Federal Reserve Bulletin, 1980-09

Volume 66 □ Number 9 □ September 1980 FEDERAL RESERVE BULLETIN B o ard o f G o v ern o rs o f th e F ed eral R eserv e S y stem W ash in g to n , D .C . P u blic a tio n s C o m m ittee Joseph R. Coyne, Chairman □ Stephen H. Axilrod □ John M. Denkler Janet O. Hart □ James L. Kichline □ Neal L. Petersen □ Edwin M. Truman Naomi P. Salus, Coordinator □ Sandra Pianalto, Staff Assistant The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. The artwork is provided by the Graphic Communications Section under the direction of Peter G. Thomas. 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 683 R ecent C orporate Financing 743 Announcem ents P atterns Revision of Regulation D to carry out pro­ Nonfinancial corporations borrowed heavi­ visions of the Monetary Control Act of 1980 ly in financial markets recently and the gap and announcement of rules to satisfy re­ between nominal capital spending and the serve requirements fixed by the Federal Re­ flow of internal funds was the largest in sev­ serve on transaction accounts and nonper­ eral years. sonal time deposits of nonmember deposi­ tory institutions. (See Legal Developments.) 691 P rofitability o f Insured Revision of Regulation A pertaining to the Com m ercial Banks, 1979 use of the discount window for extensions The profitability of insured commercial of credit by the Federal Reserve to deposi­ banks increased for the third consecutive tory institutions. (See Legal Developments.) year. Revision of rules for use of “ineligible pa­ per” as collateral at the discount window. 707 TREASUR Y AND FEDERAL RESERVE Foreign Exchange Operations Deferral of mandatory date for new meth­ ods of calculating and disclosing the annual Dollar rates in the exchange market fluc­ percentage rate on consumer loans. tuated widely over the six-month period but had firmed by late July. Proposed interpretations of Regulation B concerning consideration of income and 727 Selection and D isclosure o f disclosure of reasons for adverse actions Reasons fo r A dverse A ction in (see article on this subject, this issue); pro­ C redit-G ranting System s posed schedule of fees for Federal Reserve services to financial institutions. Discussion of Board proposal for requiring creditors to disclose their reasons for ad­ Availability of film “EFT at your service.” verse action on credit applications under Expansion of hours for tours of the Federal Regulation B. Reserve Building. 737 In du strial P roduction Annual revision of the index of industrial production and of capacity utilization rates. Output increased about 0.5 percent in Au­ gust. Admission of two state banks to member­ ship in the Federal Reserve System. 739 Statem ent to Congress 747 R ecord o f P olicy A ctions o f the Chairman Paul A. Volcker stresses the need F ederal Open M arket Com m ittee to place immediate policy actions in the context of a coherent longer-run program, At its meeting on July 9, 1980, in accord­ including firm discipline over the growth of ance with the Full Employment and Bal­ money and credit and control over spend­ anced Growth Act of 1978 (the Humphreying and the federal deficit, before the House Hawkins Act), the Committee reviewed the Committee on the Budget, September 10, ranges for growth of the monetary and 1980. credit aggregates for the period from the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

fourth quarter of 1979 to the fourth quarter growth from one month to the next and of 1980 that it had established at its meeting from one quarter to the next. in February and gave preliminary consid­ eration to objectives for monetary growth 755 Legal Developments that might be appropriate for 1981. In Revisions of Regulations A and D; amend­ doing so, the Committee continued to face ments to Regulations D and T; interpre­ unusual uncertainties concerning the forces tation of Regulation Y; various rules and affecting monetary growth. Expansion of bank holding company and bank merger or­ both M-l A and M-1B from the fourth quar­ ders; and pending cases. ter of 1979 to the second quarter of 1980 fell considerably below the growth paths con­ Al F inancial and Business S tatistics sistent with the Committee’s ranges for the year. However, growth of M-2 and M-3 was A3 Domestic Financial Statistics considerably stronger: over the two quar­ A46 Domestic Nonfinancial Statistics ters both of these aggregates grew at rates A54 International Statistics just above the lower bounds of their ranges. By midyear, growth of M-2 was near the A69 Guide to Tabular P resentation midpoint of its range, and it appeared to be and S ta tistica l R eleases moving higher. The Committee decided to retain the A70 Board o f G overnors and ranges for 1980 that it had established in S ta ff February: for the period from the fourth quarter of 1979 to the fourth quarter of A ll Federal Open Market Committee 1980, Vh to 6 percent for M-l A, 4 to 6V2 and Staff; Advisory Councils percent for M-lB, 6 to 9 percent for M-2, and 6V2 to 9V2 percent for M-3. The asso­ A73 F ederal R eserve Banks, ciated range for commercial bank credit re­ B ranches, and O ffices mained 6 to 9 percent. As in the past, it was understood that the longer-run ranges, as A74 F ederal R eserve Board well as the particular aggregates for which P ublications ranges were specified, would be reconsid­ ered at any time that conditions might war­ A76 Index to S tatistical Tables rant, and that short-run factors might cause considerable variation in annual rates of A78 Map o f F ederal R eserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Corporate Financing Patterns This article was prepared by Norman E. Mains of struction in previous quarters. Nevertheless, the the Board's Capital Markets Section, Division of increased dependence on shorter-term sources of Research and Statistics. funds reinforced the rise in the ratio of shortto long-term debt raised in markets and pushed Nonfinancial corporations borrowed heavily in it to a historic high in the first quarter of 1980. financial markets in 1979 and early 1980, as the In the second quarter of 1980, aggregate credit economy moved through the late stages of the flows contracted in association with the fall in expansion. Capital expenditures, buoyed in part economic activity and the credit restraint pro­ by the continued strong advance in prices, in­ gram and other measures taken in mid-March creased more rapidly than the flow of internal to stem inflation (table 1). Short-term interest funds, and the financing gap was the widest since rates declined by an unprecedented amount, 1974 (chart 1). To meet financing needs, non­ and most long-term interest rates retraced the financial firms borrowed substantial amounts increases recorded earlier in the year. Although from short- and intermediate-term sources of the financing gap narrowed only moderately, funds. Short-term borrowing was especially borrowing by nonfinancial corporations was heavy early in 1980 when many firms borrowed reduced because many firms used liquid assets apparently in anticipation of rumored credit con­ accumulated earlier in the year to help meet trols and used the proceeds to acquire liquid their requirements. Taking advantage of the assets. Note and bond financing remained rela­ decline in longer-term yields, manufacturing tively light by historical standards in 1979 and and other industrial corporations issued an into 1980, as many nonfinancial corporations enormous amount of long-term debt and used avoided issuing longer-term obligations at the rel­ some of the proceeds to reduce their reliance atively high level of interest rates that prevailed on loans from commercial banks. This restruc­ throughout the period. Meanwhile, the volume of turing of balance sheets decreased the ratio of commercial mortgage financing continued to be short- to long-term debt somewhat, but the draw­ sizable, reflecting the quickened pace of con- down in liquid assets together with the record in­ crease in nonfinancial commercial paper out­ standing further depressed corporate liquidity, as 1. Financing gap of nonfinancial corporations measured by the ratio of liquid assets to current Billions of dollars liabilities, to its lowest level since 1974. Capital Expenditures Capital expenditures by nonfinancial corpora­ tions, which had trended higher since the busi­ ness cycle trough in 1975, apparently reached a peak in mid-1979 (chart 2). Inventory accumula­ tion was reduced in the second half of the year, and near the end of the year growth of fixed in­ vestment decelerated. Expenditures for fixed in­ vestment were held down last year by declining 1972 1974 1976 1978 1980 purchases of motor vehicles, as businesses react­ Financing gap is capital expenditures less gross internal funds. Flow of funds quarterly data, seasonally adjusted at annual rates. ed to the temporary shortage of gasoline in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

684 Federal Reserve Bulletin □ September 1980 1. Flow of funds for nonfinancial corporations Billions of dollars; quarterly data are seasonally adjusted annual rates. 1980 Category 1976 1977 1978 1979 Ql Q2 Sources of funds............................................. 209.8 242.3 295.7 341.3 323.9 256.8 Internal funds ............................................ 125.3 139.9 148.8 158.3 153.7 162.2 Retained earnings1 ............................... 20.0 25.6 23.7 19.5 3.7 8.2 Capital consumption allowances ....... 105.3 114.3 125.1 138.8 150.0 154.0 External financing .................................... 60.7 79.9 94.7 114.3 119.4 70.7 Trade debt ................................................. 13.6 21.7 44.8 60.7 36.4 27.7 Other sources2 ......................................... 10.2 0.8 7.4 8.0 14.4 -3.8 Uses of funds................................................... 183.4 216.8 274.3 319.4 305.4 233.5 Capital expenditures.................................. 139.0 169.9 195.9 221.3 224.5 222.2 Fixed investment3.................................. 124.2 148.2 174.2 199.4 212.0 204.0 Inventories ............................................ 10.8 19.2 19.7 17.1 7.1 16.6 Other4 .................................................... 4.0 2.5 2.0 4.7 5.4 1.6 Increases in liquid assets......................... 13.9 1.9 10.3 18.8 39.2 -19.4 Trade credit ............................................... 19.5 31.6 54.9 66.1 35.2 28.8 Other uses5................................................. 10.9 13.4 13.1 13.3 6.5 1.9 Discrepancy6 ............................................ 26.4 25.5 21.4 21.9 18.5 23.3 1. Includes foreign branch profits and inventory valuation and capi­ 4. Purchases of mineral rights from U.S. government. tal consumption adjustments. 5. Includes changes in miscellaneous financial assets and in con­ 2. Includes changes in profit taxes payable and foreign direct in­ sumer credit. vestment in the United States. 6. Total sources of funds less total uses of funds. 3. Includes plant and equipment expenditures and investment in Source. Federal Reserve flow of funds accounts. residential structures. spring and higher prices of fuel. The expansion Total inventory investment increased some­ of investment outlays for capital goods other what in the first half of 1979, in part because of than autos, which includes machinery, other the emergence of excess inventories of less-fuelequipment, and plant and other structures, efficient automobiles and trucks at dealers and slowed substantially around the turn of the year manufacturers. After midyear, however, motor and declined in the second quarter of 1980. vehicle manufacturers cut production and under­ took policies to stimulate sales in efforts to achieve more comfortable stock-sales positions. 2. Capital expenditures of nonfinancial corporations Outside the motor vehicle sector, ratios of inven­ Billions of dollars tories to sales remained generally within their normal ranges through most of last year, except at retail department stores where lackluster sales kept the ratio at a high level. Although inventory investment remained moderate in early 1980, sales dropped off in the second quarter and ag­ gregate inventory-sales ratios climbed sharply. As the quarter progressed, companies ran down inventory stocks, valued in constant dollars. Corporate Profits and I I I I 1976_______1978 Internal Sources of Funds Fixed investment includes plant and equipment expenditures and investment in residential construction. Total capital expenditures in­ Although total capital expenditures of non­ clude fixed investment, change in inventories, and purchases of financial corporations moderated over the past mineral rights from the U.S. government. Flow of funds quarterly year, corporate financing needs remained quite data, seasonally adjusted at annual rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Corporate Financing Patterns 685 3. Profits of nonfinancial corporations and enlarged borrowing. The ratio of adjusted profits before tax to gross domestic product of Billions of dollars nonfinancial corporations, an approximate mea­ sure of the aggregate profit margin for such firms, fell from its peak of near 11 percent in the final quarter of 1978 to below VU percent in the sec­ ond quarter of 1980. Historically, the profit share has peaked 4 to 14 quarters before the peak in economic activity, when higher resource utiliza­ tion causes productivity gains to slow and unit costs to accelerate. During periods of accelerating inflation, the ef­ fective tax rate on current operating profits rises because taxes are levied on book profits that are bloated by inflation-related gains. Reflecting this, after-tax operating profits increased much less Profits before tax include foreign branch profits. Adjusted profits are profits plus the inventory valuation adjustment and the capital than before-tax earnings during the past expan­ consumption adjustment. Flow of funds quarterly data, seasonally ad­ sion and contracted more sharply in 1979 and the justed at annual rates. first quarter of 1980 (table 2). Despite the weak­ sizable owing to a falloff in profits. Book or re­ ness in after-tax operating profits, dividend pay­ ported profits of U.S. nonfinancial corporations ments of nonfinancial firms continued upward. rose strongly through the first quarter of 1980, As a result, adjusted retained earnings declined but all of the increase reflected inflation-related more than 17 percent from their previous year’s gains associated with the understatement of the level to near $20 billion in 1979 and to less than costs of materials and of fixed capital used in pro­ $6 billion in the first half of 1980. duction. Before-tax profits adjusted to exclude Comparisons of profit movements among in­ such inflation gains (current operating profits) dustries reveal diverse trends in 1979 and the reached a peak in the final quarter of 1978 and first quarter of 1980 (table 3). Within the non­ declined in subsequent quarters (chart 3). The durable manufacturing sector, before-tax profits weakness in operating profits occurred despite from domestic operations with inventory valu­ the continued rapid expansion of nominal sales ation adjustment (but without capital consump­ through early 1980. Profit margins narrowed as tion adjustment, which is not available by indus­ declines in productivity contributed to accelerat­ try) climbed more than 35 percent between the ing unit labor costs and as net interest payments first quarter of 1979 and the first quarter of 1980, increased in association with higher interest rates influenced by exceptionally large gains reported 2. Internal funds of nonfinancial corporations Billions of dollars; quarterly data are seasonally adjusted annual rates. 1980 Item 1976 1977 1978 1979 Ql Q2 Reported profits before tax1............................ 133.8 148.5 171.1 198.0 220.0 171.7 Plus inventory valuation adjustment......... -14.6 -15.2 -25.2 -41.8 -63.2 -28.2 Plus capital consumption adjustment ....... -13.9 -11.3 - 12.0 -15.0 -20.0 -22.2 Adjusted profits before tax ............................ 105.3 122.0 133.9 141.2 136.8 121.3 Less profit tax accruals ............................... 52.4 59.4 68.6 74.8 82.7 60.3 Adjusted profits after tax ............................... 52.9 62.6 65.3 66.4 54.1 61.0 Less net dividends paid............................... 32.9 37.0 41.6 46.8 50.4 52.8 Adjusted retained earnings ............................ 20.0 25.6 23.7 19.5 3.7 8.2 Plus depreciation allowances .................... 105.3 114.3 125.1 138.8 150.0 154.0 Gross internal funds......................................... 125.3 139.9 148.8 158.3 153.7 162.2 1. Includes foreign branch profits. Source. Federal Reserve flow of funds accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

686 Federal Reserve Bulletin □ September 1980 3. Before-tax domestic profits of nonfinancial corporations with inventory valuation adjustment and without capital consumption adjustment1 Billions of dollars; quarterly data are seasonally adjusted annual rates. 1980 Industry 1976 1977 1978 1979 Ql Q2 Total.............................................. 115.3 128.3 140.9 148.5 146.5 132.6 Manufacturing.............................. 65.7 73.5 81.7 88.8 93.0 73.4 Nondurable.............................. 37.5 39.3 41.4 51.5 65.5 58.1 Food...................................... 7.3 6.2 5.7 6.9 8.3 8.1 Chemicals ............................ 8.0 7.6 7.9 7.7 8.9 7.0 Petroleum.............................. 11.7 12.2 13.0 21.5 32.6 30.4 Other...................................... 10.6 13.4 14.7 15.5 15.7 12.6 Durable...................................... 28.2 34.2 40.3 37.2 27.4 15.3 Metals.................................... 5.9 5.6 7.1 8.5 9.7 5.4 Nonelectrical machinery .... 5.6 7.1 8.3 7.7 5.7 6.4 Electrical equipment............ 2.7 4.2 5.2 5.1 4.6 4.3 Motor vehicles .................... 7.4 9.1 8.9 4.5 -2.8 -8.8 Other...................................... 6.7 8.2 10.8 11.5 10.2 8.1 Wholesale and retail trade ......... 23.3 24.1 23.0 23.7 16.5 21.7 Public utilities, communication, and transportation.................... 13.8 16.8 20.3 18.9 18.0 18.2 Services and other....................... 12.4 13.9 16.0 17.1 19.0 19.3 1. The capital consumption adjustment is not calculated on an in­ Source. Department of Commerce. dustry basis. by petroleum companies. The rapid increase in clined and rising costs further eroded profit world petroleum prices, the initiation of the margins. In the manufacturing sector, operating staged deregulation of natural gas in the United profits fell to their lowest level since 1977; the States, and the sizable increase in prices for heat­ earnings of almost all industry groups declined ing fuel and gasoline contributed to a substantial from the previous quarter, and the motor vehicle increase in the profit margins of these firms. Dur­ industry posted a record loss. ing the same period, profits of primary and fabri­ cated metals producers gained from the accelera­ tion in basic metals prices, but the operating External Financing profits of other durable goods manufacturers de­ clined sharply. Firms associated with the motor Growing needs for external financing in 1979 and vehicle industry registered the most pronounced early 1980 were met largely with short- and interfalloff in profits, as gasoline shortages in the mediate-term borrowing (table 4). This pattern spring encouraged consumers to shift away from was especially pronounced in the first three quar­ larger vehicles to lighter units with greater fuel ters of 1979 when growth in commercial and in­ efficiency; such models were less readily avail­ dustrial loans at all commercial banks soared to able from domestic producers than from foreign more than 20 percent at a seasonally adjusted an­ manufacturers. Outside the manufacturing sector, nual rate, one of the fastest increases on record. surging fuel costs contributed to weaker profits In addition, nonfinancial corporations increased for utilities and transportation firms, which had their net issuance of commercial paper by a large difficulty in passing through increased costs to amount during this period. Business loans at fi­ their customers. Within the trade sector, retail nance companies also grew sharply in the first trade profits declined when sales and profit mar­ half of last year, with the major share of this gins were depressed by severe weather and the growth representing extensions by captive sub­ shortage of gasoline. sidiaries of motor vehicle manufacturing com­ The sharp contraction in aggregate economic panies to finance rising levels of inventories at activity in the spring of 1980 caused the decline dealers. As these inventories began to be re­ in operating profits to worsen. As is usual in peri­ duced in the third quarter, finance company lend­ ods of rapidly falling demand, productivity de­ ing slowed considerably. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Corporate Financing Patterns 687 4. Net funds raised in markets by nonfinancial corporations Billions of dollars; quarterly data are seasonally adjusted annual rates. 1979 1980 Type of obligation 1976 1977 1978 1979 Ql Q2 Q3 Q4 Ql Q2 Total......................................... 60.7 79.9 94.7 114.3 113.4 123.9 126.7 93.0 119.4 70.7 Commercial paper................. 1.4 1.6 2.7 8.8 7.0 9.9 12.1 6.0 25.8 20.2 Acceptances............................ 1.3 0.6 1.2 1.0 3.7 -0.2 2.1 -1.4 5.4 1.5 Finance company loans ....... 5.2 10.3 8.3 7.0 10.6 11.7 3.7 2.0 -1.4 -4.7 Bank loans1 ............................ 4.0 21.3 33.3 45.1 43.3 47.2 52.6 37.3 33.8 -2.8 Notes and bonds2 .................. 25.3 24.5 23.3 24.8 24.3 27.1 24.6 22.6 23.4 46.7 Mortgages ............................... 12.9 18.9 23.3 24.2 21.8 25.3 28.3 21.5 24.1 5.9 Equity....................................... 10.5 2.7 2.6 3.5 2.9 2.8 3.2 5.0 8.2 3.9 1. Includes a small amount of U.S. government loans. Source. Federal Reserve flow of funds accounts. 2. Includes tax-exempt revenue bonds to finance outlays for industrial pollution control. In longer-term markets, mortgage borrowing life insurance companies, the principal suppliers continued to climb through the first three quar­ of funds for private placements. Insurance com­ ters of 1979 to finance a growing volume of com­ panies were using an increased proportion of mercial construction. Publicly offered note and their investable funds to meet the high level of bond issues, however, remained close to the mod­ their outstanding commercial mortgage commit­ erate pace of the previous several years. Tradi­ ments, associated in part with the rapid pace of tionally, publicly offered bonds protect the inves­ construction of industrial plant and other struc­ tor from call or refunding for five years in the tures in previous quarters. case of public utility issues and ten years for Nonfinancial corporations greatly reduced issues of industrial corporations; these periods of their net borrowing in financial markets in the fi­ call protection encourage managements to post­ nal three months of 1979, largely in response to pone issuing such obligations if they think yields developments early in the quarter. On October 6, may decline in the near future. Through the first 1979, the Federal Reserve announced a series of three quarters of 1979 yields on corporate bonds policy actions designed to achieve a slowing in climbed steadily, approaching the record levels the growth of money and bank credit and thereby of 1974 and 1975, and corporations generally to help reduce inflationary pressures. Interest sought to avoid incurring long-term obligations at rates rose sharply and financial markets became such rate levels (chart 4). To some extent, busi­ unusually unsettled following the announcement, nesses turned to intermediate-term borrowing in although some of the interest rate increases were order to avoid even greater reliance on short­ partially retraced late in the year. As the cost to term debt; early in the year, term loans—that is, banks of obtaining lendable funds climbed and loans with maturities of more than one year—at uncertainty about fund availability also in­ banks accounted for an increased share of busi­ creased, the prime rate was raised 2 percentage ness borrowing from this source. In addition, points in October and November, reaching a high several multinational corporations raised cash of 153A percent. In addition, nonprice lending for U.S. operations in the Eurobond market in terms and standards of creditworthiness were the first half of 1979, attracted by the relatively tightened, with banks becoming more reluctant short period of call protection (three years) as to lend to new customers and more strict about well as by a drop in intermediate-term Eurodollar compensating-balance requirements. As a result, rates in the spring. business loan growth at banks slowed markedly Private placements of corporate bonds, as well in the fourth quarter. Intermediate- and longeras public offerings, failed to fill the growing need term interest rates rose between 1 and IV2 per­ for external financing in 1979. The volume of pri­ centage points in October and November before vate placement takedowns actually declined last edging lower toward year-end, and longer-term year, reflecting not only a reluctance by corpora­ financing fell to its lowest level in almost two tions to borrow in long-term markets but also years. some constraints on the availability of funds at Further increases in intermediate- and long­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

688 Federal Reserve Bulletin □ September 1980 term interest rates in the first few months of 1980 Money market interest rates also began rising discouraged businesses from raising bond of­ sharply in midquarter. Despite the high levels of ferings much above their depressed fourth-quar- short-term interest rates and a somewhat nar­ ter pace. Moreover, issuing corporations struc­ rower gap between capital expenditures and tured their publicly offered note and bond issues gross internal sources of funds, nonfinancial cor­ so that the proportion of intermediate-term porations boosted their short- and intermediateobligations rose to its highest level since 1974. term borrowing in the early months of 1980, ap­ Private placements of notes and bonds rose some­ parently in anticipation of rumored credit con­ what in early 1980, although this increase largely trols, and used the proceeds to expand their reflected takedowns of previous commitments. holdings of liquid assets. Nonfinancial com­ Life insurance companies cut back their new mercial paper outstanding increased especially commitment activity in the face of large net ex­ sharply, acceptance financing rose, and loan tensions of policy loans, shortfalls in expected growth at banks accelerated early in the quarter. contributions to pension and other retirement Spurred in part by the rapid escalation of inter­ plans, and the continuing heavy takedowns of est rates, which seemed to indicate that investors previously committed mortgage financings. De­ were becoming increasingly pessimistic about spite the rise in interest rates, stock prices the outlook for restraining price increases, Presi­ continued to climb early in the year and broadly dent Carter, on March 14, 1980, announced a based stock price indexes reached record highs broad program of fiscal, energy, credit, and other in midquarter (chart 5). New equity financing measures designed to help curb inflationary surged, with most of the increase attributable to forces. The President also provided the Federal industrial concerns, especially firms associated Reserve with authority, under the terms of the with the petroleum and natural gas business. Credit Control Act of 1969, to exercise particular 4. Interest rates Percent SHORT-TERM CORPORATE DEBT LONG-TERM CORPORATE BONDS Bank prime loan Moody’s Baa Moody’s Aaa Commercial paper Short term: Monthly averages of business days. Dealer offering rate bank prime less commercial paper. Long-term: Moody’s Investors on 91- to 119-day, highest quality commercial paper. Prime rate on Service, monthly average bond yields for seasoned Baa and Aaa cor­ business loans charged by majority of commercial banks. Spread is porate issues. Rate spread is Moody’s Baa minus Aaa issues. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Corporate Financing Patterns 689 5. Corporate stock price movements only a little from the unusually high first-quarter total. Mortgage lenders became especially cau­ tious in the wake of the steeply downward slop­ ing yield curve that developed in March and the uncertain outlook that followed the mid-March announcement; commercial mortgage financing fell to its lowest level since late 1976. Stock prices retraced most of their March decline in re­ sponse to the large drop in interest rates, and by the end of June, equity values were close to their historic highs. The rapid improvement in stock prices again elicited common and preferred stock financings, with the result that new equity financ­ ings in the first half of 1980 were a record for a AMEX = American Stock Exchange; NASDAQ = National Asso­ six-month period. ciation of Securities Dealers Quotations; NYSE = New York Stock Exchange. The stock price composite indexes are monthly averages normalized to equal 100 in December 1974. Corporate Liquidity and restraint on certain types of credit. Banks and Capitalization other lenders cut back sharply on credit exten­ sions following the announcement, and interest The recent financing patterns of nonfinancial cor­ rates continued to move higher. Beginning in porations are summarized by movements in mea­ April, however, rates began to fall rapidly, with sures of balance sheet liquidity and capital­ short-term interest rates dropping 7 to 10 per­ ization. Immediately after the 1973-75 recession, centage points by June to their lowest levels in nonfinancial corporations rebuilt their depleted two years, and long-term bond and mortgage liquid asset positions and aggressively reduced yields generally retracing the increases recorded their reliance on shorter-term sources of funds. in the first quarter of 1980. These firms continued to add to their liquid asset The growth of aggregate measures of money positions through the second half of the 1970s, and credit declined abruptly in response to the but the increasing reliance on short- and intercredit restraint actions and to a sharp contraction mediate-term borrowings in the late 1970s in economic activity. Nonfinancial corporations caused the ratio of liquid assets to total cur­ reduced their borrowing in credit markets to the rent liabilities—a measure of corporate liquidity lowest level in three years, as many firms were positions—to drop steadily; by the middle of able to meet financing requirements by drawing 1980 it had fallen to levels near those of the down their holdings of liquid assets. The compo­ previous recession (chart 6). sition of external financing also shifted markedly. The increased reliance of firms on short- and Manufacturing and other industrial corporations intermediate-term financing also has produced a issued an unprecedented amount of notes and steady rise in the ratio of short- to long-term debt bonds as yields declined, with a much smaller raised in markets (chart 6). Relatively heavy em­ proportion in intermediate-term maturities. Pro­ phasis by nonfinancial firms on investment in ceeds from many of these financings were used shorter-lived motor vehicles and inventories may to reduce reliance on shorter-term sources of have prompted this rise in 1976 and 1977, but the funds—especially loans from commercial banks, ratio continued to climb sharply even after the which registered a net decline for the quarter. composition of capital outlays shifted toward The weakness in bank business lending in part longer-lived industrial plants and other structures reflected the lagging adjustment of the prime rate in 1978 and 1979. Many nonfinancial corporations to declines in other interest rates. A record were reluctant to issue notes and bonds during spread between the prime and commercial paper this period at the unprecedented high level of rates opened up during the quarter, and borrow­ interest rates, in part because expectations of a ing in the commercial paper market moderated recession were widespread. Indeed, publicly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

690 Federal Reserve Bulletin □ September 1980 6. Liquidity measures for nonfinancial corporations two-thirds of total capitalization in the 1950s, but then declined steadily to only 53 percent in 1973, from which level it rebounded only a modest amount in the most recent expansion. The reduced level of equity in the balance sheets Short-term debt to long-term debt of nonfinancial corporations in recent years reflects both the general weakness in retained earnings and more importantly the reliance on financing externally with debt rather than equity capital. Escalating inflation, the tax deductibility Liquid assets to currrent liabilities of interest payments, and the generally low level of both stock prices and price-earnings multiples over most of the period encouraged the heavy reliance on debt financing. * = break in series Traditionally, a deterioration in these financial Liquid assets include currency, demand and time deposits, foreign deposits, U.S. government securities, state and local obligations, ratios, such as experienced in recent years, has open market paper, and security repurchase agreements. Short-term been interpreted as indicating an increased vul­ debt consists of short-term bank loans, commercial paper, bankers nerability on the part of some corporations to ad­ acceptances, finance company loans, and U.S. government loans. Total current liabilities include short-term debt plus trade debt and verse developments. For example, greater re­ profit taxes payable. Flow of funds quarterly data seasonally ad­ justed. liance on short-term debt implies a faster response of interest costs to rising rates; more­ over, firms must refinance at more frequent inter­ offered and privately placed note and bond vals, even when credit availability has been se­ financing was well below the 1975 total in each of verely curtailed. And, a relatively low share of the subsequent four years, although it is likely to equity in total capitalization means that a rela­ reach a new high in 1980 given the exceptional tively high level of contractual interest payments amount of public offerings in the second quarter. persists through downturns in sales and income. Net stock issuance by nonfinancial firms re­ The relevance of these traditional measures for mained relatively light in 1979—this form of assessment of corporate financial soundness may financing was unattractive to many firms that not be as clear today as it once was, since faced historically low price-eamings ratios—and innovations in financial markets have allowed total equity as a percent of total capitalization both corporations and their creditors to adopt edged down slightly from its average of the past new techniques for managing assets and liabil­ three years. By the end of 1979, the share of ities. Nonetheless, corporate concern about equity was less than 58 percent, when tangible balance sheet positions is evident from the large assets (that is, reproducible assets such as volume of bond and stock issues elicited this structures and equipment plus land) are valued at year by downward movements in the costs of replacement cost. Equity accounted for nearly these funds. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

691 Profitability of Insured Commercial Banks, 1979 Barbara Negri Opper of the Board's Division of 1. Income and expense as percent of average assets, Research and Statistics prepared this article.1 all insured commercial banks, 1977-791 Item 1977 1978 1979 In 1979 the profitability of insured commercial Gross interest earned ............................... 6.47 7.24 8.62 banks increased for the third consecutive year Gross interest expense ............................ 3.54 4.17 5.50 Net interest margin ............................... 2.93 3.07 3.12 following the reductions resulting from the Noninterest income .................................. .70 .74 .78 1973-75 recession. The rate of return on assets Loan-loss provision ................................. .26 .25 .24 Other noninterest expense....................... 2.45 2.50 2.54 rose from 0.76 to 0.80 and the rate of return on Income before tax................................. .92 1.06 1.12 Taxes2................................................. .23 .29 .28 equity increased from 12.9 to 13.9 percent—both Other3................................................. .01 -.02 -.04 highs for the decade. Dollar profits, at $12.8 bil­ Net income ............................................ .71 .76 .80 Cash dividends declared ................. .26 .26 .28 lion, set a record.2 Net retained earnings ............................... .45 .50 .52 The gain in the pre-tax return on assets during 1979 was less than half that achieved a year Memo Taxable equivalent net interest earlier. The 1978 gain reflected mainly an ex­ margin4 .............................................. 3.33 3.48 3.48 Average assets (billions of dollars)1 ..... 1,257 1,419 1,594 pansion of net interest margins, but in 1979 the pronounced increase in market interest rates and 1. Average assets are fully consolidated and net of loan-loss re­ serves; averages are based on amounts outstanding at the beginning a greater reliance on liabilities that carry costs and end of each year. tied to market rates resulted in an increase in in­ 2. Includes all taxes estimated to be due on income, on extraordi­ nary gains, and on securities gains. terest costs that nearly equaled the gain in inter­ 3. Includes securities and extraordinary gains or losses (-) before est revenue. Moreover, a combination of greater taxes. 4. For each bank with profits before tax greater than zero, income liquidity pressures and rising interest rates pro­ from state and local obligations was increased by [1/(1 - t) - 1] duced enlarged losses from the sale of securities times the lesser of profits before tax or interest earned on state and local obligations (t is the federal income tax rate, which changed in in 1979, especially in the fourth quarter. Loan- 1979). This adjustment approximates the equivalent pre-tax return on loss provisions were reduced by the same state and local obligations. amount as in 1978. Table 1 summarizes the major components of industry returns on average as­ typified by fixed-rate longer-term assets funded sets. by short-term liabilities sensitive to market rates. Because of the sharp increases in interest rates As in 1978, year-to-year changes in net interest and because of the potential costs for large banks margins also varied by type of bank. Those with associated with the Federal Reserve’s October 6 less than $1 billion in assets, which as a class had marginal reserves program, positioning of assets the highest proportion of liabilities covered by and liabilities was an important determinant of fixed-rate ceilings on deposits, experienced an profitability during 1979. Commercial banks with improvement of 2 to 3 percent in net interest expanded net interest margins tended to hold margins. Margins at large non-money-center more assets than liabilities that carried interest banks were about unchanged. Money center rates highly responsive to changes in market banks experienced a contraction of about 3 per­ yields. Conversely, the balance sheets of other­ cent in their consolidated net interest margins, wise similar banks with reduced margins were owing to a narrowing of margins at their impor­ tant and rapidly growing overseas offices. All U.S. insured commercial banks with for­ 1. The data base was developed by Nancy Pittman, and eign offices showed increased profitability during research assistance was provided by Mary McLaughlin. 1979. Their domestic net interest margins ex­ 2. Appendix tables A.l and A.2 present historical income panded, partially offsetting the reduction in forand expense information for all insured commercial banks and for member banks. eign-office margins. Gains in noninterest income Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

692 Federal Reserve Bulletin □ September 1980 and reductions in loan-loss provisions contrib­ costs, and income and expenses scaled to aver­ uted to growth in profits at those banks. age assets for major groups of banks. Yields on investment securities portfolios in­ creased more slowly than those on loans. The av­ Interest Income erage current yield on U.S. government holdings increased 88 basis points, and taxable equivalent Gross interest income as a percent of average as­ yields on total investment securities portfolios sets rose 138 basis points during 1979, about are estimated to have increased only 42 basis double the increase a year earlier when market points. With an average portfolio maturity of al­ yields had risen far more slowly. The rise in re­ most five years, only a small proportion of hold­ turn on assets was associated primarily with the ings matured to provide opportunities for rein­ pattern of market yields, but also reflected a shift vestment; some banks realized the capital losses from securities to higher-yielding loans; another associated in 1979 with sales of longer maturities 5 basis points of the gain can be traced to a shift to reinvest in issues offering higher current re­ out of tax-exempt securities into taxable in­ turns. Although banks added nearly $15 billion, struments. Commercial banks with the largest net, to their holdings of securities during 1979, proportional holdings of short-term and floating- securities as a proportion of assets fell during the rate assets experienced gains substantially above year because of strong growth in loans (table 3). the average for all banks, whereas those with a Effective in 1979, changes in the structure of smaller proportion of rate-sensitive assets exhib­ federal taxes applicable to commercial bank in­ ited below-average improvement. come introduced a larger number of incremental The average return on loan portfolios rose 169 tax brackets; this change had the overall effect of basis points in 1979 (table 2). Almost 90 percent lowering tax rates somewhat, particularly for of loans at money center banks carried maturities banks with taxable income between $25,000 and shorter than one year or had floating rates tied to $100,000. As a result, the value of the tax prefer­ money market yields, and returns on loan portfo­ ence from state and local obligations tended to be lios at these banks increased 270 basis points. By reduced. Thus, despite an increase in the nomi­ contrast, yields at small banks increased only 60 nal yield on bank portfolios of state and local gov­ basis points; these banks generally have larger ernment securities, the taxable equivalent yield percentages of their portfolios in small business, is estimated to have declined during 1979. consumer, and real estate loans, which are char­ Interest income, when scaled to average assets acterized by relatively slow turnover and rela­ and adjusted for approximate tax equivalence, tively stable yields, and in many cases by the increased 133 basis points in 1979 for insured constraints of usury ceilings. Appendix table A.3 banks as a group, and gains were experienced by presents 1979 summary statistics on balance every class of bank (chart 1). Money center sheet composition, effective interest returns and banks had the sharpest increase: their gross in­ terest income per dollar of average assets ex­ panded 24 percent. By comparison, these banks 2. Rates of return on fully consolidated portfolios, recorded a gain of 28 percent in 1974 when the all insured commercial banks, 1977-791 annual average of short-term market yields in­ Percent creased much less than it did from 1978 to 1979. Item 1977 1978 1979 Other large banks apparently have increased the rate sensitivity of their asset returns, with inter­ Securities, total....................................... 6.22 6.47 7.05 U.S. government ............................... 6.98 7.37 8.25 est income growing faster in 1979 than in 1974, a State and local government............... 5.08 5.24 5.58 Other.................................................... 8.92 8.80 9.24 cyclically comparable year.3 By contrast, gross Loans, gross............................................ 9.15 10.32 12.01 interest income at small banks grew about the Net of loan-loss provision ............... 8.63 9.82 11.55 Taxable equivalent2 Total securities ................................. 8.43 8.89 9.31 State and local.................................... 10.18 10.62 10.44 Total securities and gross loans ....... 9.96 9.95 11.37 3. Comparisons of 1974 and 1979 for large banks are marred because only domestic-office operations were includ­ 1. Calculated as described in the “Technical note,” Bulletin, vol. 65 (September 1979), p. 704. ed in earlier years; beginning in 1976, all income and expense 2. See note 4 to table 1. data were fully consolidated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profitability of Insured Commercial Banks, 1979 693 3. Portfolio composition as percent of total assets including loan-loss reserves, all insured commercial banks, 1976-791 Average during year Domestic Fully consolidated Item 1976 1977 1978 1979 1976 1977 1978 1979 Interest-earning assets ............................................................ 80.9 80.3 79.2 80.4 83.4 83.3 82.4 83.0 Loans...................................................................................... 52.0 52.1 53.3 56.0 53.1 53.4 54.6 56.3 Securities .............................................................................. 23.9 23.2 21.3 20.0 20.8 20.0 18.4 17.2 U.S. Treasury................................................................... 9.2 9.2 7.7 6.6 7.9 7.8 6.5 5.5 U.S. government agencies.............................................. 3.5 3.3 3.2 3.4 3.0 2.8 2.7 2.8 State and local governments........................................... 10.6 10.2 9.8 9.5 9.1 8.7 8.3 8.0 Other bonds and stock .................................................... .6 .5 .6 .5 .8 .8 .9 .8 Gross federal funds sold and reverse RPs......................... 4.0 4.2 4.0 4.0 3.4 3.6 3.3 3.4 Interest-bearing deposits2.................................................... 1.0 .8 .6 .4 6.1 6.3 6.1 6.2 Memo: Average gross assets (billions of dollars)................. 958 1,056 1,198 1,329 1,116 1,244 1,406 1,593 1. Percentages are based on aggregate data and thus reflect the ported 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 an dates in December of the preceding year and March, June, September, average based on the reported December amount and estimates for and December of the current year. earlier call report dates. Fully consolidated interest-bearing deposits 2. Interest-bearing deposits held by domestic offices first were re­ are estimated for 1976 and 1977. same from 1978 to 1979 as in 1974, implying some nate “other deposits” in the table. Most of the decline in the sensitivity of their asset returns to 84-basis-point cost increase is attributable to the open market yields. growth of six-month money market certificates (MMCs). MMCs grew from 5 percent to 22 per­ cent of “other deposits” as defined in the table, Interest Expense and the average interest rate on MMCs issued during 1979 increased 200 basis points. The only With the rapid escalation of market yields during changes in fixed-deposit-rate ceilings during 1979 1979 and the pronounced shift toward greater use were V4-percentage-point increases for pass­ of rate-sensitive funding sources, interest ex­ book and 90-day time accounts, so only a penses per dollar of average assets increased minor part of the interest cost increase in one-third over 1978. All classes of banks experi­ “other deposits” is related to such regulatory enced runoffs from their demand and savings ac­ actions. counts and from small time deposits carrying Even though funds from MMCs more than re­ fixed interest-rate ceilings. Consequently they plenished withdrawals from bank savings and had to expand their issuance of liabilities car­ fixed-ceiling small-denomination time accounts, rying short maturities and offering returns com­ the share of commercial bank assets funded by petitive with money market yields. For all banks savings and all small time balances diminished taken together, however, the increase in interest costs is attributable not so much to the shift in 4. Rates paid for fully consolidated liabilities, sources of funds as to the rapid increase in in­ all insured commercial banks, 1977-791 terest costs on claims that are not subject to Percent deposit rate ceilings. Those costs increased more Item 1977 1978 1979 than 300 basis points on average during 1979 Time and savings accounts............................... 5.72 6.76 8.69 (table 4) and were nearly twice the level of 1977. Negotiable CDs2............................................ 5.58 7.85 10.52 Deposits in foreign offices............................ 5.94 8.04 11.38 With two exceptions, all categories of interest- Other deposits ............................................... 5.67 5.81 6.65 bearing liabilities cost an average of at least 200 Subordinated notes and debentures ............... 7.38 7.77 8.41 Gross federal funds purchased and RPs......... 6.10 8.68 12.95 basis points more than in 1978. One exception is Other liabilities for borrowed money ............ 7.56 7.00 9.17 5.79 6.81 9.13 subordinated notes and debentures, on which aver­ age interest costs tended to be stabilized by rela­ Memo: Not covered by regulatory ceilings2 .. 5.92 8.02 11.20 tively long maturities and fixed interest rates. The 1. Calculated as described in the “Technical note,” Bulletin other exception is savings and fixed-ceiling (September 1979) p. 704. 2. Does not include nonnegotiable time deposits of $100,000 or small-denomination time deposits, which domi­ more. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

694 Federal Reserve Bulletin □ September 1980 during 1979 (“other domestic” in table 5). De­ sensitivity of returns on their assets. Because of mand deposits similarly grew less rapidly than the reliance of small banks on MMCs during total assets, as high yields on close alternatives 1979 and the more pronounced cost impact of continued to induce depositors to economize on MMCs compared with that of the four-year cer­ their non-interest-bearing balances. For all banks tificates, which grew rapidly after their introduc­ together, consequently, growth in assets during tion in mid-1973, interest cost per dollar of as­ 1979 was financed by managed liabilities, which sets at small banks grew almost half again as increased from 35.3 to 37.6 percent of banks’ fast in 1979 as in 1974. consolidated assets. The pace at which large banks issued managed liabilities slowed, as did bank credit growth, after the Federal Reserve’s Net Interest Margins October 6 policy actions. Small banks, which generally do not issue Two factors were important in determining the managed liabilities in volume, depended instead level and the pattern of change in net interest on MMCs for their growth. Nevertheless, with margins during 1979. One, the type of business savings and small-denomination fixed-ceiling that dominates a bank’s activity, influenced the time deposits continuing to dominate funding patterns shown in chart 1, since size correlates sources, interest costs at small banks increased with business mix. Second, with the rapid in­ far more slowly than the average for all banks crease in open market yields during 1979, net in­ (chart 1 and appendix table A.3). Interest costs terest margins depended on whether assets and at money center banks escalated; liabilities of liabilities of banks were positioned to produce these banks were refunded numerous times on faster growth in interest revenue than in costs. average during the year at rapidly rising inter­ Revenue gains were little larger than cost in­ est costs. creases for all banks together, and so the average In 1979, interest expenses per dollar of average net interest margin adjusted for the shift out of assets at money center banks increased 38 per­ tax-exempt securities and scaled to average as­ cent, but as with asset returns, the increase dur­ sets is estimated to have been unchanged from ing 1974 had been faster. On the other hand, in­ 1978. However, the aggregate asset and liability terest expenses of other large banks increased balance implied by the stable net interest margin much faster in 1979 than in 1974, matching the masks some substantial differences in experience 5. Composition of financial liabilities as percent of total assets including loan-loss reserves, all insured commercial banks, 1976-791 Average during year Domestic Fully consolidated Item 1976 1977 1978 1979 1976 1977 1978 1979 i Financial claims ........................................................ 89.1 89.4 89.1 88.0 90.1 90.4 90.2 89.7 Demand deposits .................................................. 32.6 32.1 31.9 30.3 28.0 27.2 26.9 25.3 Interest-bearing claims ........................................ 56.5 57.3 57.2 57.7 62.1 63.2 63.3 64.4 Time and savings accounts ............................ 49.2 49.0 48.3 47.3 55.5 55.6 55.2 55.0 Large time2 .................................................... 14.8 13.3 15.0 15.2 13.8 11.4 12.7 12.7 In foreign offices ........................................... 13.2 14.1 14.5 15.6 Other domestic ............................................. 34.4 35.7 33.3 32.1 28.5 30.1 28.1 26.7 Subordinated notes and debentures ............. .5 .5 .5 .4 .4 .4 .4 .4 Other borrowings ............................................. .5 .6 1.1 2.0 .8 .9 1.5 2.4 Gross federal funds purchased and RPs ..... 6.3 7.2 7.3 7.9 5.4 6.2 6.2 6.6 Memo Managed liabilities3 ................................................... 22.1 21.6 23.9 25.6 33.6 33.1 35.3 37.6 Average gross assets (billions of dollars)................ 958 1,056 1,198 1,329 1,116 1,244 1,406 1,593 1. Percentages are based on aggregate data and thus reflect the 2. Deposits 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 deposdates for December of the preceding year and March, June, Septem- its at foreign offices, subordinated notes and debentures, RPs, gross her, and December of the current year. federal funds purchased, and other borrowings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profitability of Insured Commercial Banks, 1979 695 1. Components of interest margins to fund rate-insensitive assets as the year pro­ gressed. Percent of average assets Even within class of bank, rapid changes in GROSS INTEREST INCOME market interest rates affect profitability in rela­ tion to the degree of balance of interest-ratesensitive assets and liabilities. At one extreme, for instance, the margin of a bank that does nothing but finance three-month fixed-rate loans with three-month time deposits will show little re­ sponse to fluctuations in market interest rates; the upper bound of the bank’s profit—ignoring noninterest factors and assuming borrowers repay on time—equals the weighted average of the differences between each loan return and its deposit-funding costs. Sharp changes in market yields after takedown but before maturity of the transactions are unlikely to bring additional gain or loss to the bank. At the other extreme would be a bank that does not match the rate sensitivi­ ties of its assets and liabilities, such as one that finances longer-term fixed-rate loans with funds purchased short-term. To the extent that the market expectations embodied in the term struc­ ture of interest rates proved to be accurate fore­ casts of the actual course of interest rates, the bank would be able to forecast its ultimate gain from the transaction and would be no better off or worse off in the end than it expected to be at the outset. To the extent that market expecta­ tions are not fulfilled, however, the bank’s actual final return will differ from that expected. More­ over, such mismatching creates the possibility of Size categories are based on year-end consolidated assets. wide fluctuations in interim returns. Gross interest income is adjusted for taxable equivalence. Net inter­ est margins are gross interest income adjusted for taxable equivalence One important indicator of a bank’s exposure minus gross interest expense. to such interest rate risk is the difference be­ Data are for domestic operations until 1976, when foreign office op­ erations of U.S. banks were consolidated into the totals. tween the percentage of assets invested in ratesensitive instruments and the percentage of as­ sets funded by rate-sensitive liabilities. That dif­ during 1979 both within and among classes of ference—the proportion of the bank’s total as­ banks. sets represented by transactions for which Margins of money center banks contracted, re­ interest rates on only one side of the balance flecting large declines at foreign offices that were sheet, not both sides, are linked to short-term only partially offset by gains at domestic offices. market yields—is indicative of the extent to Margins were unchanged at other large banks, at which gains or losses might arise from unexpect­ which corporate and foreign-office business car­ ed changes in market interest rates. ries less weight than at money center banks. Chart 2 shows measures of the relationship of Margins at smaller banks increased slightly; the rate-sensitive assets and liabilities to total assets cost advantages of the large volume of deposits for five groups of banks. The measures, defined with fixed ceilings outweighed the incremental in the notes to the chart, could have been refined narrowing effects of the high-cost MMCs issued if maturity detail within one year had been avail­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

696 Federal Reserve Bulletin □ September 1980 able, if it had been possible to include short-term suggested by chart 2, reflects increased depen­ and uncapped floating-rate loans of small banks dence upon MMCs, the only rate-sensitive fund­ and floating-rate notes and debentures issued by ing source not normally thought of as a managed all banks, and if off-balance-sheet transactions liability. In earlier periods of rising market representing hedging activities had been avail­ yields, only large banks tended to shift toward able. Across classes of banks, moreover, the rate-sensitive liabilities, as they funded increases changes in net interest margins depended upon in loans by issuing money market instruments; the interaction of this rate-sensitive balance with small banks had few alternative sources of funds the rate sensitivity of other assets and liabilities that might compensate for any shortfalls in and the relative weight of usury ceilings or de­ growth of their core deposits. The importance of posit ceilings. But within each class, banks hold­ the change in the portfolio behavior of small ing more rate-sensitive assets than liabilities banks in 1979 was that the greater dependence on were able to benefit, on average, from the in­ MMCs was not accompanied by a commensurate creases in market yields during 1979. Thus, ex­ shift toward rate-sensitive assets. As 1979 pro­ cept for the money center institutions, banks gressed, therefore, small banks as a group be­ with increased interest margins from 1978 were came increasingly exposed to interest rate risk. better positioned than their counterparts (table A cross-sectional analysis of the effect of 6).4 In addition, the differences among groups MMCs on small banks is presented in table 7. in the levels of rate-sensitive assets and liabilities, Two groups of small banks are compared—those as shown in chart 2, roughly correspond with the in the highest and in the lowest quartiles of differences among them in the rates of change in MMCs as a percentage of total financial claims. gross interest returns on assets and costs of In the second half of 1978, small banks relying liabilities (chart 1). most heavily on MMCs had average taxable The sharp rise in the sensitivity of liabilities of equivalent interest margins 17 basis points lower small banks to interest rates during 1979, than those in the lowest quartile. In 1979, the dif­ ference between the two quartiles rose to 54 basis points. Of that, only 10 basis points flowed 4. Regressions using the difference—rate-sensitive assets minus rate-sensitive liabilities all as a percent of assets—as through to profits before tax, however, largely an explanation of the percent change in 1979 in net interest because the noninterest expenses of banks in the margins yielded R2s of 8 to 12 percent for the three groups of highest quartile during 1979 were not only lower banks with less than $1 billion in assets, and 22 percent for the two classes of larger banks. The coefficients for the dif­ than those in the lowest quartile but also lower ference variable were 0.45, 0.40 and 0.25 respectively for than for that size group as a whole. Some of the banks with assets below $25 million, of $25 million to $100 unusually low operating costs for banks in the million, and of $100 million to $1 billion; they were 0.64 and 0.62 for money center and other large banks respectively. high quartile may be a result of dividing fixed as The size classes tend to be good proxies for type of business well as variable costs by average assets because and thus tend to hold constant differences in net interest mar­ those banks experienced exceptionally rapid gin behavior associated with types of borrowers, standard loan terms, predominant funding sources, and so forth. growth in assets during 1979. 2. Percentage of assets funded and invested in rate-sensitive instruments, by year-end assets Percent Percent Percent $25 MILLION—$100 MILLION $100 MILLION-$l BILLION Invested Invested Funded Funded Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profitability of Insured Commercial Banks, 1979 697 6. Impact of asset and liability positioning on the 1978-79 change in net interest margins, all insured commercial banks1 Rate-sensitive Average interest margin4 Assets, Number year-end 1979 Percent Assets2 Liabilities2 Difference3 1979 1978 change Less than $25 million Increased margins ................... 5,220 14.4 12.9 1.5 5.02 4.45 12.8 Others ........................................ 2,101 11.9 18.0 -6.0 4.48 4.83 -7.2 $25 million to $100 million Increased margins ................... 3,058 12.4 17.2 -4.8 4.92 4.55 8.1 Others ........................................ 2,030 10.7 21.3 - 10.6 4.37 4.65 -6.1 $100 million to $1 billion Increased margins ................... 700 17.7 23.3 -5.6 4.71 4.38 7.5 Others ........................................ 635 15.5 27.0 -11.5 4.09 4.34 -5.8 13 money center Increased margins ................... 3 60.3t 59.2t 1.1 2.48* 2.41 3.0 Others ........................................ 10 57.1 61.6 -4.5 2.05 2.20 -6.7 Others $1 billion or more Increased margins.................... 74 40.0 36.1 3.9 3.99 3.74 6.7 Others......................................... 81 39.8 42.3 -2.4 3.32 3.56 -6.8 1. Differences between means are statistically significant at the .01 3. Rate-sensitive assets minus rate-sensitive liabilities, as defined level except when noted by an asterisk (*), which are significant at the above and in the note to chart 2. .05 level, and a dagger (t), which are not statistically significant. 4. Taxable equivalent, as a percent of average assets. 2. Average, as a percent of total assets, on the following call dates: December 1978 and March, June, September, and December 1979. Loan Losses and Other Noninterest decade. Despite an increase in loan portfolios, Income and Expense the major improvement for money center banks came in the form of reduced chargeoffs during Loan-loss provisions declined again relative to 1979. average assets, continuing in 1979 the reversal of Increases in noninterest revenue and in nonin­ the buildup associated with the 1973-75 reces­ terest expenses other than loan-loss provisions sion. Cash losses net of recoveries fell in relation outpaced growth in assets and, as in 1978, the to average loans at all four classes of banks (table revenue gains were about offset by the increased 8). Relative to average assets, loan losses also costs. Service charges on deposits and revenue fell at all except the large non-money-center from commissions and fees expanded relative to banks (chart 3). Money center banks, for which assets. An expansion in service charges probably loan losses had increased quite rapidly in 1975 was related to the growth of interest-bearing and 1976, experienced particular improvement; transactions balances, which have been associat­ in 1979, net loan losses as a percent of their as­ ed with a move toward explicit pricing of bank sets almost matched the previous low for the services; growth in commissions and fees is Percent Percent OTHERS OVER $1 BILLION Invested Rate-sensitive assets: interest-bearing de­ posits, federal funds sold, reverse RPs, loans and government debt maturing in one year or less, and other loans with floating rates. Small banks do not report the loan detail, so their holdings of loans to financial institutions, con­ Funded struction loans, and purpose loans are included. Rate-sensitive liabilities: large time deposits and foreign office deposits due in one year or less, federal funds, RPs, MMCs, and other short-term borrowings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

698 Federal Reserve Bulletin □ September 1980 probably a result of the rapid buildup of loans tion expenses caused the increase in noninterest and in particular the increased loan-to-asset ra­ operating costs relative to average assets. tio. Salaries and related employee compensa­ Profitability and Dividends Comparison of operating results in 1979, small insured commercial banks with greatest and least reliance on MMCs1 Returns on assets for all insured banks improved 5 percent during 1979, and reflecting a minor ad­ Means in percent dition to leverage, returns on equity increased Quartile Item somewhat faster. Those gains, after the larger in­ Highest Lowest creases during 1978, raised earnings rates in 1979 Growth for all insured banks as a group to record highs Total domestic assets . 17.9 10.0 for this decade. Returns on equity were narrowly Domestic liabilities 21.7 10.4 Income and expense scaled to 3. Net loan losses charged1 average consolidated assets Interest income.............................. 8.52 8.35 Percent of average assets Interest expense ........................... 4.37 3.61 Net interest margin .................. 4.15 4.73 13 money center Taxable equivalent ............... 4.58 5.12 Noninterest income ...................... .50 .67 Non-money center Loan-loss provision ...................... .25 .27 $1 billion or more I Other noninterest expense ......... 2.88 3.51 Profit before tax........................ 1.52 1.62 Net income ................................ 1.17 1.22 Dividends ................................... .25 .28 MMCs as percent of total financial claims Top of quartile ............................................... 52.5 10.3 Bottom of quartile ......................................... 18.4 0 Below $100 million 1. Top and bottom quartiles, as determined by MMCs as a percent of total financial claims at the end of 1979, of all banks with yearend assets below $100 million. The differences between means of the two groups are all statistically 1. As a percent of average consolidated assets net of loan-loss re­ significant at the 1 percent level. serves, all insured commercial banks. 8. Loan portfolio losses and recoveries, all insured commercial banks, 1977-79 Millions of dollars, except as noted Net losses Losses Loan-loss Year, and size of bank1 Recoveries charged Dollar Percent of provision 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 Others ............................ 1,009 204 804 .46 978 1978 All banks............................ 3,537 1,073 2,464 .32 3,499 Less than $100 million .... 782 240 542 .32 748 $100 million to $1 billion 689 194 495 .32 667 $1 billion or more Money center .............. 995 335 660 .28 972 Others............................ 1,068 303 765 .36 1,112 1979 All banks............................ 3,731 1,197 2,534 .28 3,764 Less than $100 million .... 823 256 567 .30 783 $100 million to $1 billion . 758 218 540 .30 745 $1 billion or more Money center ............... 860 329 531 .20 895 Others ............................ 1,290 394 897 .34 1,341 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

