138.6 148.3 155.0 155.2 156.3 154.5 155.7 156.0 156.9 155.3 Industry groupings 8 Manufacturing............................................................ 130.3 138.4 146.8 152.5 153.3 154.5 151.6 153.8 153.8 153.8 151.9 Capacity utilization (percent)1*2 9 Manufacturing............................................................ 79.5 81.9 84.4 86.4 86.7 87.1 85.3 86.3 86.1 85.9 84.6 10 Industrial materials industries................................... 81.1 82.7 85.6 87.9 87.8 88.3 86.9 87.4 87.2 87.5 86.4 11 Construction contracts3............................................ 190.2 160.5 174.3 181.0 231.0 186.0 202.0 178.0 177.0 165.0 n.a. 120.7 125.0 130.3 133.0 133.5 134.1 134.1 134.6 134.9 135.0 135.0 13 Goods-producing, total.............................................. 100.2 104.2 108.9 112.0 112.4 113.3 113.1 113.4 113.4 113.4 112.8 14 Manufacturing, total.............................................. 97.7 101.0 104.5 107.1 107.4 107.8 107.6 107.5 107.4 107.3 106.6 15 Manufacturing, production-worker...................... 95.3 98.6 102.1 104.8 105.2 105.4 105.1 104.9 104.6 104.3 103.3 16 Service-producing....................................................... 131.9 136.4 142.1 144.5 145.0 145.5 145.7 146.2 146.7 146.8 147.1 17 Personal income, total*.............................................. 220.5 244.4 274.1 292.7 295.5 298.8 300.1 302.0 304.1 308.4 n.a. 18 Wages and salary disbursements............................... 208.2 230.2 258.1 275.3 278.0 281.2 282.1 283.2 285.3 287.4 n.a. 19 Manufacturing........................................................ 177.0 198.3 222.4 239.7 242.3 244.7 244.1 244.8 245.9 247.1 n.a. 20 Disposable personal income...................................... 176.8 194.8 217.7 234.7 '239.2 n.a. 21 Retail sales6................................................................ 203.5 224.4 248.0 270.7 271.8 275.3 272.7 274.8 274.4 276.2 278.1 Prices7 22 Consumer.................................................................... 170.5 181.5 195.4 204.7 207.1 209.1 211.5 214.1 216.6 218.9 n.a. 23 Producer finished goods............................................ 170.3 180.6 194.6 '205.4 '207.7 '209.1 '211.4 212.4 213.4 215.8 217.3 1. The industrial production and capacity utilization series have been 6. Based on Bureau of Census data published in Survey of Current revised. For a description of the changes see the August 1979 Bulletin, Business (U.S. Department of Commerce). pp. 603-07. 7. Data without seasonal adjustment, as published in Monthly Labor 2. Ratios of indexes of production to indexes of capacity. Based on data Review (U.S. Department of Labor). Seasonally adjusted data for changes from Federal Reserve, McGraw-Hill Economics Department, and De­ in the price indexes may be obtained from the Bureau of Labor Statistics, partment of Commerce. U.S. Department of Labor. 3. Index of dollar value of total construction contracts, including residential, nonresidential, and heavy engineering, from McGraw-Hill Note. Basic data (not index numbers) for series mentioned in notes Informations Systems Company, F. W. Dodge Division. 4, 5, and 6, and indexes for series mentioned in notes 3 and 7 may also be 4. Based on data in Employment and Earnings (U.S. Department of found in the Survey of Current Business (U.S. Department of Commerce). Labor). Series covers employees only, excluding personnel in the Armed Figures for industrial production for the last two months are preliminary Forces. and estimated, respectively. 5. Based on data in Survey of Current Business (U.S. Department of Commerce). Series for disposable income is quarterly. 2.11 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION A Seasonally adjusted 1978 1979 1978 1979 1978 1979 Series Q3 Q4 Ql Q2' Q3 Q4 Ql Q2 Q3 Q4 Ql Q2' Output (1967= 100) Capacity (percent of 1967 output) Utilization rate (percent) 1 Manufacturing.............................................. 148.6 151.7 153.4 153.1 174.5 175.6 176.9 178.2 85.2 86.4 86.7 85.9 2 Primary processing....................................... 158.2 162.2 162.1 161.8 179.9 181.2 182.7 184,2 87.9 89.5 88.7 '87.8 143.6 146.1 148.7 148.4 171.6 172.7 173.8 175.0 83.7 84.6 85.6 84.8 150.2 154.6 155.5 155.4 173.9 175.4 176.8 178.1 86.4 88.2 88.0 87.2 5 Durable goods.............................................. 151.9 157.3 158.4 157.7 178.5 180.1 181.5 183.0 85.1 87.4 87.3 '86.2 6 Metal materials......................................... 126.6 132.2 124.7 124.3 139.3 139.6 139.8 140.3 90.9 94.7 '89.1 88.5 7 Nondurable goods....................................... 165.9 170.3 172.2 173.1 188.5 190.2 191.9 193.7 88.0 89.6 89.7 89.4 8 Textile, paper, and chemical................... 172.2 177.1 179.1 180.9 196.2 197.9 199.6 201.5 87.8 89.5 89.7 '89.7 9 Textile................................................... 116.0 119.5 118.2 118.3 136.3 136.6 136.9 137.3 85.1 87.5 86.3 '86.2 10 Paper..................................................... 134.1 138.1 136.9 140.7 146.9 147.8 148.7 149.9 91.3 93.4 92.0 '93.9 11 Chemical............................................... 212.3 218.0 222.7 224.5 242.2 244.6 247.4 250.6 87.6 89.1 90.0 '89.6 12 Energy.......................................................... 126.9 128.9 127.9 127.7 144.7 145.7 146.7 147.5 87.7 88.5 87.2 86.6 A The capacity utilization series has been revised. For a description of the changes, see the August 1979 Bulletin, pp. 606-07. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Labor Market A47 2.12 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data are seasonally adjusted. Exceptions noted. 1979 Category 1976 1977 1978 Feb. Mar. Apr. May June July Aug. Household Survey Data 1 Noninstitutional population1.............. 156,048 158,559 161,058 162,633 162,909 163,008 163,260 163,469 163,685 163,891 2 Labor force (including Armed Forces)1.................................... 96,917 99,534 102,537 104,621 104,804 104,193 104,325 104,604 105,141 105,139 3 Civilian labor force............................. 94,773 97,401 100,420 102,527 102,714 102,111 102,247 102,528 103,059 103,049 Employment 4 Nonagricultural industries2... 84,188 87,302 91,031 93,335 93,499 92,987 93,134 93,494 93,949 93,578 5 Agriculture.................................... 3,297 3,244 3,342 3,311 3,343 3,186 3,184 3,260 3,262 3,322 Unemployment 6 Number.......................................... 7,288 6,855 6,047 5,881 5,871 5,937 5,929 5,774 5,848 6,149 7 Rate (percent of civilian labor force)........................................... 7.7 7.0 6.0 5.7 5.7 5.8 5.8 5.6 5.7 6.0 8 Not in labor force.................................... 59,130 59,025 58,521 48,012 58,105 58,815 58,935 59,865 58,545 58,752 Establishment Survey Data 9 Nonagricultural payroll employment3 79,382 82,256 85,760 87,818 88,263 88,248 88,539 r88,764 '88,813 88,815 10 Manufacturing........................................... 18,997 19,647 20,331 20,895 20,964 20,922 20,906 r20,893 *•20,863 20,740 11 Mining......................................................... 779 809 837 919 922 922 923 r930 *•933 952 12 Contract construction............................. 3,576 3,833 4,213 4,385 4,526 4,507 4,594 r4,610 *•4,645 4,594 13 Transportation and public utilities... 4,582 4,696 4,858 5,001 5,025 4,935 5,031 r5,085 *•5,075 5,066 14 Trade............................................................ 17,755 18,492 19,392 19,883 19,945 19,959 19,985 r19,980 *■19,959 19,996 15 Finance........................................................ 4,271 4,452 4,676 4,829 4,839 4,853 4,867 *-4,892 r4,907 4,939 16 Service.......................................................... 14,551 15,249 15,976 16,438 16,535 16.575 16,622 r16,706 *■16,730 16,804 17 Government............................................... 14,871 15,079 15,478 15,468 15,507 15.575 15,611 *■15,668 *•15,701 15,724 1. Persons 16 years of age and over. Monthly figures, which are based 3. Data include all full- and part-time employees who worked during, on sample data, relate to the calendar week that contains the 12th day; or received pay for, the pay period that includes the 12th day of the annual data are averages of monthly figures. By definition, seasonality month, and exclude proprietors, self-employed persons, domestic servants, does not exist in population figures. Based on data from Employment unpaid family workers, and members of the Armed Forces. Data are and Earnings (U.S. Dept, of Labor). adjusted to the February 1977 benchmark. Based on data from Employ­ 2. Includes self-employed, unpaid family, and domestic service workers. ment and Earnings (U.S. Dept, of Labor). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics □ September 1979 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value A Monthly data are seasonally adjusted. 1967 1978 1979 Grouping pro­ 1978 por­ aver­ tion age June July Aug. Dec. Jan. Feb. Mar. Apr. May June July23 Aug.e Index (1967 = 100) Major Market 1 100.00 146.1 146.1 147.1 148.0 151.8 151.5 152.0 153.0 150.8 152.4 152.4 152.6 150.9 60.71 144.8 144.6 145.6 146.6 149.0 149.2 149.9 150.8 148.4 150.3 150.1 149.8 148.0 3 Final products....................................... 47.82 142.2 142.1 143.2 144.2 146.1 146.1 146.8 148.2 145.4 147.8 147.6 147.2 145.1 4 Consumer goods................................ 27.68 149.1 149.3 149.8 150.6 151.5 150.6 151.5 152.9 149.1 152.0 151.7 150.9 147.7 5 Equipment.......................................... 20.14 132.8 132.3 134.0 135.3 138.6 139.9 140.4 141.7 140.4 141.9 142.0 142.1 141.4 6 Intermediate products........................... 12.89 154.1 154.0 154.7 155.6 159.9 160.8 161.4 160.4 159.7 159.5 159.2 159.4 159.1 7 Materials.................................................... 39.29 148.3 148.3 149.3 150.2 156.2 155.0 155.2 156.3 154.5 155.7 156.0 156.9 155.3 Consumer goods 8 Durable consumer goods.......................... 7.89 159.2 161.1 162.1 161.5 161.8 160.4 161.1 163.6 151.6 160.5 158.5 155.8 147.4 9 Automotive products............................. 2.83 179.9 181.6 183.8 183.5 186.9 181.4 179.3 186.8 163.0 182.7 175.9 169.1 147.5 10 Autos and utility vehicles................. 2.03 172.5 174.5 176.7 174.9 179.2 173.2 170.3 178.8 147 4 176.3 167.4 155.2 125.6 11 1.90 148.6 150.1 152.7 150.2 151.9 145.8 144.9 153.8 128.6 153.1 148.0 141.8 118.5 12 Auto parts and allied goods............. 80 198.5 199.4 201.9 205.5 206.5 202.2 202.2 207.2 202.7 199.0 197.5 204.4 203.0 13 Home goods.......................................... 5.06 147.7 149.6 150.0 149.2 147.7 148.6 150.9 150.6 145.2 148.1 148.8 148.4 147.3 14 1.40 133.3 140.1 138.8 132.4 129.8 124.0 129.8 128.4 115.6 128.4 129.3 129.6 127.2 IS 1.33 135.4 142.4 141.3 133.1 130.6 124.8 131.4 130.3 116.5 130.2 131.2 131.5 16 1.07 164.2 166.8 168.2 167.1 164.3 170.7 171.8 173.5 170.7 170.2 170.6 170.0 17 Miscellaneous home goods............... 2.59 148.6 147.7 148.6 150.9 150.6 152.8 153.7 153.2 150.8 149.6 150.4 149.7 150.0 18 Nondurable consumer goods................... 19.79 145.1 144.5 144.9 146.3 147.3 146.7 147.7 148.6 148.0 148.7 149.0 148.9 147.9 19 4.29 131.1 131.1 130.4 133.3 132.2 130.1 130.7 130.9 127.7 128.6 128.9 20 Consumer staples................................... 15.50 148.9 148.3 148.9 149.9 151.5 151.3 152.4 153.6 153.7 154.2 154.6 154.8 154.0 ?1 Consumer foods and tobacco........... 8.33 140.6 140.0 141.1 141.9 143.2 141.8 142.4 145.1 145.2 145.7 146.2 146.7 22 Nonfood staples................................. 7.17 158.5 157.9 158.0 159.2 161.2 162.4 164.0 163.4 163.5 164.1 164.3 164.1 163.8 23 Consumer chemical products........ 2,63 192.7 191.9 193.3 194.1 196.5 200.3 203.1 202.8 201.6 205.2 206.0 206.3 24 Consumer paper products............. 1.92 118.4 118.0 117.8 118.4 118.0 119.2 122.7 121.4 120.9 121.3 121.1 119.4 25 Consumer energy products............ 2.62 153.6 153.0 152.3 154.0 157.6 156.0 155.2 154.7 156.4 154.3 154.2 154.6 26 Residential utilities..................... 1.45 162.1 162.1 161.7 161.7 162.5 166.2 167.7 167.9 169.1 167.8 Equipment 27 Business...................................................... 12.63 160.3 160.1 161.7 163.4 166.8 168.1 169.0 170.8 168.7 171.4 171.6 171.6 170.3 28 6.77 145.8 146.1 147.0 148.0 148.4 151.4 152.5 152.8 150.4 151.8 152.0 152.1 151.2 29 Building and mining.......................... 1.44 207.3 210.5 210.3 209.0 206.3 208.8 207.9 205.2 204.2 203.7 205.4 208.6 210.0 30 Manufacturing................................... 3.85 121.2 121.6 121.4 123.2 124.5 127.4 129.1 130.3 128.0 130.1 130.1 130.1 129.0 31 1.47 149.4 147.0 151.7 153.3 154.2 157.8 159.1 160.2 156.0 157.7 156.9 154.1 151.4 32 Commercial transit, farm..................... 5.86 177.2 176.2 178.8 181.2 188.0 187.4 188.1 191.6 189.9 193.9 194.2 194.2 192.3 33 3.26 212.0 211.6 214.4 215.3 218.7 220.8 221.2 224.4 223.0 224.9 226.4 227.3 227.5 34 1.93 133.8 131.9 134.7 139.2 151.0 146.8 146.6 150.5 148.8 156.7 155.6 153.0 147.5 35 Farm................................................... 67 132.8 131.7 132.4 136.0 144.6 142.0 146.9 150.0 147.7 150.8 148.6 152.0 36 Defense and space..................................... 7.51 86.5 85.6 87.5 87.9 91.4 92.4 92.4 92.9 92.9 92.5 92.3 92.4 92.9 Intermediate products 6.42 151.7 151.5 152.4 153.8 158.3 159.1 159.3 157.1 156.0 156.4 156.2 156.8 156.9 38 TOiisiness sunnlies ..................................... 6.47 156.5 165.5 156.9 157.4 161.5 162.5 163.6 163.8 163.2 162.5 162.3 162.0 39 Commercial energy products................ 1.14 168.2 167.3 167.8 169.5 175.0 173.6 173.7 173.5 174.6 172.6 168.3 168.8 Materials 40 Durable goods materials........................... 20.35 149.0 147.7 150.5 151.9 159.5 158.1 158.0 159.2 155.7 157.9 159.6 160.0 157.1 41 Durable consumer parts....................... 4.58 140.8 140.3 142.3 142.1 148.6 148.5 146.0 145.8 136.9 142.5 142.0 136.1 130.5 42 Equipment parts.................................... 5.44 166.5 165.7 169.4 168.8 179.2 182.2 184.4 186.8 187.0 188.0 191.0 193.5 191.1 43 10.34 143.3 141.5 144.2 147.3 154.0 149.7 149.4 150.6 147.7 149.0 150.9 152.9 150.9 dd Rasir. metal materials........................ 5.57 121.2 118.8 122.1 126.5 132.0 124.4 124.1 126.7 123.2 122.9 126.1 128.6 45 Nondurable goods materials.................... 10.47 165.6 166.3 164.5 165.3 171.9 171.0 172.4 173.1 173.0 173.8 172.4 174.9 174.1 46 Textile, paper, and chemical materials. 7.62 171.8 172.3 171.3 170.7 178.9 177.5 179.6 180.1 180.7 181.5 180.4 183.0 182.4 47 Textile materials................................. 1.85 116.9 116.5 115.5 115.6 120.1 118.3 117.4 119.0 117.0 118.8 119.1 121.0 48 Paper materials................................... 1.62 137.0 139.4 134.6 130.0 139.1 133.3 137.4 139.9 140.8 140.1 141.1 144.7 49 Chemical materials............................ 4.15 210.0 210.1 210.7 211.2 220.8 221.2 223.9 223.0 224.7 225.7 223.1 225.6 50 Containers, nondurable......................... 1.70 159.8 160.8 154.2 162.6 164.8 167.8 165.8 167.3 162.0 163.3 159.2 163.5 51 Nondurable materials n.e.c................... 1.14 132.7 134.3 134.2 133.7 135.7 132.5 134.1 135.6 138.2 138.4 139.0 138.0 8.48 125.3 127.6 127.7 127.5 128.8 127.8 127.1 128.7 128.4 127.7 126.9 127.0 127.9 53 Primary energy....................................... 4.65 112.6 116.2 116.5 115.6 116.1 111.9 110.6 114.6 113.0 111.7 111.3 112.0 54 Converted fuel materials....................... 3.82 140.8 141.6 141.5 141.9 144.4 147.0 147.2 145.9 147.1 147.2 145.9 145.3 Supplementary groups 9.35 140.0 141.1 141.0 141.9 140.6 140.1 141.6 141.6 137.2 139.1 139.7 138.9 137.5 12.23 135.4 136.8 136.7 137.1 139.1 138.1 137.5 138.4 138.7 137.6 136.6 136.8 137.4 57 3.76 158.0 157.3 157.0 158.7 162.2 161.4 160.8 160.3 161.9 159.9 158.5 158.9 58 8.48 125.3 127.6 127.7 127.5 128.8 127.8 127.1 128.7 128.4 127.7 126.9 127.0 \27.9 For notes see opposite page. 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Output A49 2.13 Continued 1967 1978 1979 Grouping SIC pro­ 1978 code por­ avertion age» June July Aug. Dec. Jan. Feb. Mar. Apr. May June July? Aug.e Index (1967 == 100) Major Industry 12.05 141.7 143.1 143.6 143.2 145.0 143.9 143.0 143.5 143.8 143.4 142.9 143.3 144.3 2 Mining....................................... 6.36 124.0 127.4 127.1 126.2 127.4 123.8 120.9 122.3 122.7 122.8 123.5 124.0 125.8 3 Utilities....................................... 5.69 161.4 160.6 162.0 162.2 164.7 166.2 167.7 167.1 167.4 166.5 164.4 164.8 165.0 3.88 182.2 181.1 183.2 183.3 186.7 188.4 189.9 188.8 189.0 186.4 87.95 146.8 146.4 147.7 148.6 152.9 152.5 153. 3 154.5 151.6 153.8 153.8 153.8 151.9 6 Nondurable............................... 35.97 156.9 157.0 157.2 158.4 161.7 160.7 162.0 163.0 161.7 162.8 162 7 163.3 162.7 7 Durable...................................... 51.98 139.7 139.0 141.1 141.8 146.8 146.8 147.2 148.6 144.6 147.6 147.6 147.3 144.4 Mining 8 Metal.............................................. 10 .51 121.0 121.0 117.0 118.0 123.8 124.2 125.3 126.9 128.9 123.1 123.4 120.5 9 Coal................................................ 11,12 .69 114.7 136.0 133.1 125.9 144.7 115.9 104.5 124.0 130.1 133.4 137.5 136.6 145.8 10 Oil and gas extraction.................. 13 4.40 124.6 126.2 126.6 126.2 123.8 123.0 120.4 119.3 118.6 118.6 119.0 120.1 121.0 14 .75 131.2 130.8 131.4 132.1 134.8 135.9 135.7 135.6 135.3 137.8 137.3 138.4 Nondurable manufacturers 20 8.75 142.7 142.8 143.1 143.9 144.7 143.9 145.5 147.6 147.0 149.2 150.0 149.3 13 Tobacco products......................... 21 .67 118.3 118.5 118.2 118.5 119.1 120.6 116.2 123.3 120.0 120.2 118.3 14 Textile mill products..................... 22 2.68 137.5 136.6 137.0 137.1 141.7 141.6 139.9 142.3 141.2 141.5 142.2 142.8 15 Apparel products.......................... 23 3.31 134.2 133.7 132.7 137.7 136.5 130.3 133.5 136.5 130.8 128.2 130.2 16 Paper and products....................... 26 3.21 144.8 148.0 142.1 142.2 148.5 144.6 144.6 149.0 148.7 147.9 148.0 152.0 151.1 17 Printing and publishing................ 27 4.72 131.5 131.1 131.4 131.9 134.4 135.6 138.2 137.3 135.7 136.8 136.9 135.1 135.3 18 Chemicals and products............... 28 7.74 197.4 196.4 198.6 199.3 207.2 206.5 208.6 107.4 207.7 209.7 207.8 209.3 19 Petroleum products....................... 29 1.79 145.2 143.3 144.1 146.0 151.3 147.0 146.0 143.8 145.4 142.4 142.8 144.8 143.9 20 Rubber and plastic products........ 30 2.24 253.6 257.3 260.3 263.4 263.3 267.4 267.5 270.4 265.5 270.0 269.1 271.1 21 Leather and products................... 31 .86 73.8 74.2 73.2 73.3 73.8 74.8 73.4 72.9 69.6 72.3 70.1 71.1 Durable manufactures 22 Ordnance, private and govern­ ment ........................................... 19,91 3.64 73.7 74.1 74.1 74.0 74.6 74.9 75.8 75.1 75.1 75.3 75.1 75.3 75.6 23 Lumber and products................... 24 1.64 136.3 136.3 136.2 136.0 144.0 137.3 137.2 137.7 137.2 136.1 136.7 137.2 24 Furniture and fixtures.................. 25 1.37 155.8 156.9 159.3 159.5 157.6 161.7 163.1 163.6 159.4 159.6 159.6 159.2 25 Clay, glass, stone products.......... 32 2.74 157.2 156.7 157.0 157.6 164.0 167.4 166.9 164.9 161.2 163.8 162.8 163.0 26 Primary metals.............................. 33 6.57 119.9 118.3 122.5 124.9 132.1 123.4 120.4 123.7 121.7 121.0 124.3 126.5 124.1 27 Iron and steel............................ 331,2 4.21 113.2 113.1 116.5 118.3 125.3 113.3 110.8 116.2 115.8 114.3 118.1 118.9 28 Fabricated metal products........... 34 5.93 141.6 141.1 142.8 143.7 147.1 149.1 150.8 150.2 148.8 150.3 149.4 149.7 i48.’6 29 Nonelectrical machinery............... 35 9.15 153.6 152.9 154.7 155.5 158.1 161.2 162.9 164.0 161.8 164.3 164.5 165.7 164.9 30 Electrical machinery..................... 36 8.05 159.4 158.8 162.5 161.5 167.7 170.9 173.2 174.2 170.6 174.7 175.2 174.5 173.4 31 Transportation equipment........... 