Profitability of Insured Commercial Banks, 1979 699 dispersed among size classes of banks in 1979, $10 billion during 1979, not quite enough to keep ranging from 13.5 percent for the large non­ pace with asset growth. As in the year earlier, re­ money-center banks to 14.1 percent for small tained earnings contributed more than fourbanks (table 9). In contrast, from 1974 through fifths of the gain in equity (table 10). 1976, returns on equity at money center banks averaged one-fifth higher than at other large com­ mercial banks. Insured U.S. Commercial Banks with Cash dividends declared during 1979 increased Foreign Offices faster than average assets for the first time since 1975. Unlike 1978, when all of the increased At the end of 1979, 164 U.S. insured commercial earnings on assets were retained, banks in their banks had foreign offices or Edge Act or Agree­ second year of substantial profit growth divided ment corporation subsidiaries. Those 164 banks the gain about equally between increases in cash held $979 billion in consolidated assets at yeardividends declared and additions to retained end or almost three-fifths of industry assets. Dur­ earnings. Large banks, nearly all of which are ing 1979, funding patterns shifted so that foreign affiliated with holding companies, maintained offices became a net source of funds to domestic about the same dividend payout ratio—40 per­ offices. With that shift and with a change in lend­ cent—as in 1978. Equity capital increased nearly ing patterns from loans toward lower-yielding in- 9. Profit rates, all insured commercial banks, 1973-79 Percent Type of return, and size of bank1 1973 1974 1975 1976 1977 1978 1979 Return on assets2 All banks ........................................................................................ .76 .72 .69 .70 .71 .76 .80 Less than $100 million................................................................. 1.00 .97 .89 .94 .98 1.04 1.15 $100 million to $1 billion ............................................................. .84 .79 .75 .78 .82 .90 .96 $1 billion or more Money center ............................................................................ .60 .56 .56 .54 .50 .53 .56 Others ......................................................................................... .62 .58 .59 .60 .62 .68 .72 Return on equity3 All banks ........................................................................................ 12.9 12.6 11.8 11.5 11.8 12.9 13.9 Less than $100 million ................................................................. 13.5 12.7 11.5 11.8 12.4 13.2 14.1 $100 million to $1 billion ............................................................. 12.6 11.9 11.1 11.1 12.0 13.2 13.9 $1 billion or more ......................................................................... Money center ............................................................................ 13.2 14.1 13.8 12.3 11.4 12.8 14.0 Others ......................................................................................... 12.0 11.7 11.2 10.6 11.2 12.5 13.5 1. Size categories are based on year-end fully consolidated assets. 3. Net income as a percent of the average of beginning- and end- 2. Net income as a percent of the average of beginning- and end- of-year equity capital, of-year fully consolidated assets net of loan-loss reserves. 10. Sources of increase in total equity capital, all insured commercial banks, 1973-791 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 Column 1/ Column 2/ Total banks3 Total banks3 column 3 column 4 (1) (2) (3) (4) (5) (6) 1973 .............................................................................. 4,131 1,491 5,455 1,849 76 81 1974 .............................................................................. 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 1979 .............................................................................. 8,350 3,616 9,952 4,291 84 84 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. Data mon stock. for 1976 have been adjusted to correct for that definitional change. 3. Banks with fully consolidated assets of $1 billion or more. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

700 Federal Reserve Bulletin □ September 1980 terbank placements, foreign-office net interest During 1979, commercial banks with foreign earnings narrowed. Despite unprecedented vol­ offices were able to take advantage of a change in atility in interest rates and some additional costs the traditional cost differentials between certifi­ of managed liabilities associated with the Octo­ cates of deposit (CDs) issued domestically and ber 6 marginal reserve program instituted by the those issued in the Eurodollar market. That shift Federal Reserve, domestic-office net interest in­ meant that, adjusted for required reserves, the come for these banks expanded during 1979. Con­ interest cost to fund domestic-office operations solidated net interest margins narrowed slightly, with Eurodollar CDs was lower than with domes­ but the overall net income of banks with foreign tic CDs. For several years before that change, offices was increased by growth in noninterest those reserve-adjusted interest costs had tended income and by reductions in provisions for loan to be about equal. The intraoffice shifting of losses. All of the improvement in consolidated funds amounted to almost $15 billion, net, during net earnings was attributed to domestic business; the year; funds advanced by foreign offices to the net return on consolidated assets attributed their domestic affiliates increased nearly $6 bil­ to international business was unchanged from lion, and outstanding balances of domestic-office 1978. advances to their foreign affiliates fell nearly $9 11. Assets and liabilities, all U.S. insured commercial banks with foreign offices, December 31, 1979 Domestic offices Foreign offices Item Billions of Percent of Billions of Percent of dollars total dollars total Total assets ....................................................................................................................... 688 100 313 100 Cash and due from banks ................................................................................................ 115 17 115 37 Federal funds sold and reverse RPs............................................................................... 25 4 * * Securities .......................................................................................................................... 96 14 9 3 Loans.................................................................................................................................. 371 54 160 51 Other1 ............................................................................................................................... 81 12 29 9 Total liabilities .................................................................................................................. 644 100 313 100 Deposits............................................................................................................................ 475 74 272 87 Noninterest-bearing2 .................................................................................................. 221 34 17 5 Interest-bearing............................................................................................................. 254 39 255 81 Savings and small time............................................................................................. 129 20 n.a. n.a. Time over $100,000 .................................................................................................. 125 19 n.a. n.a. Nondeposit financial claims .......................................................................................... 113 18 12 4 Federal funds purchased and RPs ............................................................................. 87 14 * * Subordinated notes and debentures .......................................................................... 3 * * * Other liabilities for borrowed money ....................................................................... 22 3 12 4 56 9 29 9 Memo: Remaining maturities Total assets ....................................................................................................................... 688 100 313 100 Selected assets3 ............................................................................................................... 451 66 270 86 One year or less............................................................................................................ 262 38 192 61 One to five years .......................................................................................................... 108 16 55 18 Over five years ............................................................................................................ 81 12 23 7 Total liabilities .................................................................................................................. 644 100 313 100 Selected liabilities4 .......................................................................................................... 553 86 255 81 Subject to call............................................................................................................... 229 36 26 8 Other three months or less.......................................................................................... 243 38 169 54 Over three months....................................................................................................... 81 13 61 19 1. Of this amount, $12 billion represents net funds advanced by do­ well as $91 billion in domestic offices in CIPC, demand deposits issued mestic offices to their own foreign offices and $9 billion represents net by other banks, and currency. funds advanced to domestic offices by their own foreign offices. 4. For foreign offices, maturity detail is provided for all interest- 2. Demand deposits in domestic offices, non-interest-bearing de­ bearing deposits. For domestic offices, liabilities subject to call are posits in foreign offices. demand deposits and TT and L balances. Other domestic-office liabili­ 3. For foreign offices, maturity detail is provided for all loans and ties maturing within three months include all large negotiable CDs interest-bearing balances due from banks; included also are $7 billion with that remaining maturity, savings, RPs and federal funds pur­ in cash items in process of collection (CIPC), demand deposits issued chased, half of MMCs, and 4 percent of other small time deposits. by other banks, and currency. Maturity detail is not reported for do­ Over three months includes subordinated notes and debentures, half mestic-office holdings of consumer loans and single-family home mort­ of MMCs, all other large negotiable CDs, and 96 percent of small time gages, which amounted to $66 billion and $53 billion respectively and deposits. which tend to have relatively long original maturities. Maturities rep­ * Less than $500,000 or 0.5 percent. resent all other loans and all securities at domestic offices; included in n.a. Not available. the shortest category also are federal funds sold and reverse RPs as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profitability of Insured Commercial Banks, 1979 701 billion. Most of this shift occurred during the first mestic offices continued to lend far more to cus­ half. Based upon average yields during 1979, an tomers located in the United States than else­ estimated 25 to 40 basis points in interest costs where, and foreign offices overwhelmingly held were saved by financing domestic-office business loans of non-U.S. borrowers (table 12). with CDs issued by affiliates in the Eurodollar Effective interest costs and returns at both do­ market instead of CDs issued directly by domes­ mestic and foreign offices of these banks in­ tic offices. With that shift in funding and with the creased rapidly, along with market yields, re­ incentives to restrict growth stemming from the flecting the predominance of short-term liabilities marginal reserve program, managed liabilities and assets carrying short maturities or floating issued to nonaffiliates by domestic offices re­ rates (table 13). Loan portfolio yields increased mained unchanged in proportion to assets. The 237 basis points at domestic offices and 262 basis predominant funding sources for domestic of­ points at foreign offices. The average effective in­ fices carried maturities of three months or less terest cost for interest-bearing liabilities in­ (table 11). During 1979 foreign offices increased creased far more rapidly at foreign offices than at their reliance on liabilities maturing beyond three domestic offices; the relative stability at the latter months, but claims maturing within three months reflects the small change in average interest costs continued to predominate. of savings and small-denomination time deposits, Consistent with their role as a source of funds which accounted for 20 percent of total domesfor domestic affiliates, foreign offices increased tic-office liabilities of these banks. their deposits substantially more than their Gross interest income as a percent of average loans; their loans dropped from 56 percent to 51 assets increased at domestic offices during 1979, percent of total assets during the year. Accom­ largely because of the rise in market yields but panying this shift in intrabank relationships, partly because “noninterest-bearing” amounts loans at domestic offices grew in relation to as­ due from foreign affiliates, which had been in­ sets during 1979, and deposits financed a smaller cluded in assets at the end of 1978, were reduced proportion of assets than at the end of 1978. Do- and invested in interest-bearing transactions with nonaffiliates during 1979 (table 14). The increase in gross interest income at foreign offices was 12. Customers, U.S. insured commercial banks with foreign offices, December 31, 1979 held down by the growth in similarly “noninter­ est-bearing” balances advanced to domestic af­ Billions of dollars filiates. Such advances added to foreign-office as­ Domestic Foreign Item offices offices sets, but no interest income was recorded by foreign offices. The increase in gross interest ex­ Total loans, gross ....................................... 383 162 Real estate ................................................. 94 5 pense per dollar of assets at domestic offices was To financial institutions ............................ 38 28 In the United States ............................... 19 1 held down by this same accounting treatment of Outside the United States .................... 8 20 Not specified ......................................... 11 7 Commercial and industrial ....................... 157 94 To U.S. addressees ............................... 149 5 13. Rates of return and rates paid for funds, To non-U.S. addressees ....................... 8 89 To individuals ............................................ 66 6 U.S. insured commercial banks To foreign governments ............................ 2 24 with foreign offices, 1978 and 19791 Other ............................................................ 26 5 Percent Memo To U.S. addressees.................................... 168 6 Domestic offices Foreign offices To nori-U.S. addressees............................ 16 133 Item Not specified............................................... 199 23 1978 1979 1978 1979 Total deposits............................................... 475 272 Individuals, partnerships, and Loans .................................... 9.93 12.30 10.59 13.21 corporations ....................................... 376 88 Interest-earning assets2...... 9.67 11.92 9.38 12.35 U.S. federal, state, and local Interest-bearing deposits.... 6.54 8.36 7.95 11.38 governments ....................................... 28 1 Interest-bearing Foreign governments and official liabilities ...................... 6.97 9.31 8.01 11.32 institutions ......................................... 7 36 Commercial banks in the United States....................................... 45 18 1. Calculated as described in the “Technical note,” Bulletin Banks in foreign countries ....................... 10 126 (September 1979), p. 704. Certified and officers’ checks.................... 9 3 2. Approximated for domestic offices according to the method de­ scribed in table 1, note 4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

702 Federal Reserve Bulletin □ September 1980 14. Interest income and expense as percent of average 15. Consolidated income and expenses, U.S. insured assets, U.S. insured commercial banks with commercial banks with foreign offices, 1978-79 foreign offices, 1978 and 1979 Percent of average assets Domestic offices Foreign offices Item 1978 1979 Item 1978 1979 1978 1979 Gross interest income................................................ 7.09 8.75 Gross interest expense ............................................. 4.58 6.25 Gross interest income......... 6.50 7.38 8.34 9.46 Net interest margin ............................................. 2.51 2.50 Gross interest expense . 3.78 4.57 6.33 8.19 Taxable equivalent1 ......................................... 2.77 2.74 Net interest margin......... 2.72 2.82 2.00 1.26 T axable equivalent1 .... 3.10 3.13 2.00 1.26 Noninterest income ................................................... .82 .84 Loan-loss provisions ................................................ .25 .22 Other noninterest expense........................................ 2.14 2.17 1. Approximated for domestic offices according to the method de­ Income before tax................................................... .93 .95 scribed in table 1, note 4. Foreign offices2................................................... .25 .22 Domestic offices2................................................ .68 .73 .59 .63 intraoffice transactions. Thus, some of the in­ International business2 ........................................ .16 .16 crease in interest margins at domestic offices and Domestic business2................................................ .43 .47 the decrease in those at foreign offices reflects 1. Approximated for domestic offices according to the method de­ distortions related to intracompany transfers. scribed in table 1, note 4. 2. See table A.4. Reflects amounts attributed, giving full allocation Viewed as consolidated entities, U.S.-insured of income and expense. commercial banks with foreign offices experi­ enced a small attrition in net interest margins sequently increased during 1979. After taxes, the during 1979 (table 15). Interest income increased consolidated rate of return on assets of banks rapidly, but not quite so fast as interest ex­ with foreign offices increased 7 percent, and after penses. Gains in noninterest income and further full allocation of costs and revenues, all of the shrinkage of loan-loss provisions during 1979 improvement was attributed to domestic busi­ more than offset the expansion in noninterest ex­ ness (table 15). International business provided penses and the reduction in net interest earnings; net earnings of 0.16 percent of average consoli­ income before taxes on a consolidated basis con- dated assets in 1979 as in 1978. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profitability of Insured Commercial Banks, 1979 703 A.l Report of income, all insured commercial banks Amounts shown in millions of dollars Item 1971 1972 1973 1974 1975 1976 1977 1978 1979 Operating income—Total.............................................. 36,204 40,065 52,794 67,872 66,285 80,388 90,069 113,170 149,795 Interest Loans............................................................................ 22,954 25,498 35,213 46,942 43,197 51,471 58,881 75,948 101,942 Balances with banks ................................................. n.a. n.a. n.a. n.a. n.a. 4,459 4,860 6,662 10,561 Federal funds sold and securities purchased under resale agreement................................................. 870 1,023 2,474 3,695 2,283 1,979 2,471 3,664 6,106 Securities (excluding trading accounts) Total interest income ............................................ 7,660 8,329 9,138 10,344 12,201 14,333 15,140 16,432 18,755 U.S. Treasury securities.................................... 3,384 3,376 3,436 3,414 4,415 5,952 6,369 ] U.S. government agencies and corporations .. 914 1.144 1,469 2,014 2,343 2,410 2,466 J 9,335 10,630 States and political subdivisions....................... 3,124 3,490 3,861 4,449 4,911 5,116 5,338 6,003 6,928 Other bonds, notes, and debentures ............... 238 319 372 467 532 750 858 l i 1,094 1,197 Dividends on stock ............................................ (*) (’) (J) 0) (*) 105 109 J Trust department............................................................ 1,258 1,366 1,460 1,506 1,600 1,795 1,980 2,138 2,375 Direct lease financing .................................................... n.a. n.a. n.a. n.a. n.a. 534 699 862 1,073 Service charges on deposits......................................... 1,226 1,256 1,320 1,450 1,547 1,629 1,797 2,039 2,517 Other charges, fees, etc.................................................. 981 1,079 1,247 1,405 1,647 2,175 2,404 2,930 3,635 Other operating income................................................. 1,256 1,512 1,942 2,530 3,811 2,011 1,903 2,495 2,831 On trading account (net)............................................ 344 257 341 430 508 717 420 n.a.2 n.a.2 Other............................................................................ 912 1,255 1,601 2,100 3,303 1,205 1,350 n.a.2 n.a.2 Equity in return of unconsolidated subsidiaries .... n.a. n.a. n.a. n.a. n.a. 89 133 n.a.2 n.a.2 Operating expenses—Total............................................ 29,511 32,836 44,113 58,645 57,313 70,466 78,484 98,104 131,950 Interest Time and savings deposits ...................................... 12,168 13,781 19,747 27,777 26,147 34,894 38,701 50,054 71,693 Time CD’s of $100,000 or more issued by domestic offices.............................................. n.a. n.a. n.a. n.a. n.a. 7,083 6,732 11,693 18,105 Deposits in foreign offices .................................... n.a. n.a. n.a. n.a. n.a. 8,745 10,216 14,559 24,523 Other deposits......................................................... n.a. n.a. n.a. n.a. n.a. 19,066 21,753 23,802 29,065 Federal funds purchased and securities sold under repurchase agreements .................................... 1,093 1,425 3,883 5,970 3,313 3,305 4,536 7,247 12,218 Other borrowed money3............................................ 139 115 499 912 374 665 816 1,452 3,162 Capital notes and debentures.................................... 142 212 253 280 292 343 391 445 497 Salaries, wages, and employee benefits...................... 8,355 9,040 10,076 11,526 12,624 14,686 16,276 18,654 21,465 Occupancy expense...................................................... 1,721 1,915 2,141 2,424 2,739 3,247 3,587 Less rental income .................................................... 318 340 367 383 427 494 551 Net .............................................................................. 1,403 1,575 1,774 2,041 2,312 2,752 3,036 5,559 6,255 Furniture and equipment.............................................. 1,014 1,083 1,196 1,355 1,525 1,712 1,923 Provision for loan losses ............................................... 860 964 1,253 2,271 3,578 3,650 3,244 3,499 3,764 Other operating expenses ............................................ 4,337 4,640 5,432 6,514 7,149 8,456 9,561 11,194 12,7% Minority interest in consolidated subsidiaries ....... 1 1 29 24 n.a.2 n.a.2 Other............................................................................ 4,337 4,639 5,431 6,514 7,149 8,427 9,537 n.a.2 n.a.2 Income before taxes and securities gains or losses.... 6,693 7,229 8,681 9,227 8,973 9,922 11,585 15,067 17,843 Applicable income taxes............................................ 1,688 1,708 2,120 2,084 1,790 2,287 2,829 4,155 4,736 Income before securities gains or losses................. 5,005 5,522 6,560 7,143 7,182 7,635 8,756 10,911 13,109 Net securities gains or losses (-) after taxes......... 210 90 -27 -87 35 190 95 -225 -350 Extraordinary charges (-) or credits after taxes .. -1 18 22 12 32 24 47 45 39 Net income...................................................................... 5,213 5,630 6,555 7,068 7,249 7,849 8,898 10,731 12,797 Cash dividends declared ............................................... 2,227 2,191 2,423 2,760 3,025 3,029 3,299 3,714 4,449 Memo Number of banks............................................................ 13,602 13,721 13,964 14,216 14,372 14,397 14,397 14,380 14,352 Average fully consolidated assets (billions of dollars) .................................................................... 646 738 857 987 1,052 1,123 1,257 1,418 1,593 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 are not available on an aggregated basis after n.a. not available. 1977. Bracketed items similarly indicate combinations made for small Note. For “Notes on comparability of commercial bank income bank reporting. data before 1976,” see Bulletin, vol. 64 (June 1978), p. 446. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

704 Federal Reserve Bulletin □ September 1980 A.2 Report of income, member commercial banks Amounts shown in millions of dollars Item 1971 1972 1973 1974 1975 1976 1977 1978 1979 Operating income—Total ......................................................... 28,665 31,344 41,616 53,837 51,368 63,639 70,514 89,130 118,994 Interest Loans ...................................................................................... 18,315 20,053 28,266 38,063 33,749 40,901 46,060 59,925 81,303 Balances with banks............................................................... n.a. n.a. n.a. n.a. n.a. 4,263 4,671 6,387 10,077 Federal funds sold and securities purchased under resale agreement............................................................ 676 794 1,847 2,724 1,716 1,511 1,918 2,808 4,551 Securities (excluding trading accounts) Total interest income......................................................... 5,661 6,087 6,532 7,237 8,559 10,111 10,584 11,328 12,850 U.S. Treasury securities.............................................. 2,434 2,412 2,393 2,343 3,166 4,248 4,478 U.S. Government agencies and corporations............ 578 731 943 1,268 1,463 1,475 1,509 6,179 6,944 States and political subdivisions................................. 2,467 2,710 2,928 3,300 3,576 3,686 3,794 4,255 4,903 Other bonds, notes, and debentures............................ 182 234 268 326 354 612 712 Dividends on stock ...................................................... (>) 0) C1) (J) (') 90 91 ) 894 1,003 Trust department ...................................................................... 1,180 1,269 1,344 1,379 1,457 1,625 1,776 1,912 2,109 Direct lease financing .............................................................. n.a. n.a. n.a. n.a. n.a. 508 664 806 986 Service charges on deposits .................................................... 895 905 940 1,023 1,086 1,122 1,206 1,334 1,609 Other charges, fees, etc............................................................. 796 864 998 1,152 1,359 1,808 1,967 2,400 3,011 Other operating income ............................................................ 1,130 1,372 1,789 2,261 3,442 1,789 1,662 2,230 2,498 On trading account (net) ...................................................... 340 254 338 425 497 6% 407 n.a.2 n.a.2 Other ...................................................................................... 800 1,118 1,451 1,836 2,945 1,009 1,124 n.a.2 n.a.2 Equity in return of unconsolidated subsidiaries ............... n.a. n.a. n.a. n.a. n.a. 86 131 n.a.2 n.a.2 Operating expenses—Total ...................................................... 23,342 25,648 35,037 46,815 44,410 55,924 61,706 77,783 105,890 Interest Time and savings deposits.................................................... 9,426 10,518 15,382 21,812 19,800 27,745 30,363 39,808 57,792 Time CD’s of $100,000 or more issued by domestic offices......................................................... n.a. n.a. n.a. n.a. n.a. 5,895 5,461 9,586 14,333 Deposits in foreign offices................................................. n.a. n.a. n.a. n.a. n.a. 8,672 10,124 14,401 24,254 Other deposits.................................................................... n.a. n.a. n.a. n.a. n.a. 13,178 14,778 15,821 19,205 Federal funds purchased and securities sold under repurchase agreements................................................. 1,073 1,387 3,765 5,714 3,151 3,150 4,322 6,803 11,551 Other borrowed money3 ...................................................... 127 103 473 871 336 638 790 1,403 2,928 Capital notes and debentures.............................................. 123 184 204 217 228 273 303 334 366 Salaries, wages, and employee benefits................................. 6,638 7,096 7,808 8,834 9,624 11,301 12,395 14,116 16,131 Occupancy expense ................................................................. 1,408 1,556 1,724 1,929 2,155 2,564 2,804 Less rental income................................................................. 278 2% 316 325 363 418 459 Net........................................................................................... 1,130 1,260 1,408 1,603 1,792 2,146 2,345 4,224 4,711 Furniture and equipment ......................................................... 797 848 924 1,037 1,154 1,305 1,456 - Provisions for loan losses......................................................... 682 768 994 1,858 3,050 3,042 2,633 2,771 2,932 Other operating expenses......................................................... 3,346 3,484 4,079 4,870 5,275 6,323 7,100 8,324 9,429 Minority interest in consolidated subsidiaries................. 28 22 n.a.2 n.a.2 Other ...................................................................................... 6,295 7,078 n.a.2 n.a.2 Income before taxes and securities gains or losses............... 5,322 5,696 6,679 7,022 6,958 7,715 8,807 11,347 13,104 Applicable income taxes...................................................... 1,348 1,356 1,653 1,591 1,453 1,929 2,311 3,327 3,644 Income before securities gains or losses............................ 3,974 4,340 5,025 5,431 5,505 5,786 6,496 8,020 9,460 Net securities gains or losses (-) after taxes .................... 144 47 -30 -69 17 111 40 -185 -251 Extraordinary charges (-) or credits after taxes............... -3 14 15 3 23 17 38 27 25 Net income................................................................................. 4,116 4,401 5,011 5,365 5,546 5,914 6,576 7,863 9,234 Cash dividends declared ......................................................... 1,907 1,804 2,019 2,271 2,476 2,451 2,640 2,928 3,480 Memo Number of banks ...................................................................... 5,727 5,704 5,735 5,780 5,787 5,758 5,668 5,565 5,427 Average fully consolidated assets (billions of dollars)................................................................................. 530 606 705 788 857 907 1,003 1,128 1,267 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 began in November 1978. banks, these items are not available on an aggregated basis after n.a. not available. 1977. Bracketed items similarly indicate combinations made for small Note. For “Notes on comparability of commercial bank income bank reporting. data before 1976,” see Bulletin (June 1978), p. 446. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Profitability of Insured Commercial Banks, 1979 705 A.3 Earnings, portfolio composition, and interest rates, all insured commercial banks, 19791 Assets $1 billion or more Item All Less than $100 million $100 million to $1 billion Money center Others Balance sheet (as percent of average consolidated assets) Interest-earning assets ...................................................................... 83.0 89.8 87.2 77.8 81.1 Loans................................................................................................. 56.3 58.5 56.8 54.8 56.1 Securities ......................................................................................... 17.2 27.1 25.0 7.4 15.2 U.S. Treasury.............................................................................. 5.5 9.1 8.0 2.1 4.9 U.S. government agencies......................................................... 2.8 5.5 4.0 .8 2.3 State and local governments..................................................... 8.0 12.0 12.3 3.0 7.5 Other bonds and stock .............................................................. .8 .5 .7 1.4 .5 Gross federal funds sold and reverse RPs ................................. 3.4 4.0 4.3 2.0 3.8 Interest-bearing deposits .............................................................. 6.2 .1 1.0 13.7 6.0 Financial claims.................................................................................... 89.7 90.2 91.0 88.4 89.7 Demand deposits ........................................................................... 25.3 28.9 30.1 17.9 27.3 Interest-bearing claims.................................................................... 64.4 61.3 60.8 70.5 62.4 Time and savings deposits ......................................................... 55.0 59.6 54.2 57.9 49.3 Large time................................................................................. 12.7 9.1 14.1 11.2 15.8 In foreign offices...................................................................... 15.6 0.0 .5 40.1 10.8 Other domestic ........................................................................ 26.7 50.6 39.5 6.6 22.7 MMCs .................................................................................. 3.9 7.8 5.7 .8 3.2 Subordinated notes and debentures ........................................ .4 .2 .5 .3 .6 Other borrowings ........................................................................ 2.4 .4 1.2 4.2 2.6 Gross RPs and federal funds purchased ................................ 6.6 1.0 5.0 8.1 10.0 Memo: Managed liabilities ......................................................... 37.6 10.8 21.3 63.9 39.7 Effective interest rates (percent) On securities......................................................................................... 7.05 7.02 6.82 7.67 7.04 State and local governments ........................................................ 5.58 5.42 5.40 6.35 5.65 On loans, gross .................................................................................... 12.01 10.88 11.56 12.76 12.38 Net of loan-loss provision............................................................... 11.55 10.42 11.09 12.39 11.80 Taxable equivalent Securities ......................................................................................... 9.31 9.09 9.12 9.94 9.48 Securities and gross loans.............................................................. 11.37 10.31 10.80 12.42 11.75 For time and savings deposits Negotiable CDs .............................................................................. 10.52 9.79 10.82 9.90 11.10 In foreign offices.............................................................................. 11.38 11.64 11.27 11.78 Other deposits ................................................................................. 6.65 6.71 6.53 7.40 6.40 For managed liabilities ...................................................................... 11.20 10.00 11.02 11.13 11.58 Earnings and expenses (as percent of average assets) Gross interest income......................................................................... 8.62 8.44 8.44 8.85 8.63 Gross interest expense ...................................................................... 5.50 4.27 4.66 6.78 5.59 Net interest margin ......................................................................... 3.12 4.18 3.78 2.07 3.04 Noninterest income ............................................................................ .78 .60 .75 .79 .92 Loan-loss provision .......................................................................... .24 .24 .23 .18 .29 Other noninterest expense ................................................................. 2.54 3.02 3.07 1.77 2.67 Profits before tax.............................................................................. 1.12 1.52 1.23 .91 1.00 Taxes ............................................................................................ .28 .33 .23 .33 .22 Other ........................................................................................... -.04 -.04 -.03 -.02 -.06 Net income ...................................................................................... .80 1.15 .96 .56 .72 Dividends...................................................................................... .28 .29 .34 .22 .29 Retained income ......................................................................... .52 .86 .62 .34 .42 Memo: Taxable equivalent net interest margin ........................... 3.48 4.70 4.31 2.23 3.38 1. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

706 Federal Reserve Bulletin □ September 1980 A.4 Income attributable to international business of U.S. commercial banks with foreign offices, 1979 Millions of dollars Item Amount Pre-tax income attributable to foreign offices1................................................................................................................................................. 2,057 Plus: Pre-tax income attributable to international business conducted in domestic offices ................................................................. 903 Less: adjustment amount2.............................................................................................................................................................................. 171 Pre-tax income attributable to international business................................................................................................................................... 2,789 Less: All income taxes attributable to international business ................................................................................................................. 1,285 Net income attributable to international business ......................................................................................................................................... 1,504 Memo Provision for possible loan losses attributable to international business .................................................................................................... 351 Noninterest income attributable to foreign offices1 ...................................................................................................................................... 1,245 Noninterest income attributable to international business........................................................................................................................... 1,517 Noninterest expense attributable to foreign offices1 ................................................................................................................................... 2,998 Noninterest expense attributable to international business........................................................................................................................ 3,681 Intracompany interest income attributable to international business...................................................................................................... 3,172 Intracompany interest expense attributable to international business..................................................................................................... 4,154 Interest income of domestic offices from foreign-domiciled customers...................................................................................................... 2,321 Fully consolidated Pre-tax income................................................................................................................................................................................................ 8,751 Total applicable taxes ................................................................................................................................................................................... 2,803 Net income3.........................................................4.......................................................................................................................................... 5,788 Average total assets........................................................................................................................................................................................ 919,953 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 extraordi­ nary items. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

707 Treasury and Federal Reserve Foreign Exchange Operations This 37th joint report reflects the Treasury-Fed­ early April during the time in which there was an eral Reserve policy of making available addition­ intense scramble for funds and soaring interest al information on foreign exchange operations rates in the United States. Once that scramble from time to time. The Federal Reserve Bank of subsided and U.S. interest rates fell back New York acts as agent for both the Treasury through mid-June, the dollar also declined. and the Federal Open Market Committee of the Thereafter, the dollar remained vulnerable to Federal Reserve System in the conduct of for­ bouts of selling pressure each time domestic in­ eign exchange operations. terest rates tended to soften. But the selling pres­ This report was prepared by Scott E. Pardee, sures did not cumulate. By late July, with money Manager of Foreign Operations of the System demand in the United States picking up once Open Market Account and Senior Vice President again, interest rates here turned firmer and dollar in the Foreign Function of the Federal Reserve rates in the exchange market also firmed. By this Bank of New York. It covers the period February time also, the dollar was bolstered by the under­ through July 1980. Previous reports have been lying improvement in the U.S. trade and currentpublished in the March and September BULLE­ account positions and by indications of some re­ TINS of each year beginning with September duction of our inflation rate. 1962. For its part, throughout the period the Federal Reserve continued to adhere to the approach Dollar exchange rates fluctuated widely over the adopted last October 6, emphasizing bank resix-month period under review. Numerous politi­ cal and economic crosscurrents tended to impart 1. Federal Reserve reciprocal currency volatility to the exchange markets. These includ­ arrangements ed the profusion of uncertainties surrounding po­ Millions of dollars litical developments in Iran and Afghanistan and the shifting prospects for major industrial econo­ Amount of facility Institution mies in dealing with the ill effects on their infla­ Jan. 1, 1980 July 31, 1980 tion rates and current-account positions caused Austrian National Bank ............................ 250 250 by the further rise in prices for oil. Market partic­ National Bank of Belgium......................... 1,000 1,000 Bank of Canada ........................................... 2,000 2,000 ipants were also concerned about the possi­ National Bank of Denmark ...................... 250 250 bilities of unsettling capital flows as the Organi­ Bank of England.......................................... 3,000 3,000 Bank of France............................................. 2,000 2,000 zation of Petroleum Exporting Countries (OPEC) German Federal Bank ............................... 6,000 6,000 sought to invest the excess funds generated by Bank of Italy ................................................ 3,000 3,000 their massive current-account surpluses. Bank of Japan................................................ 5,000 5,000 Bank of Mexico .......................................... 700 700 Nevertheless, the broad movements in ex­ Netherlands Bank........................................ 500 500 Bank of Norway.......................................... 250 250 change rates during the period resulted largely Bank of Sweden .......................................... 300 5001 Swiss National Bank .................................. 4,000 4,000 from the relative pressures of the demand for money and credit in the United States, compared Bank for International Settlements Swiss francs/dollars ............................... 600 600 with other industrial countries and as reflected in Other authorized European currencies/dollars ......................... 1,250 1,250 sharp swings in interest differentials between in­ Total ......................................................... 30,100 30,300 vestments in dollars and other major currencies. On balance, the dollar advanced sharply through 1. Increased by $200 million effective May 23, 1980. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

708 Federal Reserve Bulletin □ September 1980 Foreign exchange operations under reciprocal currency arrangements, January 1-July 31, 1980 Millions of dollars equivalent; drawings, or repayments (-) Federal Reserve System activity1 1980 Commitments, Commitments, Transactions with Jan. 1, 1980 July 31, 1980 Ql Q2 July Bank of France ......... 0 0 100.2 60.6 166.32 316.0 996.1 265.7 German Federal Bank 3,150.4 -3,489.2 - 132.4 -263.4 879.73 22.7 0 11.2 Swiss National Bank. -22.7 0 -11.2 338.7 1,096.2 337.5 Total ............................. 3,150.4 1,046.0 -3,511.9 - 132.4 -274.7 Activity by the BIS4 1980 Outstanding, Outstanding, Bank drawing on System Jan. 1, 1980 July 31, 1980 Ql Q2 July Bank for International Settlements 192.0 50.0 (against German marks)5................... 0 1 -97.0 -145.0 ) 0 1. Because of rounding, details may not add to totals. Data are on a 3. Includes revaluation adjustments from swap renewals, which to­ value-date basis except for the last two columns, which include trans­ taled $36.6 million for drawings on the German Federal Bank renewed actions executed in late July for value after the reporting period. during the first quarter and July. 2. Includes revaluation adjustments from swap renewals, which to­ 4. Data are on a value-date basis. taled $5.5 million for drawings on the Bank of France renewed during 5. BIS drawings and repayments of dollars against European cur­ July. rencies other than Swiss francs to meet temporary cash requirements. serves rather than the federal funds rate as the as reiterated by Chairman Volcker in testimony primary operating variable in seeking to limit the to the Senate Banking Committee in late July. growth of the monetary aggregates. When the de­ Moreover, as the demand for money and credit mand for money and credit became extremely regained strength in the United States toward the heavy in February and March, largely on the end of the period, the Federal Reserve’s ap­ buildup of inflationary expectations at the time, proach again meant that these demands were not the Federal Reserve’s approach meant that not fully accommodated. all of the demand was met by increases in bank In the context of unsettled exchange market reserves. This effort was reinforced by the conditions and volatility of exchange rates, the broader anti-inflation program announced by U.S. authorities intervened frequently during the President Carter on March 14, which featured a six-month period operating on both sides of the tightening of fiscal policy but also included a pro­ market. In the phase through early April when gram of special credit restraint by the Federal the dollar was in demand, the U.S. authorities Reserve. Subsequently, when the demand for money and credit fell slack, and indeed the economy be­ 3. U. S. Treasury securities, foreign currency denominated1 gan to contract sharply, interest rates declined. Consistent with its approach, the Federal Re­ Millions of dollars equivalent; issues, or redemptions (-) serve provided bank reserves at about the same 1980 Commitments, Commitments, Issues pace as before. In late May and early July the Jan. 1, 1980 July 31,1980 Ql Q2 July special credit restraints were eliminated in two Public series steps. Many market participants expressed con­ Germany ............. 4,065.7 1,168.0 0 0 5,233.6 cern that, by allowing interest rates to decrease Switzerland ....... 1,203.0 0 0 0 1,203.0 so sharply and by eliminating the special credit Total.................... 5,268.6 1,168.0 0 0 6,436.6 restraints, the Federal Reserve was giving up on 1. Data are on a value-date basis. Because of rounding, details may its anti-inflation efforts. This was hardly the case not add to totals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 709 4. U.S. Treasury and Federal Reserve foreign shows that the System realized $14.5 million, the exchange operations1 Exchange Stabilization Fund realized $45.8 mil­ Net profits, or losses (-) in millions of dollars lion, and the Treasury’s General Account real­ U.S. Treasury ized $71.2 million in profits. On a valuation basis, Federal as of July 31 the System showed $19.2 million in Period Reserve St E a x b c il h iz a a n t g io e n General gains on outstanding foreign exchange assets and Account Fund liabilities. However, the Exchange Stabilization 1980—Ql....................................... 14.1 0 64.9 Fund and the Treasury’s General Account Q2....................................... 7.7 42.0 0 1980-July..................................... -7.3 3.8 6.3 showed $325.8 million and $163.0 million in loss­ Valuation profits and es respectively on outstanding foreign exchange losses on outstanding assets and liabilities holdings and on commitments. as of July 31, 1980 ............. 19.2 -325.8 -163.0 1. Data are on a value-date basis. German Mark were able to acquire sufficient currencies in the market and from correspondents to repay earlier During the winter of 1979-80, as the exchange debt and to build up balances, buying German markets focused on the uncertainties surround­ marks, Swiss francs, and Japanese yen. By late ing the U.S. strategic and financial position in the March to early April, the Federal Reserve inter­ Middle East and on the dollar’s role as a reserve vened on several occasions openly as a buyer of asset, the German mark had been bid up in the currencies to counter disorderly conditions in the exchanges to a record high against the dollar. But market. Subsequently, when the dollar came un­ before long the prospects for the continued ap­ der bursts of heavy selling pressure, the U.S. au­ preciation of the mark became clouded. The thorities intervened in size, selling German massive increase in world oil prices and the ex­ marks, Swiss francs, and French francs. By the pansion of the German economy had generated a end of July, the U.S. authorities were again accu­ far more rapid increase in import expenditures mulating currencies to repay swap debt and than in export revenues, leading to a dramatic rebuild balances. turnaround in Germany’s current-account posi­ For the period as a whole, total intervention tion. The current account had already swung sales of currencies amounted to $3,982.7 million from surplus into a DM 10 billion deficit in 1979, equivalent, of which $3,530.6 million was in Ger­ and an even larger deficit of as much as DM 20 man marks, $291.4 million in Swiss francs, and billion was expected this year. $160.7 million in French francs. Total acquisition Inflation also accelerated rapidly under the of currencies amounted to $6,266.9 million, of pressures of an economy running close to pro­ which $1,476.2 million was in the market and ductive capacity and the persistent buildup of en­ $4,790.7 million was from correspondents; by ergy costs. Moreover, events in the international currency, the acquisitions were $5,691.1 million arena added to the market’s sense of caution. Al­ of German marks, $357.8 million of Swiss francs, though political tensions in the Middle East still $216.8 million of Japanese yen, and $1.2 million raised the possibility that holders of dollars from of French francs. As indicated in table 2, as of that region might switch into marks, the deterio­ July 31, the Federal Reserve’s swap debt to the ration in great power relations following the So­ German Federal Bank was $879.7 million equiva­ viet invasion of Afghanistan also raised concern lent and to the Bank of France was $166.3 million about Germany’s exposure in Western Europe. equivalent. Also during the period, as shown in As a result, capital began to flow out of the mark table 1, the Federal Reserve’s reciprocal swap in search of other havens. arrangement with the Bank of Sweden was in­ In these circumstances the mark had already creased $200 million, to $500 million. slipped back from its highs early in the year to Through the first seven months of the year, the DM 1.7414 by the end of January, and sub­ Federal Reserve and the Treasury both realized sequent bouts of buying pressure did not readily profits on foreign exchange operations. Table 4 cumulate. Thus, on two occasions in early Feb­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

710 Federal Reserve Bulletin □ September 1980 ruary when concern about the dollar brought the pushed U.S. domestic and Eurodollar rates to mark into bursts of demand, the U.S. authorities new highs. With interest differentials adverse to quickly restored balance to the market with sales the mark widening progressively to reach 8V2 of $240.8 million equivalent of marks. These percentage points in the early weeks of March, sales were financed out of balances of the Trea­ capital flowed heavily out of Germany and the sury and the Federal Reserve and by drawings of mark declined rapidly in the exchanges. These the Federal Reserve in the amount of $115.4 mil­ outflows took the form of adverse commercial lion under the swap line with the German Federal leads and lags, portfolio shifts by foreign inves­ Bank. These operations raised the System’s total tors, and a buildup of dollar balances by German mark swap debt with the Federal Bank to a peak residents. In addition, some professional and of $2,746.3 million equivalent for the six-month corporate borrowers around the world began review period and steadied the mark around DM meeting their financing needs in other currencies 1.7375. by borrowing marks and converting the proceeds In view of the deterioration in Germany’s in­ in the exchanges. flation and balance of payments performance, The German authorities were concerned that German economic policy moved toward greater the sharp depreciation of the mark would further restraint. The authorities feared that rising ener­ aggravate domestic inflationary pressures gy prices would unleash a cycle of wage-price in­ through higher prices for oil and other imports. creases. Already there was some evidence of ac­ The Federal Bank intervened heavily to blunt the celerating purchases by consumers and a buildup mark’s decline, entering the Frankfurt market, of business inventories, partly on the expectation where the pressures tended to concentrate, al­ of more inflation to come. Also, the uncertain most daily as a heavy seller of dollars both spot outlook for capital inflows raised concerns about and forward. The authorities also took measures the prospects for financing the large current-ac­ to induce sufficient capital inflows to help finance count deficit. Accordingly, the pace of govern­ the current-account deficit and to help offset the ment expenditures had already been reduced. On outflows of capital. In part, these entailed the re­ February 28 the Federal Bank raised the dis­ laxation of restrictions on capital inflows by per­ count rate 1 percentage point to 7 percent and the mitting foreigners to purchase government secu­ Lombard rate IV2 percentage points to 8V2 per­ rities, domestic bonds, and other markcent. But, to prevent liquidity from tightening denominated promissory notes with maturities of too far in the face of a seasonal increase in mon­ more than two years (as opposed to four years ey demand, the Federal Bank also increased previously). In addition, the government negoti­ commercial banks’ rediscount quotas by DM 4 ated directly with foreign official institutions, no­ billion and removed borrowing limits under the tably those from OPEC, to obtain investments in Lombard facility. These actions brought official mark assets. rates in line with German money market rates, Meanwhile, through mid-March the U.S. au­ which were rising as the authorities, in the face thorities acquired $2,751.7 million equivalent of of mounting credit demands, kept the growth of marks from correspondents, mainly from the central bank money within the annual growth Federal Bank. Also, the Trading Desk inter­ range of 5 to 8 percent. vened in New York, purchasing $115 million Meanwhile, short-term dollar interest rates equivalent of marks in the market. These marks were rising even more sharply as the Federal Re­ were used to liquidate in full the Federal Re­ serve, adhering to the monetary policy adopted serve’s outstanding swap debt with the Federal last October 6, restrained the growth of bank re­ Bank and to make interest payments on the serves in the face of a sudden resurgence in the Treasury’s securities issued in the German capi­ demand for money and credit in the United tal market. On balance, by mid-March the mark States. As reports began to circulate that the had declined 5 percent from levels in early Feb­ U.S. authorities might impose credit controls to ruary to DM 1.8265. help stem the rise in inflationary expectations, a On March 14, President Carter announced a surge of precautionary borrowing ensued, which broad anti-inflation program that included ac­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 711 tions aimed at balancing the fiscal 1981 budget, a equivalent from correspondents, which were surcharge on imported oil, and authorization for added to System and Treasury balances. Mean­ the Federal Reserve under the terms of the Cred­ while, the Federal Bank’s heavy dollar sales it Control Act of 1969 to impose special restraints were reflected in a $5.1 billion decline in Germa­ on credit expansion. Accordingly, the Federal ny’s foreign exchange reserves from the end of Reserve asked the commercial banks to hold January to $41.2 billion by the end of March. their growth of lending to U.S. residents to 6 to 9 By this time, however, the German money percent during 1980, required special deposits market had tightened considerably and, even from nonmember banks and other lending insti­ though the Federal Bank had begun to offset the tutions, and raised the marginal reserve require­ drain on liquidity of its dollar sales by entering ment on managed liabilities from 8 to 10 percent into foreign exchange swaps, market participants for large member banks and U.S. agencies and expected a further rise in German official interest branches of foreign banks. In addition, the Fed­ rates. By contrast, with the scramble for funds in eral Reserve imposed a 3-percentage-point sur­ the United States tapering off and with economic charge on discount window borrowings by large indicators suggesting a sharp slowing in the U.S. member banks. The exchange market reacted economy, market participants sensed that dollar positively to the package of special credit re­ interest rates would soon turn down. straints as a sign of the U.S. authorities’ determi­ Under these circumstances, the mark came in­ nation to curb persistent and accelerating infla­ to immediate and heavy demand once interest tionary pressures. rates in the United States showed unmistakable Following these measures, the interest dis­ signs of declining in early April. Moreover, di­ incentive against the mark widened to some 10 minished prospects for a resolution of the hos­ percentage points as short-term dollar interest tage situation in Iran renewed concerns that offi­ rates climbed further in late March and into early cial dollar holders in the Middle East would April, reaching peaks of 20 percent. As a result, switch more of their surplus funds into European interest-sensitive capital flowed even more heav­ currencies—the mark in particular—as an alter­ ily from Germany at a time when the continued native to dollar assets. On April 8-10 as dollar deterioration of the current-account deficit left exchange rates declined across the board, the the mark spot rate particularly vulnerable to mark soared 5V2 percent to DM 1.8730 in ex­ downward pressure. Vigorous intervention to tremely disorderly conditions. In response, the support the mark in these circumstances threat­ Trading Desk intervened as a seller of marks and ened a drain on Germany’s foreign exchange re­ Swiss francs and, to avoid aggravating the weak­ serves, which the authorities feared would un­ ness of the mark relative to the French franc dermine confidence in the mark all the more. within the EMS, also intervened as a seller of Therefore, the Federal Bank intervened some­ French francs. The Federal Bank also sold what less forcefully than in previous weeks and French francs to support the mark within the also supported the mark through sales of mark- EMS. denominated bonds to foreign official holders. In the weeks that followed, U.S. interest rates By April 8 the mark declined another 8V2 per­ continued to drop precipitously, at times falling cent, reaching a low of DM 1.9810 in Far Eastern by as much as 1 or 2 percentage points a day. trading while also dropping to the bottom of the Traders generally recognized that the Federal European Monetary System (EMS). As the sale Reserve’s policy of restraint on money supply of marks against dollars gathered momentum be­ growth was consistent with some easing in finan­ tween mid-March and early April, the U.S. au­ cial market conditions, as demands for money thorities intervened forcefully to counter dis­ and credit weakened and as evidence of reces­ orderly trading conditions, operating frequently sion mounted. But the abruptness of the change in the New York market and, on one occasion, in market conditions generated uncertainty about overnight in the Far East. The authorities pur­ the policies of the U.S. authorities. At the same chased an additional $741.5 million equivalent of time, German interest rates remained firm, so marks in the market and another $654.7 million that interest differentials adverse to the mark Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

712 Federal Reserve Bulletin □ September 1980 were rapidly narrowing. As commercial and pro­ tervention and to repay part of the newly ac­ fessional participants continued to unwind their quired swap debt with the Federal Bank. On short mark positions, the mark advanced another balance, by mid-May the System’s swap in­ 4lU percent to as high as DM 1.7940 by late debtedness with the Federal Bank stood at April. However, the U.S. and German authori­ $331.4 million equivalent of marks. For its part ties were quick to enter the market to moderate the Treasury bought $29.8 million equivalent of the mark’s rise, and their coordinated inter­ marks on a spot basis and received delivery of vention helped bring the market into better bal­ $400 million equivalent of marks on a forward ance around the month-end. basis from correspondents. Meanwhile, in Germany, inflationary pres­ Nevertheless, market participants remained sures remained strong by recent standards and extremely sensitive to monetary policy develop­ the continued growth of credit demands was ments in Germany and in other industrial coun­ boosting borrowings from the central bank. On tries. Coming into the summer, Federal Bank of­ April 30, the Federal Bank hiked its discount rate ficials were stressing the need to rein in further xh percentage point to l xli percent and the Lom­ central bank money growth to the lower end of bard rate 1 percentage point to 9lh percent. At the 5 to 8 percent target range. In the United the same time the Federal Bank moved to curtail States, meanwhile, interest rates continued to excessive reliance on the Lombard facility by re­ decline. Participants questioned whether the ducing reserve requirements 8 percent and rais­ sharp drop in rates was more a response to the ing commercial banks’ quotas under the falloff in credit demand or to the provision of rediscount facility, thereby providing about DM bank reserves by the U.S. authorities. Traders 8 billion in domestic liquidity. The effect of these closely scrutinized the actions of the domestic actions was to leave the restrictive stance of Trading Desk, and the mark frequently came into monetary policy unchanged while keeping short­ demand when declines in the federal funds rate term liquidity tight. But market participants ini­ were interpreted as a sign of monetary ease. tially found it hard to assess the impact of these Moreover, in view of the exceptional weakness measures and focused instead on broader eco­ of the U.S. economy and increasing public dis­ nomic developments in the United States. cussion about the need for stimulus, the ex­ Monthly data showed that the U.S. trade posi­ change market was alert to any evidence of a tion was improving, while some evidence sug­ weakening in the priority of the U.S. fight against gested that price increases were slowing from the inflation. Consequently, bidding for the mark rapid pace early in the year. As a result, the mark gathered force in late May and again in early fluctuated only narrowly higher as the dollar July, when the U.S. authorities first relaxed and gained some resiliency in the exchanges, to trade then phased out completely the special credit re­ around DM 1.78-DM 1.79 through mid-May. straint program adopted early in the spring. On those occasions when upward pressures on Demand for the mark propelled the spot rate to the mark threatened to cumulate, the U.S. and as high as DM 1.7335 by early July. But against German authorities intervened to restore balance the major European currencies the mark re­ to the market. Total intervention sales by the mained weak. Germany’s current-account defi­ U.S. authorities between early April and mid- cit, already larger than that of any of its trading May amounted to $1,370.2 million equivalent of partners, continued to widen, and a number of marks, including $732.4 million equivalent for private and official organizations were predicting the System, financed out of balances and by a deterioration of up to as much as DM 25 billion drawings on the swap line with the Federal Bank, to DM 30 billion for the year as a whole. Al­ and $637.8 million equivalent for the Treasury fi­ though capital continued to flow back into Ger­ nanced from balances. At times when the mark many, a number of other EMS countries with eased back, the Federal Reserve took the oppor­ higher interest rates than those prevailing in the tunity to acquire $60.4 million equivalent of German money and capital markets were also at­ marks in the market and $169.6 million equiva­ tracting substantial inflows of funds. In these cir­ lent from correspondents in order to finance in­ cumstances, the Trading Desk again countered Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 713 the outbreak of disorder in the market by supple­ lent from correspondents. As a result, the Sys­ menting its mark intervention with sales of tem was able to reduce its outstanding in­ French francs so as to avoid aggravating the debtedness to the Federal Bank from as high as strains on the mark within the EMS. $1,080.9 million equivalent to $879.7 million By mid-July the mark began to lose some of its equivalent by the end of July (including revalua­ buoyancy as traders grew more cautious in the tion adjustments to swap renewals), while the face of changing economic conditions in Germa­ Treasury was able to begin replenishing its mark ny. Evidence mounted that domestic economic balances. Meanwhile, Germany’s foreign ex­ growth was tapering off, as industrial production change reserves rose $4.5 billion in the four and construction activity posted declines. Infla­ months through the end of July, largely reflecting tion on the wholesale and consumer levels also revaluation gains of its gold and foreign currency abated somewhat, reflecting some relief in the holdings with the European Monetary Fund. The food and energy sectors, the slowing in demand Federal Bank’s purchases of dollars also contrib­ pressures, and moderate wage settlements nego­ uted to the rise in foreign exchange reserves, tiated over the spring. Moreover, several EMS which stood at $45.7 billion at the end of July, countries had begun to allow monetary condi­ little changed on balance.1 tions to ease. Accordingly, domestic pressures built up for a relaxation of policy in Germany. The authorities were nevertheless concerned Swiss Franc that a reduction of official interest rates would undercut the progress under way in bringing in­ By early 1980, the upsurge in prices of oil and flation under control and in financing the current- other international raw materials was being account deficit. Instead, the Federal Bank an­ quickly transmitted to the Swiss economy. In­ nounced that it would provide a new repurchase deed, inflation in Switzerland, at 5 percent per facility in the amount of DM 5.4 billion. Federal year, remained low by comparison with that in Bank President Poehl described this action as a other countries but was accelerating at a worri­ cautious easing in monetary policy. some pace. At the same time, the sharp rise in At the same time the outlook for the dollar was imports of oil and other goods cut deeply into improving. The dollar was benefiting from new Switzerland’s traditional current-account sur­ data on production and employment that sug­ plus. The Swiss authorities, like those in most gested that the U.S. economy was no longer con­ other industrial countries, were pursuing a policy tracting as rapidly as before. As the demand for of monetary restraint in an effort to combat infla­ credit picked up and the monetary aggregates re­ tionary pressures, and Swiss interest rates corded large increases, short-term U.S. interest moved higher. But economic activity in Switzer­ rates rebounded. In this light, Chairman Vol- land was expanding more slowly than in other cker’s congressional testimony, reaffirming the countries. Consequently, the demand for funds Federal Reserve’s commitment to a policy of was not so intense, and Swiss interest rates— monetary restraint, was particularly well re­ while rising sharply by historical standards—did ceived. As a result, the mark dropped lower to not begin to keep pace with those abroad. close the period at DM 1.7860, for a net decline The shrinking current-account surplus, accel­ of 272 percent over the period under review. erating inflation, and adverse interest dif­ After mid-May, the U.S. authorities inter­ ferentials exerted a drag on the Swiss franc dur­ vened to sell $1,919.4 million equivalent of marks ing February and March. At times when the including $1,096.0 million equivalent for the Sys­ tem and $823.4 million equivalent for the Trea­ 1. Foreign exchange reserves for Germany and other sury. The System’s sales were financed from bal­ members of the EMS, including the United Kingdom, incor­ ances and by drawings on the swap line with the porate adjustments for gold and foreign exchange swaps Federal Bank. However, the authorities were al­ against European currency units (ECUs) done with the Euro­ pean Monetary Fund. Foreign exchange reserve numbers so able to purchase $160.0 million equivalent of used in the report are drawn from International Monetary marks in the market and $608.2 million equiva­ Fund data published in International Financial Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