37 9.27 132.5 131.4 133.4 134.2 142.9 141.2 139.9 143.7 131.6 141.9 139.4 135.0 123.4 32 Motor vehicles and parts......... 371 4.50 169.9 168.9 171.5 171.6 182.1 177.9 173.1 179.7 156.0 176.3 169.6 159.5 136.0 33 Aerospace and miscellaneous transportation equipment... 372-9 4.77 97.2 96.1 97.5 98.9 106.0 106.6 108.6 109.7 108.6 109.6 111.0 111.9 111.5 34 Instruments................................... 38 2.11 167.1 166.2 167.7 170.3 173.1 175.2 176.0 177.3 176.3 174.7 175.8 175.4 175.9 39 1.51 151.0 150.3 150.6 151.8 151.7 152.0 154.0 154.5 152.3 150.7 151.9 152.2 152.0 Gross value (billions of 1972 dollars, annual rates) Major Market 36 Products, total......................... 1507.4 610.2 609.7 610.8 613.9 631.1 626.8 627.3 636.1 620.8 632.3 628.5 624.0 609.5 37 Final.............................................. 1390.9 471.0 470.8 471.2 474.0 486.6 481.7 482.0 491.0 476.4 488.2 485.2 480.3 466.8 38 Consumer goods....................... 1277.5 326.6 326.6 326.0 327.5 334.1 328.9 329.4 334.7 323.9 331.5 329.8 326.5 317.2 39 Equipment................................. U13.4 144.4 144.2 145.1 146.5 152.4 152.9 152.6 156.3 152.5 156.7 155.4 153.8 149.6 40 Intermediate.................................. U16.6 139.2 138.9 139.7 139.9 144.5 145.1 145.3 145.1 144.4 144.2 143.3 143.7 142.7 1. 1972 dollars. Production—1976 Revision (Board of Governors of the Federal Reserve System: Washington, D.C.), December 1977. Note. Published groupings include some series and subtotals not shown separately. For description and historical data, see Industrial A The industrial production series has been revised. For a description of the changes, see “Revision of Industrial Production Index” in the August 1979 Bulletin, pp. 603-05. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics □ September 1979 2.14 HOUSING AND CONSTRUCTION Monthly figures are at seasonally adjusted annual rates except as noted. 1979 1976 1977 1978 Item Jan. Feb. Mar. Apr. May r June July Private residential real estate activity (thousands of units) New Units 1 Permits authorized............................. 1,296 1,677 1,801 1,442 1,425 1,621 1,517 1,618 1,639 1,521 2 1-family............................................ 894 1,126 1,182 920 881 1,056 1,036 1,047 1,012 987 3 2-or-more-family............................. 402 551 619 522 544 565 481 571 627 534 4 Started................................................. 1,538 1,986 2,019 1,679 1,381 1,786 1,745 1,835 1,935 1,799 5 1-family............................................ 1,163 1,451 1,433 1,139 953 1,266 1,278 1,226 1,298 1,223 6 2-or-more-family............................. 377 535 586 540 428 520 467 609 637 576 7 Under construction, end of period1.. 1,147 1,442 1,355 1,360 1,344 1,304 *•1,256 1,244 1,251 n.a. 8 1-family............................................ 655 829 1,378 812 793 770 *•793 729 723 n.a. 9 2-or-more-family............................. 492 613 553 549 551 534 519 515 527 n.a. 10 Completed........................................... 1,362 1,652 1,866 1,815 1,894 1,957 2,015 2,029 1,871 n.a. 11 1-family............................................ 1,026 1,254 1,368 1,331 1,376 1,412 1,438 1,347 1,337 n.a. 12 2-or-more-family............................. 336 398 498 484 518 545 577 682 534 n.a. 13 Mobile homes shipped....................... 246 277 276 311 272 270 273 271 279 263 Merchant builder activity in 1-family units 14 Number sold....................................... 639 819 817 774 697 784 *■709 709 695 819 15 Number for sale, end of period i........ 433 407 423 412 410 424 425 430 418 416 Price (ithousands of dollars)2 Median 16 Units sold........................................ 44.2 48.9 55.9 60.3 61.2 60.4 r62.6 63.0 64.2 64.0 17 Units for sale................................... 41.6 48.2 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Average 18 Units sold........................................ 48.1 54.4 62.7 67.7 68.7 68.5 71.1 71.8 74.1 72.3 Existing Units (1-family) 19 Number sold....................................... 3,002 3,572 3,905 3,710 3,620 3,650 3,760 3,860 3,560 3,770 Price of units sold (thous. of dollars) 2 20 Median................................................ 38.1 42.9 48.7 52.0 51.9 53.8 54.7 55.9 56.8 57.9 21 Average................................................ 42.2 47.9 55.1 59.8 59.5 61.8 62.5 64.2 66.1 66.7 Value of new construction 4 (millions of dollars) Construction 22 Total put in place............................... 148,778 172,552 202,219 212,195 210,849 216,824 216,785 223,239 224,502 229,993 23 Private.................................................. 110,416 134,723 157,455 165,768 169,262 172,820 171,962 174,847 178,705 180,027 24 Residential....................................... 60,519 80,957 93,088 93,660 97,724 96,591 95,992 95,498 97,958 98,899 25 Nonresidential, total...................... 49,897 53,766 64,367 72,108 71,538 76,229 75,970 79,349 80,747 81,128 Buildings 26 Industrial................................. 7,182 7,713 10,762 12,711 13,401 15,201 14,034 14,504 14,697 15,197 27 Commercial............................. 12,757 14,789 18,280 19,775 18,985 20,990 21,463 23,601 23,679 24,491 28 Other........................................ 6,155 6,200 6,659 6,764 6,511 7,071 7,150 7,141 7,306 7,441 29 Public utilities and other............ 23,803 25,064 28,666 32,859 32,640 32,967 33,325 34,101 33,958 34,135 30 Public.................................................. 38,312 37,828 44,762 46,427 41,587 44,004 44,823 48,391 45,798 49,966 31 Military............................................ 1,521 1,517 1,462 1,645 1,059 1,983 1,550 1,517 1,638 1,467 32 Highway.......................................... 9,439 9,280 8,627 10,015 9,037 9,332 n.a. n.a. n.a. n.a. 33 Conservation and development... 3,751 3,882 3,697 4,865 4,476 4,862 n.a. n.a. n.a. n.a. 34 Other3.............................................. 23,601 23,149 23,503 29,902 27,015 27,827 n.a. n.a. n.a. n.a. 1. Not at annual rates. Note. Census Bureau estimates for all series except (a) mobile homes 2. Not seasonally adjusted. which are private, domestic shipments as reported by the Manufactured 3. Beginning January 1977 Highway imputations are included in Other. Housing Institute and seasonally adjusted by the Census Bureau, and 4. Value of new construction data in recent periods may not be strictly (b) sales and prices of existing units, which are published by the Na­ comparable with data in prior periods due to changes by the Bureau of tional Association of Realtors. All back and current figures are avail­ the Census in its estimating techniques. For a description of these changes able from originating agency. Permit authorizations are those reported see Construction Reports (C-30-76-5), issued by the Bureau in July 1976. to the Census Bureau from 14,000 jurisdictions through 1977, and 16,000 jurisdictions beginning with 1978. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices A51 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data, except as noted 12 months to 3 months (at annual rate) to 1 month to Index level Item 1978 1979 1979 July 1978 1979 1979 June July (1967 Sept. Dec. Mar. June Mar. Apr. May June July = 100)3 Consumer Prices1 1All items........................................................ 7.7 11.3 8.5 8.5 13.0 13.4 1.0 1.1 1.1 1.0 1.0 218.9 2 Commodities................................................ 7.3 11.6 7.3 9.6 14.5 13.3 1.1 1.2 .9 1.0 .9 210.5 3 Food.......................................................... 10.5 10.2 4.8 10.2 17.7 7.5 1.1 1.0 .7 .2 .1 236.9 4 5.9 12.3 8.3 9.6 12.9 15.8 1.1 1.3 1.1 1.3 1..2 197.0 5 6.7 9.9 9.1 11.3 10.0 9.1 .5 .9 .5 .8 .7 192.6 6 Nondurable.......................................... 4.5 15.5 6.9 6.7 16.5 25.8 1.9 1.9 1.8 2.1 2.1 201.1 7 Services......................................................... 8.4 10.9 10.3 7.2 10.6 13.8 .9 .9 1.3 1.0 1.1 234.7 8 Rent.......................................................... 6.9 7.1 7.3 7.7 3.6 8.7 .2 .5 1.0 .5 .8 175.9 9 8.7 11.4 10.8 7.1 11.7 14.5 1.0 1.0 1.3 1.1 1.2 245.6 Other groupings 10 All items less food....................................... 7.2 11.6 9.3 8.5 12.0 14.9 1.0 1.2 1.2 1.1 1.2 214.2 7.3 9.5 9.7 7.7 9.3 11.2 .8 .9 .9 .8 .7 207.3 10.7 15.2 14.6 10.9 16.7 18.0 1.3 1.4 1.3 1.4 1.4 263.0 Producer Prices 8.1 10.1 7.4 10.5 r14.3 *•6.8 **1.0 r.8 .4 .5 1.1 215.8 14 8.0 10.6 7.5 11.1 *•16.0 *■6.1 rl.l *-.7 .3 .5 1.2 215.2 15 9.5 6.7 4.9 15.3 r21.0 *■-11.1 r1.2 r—A -1.3 - 1.2 0.0 224.6 16 7.1 12.8 8.8 8.8 *•13.4 *•16.8 rl.l *■1.3 1.3 1.4 1.9 208.4 17 8.4 8.9 7.0 8.8 r10.3 *•9.2 r.6 *■1.0 .7 .5 .8 216.9 18 Materials...................................................... 8.4 13.9 7.5 13.0 r17.9 *•11.3 rl.l r.9 r.9 .9 1.7 252.6 19 Intermediate2............................................ 6.4 13.0 6.9 11.2 r14.0 r14.3 *•1.1 *■1.4 1.0 1.0 1.6 245.0 Crude 20 Nonfood................................................ 13.9 21.0 16.9 19.8 r29.2 r22.0 2.2 -.5 2.3 3.3 1.4 350.0 21 Food...................................................... 16.1 14.5 2.8 21.2 *■31.0 r—7.1 r.3 *•-.4 -.3 - 1.2 2.1 254.1 1. Figures for consumer prices are those for all urban consumers. 3. Not seasonally adjusted. 2. Excludes intermediate materials for food manufacturing and manu­ factured animal feeds. Source. Bureau of Labor Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 Domestic Nonfinancial Statistics □ September 1979 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1978 1979 Account 1976 1977 1978 Ql Q2 Q3 Q4 Ql Q2r Gross National Product 1 1,702.2 1,899.5 2,127.6 2,011.3 2,104.2 2,159.6 2,235.2 2,292.1 2,329.4 By source 2 Personal consumption expenditures.................... 1,089.9 1,210.0 1,350.8 1,287.2 1,331.2 1,369.3 1,415.4 1,454.2 1,475.2 3 Durable goods.................................................. 157.4 178.8 200.3 185.3 200.3 203.5 212.1 213.8 208.1 4 Nondurable goods............................................ 443.9 481.3 530.6 505.9 521.8 536.7 558.1 571.1 580.8 5 Services.............................................................. 488.5 549.8 619.8 596.0 609.1 629.1 645.1 669.3 686.2 6 Gross private domestic investment..................... 243.0 303.3 351.5 327.0 352.3 356.2 370.5 373.8 395.7 7 Fixed investment............................................... 233.0 281.3 329.1 304.1 326.5 336.1 349.8 354.6 361.1 8 Nonresidential............................................... 164.9 189.4 221.1 203.7 218.8 225.9 236.1 243.4 247.6 9 Structures................................................... 57.3 62.6 76.5 66.9 75.2 79.7 84.4 84.9 89.9 10 Producers' durable equipment................. 107.6 126.8 144.6 136.8 143.6 146.3 151.8 158.5 157.7 11 Residential structures................................... 68.1 91.9 108.0 100.5 107.7 110.2 113.7 111.2 113.5 12 Nonfarm.................................................... 65.7 88.8 104.4 96.8 104.3 106.4 110.0 107.8 109.7 13 Change in business inventories....................... 10.0 21.9 22.3 22.8 25.8 20.0 20.6 19.1 34.6 14 Nonfarm........................................................ 12.1 20.7 21.3 22.0 25.3 18.5 19.3 18.8 33.8 15 Net exports of goods and services....................... 8.0 -9.9 -10.3 - 22.2 -7.6 - 6.8 -4.5 4.0 -7.6 16 Exports.............................................................. 163.3 175.9 207.2 184.4 205.7 213.8 224.9 238.5 244.0 17 Imports......................................................... 155.4 185.8 217.5 206.6 213.3 220.6 229.4 234.4 251.6 18 Government purchases of goods and services... 361.3 396.2 435.6 419.4 428.3 440.9 453.8 460.1 466.1 19 Federal............................................................... 129.7 144.4 152.6 150.9 148.2 152.3 159.0 163.6 161.5 20 State and local.................................................. 231.6 251.8 283.0 268.5 280.1 288.6 294.8 296.5 304.6 By major type of product 21 Final sales, total.................................................... 1,692.1 1,877.6 2,105.2 1,988.5 2,078.4 2,139.5 2,214.5 2,272.9 2,294.7 22 Goods................................................................. 762.7 842.2 930.0 873.0 922.5 940.9 983.8 1,011.8 1,017.4 23 305.9 345.9 380.4 358.7 378.0 382.6 402.3 425.5 421.3 24 Nondurable.................................................... 456.8 496.3 549.6 514.3 544.5 558.3 581.6 586.2 596.1 25 Services.............................................................. 776.7 866.4 969.3 934.1 956.2 981.7 1,005.3 1,041.4 1,064.5 26 Structures.......................................................... 162.7 190.9 228.2 204.2 225.6 237.0 246.0 238.9 247.4 27 Change in business inventories............................ 10.0 21.9 22.3 22.8 25.8 20.0 20.6 19.1 34.6 28 Durable goods................................................... 5.3 11.9 13.9 18.6 13.1 10.3 13.4 18.4 25.3 29 Nondurable goods............................................ 4.7 10.0 8.4 4.2 12.7 9.7 7.2 .7 9.3 30 Memo: Total GNP in 1972 dollars.................... 1,273.0 1,340.5 1,399.2 1,367.8 1,395.2 1,407.3 1,426.6 1,430.6 1,422.1 National Income 31 1,359.8 1,525.8 1,724.3 1,621.0 1,703.9 1,752.5 1,820.0 1,869.0 1,897.0 32 Compensation of employees................................ 1,037.8 1,156.9 1,304.5 1,244.0 1,288.2 1,321.1 1,364.8 1,411.2 1,439.4 33 Wages and salaries............................................ 890.0 984.0 1,103.5 1,052.0 1,090.0 1,117.4 1,154.7 1,189.4 1,211.3 34 Government and government enterprises .. 188.0 201.3 218.0 212.3 215.3 219.2 225.1 228.1 231.2 35 Other........................................................... 702.0 782.7 885.5 839.7 874.6 898.1 929.6 961.3 980.1 36 Supplement to wages and salaries................... 147.8 172.9 201.0 192.0 198.3 203.7 210.1 221.8 228.2 37 Employer contributions for social insurance................................................ 70.4 81.2 94.6 91.0 93.6 95.5 98.2 105.8 107.8 38 Other labor income....................................... 77.4 91.8 106.5 101.1 104.7 108.2 111.9 116.0 120.3 39 Proprietors’ income1............................................ 89.3 100.2 116.8 109.1 115.0 117.4 125.7 129.0 129.2 40 Business and professional1............................... 71.0 80.5 89.1 83.4 87.3 91.3 94.4 94.8 95.5 41 Farm1................................................................ 18.3 19.6 27.7 25.7 27.7 26.1 31.3 34.2 33.7 42 Rental income of persons2................................... 22.1 24.7 25.9 25.2 24.4 26.8 27.1 27.3 26.8 43 Corporate profits1................................................ 126.8 150.0 167.7 141.2 169.4 175.2 184.8 178.9 175.5 44 Profits before tax3............................................ 156.0 177.1 206.0 177.5 207.2 212.0 227.4 233.3 226.9 45 Inventory valuation adjustment....................... -14.6 -15.2 -25.2 -23.9 -25.1 -23.0 -28.8 -39.9 -36.6 46 Capital consumption adjustment..................... -14.5 - 12.0 -13.1 -12.4 - 12.6 -13.8 -13.8 -14.5 -14.7 47 Net interest............................................................ 83.8 94.0 109.5 101.5 106.8 111.9 117.6 122.6 126.0 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.50. 2. With capital consumption adjustments. Source. Survey of Current Business (U.S. Dept, of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

National Income Accounts A53 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1978 1979 1976 1977 1978 Ql Q2 Q3 Q4 Ql Q2r Personal Income and Saving 1 Total personal income. 1.381.6 1.531.6 1,717.4 1.634.8 1.689.3 1.742.5 1.803.1 1.852.6 1.892.8 2 Wage and salary disbursements.................... 890.0 984.0 1.103.3 1.052.0 1.090.0 1,116.8 1.154.3 1,189.3 1,212.1 3 Commodity-producing industries.............. 307.2 343.1 387.4 363.9 383.4 393.7 408.6 423.0 431.8 4 Manufacturing......................................... 237.4 266.0 298.3 285.6 294.1 300.8 312.7 324.8 328.5 5 Distributive industries................................. 216.3 239.1 269.4 257.6 265.9 272.5 281.6 291.1 295.6 6 Service industries........................................ 178.5 200.5 228.7 218.2 225.4 231.9 239.4 247.2 252.7 7 Government and government enterprises., 188.0 201.3 217.8 212.3 215.3 218.7 224.7 228.0 232.1 8 Other labor income........................................ 77.4 91.8 106.5 101.1 104.7 108.2 111.9 116.0 120.3 9 Proprietors’ income1............ 89.3 100.2 116.8 109.1 115.0 117.4 125.7 129.0 129.2 10 Business and professional1 71.0 80.5 89.1 83.4 87.3 91.3 94.4 94.8 95.5 11 Farm1................................ 18.3 19.6 27.7 25.7 27.7 26.1 31.3 34.2 33.7 12 Rental income of persons2. 22.1 24.7 25.9 25.2 24.4 26.8 27.1 27.3 26.8 13 Dividends............................ 37.5 42.1 47.2 45.1 46.0 47.8 49.7 51.5 52.3 14 Personal interest income... 127.0 141.7 163.3 152.2 159.4 167.2 174.3 181.0 188.1 15 Transfer payments......................................... 193.8 208.4 224.1 217.4 218.8 228.3 231.8 237.3 243.7 16 Old-age survivors, disability, and health insurance benefits............................... 92.9 105.0 116.3 111.4 112.4 119.8 121.5 123.8 127.1 17 Less: Personal contributions for social insurance........................................... 55.6 61.3 69.6 67.3 69.0 70.2 71.8 78.7 79.8 18 Equals: Personal income.................................... 1.381.6 1.531.6 1.717.4 1.634.8 1.689.3 1.742.5 1.803.1 1.852.6 1.892.8 19 Less: Personal tax and nontax payments.... 197.1 226.4 259.0 239.8 252.1 266.0 278.2 280.4 290.7 20 Equals: Disposable personal income................ 1,184.5 1.305.1 1.458.4 1.395.0 1.437.3 1.476.5 1,524.8 1,572.2 1,602.1 21 Less: Personal outlays..................................... 1,115.9 1.240.2 1.386.4 1,320.4 1.366.1 1.405.6 1.453.4 1,493.0 1,515.3 22 Equals: Personal saving..................................... 68.9 65.0 72.0 74.6 71.2 70.9 71.5 79.2 86.8 Memo: Per capita (1972 dollars) 23 Gross national product..................... 5,916 6,181 6,402 6,277 6,392 6,433 6,506 6,514 6,459 24 Personal consumption expenditures. 3,813 3,974 4,121 4,051 4,099 4,138 4,197 4,197 4,155 25 Disposable personal income.............. 4,144 4,285 4,449 4,390 4,426 4,462 4,522 4,536 4,513 26 Saving rate (percent)............................ 5.8 5.0 4.9 5.3 5.0 4.8 4.7 5.0 5.4 Gross Saving 27 Gross private saving................. 271.9 295.6 324.9 308.9 324.2 330.4 336.1 345.2 360.8 28 Personal saving.............................................. 68.6 65.0 72.0 74.6 71.2 70.9 71.5 79.2 86.8 29 Undistributed corporate profits1................. 25.5 35.2 36.0 25.3 38.7 40.0 40.1 36.1 35.0 30 Corporate inventory valuation adjustment., -14.6 -15.2 -25.2 -23.9 -25.1 -23.0 -28.8 -39.9 -36.6 Capital consumption allowances 31 Corporate...................................................... 111.6 121.3 132.9 128.9 131.7 134.3 136.8 139.9 145.1 32 Noncorporate................................................ 66.1 74.1 84.0 80.2 82.7 85.2 87.7 89.9 93.9 33 Wage accruals less disbursements................ 34 Government surplus, or deficit (—), national income and product accounts...................... -35.7 -19.5 -.3 -19.2 5.0 2.3 10.8 15.8 12.4 35 Federal............................................................... -53.6 -46.3 -27.7 -49.4 -24.6 -20.4 -16.3 -11.7 -7.5 36 State and local.................................................. 17.9 26.8 27.4 30.2 29.6 22.7 27.1 27.6 19.9 37 Capital grants received by the United States, net............................................................... 1.1 1.1 38 Investment......................... 242.3 283.6 327.9 292.7 331.5 336.5 351.0 362.8 373.9 39 Gross private domestic. 243.0 303.3 351.5 327.0 352.3 356.2 370.5 373.8 395.7 40 Net foreign.................... -.1 -19.6 -23.5 -34.2 -20.8 -19.6 -19.4 -11.0 -21.9 41 Statistical discrepancy. 6.1 7.5 3.3 3.0 2.3 3.9 4.1 -.5 1. With inventory valuation and capital consumption adjustments. Source. Survey of Current Business (U.S. Dept, of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics a September 1979 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.i 1978 1979 Item credits or debits 1976 1977 1978 Ql Q2 Q3 Q4 Ql 1 4,605 -14,092 -13,895 -6,935 -3,426 -3,227 -313 157 ? -5,805 -2,858 -5,955 722 1,475 3 Merchandise trade balance2............................................... -9,306 -30,873 -34,187 -11,899 -7,907 - 8,012 -6,369 -6,098 4 Merchandise exports........................................................ 114,745 120,816 141,884 30,811 35,267 36,491 39,315 41,350 5 Merchandise imports....................................................... -124,051 -151,689 -176,071 -42,710 -43,174 -44,503 -45,684 -47,448 6 Military transactions, net.................................................... 674 1,679 492 244 237 247 -239 -125 7 Investment income, net3..................................................... 15,975 17,989 21,645 5,239 4,854 4,952 6,599 6,776 8 Other service transactions, net........................................... 2,260 1,783 3,241 708 703 819 1,010 933 9 Memo: Balance on goods and services3-4......................... 9,603 -9,423 -8,809 -5,707 -2,113 -1,994 1,001 1,486 10 Remittances, pensions, and other transfers....................... -1,851 -1,895 -1,934 -463 -486 -463 -524 -525 11 U.S. government grants (excluding military).................... -3,146 -2,775 -3,152 -765 -827 -770 -790 -804 12 Change in U.S. government assets, other than official reserve assets, net (increase, —)..................................... -4,214 -3,693 -4,656 -1,009 -1,263 -1,390 -994 -1,096 13 Change in U.S. official reserve assets (increase, —)............. -2,558 -375 732 187 248 115 182 -3,589 14 0 -118 -65 0 0 0 -65 0 15 Special drawing rights (SDRs)........................................... -78 -121 1,249 -16 -104 -43 1,412 -1,142 16 Reserve position in International Monetary Fund........... - 2,212 -294 4,231 324 437 U95 3,275 -86 17 Foreign currencies............................................................... -268 158 -4,683 -121 -85 -37 -4,440 -2,361 18 Change in U.S. private assets abroad (increase, — )3.......... -44,498 -31,725 -57,033 -14,366 -4,451 -8,774 -29,442 -1,473 19 Bank-reported claims.......................................................... -21,368 -11,427 -33,023 -6,270 715 -5,488 -21,980 5,836 20 Nonbank-reported claims................................................... -2,296 -1,940 -3,853 -2,241 315 -29 -1,898 n.a. 21 Long-term......................................................................... -42 -99 -53 -63 78 61 -129 n.a. 22 Short-term........................................................................ -2,254 -1,841 -3,800 -2,178 237 -90 -1,769 n.a. 23 U.S. purchase of foreign securities, net............................. -8,885 -5,460 -3,487 -999 -1,095 -475 -918 -1,056 24 U.S. direct investments abroad, net3................................. -11,949 -12,898 -16,670 -4,856 -4,386 -2,782 -4,646 -6,253 25 Change in foreign official assets in the United States (increase, +)..................................................................... 17,573 36,656 33,758 15,618 -5,265 4,641 18,764 -8,490 26 U.S. Treasury securities...................................................... 9,319 30,230 23,542 12,904 -5,813 3,029 13,422 -8,871 27 Other U.S. government obligations.................................. 573 2,308 656 117 211 443 -115 -5 28 Other U.S. government liabilities5................................... 4,507 1,240 2,754 723 -136 122 2,045 19 29 Other U.S. liabilities reported by U.S. banks................... 969 773 5,411 1,456 -164 963 3,156 153 30 Other foreign official assets*.............................................. 2,205 2,105 1,395 418 637 84 256 215 31 Change in foreign private assets in the United States (increase, +)3.................................................................. 18,826 14,167 29,956 2,557 6,207 10,717 10,475 12,832 32 U.S. bank-reported liabilities............................................. 10,990 6,719 16,975 -404 1,865 7,958 7,556 8,124 33 U.S. nonbank-reported liabilities....................................... -578 473 1,640 498 315 1,004 -177 n.a. 34 Long-term......................................................................... - 1,000 -520 -194 28 -63 86 -245 n.a. 35 Short-term........................................................................ 422 993 1,834 470 378 918 68 n.a. 36 Foreign private purchases of U.S. Treasury securities, net................................................................................. 2,783 534 2,180 881 803 -1,053 1,549 2,586 37 Foreign purchases of other U.S. securities, net................ 1,284 2,713 2,867 453 1,347 528 540 790 38 Foreign direct investments in the United States, net3....... 4,347 3,728 6,294 1,130 1,877 2,280 1,008 1,332 39 Allocation of SDRs................................................................. 0 0 0 0 0 0 0 1,139 40 Discrepancy............................................................................. 10,265 -937 11,139 3,947 7,950 -2,082 1,328 519 41 Owing to seasonal adjustments.......................................... 901 517 -2,716 1,301 999 42 Statistical discrepancy in recorded data before seasonal adjustment........................................................................ 10,265 -937 11,139 3,046 7,433 634 27 -480 Memo: Changes in official assets 43 U.S. official reserve assets (increase, —)......................... -2,558 -375 732 187 248 115 182 -3,589 44 Foreign official assets in the United States (increase, +).. 13,066 35,416 31,004 14,895 -5,129 4,519 16,719 -8,508 45 Changes in Organization of Petroleum Exporting Countries official assets in the United States (part of line 25 above)................................................................................... 9,581 6,351 -727 1,969 -2,705 -1,794 1,803 -1,059 46 Transfers under military grant programs (excluded from lines 4, 6, and 11 above)..................................................... 373 204 259 76 50 69 63 33 1. Seasonal factors are no longer calculated for lines 13 through 46. makes various adjustments to merchandise trade and service transactions. 2. Data are on an international accounts (IA) basis. Differs from the 5. Primarily associated with military sales contracts and other transac­ census basis primarily because the IA basis includes imports into the tions arranged with or through foreign official agencies. U.S. Virgin Islands, and it excludes military exports, which are part of 6. Consists of investments in U.S. corporate stocks and in debt securi­ line 6. ties of private corporations and state and local governments. 3. Includes reinvested earnings of incorporated affiliates. 4. Differs from the definition of “net exports of goods and services” in Note. Data are from Bureau of Economic Analysis, Survey of Current the national income and product (GNP) account. The GNP definition Business (U.S. Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trade and Reserve Assets A55 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are seasonally adjusted. 1979 Item 1976 1977 1978 Jan. Feb. Mar. Apr. May June July 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments........................................ 115,156 121,150 143,574 13,132 13,507 14,452 13,883 13,862 15,037 15,669 2 GENERAL IMPORTS including merchandise for immediate con­ sumption plus entries into bonded warehouses...................................... 121,009 147,685 172,026 16,231 14,806 '15,274 16,036 16,342 16,937 16,777 3 Trade balance...................................... -5,853 -26,535 -28,452 -3,099 -1,299 -822 -2,153 -2,480 -1,900 -1,108 Note. Bureau of Census data reported on a free-alongside-ship and are reported separately in the “service account”). On the import (f.a.s.) value basis. Effective January 1978, major changes were made in side, the largest single adjustment is the addition of imports into the coverage, reporting, and compiling procedures. The international- Virgin Islands (largely oil for a refinery on St. Croix), which are not accounts-basis data adjust the Census basis data for reasons of coverage included in Census statistics. and timing. On the export side, the largest adjustments are: (a) the addition of exports to Canada not covered in Census statistics, and (b) the exclusion Source. FT 900 “Summary of U.S. Export and Import Merchandise of military exports (which are combined with other military transactions Trade” (U.S. Department of Commerce, Bureau of the Census). 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1979 Type 1976 1977 1978 Feb. Mar. Apr. May June July Aug.p 1 Total i.................................................. 18,747 19,312 18,650 20,292 21,658 21,403 22,230 21,246 20,023 20,023 2 Gold stock, including Exchange Stabilization Fund2........................ 11,598 11,719 11,671 11,544 11,479 11,418 11,354 11,323 11,290 11,259 3 Special drawing rights1 •3................... 2,395 2,629 1,558 2,672 2,667 2,602 2,624 2,670 2,690 2,689 4 Reserve position in International Monetary Fund1............................. 4,434 4,946 1,047 1,120 1,121 1,097 1,193 1,204 1,200 1,277 5 Foreign currencies4............................ 320 18 4,374 4,956 6,391 6,286 7,059 6,049 4,843 4,798 1. Beginning July 1974, the IMF adopted a technique for valuing the 3. Includes allocations by the International Monetary Fund of SDRs as SDR based on a weighted average of exchange rates for the currencies follows: $867 million on Jan. 1, 1970; $717 million on Jan. 1, 1971; $710 of 16 member countries. The U.S. SDR holdings and reserve position in million on Jan. 1, 1972; and $1,139 million on Jan. 1, 1979; plus net the IMF also are valued on this basis beginning July 1974. transactions in SDRs. 2. Gold held under earmark at Federal Reserve Banks for foreign and 4. Beginning November 1978, valued at current market exchange rates. international accounts is not included in the gold stock of the United States; see table 3.24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics □ September 1979 3.13 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data Millions of dollars, end of period 1979 Asset account 1975 1976 1977 19782 Jan. Feb. Mar. Apr. May June? All foreign countries 1 Total, all currencies............................ 176,493 219,420 258,897 r306,795 "296,453 "296,812 "307,517 "303,631 310,126 326,486 2 Claims on United States.................... 6,743 7,889 11,623 r17,340 r16,208 "16,072 "22,888 "19,957 23,801 29,204 3 Parent bank..................................... 3,665 4,323 7,806 '■12,811 "11,657 "11,195 "17,294 "14,231 17,192 22,572 4 Other................................................ 3,078 3,566 3,817 4,529 4,551 4,877 5,594 "5,726 6,609 6,632 5 Claims on foreigners........................... 163,391 204,486 238,848 278,135 "268,569 "268,501 "271,665 "270,786 274,019 284,165 6 Other branches of parent bank.... 34,508 45,955 55,772 r70,338 "66,934 "64,518 "65,256 "64,076 65,900 69,779 7 Banks............................................... 69,206 83,765 91,883 r103,111 "98,126 "99,587 "101,691 "101,622 103,074 106,884 8 Public borrowers1........................... 5,792 10,613 14,634 r23,737 "23,768 "24,586 24,895 "24,828 24,689 24,891 9 Nonbank foreigners....................... 53,886 64,153 76,560 80,949 "79,741 "79,810 "79,823 "80,260 80,356 82,611 10 Other assets......................................... 6,359 7,045 8,425 11,320 "11,676 "12,239 "12,964 "12,888 12,306 13,117 11 Total payable in U.S. dollars............. 132,901 167,695 193,764 "224,940 "215,543 "214,486 "224,346 "221,799 227,462 237,668 12 Claims on United States.................... 6,408 7,595 11,049 r16,382 "15,374 "15,137 "22,023 "18,987 22,853 28,134 13 Parent bank..................................... 3,628 4,264 7,692 r12,625 "11,464 "10,965 "17,102 "13,992 17,010 22,318 14 Other................................................ 2,780 3,332 3,357 3,757 3,910 "4,172 "4,921 "4,995 5,843 5,816 15 Claims on foreigners........................... 123,496 156,896 178,896 203,498 "194,767 "193,635 "196,396 "196,306 198,433 203,193 16 Other branches of parent bank.... 28,478 37,909 44,256 r55,408 "52,020 "49,864 "50,077 49,615 50,738 53,314 55,319 66,331 70,786 r78,686 "73,864 "74,785 "77,144 "77,436 78,897 80,702 18 Public borrowers1........................... 4,864 9,022 12,632 19,567 19,818 20,338 21,091 "20,851 20,814 20,549 34,835 43,634 51,222 49,837 "49,065 48,648 48,084 "48,404 47,984 48,628 20 Other assets......................................... 2,997 3,204 3,820 5,060 "5,402 "5,714 "5,927 "6,506 6,176 6,341 United Kingdom 21 Total, all currencies............................. 74,883 81,466 90,933 106,593 100,786 101,179 102,144 102,876 104,915 112,881 22 Claims on United States.................... 2,392 3,354 4,341 5,370 3,960 3,912 5,019 5,268 6.303 7,517 23 Parent bank..................................... 1,449 2,376 3,518 4,448 2,930 2,689 3,544 3,679 4;410 5,495 24 Other................................................ 943 978 823 922 1,030 1,223 1,475 1,589 1,893 2,022 25 Claims on foreigners........................... 70,331 75,859 84,016 98,137 93,690 94,032 93,840 94,120 95.266 101,668 26 Other branches of parent bank.... 17,557 19,753 22,017 27,830 25,911 24,474 24,911 24,435 25,248 29,158 27 Banks............................................... 35,904 38,089 39,899 45,013 42,531 44,032 42,964 43,308 43,657 44,800 28 881 1,274 2,206 4,522 4,549 4,548 4,608 4,547 4,579 4,872 29 Nonbank foreigners....................... 15,990 16,743 19,895 20,772 20,699 20,978 21,357 21,830 21,782 22,838 30 Other assets......................................... 2,159 2,253 2,576 3,086 3,136 3,235 3,285 3,488 3,346 3,696 57,361 61,587 66,635 75,860 70,502 70,525 71,499 72,015 73,480 78,155 32 Claims on United States..................... 2,273 3,275 4,100 5,113 3,738 3,618 4,710 4,946 5,981 7,058 33 Parent bank..................................... 1,445 2,374 3,431 4,386 2,878 2,610 3,488 3,612 4,374 5,386 34 Other................................................ 828 902 669 727 860 1,008 1,222 1.334 1,607 1,672 35 Claims on foreigners........................... 54,121 57,488 61,408 69,416 65,364 65,416 65,214 65,356 65,968 69,426 36 Other branches of parent bank.... 15,645 17,249 18,947 22,838 21,171 19,884 20,370 19,866 20,505 23,999 37 Banks............................................... 28,224 28,983 28,530 31,482 29,113 30,185 29,393 29,924 30,211 29,803 38 Public borrowers1........................... 648 846 1,669 3,317 3,342 3,414 3,523 3,429 3,331 3,396 39 Nonbank foreigners........................ 9,604 10,410 12,263 11,779 11,738 11,933 11,928 12,137 11,921 12,228 40 Other assets........................................ 967 824 1,126 1,331 1,400 1,491 1,575 1,713 1,531 1,671 Bahamas and Caymans 45,203 66,774 79,052 "91,735 "88,767 "88,999 "97,509 "93,832 97,317 103,322 42 Claims on United States.................... 3,229 3,508 5,782 "9,635 "10,621 "10,000 "15,774 "12,859 15,635 19,913 43 1,477 1,141 3,051 "6,429 "7,514 "6,786 "12,158 "9,332 11,519 15,896 44 Other........................................... 1,752 2,367 2,731 3,206 3,107 3,214 3,616 "3,527 4,116 4,017 45 Claims on foreigners.......................... 41,040 62,048 71,671 79,774 75,792 76,507 79,057 "77,992 78,859 80,597 46 Other branches of parent bank.... 5,411 8,144 11,120 "12,904 "11,475 11,841 12,086 11,756 11,886 11,725 47 Banks............................................... 16,298 25,354 27,939 "33,677 "31,640 31,534 33,821 33,524 34,056 36,025 48 Public borrowers1........................... 3,576 7,105 9,109 11,514 11,392 12,125 12,573 12,360 12,702 12,502 49 Nonbank foreigners....................... 15,756 21,445 23,503 21,679 21,285 21,007 20,577 "20,352 20,215 20,345 50 Other assets......................................... 933 1,217 1,599 2,326 2,354 2,492 2,678 2,981 2,823 2,812 51 Total payable in U.S. dollars............. 41,887 62,705 73,987 "85,417 "82,423 "82,616 "91,184 "87,875 91,089 96,963 For notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Overseas Branches A57 3.13 Continued IS>79 Liability account 1975 1976 1977 19782 Jan. Feb. Mar. Apr. May June® All foreign countries 52 Total, all currencies............................ 176,493 219,420 258,897 '306,795 '296,453 '296,812 '307,517 '303,631 310,126 326,486 53 To United States................................ 20,221 32,719 44,154 '57,948 '53,349 '54,731 '56,447 '56,039 56,975 61,030 54 Parent bank..................................... 12,165 19,773 24,542 '28,564 '25,445 '24,529 '21,484 '23,992 22,771 19,536 55 Other banks in United States........ 12,338 8,200 9,196 12,544 '9,884 9,900 14,919 56 Nonbanks........................................ 17,046 '19,704 21,006 '22,419 '22,163 24,304 26,575 57 Foreigners........................................... 149,815 179,954 206,579 238,912 '233,108 '232,121 '240,804 '237,217 241,976 253,581 58 Other branches of parent bank.... 34,111 44,370 53,244 67,496 '64,993 '62,400 '62,422 '61,973 63,698 66,622 59 Banks............................................... 72,259 83,880 94,140 97,711 '93,006 '94,305 '102,338 '100,140 101,698 108,832 60 Official institutions......................... 22,773 25,829 28,110 31,936 31,137 32,028 '34,275 '33,006 34,107 34,567 61 Nonbank foreigners....................... 20,672 25,877 31,085 41,769 '43,972 '43,388 '41,769 '42,098 42,473 43,560 62 Other liabilities................................... 6,456 6,747 8,163 9,935 '9,996 '9,960 '10,266 '10,375 11,175 11,875 63 Total payable in U.S. dollars............. 135,907 173,071 198,572 '230,810 '221,270 '220,948 '229,600 '226,362 231,387 242,795 64 To United States................................ 19,503 31,932 42,881 '55,811 '51,313 '52,577 '54,357 '54,070 54,843 58,490 65 Parent bank..................................... 11,939 19,559 24,213 '27,493 '24,462 '23,523 '20,452 '23,048 21,834 18,514 66 Other banks in United States........ 12,084 7,939 8,855 12,299 9,681 9,667 14,621 67 Nonbanks........................................ 16,234 '18,912 20,199 21,606 '21,341 23,342 25,355 68 To foreigners...................................... 112,879 137.612 151,363 169,927 '164,573 '162,928 '169,561 '166,825 170,383 177,960 69 Other branches of parent bank.... 28,217 37,098 43,268 53,396 '50,969 '48,411 '48,134 '48,371 49,420 50,968 70 Banks............................................... 51,583 60,619 64,872 63,000 '58,529 '59,226 '65,597 '63,977 65,181 70,523 71 Official institutions......................... 19,982 22,878 23,972 26,404 25,567 26,413 '28,524 27,108 28,310 28,307 72 Nonbank foreigners....................... 13,097 17,017 19,251 27,127 '29,508 '28,878 '27,306 '27,369 27,472 28,162 73 Other liabilities................................... 3,526 3,527 4,328 5,072 '5,384 '5,443 '5,682 '5,467 6,161 6,345 United Kingdom 74 Total, all currencies........................... 74,883 81,466 90,933 106,593 100,786 101,179 102,144 102,876 104,915 112,881 75 To United States............................... 5,646 5,997 7,753 9,730 8,118 9,214 10,086 10,781 11,697 12,779 76 Parent bank................................... 2,122 1,198 1,451 1,887 1,585 1,731 1,461 1,814 2,113 1,505 7 7 8 7 N O o th n e b r a b n a k n s k .. s . .. i . n .. . U ... n ... i . t . e .. d .. . S ... t . a .. t . e .. s .. . . . .. . .. . )> J5,JZJ 4A , */77000 0, JUZ 4 3 , , 2 61 3 1 2 2 3 , , 6 8 9 4 3 0 4 3 , , 2 2 6 1 7 6 4 3 , , 9 6 4 7 8 7 3 5 , , 5 4 4 2 1 6 6 3 , , 2 3 0 8 4 0 4 6 , , 2 9 8 94 0 79 To foreigners..................................... 67,240 73,228 80,736 93,202 88,942 88,122 88,068 88,174 88,796 95,385 80 Other branches of parent bank... 6,494 7,092 9,376 12,786 12,712 11,303 i0,910 11,023 10,931 11,353 81 Banks............................................. 