714 Federal Reserve Bulletin □ September 1980 dollar came on offer in early February the Swiss of dollars, thereby absorbing Swiss francs. The franc was bid up. On such occasions, the Swiss authorities also lifted completely restrictions on National Bank intervened to counter a disorderly forward franc sales to foreigners and removed rise in the franc. At one point, the Federal Re­ the interest payment ban on nonresident bank serve joined in the intervention by selling $22.5 deposits of three months or longer. As a further million equivalent of Swiss francs out of balanc­ stimulus to capital inflows, foreign central banks es. But otherwise the Swiss franc tended to ease. were allowed to subscribe to a second bond de­ By late February, investors began liquidating nominated in Swiss francs issued by the World assets denominated in Swiss francs, switching into Bank and to short-term certificates of the Swiss higher-yielding mark and sterling assets and, government. Even so, with interest differentials when U.S. interest rates began their upward remaining highly adverse to franc-denominated climb, moving into dollar-denominated invest­ assets, the franc spot rate continued to weaken, ments as well. In fact, the franc fell more sharply dropping through the psychologically important than the mark against the dollar, declining to SF SF 0.95 level against the mark. 1.7111 in late February, some 43U percent below On March 27, Swiss National Bank General the opening level of SF 1.6325. Manager Languetin stated that the Swiss central In response to these pressures on the franc, bank would intervene as forcefully as required to the Swiss authorities acted in late February and prevent a further weakening of the franc. At the early March to liberalize restrictions on capital same time the authorities were alert to the do­ inflows by lifting the ban on interest payments on mestic liquidity situation. The heavy volume of nonresident savings deposits and on foreign cen­ capital outflows and official dollar sales had led tral bank deposits with maturities of six months to a decline in the monetary base below desired or more. The authorities also eased restrictions levels, and a further contraction threatened to on foreigners’ purchases of forward Swiss dampen economic activity. To support the franc francs. On February 28, the Swiss National Bank without generating further liquidity strains, the raised the discount and Lombard rates 1 percent­ Swiss National Bank supplemented its spot inter­ age point each, to 3 and 4 percent respectively. vention with forward dollar sales and provided But these measures were not sufficient either to commercial banks with a substantial amount of satisfy market expectations of more comprehen­ franc liquidity through short-dated foreign ex­ sive action to dismantle barriers to inflows or to change swaps. The Federal Reserve also took bring official rates in line with interest rates pre­ advantage of the opportunity to buy Swiss francs vailing in the domestic or Eurofranc money mar­ in New York to add to balances, buying $185.1 kets. million equivalent of Swiss francs, including Meanwhile, domestic economic activity was $140.4 million equivalent in the market between picking up after two years of sluggish growth. February and early April. Whereas the franc With the economy now operating close to full soon steadied against the mark, the spot rate employment, consumers and businesses acceler­ continued to decline against the dollar, bot­ ated their purchases of imported goods at a time toming out at nearly SF 1.88 on April 8 in the Far when import prices were still rising rapidly. As a East. result, the trade deficit deteriorated further. Dur­ The abrupt decline of dollar exchange rates be­ ing March selling pressures intensified. Com­ ginning early in April had its counterpart in a mercial leads and lags swung against the franc, surge of heavy bidding for the Swiss franc. Pro­ and investors kept shifting funds out of Switzer­ fessional and commercial interests rushed to land. Moreover, higher interest rates abroad cover short franc positions in response to the de­ prompted professional and commercial borrow­ cline in U.S. interest rates that happened to coin­ ers to turn to Switzerland’s money and capital cide with reports that the Swiss National Bank markets where interest rates remained com­ might raise its interest rates in line with an ex­ paratively low. pected hike of official interest rates in Germany. In response, the Swiss National Bank began On April 8-10 the franc soared VU percent to SF intervening more openly and heavily as a seller 1.7330, outpacing the rise in the mark. To coun­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 715 ter the disorderly market conditions, the Federal contrasted with evidence of some slowing of eco­ Reserve sold $35 million equivalent of francs, nomic growth and easing in financial conditions while operating in other currencies as well. Al­ in Western Europe. With market participants though the Swiss authorities left official rates un­ sensitive to the possibility that Swiss interest changed, the franc frequently led the rise in the rates might also ease, the Swiss franc fell back in European currencies against the dollar in the the exchanges to SF 1.6570 by the end of July. In weeks that followed. Many participants bid for fact, however, Swiss interest rates held firm. the franc on the view that the Swiss authorities When the franc came on offer after mid-July, the welcomed a rise in the franc. Investors, having U.S. authorities took the opportunity to pur­ ready access to franc investments as a result of chase $42.0 million equivalent of francs in the the virtual elimination of exchange controls, re­ market and $130.5 million equivalent from corre­ acted to the reduction of adverse interest dif­ spondents. These francs were used to liquidate ferentials by purchasing a broad range of franc- the System’s outstanding swap debt with the denominated assets. Moreover, commercial and Swiss National Bank and to rebuild System and professional interests increasingly covered Swiss Treasury balances. franc liabilities incurred over the winter months. For the period as a whole, the Swiss franc de­ As the demand for Swiss securities increased, clined IV2 percent from levels at the end of Janu­ long-term yields in Switzerland declined. But the ary, while rising VU percent against the German Swiss National Bank signaled its resistance to mark. Meanwhile, Switzerland’s foreign cur­ the rapid fall in interest rates by selling secu­ rency reserves fluctuated from month to month rities. Also, Swiss National Bank President in response not only to the central bank’s inter­ Leutwiler reaffirmed the authorities’ com­ vention, but also to foreign exchange swap oper­ mitment to a restrictive monetary policy course. ations undertaken for domestic monetary pur­ Traders were also heartened by new statistics, poses. On balance, Switzerland’s foreign suggesting that Switzerland’s inflation rate was exchange reserves declined $850 million over the leveling off. six months under review to stand at $12.3 billion By contrast, the market remained concerned as of July 31. over the sharp decline in U.S. interest rates. Many traders questioned the priority of the anti­ inflation fight in the United States, particularly Japanese Yen when in late May and again in early July the Fed­ eral Reserve successively dismantled the special Last year, the Japanese economy had made good credit restraint program. On both those occa­ progress in adjusting to earlier imbalances. Ef­ sions, the Swiss franc came into demand, rising forts to boost domestic demand had generated to a high of SF 1.5840 by early July. To avoid an solid growth while also helping reduce Japan’s exaggerated movement in the spot rate, the previously excessive current-account surplus. Swiss National Bank intervened as a buyer of Export and import volumes had responded to the dollars in Zurich and through the agency of the previous appreciation of the yen, with the effect Federal Reserve in the New York market. For of reducing the current-account surplus. The yen their part, the U.S. authorities sold $233.9 mil­ rate had moved back up to around ¥220 to the lion equivalent of Swiss francs in the 11 weeks dollar. But the sharp new rise in international oil from mid-April, with the bulk financed from bal­ prices in 1979 and early 1980, coupled with the ances and $11.2 million equivalent drawn on the risk of major disruptions to oil supplies, was a System’s swap line with the Swiss National serious blow to Japan, which depends on import­ Bank. ed oil for three-fourths of its energy needs. In the final weeks of July when market senti­ Consequently, the authorities found that they ment toward the dollar improved, the franc lost had to reverse gears and adjust to a new set of its upward momentum. Signs that the U.S. econ­ problems, as inflationary pressures at the whole­ omy was no longer contracting as rapidly as be­ sale level built up drastically, as the current ac­ fore, and that interest rates were backing up, count was pushed into deep deficit under the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

716 Federal Reserve Bulletin □ September 1980 weight of a sharply higher import bill, and as the the Swiss National Bank would cooperate to yen came heavily on offer and depreciated sharp­ avoid an excessive decline of the yen. The Fed­ ly in the exchange market. In response, the Japa­ eral Reserve, for its part, indicated its willing­ nese authorities progressively tightened mone­ ness to purchase yen in the New York market for tary and fiscal policies, primarily to contain its own account and to provide resources to the inflationary pressures. The authorities also Bank of Japan if needed under the existing $5 bil­ sought to correct the current-account deficit lion swap arrangement. The German and Swiss gradually by adjustment of the real economy central banks also pledged their support and sub­ and, in the meantime, to finance the deficit by sequently concluded swap agreements with the capital inflows. The government’s budget for the Bank of Japan. Also, on March 2 the Japanese 1980-81 fiscal year called for a cutback in spend­ authorities adopted a number of measures to en­ ing for public works that would permit a reduc­ courage inflows so as to help finance the currenttion of deficit financing. The Bank of Japan raised account deficit. Banks were allowed to bring in interest rates including a 1 percentage point in­ Euroyen deposits from their foreign offices, and crease of 1XU percent in its discount rate on Feb­ Japanese banks were permitted to make mediumruary 19. It also raised reserve requirements and and long-term foreign currency loans (so-called kept tight reins on bank credit expansion. impact loans) to domestic customers. Controls Nevertheless, by February, short-term inter­ on private placements abroad of yen-denomina­ est rates abroad, especially on dollar in­ ted bonds by Japanese residents were relaxed. struments, were rising even more sharply than And free-yen deposits held by foreign official in­ the advance of Japanese money market rates. stitutions were exempted from interest rate ceil­ Consequently, the yen continued on offer. With ings. Later during the month, the Bank of Japan the exchange rate declining, market sentiment abolished its 1970 arrangement with commercial toward the yen turned increasingly bearish so banks providing for yen-dollar swap facilities to that commercial leads and lags as well as specu­ finance imports, thereby rescinding the last of lative outflows of funds added to the downward the major import promotion schemes. The autho­ pressure on the yen vis-a-vis the dollar and other rization of increased ceilings for the issuance of major currencies. By the month-end the yen had yen-denominated certificates of deposit (CDs) by plummeted to ¥251.75, a decline of 572 percent banks operating in Japan also provided more from levels in late January and fully 43 percent scope for short-term capital inflows from abroad. from the high recorded in October 1978. As be­ These measures were reinforced by a broad fore, the Bank of Japan intervened to moderate anti-inflation program, introduced on March 19, the decline of the yen, supplementing its inter­ that was keyed to the domestic economy. The vention in Tokyo with operations in New York Bank of Japan raised its discount rate another through the Federal Reserve Bank of New York. 13/4 percentage points to 9 percent and sub­ The sharp decline of the yen complicated the sequently increased both reserve requirements authorities’ efforts to contain inflation. The rising and “window guidance” limits on bank lending. cost of imports had already helped push whole­ Public works expenditures, already trimmed sale prices up over 20 percent on a year-over- back, were postponed. In addition, the govern­ year basis. This sharp increase was feeding into ment announced that henceforth it would mon­ the consumer price index, which by then was ris­ itor price developments more closely, would sell ing at a rate of about 8 percent. The key spring commodities out of stockpiles if needed to pre­ wage negotiations were about to start. In these vent shortages from developing, and would ac­ circumstances, a further weakening of the yen celerate energy conservation efforts. The author­ threatened to reinforce inflationary expectations. ities reaffirmed their commitment to a disciplined The Japanese authorities therefore undertook monetary policy and to the priority of the fight on several initiatives to support the yen in the ex­ inflation. changes. Following intensive discussions, on These measures helped relieve some of the im­ March 2 the Bank of Japan announced that the mediate selling pressures, and the yen strength­ Federal Reserve, the German Federal Bank, and ened against most of the major European cur­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 111 rencies over the course of March. But reflows As the flow of funds gathered force, the yen be­ back into yen were slow to materialize, particu­ gan to outpace the rise in the European cur­ larly since the pull of U.S. interest rates was so rencies against the dollar, soaring by mid-June to strong in late March and early April. Along with as high as ¥214.95, some I8V2 percent above its other major foreign currencies, the yen contin­ lows in early April. As the rate rose, the Bank of ued to decline against the dollar through early Japan intervened in size to counter disorderly April. By April 8, the yen had fallen a further 5 conditions, on balance buying back about half of percent to as low as ¥264 against the dollar in the dollars it had sold earlier during the six- Far Eastern trading. The Bank of Japan contin­ month period. ued to intervene forcefully to moderate the de­ By that time, the reflux of funds had about run cline of the yen rate, and its dollar sales were its course. Moreover, traders had become cau­ reflected in the $2.2 billion decline of foreign ex­ tious in light of the upcoming parliamentary elec­ change reserves during February and March. tion on June 22, especially since the sudden Meanwhile, as part of the March 2 agreement, death of Prime Minister Ohira had inserted an the Federal Reserve bought $216.8 million equiv­ added element of uncertainty into the campaign. alent of yen in the New York market in coordi­ The outcome—-a victory by the ruling Liberalnated operations with the Bank of Japan. These Democratic Party with sufficient margin to pro­ purchases were added to System balances. vide for continuity in Japan’s leadership—reas­ By mid-April, with interest rates turning sured the market. The yen rate settled in a trad­ down, the yen began to recover along with other ing range of ¥215-¥219 through early July. major currencies. At first the yen’s recovery was Coming into summer, however, the debate tentative. Wholesale prices were still rising over economic policy heated up, as the pace of sharply in Japan, and concerns about oil supplies economic expansion began to slow and industrial resurfaced amid discussions of economic sanc­ production registered a decline. With slower eco­ tions against Iran. Nevertheless, the spring wage nomic growth abroad, the authorities in several negotiations resulted in moderate wage increas­ other industrial countries were beginning to al­ es, while evidence continued to point to sub­ low monetary conditions to ease somewhat. stantial gains in labor productivity. The market Meanwhile, large inflows of interest-sensitive increasingly came to the view that declining unit funds had generated an easing in the Tokyo mon­ labor costs would mitigate domestic inflationary ey market. As a result, the authorities were pressures and would provide the basis for Japa­ urged to ease up on monetary policy, particularly nese exporters to take advantage of the now sub­ by allowing interest rates to decline. In response stantial depreciation of the yen to increase sales to this pressure, some commercial and profes­ abroad. A sharp improvement in exports was al­ sional selling of yen emerged and the yen de­ ready showing through in Japan’s trade figures, clined in mid-July. and the overall trade and current-account deficits The Japanese authorities nevertheless re­ were beginning to level off. mained concerned about the need for further ad­ In response, market sentiment toward the yen justment of the economy. Governor Mayekawa improved, and the spot rate began to rise more of the Bank of Japan stressed that an easing of rapidly at the end of April. Speculative short po­ monetary policy was premature in light of the sitions were covered, while commercial leads continuing inflationary pressures. Moreover, the and lags shifted back in favor of the yen. With new government under Prime Minister Suzuki U.S. interest rates continuing to decline and in­ quickly affirmed its support for a firm anti-inflaterest rates in Japan holding steady, the dif­ tionary effort. Consequently, the yen rate soon ferential in rates swung back to favor the yen in steadied and closed the period at ¥227.80 for a early May and the pace of capital inflows quick­ net advance of 43U percent over the six-month ened. By that time, funds were moving into yen- period under review. Meanwhile, the Bank of Ja­ denominated assets of all maturities amid reports pan’s dollar gains after March were partially re­ of large placements by OPEC central banks and flected in an increase in Japan’s foreign exchange other foreign authorities in the Japanese market. reserves of $4.2 billion. At the end of July, re­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

718 Federal Reserve Bulletin □ September 1980 serves stood at $18.8 billion, up $2.0 billion on breadth and depth of British capital markets also balance. provided attractive investment opportunities for international investors, especially OPEC mem­ bers that were seeking outlets for their bur­ Sterling geoning surpluses. As a result, foreign capital flowed heavily into sterling-denominated assets, Last year the government under Prime Minister enabling the United Kingdom to finance in 1979 a Margaret Thatcher came into office, pledging to current-account deficit of $5 billion, official debt reduce the role of the public sector in the British repayments of $2 billion, and outflows of more economy and to restore private incentives. To than $4 billion stemming from the abolition of ex­ achieve this objective, the government com­ change controls. Even after these outflows, ster­ mitted itself to alleviate the burden of taxation by ling traded around 2.27 by the end of January reducing government spending over the long 1980 and around 71.7 on a trade-weighted basis term while in the meantime shifting the tax struc­ as a percentage of the Smithsonian parities. ture away from direct toward indirect taxation. Meanwhile, Britain’s foreign exchange reserves, Meanwhile, the United Kingdom’s inflationary after increasing more than $2 billion in 1979, spiral was being given another twist by an up­ stood at $18.8 billion on January 31 of this year. surge in wage demands after the abandonment of In the late winter and early spring, evidence formal wage restraints a year earlier, rising ener­ cumulated of declining industrial output and em­ gy prices, and an increase of 4 percent in the val­ ployment. Monetary growth was also showing ue-added tax to finance reductions of income tax. signs of declining. Public-sector borrowing needs To contain these pressures the British authorities were temporarily reduced by the tax-gathering had imposed an increasingly restrictive monetary season. The authorities were able to sell a large policy, raising domestic interest rates to record amount of government debt in the wake of the highs to bring the expansion of sterling M-3, the earlier measures, and external factors continued targeted monetary aggregate, back within the an­ to have a contractionary influence on the money nual growth range of 7 to 11 percent. supply. At the same time, however, private-sec- By late 1979 the economy was slipping into re­ tor loan demand continued to grow strongly, cession. The combined impact of rising labor with the result that the banking system was faced costs and high interest rates was imposing in­ with a reduced supply of public-sector debt and creasingly severe financial strains on British in­ hence of reserve assets. The authorities were dustry. Companies were cutting back on their in­ thus obliged to provide temporary assistance to ventories and scaling down their investment the money market so as to counter the upward plans. Even so, monetary expansion was proving pressures on short-term interest rates created by difficult to control, since companies were bor­ this drain on banking liquidity. These initiatives rowing heavily from banks to meet their financ­ helped stabilize British short-term interest rates ing needs while waiting for interest rates to come at around 17 percent per year. down. Moreover, despite the government’s best Meanwhile, however, dollar interest rates efforts, public spending was proving difficult to were rising sharply in response to rising credit contain, and the public-sector borrowing require­ demand in the United States, with the result that ment for fiscal 1979-80 was running nearly £llh in late March interest differentials moved against billion above target at just under £10 billion per sterling and in favor of the dollar. As multi­ year. national corporations and international portfolio In the exchange market, sterling had strength­ managers switched funds out of sterling into dolened. British interest rates were high relative to lar-denominated assets, the pound came on offer those in most other countries. Moreover, the against the dollar and the spot rate fell to as low United Kingdom’s approaching self-sufficiency as $2.1285 on April 7. But, since British interest in oil was seen as leaving the current account rates remained substantially above those on the well protected against possible cutoffs in oil sup­ European continent, sterling fell less against the plies and further increases in energy prices. The dollar than the other European currencies. The Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 719 turnaround in the dollar on April 8 brought ster­ the imminent removal of the supplementary spe­ ling into renewed demand. As U.S. interest rates cial deposit scheme—the “corset.” Inevitably, fell sharply, interest differentials moved back in­ the mid-June termination of this scheme was fol­ to sterling’s favor. Therefore, the pound lowed by a statistical explosion in sterling M-3, bounced back to $2.2275 by mid-April. as banks restored direct lending to all their cus­ Meanwhile, with the domestic economy clear­ tomers, which had been temporarily replaced by ly headed into a recession, pressures were build­ bankers acceptances arranged to avoid hitting ing up within British industry for relaxation of the limits on the expansion of interest-bearing fiscal and monetary policy. But, in a consultative eligible liabilities imposed earlier by the corset. paper on monetary control issued jointly by the Nevertheless, credit demand was still thought to British Treasury and the Bank of England, the be relatively strong. Moreover, despite rising authorities reaffirmed sterling M-3 as the appro­ unemployment, wages were still increasing at priate target variable for monetary policy, em­ just under 20 percent per year as the trade unions phasized that lowering the government deficit sought full compensation for price increases due played a major role in reducing that aggregate’s to rising energy costs and higher indirect tax­ growth rate, and asserted that quantitative con­ ation. Therefore, the authorities felt unable to trols were not an alternative to high interest rates cut interest rates during June and, in fact, al­ as a means of reducing monetary expansion. In lowed a repurchase facility—introduced earlier the annual budget message, Chancellor Howe in the year to provide liquidity—to run off. As a followed up by announcing that the government result, sterling moved back up to fluctuate still intended to reduce the public-sector borrow­ around $2.34 in late June. ing requirement to £8.5 billion and the growth of In early July the authorities provided some in­ sterling M-3 to an annual target range of 7 to 11 terest rate relief by cutting the minimum lending percent. Thereafter, both the Prime Minister and rate 1 percentage point below its all-time high to the Chancellor repeatedly affirmed the govern­ 16 percent. The pound came on immediate offer ment’s commitment to reduce inflation by con­ but then steadied. During the rest of the month, taining monetary growth. In this context, British some professionals in the market continued to interest rates remained high even after the end of look for further reductions of British interest the tax-payment season, while U.S. interest rates. But the authorities remained cautious in rates continued to fall. Moreover, the recession light of continued strong inflationary pressures, was leading to a rapid elimination of the current- and no further action was taken. As a result, ster­ account deficit. As a result, sterling led the ad­ ling continued to be buoyed by capital inflows vance of other European currencies against the coming from OPEC and other international in­ dollar, soaring to as high as $2.3770 in late May. vestors seeking to diversify their portfolios and By early June, after prolonged negotiations, to lock in high yields on British government agreement had been reached to reduce by £750 securities. Expectations of a near-term cut in million Britain’s contribution to the European British interest rates receded, and the pound was Community (EC). These developments gener­ propelled to a five-year high of $2.3992 against ated expectations in the exchange markets of the dollar on July 24. Subsequently, the rebound near-term reductions of British interest rates. in U.S. interest rates produced a steep decline to Fearing heavy outflows of interest-sensitive $2.3305 at the month-end, for a net increase of funds, traders reacted initially by selling sterling. 2lh percent over the six-month period. However, As a result, the pound came on offer during June, the pound continued to trade firmly against the falling as much as Vh percent below its highs in other major currencies, so that it closed at 74.4 late May. on a trade-weighted effective basis on July 31. For their part, however, the authorities re­ During the six-month period, the Bank of En­ mained reluctant to cut interest rates until firmer gland intervened to smooth fluctuations in the evidence of a sustained reduction of monetary sterling rate. These operations had a negligible growth. Unfortunately, interpreting the data was impact on Britain’s foreign exchange reserves. being made increasingly difficult at this time by Instead, the $1.6 billion increase over the period Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

720 Federal Reserve Bulletin □ September 1980 to $20.4 billion mostly reflected further revalua­ sive rise in both short- and long-term interest tion gains from periodic renewals of gold and dol­ rates. lar swaps against ECUs done with the European In the exchange markets, the French franc Monetary Fund. benefited from this rise in interest rates. More­ over, France’s current-account deficit, though a source of concern, was expected to be sub­ stantially smaller than the current payments im­ French Franc balance of Germany, its principal trading part­ ner. Also, in the context of the Iranian crisis, the The French economy was embarked on a sus­ traditionally good relations between France and tained recovery late in 1979 when the sharp hike the Middle East were expected to favor the franc in imported oil costs threatened to aggravate do­ in two respects. Part of the anticipated increase mestic inflationary pressures, lower real in­ in OPEC’s surplus would gravitate into the franc. comes, and impose a sharp reversal in France’s Also, the impact of any further oil supply dis­ current-account position. The authorities faced ruptions would be less severe for France than for the prospect that the significant improvements most other major countries. In this atmosphere, achieved in curbing inflation, restoring the bal­ commercial leads and lags remained favorable to ance of payments to a surplus position, and im­ the franc, and international investors steadily proving the competitiveness of French industry, moved some of their funds into domestic and Eu­ after years of stabilization policies, would now ro-French franc assets. be seriously undercut. By early 1980, consumer These inflows enabled the French franc to stay prices were rising at an annual rate of more than at the top of the EMS band throughout the early 13 percent. Last year’s current-account surplus spring. Indeed, the Bank of France regularly had of $1.2 billion had just about disappeared. And to intervene in European currencies to keep the the huge increase in France’s oil import bill was franc within the obligatory EMS margins, and expected to lead to a deficit of $4 billion to $5 often it purchased dollars as well. These opera­ billion in the current account this year. Mean­ tions were, for the most part, reflected in the while, a shakeout of noncompetitive French in­ increase of $1.5 billion in France’s foreign ex­ dustries, together with a bulge in young entrants change reserves over the months January through to the work force, had generated a rise in March. unemployment even as the economic recovery When the scramble for dollars developed be­ continued. tween late February and early April, the franc In response, the government had provided fell along with the other European currencies. some fiscal stimulus on a selective basis (ex­ But the franc declined less than the mark against panding programs to create jobs, providing addi­ the dollar. Even so, it dropped some 12 percent tional low-cost financing to industry, and in­ from its opening level of FF 4.0725 to as low as creasing low-income subsidies to offset increases FF 4.5550 on April 7. When the dollar turned in public-sector energy prices) while keeping the around after the Easter holiday, the franc came government’s borrowing requirement at a rela­ back into heavy demand. Amid reports of large tively low 1.3 percent of GDP (gross domestic Middle Eastern demand for French francs, the product). Meanwhile, France’s already restric­ rate was bid up sharply, prompting the Bank of tive monetary policy was reinforced in order not France to intervene vigorously both in EMS cur­ to accommodate the accelerating rate of domes­ rencies and in dollars. With the franc remaining tic inflation. The 11 percent target for monetary at the top of an almost fully stretched EMS and expansion set for 1979 was carried forward into the mark at the bottom, the Federal Reserve sup­ 1980, and the system of credit ceilings was tight­ plemented its intervention operations in New ened. Inasmuch as a strong demand for credit York by selling on three occasions between April was fueling a growth of the money supply well 9 and 16 $73.9 million equivalent of French above the target rate, the Bank of France’s ef­ francs. These sales were financed by drawings on forts to curb this expansion generated a progres­ the swap line with the Bank of France. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 721 During the late spring the French economy sulted in part from the revaluation gains stem­ showed signs of turning down. Domestic demand ming from quarterly renewals of its swaps with weakened, industrial output declined, and the the European Monetary Fund. But, in addition, continuing rise in unemployment was generating the continuing purchases of dollars and EMS some pressures for more stimulative measures. currencies also contributed to a rise in foreign Nevertheless, the money supply was still ex­ currency reserves, which stood at $25.3 billion at panding slightly above the targeted rate, the cur­ the end of July. rent-account deficit was widening, and inflation continued at a troubling double-digit pace. In late June, the French government announced it Italian Lira would provide some additional funds for invest­ ment by the nationalized industries in the hous­ Throughout 1979 the Italian lira had been bol­ ing sector. But the authorities were unwilling to stered in the exchange markets by a substantial ease their restrictive monetary stance. Instead, current-account surplus, together with relatively restrictions on the expansion of bank lending high interest rates and restrictions on domestic were maintained and the limits were tightened credit expansion that had drawn in large move­ for the second half of the year. As a result, ments of capital from abroad. As a result, the lira French interest rates stayed relatively high dur­ had risen during the second half of the year to ing May and June. trade at LIT 807.50 against the dollar by the end Thus the franc continued to benefit from vari­ of January 1980, while also remaining in the up­ ous types of capital inflows. It also was bolstered per half of its 6 percent band within the EMS. by unusually large repatriations of investment in­ Meanwhile, the favorable balance of payments come and favorable tourism receipts. The franc position and valuation adjustments stemming therefore joined in the continued, albeit more from quarterly renewals of Italy’s swaps with the gradual, rise of the European currencies against European Monetary Fund had generated an in­ the dollar, moving up some IIV2 percent from crease in Italy’s foreign exchange reserves to the low in early April to FF 4.0235 by July 8. The $18.5 billion even after repayment of some offi­ Bank of France continued buying modest cial debt. By February, however, Italy’s sub­ amounts of dollars and EMS currencies. The stantial current-account surplus was rapidly dis­ Federal Reserve again included the French franc appearing. The impact of sharply higher oil in its intervention operations, selling $86.8 mil­ prices, estimated to add $8 billion to the overall lion equivalent on four occasions between mid- import bill, was already beginning to weaken June and the end of July. This intervention was Italy’s trade position. And the prospect that Italy financed by further drawings on the swap line could avoid a return to current-account deficit with the Bank of France, raising the System’s with a further upsurge in its exports looked swap indebtedness with the French central bank dubious, in view of the deteriorating economic to $166.3 million equivalent including revaluation outlook for Italy’s principal trading partners. adjustments from renewals of earlier drawings. Moreover, the domestic economy was expanding During July, French interest rates eased some­ at a brisk pace, several sectors were encounter­ what. Nonetheless, the franc fell less than the ing capacity constraints, and inflationary pres­ mark when the dollar rose in late July. At this sures were again building up. time the Federal Reserve was able to buy $1.2 In response, over the course of the winter million equivalent of French francs from a corre­ months, the Italian authorities had begun to turn spondent to begin covering its outstanding swap to a more restrictive posture. The government debt. On July 31 the franc was trading at FF raised fuel prices in line with worldwide increas­ 4.1350, for a net decline of IV2 percent over the es in the price of oil, thereby absorbing purchas­ six-month period. ing power. But, with the 1980 fiscal budget still Meanwhile, France’s foreign currency re­ moderately expansive and expected to generate a serves continued to increase during April LIT 40 trillion public-sector deficit, much of the through July. The large rise in April and July re­ burden of containing inflationary pressures con­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

722 Federal Reserve Bulletin □ September 1980 tinued to fall on monetary policy. Accordingly, inflation. But during the spring, as the cabinet the Bank of Italy had raised interest rates, sought to reach an understanding with the trade drained domestic liquidity, and tightened the en­ unions on ways to limit the rise in labor costs and forcement of domestic credit ceilings by requir­ to get the agreement of other political groups on ing that banks lending above those limits main­ an industrial policy that might help maintain em­ tain non-interest-bearing deposits at the central ployment, the exchange market for the lira re­ bank. With these actions producing steadily ris­ mained nervous. ing money market rates, Italian companies con­ Against this background, pressures began to tinued to satisfy their financing needs by borrow­ mount for a devaluation of the lira within the ing abroad. Thus, the Italian lira held within the EMS to restore the competitiveness of Italian in­ top half of the EMS joint float throughout the dustry in world markets so as to bolster export­ early spring. ers’ profit margins and to sustain economic Against the dollar, however, the lira weakened growth in the face of a spreading slowdown along with other currencies after mid-February. abroad. Although government officials in their The sharp rise in U.S. interest rates soon elimi­ public statements stressed the argument that de­ nated the interest differentials that had pre­ valuation was not a viable alternative in a highly viously favored the lira. To the extent that Italian indexed economy, the lira came on offer as mar­ companies repaid their Eurodollar borrowings ket participants continued to anticipate that a with domestic funds, they came into the market new economic package from the government to sell lira, thereby contributing to the drop in the might include a devaluation. In this environment, rate, which fell as much as 13 percent to LIT short-term capital outflows quickly materialized. 912.10 by early April. But, with Italian interest As the outflows persisted during June, the Bank rates significantly higher than those prevailing in of Italy entered the market in force, selling large other EMS countries, the lira maintained its gen­ amounts of dollars to prevent the lira from weak­ erally favorable position within the EMS. Con­ ening further within the EMS. sequently, the Bank of Italy provided little sup­ In early July, the government announced new port for the lira through intervention. Indeed, measures to bring both the economy and the ex­ Italy’s foreign exchange reserves rose through change market into better balance. The measures the end of April to $21.5 billion, reflecting valu­ included higher indirect taxes to finance a reduc­ ation adjustments in its EMS holdings. tion of employer social security contributions, Around mid-April the lira began to recover more export credits, and a reduction of the pub­ against the dollar as U.S. interest rates retreated. lic-sector deficit. Also, the government proposed The lira’s rise, however, lagged behind that of a V2 percent withholding scheme for wages and other EMS currencies so that, while just below salaries, in which the proceeds would be invest­ the center of its 6 percent EMS band, the lira ed in bonds redeemable in five years to finance emerged as the weakest currency within that ar­ economic development. In addition, the Bank of rangement by May. Italy’s current account had Italy announced a further restriction of domestic now fallen into clear deficit, exerting a drag on credit expansion to 13 percent per annum. the currency’s performance in the exchange mar­ The exchange market reacted favorably to the ket. Italy’s prices and wages had continued to package. With devaluation fears dissipating, rise at more than 20 percent per year without a funds flowed back into the lira during the balance corresponding adjustment in the exchange rate, of July, as commercial and professional partici­ so the competitiveness of Italian goods was being pants covered short positions. The lira, there­ eroded. Also, poor weather had cut into tourist fore, traded more comfortably at the bottom of revenues. Moreover, a government crisis late in the joint float through the month-end. On July 31, March had generated some questions as to the lira traded at LIT 838.80 for a net decline of whether the authorities’ anti-inflation efforts 33/4 percent over the six-month period. In addi­ would be sustained. A new center-left coalition tion, the flows of funds back into the lira, togeth­ cabinet was soon put in place, committed to de­ er with further valuation adjustments of EMS fend the lira’s position in the EMS and to check gold holdings, produced a $500 million increase Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 723 in foreign exchange holdings, to $22.0 billion, for a official support in June before stabilizing in July. net rise of $3.5 billion over the six-month period. By contrast, after trading near the bottom through mid-March, the Irish punt rose into the upper half of the EMS band during the spring and European Monetary S ystem remained there through the end of July. By the period under review the countries whose currencies were members of the European Mon­ Canadian Dollar etary System’s joint float were faced with the problem of having to adjust their economies to The sharp jump in international oil prices during large increases in the price of oil. Most of the 1979 had somewhat different consequences for economies were already expanding fairly briskly, Canada than for most other industrialized coun­ generating upward pressure on prices and wages. tries. Its untapped reserves of oil, natural gas, Consequently, for the authorities in each country and other energy resources gave Canada consid­ the greatest concern was to prevent higher ener­ erable potential for increasing energy production gy prices from setting off an inflationary spiral. in the future, both for use at home and for ex­ Each country thus adopted restrictive policies port. In the meantime, the oil price hike had little both to restore external and internal balance to direct effect on Canada’s trade account, since the their economies and to fund their current-ac­ country is self-sufficient in oil and gas. It did count deficits. Monetary policy was the major in­ have implications, however, for the distribution strument for achieving restrictiveness, and inter­ of income between the oil-producing provinces est rates remained high in the EMS countries. of the west and the oil-consuming provinces of Within the joint float the configuration of cur­ the east. Moreover, if oil prices in Canada were rencies remained relatively stable, even as the allowed to adjust more rapidly to international entire EMS fluctuated widely against the dollar. price levels, the escalation of energy prices For the most part the French franc stayed at the would add to inflationary pressures. A proposal top of the band, while the German mark re­ to that effect in the budget, which had brought mained near the bottom. The Netherlands guil­ about the government’s defeat in December, was der traded firmly near the top of the band. By still under debate pending a general election in contrast, the Belgian franc came under persistent mid-February. selling pressure between February and early Canada’s current account had begun to show April, reflecting the market’s concerns over Bel­ signs of improvement. As a net exporter of raw gium’s fiscal and current-account deficits and the materials, Canada benefited in 1979 from the fa­ political difficulties facing the coalition govern­ vorable shift in terms of trade that reflected pres­ ment. The National Bank of Belgium intervened sures in world commodity markets generally. In forcefully to keep the franc within its 2XU percent addition, the sharp depreciation in the Canadian band. Domestic interest rates were also raised. dollar of previous years and the sustained efforts These actions stemmed the outflows, and during to curb cost and price pressures at home had the last three months of the period the franc trad­ substantially enhanced the international competi­ ed comfortably within the limits of the band. tiveness of domestic industry. But, with much The Danish krone also came under selling of the manufacturing sector up against capaci­ pressure early in the period and required some ty constraints, Canada was all the more vulner­ official support through intervention. However, able to the demand and price pressures in the the krone gradually came into better balance in United States, Canada’s principal trading part­ the early spring. Thereafter, it traded steadily in ner. In these circumstances, economic policies the lower half of the EMS through the end of continued to focus on the need to counter infla­ July. tionary tendencies. Fiscal policy had been tight­ The remaining two currencies fluctuated more ened in an effort to reduce the sizable budget widely. The Italian lira fell from the top to the deficit. Monetary policy was aimed at restraining bottom of the joint float and required substantial the growth of the money supply while seeking an Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

724 Federal Reserve Bulletin □ September 1980 interest rate relationship between Canada and percent per annum, and the authorities were con­ the United States that did not contribute to an cerned to avoid a substantial depreciation that acceleration of inflation through a further sub­ might set off more cost-price pressures at home. stantial decline in the Canadian dollar. As U.S. Therefore, to provide itself with more flexibility interest rates rose, interest rates in Canada to react to rapidly changing external conditions moved up and the Bank of Canada raised its dis­ and to avoid increases in short-term interest count rate in several steps to 14 percent. rates beyond those necessary to contain infla­ By early February, Canada’s rich energy re­ tion, the Bank of Canada announced on March sources and its improving current-account per­ 10 it would set its official discount rate each week formance had contributed to a generally positive at XU percentage point above the average rate on sentiment toward the Canadian dollar. Also, its the weekly tender of three-month Treasury bills. relatively high interest rates and North American Following this announcement, Canadian mon­ location made Canada an attractive investment ey market rates continued moving up, while opportunity, especially at a time of growing polit­ longer rates remained close to their peaks during ical uncertainty and security concerns. The Ca­ March. At the same time, congestion had devel­ nadian dollar had strengthened considerably oped in the U.S. bond market, leading to the over the preceding 2xh months to trade at Can. postponement of several Canadian borrowings $1.1574 by the beginning of the month. Then, while Canadian companies were repaying dollarwhen it was clear that the general election had denominated loans as U.S. interest rates contin­ provided for a majority government, the Cana­ ued to rise. The Canadian dollar thus came on dian dollar came into stronger demand. Capital offer. Against the U.S. dollar, it declined nearly 5 inflows intensified as repeated reports of new oil percent from its earlier high to Can.$1.1983 on discoveries off the Newfoundland coast attracted April 1. The Bank of Canada intervened heavily foreign funds into a rising Canadian stock mar­ at times to cushion the decline; foreign currency ket. The Canadian dollar was thus propelled to reserves decreased $728 million during March. Can.$1.1419 on March 3, its highest level in near­ Even so, the decline in the Canadian dollar from ly a year. Meanwhile, the Bank of Canada, oper­ levels in early February was modest relative to ating to moderate the fluctuations in its currency, the much larger drops of other major currencies. had purchased dollars in the exchange market. After early April, interest differentials moved These acquisitions were reflected in the $433 mil­ back into Canada’s favor as Canadian interest lion increase in official foreign currency reserves rates eased more slowly than those in the United during the month from its level at the end of Jan­ States. Although Canadian entities still did little uary of $1.9 billion. borrowing in the United States, this traditional Nevertheless, the Canadian dollar remained source of finance for Canada’s current-account vulnerable to actual or anticipated shifts in capi­ deficit was being replaced by investment funds tal flows. When the intense demand for credit in flowing into Canadian dollar and Euro-Canadian the United States pushed up interest rates so dollar assets. Moreover, the Canadian trade ac­ sharply as to raise doubts in the market whether count remained in larger surplus than had been Canadian interest rates would keep pace, the anticipated earlier in the year. spot rate began to ease early in March. Already The Canadian dollar, therefore, traded more interest rates in the United States had risen steadily during the early spring. For a time, un­ above comparable levels in Canada, and market certainty over the outcome of a May 20 referen­ participants were unsure how long this unusual dum in Quebec, in which the governing Separat­ pattern would continue without siphoning off the ist Party sought authorization to negotiate with inflows needed to offset Canada’s current-ac­ the federal government on the sovereignty issue, count deficit. Monetary growth in Canada had gave pause to the market and tempered the cur­ slowed considerably. Indeed, the monetary ag­ rency’s previous buoyancy. But, once the mar­ gregates were now just within the lower end of ket sensed that the referendum would be de­ the Bank of Canada’s 5 percent to 9 percent tar­ feated, the Canadian dollar began to rise again. get range. But inflation was still running at 9.5 News of further increases in the price of oil, fears Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 725 of more price increases to come out of the OPEC the market that Canadian interest rates would meeting in Algiers, and reports of new energy ease further. As interest rates in the United discoveries in Canada added to the upward mo­ States backed up and a heavy supply of new is­ mentum of the rate. Also, announcements by sues in the U.S. bond market led some of the some Canadian provinces of plans to float new planned Canadian issues to be postponed, the issues in the New York bond market generated Canadian dollar dropped off along with most oth­ some professional bidding. Consequently, the er currencies late in the month. Canadian dollar was bid up in steps to Can. At the end of July, therefore, the Canadian $1.1407 by July 7. The Bank of Canada again dollar, at Can.$1.1594, was down a net lU per­ bought dollars to moderate the rise, thereby re­ cent over the six-month period. During the peri­ couping much of the reserves it had lost during od under review, the Bank of Canada intervened, March. heavily at times, on both sides of the market. In During the rest of July, the Canadian dollar addition, the government sold small quantities of lost its upward momentum in the face of political its gold holdings at market prices well above tensions over the question of pricing Alberta oil book value. Over the six-month period, total offi­ and natural gas, growing uncertainties over the cial foreign currency reserves were unchanged at outlook for U.S. interest rates, and concern in $1.9 billion. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

727 Selection and Disclosure of Reasons for Adverse Action in Credit-Granting Systems Robert A. Eisenbeis of the Board's Division of and numerical systems operate. In actuality, the Research and Statistics prepared this article. two types of systems function in similar fashions. Moreover, many of the criticisms of numerical The Board of Governors of the Federal Reserve systems apply equally to judgmental systems, System has recently requested public comment while some of the supposed desirable features of on the applicability of Regulation B to several judgmental systems are illusory. practices of creditors using credit-scoring sys­ All credit analysis, whether performed sub­ tems. These practices relate to methods for con­ jectively by loan officers or statistically by creditsidering number of jobs and of income sources; scoring systems, is rooted in the principle that to the discounting of income from part-time em­ past credit experience can be used as a guide in ployment, pensions, or alimony; and to the selec­ predicting future credit performance. That is, tion and disclosure of the reasons for adverse ac­ past and future creditworthy borrowers will tion. The purpose of this article is to highlight the share certain attributes and will tend to resemble analysis behind the Board’s proposed rules on each other more closely than noncreditworthy the selection and disclosure of reasons for ad­ applicants, and these attributes can be reliable verse action in order to stimulate and focus pub­ indicators of creditworthiness. Of course, if such lic comment on the issues. A discussion of spe­ similarities did not exist, there would be no sys­ cific questions and interpretations, however, calls tematic differences between those who are cred­ first for some general observations about the na­ itworthy and those who are not. It would be im­ ture of statistical credit-scoring systems, their re­ possible to distinguish between the two groups lation to judgmental systems, and the objectives either statistically or judgmentally, and credit for requiring disclosures of reasons for adverse would have to be granted randomly rather than action. on the basis of risk. Judgmental systems rely upon the experience of individual credit officers to delineate the char­ Statistical and Judgmental acteristics that have proven to be reliable in­ Credit-Evaluation Systems dicators of creditworthiness and to identify the relevant tradeoffs among them. These determina­ It is often argued that judgmental credit evalua­ tions provide the reference points against which tion is preferable to statistical, or numerical, the information in each application is evaluated credit scoring because in a judgmental system and weighed simultaneously in deciding whether each loan application is personally reviewed by a to grant a loan. Because each loan officer’s ex­ loan officer. This individual treatment is con­ perience is both different and relatively limited, trasted to the apparently impersonal, mecha­ nothing assures that loan officers, even those nistic, and complex nature of numerical systems. working for the same lender, will emphasize the More important, numerical systems are also same factors, give them the same weight, or ap­ viewed as being inherently more discriminatory ply the same tradeoffs among factors.1 because they seem to saddle an applicant with the attributes of similar prior applicants rather 1. One way around this problem has been the evolution of than considering each on his or her own merits. certain “rules of thumb.” Such rules merely represent at­ tempts to formalize in a summary and simplified way the ex­ Both of these characterizations, however, are perience of successful loan officers so that it can be employed inappropriate representations of how judgmental by others. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

728 Federal Reserve Bulletin □ September 1980 Statistical credit-scoring systems operate in fluence credit decisions. Finally, from the per­ much the same fashion as judgmental systems. spective of enforcing the Equal Credit Opportu­ However, they rely upon statistical methods, as nity Act, numerical systems permit examination opposed to the experience and judgment of credit of the characteristics scored and the way the officers, in evaluating and comparing borrowers. analysis considered them. In contrast, in a judg­ The statistical procedures used in devising the mental system each credit officer balances the system consider many attributes simultaneously, available information against his or her experi­ identify the relevant tradeoffs among them, and ence in a way that a person affected by an ad­ assign the statistically derived weights used in verse action or a regulatory agency cannot repli­ evaluating individual applications.2 As distinct cate. As a result, the evaluation of judgmental from most judgmental systems, which may in­ systems is much more difficult, and review must volve selective appraisal of all the material in an be limited to the consequences of the loan-grant­ applicant’s file before a decision is made, numer­ ing process. ical systems usually rely on those few attributes Several aspects of the problem of assessing that previous statistical analysis suggests are pre­ credit risk have important implications for the dictive of creditworthiness. structure of disclosure policies for credit-evalua- Statistical credit-evaluation systems are still in tion systems. The first is that credit risk is a con­ their infancy. Many systems, for example, are tinuum. Potential borrowers do not fall into one not rooted in formal behavioral models of credit of two classes—those who are creditworthy and risk.3 Rather, they often rely on numerical those who are not; rather, they have different search techniques that select variables solely on probabilities of defaulting, of becoming a slow the basis of the statistical correlations between pay, or of otherwise providing a less profitable borrower characteristics and creditworthiness transaction, which range all the way from 0 to without regard for the causal links between the 100 percent. Thus applicants are arranged along factors selected and the credit risk. Interestingly, a spectrum of risk and differ from each other in some of the information included in these numer­ degree rather than falling into two discrete ical systems is deemed offensive when scored ex­ classes. The goal of credit analysis is to deter­ plicitly because there may not be an intuitive or mine where an individual applicant lies on that obvious causal connection between the factors continuum relative to the critical threshold estab­ and creditworthiness. Yet this is often the very lished by a lender to separate acceptable and un­ same information that has been used, and toler­ acceptable credit risks. This threshold of accept­ ated, for years in judgmental systems. ability is not absolute, but may vary, both over There are other obvious differences between the business cycle and from creditor to creditor, judgmental and properly constructed numerical depending upon the creditor’s objectives, risk systems. First, since credit officers may recall preferences, and costs. past experiences imperfectly, or may weigh in­ The second aspect of risk assessment is that it formation improperly, judgmental systems prob­ is a multidimensional concern, and more than ably tend to be less accurate than numerical sys­ one type of risk may be relevant to a lender’s tems. Second, numerical systems tend to ensure decision. For example, one type of risk is the more even treatment than do judgmental sys­ likelihood that a borrower will default, while an­ tems, in which decisions on the same application other is related to the probability that a borrower may vary from credit officer to credit officer and will become a slow pay or will miss payments. from day to day. Third, judgmental systems offer An applicant may never miss a payment until more opportunity for personal prejudices to in­ default actually occurs, or a loan that is even­ tually paid in full may involve many late pay­ 2. It should be noted that no one statistical method is ments and extra collection efforts along the way. “best.” Each type of risk implies different expected re­ 3. See, for example, the review of these systems by Robert A. Eisenbeis, Problems in Applying Discriminant Analysis in turns, costs, and collection efforts. All of these Credit Scoring Models, Staff Economic Studies 94 (Board of factors affect the ultimate value of the loan to the Governors of the Federal Reserve Systems, 1978); reprinted creditor. Of course, some loans may involve a in Journal of Banking and Finance, vol. 2 (October 1978), pp. 205-19. combination of late payments and default. As a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selection and Disclosure of Reasons for Adverse Action 729 consequence, the creditor may face many equal­ Diagram 1 ly acceptable tradeoffs on the margin among these different kinds of risks, and many borrow­ ers with different combinations of risk (and pre­ sumably different characteristics) and expected returns may all lie on the same threshold that a creditor has established between acceptable and unacceptable risks. The third aspect of risk assessment is that the attributes used to capture or serve as proxies for the various dimensions of credit risk tend to be correlated with each other and tend to move to­ gether. This association can result because the underlying aspects of risk may not be indepen­ dent of each other (such as the case involving both missed payments and default) and because two or more measures may be used to assess the same dimension of risk. Both the nature of the credit-granting process and the way in which an applicant’s character­ istics are considered simultaneously help to ex­ plain the extreme difficulty, in a judgmental or a variables is complicated by compensating numerical system, of isolating the “specific” rea­ tradeoffs. For example, a higher level of income sons for an adverse action on an application. can offset a lower level of wealth. Thus a large First, as indicated above, theory as well as ex­ number of potential applicants may be equally perience indicates that the various aspects of acceptable to the lender because their various risk, and most of the factors used to describe and combinations of characteristics place them all on serve as proxies for these risks, tend to be corre­ the lender’s approval-denial threshold. This situ­ lated. For example, a young person is more ation is illustrated in diagram 1, which depicts a likely to have less time on the job, a lower in­ scatter of good and bad loans described by two come, less discretionary income, and less wealth factors, X and Y. The heavy line represents a than an older person. All of these factors could creditor’s approval-denial threshold. The credi­ be used in the credit-evaluation process. But be­ tor will be indifferent among all applicants whose cause they tend to move together, an improve­ combination of characteristics places them on ment or change in one is usually accompanied by that line; all such applicants will be marginally changes in others. For example, a somewhat old­ approvable.4 er person usually has more time on the job, a Finally, the tradeoffs among factors may often somewhat higher income, more discretionary in­ be such that a change in one factor, considered in come, and somewhat more wealth than a young­ conjunction with the values of the others in the er one. In such instances it may be difficult, even profile, may reverse an adverse action. Yet that with sophisticated statistical procedures, to iso­ same change, in combination with a different set late the independent contributions of these fac­ of values on the others, would still lead to rejec­ tors to the overall level of risk. Thus, when fac­ tion. For example, in diagram 1, for an applicant tors are correlated and are considered at A to move to A' on the approval-denial thresh­ simultaneously, it often becomes impossible to assert either that one factor or even a set of fac­ 4. The threshold line in this example is nonlinear and was tors is more important than others, or that, be­ derived as a quadratic discriminant function. It is assumed in cause of a certain factor, an otherwise approv- this example that the creditor has previously divided the con­ able application fell below a creditor’s critical tinuum of risky loans into only two classes, defined as “good” and “bad.” This is not to imply that all credit-scoring threshold and caused an adverse action. models would look like diagram 1; rather, the diagram is used Second, assessment of the role of individual as a heuristic example of one common type of system. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

730 Federal Reserve Bulletin □ September 1980 old, requires a 10-point increase in X, if there is pend to some extent on the purposes of dis­ no change in Y. The same increase in X for an closure. The legislative history of disclosure is applicant at B, however, will not change the discussed in the next section, and principles for creditor’s judgment that the application was too disclosure procedures are then set out. risky to warrant approval. Thus the role of a giv­ en factor or set of factors in the decision is usual­ ly conditioned both on the values of other factors Purposes and Principles considered in the credit-granting process and on of Disclosure the way the applicant’s combined profile com­ pares to the critical threshold. The legislative history of the 1976 Amendments The problems of isolating the role of individual to the Equal Credit Opportunity Act reveals sev­ factors, or sets of factors, in the approval-denial eral objectives for the requirement that a creditor process apply equally to judgmental and numeri­ disclose the reasons for adverse action on a cred­ cal systems. If these problems appear to be less it application. These provide guidance in estab­ troublesome in judgmental systems it is because lishing the scope of the rules for specific dis­ loan officers, in selecting the reasons for an ad­ closures. verse action, may simply choose to ignore the Generally, it was argued that disclosure of the complications introduced by the correlations reasons for adverse action would deter discrim­ among factors in a borrower’s profile.5 The loan ination while improving the efficiency and com­ officer still must decide whether an adverse ac­ petitiveness of consumer loan markets. Specifi­ tion was taken because a particular attribute was cally, it was felt that a creditor who knew that the weak (such as X for an applicant at A in diagram reasons for an adverse action had to be explained 1) or whether there simply were not enough off­ would be less likely to make decisions on a dis­ setting attributes (because Y was not high criminatory basis. Furthermore, documentation enough). would serve as a useful enforcement device for Because judgmental and numerical credit sys­ the regulators, who would be able to analyze ad­ tems function in parallel fashions, it seems rea­ verse actions to detect patterns of illegal discrim­ sonable to apply essentially the same standards ination. Disclosure was also thought to be espe­ and rules under Regulation B uniformly to the cially important in cases of an adverse action for two types of systems. This principle is especially incorrect or incomplete applications. It would relevant with respect to disclosure of reasons for permit the applicant to correct or supplement the adverse action. In addition, the fact that judg­ application so as to ensure the granting of a prof­ mental systems tend to mask the credit-granting itable loan that otherwise might never have been process, and make it hard to describe, should not made. For rejected applicants, adequate dis­ provide a rationale for making the disclosure closure might serve an important educational standards under Regulation B less stringent for function, showing them how to improve their fi­ judgmental systems than for numerical systems. nancial position to become more creditworthy. Any such difference in regulatory restrictions With respect to the specificity of the required might have the unintended effect of encouraging disclosures, the Senate report indicated that the use of what might be less profitable and less long, detailed personal letters were not con­ socially desirable procedures. Both of these con­ templated; rather a “concise indication of the siderations have been explicitly incorporated in­ applicant’s deficiencies, and a short check list to the Board’s proposed rules. statement,” would be sufficient so long as it Given the practical difficulties of isolating the “reasonably” indicated the reasons for the ac­ reasons for adverse action, the problem for the tion. Some examples of such letters were pro­ Board was to devise a reasonable set of guide­ vided.6 The bill was subsequently modified in lines for creditors to follow in giving the more conference and the requirement in the Senate bill likely reasons for adverse action. These rules de- 5. Cynical observers might suggest that an applicant is told 6. Equal Credit Opportunity Act Amendments of 1976, S. a reason that the creditor believes that applicant will find ac­ Rept. 94-589, 94 Cong. 2 Sess. (Government Printing Office, ceptable. 1976), p. 8. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selection and Disclosure of Reasons for Adverse Action 731 that a “statement of reasons” be given was Defining the pool of factors subject to potential changed to a requirement that “the specific rea­ disclosure for judgmental systems is more diffi­ sons” be given for the action taken. Although the cult because the information the loan officer con­ Conference Report gave no indication of the ra­ siders in making a decision is not always appar­ tionale for the change, the Congress presumably ent. Absent procedures or formal policies that wanted the consumer to receive more than a per­ delineate the items considered from the appli­ functory explanation of the adverse action.7 The cation and supplemental information, it seems consumer was entitled to know with some speci­ reasonable to presume that, as a minimum, the ficity the reasons for the action taken. pool of factors subject to potential disclosure would consist of all the information that is in an applicant’s file or that is available to the loan offi­ Policies for Disclosure cer when the decision is made. The objectives that appear in the legislative his­ tory have important implications for disclosure Principles for Selecting Reasons for Adverse policies. These relate to the delineation of the Action pool of factors subject to disclosure and to the procedures used to select the reasons for adverse The problem of specifying standards for selecting action. the reasons for adverse action on a credit appli­ cation has two aspects. The first is straight­ forward; it involves situations in which credit is The Pool of Factors Subject to Disclosure automatically denied (or some other adverse ac­ tion is taken) because of a single negative factor. In disclosures about adverse actions on appli­ The second is substantially more complicated be­ cations, it seems logical that the reasons should cause it deals with cases in which the applicant’s be directly related to the factors actually consid­ combined profile is judged to be more risky than ered in the decision to grant the loan. In the case is acceptable. These aspects are discussed in of a numerical credit-scoring system, under turn. which an application has been acted on adversely Many credit-granting systems, both numerical because it did not meet the minimum standards and judgmental, call for automatic rejection or in the system, the disclosed reasons should be other adverse action on an application because a based only on factors actually scored or weight­ single factor is so unsatisfactory that, in the cred­ ed in the system. It might be argued that, be­ itor’s judgment, it cannot be offset by other fac­ cause of the correlations among variables and be­ tors. Typical examples of such “black ball” cri­ cause most of the attributes used in models serve teria are presented by applicants (1) who have as proxies for risk and other factors, a creditor gone through personal bankruptcy, (2) who are should be permitted to review judgmentally an below the age of consent, or (3) who have not applicant’s entire record and to indicate the lived in an area for the length of time required by weaknesses whether or not they relate directly to the creditor. Explanation of the adverse action the specific items scored.8 The problem with on such an application is simple and straight­ such flexibility is that it removes any incentive forward. Furthermore, if a creditor’s policies for creditors either to model credit risk more pre­ contain either one or several possible absolute cisely or to understand better the methods they criteria for adverse action, it would even be fea­ use. sible to construct a check list of these factors to facilitate disclosures to applicants. As the discussion in previous sections in­ dicates, substantial problems may arise in both 7. Equal Credit Opportunity Act (Conference Report), H. Rept. 94-873 , 94 Cong. 2 Sess. (GPO, 1976), p. 8. judgmental and numerical systems in selecting 8. If the factors in the model were proxies for other basic and disclosing the reasons when an adverse ac­ characteristics contained in the application or applicant file, tion is taken because a borrower’s profile looks presumably a better specification of the scoring system would include the omitted variables or factors. too risky or does not yield the minimally accept- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

732 Federal Reserve Bulletin □ September 1980 Diagram 2 points, thus moving to the creditor’s threshold at A'.9 This standard appears to be the appropriate target for creditors in structuring disclosure poli­ cies. Unfortunately, many systems cannot easily generate such information at reasonable cost; this is especially the case with judgmental sys­ tems.10 Short of ensuring theoretically optimum dis­ closures, the problem is to define the range of acceptable disclosures. Perhaps the next-best al­ ternative most consistent with the objectives of disclosure would be to require that creditors make a series of conditional statements to the ap­ plicant as follows: if a particular factor changes in a prescribed way, and if the remainder of the profile does not change, credit will be granted or the adverse action will be reversed. Most sys­ tems, even judgmental ones, would permit a creditor to indicate at least the direction (and sometimes the degree) of change needed in a par­ ticular factor to reverse an adverse action. able score. In such a circumstance an adverse ac­ In the context of the system shown in diagram tion usually results from the combination of fac­ 3, the disclosure to an applicant at A would run tors in an applicant’s profile rather than from any as follows: if the profile changes in no other way single factor. An improvement in any one factor (that is, Y is held constant), the contribution of A" might lead to a marginal approval. Because it is must rise by 10 points (moving the applicant to the combination of factors, considered simulta­ point A") to ensure approval.11 The benefit of neously, that leads to the adverse action, it is of­ such a conditional disclosure is that the conten difficult, and perhaps impossible, to infer that sumer would know unambiguously at least one any one factor, or set of factors, “caused” the change in the profile that would make the appli­ action. In this sense, the statute establishes the cation marginally acceptable.12*13 difficult, if not impossible, requirement that cred­ itors identify the “specific reason or reasons” for 9. The point A is on the line perpendicular to the line tan­ taking an adverse action and disclose these rea­ gent to the creditor’s indifference threshold at point A'. Also the line A-A' is the shortest line (minimum Euclidean dis­ sons to the consumer. tance) that can be drawn from point A to the creditor’s mar­ When credit decisions are based on simultane­ ginal approval threshold. ous consideration of a combination of factors, Note, too, that this is a concept substantially different from disclosure of the distance an applicant is from the mean or the theoretically optimum disclosure for either a median of the approval group. In diagram 2, such a disclosure judgmental or a numerical system that is most would indicate the position of point GL defined by the mean consistent with the statutory objectives would in­ of X and the mean of Y. 10. The example in diagram 2 also assumes that X and Y dicate to customers the minimum adjustments are continuous, which clearly defines the point A'. When an necessary to make their profiles marginally ap- applicant’s attributes are not continuous, the location of point provable or to reverse the adverse action. Such a A' may not be clear. 11. For some applicants, more than one optimum point disclosure would rest on full consideration of all may correspond to A This is clearly the case for an applicant possible tradeoffs and interactions among factors at B. It is also interesting that for an applicant at B, a conditional that might follow from any change in a borrow­ disclosure would indicate that approval would be warranted if X were increased to generate 6 points or decreased to gener­ er’s characteristics. For example, in the case of ate 16 points. This would correspond to systems that give the numerical system shown in diagram 2, the more points to applicants who live in their houses for a short minimum adjustments that an applicant at A or long period of time than are given to applicants who are at their present addresses for an intermediate period. would have to make would be increases in the 12. In multistage systems in which an applicant failed an contribution of I by 8 points and of Y by 5 initial screen, the customer would be told what was necessary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selection and Disclosure of Reasons for Adverse Action 733 Diagram 3 change in X should be disclosed before the change in Y. A remaining problem is that the units ofZ and Y may not always be comparable. For example, X might measure months of resi­ dence, while Y defines thousands of dollars of in­ come. The change in the number of months of residence necessary to generate 10 points may be more difficult for the customer to accomplish than the change in income necessary to generate 18 points.14 Nevertheless, if creditors are en­ couraged to make as many conditional dis­ closures as possible, or otherwise to exploit the disclosure potential of their systems, the objec­ tive of the statute will be achieved. Furthermore, this concept of conditional disclosures is equally applicable to judgmental systems. It is not possible to specify criteria for the number of conditional disclosures. Currently, Regulation B permits creditors using judgmental systems to select subjectively the “principal rea­ son or reasons” for an adverse action. There are The problem remains to prescribe general pro­ no restrictions on the number of items to be dis­ cedures to determine how many conditional dis­ closed; only one need be given. Moreover, the closure statements should be made, and in what disclosures may be made in general terms by us­ order. For those systems that permit conversion ing a model form of the types suggested in Regu­ of changes in factors into contributions to an lation B. These procedures seem to have been overall point score, disclosures should be made generally acceptable to the public—applicants in ascending order of the size of the change nec­ and creditors alike—and no modifications have essary for favorable action on an application. In been suggested to them. Therefore, in the ab­ diagram 3, for example, the change \nX (given Y) sence of the ability to specify more objective requires only 10 points to move A' to A", where­ standards and because of the fundamental simi­ as the change in Y (given X) requires 18 points to larities between judgmental and numerical credit move the applicant to A"'. Therefore, the systems, it seems reasonable to permit flexibility in the number of reasons for adverse action dis­ closed, regardless of the type of system em­ to reverse an adverse action or to pass on to the next phase of analysis, and not what was required to become marginally ployed.15 acceptable. The key reorientation of this aspect of the 13. This proposal is different from those contained in pre­ Regulation B disclosure policy involves setting a vious Federal Trade Commission consent agreements. Each case has tailored the required disclosures to the system of the positive minimum standard that requires at least particular creditor. What has evolved, however, is a mechan­ one conditional disclosure to be made. This dis­ ical rule that requires the creditor to disclose at least four closure would indicate the general step or steps reasons. The creditor discloses those factors that deviate the most from the mean values of the factors of those applicants one might take to modify a risk profile to make who were marginal approvals. These mean values cannot be the application marginally approvable (or to precisely placed on the diagrams for easy reference. In gener­ al, however, the underlying concept focuses on the maximum deviations, rather than minimum deviations, from marginalapproval applicants. In this sense, the procedures do not pro­ vide the consumer with as useful information as the proposed 14. An alternative is to require that the creditor disclose conditional disclosures would. The reason for this is that the only mutable factors. The problem is that, given a sufficient implicit assumption underlying the staff proposal is that it is length of time, nearly all factors are mutable. Moreover, mu­ easier for an applicant to modify slightly a characteristic that tability is a subjective concept that may vary even among ap­ is already close to a marginally acceptable level than to modi­ plicants with identical profiles. fy substantially a factor that deviates a lot from a marginally 15. For numerical systems, the pool of potential factors to acceptable level. be disclosed would be limited to those actually scored. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

734 Federal Reserve Bulletin □ September 1980 move to the next phase of the evaluation pro­ Diagram 4 cess). In terms of diagram 3, conditional dis­ closure of a single factor would involve, at the minimum, a qualitative indication of how one might modify X to move ftom A to A". Disclosure of combinations of factors would indicate what the applicant might do to move to a point be­ tween A'" and A", such as A'. Furthermore, the reoriented policy implicitly places the additional burden on the creditor to reverse a negative deci­ sion or to demonstrate how credit policies or ec­ onomic conditions had changed if the applicant still did not qualify for credit after he or she had taken the steps indicated by the creditor in the original disclosure. Conclusions Reorientation of disclosure policy away from negative aspects—the reasons for an adverse ac­ tion—toward positive aspects—the things an ap­ provement provides incentives to offer meaning­ plicant might do to become marginally approv- ful disclosures and to exploit fully the disclosure able—offers several advantages to consumers potential of their systems. For example, the and creditors alike. First, telling an applicant more innovative a creditor was in approaching what must be done to secure favorable action is the “optimum” disclosures, or the more explicit most consistent with the educational objective the disclosures are, the more the creditor should cited in the legislative history. It also provides a be able to protect itself from claims by the appli­ more meaningful statement and reference point cant that the necessary improvements had been than, for example, disclosing how similar an ap­ made when in fact they had not. Thus the credi­ plicant is to the average “good” applicant. In tor could protect itself against being forced to terms of diagram 4, an applicant at C would cer­ make loans that are too risky by its standards. At tainly find it more useful to know that only a the same time, the more explicit the disclosures slight increase in either X or Y (to generate 3 are, the less uncertainty the applicant faces points) would be sufficient to result in approval about whether he or she has made the required than to know the distance he or she was from the improvements. Clearly, users of numerical sys­ mean of X or Y (represented by the point GL). tems potentially have the capability to make The applicant might interpret this latter dis­ more explicit conditional or other disclosures closure as indicating a substantial hurdle to be than do judgmental creditors. Equally important, overcome, when in fact he or she was close to they can demonstrate more easily (and thus will approval. be less vulnerable to challenge) the way changes Second, creditors argue that they want to grant in economic conditions or credit standards may loans rather than turn applicants away. Positive alter the improvements that a particular appli­ disclosures would create less ill will on the part cant must make. All of these incentives promise of applicants subject to adverse action—indeed, to benefit both applicants and creditors. would help them become acceptable risks. Fur­ Fourth, the creditor who is permitted some thermore, the long-run effect would be an im­ flexibility (given the impossibility of specifying provement in the quality of applicant pools. more precise and objective general standards) in Third, the implicit burden on creditors to act setting the number of disclosures can balance the favorably if the applicant makes the indicated im- business necessity of protecting the integrity of a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selection and Disclosure of Reasons for Adverse Action 735 credit system against the risk of being forced to it-scoring system, all of which would raise grant undesirably risky loans or of being chal­ creditor costs and incur adverse publicity. lenged in the courts. Last, specifying the order in which conditional Fifth, requiring disclosure of the steps an ap­ disclosures should be made prevents the creditor plicant must take to gain favorable action should from arbitrarily eliminating controversial items induce creditors to explore the underlying behav­ from the potential list of disclosed factors be­ ioral and causal links between the factors cited cause the order in which factors are to be dis­ and creditworthiness. To disclose factors that do closed potentially varies for each applicant. This not seem obviously or intuitively related to cred­ feature is especially important in its implication itworthiness would tend only to invite further ap­ for achieving the enforcement objectives con­ plicant questions and court challenges of a cred­ tained in the statute. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

737 Industrial Production Released for publication September 16 flecting gains in both durable and nondurable ma­ terials industries. The production of basic metals Industrial production increased an estimated 0.5 and parts for consumer durable goods increased percent in August after six months of decline that sharply, but the output of parts for equipment totaled about 8.5 percent. The increase in August edged down slightly. Production of energy mate­ reflected a large rise in the output of construction rials was about unchanged. supplies and consumer home goods. More mod­ erate increases occurred in nondurable consumer Seasonally adjusted, ratio scale, 1967 = 100 goods and in most durable and nondurable mate­ rials industries. The index for July now shows a revised decline of 1.1 percent from June com­ pared with the decrease of 1.6 percent estimated previously. At 140.5 percent of the 1967 average, the index in August was 7.6 percent lower than that of a year earlier. Output of consumer goods edged up 0.1 per­ cent in August. Auto assemblies, at an annual rate of 5.6 million units, were down more than 12 percent from their July level, reflecting to some extent shortages of parts for certain models. The large decline in the output of automotive prod­ ucts almost offset the large rise in the production of home goods and the moderate gain in non­ durables—such as food and clothing. Output of construction supplies rose more than 2 percent in August after a six-month reduction that totaled almost 19 percent. The production of business equipment declined further in August. Federal Reserve indexes, seasonally adjusted. Latest figures: August. Output of materials increased 1.0 percent, re­ Auto sales and stocks include imports. 1967= 100 Percentage change from preceding month Percentage change Grouping 1980 1980 Aug. 1979 to JulyP Aug.e Mar. Apr. May June July Aug. Aug. 1980 Total industrial production ......... 139.8 140.5 -.3 -2.5 -2.9 -1.8 -1.1 .5 -7.6 Products, total .......................... 141.8 142.3 -.1 -2.3 -2.0 -.8 -.5 .4 -4.6 Final products........................ 141.7 141.7 .0 -1.6 -1.6 -.7 -.3 .0 -2.8 Consumer goods.................. 141.6 141.7 .1 -2.2 -2.0 -.1 -.4 .1 -4.7 Durable .......................... 127.8 126.6 -.3 -5.4 -5.5 -.5 -.3 -.9 -14.5 Nondurable .................... 147.1 147.8 .2 -1.0 -.7 .0 -.4 .5 -.8 Business equipment............. 168.1 167.3 .1 -1.1 -1.3 -1.7 -.5 -.5 -2.5 Intermediate products............. 142.4 144.4 -.6 -4.7 -3.1 -1.8 -.8 1.4 -10.5 Construction supplies ......... 127.2 130.3 -1.0 -8.5 -4.6 -3.4 -1.0 2.4 -17.9 Materials.................................. 136.5 137.8 -.8 -2.8 -4.4 -3.1 -2.4 1.0 -12.0 p Preliminary. e Estimated. Note. Indexes are seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

739 Statement to Congress Statement by Paul A. Volcker, Chairman, Board tern of low productivity, rising inflation, and eco­ of Governors of the Federal Reserve System, be­ nomic instability. fore the Committee on the Budget, U.S. House In that connection, I am convinced that the of Representatives, September 10, 1980. stability and vigor of our economy will not be re­ stored over time unless the ominous cycle of ris­ I am pleased to respond to your invitation to par­ ing levels of inflation in successive periods of ex­ ticipate in this hearing to help clarify, as best I pansion can be brought to a halt. We would can, the issues before you and the Congress in neglect that prime objective of economic policy setting budgetary priorities during a period of at our peril. For that reason, the Federal Reserve economic uncertainty. has been, and will continue to be, guided by the As you are well aware, the current recession need to maintain financial discipline—a dis­ developed much later than the great majority of cipline reflected in reduced growth over time of economic forecasts had suggested and then the monetary and credit aggregates. broke with more force than had been generally As recently as July the Federal Reserve reaf­ anticipated. Indeed, the abrupt fall in output this firmed its ranges for the monetary aggregates past spring about matched the record postwar that call for a deceleration of money growth in decline that occurred in the first quarter of 1975 1980 from the pace during the preceding year. and was about as large—in percentage terms—as The tentative monetary ranges established for we have typically had over the course of an en­ next year specify slightly lower growth. I am glad tire recession. More recently, the rate of decline to say that this approach was supported by the in economic activity has moderated. Some in­ relevant congressional committees. dicators can even be interpreted as suggesting In general terms, the targets for growth of the the recession could be relatively short-lived. monetary aggregates are designed to encourage However, the recent record of economic fore­ progress toward price stability. At the same time casting is warning enough of the uncertainties in­ we would, of course, like to see resumption of herent in judging with precision fluctuations in sustainable economic growth. In the short run, economic activity. We do know that, despite monetary policy alone cannot guarantee that whatever encouragement we can draw from happy combination of events. Technically, the some of the most recent data on the near-term supply of money tends to be related to nominal outlook, the fundamental forces accounting for gross national product, and our targets are con­ some of the persistent problems of the economy sistent with a number of possible combinations remain—poor productivity and low savings, ad­ of real growth and inflation. If inflation tends to justments to sharply higher costs of energy, and decline, the prospects for satisfactory growth most importantly, the uncertainties and dis­ consistent with the targets will be greatly im­ tortions associated with strong underlying price proved. Conversely, to the extent other policies pressures. It is the strength of those forces that and behavior—public or private—are tending to seems to me to dictate the main outlines of eco­ reinforce inflationary pressures and credit de­ nomic policy. mands, more of the available money supply will I understand and share the immediate concern be absorbed in financing price increases rather about recession. But I am even more concerned than in real activity. Inflationary expectations that we shape policies that also look toward the will tend to keep interest rates higher than other­ medium- and longer-term needs of the economy, wise. lest we inadvertently extend and repeat the pat­ We cannot escape that problem by simply in­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

740 Federal Reserve Bulletin □ September 1980 creasing the money supply to accommodate a should in turn reduce the pressure for “catch higher rate of inflation. The result could only be up” wage gains or anticipatory pricing. In that to prolong and intensify the inflationary process, connection, a strong case can be made for tax in turn undermining the recovery and setting the reduction as a means of increasing investment stage for intensification, rather than resolution, and productivity. Federal taxes already account of our economic problems. That is why I believe for a historically large proportion of income, and it so important that all our policies take account in 1981 this ratio could be pushed sharply higher of the need to break the insidious pattern of ris­ as a result of sizable increases in taxes for social ing rates of inflation in successive cycles—a pat­ security, the windfall oil profits tax, and the infla­ tern that, I would remind you, has been accom­ tion-induced bracket creep in the individual in­ panied by higher levels of unemployment rather come tax. In my view, the size and the composi­ than lower. tion of the tax burden do have adverse During the spring and early summer we began implications for business investment, for costs, to see some slowing of price increases from the and possibly for incentives to work and save. exceptional pace earlier this year, and a zero in­ For those reasons I welcome the emphasis in flation rate was reported for July in the consumer recent tax proposals to deal as a matter of prior­ price index. The concerns over a virtual explo­ ity with taxes on investment. But at the same sion of inflation that were rife last winter have time, tax reduction—whether to assist productiv­ rightly receded, an important factor in the sharp ity or to support purchasing power—has effects declines in interest rates in the spring. Neverthe­ on revenues and the budgetary position that we less, we have to recognize that the improvement cannot ignore. If we try to do so, the adverse ef­ so far has been related largely to transitory or fects may more than offset the good. For that short-term factors—a softening in markets for reason, I believe tax reduction must be condi­ energy and some industrial commodities, favor­ tional on progress in restraining expenditure able supply conditions for food in the spring, and growth. the easing of mortgage interest rates. As you As you know, I fully supported the strong ef­ know, food prices have more recently turned up fort by the Budget Committees in the House and again, and the producer price indexes as last re­ Senate to restrain expenditures last winter and to ported make less happy reading. aim for a balanced budget. With the economy More important than these short-term fluctua­ slumping, a budgetary balance is obviously tions, which are part of the normal dynamics of beyond reach today. But government spending our complicated economy and reflect in part will probably be smaller as a result of the con­ weather and external developments, the “under­ gressional and administration effort, and the cen­ lying” or “core” rate of inflation—which is tral point is that restraint must be maintained if roughly determined by trends in compensation we are to have a credible opportunity to achieve and productivity—has tended to rise in recent budget balance in a more fully employed econo­ years. With no productivity gains to offset wage my. increases, that core rate appears to be in a range I am frankly concerned about the size of the of 9 percent to 10 percent; if anything, the growth expenditure increases projected in the latest offi­ rate of labor costs appears to have drifted higher cial estimates. I recognize a sizable part of those in the first half of this year. There is no doubt that increases represents a normal, and potentially re­ concern about this inflationary performance, and versible, response to cyclical developments in fears of the future, are a powerful force holding the economy. Nonetheless, the trend of our interest rates up at present. spending, taking account of national security and One important means of dealing with these other needs, plainly limits the amount of tax re­ wage and cost pressures is to improve productiv­ duction that would be prudent. To the extent that ity. Gains in productivity can directly offset cost budgetary discipline is suspended in the face of pressures; over time, moreover, productivity economic slack, the room for tax reduction could gains are the only lasting source of increases in shrink, even to the vanishing point. Indeed, pro­ real income per worker, and rising real income grams and policies interpreted as exacerbating Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 741 and prolonging the inflationary process can be that such restraint could be carried to the point of counterproductive even in terms of economic justifying general tax reduction programs at this stimulus, in part through the expectational ef­ time, pending reassessment of the budgetary and fects on financial and other markets. business situation around the turn of the year. Consequently, I cannot emphasize too strong­ As crucial as monetary and fiscal policies are, ly, if we are to plan on tax reduction, the need to many other elements of public and private policy exercise strong restraint over spending and to are directly relevant to the prospects for moving contain the stresses and strains that a huge deficit toward lower levels of inflation as the economy could place on the economy—especially on fi­ recovers. With productivity actually declining nancial markets. These markets—both domestic recently and with higher energy prices, the hard and international— have become so sensitized to fact is that the real income of the average worker inflation and so wary of deficits that the anticipa­ will decline. The fact cannot be changed by push­ tion of excessive spending and more inflation can ing up nominal wages and prices; the result is be as damaging as the reality in driving interest more inflation—not more real income. The gains rates higher at home and the dollar lower abroad. and losses may be reshuffled, but the real per­ The desirability of tax cuts—particularly those formance of the economy will probably be ad­ without clear rationale in terms of investment versely affected in the process. In the context and productivity—also is contingent on the gen­ of any given set of monetary and fiscal policies, eral performance of the economy. Our inability the end result will be fewer jobs, not more. to predict the economic future accurately has Of course, it is much easier to analyze the been demonstrated often enough. Experience in­ problem than to find practical means of slowing dicates that numerous well-intentioned programs the wage-price treadmill rapidly and effectively of economic stimulus have been ill-timed and ex­ when fears of inflation are so deeply embedded. I cessive. Currently, we are arguably near a turn­ believe it is clear from what I have already said ing point. One of the questions in that respect is that the answer cannot simply lie in passively ac­ whether the pressures of government financing— cepting whatever increase in the money supply or the inflationary outlook generally—may would be necessary to accommodate the infla­ dampen the recovery of significant sectors of the tionary process. To the contrary, I hope and ex­ economy, such as housing or automobiles. It pect that firm financial discipline—monetary and would be ironic, indeed, if overexuberant plan­ fiscal—can be one factor encouraging moder­ ning for tax reduction—designed for stimulus- ation in business and labor behavior. The possi­ had adverse effects in terms of inflationary ex­ bility of relating tax reduction to wage restraint pectations and financial markets, interfering with has occasionally been raised, but it seems to me the natural recuperative powers of the economy. to have received less attention than the question I have made the point in earlier testimony that may deserve. I have not been convinced that a I would want to defer any decision about the ap­ formal, detailed program for linking income re­ propriate scope of the tax reduction at least until straint to tax reduction, as some have proposed, after the election, when, among other things, we is practical. Nevertheless, before sizable reduc­ can have a clearer view of the spending priorities tions in personal taxes are considered by the of an administration and a congress for a period Senate and the House, I believe an opportunity of time ahead, a matter that inevitably can only presents itself to explore carefully, with business be clarified after November. I realize you do not and labor, the need for a commitment to restraint have the luxury of foregoing a budgetary resolu­ in wages and pricing during this crucial period in tion. What seems to me important is that the res­ the interests both of the economy as a whole olution sustain spending restraint. Conceivably, and of business and labor’s own economic well­ sufficient restraint could be achieved to make it being. prudent to provide room for limited tax measures I have spoken many times of the need to devel­ aimed at the priority need to stimulate business op concerted policies in other areas to help us to investment, reduce costs, and enhance produc­ achieve and reconcile our economic goals. We tivity growth. However, I am doubtful at best need to reduce our dependence on foreign oil—a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

742 Federal Reserve Bulletin □ September 1980 matter not unrelated to tax policy. We need to to a path of healthy and sustainable growth in the attack those elements in the burgeoning regula­ 1980s. We must not sacrifice that opportunity by tory structure that impede competition or add neglecting the need to place our immediate ac­ unnecessarily to costs. And, I believe, it would tions in the context of a coherent longer-run pro­ be a serious mistake to seek relief from our prob­ gram. One essential part of that program requires lems by a retreat to protectionism, which would firm discipline over the growth of money and risk weakening the forces of competition, would credit. Control over spending and the federal reduce the pressures on American industry to in­ deficit is another. Any tax reduction that can be novate, and would undermine the attack on infla­ fitted into that context should be responsive to tion. the fundamental needs of our economy to im­ We are now at the critical point in our efforts prove productivity and investment, to contain to reduce inflation while returning the economy costs, and to improve incentives. □ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

743 Announcem ents Regulation D are set forth in the Board’s official notice of these actions, which is available upon request from the Revision Federal Reserve Board and from the Federal Re­ serve Banks. The Reserve Banks will send the The Federal Reserve Board has revised its Regu­ notice to all affected depository institutions. lation D (Reserve Requirements of Depository For major provisions of the new regulation, Institutions) to carry out provisions of the Mone­ see “Legal Developments.” tary Control Act of 1980. The first period for reporting deposits under the new regulation begins October 30, 1980, for Amendment all institutions whose requirements have not been deferred. The amount of initial reserves re­ The Federal Reserve Board has announced rules quired beginning November 13 under the act’s for nonmember depository institutions to follow new reserve ratios will be calculated from these if they pass required reserve balances through reports. another institution to the Federal Reserve, and The Board amended Regulation D to conform rules for these intermediaries to follow in han­ to the act after consideration of comment on pro­ dling the reserve balances of others. The new posed new reserve requirement rules published rules, which are effective November 13, 1980, in June. amend the Board’s Regulation D (Reserve Re­ The Monetary Control Act, which became law quirements of Depository Institutions). March 31, is designed to improve the ef­ Under the Monetary Control Act of 1980, de­ fectiveness of monetary policy by applying new pository institutions are required to satisfy re­ uniform reserve requirements, set by the Federal serve requirements fixed by the Federal Reserve Reserve, to member and nonmember commer­ on their transaction accounts and nonpersonal cial banks, savings banks, savings and loan asso­ time deposits. These reserves may be held in ciations, and credit unions that offer transaction vault cash, or if vault cash is not large enough to accounts or nonpersonal time deposits. satisfy reserve requirements, balances must be By the terms of the act, the reserve require­ held with Federal Reserve Banks. ment on the first $25 million of an institution’s Depository institutions that are members of transaction accounts will be 3 percent. The initial the Federal Reserve System will continue to hold requirement on remaining transaction accounts their reserves directly with the Federal Reserve will be 12 percent. The reserve requirement on Bank in their Federal Reserve District. Non­ nonpersonal time deposits with original matu­ members may hold their reserves directly with rities of less than four years will be 3 percent. the Federal Reserve, or indirectly by passing the Nonpersonal time deposits with original matu­ reserves through another institution (pass­ rities of four years or more will be 0 percent. Eu­ through correspondent). rocurrency liabilities will have reserve require­ Some highlights of the Board’s passthrough ments of 3 percent. The new requirements are, rules are as follows: by law, to be phased in gradually in order to pro­ 1. Correspondent institutions that may re­ vide an orderly transition. The new regulation in­ ceive and pass through the reserve balances of cludes phase-in schedules, with requirements nonmember depositories are the Federal Home varying according to the status of the institution Loan Bank, the Central Liquidity Facility of the and other factors. National Credit Union Administration, or a de­ Reporting requirements, and further details, pository institution (member or nonmember) that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

744 Federal Reserve Bulletin □ September 1980 holds a required reserve balance directly at a Re­ for Federal Reserve System services provided serve Bank. The Board reserves the right to per­ separately from its local Federal Reserve office mit other institutions, on a case-by-case basis, to (but when reserve balances of nonmember insti­ be passthrough correspondents. U.S. branches tutions are zero or small, it may be necessary for and agencies of foreign banks and Edge and the institution also to maintain an adequate clear­ Agreement corporations may pass their required ing balance). reserves through other institutions or may them­ selves act as passthrough correspondents. 2. A respondent will be able to choose one Regulation A: Revision passthrough correspondent, and that correspon­ dent must pass the reserve balances through di­ The Federal Reserve Board has announced rectly to the Federal Reserve. Such arrange­ adoption of major revisions of its rules governing ments may be initiated, terminated, or changed the use of its discount window for extensions of upon notification satisfactory to the Reserve credit by the Federal Reserve to depository insti­ Bank involved. tutions, effective September 1, 1980. 3. In passthrough arrangements, the corre­ The revision of the Board’s Regulation A (Ex­ spondent has the responsibility to assure the tensions of Credit by Federal Reserve Banks) maintenance of the correct level of its respond­ was made to carry out the provisions of the Mon­ ent’s reserve balances. The passthrough rules etary Control Act of 1980. The Board acted after approved by the Board clarify the precise re­ consideration of comment received on revision sponsibilities of the parties to a passthrough ar­ of the regulation proposed in June. rangement. Reserve Banks will compare only the The Monetary Control Act provides that any aggregate required reserve balance with the total depository institution offering transaction ac­ actual balance held in each reserve account counts or nonpersonal time deposits that are sub­ maintained by the correspondent for determina­ ject to reserve requirements shall have access to tion of reserve deficiencies, penalty liability, and the Federal Reserve’s discount and borrowing other reserve maintenance purposes. facilities on the same basis as member banks. 4. The correspondent institution passing bal­ Regulation A, as revised to implement the act, ances through will maintain the reserve balances provides that Federal Reserve credit will be of­ it receives, dollar for dollar, with the Federal Re­ fered under two major programs: adjustment serve Bank in whose territory (the service area of credit and extended credit. Adjustment credit ac­ a Federal Reserve office) the main office of the counts for most Federal Reserve lending. It is respondent is located. made on a very short-term basis to help deposi­ 5. Under the rules adopted by the Board, a tory institutions adjust to sudden changes in their correspondent may choose one of the two fol­ need for funds. Extended credit is designed to lowing options with respect to handling its own help institutions cope with such needs over required reserves and those of its respondents in somewhat longer periods. It includes seasonal the same Federal Reserve territory: credit to accommodate the needs of smaller insti­ tutions and other extended credit for institutions The correspondent may maintain its own required re­ facing particular problems. Problems of the latter serve balances, as well as those of its respondents type may arise from the particular circumstances whose head office is located in the same territory as of a given institution or from general difficulties the correspondent’s head office, in a single, com­ mingled reserve account at the Federal Reserve Bank affecting a broader range of institutions. or Branch serving the territory; or the correspondent In adopting revised Regulation A, the Board may maintain its own reserve balance in the Federal modified its June proposal slightly with respect Reserve Bank or Branch serving its territory and, in to nonmember institutions that have access to addition, maintain a separate commingled reserve ac­ special industry lenders such as the Federal count for its respondents located in the same Federal Reserve territory. Home Loan Banks, credit union centrals, and the Central Liquidity Facility of the National 6. A depository institution maintaining a re­ Credit Union Administration. serve balance on a passthrough basis is eligible The amendment as adopted provides for tem­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 745 porary adjustment credit to such institutions eral Reserve to eliminate this penalty rate on when they are unable to gain timely access to such loans, and the Board, which has requested their special lender and for consultation and this authority for many years, revised its dis­ coordination with the special industry lender, as count lending rules accordingly. Pursuant to the follows: act, adjustment and seasonal credit loans so col­ lateralized will be made, effective September 2, Nonmember depository institutions . . . like member at the basic discount rate, currently 10 percent. banks generally are expected to rely on other reason­ ably available sources of funds before turning to the discount window for assistance. ... In instances Regulation Z. where depository institutions require funds on short notice to cover immediate cash or reserve needs and Deferral of Effective Date for APRs are unable to gain timely access to their special indus­ try lenders, the Federal Reserve is prepared to ad­ The Federal Reserve Board has deferred the date vance funds through its discount window. On these on which new methods of calculating and dis­ occasions the Federal Reserve will consult and coordi­ closing the annual percentage rate on consumer nate with the special industry lender as soon as pos­ loans under Regulation Z (Truth in Lending) be­ sible. Any such advances . . . will be expected to be repaid when access to the usual sources of funds is come mandatory. secured, usually the next business day. The Board acted to avoid an increased regula­ tory burden that would otherwise be brought The Board also set forth the conditions under about by differing mandatory effective dates for which the Federal Reserve will assist nonmem­ amendments to Regulation Z adopted by the ber institutions needing help over longer peri­ Board in January, and regulatory revisions re­ ods—including periods of deposit disinter­ sulting from the Truth in Lending Simplification mediation. In these instances the Federal and Reform Act enacted since then. Reserve will consult with the institution’s super­ The annual percentage rate (APR) amend­ visor to determine, among other things, why ments to Regulation Z adopted by the Board in funds are not available from sources other than January provide greater flexibility and protection the Federal Reserve. to creditors in calculating and disclosing the The Board, as it had proposed, made the pos­ APR. These would have become mandatory Oc­ sible use of a discount rate surcharge a per­ tober 1, 1980. manent addition to the System’s discount lending The Truth in Lending Simplification and Re­ rules that are applicable, according to circum­ form Act, and the new Regulation Z proposed by stances, to both adjustment and extended credit. the Board to conform to the act, contain APR calculation and disclosure rules very similar to those adopted by the Board in January. These Revision of Discount Lending Rules will become effective April 1, 1981, and will be­ come mandatory April 1, 1982. The Federal Reserve Board on August 22, 1980, To avoid requiring creditors to conform their revised its rules for the use of “ineligible paper” practices to two sets of regulations in a short as collateral at the discount window, in accord­ time, the Board deferred the mandatory date of ance with the Monetary Control Act of 1980. the January revisions of APR calculation and dis­ Ineligible paper is collateral not included closure to April 1, 1982. among collateral eligible for purposes of a dis­ The deferral has the effect of preserving the count loan under Section 13 of the Federal Re­ status quo. It is expected that the action will serve Act. have no adverse impact on consumers. Creditors Section 10(b) of the Federal Reserve Act au­ may begin to comply with the APR changes thorizes the Reserve Banks to make loans on the when the new act and the new regulation under basis of such collateral, but has required that the the act take effect April 1, 1981, or earlier, but interest rate charged be V2 of a percentage point creditors are not required to do so until a year higher than the basic discount rate. later. This provides time for retraining personnel The Monetary Control Act authorized the Fed­ and for other changes that creditors must make Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

746 Federal Reserve Bulletin □ September 1980 to conform to the new requirement. The Board’s Tours of Board Building action does not affect creditors that have already made APR changes in conformity to the amend­ The Federal Reserve Board has announced ex­ ments adopted by the Board in January. panded hours for its tour program. The Board Building is now open daily from 9:30 a.m. to 3:30 p.m. Visitors may explore the public areas of the Proposed Actions building, including its rotating art exhibit, and see a slide show on the work of the central bank. The Federal Reserve Board has proposed for comment two interpretations of its Regulation B (Equal Credit Opportunity) concerning consid­ Annual Revision of Data Series eration of income and disclosure of reasons for adverse action. The Board asked for comment by Index of industrial production October 20, 1980. The Federal Reserve Board on August 28, With the publication of the August 1980 produc­ 1980, made public a proposed schedule of fees tion index in mid-September, the results of the for its services to financial institutions, and the 1979 data revision were also released. This annu­ principles underlying the proposed system of al revision incorporates 1979 data that became charges. The Board also proposed (1) procedures available after the four-month period in which for a depository institution to follow if it main­ monthly estimates are currently adjusted as well tains low or zero required reserve balances with as data revised by the source for 1979. The sea­ the Federal Reserve and it wishes to obtain serv­ sonal factors were also reviewed and changed, ices directly from the Federal Reserve; and (2) a but only slight adjustments were necessary. series of steps designed to reduce Federal Re­ serve float and a preliminary plan to price re­ maining float beginning in mid-1982. The Board Capacity utilization rates asked for comment by October 31, 1980. The capacity utilization rates have been revised beginning with January 1979 as a result of the an­ “EFT at Your Service” nual revision of the production index. Minor ad­ justments were also made to some capacity in­ The Federal Reserve Board has announced the dexes. release of “EFT at your Service,” an educational film produced by the Federal Reserve Bank of Both the industrial production and capacity Philadelphia. The film shows how electronic fund utilization releases may be obtained from Pub­ transfers (EFTs) are changing the way many lications Services, Board of Governors of the Americans conduct their financial affairs. EFT Federal Reserve System, Washington, D.C. offers an alternative to cash and checks for many 20551. financial transactions. As directed by the Congress, the Federal Re­ serve has issued regulations to carry out provi­ System Membership: sions of the Electronic Fund Transfer Act of 1978 Admission of State Banks protecting consumers in the use of EFT services. The regulations establish procedures for cor­ The following banks were admitted to member­ recting errors and specify limits of liabilities for ship in the Federal Reserve System during the lost or stolen EFT cards. period August 11 through September 10, 1980: The 14-minute, 16mm color film is available on a free-loan basis from Association Films, 866 Oregon Third Avenue, New York, N.Y. 10022. It also Cave Junction ....................Home Valley Bank may be obtained from the Board of Governors Virginia or the 12 District Federal Reserve Banks. Chesterfield .....Peoples Bank of Chesterfield Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

747 Record o f Policy A ctions o f the Federal Open Market Committee Meeting Held on July 9, 1980 survey of business spending plans taken in late April and May indicated 1. Domestic Policy Directive that expenditures for plant and The information reviewed at this equipment would be about 10 per­ meeting indicated that real output of cent higher in 1980 than in 1979. The goods and services had declined survey also suggested, however, markedly in the second quarter after little real growth in such ex­ having expanded at an annual rate of penditures over the year after allow­ 1.2 percent in the first quarter. Aver­ ance for expected increases in age prices, as measured by the fixed- prices. weight price index for gross domes­ Private housing starts fell consid­ tic business product, continued to erably further in May to an annual rise at a rapid pace, but not so rapid­ rate of 920,000 units, one of the low­ ly as in the first quarter. est monthly rates in the postwar pe­ The dollar value of total retail riod, while residential building per­ sales declined substantially in May mits edged up. There were some for the fourth consecutive month; in indications of improvement in newreal terms such sales had fallen 10 home sales in May. percent below their peak in January, The rise in producer prices of fin­ the sharpest four-month drop on rec­ ished goods and of materials moder­ ord. Unit sales of new automobiles ated substantially in the second slowed considerably further in May quarter following exceptionally rap­ and remained weak in June. id advances in other recent quarters. The index of industrial production The rate of increase in consumer fell 2.1 percent in May, following a prices slowed appreciably in April similar reduction in April. The de­ and May from the accelerated pace cline was broadly based, reflecting in the first quarter. The recent mod­ reductions in output for all major eration in both producer and con­ product groupings. The rate of ca­ sumer prices was due largely to a pacity utilization in manufacturing lessening of the rapid rise in prices of fell 2 percentage points further to 79 energy-related items. The index of percent, 8 percentage points below average hourly earnings of private its recent high in March 1979. nonfarm production workers rose at Nonfarm payroll employment de­ an annual rate of about 9lh percent clined in May and fell sharply further over the first half of 1980, compared in June. Employment decreases with an increase of 8V2 percent dur­ were concentrated in manufacturing ing 1979. and construction in both months, In foreign exchange markets the and in June the service-producing downward pressure on the dollar sector registered its first decline that had developed in early April since the previous recession. The abated in mid-June but reemerged in unemployment rate, however, edged early July. The renewed pressure ap­ down from 7.8 to 7.7 percent in parently reflected concern about the June, following large increases in the possibility of further declines in U.S. preceding two months. interest rates. The trade-weighted The Department of Commerce value of the dollar against major for­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

748 Federal Reserve Bulletin □ September 1980 eign currencies, which had fallen steps were announced on May 28 about Vh percent since the Com­ and June 12. mittee’s meeting on May 20 and Growth in M-l A and M-1B accel­ about 11 percent since early April, erated in June to annual rates of WU was close to its level in early 1980. percent and 163/4 percent respective­ The U.S. foreign trade deficit for ly, following little change in May and April and May was well below the sharp contraction in April. Growth average for the first quarter, reflect­ in M-2 also accelerated in June to an ing a reduction in both oil and non­ annual rate of about 17V4 percent, oil imports. Nonagricultural exports up from a rate of 83/4 percent in May increased slightly after exhibiting and a small decline in April; the fast­ considerable strength in 1979 and in er growth in M-2 partly reflected the first quarter of 1980. rapid expansion in money market At its meeting on May 20, the mutual funds. From the fourth quar­ Committee had agreed that open ter of 1979 to the second quarter of market operations in the period until 1980, M-l A and M-1B grew at annu­ this meeting should be directed to­ al rates of about V2 and l3/4 percent ward expansion of reserve aggre­ respectively, considerably below the gates consistent with growth of growth paths consistent with the M-l A, M-1B, and M-2 at rates high Committee’s ranges for the year enough to promote achievement of ending in the fourth quarter of 1980; the Committee’s objectives for M-2 and M-3 grew at rates just above growth over the year, provided that the lower bounds of their ranges. in the intermeeting period the week­ Following rapid expansion in the ly average federal funds rate re­ first quarter, total credit outstanding mained within a range of 8V2 to 14 at U.S. commercial banks con­ percent. Specifically, the Committee tracted in June for the third con­ had agreed that operations should be secutive month. The June decline re­ directed toward encouraging growth flected continuing weakness in of M-l A, M-1B, and M-2 over May loans, including business loans. and June at annual rates of 7 to l xh However, short-term business bor­ percent, l xh to 8 percent, and about rowing was sustained by rapid 8 percent respectively. The Com­ growth in net issuance of com­ mittee also had agreed that, in light mercial paper by nonfinancial cor­ of the earlier shortfall, moderately porations following a surge of such faster growth would be acceptable if issuance to a record rate in May. that developed in response to a Over the first half of 1980, total com­ strengthening of the demand for mercial bank credit grew at an annu­ money. al rate of about Axh percent, some­ In pursuit of the Committee’s ob­ what below the lower bound of the jective of encouraging growth in the Committee’s range for the year. monetary aggregates, System open Market interest rates declined market operations were directed considerably further in late May and during the intermeeting period at the first half of June but since then fostering an ample availability of most rates have retraced part of the nonborrowed reserves, and condi­ decline. On balance, private short­ tions in the money market eased fur­ term rates declined 100 to 125 basis ther. The federal funds rate declined points over the intermeeting period from an average of about 107/s per­ while most long-term rates fell 10 to cent in the statement week ending 50 basis points; municipal bond May 14 to around 93/s percent in the yields, however, rose somewhat. statement week ending July 2. In Over the interval, commercial banks recognition of the easier conditions reduced their loan rate to prime busi­ in money markets, reductions in ness borrowers from I6V2 percent to Federal Reserve discount rates from IIV2 percent. In primary markets for 13 percent to 11 percent in two equal home mortgages, average rates on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 749 new commitments at savings and that uncertainty about the forecasts loan associations declined to about was especially great, partly because 12Vs percent. of the difficulty of evaluating the im­ On May 22 the Board of Gover­ pact that persistent inflation might nors announced a partial phaseout have on expectations and thus on of the special measures of credit various categories of expenditures. restraint that had been put in place, At its meeting on February 4-5, or reinforced, on March 14. Sub­ 1980, the Committee had agreed that sequently, on July 3, the Board from the fourth quarter of 1979 to the announced plans to complete the fourth quarter of 1980 average rates phaseout of the special credit re­ of growth in the monetary aggre­ straint program. The Board noted gates within the following ranges ap­ that recent banking and other data peared to be consistent with broad clearly indicated that credit expan­ economic aims: M-l A, Vh to 6 per­ sion was running at a moderate pace, cent; M-1B, 4 to 6V2 percent; M-2, 6 and accordingly the special condi­ to 9 percent; and M-3, 6V2 to 9lh tions necessitating the extraordinary percent. The associated range for credit restraint measures were no the rate of growth in commercial longer present. bank credit was 6 to 9 percent. In es­ According to staff estimates pre­ tablishing the ranges then, the Com­ sented at this meeting, the decline in mittee had agreed that monetary real GNP during the second quarter growth should slow further in 1980, was larger than had been anticipated following some deceleration in 1979, at the time of the meeting in May. in line with the continuing objective The staffs projections suggested of curbing inflation and providing the that real GNP would continue to de­ basis for restoration of economic cline in the remaining quarters of stability and sustainable growth in 1980, although at a progressively output. less rapid pace, and that the At this meeting, in accordance unemployment rate would increase with the Full Employment and Bal­ substantially further. A modest re­ anced Growth Act of 1978 (the Humcovery in real GNP appeared likely phrey-Hawkins Act), the Committee to begin around the turn of the year. reviewed the ranges for growth of The rise in prices, as measured by the monetary and credit aggregates the fixed-weight index for gross do­ for the period from the fourth quar­ mestic business product, was ex­ ter of 1979 to the fourth quarter of pected to remain rapid, but some­ 1980 that it had established at its what less rapid during 1981 than meeting in February and gave pre­ 1980. liminary consideration to objectives Although members of the Com­ for monetary growth that might be mittee differed somewhat in their ap­ appropriate for 1981.1 In doing so, praisals of the depth of the overall the Committee continued to face un­ decline and of the pace of the recov­ usual uncertainties concerning the ery, they generally agreed that the forces affecting monetary growth. contraction in real GNP would con­ As noted earlier, expansion of both tinue well into the second half of M-l A and M-1B from the fourth 1980 and that a recovery in 1981 was quarter of 1979 to the second quarter likely to be modest compared with of 1980 fell considerably below the most earlier periods of recovery. All growth paths consistent with the members believed that the rise in Committee’s ranges for the year. prices would remain rapid in 1981, However, growth of M-2 and M-3 although a few anticipated a some­ was considerably stronger: over the what more significant slowing than the staff projected; one or two mem­ 1 The Board’s midyear report under the act bers expected little if any improve­ was transmitted to the Congress on July 21, ment. However, it was suggested 1980. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

750 Federal Reserve Bulletin □ September 1980 two quarters both of these aggre­ For 1981, the prospective relation­ gates grew at rates just above the ships among the various monetary lower bounds of their ranges. By aggregates were subject to even midyear, growth of M-2 was near the greater uncertainty because of, midpoint of its range, and it ap­ among other things, certain institu­ peared to be moving higher. tional changes expected to result The weakness in the narrower from the Monetary Control Act of measures of money that developed 1980. In particular, relationships in the second quarter was unusual. It among the aggregates will be af­ raised the question of whether the fected by introduction of NOW ac­ demand for money in relation to in­ counts on a nationwide basis as of come and interest rates had shifted December 31, 1980, as authorized by downward once again, perhaps as a that act. During 1981, shifts of funds response to the unusually high level from demand deposits to NOW ac­ of interest rates of the preceding counts are likely to be substantial, quarter. It was also possible that and will retard the growth of M-l A. part of the second-quarter decline in At the same time, transfers from money balances was a temporary savings deposits and other interestphenomenon associated with the bearing assets to NOW accounts will substantial repayments of short-term enhance the growth of M-1B. To the debt that followed the special mea­ extent that funds are shifted into sures of credit restraint announced NOW accounts from other deposit on March 14. In the latter case, the components of M-2 and M-3, growth public would probably make some of these aggregates will be unaf­ effort to rebuild balances in the sec­ fected. The behavior of these aggre­ ond half of the year, which would gates, however, will also be influ­ strengthen the demand for both enced by the further development of M-l A and M-1B. In any event, in view money market mutual funds, which of recent evidence of a preference are included in M-2. The possibility for interest-bearing transactions ac­ that the apparent downward shift in counts over demand deposits that the demand for narrow money will was greater than anticipated, it ap­ persist into next year was an addi­ peared likely that M-1B would grow tional element of uncertainty. somewhat faster relative to M-l A In the Committee’s discussion, all than had been projected earlier in but one member favored retention of the year. the ranges for 1980 that had been The stronger performance of the adopted at the meeting in February. broader aggregates over the first half The likely shift in relative growth of of the year in relation to their ranges M-l A and M-1B was not considered for the year reflected rapid growth in large enough to justify “fine-tuning” instruments yielding market rates of the growth ranges at the expense of interest, including shares in money causing public confusion about the market mutual funds. As short-term meaning of the adjustments. One market interest rates declined sharp­ member advocated a reduction in ly toward the end of the period, con­ the ranges for both M-l A and M-1B. traction in savings deposits in banks In reaffirming the existing ranges and other depository institutions for 1980, Committee members in slowed and then gave way to a rise. general recognized that growth of For part of the period, growth of M-3 the narrow aggregates over the year was also promoted by issuance of as a whole might reasonably fall be­ large-denomination time deposits by low the midpoints of their ranges and commercial banks and thrift institu­ possibly near the lower bounds. On tions, but the outstanding volume of the other hand, the recent behavior such deposits began to contract in of the interest-bearing nontrans­ late spring as credit demands weak­ actions components of M-2 and M-3, ened. along with a possible pickup in de­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 751 mands for transactions balances, sug­ of moving gradually toward rates of gested that growth of the broader ag­ monetary expansion consistent with gregates over the year as a whole general price stability. Some mem­ might rise to about the midpoints of bers emphasized a possible inconsis­ their ranges or, in the case of M-2, tency between reduced monetary well into the upper part of the range. growth and satisfactory recovery in Committee members also recog­ activity should strong price pres­ nized that the sharp contraction in sures persist, as assumed in the ad­ commercial bank credit during the ministration’s forecast. A few were second quarter raised the possibility unwilling to assume, pending further that growth over the year would fall appraisal of price and other develop­ short of its range, even if the antici­ ments in coming months, that prog­ pated resumption of expansion in ress could be made in 1981 toward bank credit occurred. It was noted, the longer-term goal of reduced however, that a substantial portion monetary growth. However, most of business credit needs was being members believed that the Com­ met through other sources of funds, mittee should indicate firmly its in­ particularly the issuance of com­ tent to make more progress in 1981 mercial paper and the flotation of toward its objective of reduction in corporate bonds. monetary growth over time. One Thus the Committee decided to re­ view was that the reduction in mone­ tain the ranges for 1980 that it had tary growth should be stated only established in February: for the peri­ with respect to the narrowly defined od from the fourth quarter of 1979 to monetary aggregates, even if it were the fourth quarter of 1980, Vh to 6 not feasible to do so in specific quan­ percent for M-l A, 4 to 6V2 percent titative terms. Another was that the for M-lB, 6 to 9 percent for M-2, and objective should be stated only in 6V2 to 9V2 percent for M-3. The as­ terms of a small reduction in the sociated range for commercial bank ranges for the broader aggregates, in credit remained 6 to 9 percent. As in light of the distorted behavior of the past, it was understood that the M-l A and M-1B anticipated because longer-run ranges, as well as the par­ of the prospective growth of NOW ticular aggregates for which ranges accounts on a nationwide basis. were specified, would be reconsid­ At the conclusion of the dis­ ered at any time that conditions cussion, there was rather general might warrant, and that short-run agreement among members of the factors might cause considerable Committee that it would be appro­ variation in annual rates of growth priate to plan for some further prog­ from one month to the next and from ress in 1981 toward reduction in the one quarter to the next. targeted ranges, but that it would be With respect to objectives for premature at this time to set forth monetary growth in 1981, most precise ranges for each monetary ag­ Committee members expressed gregate for next year, especially giv­ strong reservations about attempting en the uncertainty generated by the to be numerically precise at this institutional changes affecting the time, owing to the unusual uncer­ relationships among the aggregates. tainties about the relationships Moreover, the appropriate monetary among the monetary aggregates and growth in 1981 relative to 1980 about their relationship to economic would depend to some extent on ac­ activity; they felt that a more general tual growth this year—that is, on ex­ statement, consistent with the letter actly where in the present ranges the and intent of the law as they under­ various aggregates fall at year-end. stood it, would be more meaningful The Committee adopted the following and less confusing. The members ranges for rates of growth in monetary generally wished to reaffirm the aggregates for the period from the fourth Committee’s long-standing objective quarter of 1979 to the fourth quarter of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

752 Federal Reserve Bulletin □ September 1980 1980: M-l A, Vh to 6 percent; M-1B, 4 to lic’s demand for money balances as 6V2 percent; M-2, 6 to 9 percent; and narrowly defined. In assessing the M-3, 6V2 to 9V2 percent. The associated behavior of M-l A and M-1B, it was range for bank credit is 6 to 9 percent. also understood that the rate of Votes for this action: Messrs. Volck­ growth in M-2 would be taken into er, Gramley, Morris, Partee, Rice, account. If it appeared during the pe­ Roos, Schultz, Solomon, Mrs. Tee­ riod before the next regular meeting ters, Messrs. Winn, and Balles. Vote that the constraint on the federal against this action: Mr. Wallich. (Mr. Balles voted as alternate for Mr. Guf­ funds rate was inconsistent with the fey.) objective for the expansion of re­ serves, the Manager for Domestic Mr. Wallich dissented from this Operations was promptly to notify action because he believed that the the Chairman who would then de­ ranges for growth of M-l A and M-1B cide whether the situation called for over the year ending in the fourth supplementary instructions from the quarter of 1980 should be reduced by Committee. V2 percentage point. In his opinion, The following domestic policy di­ efforts to bring these aggregates up rective was issued to the Federal Re­ into the ranges adopted in February serve Bank of New York: implied excessively rapid monetary growth over the months ahead. The information reviewed at this In the Committee’s discussion of meeting indicates a marked contraction in real GNP in the second quarter. In policy for the short run, the mem­ May total retail sales declined sub­ bers agreed that operations in the pe­ stantially for the fourth consecutive riod before the next meeting should month, and housing starts, industrial be directed toward expansion of production, and nonfarm payroll em­ ployment continued to decline. Employ­ monetary aggregates over the third ment fell sharply further in June; how­ quarter at rates that would promote ever, the unemployment rate edged achievement of its monetary objec­ down from 7.8 to 7.7 percent, following tives for the year. In doing so, the large increases in April and May. The members recognized that a number overall rise in prices of goods and ser­ vices has moderated in recent months, in of months might be required in the large part owing to a lessening of the rap­ process and that, in any case, id rise in energy items. Over the first six growth of the narrower aggregates months of the year, the rise in the index over the year as a whole might well of average hourly earnings was moder­ ately faster than the pace recorded in fall near the lower bounds of their 1979. ranges. The downward pressure on the dollar Specifically, the Committee agreed in exchange markets that emerged in that open market operations in the early April abated in mid-June, and then period until the next meeting should was resumed in early July. The average U.S. foreign trade deficit for April and be directed toward expansion of re­ May was well below the average for the serve aggregates consistent with first quarter, reflecting reduced oil and growth of M-l A, M-1B, and M-2 non-oil imports. over the third quarter of 1980 at an­ Monetary expansion was rapid in June, following weakness earlier in the nual rates of about 7 percent, 8 per­ spring. Over the first half of the year cent, and 8 percent respectively, growth of M-l A and M-1B fell short of provided that in the period before the rates consistent with the Com­ the next regular meeting the weekly mittee’s ranges for the year from the fourth quarter of 1979 to the fourth quar­ average federal funds rate remained ter of 1980; the rate of growth for M-2 within a range of 8V2 to 14 percent. was just above the lower bound of its The Committee also agreed that in range. Outstanding bank loans to busi­ light of the shortfall in monetary ness declined substantially during the growth over the first half of the year, second quarter following a large increase in the first quarter. Market interest rates moderately faster growth would be declined considerably further in late May acceptable if it developed in re­ and the first half of June, but since then sponse to a strengthening in the pub­ most rates have retraced part of the de­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 753 cline. Reductions in Federal Reserve general intent of looking toward a re­ discount rates from 13 to 11 percent in duction in ranges of growth for equal steps were announced on May 28 M-1A, M-1B, and M-2 for 1981 on and June 12. Taking account of past and prospec­ the order of V2 percentage point, ab­ tive economic developments, the Feder­ stracting from the institutional influ­ al Open Market Committee seeks to fos­ ences affecting the behavior of the ter monetary and financial conditions aggregates. The Committee voted to that will resist inflationary pressures approve the Chairman’s recommen­ while encouraging moderate economic dation. It was understood that all of expansion and contributing to a sustain­ able pattern of international transac­ the ranges would be reassessed in tions. The Committee agrees that these February 1981, or before, in accord­ objectives would be furthered by growth ance with usual procedures. of M-1A, M-1B, M-2, and M-3 from the fourth quarter of 1979 to the fourth quar­ On July 29, 1980, the Committee ter of 1980 within ranges of 3 lh to 6 per­ agreed that for the period from the fourth cent, 4 to 6V2 percent, 6 to 9 percent, and quarter of 1980 to the fourth quarter of 6V2 to 9V2 percent respectively. The as­ 1981, it looked toward a reduction in the sociated range for bank credit is 6 to 9 ranges for growth of M-l A, M-1B, and percent. M-2 on the order of V2 percentage point In the short run, the Committee seeks from the ranges adopted for 1980, ab­ expansion of reserve aggregates consis­ stracting from institutional influences af­ tent with growth of M-l A, M-1B, and fecting the behavior of the aggregates. M-2 over the third quarter of 1980 at an­ nual rates of about 7 percent, 8 percent, Votes for this action: Messrs. and 8 percent respectively, provided that Volcker, Gramley, Guffey, Partee, in the period before the next regular meet­ Rice, Roos, Schultz, Solomon, Wal­ ing the weekly average federal funds rate lich, Winn, and Eastburn. Vote remains within a range of 8V2 to 14 per­ against this action: Mrs. Teeters. (Mr. cent. Eastburn voted as alternate for Mr. If it appears during the period before Morris.) the next meeting that the constraint on the federal funds rate is inconsistent with Mrs. Teeters dissented from this the objective for the expansion of re­ action because she believed that it serves, the Manager for Domestic Oper­ ations is promptly to notify the Chairman was undesirable to specify precise who will then decide whether the situa­ numerical ranges for monetary tion calls for supplementary instructions growth in 1981 so far in advance from the Committee. while economic activity was still Votes for this action: Messrs. Volck­ contracting. In her opinion, mone­ er, Gramley, Morris, Partee, Rice, tary goals for 1981 specified at this Roos, Schultz, Solomon, Mrs. Teeters, time could prove to be inconsistent Messrs. Wallich, Winn, and Balles. with other, as yet undetermined, eco­ Votes against this action: None. (Mr. Balles voted as alternate for Mr. Guf­ nomic policies and with the objec­ fey.) tive of reducing inflation while en­ couraging a sustainable recovery in Subsequent to the meeting, Chair­ economic activity. She was espe­ man Volcker advised the Committee cially concerned about a possible in­ that its attempt to cut through the in­ consistency in view of the unusually stitutional uncertainty affecting the great uncertainties generated by the behavior of and relationships among introduction of NOW accounts na­ the various monetary aggregates and tionally and by shifts in the relation­ to describe the broad substance of ship among money, interest rates, its intent with respect to monetary and nominal GNP. growth ranges for 1981 apparently had led to some misunderstanding at the monetary oversight hearings be­ 2. Authorization for Domestic fore the Senate and House banking Open Market Operations committees on July 22-23. In an at­ tempt to clear up that misunder­ At this meeting the Committee voted standing, the Chairman recommend­ to increase from $3 billion to $4 bil­ ed that the Committee indicate its lion the limit on changes between Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

754 Federal Reserve Bulletin □ September 1980 Committee meetings in System Ac­ Votes against this action: None. (Mr. count holdings of U.S. government Balles voted as alternate for Mr. and federal agency securities speci­ Guffey). fied in paragraph 1(a) of the authori­ zation for domestic open market op­ This action was taken in light of erations, effective immediately, for projections indicating a need for sub­ the period ending with the close of stantial reserve-absorbing operations business on August 12, 1980. over the coming intermeeting interval to counter the effects of significant Votes for this action: Messrs. Volck­ reductions in required reserves asso­ er, Gramley, Morris, Partee, Rice, Roos, Schultz, Solomon, Mrs. Teeters, ciated with the phaseout of the spe­ Messrs. Wallich, Winn, and Balles. cial credit restraint program. 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 later published in the Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