32,964 36,259 37,893 39,917 36,142 36,655 38,318 39,391 38,417 42,297 82 Official institutions....................... 16,553 17,273 18,318 20,963 19,700 20,637 21,845 20,115 21,312 23,140 83 Nonbank foreigners..................... 11,229 12,605 15,149 19,536 20,388 19,527 16,995 17,645 18,136 18,595 84 Other liabilities................................. 1,997 2,241 2,445 3,661 3,726 3,843 3,990 3,921 4,422 4,717 57,820 63,174 67,573 77,030 72,048 72,293 72,639 72,653 74,127 79,256 86 To United States............................... 5,415 5,849 7.480 9,328 7,736 8,855 9,756 10,439 11,200 12,199 87 Parent bank................................... 2,083 1,182 1,416 1,836 1,539 1,694 1,418 1,780 2,047 1,460 8 8 8 9 N Ot o h n e b r a b n a k n s k .. s . .. i . n .. . U ... n ... i . t . e .. d .. . S ... t . a .. t . e .. s .. . . . .. . .. . ) -j in 4,667 6,064 4 3 , , 1 3 4 48 4 2 3 , , 6 5 0 9 1 6 4 3 , , 0 1 3 2 9 2 4 3 , , 7 6 1 2 2 6 5 3, ,1 4 6 92 7 5 3 , , 8 32 3 1 2 4 6 , , 2 5 0 3 9 0 90 To foreigners..................................... 51,447 56,372 58,977 66,216 62,629 61,729 61,215 60,689 60,948 65,081 91 Other branches of parent bank... 5,442 5,874 7,505 9,635 9,890 8,393 7,985 7,706 7,777 7,711 92 Banks............................................. 23,330 25,527 25,608 25,287 21,642 21,911 23,017 24,002 22,684 25,436 93 Official institutions....................... 14,498 15,423 15,482 17,091 15,834 16,868 18,030 16,197 17,486 19,093 94 Nonbank foreigners...................... 8,176 9,547 10,382 14,203 15,263 14,557 12,183 12,784 13,001 12,841 95 Other liabilities................................. 959 953 1,116 1,486 1,683 1,709 1,668 1,525 1,979 1,976 Bahamas and Caymans 96 Total, all currencies........................... 45,203 66,774 79,052 '91,735 '88,767 '88,999 '97,509 '93,832 97,317 103,322 97 To United States............................... 11,147 22,721 32,176 '39,431 '37,795 '37,552 '38,672 '37,698 38,071 40,038 98 Parent bank................................... 7,628 16,161 20,956 '20,456 '18,336 '16,732 '14,877 '16,627 15,388 12,460 1 9 0 9 0 N O o th n e b r a b n a k n s k .. s .. . i . n .. .. U ... n .. i . t . e .. d .. .. S .. t . a .. t .. e .. s .. . . . . . .. . > D,jZU OjjOU 11, ZZKJ '12 6 , , 7 1 7 99 6 '15 4 , , 1 2 8 75 4 1 4 5 , , 8 9 6 5 3 7 '16 7 , , 7 04 5 1 4 1 5 5 , , 2 85 2 1 0 1 5 7 , , 4 28 0 3 0 1 8 8 , , 8 6 8 9 5 3 101 To foreigners..................................... 32,949 42,899 45,292 50,447 49,153 49,534 '56,742 54,124 57,097 61,147 102 Other branches of parent bank... 10,569 13,801 12,816 16,094 14,266 13,697 '13,923 14,716 15,997 17,104 103 Banks............................................. 16,825 21,760 24,717 23,104 22,290 23,299 '28,749 25,964 28,543 31,420 104 Official institutions....................... 3,308 3,573 3,000 4,208 4,602 4,429 '5,181 5,328 4,970 4,264 105 Nonbank foreigners..................... 2,248 3,765 4,759 7,041 7,995 8,109 '8,889 8,116 7,587 8,359 106 Other liabilities................................. 1,106 1,154 1,584 1,857 1,819 1,913 2,095 2,010 2,149 2,137 107 Total payable in U.S. dollars........... 42,197 63,417 74,463 '87,014 '84,020 '84,337 '92,673 '88,942 92,057 97,936 1. In May 1978 a broader category of claims on foreign public bor- 2. In May 1978 the exemption level for branches required to report rowers, including corporations that are majority owned by foreign govern- was increased, which reduced the number of reporting branches, ments, replaced the previous, more narrowly defined claims on foreign official institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics □ September 1979 3.14 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1979 Item 1976 1977 1978 Jan. Feb. Mar. Apr. May June? July23 By type 1 Total1..................................................................... 95,634 131,097 162,345 162,606 159,869 153,650 147,494 140,725 143,987 147,706 2 Liabilities reported by banks in the United States2............................................................. 17,231 18,003 23,097 22,519 23,034 22,534 24,252 25,384 25,363 25,480 3 U.S. Treasury bills and certificates 3..................... 37,725 47,820 67,651 68,415 65,714 59,652 51,460 43,747 46,304 49,455 U.S. Treasury bonds and notes 4 Marketable......................................................... 11,788 32,164 35,907 36,056 35,538 36,063 36.305 36,156 36,454 37,487 5 N onmarketable 4................................................ 20,648 20,443 20,970 20,952 20,912 20,471 20,467 20,467 20,697 19,847 6 U.S. securities other than U.S. Treasury securities5........................................................ 8,242 12,667 14,720 14,664 14,671 14,930 15,010 14,971 15,169 15,437 Byarea 7 Total....................................................................... 95,634 131,097 162,345 162,606 159,869 153,650 147,494 140,725 143,987 147,706 8 Western Europe1.................................................... 45,882 70,748 92,984 94,456 92,867 90,191 85,040 80,995 83,478 86,513 9 Canada................................................................... 3,406 2,334 2,486 2,150 1,908 3,088 3,044 1,993 2,014 2,166 10 Latin America and Caribbean.............................. 4,926 4,649 5,026 4,331 4,402 4,201 4,773 4,802 4,592 5,317 11 Asia......................................................................... 37,767 50,693 58,662 58,845 57,532 53,363 51,275 49,518 50,573 50,404 12 Africa...................................................................... 1,893 1,742 2,443 2,299 2,371 2,135 2,529 2,604 2,614 2,618 13 Other countries6.................................................... 1,760 931 744 525 789 672 833 813 716 688 1. Includes the Bank for International Settlements. 5. Debt securities of U.S. government corporations and federally 2. Principally demand deposits, time deposits, bankers acceptances, sponsored agencies, and U.S. corporate stocks and bonds. commercial paper, negotiable time certificates of deposit, and borrowings 6. Includes countries in Oceania and Eastern Europe. under repurchase agreements. 3. Includes nonmarketable certificates of indebtedness (including those Note. Based on Treasury Department data and on data reported to payable in foreign currencies through 1974) and Treasury bills issued to the Treasury Department by banks (including Federal Reserve Banks) official institutions of foreign countries. and securities dealers in the United States. 4. Excludes notes issued to foreign official nonreserve agencies. Includes bonds and notes payable in foreign currencies. 3.15 LIABILITIES TO AND CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in Foreign Currencies Millions of dollars, end of period 1978 1979 1976 1977 1978 Sept. Dec. Mar.r June** 1 Banks’ own liabilities............................. 781 925 2,235 1,772 2,235 1,933 1,986 2 Banks’ own claims1............................... 1,834 2,356 3,547 2,957 3,547 2,620 2,530 3 Deposits.............................................. 1,103 941 1,672 1,375 1,672 1,139 1,345 4 Other claims....................................... 731 1,415 1,875 1,582 1,875 1,481 1,185 5 Claims of banks’ domestic customers2. 367 446 367 476 521 1. Includes claims of banks’ domestic customers through March 1978. Note. Data on claims exclude foreign currencies held by U.S. mone­ 2. Assets owned by customers of the reporting bank located in the tary authorities. United States that represent claims on foreigners held by reporting banks for the accounts of their domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-reported Data A59 3.16 LIABILITIES TO FOREIGNERS Reported by Banks in the United States Payable in U.S. dollars Millions of dollars, end of period 1979 Holder and type of liability 1977 1978 Jan. Feb. Mar. Apr. May June? July? 1 All foreigners................ 110,657 126,168 167,005 164,575 163,738 166,307 159,252 158,320 167,220 168,432 2 Banks’ own liabilities.. 78,959 75,307 77,178 85,242 85,727 92,910 99,219 96,791 3 Demand deposits.... 16,803 18,996 19,201 17,765 17,201 16,696 18,367 18,091 19,366 19,014 4 Time deposits1......... 11,347 11,521 12,473 12,336 12,145 12,389 12,520 12,738 12,705 12,492 5 Other2....................... 9,615 8,927 9,247 8,321 10,000 13,290 12,469 12,784 6 Own foreign offices3. 37,669 36,278 38,585 47,836 44,840 48,791 54,752 52,501 7 Banks’ custody liabilities4..................................... 88,046 89,268 86,560 81,065 73,525 65,410 67,928 71,641 8 U.S. Treasury bills and certificates5................. 40,744 48,906 68,182 69,000 66,508 60,587 53,280 45,123 47,425 51,498 9 Other negotiable and readily transferable instruments6................................................... 17,371 17,849 17,889 18,309 18,096 18,083 18,130 17,896 10 Other................................................................... 2,493 2,418 2,162 2,169 2,150 2,203 2,373 2,247 11 Nonmonetary international and regional organizations7....................................... 5,714 3,274 2,617 2,317 2,095 2,364 2,300 2,757 2,851 3,438 12 Banks’ own liabilities. 916 762 506 769 791 1,306 1,500 845 13 Demand deposits... 290 231 330 333 272 276 270 298 264 216 14 Time deposits1....... 205 139 94 88 102 99 100 85 87 79 15 Other2..................... 492 340 131 394 422 923 1,150 549 16 Banks’ custody liabilities4..................................... 1,701 1,555 1,589 1,595 1,509 1,451 1,350 2,593 17 U.S. Treasury bills and certificates.................. 2,701 706 201 183 193 211 212 175 199 1,345 18 Other negotiable and readily transferable instruments6.................................................. 1,499 1,367 1,395 1,382 1,294 1,274 1,151 1,247 19 Other................................................................... 1 5 1 2 2 1 1 1 20 Official institutions8. 54,956 65,822 90,492 90,749 88,591 82,186 75,713 69,131 71,667 74,396 21 Banks’ own liabilities. 11,960 10,725 11,275 10,425 12,411 13,647 13,320 14,090 22 Demand deposits... 3,394 3,528 3,390 2,699 2,759 2,864 3,583 3,170 3,198 2,850 23 Time deposits1....... 2,321 1,797 2,546 2,504 2,365 2,524 2,491 2,572 2,486 2,475 24 Other2..................... 6,024 5,522 6,151 5,036 6,337 7,905 7,636 8,765 25 Banks’ custody liabilities4................................. 78,532 80,024 77,317 71,762 63,301 55,484 58,347 60,846 26 U.S. Treasury bills and certificates5............. 37,725 47,820 67,395 68,230 65,558 59,652 51,460 43,747 46,304 49,455 27 Other negotiable and readily transferable instruments6................................................ 10,967 11,603 11,703 12,067 11,802 11,667 12,003 11,340 28 Other............................................................... 170 191 55 43 40 70 40 50 29 Banks9. 37,174 42,335 57,873 55,542 56,637 65,915 64,192 69,679 75,738 73,035 30 Banks' own liabilities............ 53,088 50,808 51,929 61,005 59,225 64,511 70,709 68,049 31 Unaffiliated foreign banks. 15,419 14,530 13,344 13,169 14,385 15,720 15,957 15,548 32 Demand deposits............. 9,104 10,933 11,239 10,405 9,426 9,349 10,202 10,265 11,176 11,287 33 Time deposits1................. 2,297 2,040 1,479 1,479 1,322 1,262 1,306 1,315 1,397 1,241 34 Other2............................... 2,700 2,646 2,596 2,558 2,877 4,140 3,384 3,020 35 Own foreign offices3. 37,669 36,278 38,585 47,836 44,840 48,791 54,752 52,501 36 Banks’ custody liabilities4..................................... 4,785 4,733 4,708 4,910 4,967 5,168 5,029 4,986 37 U.S. Treasury bills and certificates.................. 119 141 300 302 399 425 456 508 407 347 38 Other negotiable and readily transferable instruments6.................................................... 2,425 2,404 2,336 2,421 2,489 2,593 2,480 2,559 39 Other................................................................... 2,060 2,027 1,973 2,064 2,022 2,066 2,143 2,081 40 Other foreigners......... 12,814 14,736 16,023 15,967 16,415 15,842 17,047 16,753 16,964 17,023 41 Banks’ own liabilities. 12,995 13,012 13,469 13,044 13,299 13,446 13,762 13,808 42 Demand deposits... 4,015 4,304 4,242 4,328 4,744 4,207 4,312 4,358 4,728 4,661 43 Time deposits1....... 6,524 7,546 8,353 8,264 8,357 8,504 8,623 8,766 8,735 8,697 44 Other2..................... 399 420 368 333 364 322 299 449 45 Banks’custody liabilities4................................. 3,028 2,956 2,946 2,798 3,748 3,307 3,202 3,215 46 U.S. Treasury bills and certificates............... 198 240 285 285 358 299 1,152 693 516 350 47 Other negotiable and readily transferable instruments 6............................................... 2,481 2,476 2,455 2,439 2,511 2,549 2,497 2,750 48 Other............................................................... 262 195 133 60 85 66 190 115 49 Memo: Negotiable time certificates of deposit held in custody for foreigners........................... 11,007 11,132 10,992 11,254 11,118 10,809 10,634 10,584 1. Excludes negotiable time certificates of deposit, which are included payable in foreign currencies through 1974) and Treasury bills issued to in “Other negotiable and readily transferable instruments.” official institutions of foreign countries. 2. Includes borrowing under repurchase agreements. 6. Principally bankers acceptances, commercial paper, and negotiable 3. U.S. banks: includes amounts due to own foreign branches and time certificates of deposit. foreign subsidiaries consolidated in “Consolidated Report of Condition” 7. Principally the International Bank for Reconstruction and Develop­ filed with bank regulatory agencies. Agencies, branches, and majority- ment, and the Inter-American and Asian Development Banks. owned subsidiaries of foreign banks: principally amounts due to head 8. Foreign central banks and foreign central governments and the office or parent foreign bank, and foreign branches, agencies or wholly Bank for International Settlements. owned subsidiaries of head office or parent foreign bank. 9. Excludes central banks, which are included in “Official institutions.” 4. Financial claims on residents of the United States, other than long­ term securities, held by or through reporting banks. Note. Data for time deposits prior to April 1978 represent short-term 5. Includes nonmarketable certificates of indebtedness (including those only. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics □ September 1979 3.16 LIABILITIES TO FOREIGNERS Continued 1979 Area and country 1976 1977 1978 Jan. Feb. Mar. Apr. May June? July? 1 110,657 126,168 167,005 164,575 163,738 166,307 159,252 158,320 167,220 168,432 2 Foreign countries.................................................... 104,943 122,893 164,388 162,258 161,644 163,943 156,952 155,563 164,369 164,994 3 Europe.................................................................... 47,076 60,295 85,502 84,672 82,050 81,899 77,241 75,187 79,432 81,210 4 Austria................................................................ 346 318 513 562 505 524 484 475 449 473 5 Belgium-Luxembourg........................................ 2,187 2,531 2,552 2,746 2,192 2,443 2,359 2,282 2,413 2,475 6 Denmark............................................................ 356 770 1,946 2,036 2,074 2,131 1,596 1,526 1,165 1,563 7 Finland................................................................ 416 323 346 379 357 361 367 399 456 466 8 France................................................................. 4,876 5,269 9,208 8,609 8,207 8,891 9,291 9,755 9,594 9,614 9 Germany............................................................. 6,241 7,239 17,286 15,770 13,868 12,997 9,364 7,619 8,492 10,715 10 Greece................................................................. 403 603 826 683 761 671 656 673 684 760 11 3,182 6,857 7,674 8,723 8,056 8,142 8,939 9,751 9,656 8,432 12 Netherlands........................................................ 3,003 2,869 2,402 2,536 2,786 2,766 2,816 2,889 2,629 2,355 13 Norway............................................................... 782 944 1,271 1,411 1,445 1,572 1,477 1,456 1,349 1,264 14 Portugal.............................................................. 239 273 330 254 246 279 231 244 353 303 15 Spain................................................................... 559 619 870 759 868 763 950 897 1,210 1,107 16 Sweden................................................................ 1,692 2,712 3,121 2,955 2,656 2,520 2,596 2,524 2,437 2,227 17 Switzerland......................................................... 9,460 12,343 18,612 20,014 19,810 18,563 15,587 13,730 15,934 16,767 18 Turkey................................................................ 166 130 157 141 141 132 110 127 156 193 19 United Kingdom................................................ 10,018 14,125 14,379 13,292 13,861 15,370 16,005 16,679 18,006 18,522 20 Yugoslavia.... ................................................... 189 232 254 174 184 176 207 184 151 160 21 Other Western Europe i..................................... 2,673 1,804 3,346 3,328 3,800 3,284 3,863 3,664 3,959 3,509 22 U.S.S.R............................................................... 51 98 82 150 62 59 84 58 62 61 23 Other Eastern Europe2...................................... 236 236 325 150 171 258 258 254 277 245 24 Canada................................................................... 4,659 4,607 6,966 6,622 6,813 8,044 8,819 7,980 6,606 7,611 25 Latin America and Caribbean............................. 19,132 23,670 31,622 30,956 32,671 38,067 36,081 39,907 44,400 41,206 26 Argentina............................................................ 1,534 1,416 1,484 1,682 1,789 1,534 1,483 1,886 1,891 1,692 27 Bahamas.............................................................. 2,770 3,596 6,743 7,429 7,695 13,078 10,014 11,164 15,803 13,020 28 Bermuda.............................................................. 218 321 428 386 464 375 351 345 402 339 29 Brazil................................................................... 1,438 1,396 1,125 1,099 1,150 1,137 1,251 1,581 1,335 1,294 30 British West Indies............................................ 1,877 3,998 5,991 5,717 6,845 6,971 6,916 9,313 8,938 7,785 31 Chile................................................................... 337 360 399 376 358 343 447 368 404 606 32 Colombia............................................................ 1,021 1,221 1,756 1,769 1,867 1,925 2,074 2,192 2,402 2,292 33 Cuba................................................................... 6 6 13 7 13 6 7 9 7 7 34 Ecuador.............................................................. 320 330 322 321 274 330 335 318 391 443 35 Guatemala3........................................................ 416 387 386 339 360 318 319 319 36 Jamaica3............................................................. 52 72 43 75 80 78 54 104 37 Mexico................................................................ 2,870 2,876 3,417 3,178 3,158 3,178 3,234 3,215 3,476 3,628 38 Netherlands Antilles4........................................ 158 196 308 321 361 318 335 396 414 422 39 Panama............................................................... 1,167 2,331 2,992 2,823 2,491 2,938 3,368 2,909 3,125 3,055 40 Peru..................................................................... 257 287 363 320 347 403 360 321 380 425 41 Uruguay.............................................................. 245 243 231 222 220 236 230 223 248 219 42 Venezuela............................................................ 3,118 2,929 3,821 3,339 3,709 3,211 3,426 3,672 2,982 3,920 43 Other Latin America and Caribbean............... 1,797 2,167 1,760 1,509 1,501 1,669 1,809 1,601 1,828 1,636 44 Asia......................................................................... 29,766 30,488 36,336 36,449 36,169 32,211 30,674 28,227 29,520 30,622 China 45 Mainland........................................................ 48 53 67 65 105 280 45 41 46 42 46 Taiwan............................................................ 990 1,013 502 552 534 600 667 605 740 769 47 Hong Kong........................................................ 894 1,094 1,256 1,400 1,390 1,254 1,459 1,496 1,555 1,452 48 India................................................................... 638 961 790 804 838 857 929 1,016 940 873 49 Indonesia............................................................ 340 410 449 575 357 479 567 394 410 509 50 Israel................................................................... 392 559 674 642 598 608 673 650 710 624 51 Japan................................................................... 14,363 14,616 21,927 21,428 21,769 18,110 14,896 12,262 12,581 13,099 52 Korea.................................................................. 438 602 795 771 827 748 728 995 806 819 53 Philippines.......................................................... 628 687 644 617 549 642 562 609 689 640 54 Thailand.............................................................. 277 264 427 379 307 277 343 302 409 305 55 Middle East oil-exporting countries5............... 9,360 8,979 7,392 7,934 7,595 7,107 8,435 8,444 9,003 9,667 56 Other Asia.......................................................... 1,398 1,250 1,414 1,285 1,300 1,249 1,371 1,412 1,634 1,824 57 Africa..................................................................... 2,298 2,535 2,886 2,693 2,804 2,650 2,986 3.056 3,236 3,183 58 Egypt................................................................... 333 404 404 337 278 329 359 297 305 378 59 Morocco............................................................. 87 66 32 29 32 43 34 36 45 35 60 South Africa....................................................... 141 174 168 179 207 242 246 206 316 196 61 Zaire................................................................... 36 39 43 48 42 50 55 47 56 37 62 Oil-exporting countries6.................................... 1,116 1,155 1,525 1,379 1,549 1,256 1,554 1,523 1,566 1,656 63 Other Africa....................................................... 585 698 715 721 697 729 738 946 948 881 64 Other countries...................................................... 2,012 1,297 1,076 865 1,136 1,072 1,149 1,206 1,175 1,162 65 Australia............................................................. 1,905 1,140 838 655 934 862 957 991 890 806 66 All other......................................................... 107 158 239 209 202 211 192 215 286 355 67 Nonmonetary international and regional organizations.................................................. 5,714 3,274 2,617 2,317 2,095 2,364 2,300 2,757 2,851 3,438 68 International...................................................... 5,157 2,752 1,485 1,210 919 1,189 1,128 1,535 1,738 2,257 69 Latin American regional.................................. 267 278 808 809 865 872 872 892 829 917 70 Other regional7.................................................. 290 245 324 299 311 303 300 330 284 263 1. Includes the Bank for International Settlements. Beginning April 5. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, 1978, also includes Eastern European countries not listed in line 23. and United Arab Emirates (Trucial States). 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, German 6. Comprises Algeria, Gabon, Libya, and Nigeria. Democratic Republic, Hungary, Poland, and Romania. 7. Asian, African, Middle Eastern, and European regional organizations, 3. Included in “Other Latin America and Caribbean” through March except the Bank for International Settlements, which is included in 1978. “Other Western Europe.” 4. Includes Surinam through December 1975. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A61 3.17 BANKS’ OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1979 Area and country 1976 1977 1978 Jan. Feb. Mar. Apr. May JuneP July p 1 79,301 90,206 115,030 105,583 103,933 108,736 105,266 105,503 114,027 112,800 2 Foreign countries.................................................... 79,261 90,163 114,974 105,543 103,894 108,690 105,220 105,457 113,982 112,751 3 Europe.................................................................... 14,776 18,114 24,231 20,790 20,474 21,299 20,890 20,285 24,283 24,105 4 Austria................................................................ 63 65 140 147 115 177 130 150 151 188 5 Belgium-Luxembourg......................................... 482 561 1,200 1,504 1,378 1,804 1,377 1,330 1,677 1,657 6 133 173 254 172 170 166 204 168 153 137 7 199 172 305 281 264 297 250 184 186 226 8 France................................................................. 1,549 2,082 3,742 2,664 2,286 2,921 2,907 2,701 3,507 3,205 9 509 644 900 840 717 907 806 792 843 927 10 279 206 164 162 169 192 170 155 168 129 11 993 1,334 1.504 1,402 1,395 1,311 1,420 1,440 1,334 1,196 12 Netherlands........................................................ 315 338 680 681 619 581 532 531 517 797 13 136 162 299 251 252 206 242 196 200 181 14 88 175 171 169 173 209 208 190 172 235 15 Spain.................................................................... 745 722 1,110 905 1,103 909 806 926 995 999 16 Sweden................................................................ 206 218 537 449 388 312 300 231 247 401 17 379 564 1,283 1,051 970 1,068 878 959 1,071 1,027 18 Turkey................................................................. 249 360 283 179 132 144 148 119 136 118 19 7,033 8,964 10,156 8,444 8,886 8,575 8,684 8,546 11,197 10,688 20 234 311 363 400 409 448 475 492 535 541 21 Other Western Europe1..................................... 85 86 122 135 110 124 424 171 188 199 22 485 413 366 327 309 319 298 291 301 291 23 Other Eastern Europe2...................................... 613 566 652 629 628 628 633 713 708 965 24 Canada.................................................................... 3,319 3,355 5,145 4,961 5,049 5,181 4,775 4,718 4,880 5,085 25 Latin America and Caribbean.............................. 38,879 45,850 56,850 52,514 50,379 54,149 52,055 52,584 56,210 53,389 26 Argentina............................................................ 1,192 1,478 2,274 2,137 2,359 2,753 3,098 3,406 3,211 3,338 27 15,464 19,858 21,116 21,006 18,640 19,899 18,715 18,825 18,042 15,971 28 150 232 189 175 155 150 135 198 126 192 29 4,901 4,629 6,251 6,261 6,254 6,291 6,198 6,274 6,097 6,164 30 British West Indies............................................ 5,082 6,481 9,505 5,368 5,122 7,435 5,524 4,895 9,182 6,510 31 Chile.................................................................... 597 675 968 1,012 939 964 970 1,058 1,091 1,120 32 Colombia............................................................ 675 671 1,012 1,054 1,019 1,004 945 1,017 1,102 1,206 33 Cuba.................................................................... 13 10 * * * 4 4 4 4 4 34 375 517 705 700 768 839 903 877 898 916 35 Guatemala 3........................................................ 94 87 110 89 95 101 96 98 36 Jamaica3.............................................................. 40 37 48 61 63 64 40 47 37 Mexico................................................................ 4,822 4,909 5,417 5,449 5,398 5,562 5,778 6,024 6,455 7,166 38 Netherlands Antilles4......................................... 140 224 273 264 217 282 213 234 282 392 39 1,372 1,410 3,074 3,179 3,493 2,900 3,504 3,728 3,568 4,186 40 Peru..................................................................... 933 962 918 873 846 834 839 744 722 727 41 42 80 52 50 44 46 48 61 58 56 42 Venezuela............................................................ 1,828 2,318 3,474 3,324 3,481 3,527 3,555 3,601 3,793 3,814 43 Other Latin America and Caribbean............... 1,293 1,394 1,487 1,538 1,487 1,512 1,468 1,472 1,442 1,483 44 Asia......................................................................... 19,204 19,236 25,538 24,219 25,088 25,131 24,641 24,947 25,504 27,115 China 45 Mainland........................................................ 3 10 4 15 13 16 20 22 10 20 46 Taiwan............................................................ 1,344 1,719 1,499 1,457 1,767 1,841 1,823 1,812 1,896 1,889 47 Hong Kong........................................................ 316 543 1,573 1,620 1,960 2,036 1,717 1,993 2,112 1,965 48 69 53 54 61 60 52 73 56 86 43 49 Indonesia............................................................ 218 232 143 141 123 124 135 138 138 131 50 755 584 872 996 896 909 781 824 842 865 51 11,040 9,839 12,739 12,550 12,196 12,811 12,121 12,342 12,478 13,928 52 Korea.................................................................. 1,978 2,336 2,277 2,241 2,478 2,546 2,712 2,966 3,369 3,465 53 719 594 680 607 692 660 710 705 675 751 54 442 633 758 757 832 778 760 836 888 910 55 Middle East oil-exporting countries5............... 1,459 1,746 3,135 2,333 2,487 1,939 2,437 1,723 1,585 1,783 56 863 947 1,804 1,444 1,585 1,419 1,352 1,531 1,426 1,367 57 Africa...................................................................... 2,311 2,518 2,221 2,145 2,092 1,968 1,977 1,967 2,122 2,043 58 Egypt................................................................... 126 119 107 82 83 73 104 121 177 115 59 27 43 82 97 88 66 64 46 37 34 60 South Africa....................................................... 957 1,066 860 838 760 701 680 719 743 745 61 112 98 164 156 155 155 151 151 151 189 62 Oil-exporting countries6.................................... 524 510 452 438 456 455 462 460 474 452 63 565 682 556 533 550 518 516 471 540 508 64 Other countries...................................................... 772 1,090 988 914 813 961 882 956 983 1,013 65 597 905 877 792 704 830 755 789 775 765 66 175 186 111 122 108 131 127 167 208 248 67 Nonmonetary international and regional organizations7................................................... 40 43 56 40 39 46 46 46 45 49 1. Includes the Bank for International Settlements. Beginning April 6. Comprises Algeria, Gabon, Libya, and Nigeria. 1978, also includes Eastern European countries not listed in line 23. 7. Excludes the Bank for International Settlements, which is included 2. Beginning April 1978 comprises Bulgaria, Czechoslavkia, German in “Other Western Europe.” Democratic Republic, Hungary, Poland, and Romania. 3. Included in “Other Latin America and Caribbean” through March Note. Data for period prior to April 1978 include claims of banks’ 1978. domestic customers on foreigners. 4. Includes Surinam through December 1975. 5. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics □ September 1979 3.18 BANKS’ OWN AND DOMESTIC CUSTOMERS’ CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1979 Type of claim 1976 1977 1978 Jan; Feb. Mar. Apr. May" June July* 1 Total....................................................................... 79,301 90,206 126,139 "120,384 127,575 2 Banks' own claims on foreigners......................... 115,030 105,583 103,933 108,736 105,266 105,503 114,027 112,800 3 Foreign public borrowers..................................... 10,095 10,312 10,509 10,774 11,000 10,534 11,128 11,611 4 Own foreign offices1.............................................. 41,217 38,073 35,583 "36,931 36,206 34,701 36,295 35,606 5 Unaffiliated foreign banks..................................... 40,381 34,496 34,759 37,388 34,509 35,530 41.474 38,873 6 Deposits.............................................................. 5,664 4,862 5,397 6,340 5,698 5,566 7,390 6,972 7 Other................................................................... 34,716 29,635 29,362 31,048 28,811 29,964 34,084 31,901 8 All other foreigners................................................ 23,338 22,701 23,081 23,643 23,552 24,738 25,131 26,709 9 Claims of banks' domestic customers2............... 11,109 11,646 13,548 10 Deposits.................................................................. 994 1,143 1,438 11 Negotiable and readily transferable in­ struments 3........................................................ 4,762 4,863 6,230 12 Outstanding collections and other claims4.......... 5,756 6,176 5,353 "5,641 5,879 13 Memo* Customer liability on acceptances... 14,917 "15,098 16,838 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 5................................................................. 11,674 14,677 15,563 15,749 16,472 17,340 14,976 1. U.S. banks: includes amounts due from own foreign branches and 4. Data for March 1978 and for period prior to that are outstanding foreign subsidiaries consolidated in “Consolidated Report of Condition” collections only. filed with bank regulatory agencies. Agencies, branches, and majority- 5. Includes demand and time deposits and negotiable and nonnegotiable owned subsidiaries of foreign banks: principally amounts due from head certificates of deposit denominated in U.S. dollars issued by banks abroad. office or parent foreign bank, and foreign branches, agencies, or wholly For description of changes in data reported by nonbanks, see July 1979 owned subsidiaries of head office or parent foreign bank. Bulletin, p. 550. 2. Assets owned by customers of the reporting bank located in the United States that represent claims on foreigners held by reporting banks Note. Beginning April 1978, data for banks’ own claims are given for the account of their domestic customers. on a monthly basis, but the data for claims of banks’ domestic customers 3. Principally negotiable time certificates of deposit and bankers ac­ are available on a quarterly basis only. ceptances. 3.19 BANKS’ OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1978 1979 Maturity; by borrower and area June Sept. Dec. Mar." June? 1 Total.................................................................................................................. 55,470 59,948 73,557 71,539 77,339 By borrower 2 Maturity of 1 year or less1.............................................................................. 44,138 47,097 58,277 55,356 59,763 3 Foreign public borrowers............................................................................. 3,067 3,702 4,558 4,627 4,551 4 All other foreigners....................................................................................... 41,071 43,395 53,719 50,729 55,212 5 Maturity of over 1 year1................................................................................. 11,333 12,850 15,280 16,183 17,575 6 Foreign public borrowers............................................................................. 3,226 4,230 5,328 5,937 6,372 7 All other foreigners....................................................................................... 8,107 8,620 9,952 10,246 11,204 By area Maturity of 1 year or less1 8 Europe........................................................................................................... 9,631 10,463 15,116 12,373 13,998 9 Canada.......................................................................................................... 1,598 1,948 2,670 2,512 2,678 10 Latin American and Caribbean................................................................... 17,221 18,775 20,850 21,647 22,937 11 Asia............................................................................................................... 13,707 13,786 17,575 16,993 18,166 12 Africa............................................................................................................. 1,457 1,535 1,496 1,290 1,423 13 Allother2...................................................................................................... 523 591 569 541 563 Maturity of over 1 year1 14 Europe........................................................................................................... 2,920 3,102 3,152 3,108 3,484 15 Canada.......................................................................................................... 344 794 1,426 1,456 1,212 16 Latin America and Caribbean..................................................................... 5,889 6,859 8,452 9,336 10,214 17 Asia............................................................................................................... 1,298 1,305 1,401 1,473 1,871 18 Africa............................................................................................................. 631 580 636 629 613 19 All other2...................................................................................................... 252 211 214 180 182 1. Remaining time to maturity. Note. The first available data are for June 1978. 2. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A63 3.20 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1 Billions of dollars, end of period 1977 1978 1979 Area or Country 1975 1976 June Sept. Dec. Mar. June 7 Sept. Dec. Mar. June 1 167.0 207.7 217.8 226.7 239.4 247.2 245.7 246.7 265.3 263.4 273.6 2 G-10 countries and Switzerland............................... 88.0 100.1 104.1 108.8 115.3 116.6 112.8 113.7 124.9 118.8 124.5 3 Belgium-Luxembourg............................................ 5.3 6.1 6.3 7.1 8.4 8.3 8.3 8.4 9.0 9.4 9.2 4 France...................................................................... 8.5 10.0 10.6 10.5 11.0 11.4 11.4 11.7 12.2 11.7 12.8 5 Germany.................................................................. 7.8 8.7 8.2 8.6 9.6 9.0 9.1 9.7 11.4 10.5 10.8 6 Italy......................................................................... 5.2 5.8 6.4 6.0 6.5 6.0 6.4 6.0 6.6 5.7 6.1 7 Netherlands............................................................ 2.8 2.8 3.1 3.0 3.5 3.4 3.4 3.5 4.4 3.8 4.0 8 Sweden.................................................................... 1.0 1.2 1.7 1.9 1.9 2.0 2.1 2.2 2.1 2.0 2.0 9 Switzerland.............................................................. 2.4 3.0 3.0 3.3 3.3 4.0 4.1 4.3 5.4 4.5 4.8 10 United Kingdom.................................................... 36.3 41.5 41.4 44.1 46.5 46.5 45.0 44.4 47.2 46.4 50.2 11 Canada.................................................................... 3.8 5.1 6.4 6.6 5.8 6.9 5.1 4.9 5.9 5.8 5.5 12 Japan....................................................................... 14.9 15.9 17.0 17.6 18.8 19.1 17.9 18.6 20.7 19.0 19.1 13 Other developed countries........................................ 10.7 15.1 16.9 18.1 18.6 20.5 19.3 18.7 19.2 18.3 18.8 14 Austria..................................................................... .7 1.2 1.2 1.3 1.3 1.5 1.5 1.5 1.7 1.7 2.2 15 Denmark................................................................. .6 1.0 1.4 1.5 1.6 1.6 1.7 1.9 2.0 2.0 2.0 16 Finland.................................................................... .9 1.1 1.1 1.2 1.2 1.2 1.1 1.0 1.2 1.1 1.1 17 Greece...................................................................... 1.4 1.7 1.8 2.0 2.2 2.7 2.3 2.2 2.3 2.3 2.2 18 Norwav................................................................... 1.4 1.5 1.7 1.8 1.9 1.9 2.1 2.1 2.1 2.1 2.1 19 Portugal................................................................... .3 .4 .5 .6 .6 .7 .6 .5 .6 .6 .5 20 Spain....................................................................... 1.9 2.8 3.2 3.5 3.6 3.6 3.6 3.5 3.4 3.0 3.0 21 Turkey..................................................................... .6 1.3 1.4 1.4 1.5 1.5 1.4 1.5 1.5 1.4 1.4 22 Other Western Europe........................................... .6 .7 .8 1.2 .9 1.4 1.2 1.0 1.0 1.1 1.2 23 South Africa............................................................ 1.2 2.2 2.3 2.3 2.4 2.5 2.4 2.2 2.0 1.7 1.8 24 Australia.................................................................. 