755 Legal Developments Revision of Regulation A primary means of affecting the overall supply of re­ serves, the lending function of the Reserve Banks is an The Board of Governors has revised its rules relating effective method of supplying reserves to meet the par­ to the provision of Federal Reserve credit presently ticular credit needs of individual depository institu­ contained in Regulation A—Extensions of Credit by tions. Federal Reserve Banks. The revisions implement a provision of The Monetary Control Act of 1980 which The lending functions of the Federal Reserve Sys­ provides that a depository institution that maintains tem are conducted with due regard to the basic objec­ transaction accounts or nonpersonal time deposits is tives of monetary policy and the maintenance of a entitled to the same discount and borrowing privileges sound and orderly financial system. These basic objec­ as banks that are members of the Federal Reserve tives are promoted by influencing the overall volume System. and cost of credit through actions that affect the vol­ Effective September 1, 1980, Regulation A is revised ume and cost of reserves to depository institutions. as follows: Borrowing by individual depository institutions, at a rate of interest that is adjusted from time to time in Part 201—Extensions of Credit by Federal accordance with prevailing economic and money mar­ Reserve Banks ket conditions, has a direct impact on the reserve posi­ tions of the borrowing institutions and thus on their Section 201.1 Authority, Scope and Purpose ability to meet the credit needs of their customers. 201.2 Definitions However, the effects of such borrowing do not remain 201.3 Availability and Terms localized but have an important bearing on overall 201.4 Advances and Discounts monetary and credit conditions. 201.5 General Requirements 201.6 Federal Intermediate Credit Banks Section 201.2—Definitions Section 201.1—Authority, Scope and Purpose. For purposes of this Part, the following definitions shall apply: (a) Authority and Scope. This Part is issued under the authority of sections 10(a), 10(b), 13, 13a, and 19 of the (a)(1) “Depository institution ’ means an institution Federal Reserve Act (12 U.S.C. §§ 347a, 347b, 343 et that maintains reservable transaction accounts or seq., 347c, 348 et seq., 374, 374a and 461), other provi­ nonpersonal time deposits and is: sions of the Federal Reserve Act, and section 7(b) of (A) an insured bank as defined in section 3 of the International Banking Act of 1978 (12 U.S.C. the Federal Deposit Insurance Act (12 U.S.C. § 347d) and relates to extensions of credit by Reserve § 1813(h)) or a bank that is eligible to apply to be­ Banks to depository institutions and others. Except as come an insured bank under section 5 of such Act may be otherwise provided, this Part shall be appli­ (12 U.S.C. § 1815); cable to United States branches and agencies of for­ (B) a savings bank or mutual savings bank as de­ eign banks subject to reserve requirements under Reg­ fined in section 3 of the Federal Deposit Insurance ulation D (12 CFR Part 204) in the same manner and to Act (12 U.S.C. § 1813(f), (g)); the same extent as member banks. (C) an insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. (b) Purpose. This Part establishes rules under which § 1752(7)) or a credit union that is eligible to apply Federal Reserve Banks may extend credit to deposi­ to become an insured credit union under section tory institutions and others. Extending credit to de­ 201 of such Act (12 U.S.C. § 1781); pository institutions to accommodate commerce, in­ (D) a member as defined in section 2 of the Feder­ dustry, and agriculture is a principal function of al Home Loan Bank Act (12 U.S.C. § 1422(4)); or Reserve Banks. While open market operations are the (E) an insured institution as defined in section 401 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

756 Federal Reserve Bulletin □ September 1980 of the National Housing Act (12 U.S.C. § 1724(a)) seasonal demands for credit in a period of liquidity or an institution that is eligible to apply to become strain. To the extent practicable, a depository insti­ an insured institution under section 403 of such tution should arrange in advance for seasonal credit Act (12 U.S.C. § 1726). for the full period during which such credit is ex­ (2) A financial institution that is not required to pected to be required. Under certain circumstances, maintain reserves under Part 204 of this Title (Regu­ a surcharge may be imposed above the basic rate of lation D) because it is organized solely to do busi­ interest normally charged by Reserve Banks. ness with other financial institutions, is owned pri­ marily by the financial institutions with which it (2) Other extended credit. Federal Reserve credit is does business, and does not do business with the available to depository institutions under extended general public is not a depository institution. credit arrangements where similar assistance is not reasonably available from other sources, including (b) “Transaction account and nonpersonal time de­ special industry lenders. Such credit may be pro­ posits” have the meanings specified in Part 204 of this vided where there are exceptional circumstances or Title (Regulation D). practices involving only a particular depository in­ stitution. Exceptional circumstances would include Section 201.3—Availability and Terms situations where an individual depository institution is experiencing financial strains arising from particu­ (a) Short-term adjustment credit. Federal Reserve lar circumstances or practices affecting that institu­ credit is available on a short-term basis to a depository tion-including sustained deposit drains, impaired institution under such rules as may be prescribed to access to money market funds, or sudden deteriora­ assist the institution, to the extent appropriate, in tion in loan repayment performance. Extended cred­ meeting temporary requirements for funds, or to cush­ it may also be provided to accommodate the needs ion more persistent outflows of funds pending an or­ of depository institutions, including those with long­ derly adjustment of the institution’s assets and liabili­ er term asset portfolios, that may be experiencing ties. Such credit generally is available only after difficulties adjusting to changing money market con­ reasonable alternative sources of funds, including ditions over a longer period, particularly at times of credit from special industry lenders, such as Federal deposit disintermediation. A special rate or rates Home Loan Banks, the National Credit Union Admin­ above the basic discount rate established by the Re­ istration’s Central Liquidity Facility, and corporate serve Banks, subject to review and determination by central credit unions have been fully used. Under cer­ the Board of Governors, may be applied to other ex­ tain circumstances, a surcharge may be imposed tended credit. above the basic rate of interest normally charged by Reserve Banks. (c) Emergency credit for others. In unusual and ex­ igent circumstances, a Reserve Bank may, after con­ (b) Extended credit. sultation with the Board, advance credit to individ­ uals, partnerships, and corporations that are not (1) Seasonal credit. Federal Reserve credit is avail­ depository institutions if, in the judgment of the Re­ able for periods longer than those permitted under serve Bank, credit is not available from other sources adjustment credit to assist smaller depository insti­ and failure to obtain such credit would adversely affect tutions in meeting regular needs for funds arising the economy. The rate applicable to such credit will be from a combination of expected patterns of move­ above the highest rate for advances in effect for de­ ment in their deposits and loans. Seasonal credit is pository institutions. Where the collateral used to se­ available only if similar assistance is not available cure such credit consists of assets other than obliga­ from other special industry lenders. Seasonal credit tions of, or fully guaranteed as to principal and interest will ordinarily be limited to the amount by which the by, the United States or an agency thereof, an affirma­ depository institution’s seasonal needs exceed cer­ tive vote of five or more Board members is required tain percentages, established by the Board of Gover­ before credit may be extended. nors, of the institution’s average total deposits in the preceding calendar year. Such credit will be avail­ Section 201.4—Advances and Discounts able if the Reserve Bank is satisfied that the institu­ tion’s qualifying need for funds is seasonal and will (a) Reserve Banks may lend to depository institutions persist for at least four weeks. Need for credit at either through advances secured by acceptable collat­ depository institutions will also be given consid­ eral or through the discount of certain types of paper. eration when institutions are experiencing unusual Credit extended by the Federal Reserve generally Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 757 takes the form of an advance. Any paper so discounted shall have a period remaining (b) Reserve Banks may make advances to any deposi­ to maturity at the time of discount of not more than tory institution if secured to the satisfaction of the Re­ nine months. serve Bank. Satisfactory collateral generally includes United States government and Federal agency secu­ rities, and, if of acceptable quality, mortgage notes Amendments to Regulation D covering 1-4 family residences, State and local gov­ ernment securities, and business, consumer and other The Board of Governors has revised its Regulation D, customer notes. Reserves of Member Banks, to establish a reserve re­ (c) If a Reserve Bank concludes that a depository in­ quirement ratio of 12 per cent on savings accounts sub­ stitution will be better accommodated by the discount ject to negotiable order of withdrawal (NOW ac­ of paper than by an advance, it may discount any pa­ counts) maintained by member banks located outside per endorsed by the depository institution that meets of New England, New York, and New Jersey. This is a the requirements specified in the Federal Reserve Act. technical revision to Regulation D to implement the Board’s revised Regulation D announced on August Section 201.5—General Requirements 15, 1980. Effective August 28, 1980, section 204.5 of Regula­ (a) Credit for capital purposes. Federal Reserve credit tion D is amended as follows: is not a substitute for capital. 1. Section 204.5(a)(l)(ii) is revised to read as follows: (b) Compliance with law and regulation. All credit ex­ tended under this Part shall comply with applicable re­ Section 204.5—Reserve Requirements quirements of law and of this Part. Each Reserve Bank (1) shall keep itself informed of the general character (a) Reserve percentages.*** and amount of the loans and investments of depository institutions with a view to ascertaining whether undue (ii) 1 per cent of its time deposits outstanding on use is being made of credit for the speculative carrying or issued after October 16, 1975, that have an ini­ of or trading in securities, real estate, or commodities, tial maturity of four years or more; 2 1/2 per cent or for any other purpose inconsistent with the mainte­ of its time deposits outstanding on or issued after nance of sound credit conditions, and (2) shall consid­ December 25, 1975, that have an initial maturity er such information in determining whether to extend of 180 days or more but less than four years; 3 per credit. cent of its time deposits up to $5 million, out­ standing on or issued after October 16, 1975, that (c) Information. A Reserve Bank shall require such have an initial maturity of less than 180 days, plus information as it believes appropriate or desirable to 6 per cent of such deposits in excess of $5 million; insure that paper tendered as collateral for advances or for a member bank located outside of the States of for discount is acceptable and that Ihe credit provided Massachusetts, New Hampshire, Connecticut, is used in a manner consistent with this Part. Maine, New Jersey, New York, Rhode Island, and Vermont, 12 per cent of its savings accounts (d) Indirect credit for others. Except with the per­ subject to negotiable orders of withdrawal: Pro­ mission of the Board of Governors, no depository in­ vided, however, that in no event shall the reserves stitution shall act as the medium or agent of another required on its aggregate amount of time and sav­ depository institution in receiving Federal Reserve ings deposits be less than 3 per cent or more than credit. 10 per cent. Section 201.6—Federal Intermediate Credit 2. Section 204.5(a)(2)(ii) is revised to read as follows: Banks Section 204.5—Reserve Requirements A Reserve Bank may discount for any Federal Inter­ mediate Credit bank (1) agricultural paper, or (2) notes (a) Reserve percentages.*** payable to and bearing the endorsement of the Federal Intermediate Credit Bank that cover loans or advances (ii) 1 per cent of its time deposits outstanding on made under subsections (a) and (b) of § 2.3 of the Farm or issued after October 16, 1975, that have an ini­ Credit Act of 1971 (12 U.S.C. § 2074) and that are se­ tial maturity of four years or more; 2 1/2 per cent cured by paper eligible for discount by Reserve Banks. of its time deposits outstanding on or issued after Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

758 Federal Reserve Bulletin □ September 1980 December 25, 1975, that have an initial maturity (c) Scope. of 180 days or more but less than four years; 3 per (1) The following depository institutions are re­ cent of its time deposits up to $5 million, out­ quired to maintain reserves in accordance with this standing on or issued after October 16, 1975, that Part: have an initial maturity of less than 180 days, plus (i) Any insured bank as defined in section 3 of 6 per cent of such deposits in excess of $5 million; the Federal Deposit Insurance Act (12 U.S.C. for a member bank located outside of the States of § 1813(h)) or any bank that is eligible to apply to Massachusetts, New Hampshire, Connecticut, become an insured bank under section 5 of such Maine, New Jersey, New York, Rhode Island, Act (12 U.S.C. § 1815); and Vermont, 12 per cent of its savings accounts (ii) Any savings bank or mutual savings bank as subject to negotiable orders of withdrawal: Pro­ defined in section 3 of the Federal Deposit Insur­ vided, however, that in no event shall the reserves ance Act (12 U.S.C. § 1813(f), (g)); required on its aggregate amount of time and sav­ (iii) Any insured credit union as defined in section ings deposits be less than 3 per cent or more than 101 of the Federal Credit Union Act (12 U.S.C. 10 per cent. § 1752(7)) or any credit union that is eligible to ap­ ply to become an insured credit union under sec­ tion 201 of such Act (12 U.S.C. § 1781); Revision of Regulation D (iv) Any member as defined in section 2 of the Federal Home Loan Bank Act (12 U.S.C. The Board of Governors has adopted a revised Regula­ § 1422(4)); and tion D—Reserve Requirements of Depository Institu­ (v) Any insured institution as defined in section tions—to implement the reserve requirement provisions 401 of the National Housing Act (12 U.S.C. of the Monetary Control Act of 1980. The revised re­ § 1724(a)) or any institution which is eligible to ap­ serve requirement regulation will also apply to Edge ply to become an insured institution under section Act and Agreement Corporations and United States 403 of such Act (12 U.S.C. § 1726). branches and agencies of foreign banks. (2) Except as may be otherwise provided by the Effective November 13, 1980, Regulation D is re­ Board, a foreign bank’s branch or agency located in vised to read as follows: the United States is required to comply with the pro­ visions of this Part in the same manner and to the same extent as if the branch or agency were a mem­ Part 204—Reserve Requirements of Depository ber bank, if its parent foreign bank (i) has total Institutions worldwide consolidated bank assets in excess of $1 billion; or (ii) is controlled by a foreign company or Section 204.1 Authority, Purpose and Scope by a group of foreign companies that own or control 204.2 Definitions foreign banks that in the aggregate have total world­ 204.3 Computation and Maintenance wide consolidated bank assets in excess of $1 bil­ 204.4 Transitional Adjustments lion. In addition, any other foreign bank’s branch 204.5 Emergency Reserve Requirement located in the United States that is eligible to apply 204.6 Supplemental Reserve Requirement to become an insured bank under section 5 of the 204.7 Penalties Federal Deposit Insurance Act (12 U.S.C. § 1815) is 204.8 Reserve Ratios required to maintain reserves in accordance with this Part as a nonmember depository institution. (3) Except as may be otherwise provided by the Section 204.1—Authority, Purpose and Scope Board, an Edge Corporation (12 U.S.C. § 611 et seq.) or an Agreement Corporation (12U.S.C.§601 (a) Authority. This Part is issued under the authority et seq.) is required to comply with the provisions of of section 19 (12 U.S.C. §§ 461 et seq.) and other pro­ this Part in the same manner and to the same extent visions of the Federal Reserve Act and of section 7 of as a member bank. the International Banking Act of 1978 (12 U.S.C. (4) This Part does not apply to any financial institu­ §3105). tion that (i) is organized solely to do business with other financial institutions; (ii) is owned primarily by (b) Purpose. This Part relates to reserves that deposi­ the financial institutions with which it does business; tory institutions are required to maintain for the pur­ and (iii) does not do business with the general pub­ pose of facilitating the implementation of monetary lic. policy by the Federal Reserve System. (5) The provisions of this Part do not apply to any Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 759 deposit that is payable only at an office located out­ maintain the availability of funds (other than capi­ side the United States. tal) to the depository institution, except any such obligation that, had it been issued directly by the Section 204.2—Definitions depository institution, would not constitute a de­ posit. If an obligation of an affiliate of a depository For purposes of this Part, the following definitions ap­ institution is regarded as a deposit and is used to ply unless otherwise specified: purchase assets from the depository institution, the maturity of the deposit is determined by the (a)(1) “Deposit” means: shorter of the maturity of the obligation issued or (i) the unpaid balance of money or its equivalent the remaining maturity of the assets purchased. If received or held by a depository institution in the the proceeds from an affiliate’s obligation are usual course of business and for which it has given placed in the depository institution in the form of or is obligated to give credit, either conditionally a reservable deposit, no reserves need be main­ or unconditionally, to an account, including inter­ tained against the obligation of the affiliate since est credited, or which is evidenced by an in­ reserves are required to be maintained against the strument on which the depository institution is deposit issued by the depository institution. How­ primarily liable; ever, the maturity of the deposit issued to the af­ (ii) money received or held by a depository insti­ filiate shall be the shorter of the maturity of the tution, or the credit given for money or its equiva­ affiliate’s obligation or the maturity of the deposit; lent received or held by the depository institution (vi) credit balances; in the usual course of business for a special or spe­ (vii) any liability of a depository institution on cific purpose, regardless of the legal relationships any promissory note, acknowledgment of ad­ established thereby, including escrow funds, vance, bankers’ acceptance, or similar obligation funds held as security for securities loaned by the (written or oral), including mortgage-backed depository institution, funds deposited as advance bonds, that is issued or undertaken by a deposi­ payment on subscriptions to United States gov­ tory institution as a means of obtaining funds, ex­ ernment securities, and funds held to meet its ac­ cept any such obligation that: ceptances; (A) is issued or undertaken and held for the ac­ (iii) an outstanding draft, cashier’s check, money count of: order, or officer’s check drawn on the depository (1) an office located in the United States of institution and issued in the usual course of busi­ another depository institution, foreign bank, ness for any purpose, including payment for serv­ Edge or Agreement Corporation, or New ices, dividends, or purchases; York Investment (Article XII) Company; (iv) any due bill or other liability or undertaking (2) the United States government or an agen­ on the part of a depository institution to sell or cy thereof; or deliver securities to, or purchase securities for the (3) the Export-Import Bank of the United account of, any customer (including another de­ States, Minbanc Capital Corporation, the pository institution), involving either the receipt Government Development Bank for Puerto of funds by the depository institution, regardless Rico, a Federal Reserve Bank, a Federal of the use of the proceeds, or a debit to an account Home Loan Bank, or the National Credit of the customer before the securities are deliv­ Union Administration Central Liquidity Fa­ ered. A deposit arises thereafter, if after three cility: business days from the date of issuance of the ob­ (B) arises from a transfer of direct obligations ligation, the depository institution does not deliv­ of, or obligations that are fully guaranteed as to er the securities purchased or does not fully col­ principal and interest by, the United States gov­ lateralize its obligation with securities similar to ernment or any agency thereof that the deposi­ the securities purchased. A security is similar if it tory institution is obligated to repurchase; is of the same type and if it is of comparable matu­ (C) is not insured by a Federal agency, is sub­ rity to that purchased by the customer; ordinated to the claims of depositors, has a (v) any liability of a depository institution’s affili­ weighted average maturity of seven years or ate that is not a depository institution, on any more, is not subject to Federal interest rate lim­ promissory note, acknowledgment of advance, itations, and is issued by a depository institu­ due bill, or similar obligation (written or oral), tion with the approval of, or under the rules and with a maturity of less than four years, to the ex­ regulations of, its primary Federal supervisor; tent that the proceeds are used to supply or to (D) arises from a borrowing by a depository in­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

760 Federal Reserve Bulletin □ September 1980 stitution from a dealer in securities, for one (viii) an obligation representing a “pass through business day, of proceeds of a transfer of de­ account,” as defined in this section; posit credit in a Federal Reserve Bank or other (ix) an obligation arising from the retention by the immediately available funds, (commonly re­ depository institution of no more than a 10 per ferred to as “Federal funds”), received by such cent interest in a pool of conventional 1-4 family dealer on the date of the loan in connection with mortgages that are sold to third parties; clearance of securities transactions; or (x) an obligation issued to a State or municipal (E) arises from the creation, discount and sub­ housing authority under a loan-to-lender program sequent sale by a depository institution of its involving the issuance of tax exempt bonds and bankers’ acceptance of the type described in the subsequent lending of the proceeds to the de­ paragraph 7 of section 13 of the Federal Re­ pository institution for housing finance purposes; serve Act (12 U.S.C. § 372). (xi) shares of a credit union held by the National Credit Union Administration or the National (2) “Deposit” does not include: Credit Union Administration Central Liquidity (i) trust funds received or held by the depository Facility under a statutorily authorized assitance institution that it keeps properly segregated as program; trust funds and apart from its general assets or (xii) any liability of a United States branch or which it deposits in another institution to the cred­ agency of a foreign bank to another United States it of itself as trustee or other fiduciary. If trust branch or agency of the same foreign bank, or the funds are deposited with the commercial depart­ liability of the United States office of an Edge Cor­ ment of the depository institution or otherwise poration to another United States office of the mingled with its general assets, a deposit liability same Edge Corporation. of the institution is created; (ii) an obligation that represents a conditional, (b)(1) “Demand deposit’’ means a deposit that is pay­ contingent or endorser’s liability; able on demand, or a deposit issued with an original (ii) obligations, the proceeds of which are not maturity or required notice period of less than 14 used by the depository institution for purposes of days, or a deposit representing funds for which the making loans, investments, or maintaining liquid depository institution does not reserve the right to assets such as cash or “due from” depository in­ require at least 14 days’ written notice of an in­ stitutions or other similar purposes. An obligation tended withdrawal. The term includes all deposits issued for the purpose of raising funds to purchase other than time and savings deposits. Demand de­ business premises, equipment, supplies, or simi­ posits may be in the form of (i) checking accounts; lar assets is not a deposit; (ii) certified, cashier’s and officer’s checks (includ­ (iv) accounts payable; ing checks issued by the depository institution in (v) hypothecated “deposits” created by pay­ payment of dividends); (iii) traveler’s checks and ments on an installment loan where (A) the money orders that are primary obligations of the is­ amounts received are not used immediately to re­ suing institution; (iv) checks or drafts drawn by, or duce the unpaid balance due on the loan until the on behalf of, a non-United States office of a deposi­ sum of the payments equals the entire amount of tory institution on an account maintained at any of loan principal and interest; (B) and where such the institution’s United States offices; (v) letters of amounts are irrevocably assigned to the deposi­ credit sold for cash or its equivalent; (vi) withheld tory institution and cannot be reached by the bor­ taxes, withheld insurance and other withheld funds; rower or creditors of the borrower; (vii) time deposits that have matured or time depos­ (vi) dealer reserve and differential accounts that its upon which the required notice of withdrawal pe­ arise from the financing of dealer installment ac­ riod has expired and have not been renewed (either counts receivable, and which provide that the by action of the depositor or automatically under the dealer may not have access to the funds in the ac­ terms of the deposit agreement); and (viii) an obliga­ count until the installment loans are repaid, as tion to pay on demand or within 14 days a check (or long as the depository institution is not actually other instrument, device, or arrangement for the (as distinguished from contingently) obligated to transfer of funds) drawn on the depository institu­ make credit or funds available to the dealer; tion, where the account of the institution’s customer (vii) a dividend declared by a depository institu­ already has been debited. The term does not include tion for the period intervening between the date of an obligation that is a time deposit under section the declaration of the dividend and the date on 204.2(c)(l)(ii). which it is paid; (2) A “demand deposit” does not include checks or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 761 drafts drawn by the depository institution on the it even if the depository institution exercises its Federal Reserve or on another depository institution. right to require notice of withdrawal. A “savings deposit” includes a regular share account at a (c)(1) “Time deposit” means (i) a deposit that the credit union and a regular account at a savings and depositor does not have a right to withdraw for a loan association. period of 14 days or more after the date of deposit. (2) For depository institutions subject to 12 CFR “Time deposit” includes funds: Part 217 or 12 CFR Part 329, funds deposited to (A) payable on a specified date not less than 14 the credit of, or in which any beneficial interest is days after the date of deposit; held by, a corporation, association, partnership or (B) payable at the expiration of a specified time other organization operated for profit may be clas­ not less than 14 days after the date of deposit; sified as a savings deposit if such funds do not ex­ (C) payable upon written notice which actually ceed $150,000 per depositor at the depository in­ is required to be given by the depositor not less stitution. than 14 days before the date of repayment; (3) “Savings deposit” does not include funds de­ (D) such as “Christmas club” accounts and posited to the credit of the depository institution’s “vacation club” accounts, that are deposited own trust department where the funds involved are under written contracts providing that no with­ utilized to cover checks or drafts. Such funds are drawal shall be made until a certain number of “transaction accounts.” periodic deposits have been made during a peri­ od of not less than three months even though some of the deposits may be made within 14 (e) “Transaction account” means a deposit or ac­ days from the end of the period; or count on which the depositor or account holder is per­ (E) that constitute a “savings deposit” which mitted to make withdrawals by negotiable or transfer­ is not regarded as a “transaction account.” able instrument, payment orders of withdrawal, (ii) borrowings, regardless of maturity, represent­ telephone transfers, or other similar device for the pur­ ed by a promissory note, an acknowledgement of pose of making payments or transfers to third persons advance, or similar obligation described in section or others. “Transaction account” includes: 204.2(a)(l)(vii) that is issued to any office located (1) demand deposits; outside the United States of another depository (2) deposits or accounts subject to check, draft, ne­ institution or Edge or Agreement Corporation or­ gotiable order of withdrawal, share draft, or other ganized under the laws of the United States, to similar item; any office located outside the United States of a (3) savings deposits or accounts in which with­ foreign bank, or to institutions whose time depos­ drawals may be made automatically through pay­ its are exempt from interest rate limitations under ment to the depository institution itself or through section 217.3(g) of Regulation Q (12 CFR Part transfer of credit to a demand deposit or other ac­ 217.3(g)). count in order to cover checks or drafts drawn upon (2) A time deposit may be represented by a transfer­ the institution or to maintain a specified balance in, able or nontransferable, or a negotiable or non­ or to make periodic transfers to, such accounts (au­ negotiable, certificate, instrument, passbook, state­ tomatic transfer accounts); ment, or otherwise. A “time deposit” includes (4) deposits or accounts in which payments may be share certificates and certificates of indebtedness is­ made to third parties by means of an automated tell­ sued by credit unions, and certificate accounts and er machine, remote service unit or other electronic notice accounts issued by savings and loan associa­ device; and tions. (5) deposits or accounts in which payments may be made to third parties by means of a debit card; (6) deposits or accounts under the terms of which, (d)(1) “Savings deposit” means a deposit or account or which by practice of the depository institution, with respect to which the depositor is not required the depositor is permitted or authorized to make by the deposit contract but may at any time be more than three withdrawals per month for purposes required by the depository institution to give writ­ of transferring funds to another account or for mak­ ten notice of an intended withdrawal not less than ing a payment to a third party by means of pre­ 14 days before withdrawal is made, and that is not authorized or telephone agreement, order or instruc­ payable on a specified date or at the expiration of tion. An account that permits or authorizes more a specified time after the date of deposit. A depos­ than three such withdrawals in a calendar month is a it may continue to be classified as a savings depos­ “transaction account” whether or not more than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

762 Federal Reserve Bulletin □ September 1980 three such withdrawals actually are made in a calen­ States of another depository institution or Edge or dar month. A “preauthorized transfer” includes any Agreement Corporation organized under the laws arrangement by the depository institution to pay a of the United States, to any office located outside third party from the account of a depositor upon the United States of a foreign bank, or to institu­ written or oral instruction (including an order re­ tions whose time deposits are exempt from inter­ ceived through an automated clearing house est rate limitations under section 217.3(g) of Regu­ (ACH)), or any arrangement by a depository institu­ lation Q (12 CFR 217.3(g)). tion to pay a third party from the account of the de­ (2) “Nonpersonal time deposit” does not include positor at a predetermined time or on a fixed sched­ nontransferable time deposits to the credit of or in ule. An account is not a “transaction account” by which the entire beneficial interest is held by an indi­ virtue of an arrangement that permits withdrawals vidual pursuant to an Individual Retirement Ac­ for the purpose of repaying loans and associated ex­ count or Keogh (H. R. 10) Plan under 26 U.S.C. penses at the same depository institution (as origina­ (I.R.C. 1954) §§ 408, 401. tor or servicer). (g) “Natural person” means an individual or a sole (f)(1) “Nonpersonal time deposit" means: proprietorship. The term does not mean a corporation (i) a time deposit, including a savings deposit, owned by an individual, a partnership or other associa­ that is not a transaction account, representing tion. funds in which any beneficial interest is held by a depositor which is not a natural person; (h) “Eurocurrency liabilities’* means the sum of the (ii) a time deposit, including a savings deposit following: that is not a transaction account, that represents funds deposited to the credit of a depositor that is (1) Transactions with related offices outside the not a natural person, other than a deposit to the United States. credit of a trustee or other fiduciary if the entire (i) In the case of a depository institution or an beneficial interest in the deposit is held by one or Edge or Agreement Corporation organized under more natural persons; the laws of the United States, (iii) a time deposit that is transferable, except a (A) positive net balances due to its non-United time deposit originally issued before October 1, States offices from its United States offices, and 1980, to and held by one or more natural persons, (B) assets (including participations) held by its including a deposit to the credit of a trustee or oth­ non-United States offices or by non-United er fiduciary if the entire beneficial interest in the States offices of an affiliated Edge or Agreement deposit is held by one or more natural persons; Corporation that were acquired from its United (iv) a time deposit that is transferable, issued on States offices. or after October 1, 1980, to and held by one or (ii) In the case of a United States branch and more natural persons, including a deposit to the agency of a foreign bank, credit of a trustee or other fiduciary if the entire (A) positive net balances due to its foreign beneficial interest is held by one or more natural bank (including offices thereof located outside persons. A time deposit is transferable unless it the United States) after deducting an amount contains a specific statement on the certificate, in­ equal to 8 per cent of the following: the United strument, passbook, statement or other form rep­ States branch’s or agency’s total assets less the resenting the account that is not transferable. A sum of United States coin and currency, cash time deposit that contains a specific statement items in the process of collection and unposted that it is not transferable is not regarded as trans­ debits, balances due from domestic banks and ferable even if the following transactions can be other foreign banks, balances due from foreign effected: a pledge as collateral for a loan; a trans­ central banks, and net balances due from its for­ action that occurs due to circumstances arising eign bank and the foreign bank’s United States from death, incompetency, marriage, divorce, at­ and non-United States offices; however, the tachment or otherwise by operation of law or a amount that may be deducted may not exceed transfer on the books or records of the institution; net balances due to the foreign bank (including and offices thereof located outside the United (v) a time deposit represented by a promissory States), and note, an acknowledgment of advance, or a similar (B) assets (including participations) held by its obligation described in section 204.2(a)(l)(vii) that foreign bank (including offices thereof located is issued to any office located outside the United outside the United States) or by its parent hold­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 763 ing company that were acquired from the insure that funds are available on the payment United States branch or agency (other than as­ date; sets required to be sold by Federal or State su­ (F) commodity or bill of lading drafts payable pervisory authorities) or from an affiliated Edge immediately upon presentation in the United or Agreement Corporation. States; (2) Foreign branch credit extended to United States (G) returned items and unposted debits; and residents. Credit outstanding from the non-United (H) broker security drafts. States office of a depository institution organized (2) “Cash item in process of collection” does not under United States law to United States residents include items handled as noncash collections and (other than assets acquired and net balances due credit card sales slips and drafts. from its United States offices), except credit extend­ ed (i) in the aggregate amount of $100,000 or less to (j) “Net transaction accounts” means the total any United States resident, (ii) by a non-United amount of a depository institution’s transaction ac­ States office that at no time during the computation counts less the deductions allowed under the provi­ period had credit outstanding to United States resi­ sions of § 204.3. dents exceeding $1 million, or (iii) to an institution that will be maintaining reserves on such credit pur­ (k)(l) “Vault cash” means United States currency suant to this Part. Credit extended to a foreign and coin owned and held by a depository institution branch, office, subsidiary, affiliate or other foreign that may, at any time, be used to satisfy depositors’ establishment (“foreign affiliate”) controlled by one claims. or more domestic corporations is regarded as credit (2) “Vault cash” includes United States currency extended to a United States resident unless the pro­ and coin in transit to a Federal Reserve Bank or a ceeds will be used in its foreign business or that of correspondent depository institution for which the other foreign affiliates of the controlling domestic reporting depository institution has not yet received corporation(s). This subparagraph does not apply to credit, and United States currency and coin in tran­ United States branches and agencies of foreign sit from a Federal Reserve Bank or a correspondent banks. depository institution when the reporting depository institution’s account at the Federal Reserve or cor­ (i)(l) “Cash item in process of collection’' means: respondent bank has been charged for such ship­ (i) checks in the process of collection, drawn on a ment. bank or other depository institution that are pay­ (3) Silver and gold coin and other currency and coin able immediately upon presentation in the United whose numismatic or bullion value is substantially States, including checks forwarded to a Federal in excess of face value is not vault cash for purposes Reserve Bank in process of collection and checks of this Part. on hand that will be presented for payment or for­ (1) “Pass through account,y means a balance main­ warded for collection on the following business tained by a depository institution that is not a member day; bank, by a U.S. branch or agency of a foreign bank, (ii) government checks drawn on the Treasury of or by an Edge or Agreement Corporation, the United States that are in the process of collec­ (1) in an institution that maintains required reserve tion; and balances at a Federal Reserve Bank, (iii) such other items in the process of collection, (2) in a Federal Home Loan Bank, that are payable immediately upon presentation in (3) in the National Credit Union Administration the United States and that are customarily cleared Central Liquidity Facility, or or collected by depository institutions as cash (4) in an institution that has been authorized by the items, including: Board to pass through required reserve balances if (A) drafts payable through another depository the institution, Federal Home Loan Bank, or Na­ institution; tional Credit Union Administration Central Liquidi­ (B) redeemed bonds and coupons; ty Facility maintains the funds in the form of a bal­ (C) food coupons and certificates; ance in a Federal Reserve Bank of which it is a (D) postal and other money orders, and travel­ member or at which it maintains an account in ac­ er’s checks; cordance with rules and regulations of the Board. (E) amounts credited to deposit accounts in connection with automated payment arrange­ (m)(l) “Depository institution” means: ments where such credits are made one busi­ (i) any insured bank as defined in section 3 of the ness day prior to the scheduled payment date to Federal Deposit Insurance Act (12 U.S.C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

764 Federal Reserve Bulletin □ September 1980 § 1813(h)) or any bank that is eligible to apply to or control either a majority of the shares of such de­ become an insured bank under section 5 of such pository institution or more than 50 per cent of the Act (12 U.S.C. § 1815); number of shares voted for the election of directors (ii) any savings bank or mutual savings bank as of such depository institution at the preceding elec­ defined in section 3 of the Federal Deposit Insur­ tion, or by trustees for the benefit of the share­ ance Act (12 U.S.C. § 1813(f), (g)); holders of any such depository institution; (iii) any insured credit union as defined in section (3) Of which a majority of its directors, trustees, or 101 of the Federal Credit Union Act (12 U.S.C. other persons exercising similar functions are direc­ § 1752(7)) or any credit union that is eligible to ap­ tors of any one depository institution; or ply to become an insured credit union under sec­ (4) Which owns or controls, directly or indirectly, tion 201 of such Act (12 U.S.C. § 1781); either a majority of the shares of capital stock of a (iv) any member as defined in section 2 of the depository institution or more than 50 per cent of the Federal Home Loan Bank Act (12 U.S.C. number of shares voted for the election of directors, § 1422(4)); and trustees or other persons exercising similar func­ (v) any insured institution as defined in section tions of a depository institution at the preceding 401 of the National Housing Act (12 U.S.C. election, or controls in any manner the election of a § 1724(a)) or any institution which is eligible to ap­ majority of the directors, trustees, or other persons ply to become an insured institution under section exercising similar functions of a depository institu­ 403 of such Act (12 U.S.C. § 1726). tion, or for the benefit of whose shareholders or (2) “Depository institution” does not include inter­ members all or substantially all the capital stock of a national organizations such as the World Bank, the depository institution is held by trustees. Inter-American Development Bank, and the Asian Development bank. (r) “United States” means the States of the United States and the District of Columbia. (n) “Member bank” means a depository institution that is a member of the Federal Reserve System. (s) “United States resident” means (1) any individual residing (at the time of the transac­ (o) “Foreign bank” means any bank or other similar tion) in the United States; institution organized under the laws of any country (2) any corporation, partnership, association or oth­ other than the United States or organized under the er entity organized in the United States (“domestic laws of Puerto Rico, Guam, American Samoa, the Vir­ corporation”); and gin Islands, or other territory or possession of the (3) any branch or office located in the United States United States. of any entity that is not organized in the United States. (p) “De novo depository institution” means a deposi­ tory institution that was not engaged in business on Section 204.3—Computation and Maintenance July 1, 1979, and is not the successor by merger or consolidation to a depository institution that was en­ (a) Maintenance of required reserves. A depository gaged in business prior to the date of merger or consol­ institution, a U. S. branch or agency of a foreign bank, idation. and an Edge or Agreement Corporation shall maintain reserves against its deposits and Eurocurrency liabili­ (q)*'Affiliate” includes any corporation, association, ties in accordance with the procedures prescribed in or other organization: this section and section 204.4 and the ratios prescribed (1) Of which a depository institution, directly or in­ in section 204.8. Penalties shall be assessed for defi­ directly, owns or controls either a majority of the ciencies in required reserves in accordance with the voting shares or more than 50 per cent of the num­ provisions of section 204.7. Every institution holding bers of shares voted for the election of its directors, transaction accounts or nonpersonal time deposits trustees, or other persons exercising similar func­ shall file a report of deposits each week with the Fed­ tions at the preceding election, or controls in any eral Reserve Band of its District (see section 204.3(d) manner the election of a majority of its directors, for the special rule for depository institutions with to­ trustees, or other persons exercising similar func­ tal deposits of less than $5 million) and any other re­ tions; ports that the Board may require by rule, regulation or (2) Of which control is held, directly or indirectly, order. For purposes of this Part, the obligations of a through stock ownership or in any other manner, by majority owned (50% or more) U. S. subsidiary (ex­ the shareholders of a depository institution who own cept an Edge or Agreement Corporation) of a deposi­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 765 tory institution shall be regarded as obligations of the designation of office(s) to which the low reserve parent depository institution. tranche is assigned may be changed at the begin­ ning of a calendar year. (1) United States branches and agencies for foreign banks. (b) Form of reserves. Reserves shall be held in the (i) A foreign bank’s United States branches and form of agencies operating within the same State and (i) vault cash, within the same Federal Reserve District shall (ii) a balance maintained directly with the Federal prepare and file a report of deposits on an aggre­ Reserve Bank in the District in which it is located, gated basis. or (ii) United States branches and agencies of the (iii) a pass through account. Reserves held in the same foreign bank shall, if possible, assign the low form of a pass through account shall be consid­ reserve tranche on transaction accounts (§ ered to be a balance maintained with the Federal 204.8(a)) to only one office or to a group of offices Reserve. filing a single aggregated report of deposits. If the low reserve tranche cannot be fully utilized by a (c) Computation of required reserves. Required re­ single office or by a group of offices filing a single serves are computed on the basis of the daily average report of deposits, the unused portion of the deposit balances during a seven-day period ending tranche may be assigned to other offices of the each Wednesday (the “computation period”). Re­ same foreign bank until the amount the tranche or serve requirements are computed by applying the ra­ net transaction accounts is exhausted. The foreign tios prescribed in section 204.8 to the classes of depos­ bank shall determine this assignment subject to its and Eurocurrency liabilities of the institution. In the restriction that if a portion of the tranche is determining the reserve balance that is required to be assigned to an office in a particular State, any maintained with the Federal Reserve, the average dai­ unused portion must first be assigned to other of­ ly vault cash held during the computation period is de­ fices located within the same State and within the ducted from the amount of the institution’s required same Federal Reserve District, that is, the other reserves. The reserve balance that is required to be offices included on the same aggregated report of maintained with the Federal Reserve shall be main­ deposits. The designation of office(s) to which the tained during a corresponding seven-day period (the low reserve tranche is assigned may be changed at “maintenance period”) which begins on the second the beginning of a calendar year. Thursday following the end of a given computation pe­ riod. (2) Edge and Agreement Corporations. (i) An Edge or Agreement corporation’s offices (d) Special rule for depository institutions that have operating within the same State and within the total deposits of less than $5 million. same Federal Reserve District shall prepare and (1) A depository institution with total deposits of file a report of deposits on an aggregated basis. less than $5 million shall file a report of deposits (ii) An Edge or Agreement Corporation shall, if once each calendar quarter for a seven-day compu­ possible, assign the low reserve tranche on trans­ tation period that begins on the third Thursday of a action accounts (§ 204.8(a)) to only one office or to given month during the calendar quarter. Each Re­ a group of offices filing a single aggregated report serve Bank shall divide the depository institutions in of deposits. If the low reserve tranche cannot be its District that qualify under this paragraph into fully utilized by a single office or by a group of three substantially equal groups and assign each offices filing a single report of deposits, the unused group a different month to report during each calen­ portion of the tranche may be assigned to other dar quarter. offices of the same institution until the amount of (2) Required reserves are computed on the basis of the tranche or net transaction amounts is exhaust­ the depository institution’s daily average deposit ed. An Edge or Agreement Corporation shall de­ balances during the seven-day computation period. termine this assignment subject to the restriction In determining the reserve balance that a depository that if a portion of the tranche is assigned to an institution is required to maintain with the Federal office in a particular State, any unused portion Reserve, the average daily vault cash held during must first be assigned to other offices located the computation period is deducted from the amount within the same State and within the same Federal of the institution’s required reserves. The reserve Reserve District, that is, to other offices included balance that is required to be maintained with the on the same aggregated report of deposits. The Federal Reserve shall be maintained during a corre­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

766 Federal Reserve Bulletin □ September 1980 sponding period that begins on the second Thursday bank may not deduct balances due from another following the end of the institution’s computation United States branch or agency of the same foreign period and ends on the first Wednesday after the bank, and United States branch or agency of an close of the institution’s next computation period. Edge or Agreement Corporation may not deduct (3) A depository institution that has less than $5 mil­ balances due from another United States office of lion in total deposits as of December 31, 1979, shall the same Edge Corporation. qualify under this paragraph until it reports total de­ (3) Balances “due from other depository institu­ posits of $5 million or more for two consecutive cal­ tions” do not include balances due from Federal Re­ endar quarters. serve Banks, pass through accounts, or balances (4) A depository institution that qualifies under this (payable in dollars or otherwise) due from banking paragraph may elect at the beginning of a calendar offices located outside the United States. An institu­ year to report deposits and maintain reserves on a tion exercising fiduciary powers may not include in weekly basis. “balances due from other depository institutions” (5) This paragraph shall not apply to an Edge or amounts of trust funds deposited with other banks Agreement Corporation or a United States branch and due to it as a trustee or other fiduciary. or agency of a foreign bank. (g) Availability of cash items as reserves. Cash items (e) Computation of transaction accounts. Overdrafts forwarded to a Federal Reserve Bank for collection in demand deposit or other transaction accounts are and credit shall not be counted as part of the reserve not to be treated as negative demand deposits or nega­ balance to be carried with the Federal Reserve until tive transaction accounts and shall not be netted since the expiration of the time specified in the appropriate overdrafts are properly reflected on an institution’s time schedule established under Regulation J, “Col­ books as assets. However, where a customer main­ lection of Checks and Other Items and Transfers of tains multiple transaction accounts with a depository Funds” (12 CFR Part 210). If a depository institution institution, overdrafts in one account pursuant to a draws against items before that time, the charge will be bona fide cash management arrangement are permitted made to its reserve account if the balance is sufficient to be netted against balances in other related transac­ to pay it; any resulting impairment of reserve balances tion accounts for reserve requirement purposes. will be subject to penalties provided by law and by this Part. However, the Federal Reserve Bank may, at its (f) Deductions allowed in computing reserves. discretion, refuse to permit the withdrawal or other (1) In determining the reserve balance required un­ use of credit given in a reserve account for any time for der this Part, the amount of cash items in process of which the Federal Reserve bank has not received pay­ collection and balances subject to immediate with­ ment in actually and finally collected funds. drawal due from other depository institutions lo­ cated in the United States (including such amounts (h) Carryover of deficiencies. Any excess or defi­ due from United States branches and agencies of ciency in a required reserve balance for any mainte­ foreign banks and Edge and Agreement Corpora­ nance period that does not exceed 2 per cent of institu­ tions) may be deducted from the amount of gross tion’s required reserves shall be carried forward to the transaction accounts. The amount that may be de­ next maintenance period. Any carryover not offset ducted may not exceed the amount of gross transac­ during the next period may not be carried forward to tion accounts. However, if a depository institution additional periods. maintains any transaction accounts that are first au­ thorized under Federal law after April 1, 1980, it (i) Pass-through rules. may deduct from those balances cash items in pro­ cess of collection and balances subject to immediate (1) Procedure withdrawal due from other depository institutions (i) A nonmember depository institution required located in the United States only to the extent of the to maintain reserve balances (“respondent”) may proportion that such newly authorized transaction select only one institution to pass through its re­ accounts are of the institution’s total transaction ac­ quired reserves. Eligible institutions through counts. The remaining cash items in process of col­ which respondent required reserve balances may lection and balances subject to immediate with­ be passed (“correspondents”) are Federal Home drawal due from other depository institutions Loan Banks, the National Credit Union Adminis­ located in the United States shall be deducted from tration Central Liquidity Facility, and depository the institution’s remaining transaction accounts. institutions that maintain required reserve balanc­ (2) United States branches and agencies of a foreign es at a Federal Reserve office. In addition, the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 767 Board reserves the right to permit other institu­ spondents to their local Federal Reserve Banks. tions, on a case-by-case basis, to serve as pass­ (3) Account Maintenance through correspondents. The correspondent cho­ (i) A correspondent that passes through required sen must subsequently pass through the required reserve balances of respondents whose main of­ reserve balances of its respondents directly to the fices are located in the same Federal Reserve ter­ appropriate Federal Reserve office. The corre­ ritory in which the main office of the correspon­ spondent placing funds with the Federal Reserve dent is located shall have the option of on behalf of respondents will be responsible for maintaining such required reserve balances in one reserve account maintenance as described in subof two ways: (a) A correspondent may maintain paragraphs (3) and (4) below. such balances, along with the correspondent’s (ii) Respondent depository institutions or pass­ own required reserve balances, in a single com­ through correspondents may institute, terminate, mingled account at the Federal Reserve Bank of­ or change pass-through arrangements for the fice in whose territory the correspondent’s main maintenance of required reserve balances by pro­ office is located, or (b) A correspondent may viding all documentation required for the estab­ maintain its own required reserve balance in an lishment of the new arrangement and/or termi­ account with the Federal Reserve Bank office in nation of the existing arrangement to the Federal whose territory its main office is located. The cor­ Reserve Bank in whose territory the respondent is respondent, in addition, would maintain in a sepa­ located. The time period required for such a rate commingled account the required reserve bal­ change to be effected shall be specified by each ances passed through for respondents whose main Reserve Bank in its operating circular. offices are located in the same Federal Reserve (iii) U.S. branches and agencies of foreign banks territory as that of the main office of the corre­ and Edge and Agreement Corporations may (a) spondent. act as pass-through correspondents for any non­ (ii) A correspondent that passes through required member institution required to maintain reserves reserve balances of respondents whose main of­ or (b) pass their own required reserve balances fices are located outside the Federal Reserve terri­ through correspondents. In accordance with the tory in which the main office of the correspondent provision set forth in subparagraph (3) below, the is located shall maintain such required reserve U.S. branches and agencies of a foreign bank or balances in a separate commingled account at offices of an Edge and Agreement Corporation fil­ each Federal Reserve office in whose territory the ing a single aggregated report of deposits may des­ main offices of such respondents are located. ignate any one of the other U.S. offices of the (iii) A Reserve Bank may, at its discretion, re­ same institution to serve as a pass-through corre­ quire a pass-through correspondent to consolidate spondent for all the offices filing such a single ag­ in a single account the reserve balances of all of its gregated report of deposits. respondents whose main offices are located in any territory of that Federal Reserve District. (2) Reports (i) Every depository institution that maintains (4) Responsibilities of Parties transaction accounts or nonpersonal time deposits (i) Each individual depository institution is re­ is required to file its report of deposits (or any oth­ sponsible for maintaining its required reserve er required form or statement) directly with the balance with the Federal Reserve Bank either di­ Federal Reserve Bank of its District, regardless of rectly or through a pass-through correspondent. the manner in which it chooses to maintain (ii) A pass-through correspondent shall be re­ required reserve balances. sponsible for assuring the maintenance of the ap­ (ii) The Federal Reserve Bank receiving such re­ propriate aggregate level of its respondents’ re­ ports shall notify the reporting depository institu­ quired reserve balances. A Reserve Bank will tion of its reserve requirements. Where a pass­ compare the total reserve balance required to be through arrangement exists, the Reserve Bank maintained in each reserve account with the total will also notify the correspondent passing re­ actual reserve balance held in such reserve ac­ spondent reserve balances through to the Federal count for purposes of determining required re­ Reserve of its respondent’s required reserve serve deficiencies, imposing or waiving penalties balances. for deficiencies in required reserves, and for other (iii) The Federal Reserve will not hold a corre­ reserve maintenance purposes. A penalty for a spondent responsible for guaranteeing the accura­ deficiency in the aggregate level of the required cy of the reports of deposits submitted by its re­ reserve balance will be imposed by the Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

768 Federal Reserve Bulletin □ September 1980 Bank on the correspondent maintaining the ac­ are passed through by a correspondent to a Feder­ count. al Reserve Bank may be used only for transac­ (iii) Each correspondent is required to maintain tions of respondents. A correspondent will not be detailed records for each of its respondents in a permitted to use such pass-through accounts for manner that permits Reserve Banks to determine purposes other than serving its respondents’ whether the respondent has provided a sufficient needs. required reserve balance to the correspondent. A (iv) A correspondent may not apply for Federal correspondent passing through a respondent’s re­ Reserve credit on behalf of a respondent. Rather, serve balance shall maintain records and make a respondent should apply directly to its Federal such reports as the Federal Reserve System re­ Reserve Bank for credit. Any Federal Reserve quires in order to insure the correspondent’s com­ credit obtained by a respondent may be credited, pliance with its responsibilities for the mainte­ at the respondent’s option and with the approval nance of a respondent’s reserve balance. Such of the parties concerned, to the reserve account in records shall be available to the Federal Reserve which its required reserves are maintained by a Banks as required. correspondent, to a clearing account maintained (iv) The Federal Reserve Bank may terminate by the respondent, or to any account to which the any pass-through relationship in which the corre­ respondent is authorized to post entries arising spondent is deficient in its recordkeeping or other from the use of Federal Reserve services. responsibilities. (v) Interest paid on supplemental reserves (if such Section 204.4 —Transitional Adjustments reserves are required under section 204.6 of this Part) held by respondent(s) will be credited to the The following transitional adjustments for computing commingled reserve account(s) maintained by the Federal reserve requirements shall apply to all mem­ correspondent. ber and nonmember depository institutions, except for reserves imposed under sections 204.5 and 204.6. (5) Services (i) A depository institution maintaining its re­ (a) Nonmembers. Except as provided below, the re­ serve balances on a pass-through basis may obtain quired reserves of a depository institution that was en­ available Federal Reserve System services direct­ gaged in business on July 1, 1979, but was not a mem­ ly from its local Federal Reserve office. For this ber of the the Federal Reserve System on or after that purpose, the pass-through account in which a re­ date shall be determined by reducing the amount of spondent’s required reserve balance is maintained required reserves computed under section 204.3 in ac­ may be used by the respondent for the posting of cordance with the following schedule: entries arising from transactions involving the use of such Federal Reserve services, if the posting of these types of transactions has been authorized by Reserve maintenance periods Percentage that occurring between computed reserves the correspondent and the Federal Reserve. For will be reduced example, access to the wire transfer, securities transfer, and settlement services that involve November 13, 1980 to September 2, 1981 87.5 September 3, 1981 to September 1, 1982 75 charges to the commingled reserve account at the September 2, 1982 to August 31,1983 62.5 Reserve Bank will require authorization from the September 1, 1983 to September 5, 1984 50 September 6, 1984 to September 4, 1985 37.5 correspondent and the Reserve Bank for the type September 5, 1985 to September 3, 1986 25 of transaction that is occurring. September 4, 1986 to September 2, 1987 12.5 September 3, 1987 forward 0 (ii) In addition, in obtaining Federal Reserve services, respondents maintaining their required reserves on a pass-through basis may choose to However, an institution shall not reduce the amount of have entries arising from the use of Federal Re­ required reserves on any category of deposits or ac­ serve services posted to: (a) with the prior autho­ counts that are first authorized under Federal law in rization of all parties concerned, the reserve ac­ any State after April 1, 1980. count maintained by any institution at a Federal Reserve Bank, or (b) an account maintained for (b) Members and former members. The required re­ clearing purposes at a Federal Reserve Bank by serves of any depository institution that is a member the respondent. bank on September 1, 1980, or was a member bank on (iii) Accounts at Federal Reserve Banks con­ or after July 1, 1979 and withdrew from membership sisting only of respondents’ reserve balances that before March 31, 1980, or withdraws from member­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 769 ship on or after March 31, 1980, shall be determined as follows: Reserve maintenance periods d P i e f r fe c r e e n n t c a e g e t o a p co p m lie p d u t t o e occurring between (1) A depository institution whose required re­ amount to be added serves are higher using the reserve ratios in effect during a given computation period (§ 204.8(a)) than November 13, 1980-September 2, 1981 75 September 3, 1981-March 3, 1982 62.5 its required reserves using the reserve ratios in ef­ March 4-September 1, 1982 50 fect on August 31, 1980 (§ 204.8(b)) (without regard September 2, 1982-March 2, 1983 37.5 March 3-August 31, 1983 25 to required reserves on any category of deposits or September 1, 1983-February 29, 1984 12.5 March 1, 1984 forward 0 accounts that are first authorized under Federal law in any State after April 1, 1980): (i) shall maintain the full amount of required re­ (c) Certain nonmembers and branches and serves on any category of deposits or accounts agencies offoreign banks. The required reserves of that are first authorized under Federal law in any a nonmember depository institution that was not en­ State after April 1, 1980; and gaged in business on or before July 1, 1979, but com­ (ii) shall reduce the amount of its required re­ menced business between July 2, 1979, and Septem­ serves on all other deposits computed under sec­ ber 1, 1980, and any United States branch or agency tion 204.3 by an amount determined by multi­ of a foreign bank with total worldwide consolidated plying the amount by which required reserves bank assets in excess of $1 billion shall be deter­ computed under section 204.3 exceeds the mined by reducing the amount of its required re­ amount of required reserves computed using the serves computed under section 204.3 in accordance reserve ratios that were in effect on August 31, with the following schedules: 1980 (§ 204.8(b)), times the appropriate percent­ age specified below in accordance with the follow­ Reserve maintenance periods Percentage that computed ing schedule: occurring between reserves will be reduced November 13, 1980-February 11, 1981 87.5 Reserve maintenance periods Percentage applied to February 12-May 13, 1981 75.0 occurring between difference to compute May 14-August 12, 1981 62.5 amount to be subtracted August 13-November 11, 1981 50.0 November 12, 1981-February 10, 1982 37.5 February 11-May 12, 1982 25.0 November 13, 1980 to September 2, 1981 75 May 13-August 11, 1982 12.5 September 3, 1981 to September 1, 1982 50 August 12, 1982 forward 0 September 2, 1982 to August 31, 1983 25 September 1, 1983 forward 0 However, an institution shall not reduce the amount of (2) A depository institution whose required re­ required reserves on any category of deposits or ac­ serves are lower using the reserve ratios in effect counts that are first authorized under Federal law in during a given computation period (§ 204.8(a)) than any State after April 1, 1980. An additional United its required reserves computed using the reserve ra­ States branch or agency of a foreign bank operating a tios in effect on August 31,1980 (§ 204.8(b)) (without branch or agency in the United States as of September regard to required reserves on any category of de­ 1, 1980, shall be entitled only to the remaining phase-in posits or accounts that are first authorized under available to the existing U.S. branch or agency. Federal law in any State after April 1, 1980): (i) shall maintain the full amount of required re­ (d) New members. The required reserves of non­ serves on any cateogry of deposits or accounts member depository instituion that was engaged in that are first authorized under Federal law in any business but was not a member bank during the period State after April 1, 1980; and between July 1, 1979 and September 1, 1980, inclusive, (ii) shall increase the amount of its required re­ and which becomes a member of the Federal Reserve serves on all other deposits computed under sec­ System after September 1, 1980, shall be determined tion 204.3 by an amount determined by multi­ under paragraph (a) or (c), as applicable, as if it had plying the amount by which required reserves remained a nonmember and adding to this amount an computed using the reserve ratios that were in ef­ amount determined by multiplying the difference be­ fect on August 31, 1980 (§ 204.8(b)), exceeds the tween its required reserves computed using the ratios amount of required reserves computed under sec­ specified in § 204.8(a) and its required reserves com­ tion 204.3, times the appropriate percentage spec­ puted as if it had remained a nonmember times the per­ ified below in accordance with the following centage specified below in accordance wit the follow­ schedule: ing schedule: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

770 Federal Reserve Bulletin □ September 1980 (g) Mergers and consolidations. Maintenance periods occurring Percentage applied to The following rules concerning transitional adjust­ During successive quarters after difference to compute becoming a member bank amount to be added ments apply to mergers and consolidations of deposi­ tory institutions: 1 12.5 2 25.0 3 37.5 (1) Nonmembers. Where the surviving institution of 4 50.0 a merger or consolidation between nonmember de­ 5 62.5 6 75.0 pository institutions that were engaged in business 7 87.5 on July 1, 1979, and were not members of the Feder­ 8 and succeeding 100.0 al Reserve System on or after that date is a non­ member institution, it shall compute its transitional (e) De novo institutions. The required reserves of any adjustment of required reserves under paragraph depository institution that was not engaged in business (a), except that the amount of required reserves on September 1, 1980, shall be computed under sec­ shall be reduced by an amount determined by multi­ tion 204.3 in accordance with the following schedule: plying the amount by which the required reserves during the computation period immediately preced­ ing the date of the merger (computed as if the institu­ Maintenance periods occurring Percentage of reserve during successive quarters after requirement to be maintained tions had merged) exceeds the sum of the actual re­ entering into business quired reserves of each bank during the same computation period times the appropriate percent­ 1 40 2 45 age as specified in the following schedule: 3 50 4 55 5 65 Reserve maintenance periods Percentage applied to 6 75 occurring during quarterly difference to compute 7 85 periods following merger amount to be subtracted 8 and succeeding 100 87.5 2 75.0 This paragraph shall also apply to a United States 3 62.5 branch or agency of a foreign bank if such branch or 4 50.0 5 37.5 agency is the foreign bank’s first office in the United 6 25.0 States. Additional branches or agencies of such a for­ 7 12.5 8 and succeeding 0 eign bank shall be entitled only to the remaining phasein available to the initial office. (2) Member with surviving nonmember. Where the (f) Certain nonmembers chartered under laws of Ha­ surviving institution of a merger or consolidation be­ waii. Any State-chartered depository institution that tween a nonmember bank and a bank that was a was engaged in business on August 1, 1978, which was member bank on or after July 1, 1979, is a non­ not a member of the Federal Reserve System on that member bank, it shall apply the transitional rules for date, and whose principal office was located in Hawaii member banks in paragraphs (b) or (d), as appli­ on and after that date shall not maintain reserves cable, on the proportion of its deposits attributable against its deposits imposed under this Part until Janu­ to the absorbed member bank. This proportion will ary 2, 1986. On or after January 2, 1986, the required be the ratio that daily average deposits of the ab­ reserves of such a depository institution shall be deter­ sorbed member bank were to the daily average de­ mined by reducing the amount of required reserves posits of the combined banks during the reserve computed under section 204.3 in accordance with the computation period immediately preceding the date following schedule: of the merger. The bank will compute and maintain reserves against the remaining proportion of depos­ Maintenance periods Percentage that computed its applying the transitional rules applicable to non­ occurring between reserves will be reduced member depository institutions in paragraphs (a), (c) or (e), as applicable. A ratio of vault cash also will January 2 to December 31, 1986 87.5 be computed and applied. January 1, 1987 to January 6, 1988 75 January 7, 1988 to January 4, 1989 62.5 January 5, 1989 to January 3, 1990 50 January 4, 1990 to January 2, 1991 37.5 January 3, 1991 to January 1, 1992 25 (3) De novo with surviving nonmember. Where the January 2, 1992 to January 6, 1993 12.5 January 7, 1993 forward 0 surviving institution of a merger or consolidation be­ tween a depository institution that was engaged in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 111 business on July 1, 1979, and was not a member of (6) De novo with surviving member. Where the sur­ the Federal Reserve System on or after that date, viving institution of a merger or consolidation be­ and a de novo depository institution is a nonmember tween a bank that was a member bank at any time depository institution, it shall compute and maintain between July 1, 1979, and September 1, 1980, or that reserves applying the transitional rules for de novo was engaged in business on July 1, 1979 and became depository institutions in paragraphs (c) or (e), as a member after September 1, 1980, and a de novo applicable, on a proportion of its deposits attribut­ depository institution is a member bank, it shall able to the absorbed de novo bank. This proportion compute and maintain reserves by applying para­ will be the ratio that daily average deposits of the graph (e) only to the amount of deposits of the de absorbed de novo institution were to the daily aver­ novo institution outstanding on a daily average basis age deposits of the combined institutions during the during the computation period immediately preced­ reserve computation period immediately preceding ing the date of the merger. Reserves will be comput­ the date of the merger. The institution will compute ed and maintained against the remaining deposits of and maintain reserves against the remaining propor­ the surviving member bank under paragraphs (b) or tion of its deposits by applying the transitional rules (d), as applicable. applicable to nonmember depository institutions in paragraph (a). A ratio of vault cash also will be com­ (7) De novos. Where a merger involves de novo de­ puted and applied. pository institutions, required reserves shall be computed and maintained in accordance with sec­ (4) Nonmember with surviving member. Where the tion 204.3, except that the amount of reserves which surviving institution of a merger or consolidation be­ shall be maintained shall be reduced by an amount tween a member bank and a nonmember bank is a determined by multiplying the amount by which the member bank, it shall apply the transitional rules un­ required reserves during the computation period im­ der paragraphs (a), (c) or (e), as applicable, only on mediately preceding the date of the merger (comput­ the amount of deposits of the nonmember bank out­ ed as if the depository institutions had merged) ex­ standing on a daily average basis during the compu­ ceeds the sum of the actual required reserves of tation period immediately preceding the date of the each depository institution during the same compu­ merger. Reserves will be computed and maintained tation period, times the appropriate percentage as against the balance of the deposits of the surviving specified in the following schedule: member bank under paragraphs (b), (d) or (e), as ap­ plicable. Maintenance periods occurring Percentage applied (5) Members. Where a merger or consolidation in­ during quarterly periods compute amount to following merger be subtracted volves member banks, required reserves shall be computed and maintained applying the transitional 1 87.5 rules in paragraph (b), except that the amount of re­ 2 75.0 serves which shall be maintained shall be reduced 3 62.5 4 50.0 by an amount determined by multiplying the amount 5 37.5 6 25.0 by which the required reserves during the computa­ 7 12.5 tion period immediately preceding the date of the 8 and succeeding 0 merger (computed as if the banks had merged) ex­ ceeds the sum of the actual required reserves of each bank during the same computation period times the appropriate percentage as specified in the Section 204.5—Emergency Reserve following schedule: Requirement (a) Finding by Board. The Board may impose, after Reserve maintenance periods Percentage applied to consulting with the appropriate committees of Con­ occurring during quarterly difference to compute periods following merger amount to be subtracted gress, additional reserve requirements on depository institutions at any ratio on any liability upon a finding 1 87.5 by at least five members of the Board that extraordi­ 2 75.0 3 62.5 nary circumstances require such action. 4 50.0 5 37.5 6 25.0 (b) Term. Any action taken under this section shall be 7 12.5 8 and succeeding 0 valid for a period not exceeding 180 days, and may be extended for further periods of up to 180 days each by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

772 Federal Reserve Bulletin □ September 1980 affirmative action of at least five members of the Board amount of supplemental reserves required are less for each extension. than the amount of reserves which would be re­ quired if the ratios in effect on September 1, 1980, (c) Reports to Congress. The Board shall transmit were applied. promptly to Congress a report of any exercise of its authority under this paragraph and the reasons for the (c) Earnings Participation Account. A depository in­ exercise of authority. stitution’s supplemental reserve requirement shall be maintained by the Federal Reserve Banks in an Earn­ (d) Reserx’e requirements. At present, there are no ings Participation Account. Such balances shall re­ emergency reserve requirements imposed under this ceive earnings to be paid by the Federal Reserve section. Banks during each calendar quarter at a rate not to exceed the rate earned on the securities portfolio of the Federal Reserve System during the previous calen­ Section 204.6—Supplemental Reserve dar quarter. Additional rules and regulations may be Requirement prescribed by the Board concerning the payment of earnings on Earnings Participation Accounts by Fed­ (a) Finding by Board. Upon the affirmative vote of at eral Reserve Banks. least five members of the Board and after consultation with the Board of Directors of the Federal Deposit In­ (d) Report to Congress. The Board shall transmit surance Corporation, the Federal Home Loan Bank promptly to the Congress a report stating the basis for Board, and the National Credit Union Administration exercising its authority to require a supplemental re­ Board, the Board may impose a supplemental reserve serve under this section. requirement on every depository institution of not more than 4 per cent of its total transaction accounts. (e) Reserve requirements. At present, there are no A supplemental reserve requirement may be imposed supplemental reserve requirements imposed under this if: section. (1) the sole purpose of the requirement is to in­ crease the amount of reserves maintained to a level Section 204.7—Penalties essential for the conduct of monetary policy ; (2) the requirement is not imposed for the purpose (a) Penalties for Deficiencies. of reducing the cost burdens resulting from the im­ position of basic reserve requirements; (1) Assessment of Penalties. Deficiencies in a de­ (3) such requirement is not imposed for the purpose pository institution’s required reserve balance, after of increasing the amount of balances needed for application of the 2 per cent carryover provided in clearing purposes; and section 204.3(f) are subject to penalties. Federal Re­ (4) on the date on which supplemental reserve re­ serve Banks are authorized to assess penalties for quirements are imposed, the total amount of basic deficiencies in required reserves at a rate of 2 per reserve requirements is not less than the amount of cent per year above the lowest rate in effect for bor­ reserves that would be required on transaction ac­ rowings from the Federal Reserve Bank on the first counts and nonpersonal time deposits under the ini­ day of the calendar month in which the deficiencies tial reserve ratios established by the Monetary Con­ occurred. Penalties shall be assessed on the basis of trol Act of 1980 (Pub. L. 96-221) in effect on daily average deficiencies during each computation September 1, 1980. period. Reserve Banks may, as an alternative to levying monetary penalties, after consideration of (b) Term. the circumstances involved, permit a depository in­ stitution to eliminate deficiencies in its required re­ (1) If a supplemental reserve requirement has been serve balance by maintaining additional reserves imposed on for a period of one year or more, the during subsequent reserve maintenance periods. Board shall review and determine the need for con­ tinued maintenance of supplemental reserves and (2) Waivers. shall transmit annual reports to the Congress regard­ (i) Reserve Banks may waive the penalty for re­ ing the need for continuing such requirement. serve deficiencies except when the deficiency (2) Any supplemental reserve requirement shall ter­ arises out of a depository institution’s gross negli­ minate at the close of the first 90-day period after the gence or conduct that is inconsistent with the requirement is imposed during which the average principles and purposes of reserve requirements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 773 Each Reserve Bank has adopted guidelines that (b) Reserve ratios in effect during last computation provide for waivers of small penalties. The guide­ period prior to September 1, 1980. lines also provide for waiving the penalty once during a two-year period for any deficiency that Category Reserve requirement does not exceed a certain percentage of the de­ Net Demand Deposits pository institution’s required reserves. Decisions Deposit tranche: by Reserve Banks to waive penalties in other situ­ $0-$2 million 7% ations are based on an evaluation of the circum­ Over $2 million-$10 million $140,000 + 9'/2% of amount over $2 million stances in each individual case and the depository Over $10 million-$100 million $900,000 + 1 VU% of amount institution’s reserve maintenance record. If a de­ Over $ 100 million-$400 million $11,475 o , v 0 e 0 r 0 $ + 10 1 m 23 i / ll 4 i % on of pository institution has demonstrated a lack of amount over $100 mil­ lion due regard for the proper maintenance of required Over $400 million $49,725,000 + 16*/4% of reserves, the Reserve Bank may decline to exer­ amount over $400 mil­ lion cise the waiver privilege and assess all penalties regardless of amount or reason for the deficiency, Savings deposits (ii) In individual cases, where a Federal supervi­ Time deposits sory authority waives a liquidity requirement, or (subject to 3% minimum speci­ fied by law) 3% waives the penalty for failing to satisfy a liquidity By initial maturity: requirement, the Reserve Bank in the District where the involved depository institution is lo­ Less than 180 days $0-5 million 3% cated shall waive the reserve requirement im­ Over $5 million 6% posed under this Part for such depository institu­ 180 days to 4 years Vh% 4 years or more 1% tion when requested by the Federal supervisory Accounts authorized pursuant to Section 303 of Public authority involved. Law 96-221 offered by member banks located in States outside Con­ (b) Penalties for Violations. Violations of this Part necticut, Maine, Massa­ may be subject to assessment of civil money penalties chusetts, New Hamp­ shire, New Jersey, New by the Board under authority of section 19(1) of the York, Rhode Island and Federal Reserve Act (12 U.S.C. § 505) as implemented Vermont 12% Club accounts 3% in 12 CFR Part 263. In addition, the Board and any other Federal financial institution supervisory author­ ity may enforce this Part with respect to depository For purposes of computing the reserves under this institutions subject to their jurisdiction under authority Part, that would have been required using the reserve conferred by law to undertake cease and desist pro­ ratios that were in effect on August 31, 1980, the re­ ceedings. serve ratio on time deposits of a member bank shall be the average time deposit ratio of the member bank dur­ ing the 14-day period ending August 6, 1980, except that the reserve ratio on time deposits of a nonmember Section 204.8—Reserve Requirement Ratios bank that was a member bank on or after July 1, 1979, but which became a nonmember bank before March (a) Reserve percentages. The following reserve ratios 31, 1980, may be the average time deposit ratio of the are prescribed for all depository institutions, Edge and nonmember during the 14-day period ending August Agreement Corporations and United States branches 27, 1980. and agencies of foreign banks: Category Reserve requirement Amendments to Regulation T Net transaction accounts $0-$25 million 3% of amount The Board of Governors has amended its Regulation Over $25 million $750,000 plus 12% of amount T, Credit by Brokers and Dealers. This amendment over $25 million Nonpersonal time deposits will permit brokers and dealers to extend credit on By original maturity (or no­ fully paid for mutual fund shares deposited in a general tice period) account. The present rule permits broker-dealers to less than 4 years 3% 4 years or more 0% extend and maintain credit only on securities regis­ tered on a national securities exchange, or included on Eurocurrency liabilities 3% the Board’s List of OTC Margin Stock and on certain Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

774 Federal Reserve Bulletin □ September 1980 non-convertible debt securities which are traded in the but not deny or revoke, exemptions to states over-the-counter market. from the requirements of the act or regulation, Effective November 3, 1980, section 220.2(f) of Reg­ where state law imposes substantially similar ulation T is revised as follows: requirements and there is adequate provision for enforcement. Section 220.2—Definitions % jfc jjC Interpretation of Regulation Y (f) The term “margin security” means any registered security, OTC margin stock, OTC margin bond, or any The Board of Governors has issued an interpretation security issued by an open-end investment company of its Regulation Y, Bank Holding Companies and or unit investment trust registered under section 8 of Change in Bank Control. This interpretation provides the Investment Company Act of 1940 (15 U.S.C. 80a- that a bank holding company may form a subidiary to 8). perform services for its subsidiaries that the bank holding company could perform directly through a di­ vision or department. Amendments to Rules Regarding Effective August 11, 1980, Regulation Y is amended Delegation of Authority by adding a new section 225.141 to read as follows: The Board of Governors has amended its Rules Re­ Section 225.141—Operations Subsidiaries of a garding Delegation of Authority, to delegate to the Di­ Bank Holding Company rector of the Division of Consumer and Community Affairs the authority to determine whether provisions In orders approving the retention by a bank holding of the Electronic Fund Transfer Act and Regulation E company of a 4(c)(8) subsidiary, the Board has stated preempt provisions of state laws that are inconsistent that it would permit, without any specific regulatory with federal law and are not more protective of the approval, the formation of a wholly-owned subsidiary consumer. In addition, the rule delegates to the Direc­ of an approved 4(c)(8) company to engage in activities tor the authority to grant, but not to deny or revoke, that such a company could itself engage in directly exemptions to states if their statutes contain provi­ through a division or department. (Northwestern Fi­ sions substantially similar to the federal statute and nancial Corporation, 65 Federal Reserve Bulletin there is adequate provision for enforcement. Because 566 (1979).) Section 4(a)(2) of the Act provides gener­ of the complex and time-consuming nature of these de­ ally that a bank holding company may engage directly cisions, the Board finds that this delegation of author­ in the business of managing and controlling banks and ity is appropriate. permissible nonbank activities, and in furnishing serv­ Effective August 8, 1980, section 265.2 is amended ices directly to its subsidiaries. Even though section 4 to read as follows: of the Act generally prohobits the acquisition of shares of nonbanking organizations, the Board does not be­ Section 265.2—Specific Functions Delegated to lieve that such prohibition should apply to the forma­ Board Employees and to Federal Reserve tion by a holding company of a wholly-owned subsidi­ Banks. ary to engage in activities that it could engage in directly. Accordingly, as a general matter, the Board will permit without any regulatory approval a bank (h) The Director of the Division of Consumer and holding company to form a wholly-owned subsidiary Community Affairs (or, in the Director’s absence, the to perform servicing activities for subsidiaries that the Acting Director) is authorized: holding company itself could perform directly or through a department or a division under section 4(a)(2) of the Act. The Board believes that permitting (4)(i) Pursuant to Section 919 of the Electronic this type of subsidiary is not inconsistent with the non­ Fund Transfer Act (15 U.S.C. 1693, et seq.) and banking prohibitions of section 4 of the Act, and is the Board’s Regulation E, 12 CFR Part 205.12, consistent with the authority in section 4(c)(1)(C) of to determine whether the act and regulation the Act, which permits a bank holding company, with­ preempt state laws that are inconsistent with the out regulatory approval, to form a subsidiary to per­ act and regulation. form services for its banking subsidiaries. The Board (ii) Pursuant to Section 920 of the Electronic notes, however, that a servicing subsidiary established Fund Transfer Act and Regulation E, to grant, by a bank holding company in reliance on this inter­ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 115 pretation will be an affiliate of the subsidiary bank of a bank holding company, its subsidiary bank, and a the holding company for the purposes of the lending savings and loan association. However, these organi­ restrictions of section 23A of the Federal Reserve Act. zations are located in Brownfield, Odessa and Mid­ (12 U.S.C. 371c) land, Texas, respectively, and operate in separate The Board has issued this interpretation pursuant to banking markets from Bank. It appears from the facts its statutory authority under sections 4(a)(2) and 5(b) of record that consummation of the proposal would of the Bank Holding Company Act, 12 U.S.C. not result in any adverse effects upon competition or §§ 1843(a)(2) and 1844(b). increase the concentration of banking resources in any relevant area. Accordingly, the Board concludes that competitive considerations are consistent with ap­ proval of the application. Bank Holding Company and Bank Merger The Board has indicated on previous occasions that Orders Issued by the Board of Governors a holding company should serve as a source of finan­ cial and managerial strength to its subsidiary banks, Orders Under Section 3 of Bank Holding and that the Board would closely examine the condi­ Company Act tion of an applicant in each case with this consid­ eration in mind. In this case, the Board concludes that Capital Bancshares, Inc., the record presents adverse considerations that war­ Dallas, Texas rant denial of the proposal to form a bank holding com­ pany. Order Denying Formation of a Bank Holding With regard to financial considerations, the Board Company notes that Applicant would incur a sizeable debt in connection with this proposal. Applicant proposes to Capital Bancshares, Inc., Dallas, Texas, has applied service this debt over a 12-year period through divi­ for the Board’s approval under section 3(a) (1) of the dends to be declared by Bank and tax savings to be Bank Holding Company Act (12 U.S.C. § 1842(a) (1)) derived from filing consolidated tax returns. Applicant of formation of a bank holding company by acquiring has also proposed a capital injection for Bank as a part 100 percent (less directors’ qualifying shares) of the of its acquisition of Bank. Applicant anticipates that voting shares of the Capital Bank “Bank”), Dallas, this capital injection and projected improvements in Texas. Bank’s assets and earnings will allow Applicant to Notice of the application, affording an opportunity service its acquisition debt while maintaining an ade­ for interested persons to submit comments and views, quate capital level in Bank. However, in light of has been given in accordance with section 3(b) of the Bank’s historical performance, Bank’s earnings and Act. The time for filing comments and views has ex­ growth projections appear optimistic. It is the Board’s pired, and the Board has considered the application view that Bank is unlikely to have sufficient actual and all comments received in light of the factors set earnings to enable Applicant to service its debt while forth in section 3(c) of the Act (12 U.S.C. § 1842(c)). maintaining adequate capital in Bank as well as af­ Applicant, a nonoperating corporation with no sub­ fording Applicant the flexibility to meet any unfore­ sidiaries, was organized for the purpose of becoming a seen problems that might arise at Bank. Accordingly, bank holding company by acquiring Bank, which holds the Board is of the opinion that the considerations re­ deposits of $36.6 million.1 Upon acquisition of Bank, lating to financial and managerial resources and future Applicant would control the 238th largest bank in Tex­ prospects lend weight toward denial of the application. as and would hold approximately 0.05 percent of the No significant changes in the services offered by total deposits of commercial banks in the state. Bank are expected to follow from consummation of Bank is the 38th largest of 93 banking organizations the proposed transaction. Consequently, convenience in the relevant market and holds 0.27 percent of the and needs factors, including the Community Reinvest­ total deposits in commercial banks in the market.2 ment Act considerations, are consistent with but lend Two principals of Bank and Applicant are principals of no weight towards approval of this application. On the basis of the circumstances concerning this application, the Board concludes that the banking con­ siderations involved in this proposal present adverse 1. All banking data are as of June 30, 1979 and reflect bank holding factors bearing upon the financial and managerial re­ company formations and acquisitions approved as of April 30, 1980. sources and future prospects of Applicant and Bank. 2. The relevant banking market for this analysis is the Dallas bank­ ing market, which is approximated by the Dallas Rand McNally Met­ Such adverse factors are not outweighed by any proropolitan Area. competitive effects or by benefits that would result in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

776 Federal Reserve Bulletin □ September 1980 better serving the convenience and needs of the com­ tion of this application. Applicant’s record has been munity. Accordingly, it is the Board’s judgment that challenged by the Greenpoint-Williamsburg Com­ approval of the application would not be in the public mittee Against Redlining (“GWCAR”), a group orga­ interest and the application should be denied. nized to monitor local bank investment in Community On the basis of the facts of record, the application is Planning District Number 1 in Brooklyn and to devel­ denied for the reasons summarized above. op strategies for improving economic conditions By order of the Board of Governors, effective Au­ there.2 Specifically, GWCAR believes that Applicant gust 5, 1980. has not adequately tried to ascertain community credit needs, that it has not aggressively marketed loans, and Voting for this action: Vice Chairman Schultz and Gover­ that it has failed to meet mortgage loan demand and nors Wallich, Partee, Teeters, and Gramley. Absent and not has reinvested in one- to four-family mortgages only a voting: Chairman Volcker and Governor Rice. very small part of the deposits of its three branches located within the planning district. GWCAR also (Signed) Theodore E. Allison, complains of Applicant’s failure to extend mortgage [seal] Secretary of the Board. credit on mixed-use property and multi-family residen­ tial property. GWCAR has submitted the results of the group’s well-documented research regarding the distri­ Chemical Bank, bution of mortgage credit within the planning district. New York, New York Applicant’s record was also reviewed by the Federal Reserve System in a recent consumer compliance ex­ Order Approving Establishment of Branch amination. Based on that examination, Applicant’s CRA record is viewed as lending weight toward ap­ Chemical Bank, New York, New York, a state mem­ proval of this application, and the Board believes the ber bank of the Federal Reserve System, has applied information submitted by GWCAR does not warrant a for the Board’s approval under section 9 of the Federal change in that conclusion. GWCAR has not contested Reserve Act, 12 U.S.C. § 321, to establish a branch at a finding that Applicant is in technical compliance with Rockefeller Center, New York, New York. Notice of all procedural requirements of the Board’s Regulation this application has been given, as the Board’s Rules BB, 12 C.F.R. Part 228, and that it has reasonably de­ of Procedure require, 12 C.F.R. § 262.3(b), and the lineated its local communities.3 There is no evidence time for the submission of comments has expired. The of discrimination or other illegal credit practices by Board has considered the application and all com­ Applicant. ments received in light of section 9 of the Federal Re­ Overall, Applicant has a large retail presence in its serve Act and the Community Reinvestment Act of local communities. In 1978, Applicant was a leading 1977 (“CRA”), 12 U.S.C. §§ 2901-2905. originator of one- to four-family mortgage loans in low, Applicant, a subsidiary of Chemical New York Cor­ moderate, and high income areas in New York City. poration, has total assets of $23.9 billion and operates Consumer loans and residential credits account for 276 domestic branches.1 Establishment of the pro­ over 20 percent of its loan portfolio, and its propor­ posed office would not adversely affect competition. tional holdings of multi-family residential credit is rela­ Applicant’s financial and managerial resources and its tively high. In important respects Applicant has as­ future prospects are considered generally satisfactory sumed a rule of leadership in affirmatively pursuing the as are the future prospects of the proposed branch. objectives toward which the CRA is directed, and in The new office would provide a convenient source of the process it has achieved a distinctly positive record. banking services to Applicant’s trust customers. GWCAR has criticized Applicant for failing to as­ These considerations are consistent with approval of certain community credit needs and to market its cred­ this application. it services aggressively, but the Board cannot con­ The CRA also requires the Board, in connection clude Applicant’s record is deficient in either of those with its examination of Applicant, to assess Appli­ cant’s record of meeting the credit needs of its entire community, including low and moderate income 2. On July 11, 1980, GWCAR requested that the Board order a for­ neighborhoods, consistent with safe and sound opera­ mal hearing on this application. Section 262.3(d) of the Board’s Rules tion, and to take that record into account in its evalua­ of Procedure, 12 C.F.R. § 262.3(d), precludes Board consideration of this request. Moreover, it does not appear that there is a controversy between Applicant and GWCAR over material facts; only the con­ clusions to be drawn from available facts are in dispute. The Board accordingly has declined to order a formal hearing. 1. Financial data are as of September 30, 1979, unless otherwise 3. Applicant’s delineation encompasses the five boroughs of New noted. York City, four suburban counties, and several upstate counties. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 111 respects. For several years Applicant has maintained Voting for this action: Chairman Volcker and Governors contact with a large number of community and civic Wallich, Partee, Teeters, and Gramley. Absent and not vot­ ing: Governors Schultz and Rice. organizations and has provided support and advice for nonprofit organizations in its community. It has pro­ moted its credit services through conferences, of a va­ (Signed) Griffith L. Garwood, riety of market factors. The evidence shows that Ap­ [seal] Deputy Secretary of the Board. plicant has been relatively active in conventional oneto four-family mortgage loans in low and moderate in­ First National Bancshares in Newton, Inc., come as well as higher income areas, and it has pro­ Newton, Illinois vided other types of credit, such as installment loans, revolving credit plans, and home improvement loans. Applicant does offer credit on mixed-use property, but Order Approving Formation of Bank Holding its policy, uniformly applied throughout its commu­ Company nity, has been to treat such credit as commercial loans if the owner will not reside on the property. It does not First National Bancshares in Newton, Inc., New­ ton, Illinois, has applied for the Board’s approval un­ appear that this policy arises from unreasonable or dis­ der section 3(a) (1) of the Bank Holding Company Act criminatory considerations, but Applicant, responsive (12 U.S.C. § 1842(a) (1)) of formation of a bank holding to concerns expressed by community groups and local company by acquiring 80 percent or more of the voting public officials, has joined other New York banks in shares of First National Bank in Newton (“Bank”), studying whether alterations in such policies are fea­ sible. Newton, Illinois. Notice of the application, affording opportunity for No state-chartered commercial bank in New York interested persons to submit comments and views, has extended multi-family mortgages in low and moderate been given in accordance with section 3(b) of the Act. income neighborhoods in New York City in 1978. Usu­ The time for filing comments and views has expired, ry and rent control laws appear to have operated sig­ and the Board has considered the application and all nificantly to discourage activity in this area.5 Applicant comments received, including those of Mr. James does offer small business credit on multi-family units, Laugel (“Protestant”), Newton, Illinois, in light of the however, and it has been active in supporting multi­ family housing in low income neighborhoods through factors set forth in section 3(c) of the Act (12 U.S.C. its participation in various housing and neighborhood § 1842(c)). rehabilitation programs. Applicant, a nonoperating corporation with no sub­ sidiaries, was organized for the purpose of becoming a On balance, it is the Board’s judgment that the infor­ bank holding company through the acquisition of mation presented by GWCAR does not materially de­ Bank, which holds deposits of $33.6 million.1 Bank is tract from a conclusion that Applicant’s record of meeting the credit needs of its entire community lends the second largest of three banks in the relevant bank­ ing market 2 and controls 39 percent of commercial weight toward approval of this application, and the bank deposits in that market. The proposed transac­ Board views considerations relating to the conve­ tion represents a reorganization whereby ownership of nience and needs of the community to be served as consistent with approval. Bank will be transferred from individuals to a corpora­ tion owned by the same individuals, and it appears that On the basis of the record, the Board has deter­ mined that approval of this application would be in the consummation of this proposal would have no adverse effect upon existing or potential competition, nor public interest, and it approves the application for the would it increase the concentration of banking re­ reasons summarized above. The proposed branch sources in any relevant market. Accordingly, the should be established not later than three months after Board concludes that competitive considerations asso­ the effective date of this Order unless that period is ciated with this proposal are consistent with approval extended for good cause by the Board or the Federal of the application. Reserve Bank of New York, under authority hereby delegated. The financial and managerial resources and future By order of the Board of Governors, effective Au­ prospects of Applicant and Bank are satisfactory. Al­ gust 19, 1980. though Applicant will assume some debt in connection 1. All banking data are as of June 30, 1978. 5. Restrictive usury ceilings were in place during the periods stud- 2. The relevant banking market is approximated by Jasper County, ied. Illinois. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

778 Federal Reserve Bulletin □ September 1980 with its acquisition of Bank’s shares, it appears that gations, and no indication whatever that a hearing Applicant’s proposal will provide it sufficient financial might prove them to be accurate. flexibility to meet its debt-servicing requirements with­ The Comptroller of the Currency has not recom­ out adversely affecting the financial condition of Bank. mended denial of this application, and in those circum­ Moreover, Bank’s principals, who are also Applicant’s stances section 3 of the Act contemplates that objec­ principals, gained control of Bank in September 1978. tions to a proposed transaction will in the normal case Since acquiring control, Applicant’s principals have be explored, at least preliminarily, through written made adjustments in Bank’s management, lending pol­ submissions and informal discussions.5 Mr. Laugel has icies, and internal controls that have significantly im­ refused to provide any written factual basis for his ob­ proved Bank’s condition. Accordingly, the Board con­ jections, however, and he has declined the offer of in­ cludes that banking factors are consistent with formal discussions or an informal hearing, not on the approval of the application. ground of inconvenience but because he is only willing In reaching this conclusion, the Board has consid­ to confront Applicant with his evidence in the pres­ ered comments concerning this application from a ence of Board members. The Protestant has not satis­ shareholder and director of Bank, Mr. James Laugel, fied even a minimal burden of showing that a hearing who has also requested a hearing before members of might be worthwhile, and his request for one is denied. the Board. Mr. Laugel has voiced various objections On the basis of the record, the Board concludes that to this proposal. Setting to one side those objections his charges are without merit.6 that are not relevant to the determinations the Board While no immediate changes in Bank’s operations or must make under section 3(c) of the Act (such as griev­ in the service offered to its customers are anticipated ances against former management actions, uncon­ to follow consummation of the proposed acquisition, nected with Applicant), those that are not material, convenience and needs considerations are consistent and those challenging conclusions (such as forecasts of with approval of this application. Based upon the fore­ Bank’s future prospects) the underlying facts of which going and other considerations reflected in the record, the Board has taken into account, there remains one the Board concludes that consummation of the pro­ serious allegation against Applicant. Mr. Laugel be­ posal would be consistent with the public interest and lieves that Applicant’s principal, by arrangement with that the application should be approved. Bank’s former acting president, coerced minority On the basis of the record, the application is ap­ shareholders to sell their shares or deliver proxies, proved for the reasons summarized above. The trans­ through refusals to grant credit and other unspecified action shall not be made before the thirtieth calendar but allegedly unethical means.3 day following the effective date of this Order or later Such charges, if true, would constitute a serious ad­ than three months after the effective date of this Or­ verse managerial consideration that could warrant or der, unless such period is extended for good cause by demand denial of this application.4 However, in the the Board of Governors or by the Federal Reserve face of specific denials by those persons alleged to Bank of St. Louis pursuant to delegated authority. have participated in this conduct, Mr. Laugel, who By order of the Board of Governors, effective Au­ claims to have no personal knowledge of these mat­ gust 12, 1980. ters, has done nothing to substantiate his claims. This is not a case where evidence is exclusively in the Voting for this action: Chairman Volcker and Governors hands of, or even more conveniently accessible to, an Schultz, Wallich, Partee, Teeters, Rice, and Gramley. adverse party. Mr. Laugel claims to have evidence; he claims to have witnesses to the conduct he suggests (Signed) Cathy L. Petryshyn, took place. But he has refused to provide that evi­ [seal] Assistant Secretary of the Board. dence to the Board. As a consequence, although this proceeding has been protracted, there is still before the Board no factual foundation for Mr. Laugel’s alle- 5. Farmers and Merchants Bank of Las Cruces, New Mexico v. Board of Governors, 567 F.2d 1082 (D.C. Cir., 1977). Even in pro­ ceedings under a statute requiring opportunity for hearing, a person requesting a hearing must first make some showing in support of his 3. Mr. Laugel has also entered a variety of procedural objections to allegations. Connecticut Bankers Association v. Board of Governors, this proceeding, which the Board believes to be without merit. In any F.2nd (D.C. Cir. 1980). event, no showing has been made that he has been prejudiced by any . Similarly, no reasonable construction of information Mr. Laugel 6 of the procedures objected to, or that his opportunity to present views has submitted supports any charge that persons associated with Appli­ and evidence has been impaired in any way. The Board has consid­ cant have dealt dishonestly with the Board or the Reserve Bank. The ered Mr. Laugel’s comments as if he had timely complied with section Board also notes that the Protestant has not clearly demonstrated a 262.3(d) of the Board’s Rules of Procedure. 12 C.F.R. § 262.3(d). substantial protected financial or economic interest that is distinct 4. Benson Bancshares, Inc., 63 Federal Reserve Bulletin 1009 from that of Bank and that would be directly and adversely affected by (1977). the transaction for which approval is sought. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 779 Flagship Banks, Inc. Beach banking markets.2 Florida Bankshares also Miami, Florida competes in the Sebring banking market and the Moore Haven banking market.3 In view of Flagship’s Order Approving Acquisition of Bank Holding financial and managerial resources and its previous Company and Merger of Bank Holding Companies geographic expansion, Flagship is viewed as a poten­ tial entrant into these two markets. Therefore, the Flagship Banks, Inc. (“Flagship”), Miami, Florida, a Board regards these two markets as also relevant for bank holding company within the meaning of the Bank analysis of the competitive effects of the proposal. Holding Company Act, has applied for the Board’s While Flagship competes in banking markets not cur­ approval under section 3(a) (3) of the Act (12 U.S.C. rently served by Florida Bankshares, the Board does § 1842(a)(3)), to acquire 100 per cent of the voting not regard Florida Bankshares as a likely potential en­ shares of Florida Bankshares, Inc. (“Florida Bank­ trant into such markets in light of the financial and shares”), Hollywood, Florida, also a bank holding managerial resources and previous history of expan­ company, thereby indirectly acquiring voting shares of sion of Florida Bankshares. Accordingly, the Miami- First National Bank of Hollywood (“Hollywood Fort Lauderdale, Eastern Palm Beach, Sebring, and Bank”), Hollywood, Florida; First National Bank of Moore Haven banking markets are considered to be West Delray (“West Delray Bank”), Delray Beach, the relevant geographic markets for considering the Florida; First National Bank of Moore Haven (“Moore competitive effects of this proposal. Haven Bank”), Moore Haven, Florida; and First Flagship, through its subsidiaries, Flagship First National Bank of Sebring (“Sebring Bank”), Sebring, National Bank of Boynton Beach, Boynton Beach, Florida. Flagship has also applied for the Board’s Florida, and Flagship Bank of West Palm Beach, West approval under section 3(a)(5) of the Act (12 U.S.C. Palm Beach, Florida, ranks as the 12th largest of 24 § 1842(a)(5)) to merge with Florida Bankshares under banking organizations competing in the Eastern Palm the name and charter of Flagship. Beach banking market, with total market deposits of Notice of the application, affording opportunity for $94,7 million, representing 4.3 percent of total market interested persons to submit comments, has been giv­ deposits. Florida Bankshares, through its smallest en in accordance with section 3(b) of the Act. The time banking subsidiary, West Delray Bank, ranks as the for filing comments has expired, and the Board has smallest banking organization in this market, with total considered the application and all comments received market deposits of $3.4 million, representing 0.2 per­ in light of the factors set forth in section 3(c) of the cent of total deposits in the market. Flagship’s closest Act. subsidiary bank is located ten miles from West Delray Flagship, the fifth largest banking organization in Bank, and while there is some existing competition be­ Florida, controls 23 banks with aggregate deposits of tween Flagship and Florida Bankshares in the Eastern approximately $1.53 billion, representing 4.7 percent Palm Beach market, the amount of such competition of the total deposits in commercial banks in the state.1 that would be eliminated upon consummation does not Florida Bankshares, the 27th largest banking organiza­ appear to be significant, and the market is relatively tion in the state, controls three banks with aggregate unconcentrated, with the four largest banking organi­ deposits of approximately $200 million, representing zations controlling 43.5 percent of market deposits. 0.6 percent of the total deposits in commercial banks Flagship, through its largest banking subsidiary, in the state. Upon consummation of the proposed ac­ Flagship National Bank of Miami, Miami, Florida, quisition, Flagship would become the fourth largest ranks as the third largest of 72 banking organizations banking organization in the state with 5.3 percent of competing in the Miami-Fort Lauderdale banking mar­ total commercial bank deposits in Florida. On the ket, with total market deposits of $512 million, reprebasis of all the facts of record, including the overall structure of banking in Florida, the Board does not view the proposal as having any significantly adverse 2. The Miami-Fort Lauderdale banking market is approximated by effects on the concentration of banking resources in Broward and Dade Counties, Florida. Until recently, this market en­ compassed two separate banking markets, but these two markets have Florida. now merged as a result of both commercial and residential develop­ Banking subsidiaries of Flagship currently compete ment in the area that formerly separated them. The Eastern Palm against banking subsidiaries of Florida Bankshares in Beach banking market is approximated by the entire eastern coastal portion of Palm Beach County, Florida, which includes all of the de­ the Miami-Fort Lauderdale and the Eastern Palm veloped portions of Palm Beach County with the exception of the Belle Glade area in the western portion of the county. 3. The Sebring banking market is approximated by all of Highlands County plus the City of Frostproof in Polk County, Florida. The Moore Haven banking market is approximated by all of Glades Coun­ 1. Banking data are as of June 30, 1979. ty plus the Clewiston area of Henry County, Florida. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

780 Federal Reserve Bulletin □ September 1980 senting 4.9 per cent of commercial bank deposits in the market. None of Flagship’s banking subsidiaries is lo­ market. Florida Bankshares, through its lead bank, cated in either of these banking markets, and the Hollywood Bank, ranks as the 23rd largest banking or­ Board concludes that consummation of the proposal ganization in this market, with total deposits of $148 would not eliminate any existing competition in these million, representing 1.4 percent of market deposits. markets. With respect to the effects on potential com­ Consummation of the acquisition would increase Flag­ petition in these markets, Sebring Bank and Moore ship’s share of deposits in the Miami-Fort Lauderdale Haven Bank hold deposits of approximately $43 mil­ banking market to 6.3 percent, causing it to become lion and $5 million, representing 19.0 and 16.5 percent the second largest banking organization in the market. of total commercial bank deposits in their respective In light of these and other facts of record, the Board banking markets. Applicant appears to be but one of finds that consummation of the proposal will result in many potential entrants for these markets. In view of an elimination of existing competition between Flag­ all the facts of record, including the relative and abso­ ship National Bank and Hollywood Bank, will remove lute size of Sebring Bank and Moore Haven Bank and an independent competitor from the market, and will the structure of their banking markets, the Board con­ increase the concentration of banking resources in the cludes that consummation of the proposal would have market. Proposals involving the acquisition of an inde­ no significant adverse effects upon potential com­ pendent banking organization by an organization al­ petition in these markets. ready represented in the market must be analyzed The financial and managerial resources of Flagship, carefully, giving attention to all the facts presented in Florida Bankshares, and their subsidiaries are re­ each case, such as the structural characteristics of the garded as consistent with approval and the future pros­ market as well as the quantitative factors associated pects of Flagship and its subsidiaries appear favorable. with the proposal. Following consummation of the proposal, Flagship in­ The Board recently denied a proposed acquisition of tends to expand the services offered by Hollywood a bank holding company where the combined market Bank by installing automated teller machines, in­ share that would have resulted from consummation troducing new deposit instruments, including money was not significantly different than the market share market certificates of deposit and NOW accounts, of­ that would result in the Miami-Fort Lauderdale bank­ fering international banking services, and by more ag­ ing market from consummation of the proposal.4 The gressively promoting the lending activities of this Board finds that there are several significant factors bank. Flagship also intends to establish additional that distinguish the competitive effects of this proposal branches of other banking subsidiaries of Florida from that which the Board previously found warranted Bankshares. Although these proposals are modest and denial. The Miami-Fort Lauderdale market is some­ may be accomplished through means other than this what less concentrated than the banking market in proposal, the Board regards them as sufficient to out­ County National5 and Hollywood Bank is somewhat weigh the slightly adverse effects on competition asso­ smaller than the bank to be acquired in County Nation­ ciated with this proposal. al. Furthermore, Hollywood Bank is located some 16 Based on the foregoing and other considerations re­ miles from Flagship’s subsidiary in an area into which flected in the record, it is the Board’s judgement that Flagship’s subsidiary is prohibited from branching un­ the proposed acquisition is in the public interest and der state law. that the application should be approved. On the basis of the facts of record, including the lev­ On the basis of the record the application is ap­ els of concentration of banking resources in the Mi­ proved for the reasons summarized above. The trans­ ami-Fort Lauderdale and Eastern Palm Beach banking action shall not be made before the thirtieth calendar markets and the number of potential market entrants day following the effective date of this Order or later and vehicles for entry remaining in these markets after than three months after the effective date of this Or­ consummation of this proposal, the Board does not re­ der, unless such period is extended for good cause by gard the effect of the proposal on competition in these the Board or by the Federal Reserve Bank of Atlanta markets as significant. pursuant to delegated authority. Florida Bankshares’ second largest banking subsidi­ By order of the Board of Governors, effective Au­ ary, Sebring Bank, competes in the Sebring banking gust 25, 1980. market; its third largest banking subsidiary, Moore Haven Bank, competes in the Moore Haven banking Voting for this action: Chairman Volcker and Governors Schultz, Partee, and Gramley. Absent and not voting: Gover­ nors Wallich, Teeters, and Rice. 4. County National Bancorporation, 65 Federal Reserve Bulle­ tin 763 (1979) (hereinafter referred to as “County National"). 5. In the Miami-Fort Lauderdale market the four largest banking organizations hold 35.8 percent of market deposits, whereas the four- (Signed) Griffith L. Garwood, firm concentration ratio in County National was 41.9. [seal] Deputy Secretary of the Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 781 Key Banks, Inc., in deposits, representing 26.1 percent of market depos­ Albany, New York its. Acquisition of Bank would increase Applicant’s share of market deposits to 27.0 percent. In evaluating Order Approving Acquisition of Bank the competitive effects of the acquisition, the Board notes that also competing in the market are seven of Key Banks, Inc., Albany, New York, a bank holding the nation’s largest 25 banks including several large company within the meaning of the Bank Holding New York City banks (Chase Manhattan, Chemical, Company Act, has applied for Board’s approv­ Citicorp and Manufacturers Hanover). As the Board al under section 3(a)(3) of the Act (12 U.S.C. has indicated previously, the competitive influence of § 1842(a)(3)) to acquire 100 percent of the voting such firms is not measurable solely by their market shares (less directors’ qualifying shares) of The Na­ shares, especially with respect to their ability to serve tional Bank of Northern New York, Watertown, New commercial customers. In addition, the Board notes York (“Bank”). that there are several large thrift institutions in the Notice of the application, affording opportunity for market and, although the Board remains of the view interested persons to submit comments and views, has that thrift institutions do not yet compete with com­ been given in accordance with section 3(b) of the Act. mercial banks over a sufficiently broad range of prod­ The time for filing comments and views has expired, ucts and services to include them in the same line of and the Board has considered the application and all commerce, the Board has on occasion noted that it comments received in light of the factors set forth in may be appropriate in particular cases to take into con­ section 3(c) of the Act (12 U.S.C. § 1842(c)). sideration the competition afforded by thrifts in eval­ Applicant is the fifteenth largest commercial bank­ uating the competitive impact of horizontal acquisi­ ing organization in the state of New York, controlling tions.7 In view of all the facts of record in this case, five subsidiary banks with aggregate deposits of $1.7 including the absolute and relative size of Bank, the billion, representing 1.1 percent of total commercial number and size of banking organizations in the mar­ bank deposits in the state.1 Acquisition of Bank, which ket, the sizeable thrift presence in the market, and the holds deposits of $200.6 million, would increase Appli­ fact that there will remain a number of organizations cant’s share of statewide commercial bank deposits by that could serve as entry vehicles for organizations not approximately 0.1 percent and would not alter Appli­ now represented in the market, the Board is of the cant’s ranking among other commercial banking or­ opinion that consummation of the proposal would ganizations in the state. Accordingly, consummation have only slightly adverse effects on existing com­ of this proposal would not significantly increase the petition in the Syracuse market. concentration of commercial banking resources in With respect to potential competition, the Board New York. notes that Bank operates in three markets in which Bank operates 17 offices in four separate banking Applicant is not currently represented. Each of these markets in central New York state—the Syracuse mar­ banking markets, Lewis, Watertown and St. Law­ ket,2 the Lewis market,3 the St. Lawrence County rence County, is concentrated and Applicant, given its market,4 and the Watertown market.5 Applicant cur­ size and managerial resources, may be regarded as a rently competes with Bank only in the Syracuse bank­ potential entrant into each market. However, in view ing market. Bank is the 10th largest of 17 commercial of all the facts of record, the Board is of the view that banking organizations located in the Syracuse market any elimination of potential competition that would re­ with $14.6 million in deposits, representing 0.9 percent sult upon consummation of the proposal is not so seri­ of total market deposits.6 Applicant is the largest ous as to warrant denial of the application. banking organization in the market with $424.3 million Bank is the largest of five banking organizations in the Lewis Banking market, and holds deposits of $36.9 million, representing 46.2 percent of total commercial 1. All banking data are as of December 31, 1979, and reflect bank bank deposits in the market. The two largest banking holding company formations and acquisitions approved through July organizations in the market together hold 81.1 percent 31, 1980. 2. The Syracuse banking market is approximated by Oswego, of market deposits. The banking structure of the Lewis Onondaga, and part of Madison County in central New York State. market reflects its rural nature, its low population, and 3. The Lewis banking market is approximated by Lewis County, its low per capita income. The record indicates the New York. 4. The St. Lawrence County banking market is approximated by St. Lawrence County, New York. 5. The Watertown banking market is approximated by Jefferson 7. First Bancorp of New Hampshire, Inc. (Londonderry Bank & County, New York. Trust Co), 64 Federal Reserve Bulletin 967 (1978); United Bank 6 . As part of this proposal, Applicant has committed to divest one Corporation of New York (Schenectady Trust Company), 66 Federal office of Bank in the Syracuse market as a going concern. Following Reserve Bulletin 61 (1980); Fidelity Union Bancorporation (Gar­ divestiture. Bank will rank as the 12th largest banking organization in den State National Bank) 66 Federal Reserve Bulletin 576(1980). the market controlling 0.7 percent of market deposits. Bank of New York. 66 Federal Reserve Bulletin (August 12, 1980. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

782 Federal Reserve Bulletin □ September 1980 market is not attractive to de novo entry. With respect petition that may result from consummation of the pro­ to the Watertown banking market, there are seven posal. Accordingly, it is the Board’s judgment that the commercial banking organizations operating in the subject proposal is in the public interest and that the market with 29 banking offices. Bank is the largest of application should be approved. these organizations with deposits of $103.9 million, On the basis of the record, the application is ap­ representing 40.0 percent of total market deposits. The proved for the reasons summarized above. The trans­ two largest banking organizations control about 80.0 action shall not be made before the thirtieth calendar percent of market deposits. As with respect to the day following the effective date of this Order, or later Lewis banking market, the Watertown market is not than three months after the effective date of this Order attractive to de novo entry. Moreover, thrift institu­ unless such period is extended for good cause by the tions have a substantial presence in the Watertown Board or by the Federal Reserve Bank of New York market, and compete to a significant degree with com­ under delegated authority. mercial banks in the area of consumer services. In By order of the Board of Governors, effective Au­ light of all the facts of record, the Board finds that con­ gust 25, 1980. summation of the proposal would have only slightly adverse effects on potential competition in the Lewis Voting for this action: Chairman Volcker and Governors and Watertown banking markets. Schultz, Partee, and Gramley. Absent and not voting: Gover­ nors Wallich, Teeters, and Rice. The fourth market in which Bank operates is the St. Lawrence County banking market. Bank is the third largest of 11 commercial banking organizations, with (Signed) Theodore E. Allison, $45.6 million in deposits, representing 15.0 percent of [seal] Secretary of the Board. total market deposits. Bank’s share of market deposits has declined from 20.6 percent in 1976 to its present North Platte Corporation, level of 15.0 percent. Also present in the market are Torrington, Wyoming banking subsidiaries of Marine Midland, Bankers Trust and Chase Manhattan. In view of the number of potential entrants, the relative unattractiveness of the Order Denying Acquisition of Additional Shares of market to de novo entry, and other facts of record, it Bank Holding Company appears that potential competition in the St. Lawrence North Platte Corporation, Torrington, Wyoming, a County market would not be seriously affected by con­ bank holding company within the meaning of the Bank summation of the proposal. Accordingly, the Board Holding Company Act (the “Act”), has applied for the finds that the effects on competition in any relevant Board’s approval under section 3(a)(3) of the Act area are at most only slightly adverse. (12 U.S.C. § 1842(a)(3)) to acquire an additional 221,600 The financial and managerial resources of Applicant voting shares (approximately 8.6 percent of the out­ and its subsidiary banks are considered generally satis­ standing voting shares) or Wyoming Bancorporation factory and their future prospects favorable. The fi­ (“Wybanco”), Cheyenne, Wyoming, also a bank hold­ nancial and managerial resources and future prospects ing company within the meaning of the Act. Applicant of Bank are considered satisfactory. Thus, banking currently owns 4.6 percent of Wybanco. Upon con­ factors are consistent with approval of the application. summation of the proposed acquisition, Applicant Consummation of the proposal will expand the would own about 13.2 percent of Wybanco and would range and sophistication of services available at be the largest single shareholder of Wybanco.1 Bank’s offices. Bank’s effective lending limit will in­ Notice of the application, affording opportunity for crease to reflect the aggregate lending limitation on interested persons to submit comments, has been giv­ Applicant’s subsidiary banks, thereby allowing Bank en in accordance with section 3(b) of the Act. The time to compete more effectively in extending loans to large for filing comments and views has expired, and the corporate customers. Applicant has indicated it will Board has considered the application and all com­ extend its electronic point-of-sale terminal system to ments received, including the objections of Wybanco’s Bank’s service area and will make available to Bank its computer, trust and investment services, enabling Bank to make available to its customers more exten­ 1. On July 11, 1980, Wybanco entered into a memorandum of un­ sive services. In light of the above, considerations re­ derstanding to sell to a group of investors $8 million of its subordi­ lating to the convenience and needs of the community nated debentures. The debentures are convertible into 500,000 Wy­ to be served lend weight toward approval and needs of banco shares, which would represent upon conversion about 16 percent of Wybanco’s then outstanding shares. Upon conversion of the community to be served lend weight toward ap­ the debentures, Applicant would own approximately 11 percent of proval as to outweigh any adverse effects on com­ Wybanco. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 783 management (“Protestant”), in light of the factors set or restrain trade.5 The antitrust laws and section 3(c) forth in section 3(c) of the Act (12 U.S.C. § 1842(c)). of the Act are directed not only against the immediate Protestant has challenged the proposal on financial, anticompetitive effects of a proposed acquisition, but competitive, conflict of interest, and Community Rein­ also are designed “to arrest in its incipiency . . . the vestment Act considerations, and a number of other substantial lessening of competition from the acquisi­ grounds. In addition to submitting numerous written tion by one corporation of the whole or any part of the objections to this proposal, Protestant has requested stock of a competing corporation.6 the Board to hold a formal hearing to resolve any dis­ In applying the competitive standards of the Bank putes as to material questions of fact unresolved by Holding Company Act where, as here, the principal of written submissions.2 The Board’s disposition of the an applicant controls another banking organization, application in this matter makes it unnecessary for the the Board considers the effects of the proposal on all Board to consider Protestant’s hearing request. controlled organizations.7 Section 3 of the Act requires a bank holding compa­ It is in the context of the above described legal ny to apply for the Board’s prior approval to acquire framework that the Board has considered the subject direct or indirect control of any voting shares of a application. bank, if after such acquisition the company will direct­ Applicant, the 18th largest banking organization in ly or indirectly control more than 5 percent of the Wyoming, controls one bank, the Citizens National bank’s voting shares. 12 U.S.C. § 1842(c)(1). In as­ Bank and Trust Company (“Citizens Bank”), Torringsessing a bank holding company application under sec­ ton, Wyoming, with deposits of $40.0 million, repre­ tion 3 of the Act, the Board is required “in every senting 1.7 per cent of the commercial bank deposits in case” to consider the competitive effects of the pro­ the state.8 Mr. Roy Dinsdale, Applicant’s chairman posal, as well as financial, managerial, future pros­ and president, serves in similar capacities with another pects and convenience and needs factors. 12 U.S.C. Wyoming bank holding company, Green River Com­ § 1842(c).3 Together, these sections demonstrate that pany, Green River, Wyoming, whose sole subsidiary Congress contemplated that a bank holding company is the First National Bank of Green River (“Green acquisition resulting in direct or indirect control of River Bank”), holding deposits of $12.8 million repre­ more than 5 percent of the shares of a bank might have senting 0.6 percent of deposits in the state.9 Mr. Dins­ anticompetitive aspects or be adverse to the conve­ dale and members of his family own in excess of 80 nience and needs of the community and that the percent of the stock of each of these companies.10 In Board’s decision to approve or deny an application addition, Mr. Dinsdale has acquired control of ten should take into consideration the reasonable likeli­ banks in Nebraska, and one bank each in Kansas and hood of anticompetitive aspects notwithstanding the Colorado. fact that the holding company would not acquire con­ Wybanco, with eighteen subsidiary banks, is the trol of 25 percent of the bank’s shares.4 largest banking organization in Wyoming, holding ag­ A company need not acquire control of another gregate deposits of $388.3 million, representing 16.6 company in order to substantially lessen competition percent of total deposits in commercial banks in the 5. Denver & Rio Grande Western Railroad v. United States, 387 2. Applicant has not requested a hearing on the application and has U.S. 485, 501 (1967). opposed Protestant’s request for a hearing. 6 . See United States v. E. 1. du Pont de Nemours & Co., 353 U.S. 3. In addition to the general standard in section 3 of the Act, section 586, 589 (1957). 3(c)(2) of the Act (12 U.S.C. § 1842(c)(2)) generally precludes Board 7. In Mahaska Investment Company, 63 Federal Reserve Bul­ approval of a proposal that may substantially lessen competition or letin 579 (1977), the Board stated that, where a proposed acquisition restrain trade (the anticompetitive effects condemned by the antitrust involves the use of a holding company by an individual or a group of laws) unless the anticompetitive effects are clearly outweighed by the individuals to acquire control of a bank that is a competitor of another convenience and needs of the community. bank under the control of essentially the same individuals, the Board 4. Under section 3 the Board might lawfully deny a bank holding will apply the section 3(c) competitive standards. In Mid-Nebraska company’s application to acquire less than 25 percent of another bank Bancshares v. Board of Governors, No. 78-1658 (D.C. Cir. Feburary holding company, if after the acquisition the acquiring company would 15, 1980), the Court of Appeals upheld the Board’s authority to con­ have probably or apparent influence over the acquiree and com­ sider the competitive effects of bank holding company proposals in petitive considerations involved in the relationship are significantly such circumstances. adverse. Cf. First City Bancorporation of Texas, 59 Federal Re­ 8 . All banking data are as of March 31, 1979, unless otherwise in­ serve Bulletin 105 (1973), where the Board approved a bank hold­ dicated. ing company’s acquisition of banks on the condition that it divest itself 9. Applicant has a substantial investment in Green River Company of any direct or indirect control in excess of 5 percent of the voting through non-voting common stock and subordinated debentures. Ap­ shares of two banks in the acquiree banks’ markets. Although the ap­ plicant’s investment accounts for a substantial portion of Green Riv­ plicant there directly owned only 8.9 percent and 0.5 percent respec­ er’s equity capital. tively of the two banks to be divested, the Board concluded that reten­ 10. Mr. Dinsdale has supplied the Board with an affidavit stating tion of applicant’s influence over those two banks presented that he exercises effective control over each of the corporations competitive considerations adverse to approval of the application. owned by the Dinsdale family. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