1.3 1.2 1.5 1.5 1.4 1.9 1.4 1.3 1.4 1.3 1.3 25 Oil-exporting countries2............................................ 6.9 12.6 15.0 16.5 17.6 19.2 19.1 20.4 22.8 22.9 22.6 26 Ecuador................................................................... .4 .7 .9 1.1 1.1 1.3 1.4 1.6 1.6 1.5 1.6 27 Venezuela................................................................ 2.3 4.1 4.6 5.1 5.5 5.5 5.6 6.2 7.2 7.2 7.5 28 Indonesia................................................................. 1.6 2.2 2.2 2.2 2.2 2.1 1.9 1.9 2.0 1.9 1.9 29 Middle East countries............................................ 1.6 4.2 5.5 6.3 6.9 8.3 8.3 8.7 9.5 9.7 9.0 30 African countries.................................................... 1.0 1.4 1.8 1.9 1.9 2.0 1.9 2.0 2.5 2.6 2.6 31 Non-oil developing countries.................................... 34.2 43.1 45.8 47.6 50.0 49.9 48.9 49.5 52.4 53.1 56.1 32 Argentina................................................................ 1.7 1.9 2.1 2.4 2.9 3.0 3.0 2.9 3.0 2.9 3.5 33 Brazil....................................................................... 8.0 11.1 11.8 11.8 12.7 13.0 13.3 14.0 14.9 14.6 15.0 34 Chile........................................................................ .5 .8 .7 .8 .9 1.1 1.3 1.3 1.6 1.7 1.8 China 35 Mainland............................................................. * * * * * * * * * .1 .1 36 Taiwan................................................................. 1.7 2.3 2.7 2.9 3.1 2.5 2.4 2.4 2.9 3.1 3.3 37 Colombia................................................................ 1.2 1.3 1.2 1.2 1.3 1.3 1.3 1.3 1.4 1.5 1.5 38 Mexico.................................................................... 9.0 11.7 12.2 12.6 11.9 11.2 11.0 10.7 10.8 10.9 11.0 39 Peru......................................................................... 1.4 1.8 2.0 1.9 1.9 1.7 1.8 1.8 1.7 1.6 1.4 40 Other Latin America.............................................. 2.6 2.7 2.4 2.5 2.7 3.5 3.3 3.4 3.6 3.5 3.3 41 India........................................................................ .2 .2 .2 .3 .3 .3 .2 .3 .2 .2 .2 42 Israel........................................................................ .9 1.0 .8 .7 .9 .8 .7 .7 1.0 1.0 .9 43 Korea (South)........................................................ 2.4 3.1 3.4 3.6 3.9 3.7 3.6 3.5 3.9 4.2 5.0 44 Malaysia3................................................................ .3 .5 .7 .7 .7 .6 .6 .6 .6 .6 .7 45 Philippines.............................................................. 1.7 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.8 3.2 3.7 46 Thailand.................................................................. .7 .7 .8 .9 1.7 1.1 1.1 1.1 1.2 1.2 1.4 47 Other Asia.............................................................. .4 .4 .3 .4 .3 .4 .3 .3 .2 .3 .4 48 Egypt....................................................................... .4 .4 .4 .4 .3 .3 .3 .4 .4 .4 .7 49 Morocco.................................................................. .1 .2 .3 .4 .5 .4 .5 .5 .6 .6 .5 50 Zaire........................................................................ .3 .2 .3 .3 .3 .3 .2 .2 .2 .2 .2 51 Other Africa4.......................................................... .5 .6 1.0 1.2 1.2 1.4 1.2 1.3 1.4 1.4 1.5 52 Eastern Europe.......................................................... 3.7 5.2 5.5 5.5 6.5 6.3 6.4 6.6 6.9 6.7 6.7 53 U.S.S.R.................................................................... 1.0 1.5 1.5 1.5 1.6 1.4 1.4 1.4 1.3 1.1 .9 54 Yugoslavia.............................................................. .6 .8 .9 1.0 1.1 1.2 1.3 1.3 1.5 1.6 1.7 55 Other....................................................................... 2.1 2.8 3.1 3.0 3.8 3.7 3.7 3.9 4.1 4.0 4.1 56 Offshore banking centers........................................... 19.4 26.2 25.4 25.3 26.1 29.0 31.1 29.2 30.0 34.1 35.0 57 Bahamas.................................................................. 7.3 11.8 9.5 9.9 9.8 11.3 11.8 11.1 9.9 12.8 13.2 58 Bermuda.................................................................. .5 .5 .5 .5 .6 .6 .7 .7 .7 .6 .7 59 Cayman Islands and other British West Indies... 2.5 3.8 4.8 4.3 3.8 4.5 6.3 6.2 6.9 7.3 7.1 60 Netherlands Antilles.............................................. .6 .6 .5 .6 .7 .7 .6 .6 .8 .7 .8 61 Panama................................................................... 2.6 2.7 2.9 2.8 3.1 3.2 3.2 3.1 2.9 3.3 3.4 62 Lebanon.................................................................. .2 .1 .2 .1 .2 .2 .1 .1 . 1 .1 .1 63 Hong Kong............................................................. 1.6 2.3 2.8 3.1 3.7 4.0 4.1 4.0 4.3 4.7 5.1 64 Singapore................................................................ 3.8 4.4 4.2 3.9 3.7 4.0 3.8 2.9 3.9 4.1 4.2 65 Others5.................................................................... .1 * * .1 .5 .5 .5 .5 .5 .5 .4 66 Miscellaneous and unallocated6............................... 4.1 5.4 5.1 5.0 5.3 5.7 8.1 8.6 9.1 9.5 9.9 1. The banking offices covered by these data are the U.S. offices and Oman, Qatar, Saudi Arabia, and United Arab Emirates in addition to foreign branches of U.S.-owned banks and of U.S. subsidiaries of foreign- countries shown individually. owned banks. Offices not covered include (1) U.S. agencies and branches 3. Foreign branch claims only through December 1976. of foreign banks, and (2) foreign subsidiaries of U.S. banks. To minimize 4. Excludes Liberia. duplication, the data are adjusted to exclude the claims on foreign branches 5. Foreign branch claims only. held by a U.S. office or another foreign branch of the same banking 6. Includes New Zealand, Liberia, and international and regional institution. The data in this table combine foreign branch claims in table organizations. 3.13 (the sum of lines 7 through 10) with the claims of U.S. offices in table 7. For June 1978 and subsequent dates, the claims of the U.S. offices 3.17 (excluding those held by agencies and branches of foreign banks in this table include only banks’ own claims payable in dollars. For and those constituting claims on own foreign branches). However, see earlier dates the claims of the U.S. offices also include customer claims also footnote 2. and foreign currency claims (amounting in June 1978 to $10 billion). 2. Includes Algeria, Bahrain, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics □ September 1979 3.21 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Holdings and Transactions Millions of dollars 1979 1979 Country or area 1977 1978 Jan.- JulyP Jan. Feb. Mar. Apr. May JuneP JulyP Holdings (end of period)4 1 Estimated total1........................................ 38,640 44,938 46,210 45,667 47,529 48,131 47,218 47,494 48,991 2 Foreign countries1..................................... 33,894 39,817 41,341 40,963 42,932 43,177 43,055 43,454 44,544 3 Europe1.................................................... 13,936 17,072 18,360 18,502 20,172 20,593 20,667 21,047 22,213 4 Belgium-Luxembourg........................... 19 19 19 19 19 19 20 24 24 5 Germany1.............................................. 3,168 8,705 8,864 8,860 10,216 10,812 10,828 10,751 10,781 6 Netherlands.......................................... 911 1,358 1,433 1,517 1,587 1,637 1,672 1,695 1,655 7 Sweden................................................. 100 285 320 355 360 415 479 484 481 8 Switzerland............................................ 497 977 1,818 1,508 1,537 1,510 1,458 1,582 1,843 9 United Kingdom.................................. 8,888 5,373 5,489 5,823 5,991 5,735 5,697 6,016 6,938 10 Other Western Europe......................... 349 354 417 420 461 464 513 496 491 11 Eastern Europe..................................... 4 12 Canada...................................................... 288 152 150 146 166 226 216 227 232 13 Latin America and Caribbean............ 551 416 433 417 418 397 387 387 537 14 Venezuela.............................................. 199 144 183 183 183 183 183 183 183 15 Other Latin American and Caribbean 183 110 88 72 72 52 42 42 192 16 Netherlands Antilles........................... 170 162 162 162 162 162 162 162 162 17 Asia.......................................................... 18,745 21,488 21,709 21,210 21,488 21,273 21,097 21,103 20,874 18 Japan.................................................... 6,860 11,528 12,226 12,422 12,729 12,982 13,014 13,040 13,090 19 Africa...................................................... 362 691 691 691 691 691 691 691 691 20 All other.................................................. 11 -3 -3 -3 -3 -3 -3 -3 -3 21 Nonmonetary international and regional organizations................................... 4,746 5,121 4,869 4,704 4,597 4,954 4,163 4,040 4,447 22 International....................................... 4,646 5,089 4,837 4,666 4,560 4,915 4,114 3,993 4,400 23 Latin American regional.................... 100 33 33 38 38 38 48 48 48 Transactions (net purchases, or sales (—), during period) 24 Total i. 22,843 6,297 1,272 -543 1,862 602 -913 277 1,497 4,054 25 Foreign countries1. .. 21,130 5,921 1,524 -378 1,968 246 -122 399 1,090 26 Official institutions. 20,377 3,734 4,727 150 -517 524 242 -149 298 1,033 27 Other foreign i........ 753 2,188 1,580 1,375 141 1,443 4 27 101 57 3,148 28 Nonmonetary international and regional organizations....................................... 1,713 375 -252 -165 -106 356 -791 -121 407 -672 Memo: Oil-exporting countries 29 Middle East 2.............................. 4,451 -1,785 - 2,012 -461 -693 -31 -452 -190 8 -193 30 Africa 3........................................ -181 329 1. Beginning December 1978, includes U.S. Treasury notes publicly 4. Estimated official and private holdings of marketable U.S. Treasury issued to private foreign residents. securities with an original maturity of more than 1 year. Data are based 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, on a benchmark survey of holdings as of Jan. 31, 1971, and monthly and United Arab Emirates (Trucial States). transactions reports. Excludes nonmarketable U.S. Treasury bonds and 3. Comprises Algeria, Gabon, Libya, and Nigeria. notes held by official institutions of foreign countries. 3.22 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS Millions of dollars, end of period 1979 Assets 1976 1977 1978 Feb. Mar. Apr. May June July Aug.p 352 424 367 343 303 388 407 326 372 325 Assets held in custody 66,532 91,962 117,126 114,005 107,854 99,674 91,327 95,301 98,794 98,794 16,414 15,988 15,463 15,432 15,426 15,406 15,381 15,356 15,322 15,296 1. Marketable U.S. Treasury bills, notes, and bonds; and nonmarketable Note. Excludes deposits and U.S. Treasury securities held for inter- U.S. Treasury securities payable in dollars and in foreign currencies. national and regional organizations. Earmarked gold is gold held for 2. The value of earmarked gold increased because of the changes in foreign and international accounts and is not included in the gold stock par value of the U.S. dollar in May 1972 and in October 1973. of the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Investment Transactions A65 3.23 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1979 1979 Transactions, and area or country 1977 1978 J J u a ly n P - Jan. Feb. Mar. Apr. May June** JulyP U.S. corporate securities Stocks 1 Foreign purchases.................................................. 14,155 20,142 11,502 1,361 1,384 1,941 1,614 1,578 1,859 1,765 2 Foreign sales.......................................................... 11,479 17,723 10,473 1,301 1,264 1,437 1,520 1,386 1,792 1,772 3 Net purchases, or sales (—)................................... 2,676 2,420 1,029 60 120 504 94 191 66 -7 4 Foreign countries.................................................... 2,661 2,466 1,011 61 104 501 94 191 67 -7 5 Europe.................................................................... 1,006 1,283 253 -7 52 104 -2 136 11 -41 6 France.................................................................. 40 47 181 -6 16 33 31 48 41 18 7 Germany............................................................. 291 620 -86 -18 20 -2 -59 -1 -16 -11 8 Netherlands........................................................ 22 -22 -94 -35 -15 -19 -10 -7 -15 8 9 Switzerland.......................................................... 152 -585 -84 -30 12 -12 -17 18 -3 -52 10 United Kingdom................................................ 613 1,230 333 85 19 109 52 74 5 -11 11 Canada.................................................................... 65 74 199 7 -6 57 30 47 33 30 12 Latin America and Caribbean.............................. 127 151 3 34 -25 36 22 -18 -28 -17 13 Middle East1.......................................................... 1,390 781 348 -16 46 242 48 20 15 -7 14 Other Asia.............................................................. 59 187 217 49 30 61 -3 9 39 32 15 Africa...................................................................... 5 -13 -6 -2 6 1 -3 -2 -3 -4 16 Other countries...................................................... 8 3 -2 -4 1 1 2 -1 -1 1 17 Nonmonetary international and regional 15 -46 18 -1 16 3 1 * -1 * Bonds 2 18 Foreign purchases.................................................. 7,739 7,955 5,061 641 453 581 589 863 1,081 853 19 Foreign sales........................................................... 3,560 5,509 4,490 704 547 489 378 922 802 647 20 Net purchases, or sales (—)................................... 4,179 2,446 571 -63 -94 92 210 -59 279 206 21 Foreign countries.................................................... 4,083 2,037 807 54 28 79 106 87 245 207 22 Europe.................................................................... 1,850 915 707 39 110 1 139 121 153 143 23 France................................................................. -34 30 2 18 * 13 -2 -1 8 -34 24 Germany............................................................. -20 68 81 42 13 4 19 6 24 -27 25 Netherlands........................................................ 72 19 -139 -4 -10 -27 -20 -37 -32 -9 26 Switzerland......................................................... 94 -100 -20 8 6 12 8 -41 -10 -4 27 United Kingdom................................................ 1,690 930 753 -54 93 27 134 151 169 232 28 Canada.................................................................... 141 102 72 11 10 33 6 4 * 8 29 Latin America and Caribbean.............................. 64 78 73 23 9 24 9 7 -10 11 30 Middle East1.......................................................... 1,695 810 -157 -34 -106 25 -61 -73 52 40 31 Other Asia.............................................................. 338 131 112 16 4 -3 14 28 48 5 32 Africa...................................................................... -6 -1 1 * 1 * * * * * 33 Other countries...................................................... * 1 * * * 1 -1 * * * 34 Nonmonetary international and regional organizations....................................................... 96 409 -237 -118 -122 13 104 -146 34 -1 Foreign securities 35 Stocks, net purchases, or sales ( —)...................... -410 527 -20 11 -28 2 13 67 -18 -67 36 Foreign purchases.............................................. 2,255 3,666 2,482 265 232 331 369 554 403 329 37 Foreign sales....................................................... 2,665 3,139 2,502 254 260 329 356 487 421 396 38 Bonds, net purchases, or sales (—)...................... -5,096 -4,017 -1,992 -600 -322 -39 -21 5 -684 -331 39 Foreign purchases.............................................. 8,040 11,044 6,641 783 942 1,182 879 851 1,006 998 40 Foreign sales...................................................... 13,136 15,061 8,633 1,383 1,264 1,220 900 847 1,690 1,330 41 Net purchases, or sales (—) of stocks and bonds.. -5,506 -3,490 -2,013 -590 -349 -37 -8 71 -703 -398 42 Foreign countries.................................................... -3,949 -3,313 -1,465 -513 -141 -19 -21 70 -420 -422 43 Europe.................................................................... - 1,100 -40 -819 -124 -42 3 -174 -31 -139 -311 44 Canada.................................................................... -2,404 -3,237 - 1,022 -305 -184 -228 10 85 -221 -178 45 Latin America and Caribbean.............................. -82 201 348 60 70 54 55 26 53 30 46 Asia......................................................................... -97 350 23 -141 19 152 84 -14 -114 37 47 Africa...................................................................... 2 -441 -7 -3 -5 -8 2 4 4 * 48 Other countries...................................................... -267 -146 11 1 2 7 2 1 -4 2 49 Nonmonetary international and regional organizations....................................................... -1,557 -177 -547 ♦ -77 -209 -17 13 1 -282 24 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, 2. Includes state and local government securities, and securities of U.S. Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial government agencies and corporations. Also includes issues of new debt States). securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics □ September 1979 3.24 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States ▲ Millions of dollars, end of period 1978 1979 Type, and area or country 1976 1977 June Sept. Dec. Mar. June Sept. Dec. 1 Total .................................................................. 10,099 11,085 11,870 12,786 13,888 13,370 9,390 10,284 11,044 11,955 11,166 10,930 709 801 825 831 2,723 2,440 By type 5,407 5,238 3,465 3,419 1,942 1,819 8,481 8,131 3,930 3,431 4,552 4,700 7,701 7,511 780 620 By area or country Financial liabilities 3,467 3,281 287 254 157 133 334 293 360 391 207 187 1,947 1,852 205 233 20 Latin America and Caribbean......................... 971 969 21 Bahamas........................................................ 422 407 22 Bermuda........................................................ 56 41 23 Brazil.............................................................. 10 13 24 British West Indies........................................ 122 132 25 Mexico............................................................ 77 73 26 Venezuela....................................................... 46 52 27 Asia.................................................................... 754 745 28 Japan. ...................................................... 671 667 29 Middle East oil-exporting countries 2......... 48 36 30 Africa................................................................. 5 5 31 Oil-exporting countries 3............................... 2 1 32 All other4.......................................................... 5 5 Commercial liabilities 33 Europe................................................................ 2,927 2,809 34 Belgium-Luxembourg................................... 73 68 35 France. . .... ................ .......... 312 336 36 Germany........................................................ 519 390 37 Netherlands.................................................... 206 193 38 Switzerland................................................... 321 343 39 United Kingdom........................................... 760 811 40 Canada.. . . . . ............ 653 601 41 Latin America................................................... 1,031 1,102 42 Bahamas........................................................ 25 16 43 Bermuda........................................................ 95 40 44 Brazil. . . . . ............ 75 62 45 British West Indies. .. ........................... 53 89 130 240 47 Venezuela....................................................... 306 359 48 Asia.... .... ............ 2,942 2,627 49 Japan. .. ............................... 430 411 50 Middle East oil-exporting countries 2 .. . 