784 Federal Reserve Bulletin □ September 1980 state. Wybanco has an application pending with the relationships and circumstances present in a particular Board to acquire a newly-chartered bank in Worland, case.13 The Board has indicated that a controlling in­ Wyoming, and an application pending with the Comp­ fluence embraces pressures and influences, at times troller of the Currency to charter a national bank in subtle, by which a company may be capable of influ­ Torrington, Wyoming. encing or controlling the affairs of another company.14 The subject application represents the second at­ Pursuant to the Congressional direction in the 1970 tempt by Mr. Dinsdale and his controlled companies to Amendments that the Board consider a controlling in­ acquire a substantial portion of Wybanco’s shares. In fluence to be control, the Board delineated a number 1978, Mr. Dinsdale, acting as agent for five of his Ne­ of factual situations that, in the Board’s judgment, braska bank holding companies and Applicant, made a raise a reasonable probability that a controlling influ­ tender offer for up to 24 percent of Wybanco’s out­ ence might exist.15 One of those situations is relevant standing stock. As proposed, each of the holding com­ to the application here. Under section 225.2(b)(1) of panies was to acquire up to 4.9 percent of Wybanco’s Regulation Y, a company is presumed to control a shares. The tender offer was withdrawn after the bank or other company if each of three conditions is Board advised that the acquisition was precluded by met: (1) the company owns or controls more than 5 section 3(d) of the Act.11 percent of the outstanding voting shares of the bank or After considering all the evidence of record in this other company, (2) one or more of the company’s di­ matter, the Board has concluded that the effect of con­ rectors or officers serves in a similar capacity with the summation of Applicant’s proposal may be to serious­ bank or other company, and (3) no other person owns ly lessen present and potential competition in the rele­ or controls more than 5 percent of the outstanding vot­ vant geographic markets. Preliminary to making a ing securities of the bank or company. finding that such anticompetitive effects may result, In this case, the record shows that the proposed ac­ the Board has considered whether, upon consum­ quisition would give Applicant 13.2 percent of Wy­ mation of the proposal, Applicant and Mr. Dinsdale banco’s outstanding shares and Applicant would be may reasonably be expected to have a controlling in­ the single largest shareholder of Wybanco with nearly fluence over the management or policies of Wybanco. three times the shares held by any other person. No The Act provides that a company has control over a other person owns more than 5 percent of Wybanco’s bank or company if “the Board determines, after no­ shares. Applicant would have the power to elect at tice and opportunity for hearing, that the company di­ least one and perhaps two of Wybanco’s twelve direc­ rectly or indirectly exercises a controlling influence tors.16 The application states that Applicant will cast over the management or policies of the bank or compa­ its shares to elect Mr. Dinsdale as a Wybanco director. ny.”12 The Board has previously recognized that a de­ The record also shows that the current management of termination with respect to the existence of a con­ Wybanco, including its board of directors, as a.group trolling influence is necessarily a question of fact that holds about 15.4 percent of Wybanco’s voting shares requires a careful appraisal of the past and prospective and is vigorously opposing the purchase of Wybanco shares by Mr. Dinsdale or companies he controls.17 After considering all the facts of record, including 11. Wybanco filed a lawsuit against Mr. Dinsdale in Federal district Mr. Dinsdale’s banking experience, a majority of the court to block the tender offer. Wybanco alleged, among other things, Board finds that it is reasonably likely that, upon con­ that consummation of the tender offer would violate the Bank Holding Company Act. In response to an Order from the United States District summation of the proposal, Applicant and its principal Court for the District of Wyoming, the Board advised the court that shareholder may be capable of exercising such a signif­ the six companies, acting together as a single enterprise to achieve a common purpose, constituted a bank holding company under the Act icant influence over the management or policies of with its principal place of business in Nebraska and that section 3(d) of the Act (the prohibition against out-of-state bank acquisitions) pre­ cluded approval of the proposed acquisition in Wyoming. Protestant contends that consummation of the transaction proposed 13. Patagonia Corporation, (63 Federal Reserve Bulletin 288 in the present application would likewise also violate section 3(d). (1977). However, since this application is by a Wyoming bank holding compa­ 14. Id. at 291. ny to acquire shares in another Wyoming bank holding company, the 15. 36 Federal Register 18945 (1971); 12 C.F.R. 225.2(b) (1980). interstate prohibition of section 3(d) of the Act is inapplicable. Con­ 16. Based upon the number of shares historically voted in Wybanco trary to Protestant’s assertions, there is no evidence of record that any elections (about 60 percent), and the fact that Wybanco has cumula­ of Mr. Dinsdale’s out-of-state holding companies are involved in this tive voting, Applicant (with a 13.2 percent interest in Wybanco) would application, and Applicant has specifically denied that they are pro­ be able to elect two of the twelve directors of Wybanco. Under the viding financial support for the proposed acquisition. most adverse conditions, with full shareholder turnout, Applicant 12. The controlling influence test of control was added to the Act in would be able to elect at least one of Wybanco’s directors. 1970 in order to cover situations where a company has control of a 17. At its recent shareholder meeting, Wybanco management was bank but does not own 25 percent of the bank’s shares or control the able to secure over 50 percent of Wybanco’s outstanding shares in election of a majority of its directors. S. Rep. No. 91-1084,91st Cong., favor of a proposal to prohibit any individual who owned 5 percent or 2d Sess., 6 (1970). Congress recognized that “under modem condi­ more of a Wyoming bank from serving as a director of Wybanco. The tions, it is entirely possible to control the affairs of a company without proposal failed because it did not secure the necessary approval of owning 25 percent or more of its outstanding voting shares.” Id. two-thirds of the outstanding voting shares. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 785 Wybanco as to constitute a controlling influence, with­ market, the First Wyoming Bank of Rock Springs, in the meaning of that concept in the Act.18 On this N.A., Rock Springs, Wyoming (total deposits of $10.8 basis, the Board views the proposed acquisition as one million). This Wybanco subsidiary bank controls 6.8 that may seriously lessen competition between Wy­ percent of market deposits and is in direct competition banco subsidiary banks and the subsidiary banks of with Green River Bank.21 Applicant and the other Wyoming company controlled With respect to potential competition, the Board by Mr. Dinsdale. finds that consummation of the proposal may eliminate However, apart from any probable controlling influ­ or reduce probable future competition in the Goshen ence by Applicant or Mr. Dinsdale over Wybanco, the County banking market.22 Applicant’s subsidiary, Board is concerned that consummation of the proposal Citizens Bank, Torrington, Wyoming, is the largest of may nonetheless result in serious anticompetitive ef­ three banks in the Goshen County market with total fects. With a 13.2 percent interest in Wybanco and at deposits of $40 million, representing 63.1 percent of least one seat on Wybanco’s board of directors, Appli­ market deposits. Wybanco has an application to char­ cant would have access to and be in a position (and ter a de novo bank in Torrington, Wyoming, pending indeed have a responsibility) to influence and partici­ before the Comptroller of the Currency. In the Board’s pate in the formulation of the policies and strategies of judgment, approval of the subject proposal may sub­ Wybanco, which competes, or is expected to compete, stantially reduce the expected procompetitive effects with banks under Mr. Dinsdale’s control. The Board associated with Wybanco’s projected entry into the finds that this situation raises potential conflicts of in­ Goshen County market and eliminate the prospects for terest in the operation of the competing or potentially deconcentration of that market. Accordingly, the competing banks controlled by Mr. Dinsdale and Wy­ Board concludes that the effect of the proposal may be banco and is likely to seriously reduce competition.19 to seriously lessen potential competition in the Goshen In view of the likelihood that Applicant may gain a County market. controlling influence over Wybanco and Applicant’s The Board recognizes that the state of Wyoming has proposed substantial stock ownership of Wybanco and experienced rapid financial and population growth in representation on its board of directors, the Board be­ recent years. With Wyoming’s potential for develop­ lieves that consummation of the proposed acquisition ment from its energy resources, this growth is ex­ may have seriously adverse effects on existing com­ pected to continue causing the state’s major banking petition in the Sweetwater County banking market.20 markets to be attractive for entry by new banking or­ Green River Bank, which is controlled by Mr. Dins­ ganizations.23 In light of Mr. Dinsdale’s financial re­ dale, is the fifth largest of six banks in the market with sources, banking experience, his expressed interest in 8.1 percent of market deposits. Wybanco also has a banking expansion in Wyoming, his recent bank acqui­ subsidiary bank in the Sweetwater County banking sitions in Wyoming (and neighboring Nebraska), the Board believes it reasonably probable that Applicant will, absent Board approval of the instant proposal, 18. During the processing of the application, the Board advised Ap­ expand into one or more of the major Wyoming bank­ plicant that consummation of the proposal was likely to result in cov­ erage of Applicant by the rebuttable presumption in section ing markets, in the most attractive of which Wybanco 225.2(b)(1) of Regulation Y and that a serious question was raised as to operates subsidiary banks. Approval of this appli­ the competitive effect of the proposal. The Board requested Applicant to supply any facts or argument relevant to the control and com­ petitive questions and the appropriateness of a hearing on these is­ sues. In response Mr. Dinsdale advised the Board that no hearing was 21. Protestant also alleges that the proposed acquisition should elim­ necessary or appropriate. In July 1980, he advised the Board that he inate existing competition between Applicant’s subsidiary bank in would not, without the Board’s prior approval, exercise a controlling Goshen County, Wyoming, and two Wybanco banks located in coun­ influence over Wybanco. However, this assurance is unpersuasive in ties adjacent to Goshen County. In making this allegation, Protestant light of Applicant’s proposed substantial stock ownership in Wybanco asserts that all three counties constitute a single banking market. The and representation on Wybanco’s board of directors. Board believes that the relevant banking market should consist of the 19. Congress’ concern about the potential for significant anti­ localized area where the banks involved offer their services and where competitive effects in this type of situation was one of the reasons local customers can practicably turn for alternatives. In the Board’s underlying enactment of the Depository Institution Management In­ view, this three-county area is not sufficiently economically integrated terlocks Act (12 U.S.C. §§ 3201 et seq.). Despite the fact that Green to constitute a single banking market centered around the town of Tor­ River Bank and one of Wybanco’s subsidiary banks are located in the rington, and each of the counties should be considered as a separate same market, the distance between these banks makes it possible for banking market. Therefore, consummation of the proposal would not Mr. Dinsdale to serve on the boards of directors of the Green River eliminate any significant existing competition in any of these three Bank and Wybanco. However, since the adverse consequences counties. sought to be prevented by the ban on interlocking management in 22. The Goshen county market is approximated by Goshen County, competing financial institutions appear to be associated with the pro­ Wyoming. posed acquisition, the Board finds added weight supporting its con­ 23. During 1979, commercial bank deposits in Wyoming increased clusion that the proposed acquisition would have a serious anti­ by 14 percent, the greatest yearly gain in the State’s history. In addi­ competitive impact. tion, six new commercial banks opened in 1979, and seven additional 20. The Sweetwater County market is approximated by Sweet­ charters were issued for new banks that had not opened by the end of water County, Wyoming. 1979. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

786 Federal Reserve Bulletin □ September 1980 cation would eliminate or reduce the likelihood of the Concurring Statement of Chairman Volcker and procompetitive effects that may be expected to result Governor Gramley from such entry and would have adverse effects on banking structure in Wyoming.24 On this basis, ap­ In our judgment, the facts of this case do not warrant proval of the application would not serve the conve­ the conclusion that Applicant will have control of Wy­ nience and needs of the public and would not be in the banco upon completion of the proposed acquisition. public interest. Nevertheless, we believe that Applicant’s acquisition Accordingly, the Board finds, on the basis of the of over 13 percent of Wybanco’s outstanding shares foregoing and other facts of record, that the seriously and the proposed interlocking director relationship are adverse effects on existing and potential competition, likely to result in a serious lessening of present and concentration of resources in the relevant geographic potential competition between Wybanco’s subsidiary markets, and the state banking structure, that are banks and those controlled by Applicant and its princi­ likely to result from consummation of this proposal are pal shareholder, and to have a seriously adverse effect so substantial as to warrant denial of this application. on the banking structure of the state of Wyoming. The financial and managerial resources of Applicant The acquisition by an organization of a substantial and Wybanco and their subsidiary banks, as well as ownership interest in a competitor or potential com­ the other banks controlled by Mr. Dinsdale, are con­ petitor, coupled with the establishment of an inter­ sidered generally satisfactory and their future pros­ locking officer or director relationship between the two pects appear favorable.25 Thus, considerations relat­ organizations, raises a substantial likelihood that the ing to banking factors are consistent with approval. amount and effectiveness of present and potential With regard to convenience and needs considera­ competition between the organizations will be les­ tions, Applicant makes no explicit commitments to in­ sened. This type of association weakens, and may crease services to the communities served by Wy­ eliminate, the independence of action between organi­ banco. Applicant does state that it will use whatever zations previously acting competitively with one an­ influence it has to encourage Wybanco to strengthen other and increases the likelihood of cooperative oper­ its capital position and the earnings of its subsidiary ations between them, even if one organization does banks. In the Board’s view, Applicant has failed to not control the other within the concept of the Bank demonstrate that any benefits to the convenience and Holding Company Act. Such anticompetitive effects needs of the communities that may result from the pro­ have been recognized by Congress in enacting the De­ posed acquisition are adequate to outweigh the sub­ pository Institutions Management Interlocks Act and stantially adverse competitive effects that may reason­ by the Board in its administration of the Bank Holding ably be expected to result from Applicant’s acquisition Company Act. of Wybanco’s shares. In this case, we find the present and prospective On the basis of all the relevant facts of record, it is lessening of competition that is presented by the pro­ the Board’s judgment that consummation of the pro­ posed association of two strong and aggressive com­ posal would not be in the public interest and that the petitors to be so serious and so adverse to the public application should be denied. Accordingly, the appli­ convenience and needs as to warrant denial of the ap­ cation is denied for the reasons summarized above. plication. Accordingly, we concur in the majority’s de­ By order of the Board of Governors, effective Au­ cision to deny approval to the proposed acquisition. gust 13, 1980. August 13, 1980 (Signed) Theodore E. Allison, [seal] Secretary of the Board. Dissenting Statement of Governor Wallich 24. As previously noted, Wybanco has 18 banking subsidiaries, two applications pending for additional banks, and controls 16.6 percent of In my opinion, this proposal will result in anti­ the state’s total deposits. The second largest banking organization in Wyoming, Western Bancorporation, Los Angeles, California, has competitive effects serious enough to warrant denial three subsidiary banks in the state, but is precluded by section 3(d) of only if there is a preliminary finding that Applicant and the Act from expanding its holdings through the acquisition of new or its principal shareholder, Mr. Dinsdale, would be able existing banks, and by state law from branching from its three existing banks. Therefore, only the third and fourth largest banking organiza­ to control Wybanco upon consummation of the pro­ tions, the only other multibank holding companies in the state, are in a posed acquisition. I am unable to find sufficient evi­ position to challenge Wybanco in markets throughout the state. They dence in the record to support such a finding. each have three subsidiary banks and control 9.5 and 4.2 percent of deposits in Wyoming. In my opinion, the majority’s conclusion that con­ 25. Protestant has challenged this acquisition on a number of finan­ summation of the proposed acquisiton would give Ap­ cial grounds. The Board’s decision to deny the acquisition on com­ petitive grounds obviates the necessity of treating the challenge of plicant and Mr. Dinsdale a controlling influence over Protestant to the acquisition on financial grounds. the management and policies of Wybanco or otherwise Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 787 result in serious anticompetitive effects rests on con­ preliminary determination of control. 12 C.F.R. jecture and remote possibility. The United States Su­ § 225.2(c). If, after comment and an opportunity for preme Court has repeatedly emphasized that com­ hearing, the Board finds that control or a controlling petitive issues under section 7 of the Clayton Antitrust influence exists, Applicant would be required to termi­ Act must be resolved on the basis of “probabilities,” nate the control relationship or promptly seek Board not “ephemeral possibilities.”* approval to retain the control relationship. I believe I am concerned over the serious anticompetitive ef­ this procedure to be fully adequate to resolve the con­ fects that might attend consummation of the proposal trol question raised in this case. if Applicant were to acquire control of Wybanco. Accordingly, on the basis of the record before the However, I would approve the application because of Board and under current law, I would approve the pro­ the absence of persuasive evidence that Applicant and posed acquisition. its principal shareholder would be capable of ex­ ercising control or a controlling influence over the August 13, 1980 management or policies of Wybanco or that any con­ flicts of interest or other anticompetitive effects may reasonably be expected to result from consummation Republic of Texas Corporation, of the proposal. Dallas, Texas In this case, a majority of the Board has determined that with a 13.2 percent ownership interest in Wy­ Order Denying Acquisition of Bank banco and the ability to elect at least one member to Wybanco’s board of directors, Applicant would likely Republic of Texas Corporation, Dallas, Texas, a bank acquire a significant or controlling influence over Wy­ holding company within the meaning of the Bank banco that is expected to result in anticompetitive ef­ Holding Company Act, has applied for the Board’s ap­ fects. This determination has been made notwithstand­ proval under section 3(a)(3) of the Act (12 U.S.C. § ing the fact that Wybanco’s current management, 1842(a)(3)) to acquire 100 percent, less directors’ quali­ which has an aggregate stock ownership in Wybanco fying shares, of the voting shares of Citizens National of 15 percent, has vigorously opposed this application Bank of Waco (“Bank”), Waco, Texas. and has frustrated any attempt by Mr. Dinsdale or his Notice of the application, affording opportunity for controlled companies to acquire more than five per­ interested persons to submit comments and views, has cent of Wybanco’s outstanding shares. In my opinion, been given in accordance with section 3(b) of the Act. the Board’s conclusions are based upon conjecture re­ The time for filing comments and views has expired, garding possible future occurrences, and, as such, do and the Board has considered the application and all not constitute a sufficient basis upon which to deny the comments received in light of the factors set forth in application. section 3(c) of the Act (12 U.S.C. § 1842(c)). Notwithstanding the fact that Mr. Dinsdale has pro­ Applicant, the fourth largest banking organization in vided the Board with an assurance that he would not Texas, controls 23 banks with aggregate deposits of exercise or attempt to exercise a controlling influence approximately $5.01 billion,1 representing 7.2 percent over Wybanco, it is possible that Applicant and Mr. of the total deposits in commercial banks in the state. Dinsdale might in the future succeed in gaining a con­ Bank, the 29th largest banking organization in Texas, trolling influence over Wybanco, which might enable controls total deposits of $203.2 million, representing them to reduce competition by cooperatively oper­ 0.3 percent of the total deposits in commercial banks ating Wybanco and the Wyoming banks controlled by in Texas. Upon consummation of this proposal, Appli­ Applicant and Mr. Dinsdale. If the Board were to ap­ cant’s share of the total deposits in commercial banks prove the application based upon the absence of con­ in Texas would increase to 7.5 percent, and Applicant trol and it later appeared to the Board that Applicant would continue to rank as the fourth largest banking and Mr. Dinsdale had, through ownership of Wy­ organization in the state. banco’s shares and representation on Wybanco’s Bank is the largest of 15 banking organizations in the board of directors, obtained or exercised control or a Waco banking market2 and controls 30.8 percent of the controlling influence over Wybanco’s management or total deposits in the market. None of Applicant’s sub­ policies, the Board could under its regulations issue a sidiary banks has an office in the relevant market and *Brown Shoe Co. v. United States, 370 U.S. 294, 323 (1962); United 1. All banking data are as of June 30, 1979, and reflect bank holding States v. Falstaff Brewing Corp., 410 U.S. 526, 555 (1973) (separate company formations and acquisitions approved as of April 30, 1980. opinion of Justice Marshall) (“Remote possibilities are not sufficient 2. The Waco banking market is approximated by the Waco SMSA to satisfy the test set forth in § 7.“) which is represented by McClennan County, Texas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

788 Federal Reserve Bulletin □ September 1980 Applicant’s nearest subsidiary is located 87 miles from fects upon the structure of banking in Texas. The Waco in Fort Worth. Thus, no existing competition Board has consistently expressed its concern regard­ would be eliminated by this proposal. With regard to ing acquisitions that have a significant impact on state­ probably future competition, however, the Board has wide structure and the concentration of resources previously expressed its concern about the adverse within a state, and has indicated that there are limits as competitive effects resulting from the entry into small­ to what it regards as approvable under the standards of er metropolitan areas by one of the larger banking or­ the Bank Holding Company Act.4 The Board contin­ ganizations in a state through acquisition of one of the ues to monitor statewide banking structures in general larger independent organizations in those areas. Such and, more particularly, the size disparity among the adverse effects are exacerbated particularly in a situa­ large banking organizations. The Board is concerned tion where the banking organization to be acquired is with the possibility that continued approval of acquisi­ located in a concentrated market.3 tion or merger proposals involving large statewide The Waco banking market is a concentrated market, holding companies and relatively sizable banking or­ with the four largest banking organizations controlling ganizations, such as is presented by this proposal, may 72.4 percent of the total deposits in commercial banks perpetuate this size disparity and increase concentra­ in the market. Several smaller foothold entry points tion ratios. In reviewing the overall impact of consum­ are available in the market and in view of Applicant’s mation of this proposal, the Board believes the acqui­ overall size, financial and managerial resources and sition by Applicant of the largest bank in an already history of, and plans for, expansion, Applicant ap­ concentrated market in Texas is not warranted. pears to be a likely entrant into the market in the rea­ In view of the facts of record, including the market sonably foreseeable future. Acquisition of Bank by share held by Bank in the Waco banking market, the Applicant would eliminate the probability that these level of concentration in the market and the presence two organizations would come into direct competition of a number of alternative means of entry, the Board in the future and the Board would view this com­ concludes that the effect of consummation of this pro­ petition as desirable because of the present structure posal may be to substantially lessen potential com­ of the market. Thus, it is the Board’s view that poten­ petition in the relevant banking market and on this tial competition would be eliminated by permitting one basis requires denial of the proposal unless such anti­ of the state’s largest banking organizations to enter a competitive effects are clearly outweighed by consid­ concentrated market through the acquisition of the erations relating to the convenience and needs of the market’s largest bank. Consummation of the proposal community to be served. Even if the anticompetitive would also eliminate the present procompetitive effect effects of this proposal were viewed as less than “sub­ Applicant exerts as a result of its position as a per­ stantial,” the Board considers these effects to be so ceived potential entrant into the market. Although this seriously adverse as to warrant denial under the gener­ proposed acquisition would ultimately result in the al mandate of section 3 of the Act. separation of Bank from a group of smaller Waco The financial and managerial resources and future banks under the control of the same family, in the prospects of Applicant, its subsidiaries, and Bank are Board’s view the possibility of separation does not regarded as satisfactory. While Applicant has indi­ mitigate the effects of the proposal on competition in cated that it would cause Bank to place greater empha­ the Waco market. sis on real estate and business lending and government In evaluating the competitive effects of this pro­ sponsored lending programs, there is no evidence in posal, the Board has considered the impact of thrift the record indicating that these banking needs are not institutions on competition within the Waco market. now being met in the community and Bank appears to Although thrift institutions hold substantial deposits in have the resources to develop these services inde­ the Waco banking market, the Board in this instance is pendent of affiliation with Applicant. Furthermore, unable to conclude from the evidence in the record Applicant could furnish these services through foot­ that these institutions compete actively with com­ hold entry into the Waco market and thereby provide mercial banks over a sufficient range of financial serv­ the banking customers with a new alternative source ices to mitigate significantly the anticompetitive ef­ of banking services. On the basis of the record, it is the fects of the proposal. Board’s opinion that the convenience and needs of the The competitive consequences associated with this the community to be served are not sufficient to outproposal must also be considered in light of their ef- 4. See Mercantile Texas Corporation, 66 Federal Reserve Bul­ 3. Mercantile Texas Corporation, 66 Federal Reserve Bulletin letin 423 (1980) in which the Board denied an application by the 5th 423 (1980); First City Bancorporation of Texas, Inc., 65 Federal Re­ largest banking organization in Texas to acquire the 2nd largest bank serve Bulletin 862 (1979). in the Waco market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 789 weigh the anticompetitive effects associated with this stock ownership and director interlocks, control the proposal. Accordingly, it is the Board’s judgment that operating policies of the largest bank in the market, consummation of the proposed transaction would not Security Bank & Trust Company, Miami, Oklahoma be in the public interest and that the application should (“Security Bank”), which holds total deposits of $76.4 be denied. Based on the foregoing and other facts of million reprewenting 42.4 percent of market deposits. record, the application is hereby denied. Collectively, Applicant’s principals control 47.4 per­ By order of the Board of Governors, effective Au­ cent of the market’s total deposits. gust 20, 1980. Applicant disputes the definition of the relevant banking market in this case and contends that Bank Voting for this action: Chairman Volcker and Governors does not compete in the banking market where Secur­ Wallich, and Teeters. Voting against this action: Governors ity Bank is located. The market definition suggested by Partee, and Gramley. Absent and not voting: Governors Applicant is all of Craig County, and southern Labette Schultz and Rice. County, Kansas, including the town of Chetopa. Alter­ natively, Applicant asserts Bank is the only bank in a (Signed) Griffith L. Garwood, market consisting of northern Craig County, or that it [seal] Deputy Secretary of the Board. is in the Vinita banking market, which includes the towns of Vinita and Ketchum in Craig County, and Langley in Mayes County to the south of Craig Coun­ Welch Bancshares, Inc., ty* Welch, Oklahoma In support of its contentions, Applicant has sub­ mitted data concerning the respective service areas for Order Denying Formation of Bank Holding Company loans and deposits of the banks involved.2 Applicant also makes allegations concerning the extent of com­ Welch Bancshares, Inc., Welch, Oklahoma, has ap­ mercial interaction in the area surrounding Welch. plied for the Board’s approval under section 3(a)(1) of While the respective service areas of banks involved in the Bank Holding Company Act (12 U.S.C. § a proposed transaction are among the factors that the 1842(a)(1)) of formation of a bank holding company by Board considers in determining the relevant banking acquiring 100 percent, less directors’ qualifying market in which to analyze the competitive effects of a shares, of the voting shares of Welch State Bank of proposal, the Board does not consider such service Welch (“Bank”), Welch, Oklahoma. areas to be dispositive.3 Based on facts of record dis­ Notice of the application, affording opportunity for cussed below, it appears that Bank and Security Bank interested persons to submit comments, has been giv­ should in fact be regarded as reasonable alternatives to en in accordance with section 3(b) of the Act. The time one another. for filing comments has expired, and the Board has Bank is the only financial institution in northern considered the application and all comments received Craig County. Due to Bank’s relatively small size and in light of the factors set forth in section 3(c) of the Act the low population density of northeastern Oklahoma, (12 U.S.C. § 1842(c)). the Board does not believe that Bank is in an inde­ Applicant is a nonoperating company organized for pendent market. Based on the results of a field survey the purpose of becoming a bank holding company by of the area that included interviews with local bankers acquiring Bank ($9 million in deposits).1 Upon acquisi­ and business representatives and an analysis of market tion of Bank, Applicant would control the 333rd larg­ information concerning economic activity and employ­ est of 489 commercial banking organizations in Okla­ ment data in northeastern Oklahoma, the Board con­ homa and approximately 0.05 percent of total deposits cludes that northern Craig County and Ottawa County in commercial banks in the state. Bank is the third comprise the appropriate relevant banking market. largest of ten commercial banks located in the Miami, Oklahoma, banking market, which is approximated by northern Craig County and Ottawa County, and holds approximately 5.0 percent of the market’s total depos­ 2. In particular, Applicant cites the lack of substantial overlap of its in commercial banks. the service areas of Bank and Security Bank. However, the Board This proposal involves a restructuring of Bank’s notes that in this case the lack of service area overlap may merely reflect the lack of competition between the two banks as a result of ownership from individuals to a corporation owned by their common ownership and control by Applicant’s principals since those same individuals. The facts of record indicate 1956. For the same reason, the Board finds unpersuasive Applicant’s observation that Bank does not advertise in the Ottawa County news­ that seven of Applicant’s principals, through common paper and Security Bank does not advertise in the Craig County news­ paper. 3. See Ellis Banking Corporation, 64 Federal Reserve Bulletin 1. Deposit data are as of December 31, 1979. 884 (1978). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

790 Federal Reserve Bulletin □ September 1980 Miami, Oklahoma, located some 14 miles east of anticompetitive effects are clearly outweighed by the Welch in Ottawa County, is substantially larger than convenience and needs of the community to be served. any other city within 20 miles of Welch. Its 1976 popu­ As part of its analysis of the competitive effects of a lation approximates 14,000, as opposed to 5,000 for Vi- proposal involving the restructuring of a bank’s own­ nita, which is 17 miles to the south, and 2,000 for Che- ership into corporate form, the Board takes into con­ topa, Kansas, located 13 miles to the north. Despite sideration the competitive effects of the transaction Applicant’s assertions to the contrary, the road con­ whereby common share ownership and/or interlocking necting Welch to Miami is not more difficult to tra­ director/officer relationships were established between verse than the road from Welch to Vinita. Welch, with the subject bank and one or more of the other banks in a population of 772, provides little in the way of em­ the same market.5 ployment opportunities or basic services to its resi­ In this case, the Board has considered the com­ dents. Miami, on the other hand, is a regional trade petitive effects of the original transaction by which center, with significantly more shopping and employ­ Bank and Security Bank came under common own­ ment opportunities than Welch, Vinita, or Chetopa. ership. In 1956, when Bank came under common con­ Miami also has a two year junior college with an en­ trol with Security Bank, Bank was the fifth largest of rollment of about 2,000. Moreover, Vinita’s popu­ nine banks in the market and controlled 4.23 percent of lation has declined by 14.5 percent since 1970, and market deposits. Security Bank ranked second with 28 four businesses in its downtown area recently ceased percent of market deposits, and the four-bank concen­ operation. In contrast, Miami has experienced modest tration ratio in the market was 85.7 percent. The com­ population growth of 2.3 percent since 1970. Newspa­ bination of Bank and Security Bank created the sec­ per circulation figures and loan recording data supplied ond largest organization in the market with a market by Applicant suggest that there is some interaction be­ share of 32.3 percent, and raised the four-bank con­ tween Welch and Vinita. The loan recording data are centration ratio to 90 percent. The Board finds that the limited both with regard to the type of loan and the effect of the acquisition of Bank by Applicant’s princi­ period over which the data were gathered, however, pals was to eliminate significant competition that exist­ and on balance, the significant differences between Mi­ ed at that time between Bank and Security Bank, in­ ami and Vinita persuade the Board that residents of crease the concentration of banking resources within Welch look to Miami as the principal economic center the relevant market, and eliminate an independent in the surrounding area. It therefore appears that Bank banking competitor in the market. Although this rela­ and Security Bank are both located in the Miami bank­ tionship is long standing in nature, approval of this ap­ ing market.4 plication would further solidify this anticompetitive Under section 3(c) of the Bank Holding Company relationship, a relationship that now involves control Act, the Board is precluded from approving any pro­ of more than 47 percent of market deposits. On the posed acquisition of a bank that in any part of the basis of the foregoing and the facts of record, the country (1) would result in a monopoly, or would be in Board concludes that approval of the application furtherance of any combination or conspiracy to mo­ would have substantial adverse competitive effects. nopolize or attempt to monopolize the business of Accordingly, under the standards set forth in section banking; or (2) may substantially lessen competition or 3(c)(2) of the Bank Holding Company Act, the pro­ tend to create a monopoly or be in restraint of trade in posal may not be approved unless the adverse com­ any banking market, unless the Board finds that such petitive factors are clearly outweighed by other public interest considerations reflected in the record. In this case, the Board finds that the adverse competitive as­ pects are not clearly outweighed. When principals of an applicant are engaged in oper­ 4. Applicant also has submitted affidavits from the presidents of ating a chain of banking organizations, the Board, in each of the banks in Craig and Ottawa Counties to the effect that those addition to analyzing the one-bank holding company countries are in separate banking markets. Although these affidavits lend some support to applicant’s position, the Supreme Court has proposal before it, also considers the total chain and stated that a market is not only the area in which the seller operates, analyzes the financial and managerial resources and but “to which the purchaser can practicably turn for supplies.” future prospects of the chain within the context of the United States v. Philadelphia National Bank, 314 U.S. 321, 359 (1963). On the basis of the above discussion and all the facts of record, Board’s multibank holding company standards. Based the Board believes that residents of Welch must regard Miami as a upon such analysis in this case, the financial and manpracticable alternative for banking services. In any event, in view of the discussion above, the only other plau­ sible market would be one encompassing both Miami and Vinita, and the combination of Bank and Security Bank in such a market would also involve the elimination of a substantial amount of existing com­ 5. Mid-Nebraska Bancshares, Inc. v. Board of Governors, No. 78petition since the combined market share of those two banks would 1658 (D.C. Cir. February 15, 1980); Mahaska Investment Co., 63 Fed­ approximate 32.5 percent. eral Reserve Bulletin 579 (1977). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 791 agerial resources and future prospects of Applicant Wyoming Bancorporation, and Bank appear to be generally satisfactory. There­ Cheyenne, Wyoming fore, considerations relating to banking factors are consistent with, but lend no weight toward approval Order Approving Acquisition of a Bank of the application. No significant changes in the serv­ ices offered by Bank are expected to result from con­ Wyoming Bancorporation, Cheyenne, Wyoming, a summation of the proposed acquisition. Thus, public bank holding company within the meaning of the Bank interest factors lend no weight toward approval of the Holding Company Act, has applied for the Board’s ap­ proposal and therefore cannot clearly outweigh the proval under section 3(a)(3) of the Act (12 U.S.C. substantially adverse competitive effects associated § 1842 (a)(3)) to acquire 100 per cent, less directors’ with it. In view of the substantially adverse com­ qualifying shares, of the voting shares of First Wyo­ petitive effects associated with this proposal and the ming Bank-Worland (“Bank”), Worland, Wyoming, a absence of any outweighing factors, the Board also proposed de novo bank. concludes that, under the last sentence of section 3(c) Notice of the application, affording opportunity for of the Act, the proposal would have a negative effect interested persons to submit comments and views, has on the convenience and needs of the community to be been given in accordance with section 3(b) of the Act. served and that, on balance, the application should be The time for filing comments and views has expired, denied. and the Board has considered the application and all On the basis of the facts of record, and in light of the comments received, including those submitted on be­ factors set forth in section 3(c) of the Act, it is the half of First National Bank and Stockgrowers State Board’s judgment that consummation of the proposal Bank, both of Worland, Wyoming (collectively re­ to form a bank holding company would not be in the ferred to as “Protestants”), in light of the factors set public interest and that the application should be and forth in section 3(c) of the Act (12 U.S.C. § 1842(c)). hereby is denied for the reasons summarized herein. Applicant, the largest banking organization in Wyo­ By order of the Board of Governors, effective Au­ ming, controls 18 banks with aggregate deposits of gust 19, 1980. $405.6 million, representing 19.3 percent of the total commercial bank deposits in the state.1 Since this ap­ Voting for this action: Governors Wallich, Partee, and Tee­ plication involves the acquisition of a proposed de ters. Voting against this action: Chairman Volcker and Gov­ novo bank, consummation of the proposal would nei­ ernor Gramley. Absent and not voting: Governors Schultz ther eliminate any existing competition nor immediate­ and Rice. ly increase Applicant’s share of commercial bank de­ posits in Wyoming. (Signed) Griffith L. Garwood, Applicant is seeking to make its initial entry into the [seal] Deputy Secretary of the Board. Washakie County banking market (the relevant mar­ ket).2 There are only two commercial banks presently in the Washakie market, both of which are protesting Dissenting Statement of Chairman Volcker and the subject application. Applicant’s nearest subsidiary Governor Gramley bank to Bank is located more than 50 miles from Bank in a separate banking market. Since Applicant has no We would approve this application in view of the long­ other banking interests in the relevant market, it does standing relationship between Bank and Security Bank not appear that consummation of the proposal would & Trust Company, a relationship that spans nearly a have any adverse competitive impact in the Washakie quarter of a century. We do not believe that denial of County banking market. Moreover, since Bank is this application at this time will increase the probabili­ being formed de novo, approval of the application ty that common control of the two banks will be termi­ would permit the establishment of an additional com­ nated. The combined market share of the two banks is petitor in the Washakie County banking market. Ac­ certainly substantial, and we would join the majority cordingly, competitive considerations lend weight to­ of the Board if there were some reasonable possibility ward approval of the application. that denial might result in severance of this relation­ The financial and managerial resources and future ship. The duration of this relationship is significantly prospects of Applicant and its subsidiaries are relonger than in any application previously denied by the Board solely on competitive grounds, however, and it thus appears unlikely that denial would have any . All banking data are as of September 30, 1979, and do not include 1 meaningful effect. Applicant’s subsidiary, First Wyoming Bank-Douglas, Douglas, Wyo­ ming, which opened for business on February 15, 1980. 2. The Washakie County banking market is approximated by August 19, 1980 Washakie County, Wyoming. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

792 Federal Reserve Bulletin □ September 1980 garded as generally satisfactory. Bank, as a proposed state Examiner issue Bank’s charter. Protestants sub­ de novo bank, has no financial or operating history; sequently filed an appeal of the state Board’s decision however, its financial and managerial resources and to the Supreme Court of Wyoming. The state Examin­ prospects as a subsidiary of Applicant appear favor­ er reaffirmed its charter approval action upon notifica­ able. Thus, considerations relating to banking factors tion of the subject application by the Reserve Bank, are consistent with approval. As a new institution in stating that such approval was granted based upon tes­ the Washakie County banking market, which is cur­ timony that Bank would be affiliated with Applicant. rently being served by only two commercial banks, In general, the Board views a bank holding compa­ Bank would serve as an additional source of a full ny’s de novo entry into a market where it is not yet range of banking services in the market. Accordingly, represented as a positive convenience and needs con­ considerations relating to the convenience and needs sideration in view of the fact that it will provide an of the community to be served lend weight toward ap­ added source of services, will add another competitor proval of the application. to the market, and will serve to deconcentrate the rele­ In its review of the subject application, the Board vant market. Protestants contend that the public bene­ has given careful consideration to the comments sub­ fits generally associated with de novo entry into a mar­ mitted on behalf of Protestants. Protestants’ principal ket are not applicable in this case. This contention is contention is that the banking needs of the community based upon the following factors: (1) that population are being adequately met at the present time and there and deposit growth rates, as well as the median family is no need for the proposed new bank in the market, income, in the Washakie banking market were signifi­ particularly since Bank is to be located within one cantly below state averages, thus evidencing economic block of the two existing commercial banks in Wor- weakness in the area and the inability of the area to land.3 Protestants participated in state proceedings be­ support a new financial institution; (2) that market data fore the Financial Institutions Board of the state of and a survey of residents and businesses in the market Wyoming (“state Board”) concerning applications to indicate that existing banks are satisfying market loan charter Bank and raised essentially the same objec­ demands and providing satisfactory services for their tions in those proceedings as they have raised in pro­ customers; and (3) that Bank would not serve the pub­ testing the instant application. lic convenience and needs because of Bank’s close In summary, on August 24, 1978, Applicant filed an proximity to the other two commercial banks in the application with the state Board for Bank’s charter. market and the fact that it proposes to provide the The state Board denied the application on November same services as the two commercial bank com­ 17, 1978, whereupon Applicant submitted a new appli­ petitors in the market. cation for Bank’s charter. A public hearing was held in Contrary to Protestants’ assertions, the economic connection with the new application on April 18, 1979, data indicate that the Washakie banking market is at­ in which both Applicant and Protestants participated. tractive for de novo entry and could support the for­ After considering all the evidence of record, including mation of a new bank. Population growth data indicate feasibility studies submitted by each side that arrived that between 1970 and 1979 Washakie County’s popu­ at opposite conclusions, the state Board concluded in lation increased approximately 28.2 percent, and Wor­ its Order of July 25, 1979, that the public needs and land’ s population increased 36.5 percent. During that convenience of Worland and Washakie County would same period census estimates indicate that Wyoming’s be promoted by the establishment of Bank and that population increased approximately 34.8 percent.4 Al­ there was reasonable promise of successful operation though there have been no commercial bank entrants of Bank. Accordingly, the state Board ordered that the in the market during the 1970-1979 period, two new Worland savings and loan associations opened in 1976 3. In connection with this contention, Protestants have also alleged in response to the population increases and attendant that Applicant does not have sufficient financial resources to support increases in economic activity. These two depository the establishment and maintain the capital requirements of Bank un­ institutions had accumulated $8.8 million in combined der such circumstances. The Board has considered Applicant’s re­ sources and finds, as earlier stated in this Order, that Applicant’s fi­ deposits by March 1979.5 This evidence of successful nancial resources are generally satisfactory and Bank's prospects as a market penetration facts of record, including the rec­ subsidiary of Applicant are favorable. An additional objection by ord of the state Board proceeding, that the Washakie Protestants to this application is that Applicant acted in excess of the law in taking action to obtain charter approval for Bank without the Board’s prior approval. The Board does not require that an applicant receive Board approval before chartering a de novo bank, and, in fact, 4. Population growth data relative to Worland and Washakie Coun­ has expressly instructed applicants in the FR Y-2 Application Form ty were obtained from the Big Horn Regional Planning Office. State (December 1979) that “if a proposed new operating bank is involved, figures were obtained from the Bureau of Economic Analysis, Depart­ Applicant should have received at least preliminary approval of the ment of Commerce, Regional Economic Information System, April charter before filing [the FR Y-2] application." Therefore, Applicant’s 1980. actions to charter Bank did not require prior Board approval and were 5. Source: Federal Home Loan Bank of Seattle, Seattle, Washing­ not in violation of law. ton. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 793 banking market is capable of supporting an additional meaning of the Bank Holding Company Act (“Act”), market entrant. has applied for the Board’s approval, under § 4(c)(8) of Protestants’ random market survey indicating public the Act (12 U.S.C. § 1843(c)(8)), and 225.4(b)(2) of the satisfaction with existing banking services is not con­ Board’s Regulation Y (12 C.F.R. § 225.4(b)(2)), to ac­ clusive with respect to the need or feasibility of Bank. quire voting shares of ARCS Mortgage Corporation, The proposed location of Bank, despite its close prox­ North Miami Beach, Florida (“ARCS-Florida”) and imity to the two other commercial bank competitors, ARCS Mortgage Corporation, Encino, California appears to be quite convenient to the public since it is (“ARCS-California”) (“Companies”), both of which a central location near most other retail and service are engaged in mortgage lending activities and cur­ facilities in the area. In fact, the Board finds that the rently are subsidiaries of Empire National Bank (“Em­ proposed de novo bank would not only serve public pire”), Middletown, New York. convenience as an additional full-service banking facil­ Companies are engaged in the business of originat­ ity in the market, but would also benefit the public by ing and servicing first mortgage loans on one-to-four enhancing competition and deconcentrating a market family residential homes, selling these mortgages, and where there are only two commercial banking alterna­ servicing the loans for permanent investors. These ac­ tives. tivities have been determined by the Board to be close­ In view of the foregoing discussion and having con­ ly related to banking (12 C.F.R. §§ 225.4(a)(1) and (3)). sidered all the facts of record and all the comments of Notice of the application, affording opportunity for Protestants in light of the statutory factors the Board interested persons to submit comments on the public must consider under section 3(c) of the Act, it is the interest factors, has been duly published. The time for Board’s judgment that consummation of the subject filing comments has expired, and the Board has con­ proposal would be in the public interest and that the sidered the application and all comments received in application to acquire Bank should be approved. the light of the public interest factors set forth in sec­ On the basis of the record, the application is ap­ tion 4(c)(8) of the Act. proved for the reasons summarized above. The trans­ Applicant, the ninth largest banking organization in action shall not be made (a) before the thirtieth calen­ New York, controls one bank and a nonbank subsidi­ dar day following the effective date of this Order, or ary engaged in reinsurance activities, with consoli­ (b) later than three months after that date, and (c) First dated assets approximately $8.9 billion.1 Applicant Wyoming Bank, Worland, Wyoming, shall be opened proposes to acquire companies in connection with for business not later than six months after the ef­ consummation of the merger of its lead bank, Bank of fective date of this Order. Each of the periods de­ New York (“BNY”), New York, New York with Em­ scribed in (b) and (c) may be extended for good cause pire National Bank, Middletown, New York.2 ARCSby the Board, or by the Federal Reserve Bank of Kan­ California engages in mortgage banking activities from sas City pursuant to delegated authority. offices in Cerritos, Covina, Encino, Clovis, Oxnard, By order of the Board of Governors, effective Au­ Paso Robles, Sacramento, San Diego, San Jose, gust 19, 1980. Stockton, Van Nuys, Hayward, and Pleasant Hill, California, serving the counties of Fresno, Ventura, Voting for this action: Chairman Volcker and Governors San Luis Obispo, Sacramento, San Diego, Santa Wallich, Partee, Teeters, and Gramley. Absent and not vot­ Clara, San Joaquin, Alameda, and Contra Costa, Cali­ ing: Governors Schultz and Rice. fornia, and East San Fernando Valley, Eagle Rock, Highland Park, Simi Valley, and Los Angeles and the (Signed) Griffith L. Garwood, surrounding area. ARCS-Florida engages in mortgage [seal] Deputy Secretary of the Board. banking activities from offices in West Palm Beach, Lighthouse Point, and North Miami Beach, serving the geographic areas of Dade, Broward, and Palm Orders Under Section 4 Beach Counties, Florida. of Bank Holding Company Act In order to approve this application, the Board must find that Applicant’s performance of the proposed ac­ The Bank of New York Company, tivities through Companies “can reasonably be ex­ New York, New York pected to produce benefits to the public, such as great­ er convenience, increased competition, or gains in Order Approving Acquisition of Nonhanking efficiency, that outweigh possible adverse effects, such Companies The Bank of New York Company (“BNY Co.”), New 1. Data are as of December 31, 1979. York, New York, a bank holding company within the 2. See the Board's Order of this date approving the merger. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

794 Federal Reserve Bulletin □ September 1980 as undue concentration of resources, decreased or un­ By order of the Board of Governors, effective Au­ fair competition, conflicts of interest, or unsound gust 12, 1980. banking practices.” The proposed acquisition of Com­ panies does not raise any significant competitive is­ Voting for this action: Chairman Volcker and Governors sues. Companies (total combined assets of $14.7 mil­ Schultz, Wallich, Partee, Teeters, Rice, and Gramly. lion and a servicing portfolio of $518 million) are among the smaller participants in their respective (Signed) Theodore E. Allison, mortgage lending markets, ranking as the 112th and [seal] Secretary of the Board. 130th largest mortgage companies in the United States.3 Unlike their larger competitors, Companies do not originate mortgages on a nationwide basis. No First City Bancorporation of Texas, direct competition between Companies and BNY Co. Houston, Texas would be eliminated by the proposed acquisition. BNY Co. does not engage in the business of mortgage Order Approving Acquisition of First City Insurance banking and BNY at present does not extend mortgage Agency credit in any of the Florida and California markets where Companies originate all of their mortgage loans. First City Bancorporation of Texas, Houston, Texas, It is unlikely that BNY would expand its mortgage a bank holding company within the meaning of the lending activity to Companies’ markets given the wide Bank Holding Company Act (“Act”), has applied for geographic dispersion of Companies’ offices. Similar­ the Board’s approval under section 4(c)(8) of the Act ly, Companies are of insufficient size to be considered (12 U.S.C. § 1843(c)(8)) and section 225.4(b)(2) of the potential competitors in BNY’s markets. Affiliation Board’s Regulation Y (12 C.F.R. § 225.4(b)(2)), to ac­ with Applicant will facilitate expansion of Companies’ quire a dormant Texas corporation in order to acquire capital base and their mortgage activities due to Appli­ its license to act as a managing general agent as that cant’s access to the commercial paper market which term is defined by the Insurance Code of Texas. The can be used to fund Companies and due to the ability company’s name would be changed from Central Tex­ of Applicant to borrow funds for Companies in excess as Insurance Agency, Inc., to First City Insurance of Empire’s lending limitations. Applicant also will Agency, Houston, Texas (“Agency”), and Applicant provide the managerial expertise necessary to insure would thereafter engage de novo in the activity of act­ continuous, profitable operation of Companies. ing as managing general agent with respect to (i) insur­ There is no evidence in the record that consum­ ance for Applicant’s banking subsidiaries, and (ii) mation of the proposal would result in undue concen­ credit-related life, health, property and casualty insur­ tration of resources, decreased or unfair competition, ance. Such activities have been determined by the conflicts of interest, unsound banking practices, or Board to be closely related to banking (12 C.F.R. other adverse effects on the public interest. Accord­ § 225.4(a)(9)(i) and (ii)). ingly, the Board concludes that the balance of public Notice of the application, affording opportunity for interest factors it must consider under section 4(c)(8) interested persons to submit comments on the public of the Act favors approval of the applications filed un­ interest factors, has been published (44 Federal Regis­ der that section, and that the application should be ap­ ter 55654 (1979)).1 The time for filing comments has proved. expired, and the Board has considered the application This determination is subject to the conditions set and all comments received, including the request for a forth in section 225.4(c) of Regulation Y and to the hearing submitted jointly by the Independent Insur­ Board’s authority to make examinations of bank hold­ ance Agents of America and the Independent Insur­ ing companies and their subsidiaries, and to require ance Agents of Texas (collectively, “IIAA” or “Prot­ such modification or termination of the activities of a estant”), in light of the public interest factors set forth bank holding company or any of its subsidiaries as the in section 4(c)(8) of the Act. Board finds necessary to assure compliance with the Applicant is the largest banking organization in the provisions and purposes of the Act and the Board’s state of Texas with 44 domestic bank subsidiaries and Orders and regulations issued thereunder, or to pre­ total assets of approximately $9.5 billion.2 Applicant vent evasion thereof. The transaction shall be made not later than three months after the effective date of 1. This application was initially processed under the procedures set this order, unless such period is extended for good forth in section 225.4(b)(1) of the Board’s Regulation Y (12 C.F.R. § cause by the Board or by the Federal Reserve Bank of 225.4(b)(1)) as a proposal to engage de novo in activities determined New York pursuant to delegated authority. by the Board to be closely related to banking. Because of the nature of the protests filed and request for hearing, it was determined that the application should be processed at the Board. 3. Data are as of June 30, 1979. 2. All data are as of December 31, 1979. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 795 controls six nonbanking subsidiaries representing a result in any benefits to the public and would result in minimal portion of Applicant’s overall operations. adverse effects in the form of decreased competition; Agency is a dormant corporation not currently en­ and a formal hearing is needed to resolve all of the gaged in any business. Agency’s only assets are $1,000 issues raised above. in capital and a license to act as a “managing general In response, Applicant contends that the con­ agent” under the laws of Texas.3 Upon consummation clusions reached by Protestant are incorrect. The of the proposal, Applicant through Agency would en­ Board will address these issues in turn. ter into an agreement with one or more independent insurance agents, known under Texas law as “local Whether the Proposed Activity is “Closely Related” recording agents,”4 to perform the managerial and ad­ to Banking ministrative functions associated with the selling of in­ surance by these agents for Applicant’s banking sub­ Texas law separately authorizes two insurance agency sidiaries and in connection with extensions of credit activities: acting as managing general agent and acting made by the Applicant’s subsidiary banks. Applicant as local recording agent.6 Generally, managing general would not act as “local recording agent.” agents perform the administrative and supervisory Section 4(c)(8) of the Act provides that the Board functions related to the sale of insurance contracts, may approve a bank holding company’s application to while local recording agents perform the solicitation engage in a nonbanking activity only after the Board and negotiation functions related to the sale of such has determined that the proposed activity is so closely contracts. related to banking as to be a proper incident thereto. Applicant has applied pursuant to the Board’s insur­ The Board has determined by regulation that acting as ance agency regulation (i.e., 12 C.F.R. § 225.4(a)(9)) to agent with respect to the sale of credit-related insur­ engage in the former of these two insurance agency ance and insurance for the banking subsidiaries of a activities. The Protestant asserts that the proposed ac­ bank holding company are permissible nonbank activi­ tivity is not included in the Board’s insurance regula­ ties. This determination was affirmed in Alabama As­ tion, which it claims authorizes only sales functions sociation of Insurance Agents v. Board of Governors.5 relating to certain types of insurance contracts. Ac­ To approve an application under section 4(c)(8) of cordingly, Protestant contends that the proposed ac­ the Act the Board must also determine that the per­ tivity is not “closely related” to banking within the formance of the proposed activities by a nonbank sub­ meaning of section 4(c)(8) of the Act. sidiary of a bank holding company can reasonably be The Board’s insurance agency regulation authorizes expected to produce benefits to the public such as bank holding companies to act as “agent or broker” greater convenience, increased competition, or gains with respect to the sale of certain types of insurance in efficiency, that outweigh possible adverse effects, (12 C.F.R. § 225.4(a)(9)). The Board’s regulation does such as undue concentration of resources, decreased not define the term “agent or broker.” However, Tex­ or unfair competition, conflicts of interests, or un­ as law specifically defines the term agent and autho­ sound banking practices. Section 4(c)(8) of the Act al­ rizes the activities proposed by this application. Fur­ so provides that the Board may approve a bank hold­ thermore, Applicant has committed to engage in no ing company’s application to engage in, or to acquire, insurance underwriting activities in connection with voting shares of a company engaged in nonbanking ac­ this application and has committed to conduct its pro­ tivities only after notice of the proposal and an oppor­ posed activities in accordance with Texas law and the tunity for a hearing on the matter. Board’s regulations. The Board understands that in Both Applicant and Protestant have made numerous some states other than Texas, the activities of a man­ written submissions to support their respective posi­ aging general agent and a local recording agent may be tions regarding this application. In reaching the con­ performed by the same insurance agent.7 In fact, the clusions set forth below, the Board has considered the Board in the past has approved applications by bank application, Applicant’s supplementary comments and holding companies to engage in the proposed activity submissions, and all of the comments and submissions in Texas. Accordingly, in light of all these facts, the made by Protestant. Board believes there is no reason in this instance to Protestant’s assertions may be summarized as fol­ restrict the meaning of the term insurance agent as de­ lows: the proposed activity is not “closely related” to fined by Texas statute and finds that the proposed acbanking within the meaning of section 4(c)(8) of the Act; Applicant’s proposal lacks specificity, would not 6. See footnotes 3 and 4, supra. 7. For example, in Florida Association of Insurance Agents v. 3. Insurance Code of Texas, Article 21.07-3, section 2. Board of Governors, 591 F.2d 334 (5th Cir. 1979), it was noted that 4. Ibid., Article 21.14, section 2. insurance agency activities included the “solicitation, negotiation, ef­ 5. 533 F.2d 224 (5th Cir. 1976), modified on rehearing, 558 F.2d 729 fectuating or servicing any policy or contract of insurance" (emphasis (1977), cert, denied, 435 U.S. 904 (1978). supplied). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