1,543 1,117 51 Africa................................................................. 724 754 52 Oil-exporting countries3. ... ............ 313 345 53 All other4 204 239 1. Prior to December 1978, foreign currency data include only liabilities 3. Comprises Algeria, Gabon, Libya, and Nigeria. denominated in foreign currencies with an original maturity of less than 4. Includes nonmonetary international and regional organizations. one year. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, A For a description of the changes in the International Statistics and United Arab Emirates (Trucial States). tables, see July 1979 Bulletin, p. 550. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A67 3.25 CLAIMS ON UN AFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States A Millions of dollars, end of period 1978 1979 Type, and area or country 1976 1977 June Sept. Dec. Mar. June Sept. Dec. 1 Total .................................................................. 19,350 71,298 23,229 23,260 27,138 29,859 18,300 19,880 21,665 21,292 24,160 27,036 1,050 1,418 1,564 1,968 2,978 2,823 By type 15,843 19,097 10,735 13,989 9,694 13,087 1,041 903 5,108 5,108 3,528 3,573 1,580 1,535 11,295 10,762 10,647 10,008 647 754 10,938 10,377 357 385 By area or country Financial claims 5,054 5,333 48 63 179 180 529 263 107 91 98 96 22 United Kingdom........................................... 3,850 4,409 23 Canada............................................................... 4,454 5,130 24 Latin America and Caribbean......................... 5,197 7,566 25 Bahamas........................................................ 2,836 4,124 26 Bermuda........................................................ 80 62 27 Brazil.............................................................. 151 137 28 British West Indies........................................ 1,231 2,394 29 Mexico............................................................ 146 145 30 Venezuela....................................................... 149 142 31 Asia................................................................. 918 825 32 Japan.............................................................. 306 206 33 Middle East oil-exporting countries2.......... 18 17 34 Africa................................................................. 180 203 35 Oil-exporting countries 3............................... 10 26 36 All other4.......................................................... 41 39 Commercial claims 37 Europe................................................................ 3,935 3,800 38 Belgium-Luxembourg................................... 145 172 39 France............................................................ 607 487 40 Germany........................................................ 392 495 41 Netherlands.................................................... 256 270 42 Switzerland.................................................... 213 253 43 United Kingdom........................................... 802 678 44 Canada............................................................... 1,102 1,106 45 Latin America and Caribbean......................... 2,535 2,461 ....................................4..6.. .........B...a..h..amas 109 117 47 Bermuda........................................................ 215 241 48 Brazil.............................................................. 624 489 49 British West Indies........................................ 9 10 50 Mexico............................................................ 513 497 51 Venezuela....................................................... 293 273 52 Asia.................................................................... 3,087 2,748 53 Japan.............................................................. 978 894 54 Middle East oil-exporting countries2......... 711 665 55 Africa................................................................. 449 445 56 Oil-exporting countries 3............................... 137 132 57 All other4.......................................................... 187 201 1. Prior to December 1978, foreign currency data include only liabilities 3. Comprises Algeria, Gabon, Libya, and Nigeria. denominated in foreign currencies with an original maturity of less than 4. Includes nonmonetary international and regional organizations. one year. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, A For a description of the changes in the International Statistics and United Arab Emirates (Trucial States). tables, see July 1979 Bulletin, p. 550. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 International Statistics □ September 1979 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per annum Rate on Aug. 31,1979 Rate on Aug. 31,1979 Rate on Aug. 31,1979 Country Country Country Per­ Month Per­ Month Per­ Month cent effective cent effective cent effective Argentina........................ 18.0 Feb. 1972 France............................ 9.5 Aug. 1977 7.0 Feb. 1978 Austria............................. 3.75 Jan. 1979 Germany, Fed. Rep. of. 5.0 July 1979 7.0 July 1979 Belgium........................... 9.0 June 1979 10.5 Sept. 1978 1.0 Feb. 1978 Brazil............................... 33.0 Nov. 1978 5.25 July 1979 United Kingdom.......... 14.0 June 1979 Canada............................ 11.75 July 1979 4.5 June 1942 5.0 Oct. 1970 Denmark......................... 9.0 June 1979 Netherlands................... 8.0 July 1979 Note. Rates shown are mainly those at which the central bank either more than one rate applicable to such discounts or advances, the rate discounts or makes advances against eligible commercial paper and/or shown is the one at which it is understood the central bank transacts the government securities for commercial banks or brokers. For countries with largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES Percent per annum, averages of daily figures 1979 Country, or type 1976 1977 1978 Mar. Apr. May June July Aug. 1 Eurodollars........................................................... 5.58 6.03 8.74 10.64 10.60 10.75 10.52 10.87 11.53 2 United Kingdom................................................... 11.35 8.07 9.18 11.98 11.64 11.76 13.02 13.87 14.06 9.39 7.47 8.52 11.08 11.18 11.26 11.17 11.29 11.78 4 Germany............................................................... 4.19 4.30 3.67 4.42 5.50 5.89 6.40 6.77 7.04 5 Switzerland............................................................ 1.45 2.56 0.74 0.03 0.93 1.54 1.51 1.19 1.67 7.02 4.73 6.53 7.35 7.23 7.82 8.55 9.53 9.51 7 France.................................................................... 8.65 9.20 8.10 7.05 6.96 7.63 8.63 9.90 10.85 8 Italy....................................................................... 16.32 14.26 11.40 11.46 11.52 11.37 11.27 11.46 11.50 9 Belgium................................................................. 10.25 6.95 7.14 7.63 7.63 8.16 9.09 11.18 11.42 10 Japan..................................................................... 7.70 6.22 4.75 4.54 5.13 5.25 5.46 6.26 7.00 Note. Rates are for 3-month interbank loans except for the following: francs and over; and Japan, loans and discounts that can be called after Canada, finance company paper; Belgium, time deposits of 20 million being held over a minimum of two month-ends. 3.28 FOREIGN EXCHANGE RATES Cents per unit of foreign currency 1979 Country/currency 1976 1977 1978 Mar. Apr. May June July Aug. 1 Australia/dollar.................. 122.15 110.82 114.41 112.15 110.85 110.57 111.11 112.83 112.83 2 Austria/schilling................. 5.5744 6.0494 6.8958 7.3312 7.1862 7.1222 7.2081 7.4628 7.4786 3 Belgium/franc..................... 2.5921 2.7911 3.1809 3.3971 3.3271 3.2732 3.3048 3.4240 3.4140 4 Canada/dollar..................... 101.41 94.112 87.729 85.187 87.235 86.534 85.296 85.920 85.425 5 Denmark/krone.................. 16.546 16.658 18.156 19.269 18.958 18.562 18.401 19.072 18.964 6 Finland/markka................. 25.938 24.913 24.337 25.161 24.976 24.974 25.250 26.040 26.075 7 France/franc....................... 20.942 20.344 22.218 23.328 22.967 22.691 22.914 23.535 23.491 8 Germany/deutsche mark... 39.737 43.079 49.867 53.754 52.745 52.422 53.084 54.817 54.666 9 India/rupee......................... 11.148 11.406 12.207 12.138 12.191 12.066 12.317 12.651 12.484 10 Ireland/pound..................... 180.48 174.49 191.84 203.73 201.97 198.43 200.01 206.79 205.79 11 Italy/lira.............................. .12044 .11328 .11782 .11888 .11858 .11744 .11828 .12192 .12219 .33741 .37342 .47981 .48470 .46241 .45797 .45750 .46189 .45890 13 Malaysia/ringgit................. 39.340 40.620 43.210 45.440 45.023 44.934 45.474 46.422 46.363 6.9161 4.4239 4.3896 4.3835 4.3780 4.3805 4.3767 4.3767 4.3804 15 Netherlands/guilder............ 37.846 40.752 46.284 49.801 48.794 48.132 48.374 49.821 49.805 99.115 96.893 103.64 105.39 104.96 104.37 103.29 102.04 101.40 18.327 18.789 19.079 19.619 19.444 19.270 19.398 19.824 19.877 18 Portugal/escudo................. 3.3159 2.6234 2.2782 2.0855 2.0482 2.0214 2.0192 2.0551 2.0332 19 South Africa/rand.............. 114.85 114.99 115.01 118.40 117.94 118.22 118.31 118.46 119.38 20 Spain/peseta....................... 1.4958 1.3287 1.3073 1.4490 1.4679 1.5131 1.5131 1.5118 1.5132 11.908 11.964 6.3834 6.4593 6.4455 6.4239 6.4059 6.3786 6.4174 22.957 22.383 22.139 22.901 22.772 22.755 23.028 23.687 23.693 23 Switzerland/franc............... 40.013 41.714 56.283 59.473 58.220 57.894 58.884 60.650 60.349 24 United Kingdom/pound... 180.48 174.49 191.84 203.78 207.34 205.87 211.19 225.98 223.68 Memo: 25 United States/dollar i.......... 105.57 103.31 92.39 88.39 89.49 90.31 89.56 86.93 87.24 1. Index of weighted average exchange value of U.S. dollar against cur- the Weighted-Average Exchange Value of the U.S. Dollar: Revision” on rencies of other G-10 countries plus Switzerland. March 1973 = 100. page 700 of the August 1978 Bulletin. Weights are 1972-76 global trade of each of the 10 countries. Series revised as of August 1978. For description and back data, see “Index of Note. Averages of certified noon buying rates in New York for cable transfers Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 69 Guide to Tabular Presentation and Statistical Releases Guide to Tabular Presentation Symbols and Abbreviations c Corrected 0 Calculated to be zero e Estimated n.a. Not available P Preliminary n.e.c. Not elsewhere classified r Revised (Notation appears on column head­ IPCs Individuals, partnerships, and corporations ing when more than half of figures in that REITs Real estate investment trusts column are changed.) RPs Repurchase agreements * Amounts insignificant in terms of the last SMSAs Standard metropolitan statistical areas decimal place shown in the table (for Cell not applicable example, less than 500,000 when the smallest unit given is millions) General Information Minus signs are used to indicate (1) a decrease, (2) as well as direct obligations of the Treasury. “State a negative figure, or (3) an outflow. and local government” also includes municipalities, “U.S. government securities” may include guaran­ special districts, and other political subdivisions. teed issues of U.S. government agencies (the flow of In some of the tables details do not add to totals funds figures also include not fully guaranteed issues) because of rounding. Statistical Releases List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for individual releases................. June 1979 A-76 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 70 Federal Reserve B oard of G overnors Paul A. Volcker, Chairman Henry C. W allich Frederick H. Schultz, Vice Chairman Philip E. Coldw ell Office of Board Members Office of Staff Director for Monetary and Financial Policy Joseph R. Coyne, Assistant to the Board Kenneth A. Guenther, Assistant to the Board Stephen H. Axilrod, Staff Director Jay Paul Brenneman, Special Assistant to the Edward C. Ettin, Deputy Staff Director Board Murray Altmann, Assistant to the Board Frank O’Brien, Jr., Special Assistant to the Peter M. Keir, Assistant to the Board Board Stanley J. Sigel, Assistant to the Board Joseph S. Sims, Special Assistant to the Board Normand R. V. Bernard, Special Assistant to Donald J. Winn, Special Assistant to the Board the Board Legal Division Division of Research and Statistics James L. Kichline, Director Neal L. Petersen, General Counsel Joseph S. Zeisel, Deputy Director Robert E. Mannion, Deputy General John H. Kalchbrenner, Associate Director Counsel John J. Mingo, Senior Research Division Charles R. McNeill, Assistant to the General Officer Counsel Eleanor J. Stockwell, Senior Research J. Virgil Mattingly, Assistant General Division Officer Counsel James M. Brundy, Associate Research Division Gilbert T. Schwartz, Assistant General Officer Counsel Robert A. Eisenbeis, Associate Research Division Officer Jared J. Enzler, Associate Research Division Office of the Secretary Officer J. Cortland G. Peret, Associate Research Theodore E. Allison, Secretary Division Officer Griffith L. Garwood, Deputy Secretary Michael J. Prell, Associate Research Division Richard H. Puckett, Manager, Regulatory Officer Improvement Project Helmut F. Wendel, Associate Research Division Officer Robert M. Fisher, Assistant Research Division Division of Consumer Affairs Officer Frederick M. Struble, Assistant Research Janet O. Hart, Director Division Officer Nathaniel E. Butler, Associate Director Stephen P. Taylor, Assistant Research Jerauld C. Kluckman, Associate Director Division Officer Anne Geary, Assistant Director Levon H. Garabedian, Assistant Director Division of Banking Division of International Finance Supervision and Regulation Edwin M. Truman, Director Robert F. Gemmill, Associate Director John E. Ryan, Director George B. Henry, Associate Director IFrederick C. Schadrack, Deputy Director Charles J. Siegman, Associate Director Frederick R. Dahl, Associate Director Samuel Pizer, Senior International Division William Taylor, Associate Director Officer William W. Wiles, Associate Director Jeffrey R. Shafer, Associate International Jack M. Egertson, Assistant Director Division Officer Robert A. Jacobsen, Assistant Director Dale W. Henderson, Assistant International Don E. Kline, Assistant Director Division Officer Robert S. Plotkin, Assistant Director Larry J. Promisel, Assistant International Thomas A. Sidman, Assistant Director Division Officer Samuel H. Talley, Assistant Director Ralph W. Smith, Jr., Assistant International Division Officer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 71 and O fficial Staff J. Charles Partee Emmett J. Rice Nancy H. Teeters Office of Office of Staff Director for Staff Director for Management Federal Reserve Bank Activities John M. Denkler, Staff Director William H. Wallace, Staff Director Edward T. Mulrenin, Assistant Staff Director Harry A. Guinter, Assistant Director for Joseph W. Daniels, Sr., Director of Equal Contingency Planning Employment Opportunity Division of Federal Reserve Division of Data Processing Bank Examinations and Budgets Charles L. Hampton, Director Clyde H. Farnsworth, Jr., Associate Bruce M. Beardsley, Associate Director Director Uyless D. Black, Assistant Director Charles W. Bennett, Assistant Director Glenn L. Cummins, Assistant Director John F. Hoover, Assistant Director Robert J. Zemel, Assistant Director P. D. Ring, Assistant Director Raymond L. Teed, Assistant Director Division of Personnel Division of Federal Reserve David L. Shannon, Director John R. Weis, Assistant Director Bank Operations Charles W. Wood, Assistant Director James R. Kudlinski, Director Walter Althausen, Assistant Director Office of the Controller Brian M. Carey, Assistant Director Lorin S. Meeder, Assistant Director John Kakalec, Controller Division of Support Services Donald E. Anderson,Director John L. Grizzard, Associate Director Walter W. Kreimann, Associate Director John D. Smith, Assistant Director tOn loan from the Federal Reserve Bank of New York. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 72 Federal Reserve Bulletin □ September 1979 FOMC and Advisory Councils Federal Open Market Committee Paul A. Volcker, Chairman John Balles Monroe Kimbrel Frederick H. Schultz Robert Black Robert Mayo Nancy H. Teeters Philip E. Coldwell J. Charles Partee Henry C. Wallich Emmett J. Rice Murray Altmann, Secretary Edward C. Ettin, Associate Economist Normand R. V. Bernard, Assistant Secretary George B. Henry, Associate Economist Neal L. Petersen, General Counsel Peter M. Keir, Associate Economist James H. Oltman, Deputy General Counsel Michael Keran, Associate Economist Robert E. Mannion, Assistant General Counsel James L. Kichline, Associate Economist Stephen H. Axilrod, Economist James Parthemus, Associate Economist Alan R. Holmes, Advisor for Market Operations Karl Scheld, Associate Economist Harry Brandt, Associate Economist Edwin M. Truman, Associate Economist Richard G. Davis, Associate Economist Joseph S. Zeisel, Associate Economist Peter D. Sternlight, Manager for Domestic Operations, System Open Market Account Scott E. Pardee, Manager for Foreign Operations, System Open Market Account Federal Advisory Council J. W. McLean, tenth district, President Henry S. Woodbridge, Jr., first district Frank A. Plummer, sixth district Walter B. Wriston, second district Roger E. Anderson, seventh district William B. Eagleson, Jr., third district Clarence C. Barksdale, eighth district Merle E. Gilliand, fourth district Clarence G. Frame, ninth district J. Owen Cole, fifth district James D. Berry, eleventh district Chauncey E. Schmidt, twelfth district Herbert V. Prochnow, Secretary William J. Korsvik, Associate Secretary Consumer Advisory Council William D. Warren, Los Angeles, California, Chairman Marcia A. Hakala, Omaha, Nebraska, Vice Chairman Roland E. Brandel, San Francisco, California Percy W. Loy, Portland, Oregon James L. Brown, Milwaukee, Wisconsin R. C. Morgan, El Paso, Texas Mark E. Budnitz, Atlanta, Georgia Florence M. Rice, New York, New York John G. Bull, Fort Lauderdale, Florida Ralph J. Rohner, Washington, D. C. Robert V. Bullock, Frankfort, Kentucky Raymond J. Saulnier, New York, New York Carl Felsenfeld, New York, New York Henry B. Schechter, Washington, D. C. Jean A. Fox, Pittsburgh, Pennsylvania E. G. Schuhart II, Amarillo, Texas Richard H. Holton, Berkeley, California Blair C. Shick, Cambridge, Massachusetts Edna DeCoursey Johnson, Baltimore, Mary­ Thomas R. Swan, Portland, Maine land Anne Gary Taylor, Alexandria, Virginia Richard F. Kerr, Cincinnati, Ohio Richard A. Van Winkle, Salt Lake City, Utah Robert J. Klein, New York, New York Richard D. Wagner, Simsbury, Connecticut Harvey M. Kuhnley, Minneapolis, Minnesota Mary W. Walker, Monroe, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 73 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK, Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON*.......................02106 Robert M. Solow Frank E. Morris Robert P. Henderson James A. McIntosh NEW YORK*................ 10045 Robert H. Knight Vacancy Boris Yavitz Thomas M. Timlen Buffalo......................... 14240 Frederick D. Berkeley, III John T. Keane PHILADELPHIA...........19105 John W. Eckman David P. Eastburn Werner C. Brown Richard L. Smoot CLEVELAND*..............44101 Robert E. Kirby Willis J. Winn Arnold R. Weber Walter H. MacDonald Cincinnati....................45201 Lawrence H. Rogers, II Robert E. Showalter Pittsburgh.................... 