796 Federal Reserve Bulletin □ September 1980 tivity is “closely related” to banking within the mean­ large volume of business Applicant would offer. IIAA ing of the Act. makes claims to the contrary. The Board is not per­ suaded by the Protestant’s claims that independent Public Benefits/Adverse Effects recording agents would not compete for Applicant’s insurance business as a result of the proposal. This Applicant has enumerated several public benefits that conclusion ignores the fact that such agents can freely it claims would result from approval of this appli­ compete to sell insurance to Applicant’s customers, cation. It asserts that Agency would have a better bar­ may compete for appointment as local recording gaining position vis-a-vis the insurance underwriters agents by Applicant, and that section 106 of the Act than the independent local recording agents hold. Such specifically prohibits Applicant from tying its insur­ a better position may mean that Applicant’s customers ance business to its credit-granting activities.8 On the could obtain insurance at a lower cost than they would other hand, the Board is not convinced that increased through independent agents. In fact, Applicant has competition in the form described by Applicant is committed to obtain insurance for its customers at the likely to result from Applicant’s proposal. Accord­ lowest practicable cost. Additionally, Applicant as­ ingly, the Board attributes no weight to Applicant’s serts that approval of this application would result in contentions that the proposal is likely to result in pub­ increased public convenience, because Applicant’s lic benefits. customers will be able to purchase credit-related insur­ It is clear to the Board, however, that consum­ ance at the same time credit is obtained; duplicative mation of the proposal will add an additional com­ forms and other information will be eliminated, and petitor because Applicant essentially seeks to expand customers will have the advantages of combined bill­ its activities de novo. Thus a new alternative will be ing. Further, Applicant would be able to achieve in­ offered to those members of the public wishing to pur­ creased efficiency by using its existing facilities (there­ chase their credit-related insurance from a system that by realizing a savings in overhead expenses); and by offers the services of a managing general agent and a consolidating administrative handling of claims, pre­ local recording agent. The Board considers this new miums and applications, achieving some economies of combination to be an alternative to, rather than a re­ scale. Finally, Applicant contends that consummation placement for, independent local recording agents and of the proposal would result in increased competition believes that insurance customers should be allowed among the local recording agents and among the insur­ to choose between such alternatives. Thus the de novo ance underwriters. nature of this proposal represents a clear public bene­ IIAA states that the proposal does not satisfy the fit.9 Moreover, Applicant has committed to secure in­ public benefits requirements of section 4(c)(8) of the surance for its customers at the lowest practicable Act and challenges many of the alleged public benefits. cost. The Board regards this commitment as a material Protestant contends that Agency’s role as a managing representation relative to the public benefits to be ex­ general agent adds another level of distribution be­ pected from this proposal. Accordingly, the Board tween insurance underwriters and the local recording concludes that lower costs to the public likely to result agents, thereby reducing rather than increasing effi­ from this proposal also constitute a public benefit. ciency in the sale of insurance. Finally, IIAA contends that consummation of the proposal would have the ad­ Hearing Request10 verse effect of reducing competition among local re­ cording agents for insurance business related to exten­ IIAA asserts, however, that further examination of sions of credit by Appplicant’s subsidiaries. Applicant’s proposal is necessary for the Board to The Board has considered the assertions of Appli­ conclude that the benefits associated with the appli­ cant and Protestant and concludes that on balance Ap­ cation outweigh adverse effects, and that such exami­ plicant’s proposal is not likely to result in significant nation can only be accomplished through a formal gains in convenience or efficiency. Some gains in con­ hearing. Indeed, Protestant states that such a hearing venience and efficiency might be associated with Ap­ is necessary simply to ascertain that Applicant will not plicant’s proposal, but Applicant has not provided suf­ engage in insurance activities (such as underwriting ficient information for the Board to conclude that such and acting as agent for noncredit related insurance) gains may reasonably be expected to occur. Thus, the Board has accorded Applicant’s claims no weight in . Protestant has made speculative allegations as to the possibility acting on this application. Also, the Board has consid­ 8 of tying but has offered no evidence of such a practice. ered Applicant’s claim that consummation of this pro­ 9. See, Virginia National Corporation, Order dated July 24, 1980, posal will increase competition among the local re­ pp. 12-13. 10. The Board has considered IIAA’s objections and request for a cording agents to be appointed by Applicant and hearing, although in this instance it has not concluded that IIAA between insurance underwriters competing for the would be a “party in interest" with respect to this application. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 797 that the Board has not determined to be permissible concentration of resources, decreased or unfair com­ for bank holding companies. petition, conflicts of interests, unsound banking prac­ In order to be entitled to a hearing under section tices or other adverse effects. Public benefits can rea­ 4(c)(8) of the Act, a protestant must present issues of sonably be expected to result from this proposal, and fact that are material to the Board’s decision and dis­ they are easily sufficient to outweigh any possible ad­ puted by the relevant parties.11 Moreover, although a verse effects which the Board has, in any event, found hearing request may not lightly be denied, “. . . an to be unlikely to occur. Additionally, Protestant’s agency is not required to conduct an evidentiary hear­ claims regarding whether the activity is closely related ing when it can serve absolutely no purpose.”12 Appli­ to banking and the propriety of bank holding company cant has committed to engage only in insurance activi­ involvement in the activity are, in the Board’s judg­ ties permitted by the Board’s regulations, and ment, without merit. Protestant does not offer evidence that Applicant in Based upon the foregoing and other considerations fact intends to underwrite or act as agent with respect reflected in the record, the Board has determined that to any other insurance. Applicant’s proposal is suffi­ the balance of the public interest factors that the Board ciently specific to put competitors and the public on is required to consider under section 4(c)(8) is favor­ notice regarding its intentions, and the Board’s contin­ able. Accordingly, the application is hereby approved. uing supervisory authority over bank holding com­ This determination is subject to the conditions set panies enables it to prevent the commencement of im­ forth in section 225.4(c) of Regulation Y and to the permissible insurance activities. Moreover, there is no Board’s authority to require such modification or ter­ evidence that Applicant has engaged in any unauthor­ mination of the activities of a holding company or any ized insurance activities in the past. Thus, the Board of its subsidiaries as the Board finds necessary to as­ concludes that material facts are not in issue regarding sure compliance with the provisions and purposes of the scope of Applicant’s proposal and that no purpose the Act and the Board’s regulations and orders issued would be served by ordering a hearing on this point. thereunder, or to prevent evasion thereof. Protestant asserts that there are a number of other The transaction shall be made not later than three material issues in dispute that require a hearing. How­ months after the effective date of this Order, unless ever, much of IIAA’s request for a hearing relates to such period is extended for good cause by the Board or its claim that additional facts are needed, rather than by the Federal Reserve Bank of Dallas, pursuant to to explore differences in the facts presented. A hearing delegated authority. is not required in such instances. The remainder of By order of the Board of Governors, effective Au­ IIAA’s request for a hearing relates to IIAA’s dis­ gust 22, 1980. agreement with Applicant that consummation of this proposal would result in greater convenience, in­ Voting for this action: Chairman Volcker and Governors creased efficiency and certain types of increased com­ Schultz, Partee and Gramley. Absent and not voting: Gover­ nors Wallich, Teeters, and Rice. petition. The Board has resolved these issues in IIAA’s favor and, as indicated above, has accorded no weight to Applicant’s claims. Consequently a hearing (Signed) G riffith L. Garwood, on these points would serve no purpose. It bears re­ [seal] Deputy Secretary of the Board. peating, however, that IIA A has not controverted the public benefits associated with the proposal in the form of the creation of an additional insurance alterna­ Liberty National Corporation, tive for the consumer nor has IIAA offered any evi­ Oklahoma City, Oklahoma dence that Applicant would not keep its commitment to secure insurance at the lowest practicable cost to its Order Approving Retention of 50 percent Interest in customers. Therefore, the Board concludes that a Liberty-Heller Factors, Inc. hearing on this application can serve no useful pur­ pose. Liberty National Corporation, Oklahoma City, Okla­ The Board finds that consummation of this proposal homa, a bank holding company within the meaning of cannot reasonable be expected to produce any undue the Bank Holding Company Act (the “Act”) has ap­ plied for the approval of the Board under section 4(c)(8) of the Act, 12 U.S.C. § 1843(c)(8), and section 225.4(b)(2) of Regulation Y, 12 C.F.R. § 225.4(b)(2), to 11. Connecticut Bankers Assn., supra at 12. The court stated that "a protestant does not become entitled to an evidentiary hearing retain 50 percent of the voting shares of Liberty-Heller merely on request, or on a bald or conclusory allegation that such a Factors, Inc., Oklahoma City, Oklahoma (“Compa­ dispute exists." Id. 12. Independent Bankers Assn. v. Board of Governors, 516 F.2d ny”). The remaining 50 percent of Company’s voting 1206, 1220 (D.C. Cir. 1975). shares are held by Heller Interstate, Inc., Chicago, Illi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

798 Federal Reserve Bulletin □ September 1980 nois, a wholly-owned subsidiary of Walter E. Heller joint venture, either Applicant or Heller, on its own, International Corporation, Chicago, Illinois (“Hel­ would have entered the market. With respect to Com­ ler”), which is also a bank holding company within the pany’s original factoring activities for oil and gas drill­ meaning of the Act. The Company engages in accounts ing companies, it appears that the likelihood of sepa­ receivable and inventory financing activities. The rate entry into these activities by either of the co­ Board has previously determined that such activities venturers was remote because the success of such op­ are closely related to banking. 12 C.F.R. § 225.4(a)(1). erations depended on the combination of expertise not Notice of the application, affording opportunity for possessed by either bank holding company alone: Ap­ interested persons to submit comments and views, has plicant was familiar with the area to be served and its been duly published. The time for filing comments and businesses, but had no experience in factoring activi­ views has expired, and the Board has considered the ties; on the other hand, Heller had significant expertise application and all comments received in light of the in factoring but little knowledge of the market area to factors set forth in section 4(c)(8) of the Act. be served. With respect to Company’s more recent ac­ Applicant has one banking subsidiary, Liberty Na­ counts receivable and inventory lending operations, tional Bank and Trust Company of Oklahoma City, the need for this mutually exclusive expertise is less holding deposits of $1.4 billion (as of December 1979), apparent. However, because numerous commercial and eight direct or indirect non-banking subsidiaries in banks and commercial finance companies provide addition to Company. Applicant and Heller formed commercial financing services in the relevant geo­ Company as a joint venture in 1969 to engage in factor­ graphic market similar to those provided by Company, ing activities for oil and gas drilling companies in Okla­ the Board finds that the loss of either of the co-ventur­ homa. Due to a lack of demand for this kind of service, ers as a potential competitor as a result of the forma­ the Company gradually began providing accounts re­ tion of this joint venture was not significant. Accord­ ceivable and inventory financing, terminating its factor­ ingly, in the Board’s view, retention of a 50 percent ing activities completely by 1974. Because Applicant interest in Company by Applicant will not have any became a bank holding company pursuant to the 1970 significantly adverse competitive effects. On the other amendments to the Act, Applicant must divest or se­ hand, continuation of the joint venture will result in cure the Board’s approval to retain its ownership of the continued existence of a viable competitor in the Company by December 31, 1980.1 market. Therefore, retention of Company will result in The Board regards the standards of section 4(c)(8) public benefits. for the retention of shares in a non-banking company There is no evidence in the record that would in­ to be the same as the standards for a proposed acquisi­ dicate that Applicant’s continued retention of its inter­ tion. In addition, the Board has previously expressed est in Company would result in undue concentration of concern about the competitive effects of joint activities resources, unfair competition, conflicts of interest, un­ by bank holding companies.2 sound banking practices, or other adverse effects. The extent to which this joint venture eliminated Based upon the foregoing and other considerations competition is determined by the facts that existed at reflected in the record, the Board has determined that the time the co-venturers entered into the activity.3 It the balance of the public interest factors the Board is appears that at the time Company was formed, neither required to consider under section 4(c)(8) is favorable. Applicant nor Heller was engaged in factoring activi­ Accordingly, the application is hereby approved. This ties for oil and gas drilling companies in the relevant determination is subject to the conditions set forth in geographic market.4 Therefore, the Board finds that no section 225.4(c) of Regulation Y and to the Board’s existing competition was eliminated by the estab­ authority to require such modification or termination lishment of Company. of the activities of a holding company or any of its sub­ The Board must also consider whether, at its in­ sidiaries as the Board finds necessary to assure com­ ception, the formation of the joint venture eliminated pliance with the provisions and purposes of the Act any potential competition, i.e., whether, absent this and the Board’s regulations and orders issued there­ under, or to prevent evasion thereof. By order of the Board of Governors, effective Au­ gust 4, 1980. 1. Heller’s participation in the joint venture was approved by the Board’s Order approving Heller's application to become a bank hold­ ing company. Walter E. Heller International Corp., 59 Federal Re­ Voting for this action: Vice Chairman Schultz and Gover­ serve Bulletin 463 (1973). nor Wallich Partee, Teeters, and Gramley. Absent and not 2. E.g., Fort Worth National Corporation, Shaw mu t Association, voting: Chairman Volcker and Governor Rice. Inc., 60 Federal Reserve Bulletin 382, 384 (1974). 3. See United States r. Penn-Olin Chemical Co., 378 U.S. 158 (1964). 4. The geographic market for both factoring and commercial (Signed) Theodore E. Allison, financing services is regional or national in scope. [seal] Secretary of the Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 199 Mercantile Bancorporation, Inc., Alabama Association of Insurance Agents v. Board of St. Louis, Missouri Governors.3 To approve an application under section 4(c)(8) of Order Approving Insurance Agency Activities the Act the Board must also determine that the per­ formance of the proposed activities by a nonbank sub­ Mercantile Bancorporation, Inc. (“Applicant”), St. sidiary of a bank holding company can reasonably be Louis, Missouri, a bank holding company within the expected to produce benefits to the public such as meaning of the Bank Holding Company Act (“Act”), greater convenience, increased competition, or gains has applied pursuant to section 4(c)(8) of the Act (12 in efficiency, that outweigh possible adverse effects, U.S.C. § 1843(c)(8)) and section 225.4(b)(1) of the such as undue concentration of resources, decreased Board’s Regulation Y (12 C.F.R. § 225.4(b)(1)), for or unfair competition, conflicts of interests, or un­ permission to engage de novo, through its subsidiary, sound banking practices. Section 4(c)(8) of the Act al­ MBI Insurance Agency, Inc., St. Louis, Missouri so provides that the Board may approve a bank hold­ (“Agency”), in the sale of property and casualty insur­ ing company’s application to engage in, or to acquire ance directly related to extensions of credit or other voting shares of a company engaged in, nonbanking financial services by Applicant’s banking subsidiaries activities only after notice of the proposal and an op­ in Missouri. Such nonbank activities have been deter­ portunity for a hearing on the matter. mined by the Board to be closely related to banking Both Applicant and Protestant have made numerous and therefore permissible for bank holding companies written submissions to support their respective posi­ (12 C.F.R. § 225.4(a)(9)). tions regarding this application. In reaching the con­ Notice of the application, affording opportunity for clusions set forth below, the Board has considered the interested persons to submit comments on the public application, Applicant’s supplementary comments and interest factors has been duly published.1 The time for submissions, and all of the comments and submissions filing comments has expired, and the Board has con­ made by Protestant. sidered the application and all comments received, in­ Protestant’s assertions may be summarized as fol­ cluding those received from the Independent Insur­ lows: (1) It is unclear whether the proposed activity ance Agents of America, Inc., and the Independent falls within the category of insurance activities ap­ Insurance Agents of Missouri (collectively, “Protes­ proved by the Board as “closely related to banking” tant”), in light of the considerations specified in sec­ since the application does not state wjth “absolute tion 4(c)(8) of the Act. clarity” what insurance coverages are contemplated Applicant controls the largest banking organization by its application. (2) The application raises the poten­ in Missouri, with aggregate deposits of approximately tial for coercive or voluntary tying of insurance sales $2.2 billion.2 Applicant proposes to sell property and to extensions of credit and this potential is enhanced casualty insurance at the location of each of its bank­ by the fact that Applicant’s insurance agents will have ing subsidiaries. It is anticipated that the area to be other duties and thus may have a conflict of interest. served for such insurance sales will be the area sur­ (3) The application fails to demonstrate how Applicant rounding each such office. will compete with nonaffiliated insurance agents on the Section 4(c)(8) of the Act provides that the Board basis of lower price and also fails to present facts re­ may approve a bank holding company’s application to garding the rates at which Applicant intends to sell in­ engage in a nonbanking activity only after the Board surance. In this connection, the financing of premiums has determined that the proposed activity is so closely to be offered by Applicant may increase costs for con­ related to banking as to be a proper incident thereto. sumers since most underwriters provide premium de­ The Board has determined by regulation that the sale ferral plans that effectively finance premiums at more as agent of credit-related insurance and the sale of in­ favorable rates than normal bank lending rates. (4) Be­ surance related to the provision of other financial serv­ cause Applicant’s insurance agents will be engaged in ices, such as mortgage servicing, are permissible non­ a combination of activities, Applicant’s customers will banking activities. This determination was affirmed in not have available to them a full-time insurance profes­ sional. The Board will address each of these issues in turn. (1) Whether the proposed activity is 4 'closely related 1. This application initially was processed under the procedures set to bankingProtestant initially asserted that Appli­ forth in section 225.4(b)(1) of the Board’s Regulation Y (12 C.F.R. § 225.4(b)(1)) as a proposal to engage de novo in activities determined cant is required to state with “absolute clarity” by the Board to be closely related to banking. Because of the nature of the protest filed and request for hearing, it was determined that the application should be processed at the Board. 3. 533 F.2d 224 (5th Cir. 1976), modified on rehearing, 558 F.2d 729 2. Banking data are as of June 30. 1978. (1977), cert, denied, 435 U.S. 904 (1978). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

800 Federal Reserve Bulletin □ September 1980 what insurance coverages are contemplated by its insurance from it is unlawful. There is no evidence application so that the Board may determine that that Applicant has engaged in any coercive tying in Applicant does not propose to sell any types of in­ the past with regard to any of its activities. surance that the Board has determined are not per­ Protestant asserts, however, that credit custom­ missible for bank holding companies. Applicant has ers may nevertheless believe that the likelihood that committed not to sell any of the types of insurance credit will be granted may be enhanced by agreeing that the Board has determined are not permissible to purchase insurance from Applicant, and that an and Protestant does not assert that Applicant in fact effective or voluntary tie will result. For the reasons intends to sell any such insurance. Applicant’s pro­ explained below, the Board finds this contention to posal is sufficiently specific to put competitors and be without merit. the public on notice regarding its intentions, and the The possibility of voluntary tying is significantly Board’s continuing supervisory authority over bank reduced by the number of credit alternatives in the holding companies enables it to prevent the com­ relevant markets. The Board notes that there are mencement of impermissible insurance activities. five or more banking organizations in all but three of Moreover, there is no evidence that Applicant has the 22 markets in which Applicant competes, as well engaged in any unauthorized insurance activities in as a number of other financial intermediaries, such the past. as savings and loan associations and credit unions. Applicant has stated both in its application and in Moreover, Applicant does not hold more than 15 correspondence to the Board that it will offer prop­ percent of total commercial bank deposits in any of erty insurance on motor vehicles, recreational vehi­ Missouri’s five major urban areas, and Applicant cles, boats, mobile homes, and improved real estate. does not appear to be the dominant organization in It has stated that the insurance coverages it will of­ any of these markets. fer include dual and single interest physical damage At the time the Board added the activity of selling insurance for motor and recreational vehicles, phys­ credit related insurance to the list of permissible ac­ ical damage insurance for boats, fire and/or mobile tivities for bank holding companies, it determined home owner insurance for mobile homes, and fire that absent unusual circumstances associated with a and/or home owners insurance for improved real particular application, there are, as a general matter, property. In addition, Applicant has stated that it no significant adverse effects, such as voluntary ty­ may offer flood insurance for mobile homes and im­ ing, inherent in the performance of the activity by a proved real estate. The Board has interpreted the bank holding company on a de novo basis. The insurance provisions of its Regulation Y to authorize Board continues to believe that this is the case with the sale of these types of insurance. (12 C.F.R. regard to insurance agency activities, particularly in § 225.128) view of the court’s decision in Alabama Association Protestant’s letter of July 3, 1980, to the Board of Insurance Agents, supra. Protestant’s general ob­ acknowledges that Applicant now has sufficiently jection to this application on the basis that voluntary stated the lines of insurance covered by its appli­ tying might occur is in substance an attack on the cation, with the exception of flood insurance on mo­ relevant regulation, a regulation that was upheld in bile homes and improved real estate, which was not Alabama Association. originally proposed in the application as a type of With regard to this particular application, it is the insurance Applicant would offer. It is the Board’s Board’s judgment that the commitments provided opinion that such insurance coverage falls generally by Applicant sufficiently assure against any possi­ within the category of property and casualty insur­ bility of voluntary tying as an adverse effect. Specif­ ance permissible for bank holding companies and ically, Applicant has expressly committed that the that no additional notice of this particular coverage provision of other financial services by its banking is required. and nonbanking subsidiaries, including extensions of credit, shall not be conditioned expressly or im­ (2) Coercive or voluntary tying. Section 106 of the pliedly on the purchase of insurance through its in­ Bank Holding Company Act prohibits a bank from surance agency subsidiary and that Applicant’s em­ requiring its customers to purchase insurance from ployees involved in insurance activities will be it in order to receive credit. Although section 106 continuously instructed in this policy. In addition, applies directly only to banks, the Board has ex­ Applicant has committed that in all instances where panded the prohibition of that section to encompass property or casualty insurance will be offered to cus­ bank holding companies through section 225.4(c) of tomers of its subsidiary banks, the loan documenta­ its Regulation Y (12 C.F.R. § 225.4(c)). Thus, any tion will include a statement that the customer may action taken by Applicant to require the purchase of obtain insurance through other persons. Applicant Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 801 has further indicated that it will not promote its result in higher costs when compared to premium property and casualty insurance services to the pub­ deferral plans neither detracts from Applicant’s lic through advertising or similar means. The Board commitment regarding cost nor represents an ad­ regards these commitments as significant, and has verse effect because such premium financing is op­ relied on them in acting on this application.4 tional. (3) Price competition. Protestant argues that Appli­ (4) Presence of full-time insurance professionals to cant should be required to demonstrate how it will serve customers. Protestant asserts that, because compete with nonaffiliated insurance agents on the Mercantile’s insurance agents will be engaged in a basis of lower price and to present facts regarding combination of activities, Mercantile’s customers the rates at which it intends to sell insurance, the will not have available to them a full-time insurance interest rates it would charge for premium financing, professional. Protestant further asserts that custom­ and other pricing variables. The Board does not find ers will be inconvenienced since Applicant cannot it necessary for Applicant to commit to specific renew insurance coverage once the underlying ex­ prices and interest rates in view of the pro- tension of credit is repaid. While it is correct that competitive nature of this application and the com­ Applicant may not offer renewal insurance and in mitment Applicant has made regarding pricing, as some respects will not offer the services of a full discussed below.5 Consummation of this proposal service insurance agency, the Board does not con­ will add an additional competitor since Applicant sider this to be an adverse effect. The fact that a seeks to expand its insurance activities de novo. Be­ holding company either chooses not to offer certain cause de novo expansion provides an additional services, or is prevented by the Board’s regulations source of competition, the Board views such expan­ from doing so, does not represent an adverse effect sion as being precompetitive in the absence of evi­ within the meaning of section 4(c)(8).8 Some impor­ dence to the contrary.6 With regard to applications tant gains in convenience and efficiency might result filed under section 4(c)(8) of the Act, Congress au­ from Applicant’s proposal. Applicant has stated that thorized the Board to differentiate between activi­ it will have a qualified licensed insurance agent at ties commenced de novo and activities commenced the location of each of its banking subsidiaries and through the acquisition of a going concern because has committed to provide an ongoing training pro­ Congress viewed de novo entry as having beneficial gram for its insurance employees. On balance, how­ effects on competition.7 The Board concludes that ever, the proposal may not result in significant over­ the de novo nature of this proposal represents a all gains in convenience or efficiency, and the Board clear public benefit. This conclusion is based on eco­ thus has not relied on Applicant’s contentions in this nomic theory, Congressional instruction, and the regard in approving the application. Board’s experience in administering the Act. On the basis of the preceding discussion, the Moreover, Applicant has committed to offer in­ Board concludes that the precompetitive nature of surance at the lowest reasonable cost to the custom­ Applicant’s proposal can reasonably be expected to er. The Board regards this as a commitment to offer produce benefits to the public. These clear public insurance at the lowest practicable total cost, in­ benefits easily outweigh the speculative adverse ef­ cluding the costs of billing. The possibility that the fects alledged by Protestant with regard to unfair premium financing to be offered by Applicant could competition, which adverse effects the Board has concluded are not likely to occur.9 Indeed, the de novo nature of this proposal alone is sufficient to 4. Applicant’s insurance agents will be compensated only through outweigh such speculative adverse effects. There is their salaries. This fact, when coupled with the commitments de­ scribed above, eliminates any concern regarding a conflict of interest no evidence that any other adverse effects may be on the part of the insurance agents. associated with this proposal, such as undue con­ 5. The Board has required specific rate reductions with regard to the underwriting of credit life, accident and health insurance, because centration of resources or unsound banking prac­ the manner in which the insurance underwriting industry is regulated tices. is more conducive to such a policy. 6. Virginia National Bankshares, Inc., 00 Ff.df.ral Reserve Bul­ letin 000 (July 24. 1980). BankAmerica Corporation (Decimus Cor­ Need for Hearing poration, 66 Federal Reserve Bulletin 511 (1980); Citicorp (Per­ son to Person). 65 Federal Reserve Bulletin 507 (1979); U.N. Protestant asserts that examination of Applicant’s pro­ Bancshares, Inc.. 59 Federal Reserve Bulletin 204 (1973). The United States Court of Appeals for the District of Columbia Circuit posal in a formal hearing is necessary for the Board to affirmed the Board's conclusions regarding the procompetitive nature of de novo entry in Connecticut Bankers Association v. Board of Gov­ ernors,, No. 79-1554 (D.C. Cir. Feb. 7. 1980). 8. Virginia National Bankshares, Inc., supra. 7. S. Rep. No. 91-1084. 91st Cong., 2nd Sess. 15. 16 (1970). 9. Id. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

802 Federal Reserve Bulletin □ September 1980 conclude that the benefits associated with the appli­ Voting for this action: Chairman Volcker and Governors cation outweigh adverse effects. In order to be entitled Schultz, Partee and Gramley. Absent and not voting: Gover­ nors Wallich, Teeters, and Rice. to a hearing under section 4(c)(8) of the Act, a protestant must present issues of fact that are material to the (Signed) Griffith L. Garwood, Board’s decision and disputed by the relevant par­ [seal] Deputy Secretary of the Board. ties.10 Moreover, although a hearing request may not lightly be denied, “. . . an agency is not required to conduct an evidentiary hearing when it can serve abso­ lutely no purpose.11 For the reasons stated in this Or­ Order Under Section 2 of Bank Holding der and on previous occasions when it has denied a Company Act hearing requested by the same protestants raising simi­ lar objections,12 the Board has determined that a hear­ Kelwood Farms, Inc., ing in this case would serve no useful purpose. Eureka, Kansas Balance of Public Benefits and Adverse Effects Order Granting Determination Under the Bank Holding Company Act The Board finds that consummation of this proposal as approved herein cannot reasonably be expected to Kelwood Farms, Inc. (“Kelwood”), Eureka, Kansas, produce any undue concentration of resources, de­ a bank holding company within the meaning of the creased or unfair competition, conflicts of interests, Bank Holding Company Act of 1956, as amended, (12 unsound banking practices or other adverse effects. U.S.C. § 1841 et seq.) (the “Act”), has requested a Public benefits can reasonably be expected to result determination under section 2(g)(3) of the Act (12 from this proposal, and they are easily sufficient to U.S.C. § 1841(g)(3)) that Kelwood is not in fact ca­ outweigh any possible adverse effects which the Board pable of controlling Mr. Elwood Marshall, although he has, in any event, found to be unlikely to occur. is indebted to Kelwood as a result of his purchase of Based upon the foregoing and other considerations certain parcels of land from Kelwood. reflected in the record, the Board has determined that Under the provisions of section 2(g)(3) of the Act, the balance of the public interest factors that the Board shares1 transferred after January 1, 1966, by any bank is required to consider under section 4(c)(8) is favor­ holding company to a transferee that is indebted to the able. Accordingly, the application is hereby approved. transferor are deemed to be indirectly owned or con­ This determination is subject to the conditions set trolled by the transferor unless the Board, after oppor­ forth in section 225.4(c) of Regulation Y and to the tunity for hearing, determines that the transferor is not Board’s authority to require such modification or ter­ in fact capable of controlling the transferee. No mination of the activities of a holding company or any request for a hearing was made by Kelwood. Instead, of its subsidiaries as the Board finds necessary to as­ Kelwood has submitted evidence to the Board to sup­ sure compliance with the provisions and purposes of port its contention that it is not in fact capable of con­ the Act and the Board’s regulations and orders issued trolling Mr. Marshall, either directly or indirectly, and thereunder or to prevent evasion thereof The Board the Board has received no contradictory evidence. has also relied on the commitments made by Applicant On the basis of the facts of record, it is hereby deter­ with regard to this proposal and is prepared to ensure mined that Kelwood is not in fact capable of con­ compliance with those commitments. trolling Mr. Marshall or the subject parcels of land. The transaction shall be made not later than three Kelwood is a small closely-held corporation of which months after the effective date of this Order, unless Mr. Marshall and members of his immediate family such period is extended for good cause by the Board or control 81.23 percent of the voting shares and Mr. by the Federal Reserve Bank of St. Louis, pursuant to Marshall is its president. Kelwood divested certain delegated authority. parcels of land, representing substantially all of its real By order of the Board of Governors, effective Au­ estate business, by selling them to Mr. Marshall for a gust 22, 1980. purchase price that included indebtedness from Mr. Marshall to Kelwood. The transfer of real estate by 10. Connecticut Bankers Assn., supra at 12. The court stated that Kelwood to Mr. Marshall does not appear to be a “a protestant does not become entitled to an evidentiary hearing means of perpetuating Kelwood’s control over the merely on request, or on a bald or conclusory allegation that such a dispute exists." Id. 11. Independent Bankers Association v. Board of Governors. 516 F.2d 1206, 1220 (D.C. Cir. 1975). 1. The Board deems the transfer of all or substantially all the assets 12. Virginia National Bankshares, Inc., supra. of a company to involve a transfer of shares of the company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 803 property, since Mr. Marshall is the dominant share­ fectuate the policies of the Bank Holding Company holder of Kelwood. Furthermore, there is no in­ Act (12 U.S.C. § 1841 et seq (“BHC Act”). AFC pro­ dication that the financial resources of Mr. Marshall poses to exchange the 5,107 shares (approximating in are not sufficient to repay the debt to Kelwood. Final­ excess of 99 percent of Bank’s outstanding shares) of ly, Kelwood has undertaken that it will not attempt to Bank that it presently owns for all the shares of PHC, exercise control over Mr. Marshall and Mr. Marshall and immediately thereafter to distribute all of PHC’s has committed not to allow Kelwood to exercise con­ shares pro rata to the holders of common stock of trol over him or the parcels of land. On the basis of the AFC.1 above and other factors of record, it is concluded that In connection with this request, the following infor­ Kelwood is not capable of controlling the real estate or mation is deemed relevant, for purposes of issuing the Mr. Marshall in his capacity as transferee of the real requested certification:2 estate. 1. AFC is a corporation organized under the laws of Accordingly, it is ordered that the request by Kel­ Ohio on November 15, 1955. AFC acquired own­ wood for a determination pursuant to section 2(g)(3) is ership and control of substantially all the shares of granted. This determination is based on representa­ Bank in a series of transactions, such that on June tions made to the Board by Kelwood and Mr. Mar­ 30, 1968, AFC had acquired ownership and control shall. In the event that the Board should hereafter de­ of 255,164 shares (5,103.28 shares as adjusted for the termine that facts material to this determination are one for fifty reverse stock split of May 1, 1972), rep­ otherwise than as represented, or that Kelwood, or resenting approximately 99 percent of the out­ Mr. Marshall have failed to disclose to the Board other material facts and circumstances relied upon by the Board in making this determination could result in the 1. The Board has received numerous submissions from an individ­ Board reconsidering the determination made herein. ual (“Protestant”) challenging the effectiveness of the proposed di­ By order of the Board of Governors, acting through vestiture and the continuation of Bank’s current management. The Tax Act contains no provision for participation in a tax certification its General Counsel, pursuant to delegated authority proceeding by a third party. Moreover, Protestant’s only alleged inter­ (12 C.F.R. § 265.2(b)(1)) effective August 11, 1980. est in this divestiture is that of a concerned member of the general public. It thus appears that Protestant has no standing to participate in this matter. Protestant’s allegations have been considered in order to ensure that AFC’s proposal will result in an adequate divestiture of Bank, but this consideration in no way represents a waiver of the con­ clusion that Protestant has no standing. (Signed)Theodore E. Allison, Protestant’s primary concern is that the proposed spin-off will not [seal] Secretary of the Board. result in a true divestiture because the same stockholders that cur­ rently control AFC will control PHC and Bank after the spin-off. The fact that, after a spin-off, shareholders of a divesting company and the bank divested are identical and that such persons, acting as individ­ uals, may exercise influence over such bank, is a logical result of a divestiture method clearly sanctioned by Congress. Section 1101(b)(2) Certifications Pursuant to the Bank Holding of the Code authorizes spin-offs to a bank holding company’s share­ Company Tax Act of 1976 holders without the surrender by such shareholders of stock in the divesting company. Furthermore, under section 1101(a)(3) of the Code, such spin-offs generally must be on a pro rata basis. On the American Financial Corporation, basis of all the information of record, including the allegations and Cincinnati, Ohio submissions of Protestent, and AFC’s affidavits disclaiming any abili­ ty or intent to control Bank and its commitments to terminate manage­ ment interlocks, it appears that there is insufficient evidence to sup­ Prior Certification Pursuant to the Bank Holding port a finding that AFC will continue to control Bank at this time. Company Tax Act of 1976 Since a spin-off is a permissible divestiture method, the proposed di­ vestiture appears to be adequate. See note 4 below for a further dis­ cussion of the adequacy of the proposed divestiture. American Financial Corporation (“AFC”), Cincin­ Protestant has also submitted information relative to Securities and nati, Ohio, has requested a prior certification pursuant Exchange Commission (“SEC”) investigations of Bank and AFC’s principals, which involved alleged violations of securities laws. These to section 1101(b) and 1101(c)(3) of the Internal Reve­ investigations concluded with the issuance of consent decrees on Au­ nue Code (“Code”) as amended by section 2(a) of the gust 30, 1976, and July 2, 1979, signed by AFC and certain of its prin­ Bank Holding Company Tax Act of 1976 (“Tax Act”), cipals, without those parties admitting or denying the allegations in the SEC's complaint. The purpose of AFC’s proposal is to eliminate its that its proposed divestiture of all the 5,107 shares of ability to control Bank, and none of the AFC principals that signed The Provident Bank (“Bank”), Cincinnati, Ohio, pres­ these consent decrees will be an officer or director of bank or PHC. Moreover, it appears that to the extent any violations of the securities ently held by AFC, through the pro rata distribution to laws may have occurred, such violations have been remedied, and AFC's common stockholders of the stock of Provident there is no evidence of subsequent violations. Holding Company (“PHC ”), a corporation created 2. This information derives from AFC's communications with the Board concerning its request for this certification, AFC's Registration and availed of solely for the purpose of receiving Statement filed with the Board pursuant to the BHC Act, and other Bank's shares, is necessary or appropriate to ef­ records of the Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

804 Federal Reserve Bulletin □ September 1980 standing voting shares, of Bank. On July 7, 1970, On the basis of the foregoing information, it is here­ AFC held 255,214 shares (or 5,104 shares as adjust­ by certified that: ed above) of the outstanding shares of Bank. AFC (A) AFC is a qualified bank holding corporation presently owns 5,107 shares of Bank’s 5,116 out­ within the meaning of subsection (b) of section 1103 standing shares, reflecting the acquisition, between of the Code, and satisfies the requirements of that July 7, 1970, and the present, of two director’s quali­ subsection; fying shares and one additional share.3 (B) the shares of Bank that AFC proposes to ex­ 2. AFC became a bank holding company on Decem­ change for shares of PHC are all or part of the prop­ ber 31, 1970, as a result of the 1970 Amendments to erty by reason of which AFC controls (within the the BHC Act, by virtue of its ownership and control meaning of section 2(a) of the BHC Act) a bank or at that time of more than 25 percent of the out­ bank holding company ; and standing voting shares of Bank and registered as (C) the exchange of the shares of Bank for the such with the Board on October 15, 1971. AFC shares of PHC and the distribution to the share­ would have been a bank holding company on July 7, holders of AFC of the shares of PHC are necessary 1970, if the BHC Act Amendments of 1970 had been or appropriate to effectuate the policies of the BHC in effect on that date by virtue of its ownership and Act. control on that date of more than 25 percent of the outstanding voting shares of Bank. This certification is based upon the representations 3. AFC has filed with the Board an irrevocable dec­ and commitments made to the Board by AFC and up­ laration, pursuant to section 4(c)(12) of the BHC Act on the facts set forth above. In the event the Board and section 225.4(d) of the Board’s Regulation Y, should hereafter determine that facts material to this that it will cease to be a bank holding company by certification are otherwise than as represented by January 1, 1981. AFC, or that AFC has failed to disclose to the Board 4. AFC holds property acquired by it prior to July 7, other material facts or to fulfill any commitments made 1970, the disposition of which would be required by to the Board in connection herewith, it may revoke section 4 of the BHC Act, if AFC were to continue this certification. to be a bank holding company beyond December 31, By order of the Board of Governors, acting through 1980, and which property is “prohibited property” its General Counsel, pursuant to delegated authority within the meaning of section 1103(c) of the Code. (12 C.F.R. § 265.2(b)(3)) effective August 29, 1980. 5. AFC has committed to the Board that by Decem­ ber 31, 1980, no person holding an office or position (including an advisory or honorary position) with AFC or any of its subsidiaries as an officer, director, (Signed) Griffith L. Garwood, policy-making employee or management consultant, [seal] Deputy Secretary of the Board. or who performs (directly or through an agent, rep­ resentative or nominee) functions comparable to those normally associated with such office or posi­ Atlantic Corporation, tion, will hold any such office or perform any such Boston, Massachusetts function with PHC, Bank, or any of their sub­ sidiaries.4 Prior Certification Pursuant to the Bank Holding Company Tax Act of 1976 Atlantic Corporation, Boston, Massachusetts, (“At­ 3. Under subsection (c) of section 1101 of the Code, property ac­ lantic”), has requested a prior certification pursuant to quired after July 7, 1970, generally does not qualify for the tax benefits of section 1101(b) when distributed by an otherwise qualified bank section 6158(a) of the Internal Revenue Code holding company. The Board has, however, permitted directors’ qual­ ifying shares to be repurchased by a company after July 7, 1970, pur­ suant to a repurchase agreement, without losing their qualified status under the Code. Therefore, the two repurchased shares do qualify for tax benefits. The remaining single share of Bank’s stock was pur­ chased after July 7, 1970, does not qualify for any of the exceptions and AFC is a publicly held corporation. Furthermore, the largest num­ under section 1101(c) of the Code, and was not acquired pursuant to a ber of shares that could be attributed to one person on the basis of the repurchase agreement. That single share of the 5,107 shares of Bank ‘‘immediate family” rule of Regulation Y (section 225.2(b)(2)) is ap­ stock owned by AFC does not qualify for tax benefits. proximately 25.6 percent. On the basis of these and other facts of rec­ 4. AFC has owned approximately 99 percent of Bank's outstanding ord, it does not appear that AFC is the alter ego of this person and his shares and has controlled Bank's operations for more than 10 years. immediate family. Since management interlocks between AFC and Six members of AFC's management serve in similar positions with Bank are one of the principal means by which AFC’s control might be Bank. Although one family, including all relations by blood and mar­ maintained over Bank, termination of the interlocking relationships riage. owns approximately 50 percent of the shares of AFC. approxi­ appears necessary to insure a complete divestiture of AFC's long­ mately the same number of shares are owned by unrelated individuals standing control over Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 805 (“Code”), as amended by section 3(a) of the Bank fectuate § 4 of the BHC Act if Atlantic were to re­ Holding Company Tax Act of 1976 (“Tax Act”), that main a bank holding company beyond and Decem­ its proposed sale of 204,538 shares of common stock of ber 31, 1980, and which property would, but for City Bank and Trust Company, Boston, Massachu­ such proviso and such clause, be “prohibited prop­ setts, (“Bank”) to an unaffiliated bank is necessary or erty” within the meaning of § 1103(c) of the Code. appropriate to effectuate the policies of the Bank Sections 1103(g) and 1103(h) of the Code provide Holding Company Act (12 U.S.C. § 1841 et seq.) that any bank holding company may elect, for the (“BHC Act”). purposes of Part VIII of subchapter 0 of chapter 1 of In connection with this request the following infor­ the Code, to have the determination whether prop­ mation is deemed relevant for the purposes of issuing erty is “prohibited property” or is property eligible the certification:1 to be distributed without recognition of gain under § 1. Atlantic is a corporation organized on November 1101(b)(1) of the Code, made under the BHC Act as 26, 1937, under the laws of the State of Massachu­ if such Act did not contain, respectively, the proviso setts. On January 28, 1957, Atlantic acquired own­ of § 4(a)(2) thereof and clause (ii) of § 4(c) thereof. ership and control of 3,950 shares, representing 39.5 Atlantic has represented that it will make such an percent of the outstanding voting shares of Bank. election.3 On April 15, 1971, Atlantic received 9,910 shares of 5. Atlantic has committed to the Board that no per­ common stock of Bank as a stock dividend.2 son holding an office or position (including and advi­ 2. Atlantic became a bank holding company on De­ sory or honorary position) with Atlantic or any of its cember 31, 1970, as a result of the 1970 Amend­ subsidiaries as an officer director, policymaking em­ ments to the BHC Act by virtue of its ownership and ployee, who performs (directly, through an agent control that time of more than 25 percent of the out­ representative or nominee) functions comparable to standing voting shares of Bank, and it registered as those normally associated with such office or posi­ such with the Board on January 12, 1972. Atlantic tion, will hold any such office or position or perform would have been a bank holding company on July 7, any such function with Bank or the acquiring bank, 1970, if the BHC Act Amendments of 1970 had been or any of its subsidiaries. Atlantic has further com­ in effect on such date by virtue of its ownership and mitted that all such interlocking relationships pres­ control on that date of more than 25 percent of the ently existing between Atlantic and Bank and their outstanding voting shares of Bank. respective subsidiaries will be terminated. 3. More than 85 percentum of the voting stock of Atlantic was collectively owned on June 30, 1968, On the basis of the foregoing information, it is here­ and has been so owned continuously thereafter, di­ by certified that: rectly or indirectly, by members of the same family, (A) Atlantic is a qualified bank holding corporation, or their spouses, who are lineal descendants of com­ within the meaning of section 1103(b) of the Code, mon ancestors. Accordingly, Atlantic has been ex­ and satisfies the requirements of that subsection; empt from the prohibitions of § 4 of the BHC Act by (B) The 204,538 shares of Bank that Atlantic pro­ virtue of clause (ii) of § 4 of the BHC Act. poses to sell to an unaffiliated bank are all or part of 4. Atlantic holds property acquired by it on or be­ the property by reason of which Atlantic controls fore July 7, 1970, the disposition of which would, (within the meaning of § 2(a) of the BHC Act a bank but for the proviso of § 4(a)(2) and clause (ii) of § 4(c) or a bank holding company; and of the BHC Act, be necessary or appropriate to ef- (C) The sale of such shares of Bank to an unaffi­ liated bank is necessary or appropriate to effectuate the policies of the BHC Act. 1. This information derives from Atlantic’s correspondence with the Board concerning its request for this certification, Atlantic’s Reg­ This certification is based upon the facts set forth istration Statement filed with the Board pursuant to the BHC Act, and above. In the event the Board should hereafter deter­ other records of the Board. 2. Under section 1101(c) of the Code, property acquired after July mine that facts material to this certification are other­ 7, 1970. generally, does not qualify for the tax benefits of section wise than as represented by Atlantic or that Atlantic 6158(a) of the Code when acquired by an otherwise qualified bank holding company. However, where such property was acquired by a has failed to disclose to the Board other material facts, qualified bank holding company in a transaction in which gain was not it may revoke this certification. recognized under § 305(a) of the Code, then § 1101(b) is applicable. Atlantic has indicated that it received 9,910 shares of Bank in a stock dividend on April 15. 1971. Accordingly, even though 9,910 shares of 3. Sections 1103(g) and (h) require that an election thereunder be Bank's common stock were acquired by Atlantic after July 7, 1970. made “at such time and in such manner as the Secretary [of the Trea­ those shares would nevertheless qualify property eligible for the tax sury] or his delegate may by regulations prescribe.” As of this date no benefits provided in § 1101(b) of the Code, by virtue of § 1101(c). if the final regulations have been promulgated. However. Atlantic has com­ Bank shares were in fact received in a transaction described in § 305(a) plied with the temporary regulations issued by the Secretary of the of the Code in which no gain was recognized. Treasury. 26 C.F.R. 7570. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

806 Federal Reserve Bulletin □ September 1980 By order of the Board of Governors, acting through ka’s currently owns and controls 1,244 shares, its General Counsel, pursuant to delegated authority representing 62.2 percent of the outstanding voting (12 C.F.R. § 265.2(b)(3)), effective August 29, 1980. shares, of Bank. 4. Kupka’s holds property acquired by it on or be­ (Signed) Theodore E. Allison, fore July 7, 1970, the disposition of which would be [seal] Secretary of the Board. required under section 4 of the BHC Act if Kupka’s is to remain a bank holding company beyond De­ cember 31, 1980, and which property is “prohibited property” within the meaning of section 1103(c) of Kupka’s Inc., the Code. Traer, Iowa On the basis of the foregoing, it is hereby certified Prior Certification Pursuant to the Bank Holding that: Company Tax Act of 1976 (A) Kupka’s is a qualified bank holding corporation within the meaning of section 1103(b) of the Code [Docket No. TCR 76-193] and satisfies the requirements of that section; (B) the farmland that Kupka’s proposes to distrib­ Kupka’s, Inc., Traer, Iowa (“Kupka’s”) has re­ ute to its shareholders is “prohibited property” quested a prior certification pursuant to section within the meaning of section 1103(c) of the Code; llQl(a) of the Internal Revenue Code (“Code”), as (C) the distribution of such farmland is necessary or amended by the Bank Holding Company Tax Act of appropriate to effectuate section 4 of the BHC Act. 1976 (“Tax Act”), that its proposed divestiture of 160 acres of farmland, by means of a pro rata distribution This certification is based upon the representations to its two shareholders, is necessary or appropriate to made to the Board by Kupka’s and upon the facts set effectuate section 4 of the Bank Holding Company Act forth above. In the event that the Board should hereaf­ (12 U.S.C. § 1843) (“BHC Act”). ter determine that the facts material to this certifica­ In connection with this request, the following infor­ tion are otherwise than as represented by Kupka’s or mation is deemed relevant for purposes of issuing the that Kupka’s has failed to disclose to the Board other requested certification:1 material facts, the Board may revoke this certification. 1. Kupka’s is a corporation organized and existing By order of the Board of Governors, acting through under the laws of the State of Iowa. All of its out­ its General Counsel pursuant to delegated authority standing shares are owned and controlled by Melvin (12 C.F.R. § 265.2(b)(3)), effective August 8, 1980. M. Kupfca and his wife, Betty L. Kupka. 2. On August 29, 1969, Kupka’s acquired own­ (Signed)Theodore E. Allison, ership and control of 250 shares, representing 50 [seal] Secretary of the Board. percent of the outstanding voting shares, of Clutier State Bank, Clutier, Iowa (“Bank”). 3. Kupka’s became a bank holding company on De­ Lee Wilson & Co., cember 31, 1970, as a result of the 1970 Amend­ Wilson, Arkansas ments to the BHC Act, by virtue of its ownership and control at that time of more than 25 percent of Prior Certification Pursuant to the Bank Holding the outstanding voting shares of Bank, and it regis­ Company Tax Act of 1976 tered as such with the Board on October 28, 1971. Kupka’s would have been a bank holding company Lee Wilson & Co., Wilson, Arkansas (“Company”), on July 7, 1970, if the BHC Act Amendments of 1970 has requested a prior certification pursuant to section had been in effect on such date, by virtue of own­ 1101(b)(3) of the Internal Revenue Code (“Code”), as ership and control on that date of more than 25 per­ amended by section 2(a) of the Bank Holding Compa­ cent of the outstanding voting shares of Bank. Kup- ny Tax Act of 1976, that its proposed divestiture of all of the 3,452 shares (86.3 percent) or Bank of Wilson, Wilson, Arkansas (“Bank”), currently held by Com­ pany, through the pro rata distribution of the stock of Bank to Company’s stockholders, is necessary or ap­ 1. This information derives from Kupka’s communications with the propriate to effectuate the policies of the Bank Holding Board concerning its request for this certification, Kupka's Registra­ tion Statement filed with the Board pursuant to the BHC Act, and Company Act (12 U.S.C. § 1841 et seq.) (“BHC other records of the Board. Act”). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 807 In connection with this request, the following infor­ (A) Company is a qualified bank holding corpora­ mation is deemed relevant, for purposes of issuing the tion within the meaning of subsection (b) of section requested certification:1 1103 of the Code, and satisfies the requirements of 1. Company is a corporation organized on January that subsection; 24, 1958, under the laws of Delaware as a successor (B) the shares of Bank that Company proposes to to a business trust with its principle place of busi­ distribute are all or part of the property by reason of ness in Wilson, Arkansas. By virtue of the merger, which Company controls (within the meaning of sec­ on that date Company acquired ownership and con­ tion 2(a) of the BHC Act) a bank or bank holding trol of 3,452 shares, representing 86.3 percent of the company, and outstanding voting shares, of Bank, and held these (C) distribution to the shareholders of Company of shares on July 7, 1970. the shares of Bank are necessary or appropriate to 2. Company became a bank holding company on effectuate the policies of the BHC Act. December 31, 1970, as a result of the 1970 Amend­ ments to the BHC Act, by virtue of its ownership This certification is based upon the representations and control at that time of more than 25 percent of made to the Board by Company and upon the facts set the outstanding voting shares of Bank, and it regis­ forth above. In the event the Board should hereafter tered as such with the Board on August 5, 1971. determine that facts material to this certification are Company would have been a bank holding company otherwise than as represented by Company, or that on July 7, 1970, if the BHC Act Amendments of 1970 Company has failed to disclose to the Board other ma­ had been in effect on that date by virtue of its own­ terial facts, it may revoke this certification. ership and control on that date of more than 25 per­ By order of the Board of Governors acting through cent of the outstanding voting shares of Bank. Com­ the General Counsel, pursuant to delegated authority pany currently owns and controls 3,452 shares, (12 C.F.R. § 265.2(b)(3)) effective August 7, 1980. representing 86.3 percent of the outstanding voting shares, of Bank. (Signed) Theodore E. Allison, 3. Company holds property acquired by it on or be­ [seal] Secretary of the Board. fore July 7, 1970, the disposition of which but for section 4(c)(ii) and the proviso of section 4(a)(2) of the BHC Act would be necessary or appropriate to Order Approved Under Bank Merger Act effectuate section 4 of the BHC Act if Company were to continue to be a bank holding company The Bank of New York, beyond December 31, 1980, and which property, but New York, New York for such proviso, would be “prohibited property” within the meaning of section 1103(c) of the Code. Order Approving Merger of Banks Section 1103(g) of the Code provides that any bank holding company may elect, for the purposes of Part The Bank of New York (“BNY”), New York, New VIII of subchapter O of Chapter 1 of the Code, to York, a subsidiary of The Bank of New York Compa­ have the determination of whether property is “pro­ ny, Inc., (“BNY Co.”), New York, New York, a bank hibited property” or is property eligible to be dis­ holding company within the meaning of the Bank tributed without recognition of gain under section Holding Company Act (“Act”), has applied for the 1101(b)(1) of the Code, made under the BHC Act as Board’s approval under the Bank Merger Act if the Act did not contain the proviso of section (12 U.S.C. § 1828(c)), to merge with Empire National 4(a)(2). Company has represented that it will waive Bank (“Empire”), Middletown, New York, under the its permanent exemption under section 4(c)(ii) from charter and title of BNY.1 the prohibitions of section 4 and make an election As required by the Bank Merger Act, notice of the under the section 1103(g) of the Code prior to the proposed transaction has been published and reports consummation of the proposed divestiture. on competitive factors have been requested from the Attorney General, the Comptroller of the Currency, On the basis of the foregoing information, it is here­ and the Federal Deposit Insurance Corporation. The by certified that: time for filing views and comments has expired and the application and all comments received have been con­ 1. This information derives from Company’s correspondence with the Board concerning its request for this certification, Company’s 1. See also the Board’s Order of this date approving BNY Co.'s Registration Statement filed with the Board pursuant to the BHC Act, application to acquire voting shares of Empire’s mortgage lending sub­ and other records of the Board. sidiaries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

808 Federal Reserve Bulletin □ September 1980 sidered in light of the factors set forth in the Act. BNY has agreed to divest two of its offices in the Mid­ BNY, with deposits of $4.7 billion, is the ninth larg­ dletown market with deposits of $15.1 million, reduc­ est commercial banking organization in New York, ing its rank in the market from fourth to sixth largest. holding 3.1 percent of the total deposits in commercial The Middletown market is not highly concentrated and banks in the State.2 Empire, with deposits of $465.6 has become even less so due to the relatively recent million, ranks 24th among commercial banks in New entry of six of the nation’s largest 14 banks, including York, with 0.3 percent of the total deposits in com­ five large New York City banks, (Bankers Trust, mercial banks in the state. Upon consummation of the Chase Manhattan, Citicorp, Chemical, and Manufac­ proposed merger, BNY would remain the ninth largest turers Hanover). As the Board has noted on previous banking organization in the state. occasions, the competitive influence of firms such as Empire operates 41 offices in three separate market these cannot always be measured by their market areas—the Metropolitan New York market,3 the Mid- shares alone, especially with respect to their ability to Hudson market,4 and the Middletown market.5 The ef­ serve commercial customers. fect of the proposal on existing competition in the Met­ The Board has also considered the presence of sav­ ropolitan New York market would be de minimus in ings and loan associations and mutual savings banks in view of the unconcentrated nature of the market the the market. While the Board continues to view com­ relatively small market share that BNY would hold fol­ mercial banking as the relevant line of commerce in lowing consummation of the proposal, and BNY’s determining the competitive effects of a proposal,6 the commitment to divest four offices in that market. Board has stated that it may be appropriate in particu­ BNY’s rank in that market among commercial banking lar cases to take into consideration direct competition organizations, currently eighth largest, would remain from thrifts in specific areas in evaluating various com­ unchanged. The effect of the proposal on existing com­ petitive influences.7 In view of the absolute size and petition in the Mid-Hudson market would not be sig­ significant deposit-taking role of thrifts in the Mid­ nificant and would be mitigated by the divestiture of dletown market, as well as their increasing powers, the BNY’s two offices in that market. Board believes that the influence of thrift institutions The only market where competition is an issue in further diminishes the adverse competitive effects of this application is the Middletown market, where both the proposed merger. Accordingly, the Board con­ BNY and Empire currently compete. Empire, with to­ cludes that the competitive effects of the proposal are tal deposits of $164.7 in the Middletown market, ranks seriously adverse, but that denial of the proposal is not first in the market with a 25.3 percent share of com­ warranted in light of the outweighing considerations mercial bank deposits. BNY operates five offices in the discussed below. Middletown market and ranks fourth in the market Empire has experienced financial and managerial with deposits of $56.6 million. The Board normally problems in recent years that have reduced its ef­ considers the elimination of existing competition fectiveness as a competitor in the market. The finan­ through such a combination of size and market shares cial and managerial resources and future prospects of as having a substantially adverse competitive effect. the resulting organization in the Middletown market as The competitive effects of this application, however, a result of the proposed merger would have a positive are mitigated by a number of factors. impact on the operations of Empire without diminish­ Although Empire is the leading competitor in the ing the prospects of BNY. The financial and manage­ Middletown market, its competitive influence has been rial resources and future prospects of BNY are satis­ declining in recent years due to its financial and man­ factory and, as a result of this proposal, Empire’s agerial condition. Its market share has declined from customers will be served by a stronger banking organi­ approximately 32 percent in 1973 to 25.3 percent in zation. In terms of convenience and needs, BNY pro­ 1979. Moreover, in connection with this proposal, poses to expand and improve the services offered at Empire’s banking offices by increasing the effective in­ terest rate paid on passbook savings and offering addi- 2. All deposit data are as of June 30,1979, or December 31, 1979. 3. The Metropolitan New York market includes the five boroughs of New York City; Nassau, Westchester, Putnam and Rockland 6. In view of the uncertainty with respect to the extent to which Counties and western Suffolk County in New York State; the northern thrifts will exercise the new powers conferred upon them by the De­ two-thirds of Bergen County and eastern Hudson County in New Jer­ pository Institutions Deregulation and Monetary Control Act (P.L. 96sey; and southwestern Fairfield County in Connecticut. 221), the Board believes that it would be premature to consider thrift 4. The Mid-Hudson market includes all of Dutchess and Ulster institutions as full competitors of banks until the effects of their new Counties and the northeastern portion of Orange County, New York. powers can be meaningfully ascertained. 5. The Middletown market includes Sullivan and Orange Counties, 7. Fidelity Union Bancorporation, 66 Federal Reserve Bulle­ except for the Orange County municipalities of the town of New­ tin 576 (June 26, 1980); United Bank Corporation of New York (Sche­ burgh, Newburgh City, Montgomery, New Windsor, Cornwall, and nectady Trust Company), 66 Federal Reserve Bulletin 61, 63 Highlands. (January 1979). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 809 tional services, including commercial and corporate posed transaction shall not be made before the trust services, cash management, cash disbursement thirtieth calendar day following the effective date of and economic forecasting services. BNY also pro­ this Order, or later than three months after the ef­ poses to offer lease financing, FHA construction cred­ fective date of this Order unless such period is extend­ it, and individual FHA and VA loans. In light of the ed for good cause by the Board or by the Federal Re­ above, considerations relating to the convenience and serve Bank of New York pursuant to delegated needs of the community to be served lend such weight authority. toward approval of the application as to outweigh the By order of the Board of Governors, effective Au­ serious adverse competitive effects associated with gust 12, 1980. this proposal. Based on the foregoing and other con­ siderations reflected in the record of this application, it Voting for this action: Chairman Volcker and Governors is the Board’s judgment that the subject proposal is in Schultz, Wallich, Partee, Teeters, Rice, and Gramley. the public interest and that the application should be approved. (Signed) Theodore E. Allison, On the basis of the record, the application is ap­ [seal] Secretary of the Board. proved for the reasons summarized above. The pro­ Legal Developments continued on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

810 Federal Reserve Bulletin □ September 1980 Orders Approved Under Bank Holding Company Act By the Board of Governors During August 1980 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 Sys­ tem, Washington, D.C. 20551. Section 3 Board action Applicant Bank(s) (effective date) American National Holding Company, Ludington Bank and Trust Company, August 13, 1980 Kalamazoo, Michigan Ludington, Michigan Centran Corporation, The Franklin Bank, August 29, 1980 Cleveland, Ohio Columbus, Ohio Community Bancshares of Tulsa, Inc., Community Bank and Trust Company, August 13, 1980 Tulsa, Oklahoma Tulsa, Oklahoma Drexel Holding Company, Drexel National Bank, August 25, 1980 Chicago, Illinois Chicago, Illinois 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 Alabama Bancorporation, Citizens Bank & Trust Co., Atlanta August 1, 1980 Birmingham, Alabama Alabaster, Alabama Amador Bancshares, Inc., Citizens Bank of Las Cruces, Dallas August 19, 1980 Las Cruces, New Mexico Las Cruces, New Mexico The American Bancorporation of The American Bank of Merritt Atlanta August 14,1980 Merritt Island, Island, Merritt Island, Florida Merritt Island, Florida American Independent Bancshares, Bank of Santa Fe, Dallas August 15,1980 Inc., Alta Loma, Texas Alta Loma, Texas Americana State Agency, Inc., The Americana State Bank of Minneapolis August 13,1980