15230 G. J. Tankersley Robert D. Duggan RICHMOND*................23261 Maceo A. Sloan Robert P. Black Steven Muller George C. Rankin Baltimore.....................21203 I. E. Killian Jimmie R. Monhollon Charlotte.....................28230 Robert E. Elberson Stuart P. Fishburne Culpeper Communications and Records Center 22701 Albert D. Tinkelenberg ATLANTA.....................30303 Clifford M. Kirtland, Jr. Monroe Kimbrel William A. Fickling, Jr. Robert P. Forrestal Birmingham................35202 William H. Martin, III Hiram J. Honea Jacksonville................32203 Copeland D. Newbern Charles D. East Miami...........................33152 Castle W. Jordan F. J. Craven, Jr. Nashville.....................37203 Cecelia Adkins Jeffrey J. Wells New Orleans..............70161 Levere C. Montgomery George C. Guynn CHICAGO* ....................60690 Robert H. Strotz Robert P. Mayo John Sagan Daniel M. Doyle Detroit...........................48231 Jordan B. Tatter William C. Conrad ST. LOUIS.....................63166 Armand C. Stalnaker Lawrence K. Roos William B. Walton Donald W. Moriarty, Jr. Little Rock ................72203 G. Larry Kelley John F. Breen Louisville ..................40232 James F. Thompson Donald L. Henry Memphis ....................38101 Frank A. Jones, Jr. L. Terry Britt MINNEAPOLIS.............55480 Stephen F. Keating Mark H. Willes William G. Phillips Thomas E. Gainor Helena...........................59601 Patricia P. Douglas John D. Johnson KANSAS CITY.............64198 Harold W. Andersen Roger Guffey Joseph H. Williams Henry R. Czerwinski Denver.........................80217 A. L. Feldman Wayne W. Martin Oklahoma City...........73125 Christine H. Anthony William G. Evans Omaha .........................68102 Durward B. Varner Robert D. Hamilton DALLAS.........................75222 Irving A. Mathews Ernest T. Baughman Gerald D. Hines Robert H. Boykin El Paso.........................79999 A. J. Losee Fredric W. Reed Houston.......................77001 Gene M. Woodfin J. Z. Rowe San Antonio................78295 Pat Legan Carl H. Moore SAN FRANCISCO.......94120 Joseph F. Alibrandi John J. Balles Cornell C. Maier John B. Williams Los Angeles................90051 Caroline L. Ahmanson Richard C. Dunn Portland.......................97208 Loran L. Stewart Angelo S. Carella Salt Lake City .........84125 Wendell J. Ashton A. Grant Holman Seattle .........................98124 Lloyd E. Cooney Gerald R. Kelly * Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; Cranford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 74 Federal Reserve Board Publications Available from Publications Services, Division of Sup­ quest and be made payable to the order of the Board port Services, Board of Governors of the Federal Re­ of Governors of the Federal Reserve System. Remit­ serve System, Washington, D.C. 20551. Where a tance from foreign residents should be drawn on a U.S. charge is indicated, remittance should accompany re- bank. (Stamps and coupons are not accepted.) The Federal Reserve System—Purposes and Bank Credit-Card and Check-Credit Plans. 1968. Functions. 1974. 125 pp. 102 pp. $1.00 each; 10 or more to one address, $.85 each. Annual Report. Survey of Changes in Family Finances. 1968. 321 Federal Reserve Bulletin. Monthly. $20.00 per pp. $1.00 each; 10 or more to one address, $.85 year or $2.00 each in the United States, its posses­ each. sions, Canada, and Mexico; 10 or more of same Report of the Joint Treasury-Federal Reserve issue to one address, $18.00 per year or $1.75 Study of the U.S. Government Securities each. Elsewhere, $24.00 per year or $2.50 each. Market. 1969. 48 pp. $.25 each; 10 or more to one address, $.20 each. Banking and Monetary Statistics, 1914-1941. Joint Treasury-Federal Reserve Study of the (Reprint of Part 1 only) 1976. 682 pp. $5.00. Government Securities Market: Staff Stud­ Banking and Monetary Statistics, 1941-1970. ies—Part 1. 1970. 86 pp. $.50 each; 10 or more 1976. 1,168 pp. $15.00. to one address, $.40 each. Part 2. 1971. 153 pp. Annual Statistical Digest and Part 3. 1973. 131 pp. Each volume $1.00; 1971-75. 1976. 339 pp. $4.00 per copy for each 10 or more to one address, $.85 each. paid subscription to Federal Reserve Bulletin; Open Market Policies and Operating Proce­ all others $5.00 each. dures—Staff Studies. 1971. 218 pp. $2.00 1972-76. 1977. 338 pp. $10.00 per copy. each; 10 or more to one address, $1.75 each. Reappraisal of the Federal Reserve Discount 1973-77. 1978. 361 pp. $12.00 per copy. Mechanism. Vol. 1. 1971. 276 pp. Vol. 2. 1971. Federal Reserve Chart Book. Issued four times a 173 pp. Vol. 3. 1972. 220 pp. Each volume $3.00; year in February, May, August, and November. 10 or more to one address, $2.50 each. Subscription includes one issue of Historical Chart The Econometrics of Price Determination Con­ Book. $7.00 per year or $2.00 each in the United ference, October 30-31, 1970, Washington, D.C. States, its possessions, Canada, and Mexico. Else­ 1972. 397 pp. Cloth ed. $5.00 each; 10 or more where, $10.00 per year or $3.00 each. to one address, $4.50 each. Paper ed. $4.00 each; Historical Chart Book. Issued annually in Sept. 10 or more to one address, $3.60 each. Subscription to Federal Reserve Chart Book in­ Federal Reserve Staff Study: Ways to Moderate cludes one issue. $1.25 each in the United States, Fluctuations in Housing Construction . its possessions, Canada, and Mexico; 10 or more 1972. 487 pp. $4.00 each; 10 or more to one to one address, $1.00 each. Elsewhere, $1.50 each. address, $3.60 each. Capital Market Developments. Weekly. $15.00 per Lending Functions of the Federal Reserve year or $.40 each in the United States, its posses­ Banks. 1973. 271 pp. $3.50 each; 10 or more sions, Canada, and Mexico; 10 or more of same to one address, $3.00 each. issue to one address, $13.50 per year or $.35 each. Improving the Monetary Aggregates: Report of Elsewhere, $20.00 per year or $.50 each. the Advisory Committee on Monetary Sta­ Selected Interest and Exchange Rates—Weekly tistics. 1976. 43 pp. $1.00 each; 10 or more to Series of Charts. Weekly. $15.00 per year or one address, $.85 each. $.40 each in the United States, its possessions, Annual Percentage Rate Tables (Truth in Lend­ Canada, and Mexico; 10 or more of same issue ing—Regulation Z) Vol. I (Regular Transactions). to one address, $13.50 per year or $.35 each. 1969. 100 pp. Vol. II (Irregular Transactions). Elsewhere, $20.00 per year or $.50 each. 1969. 116 pp. Each volume $1.00, 10 or more of same volume to one address, $.85 each. The Federal Reserve Act, as amended through De­ cember 1976, with an appendix containing provi­ Federal Reserve Measures of Capacity and Ca­ sions of certain other statutes affecting the Federal pacity Utilization. 1978. 40 pp. $1.75 each, 10 or more to one address, $1.50. each. Reserve System. 307 pp. $2.50. The Bank Holding Company Movement to 1978: Regulations of the Board of Governors of the A Compendium. 1978. 289 pp. $2.50 each, 10 Federal Reserve System or more to one address, $2.25 each. Published Interpretations of the Board of Gov­ Improving the Monetary Aggregates: Staff ernors, as of Dec. 31, 1978. $7.50. Papers. 1978. 170 pp. $4.00 each, 10 or more Industrial Production— 1976 Edition. 1977. 304 to one address, $3.75 each. pp. $4.50 each; 10 or more to one address, $4.00 1977 Consumer Credit Survey. 1978. 119 pp. $2.00 each. each. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Board Publications A 75 Consumer Education Pamphlets Measurement of Capacity Utilization: Problems (Short pamphlets suitable for classroom use. Multiple and Tasks, by Frank de Leeuw, Lawrence R. copies available without charge.) Forest, Jr., Richard D. Raddock, and Zoltan E. Kenesey. July 1979. 264 pp. The Board of Governors of the Federal Reserve The Market for Federal Funds and Repurchase System Agreements, by Thomas D. Simpson. July 1979. Consumer Handbook To Credit Protection Laws. 106 pp. The Equal Credit Opportunity Act and . . . Age. The Equal Credit Opportunity Act and . . . Printed in Full in the Bulletin Credit Rights in Housing. (Included under “Reprints.”) The Equal Credit Opportunity Act and . . . Doctors, Lawyers, Small Retailers, and Others Who May Provide Incidental Credit. The Equal Credit Opportunity Act and . . . Reprints Women. (Except for Staff Papers, Staff Studies, and some Fair Credit Billing. leading articles, most of the articles reprinted do not The Federal Open Market Committee exceed 12 pages.) Federal Reserve Bank Board of Directors Federal Reserve Banks Measures of Security Credit. 12/70. A Guide to Federal Reserve Regulations. Revision of Bank Credit Series. 12/71. How to File A Consumer Credit Complaint. Assets and Liabilities of Foreign Branches of If You Borrow To Buy Stock. U.S. Banks. 2/72. If You Use A Credit Card. Bank Debits, Deposits, and Deposit Turnover— Truth in Leasing. Revised Series. 7/72. U.S. Currency. Yields on Newly Issued Corporate Bonds. 9/72. What Truth in Lending Means to You. Recent Activities of Foreign Branches of U.S. Banks. 10/72. One-Bank Holding Companies Before the 1970 Staff Studies Amendments. 12/72. (Studies and papers on economic and financial sub­ Yields on Recently Offered Corporate Bonds. jects that are of general interest.) 5/73. Rates on Consumer Instalment Loans. 9/73. Summaries Only Printed in the Bulletin New Series for Large Manufacturing Corpora­ (Requests to obtain single copies of the full text or tions. 10/73. to be added to the mailing list for the series may be U.S. Energy Supplies and Uses, Staff Economic sent to Publications Services.) Study by Clayton Gehman. 12/73. The Structure of Margin Credit. 4/75. The Behavior of Member Bank Required Reserve New Statistical Series on Loan Commitments at Ratios and the Effects of Board Action, Selected Large Commercial Banks. 4/75. An Assessment of Bank Holding Companies, Staff 1968-77, by Thomas D. Simpson. July 1978. 39 Economic Study by Robert J. Lawrence and Sam­ pp. uel H. Talley. 1/76. Foothold Acquisitions and Bank Market Struc­ ture, by Stephen A. Rhoades and Paul Schweit­ Industrial Electric Power Use. 1/76. zer, July 1978. 8 pp. Revision of Money Stock Measures. 2/76. Interest Rate Ceilings and Disintermediation, by Survey of Finance Companies, 1975. 3/76. Edward F. McKelvey. Sept. 1978. 105 pp. Revised Series for Member Bank Deposits and Aggregate Reserves. 4/76. The Relationship Between Reserve Ratios and the Monetary Aggregates Under Reserves Industrial Production— 1976 Revision. 6/76. and Federal Funds Rate Operating Targets, Federal Reserve Operations in Payment Mecha­ by Kenneth J. Kopecky. Dec. 1978. 58 pp. nisms: A Summary. 6/76. Tie-ins Between the Granting of Credit and New Estimates of Capacity Utilization: Manu­ Sales of Insurance by Bank Holding Compa­ facturing and Materials. 11/76. nies and Other Lenders, by Robert A. Eisenbeis Bank Holding Company Financial Developments and Paul R. Schweitzer. Feb. 1979. 75 pp. in 1976. 4/77. Geographic Expansion of Banks and Changes in Survey of Terms of Bank Lending—New Series. Banking Structure, by Stephen A. Rhoades. 5/77. Mar. 1979. 40 pp. The Commercial Paper Market. 6/77. Impact of the Dollar Depreciation on the U.S. The Federal Budget in the 1970’s. 9/7D Price Level: An Analytical Survey of Em­ Summary Measures of the Dollar’s Foreign Ex­ pirical Estimates, by Peter Hooper and Barbara change Value. 10/78. R. Lowrey. Apr. 1979. 53 pp. Survey of Time and Savings Deposits at Commer­ Innovations in Bank Loan Contracting: Recent cial Banks, January 1979. 5/79. Evidence, by Paul W. Boltz and Tim S. Camp­ Redefining the Monetary Aggregates. 1/79. bell. May 1979. 40 pp. U.S. International Transactions in 1978. 4/79. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Index to Statistical Tables References are to pages A-3 through A-68 although the prefix “A ” is omitted in this index ACCEPTANCES, bankers, 11, 25, 27 Demand deposits Agricultural loans, commercial banks, 18, 20-22, 26 Adjusted, commercial banks, 13, 15, 19 Assets and liabilities (See also Foreigners) Banks, by classes, 16, 17, 19, 20-23 Banks, by classes, 16, 17, 18, 20-23, 29 Ownership by individuals, partnerships, and Domestic finance companies, 39 corporations, 25 Federal Reserve Banks, 12 Subject to reserve requirements, 15 Nonfinancial corporations, current, 38 Turnover, 13 Automobiles Deposits (See also specific types) Consumer installment credit, 42, 43 Banks, by classes, 3, 16, 17, 19,20-23,29,69-72 Production, 48, 49 Federal Reserve Banks, 4, 12 Subject to reserve requirements, 15 Turnover, 13 BANKERS balances, 16, 18, 20, 21, 22 Discount rates at Reserve Banks (See Interest rates) (See also Foreigners) Discounts and advances by Reserve Banks (See Loans) Banks for Cooperatives, 35 Dividends, corporate, 37 Bonds (See also U.S. government securities) New issues, 36 EMPLOYMENT, 46, 47 Yields, 3 Eurodollars, 27 Branch banks Assets and liabilities of foreign branches of U.S. FARM mortgage loans, 41 banks, 56 Farmers Home Administration, 41 Liabilities of U.S. banks to their foreign Federal agency obligations, 4, 1 1, 12, 13, 34 branches, 23 Federal and federally sponsored credit agencies, 35 Business activity, 46 Federal finance Business expenditures on new plant and Debt subject to statutory limitation and equipment, 38 types and ownership of gross debt, 32 Business loans (See Commercial and industrial Receipts and outlays, 30, 31 loans) Treasury operating balance, 30 Federal Financing Bank, 30, 35 Federal funds, 3, 6, 18, 20, 21, 22, 27, 30 CAPACITY utilization, 46 Federal Home Loan Banks, 35 Capital accounts Federal Home Loan Mortgage Corporation, 35, 40, 41 Banks, by classes, 16, 17, 19, 20 Federal Housing Administration, 35, 40, 41 Federal Reserve Banks, 12 Federal Intermediate Credit Banks, 35 Central banks, 68 Federal Land Banks, 35, 41 Certificates of deposit, 23, 27 Federal National Mortgage Association, 35, 40, 41 Commercial and industrial loans Federal Reserve Banks Commercial banks, 15, 18, 26 Condition statement, 12 Weekly reporting banks, 20, 21, 22, 23, 24 Discount rates (See Interest rates) Commercial banks U.S. government securities held, 4, 12, 13, 32, 33 Assets and liabilities, 3, 15-19, 20-23, 69-72 Federal Reserve credit, 4, 5, 12, 13 Business loans, 26 Federal Reserve notes, 12 Commercial and industrial loans, 24, 26 Federally sponsored credit agencies, 35 Consumer loans held, by type, 42, 43 Finance companies Loans sold outright, 23 Assets and liabilities, 39 Number, by classes, 16, 17, 19 Business credit, 39 Real estate mortgages held, by type of holder and Loans, 20, 21, 22, 42, 43 property, 41 Paper, 25, 27 Commercial paper, 3, 25, 27, 39 Financial institutions, loans to, 18, 20-22 Condition statements (See Assets and liabilities) Float, 4 Construction, 46, 50 Flow of funds, 44, 45 Consumer installment credit, 42, 43 Foreign Consumer prices, 46, 51 Currency operations, 12 Consumption expenditures, 52, 53 Deposits in U.S. banks, 4, 12, 19, 20, 21, 22 Corporations Exchange rates, 68 Profits, taxes, and dividends, 37 Trade, 55 Security issues, 36, 65 Foreigners Cost of living (See Consumer prices) Claims on, 56, 58, 61, 62, 63, 67 Credit unions, 29, 42, 43 Liabilities to, 23, 56-60, 64-66 Currency and coin, 5, 16, 18 Currency in circulation, 4, 14 GOLD Customer credit, stock market, 28 Certificates, 12 Stock, 4, 55 DEBITS to deposit accounts, 13 Government National Mortgage Association, 35, 40, 41 Debt (See specific types of debt or securities) Gross national product, 52, 53 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A77 HOUSING, new and existing units, 50 REAL estate loans Banks, by classes, 18, 20-22, 29, 41 INCOME, personal and national, 46, 52, 53 Life insurance companies, 29 Industrial production, 46, 48 Mortgage terms, yields, and activity, 3, 40 Installment loans, 42, 43 Type of holder and property mortgaged, 41 Insurance companies, 29, 32, 33, 41 Reserve position, basic, member banks, 6 Insured commercial banks, 17, 18, 19, 69-72 Reserve requirements, member banks, 9 Interbank loans and deposits, 16, 17 Reserves Interest rates Commercial banks, 16, 18, 20, 21, 22 Bonds, 3 Federal Reserve Banks, 12 Business loans of banks, 26 Member banks, 3, 4, 5, 15, 16, 18 Federal Reserve Banks, 3, 8 U.S. reserve assets, 55 Foreign countries, 68 Residential mortgage loans, 40 Money and capital markets, 3, 27 Retail credit and retail sales, 42, 43, 46 Mortgages, 3, 40 Prime rate, commercial banks, 26 SAVING Time and savings deposits, 10, 72 Flow of funds, 44, 45 International capital transactions ot the United National income accounts, 53 States, 56-67 Savings and loan assns., 3, 10, 29, 33, 41, 44 International organizations, 56-61, 64-67 Savings deposits (See Time deposits) Inventories, 52 >Savings institutions, selected assets, 29 Investment companies, issues and assets, 37 Securities (See also U.S. government securities) Investments (See also specific types) Federal and federally sponsored agencies, 35 Banks, by classes, 16, 17, 18, 20, 21, 22, 29 Foreign transactions, 65 Commercial banks, 3, 15, 16, 17, 18 New issues, 36 Federal Reserve Banks, 12, 13 Prices, 28 Life insurance companies, 29 Special Drawing Rights, 4, 12, 54, 55 Savings and loan associations, 29 State and local governments Deposits, 19, 20, 21, 22 LABOR force, 47 Holdings of U.S. government securities, 32, 33 Life insurance companies (See Insurance companies) New security issues, 36 Loans (See also specific types) Ownership of securities of, 18, 20, 21, 22, 29 Banks, by classes, 16, 17, 18, 20-23, 29 Yields of securities, 3 Commercial banks, 3, 15-18, 20-23, 24, 26 State member banks, 17 Federal Reserve Banks, 3, 4, 5, 8, 12, 13 Stock market, 28 Insurance companies, 29, 41 Stocks (See also Securities) Insured or guaranteed by United States, 40, 41 New issues, 36 Savings and loan associations, 29 Prices, 28 MANUFACTURING Capacity utilization, 46 TAX receipts, federal, 31 Time deposits, 3, 10, 13, 15, 16, 17, 19, 20, 21, Production, 46, 49 22, 23, 69-72 Margin requirements, 28 Member banks Trade, foreign, 55 Assets and liabilities, by classes, 16, 17, 18 Treasury currency, Treasury cash, 4 Borrowings at Federal Reserve Banks, 5, 12 Treasury deposits, 4, 12, 30 Number, by classes, 16, 17, 19 Treasury operating balance, 30 Reserve position, basic, 6 Reserve requirements, 9 UNEMPLOYMENT, 47 Reserves and related items, 3, 4, 5, 15 U.S. balance of payments, 54 Mining production, 49 U.S. government balances Mobile home shipments, 50 Commercial bank holdings, 19, 20, 21, 22 Monetary aggregates, 3, 15 Member bank holdings, 15 Money and capital market rates (See Interest rates) Treasury deposits at Reserve Banks, 4, 12, 30 Money stock measures and components, 3, 14 U.S. government securities Mortgages (See Real estate loans) Bank holdings, 16, 17, 18, 20, 21, 22, 29, Mutual funds (See Investment companies) 32, 33 Mutual savings banks, 3, 10, 20-22, 29, 32, 33, 41 Dealer transactions, positions, and financing, 34 Federal Reserve Bank holdings, 4, 12, 13, 32, 33 NATIONAL banks, 17 Foreign and international holdings and National defense outlays, 31 transactions, 12, 32, 64 National income, 52 Open market transactions, 1 1 Nonmember banks, 17, 18, 19 Outstanding, by type and ownership, 32, 33 Rates, 3, 27 OPEN market transactions, 1 1 Utilities, production, 49 PERSONAL income, 53 VETERANS Administration, 40, 41 Prices Consumer and producer, 46, 51 Stock market, 28 WEEKLY reporting banks, 20-24 Prime rate, commercial banks, 26 Wholesale prices, 46, 51 Production, 46, 48 Profits, corporate, 37 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A 78 The Federal Reserve System B oundaries of Federal R eserve D istricts and Their B ranch Territories — Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities ----- Boundaries of Federal Reserve Branch • Federal Reserve Branch Cities Territories Federal Reserve Bank Facility Q Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis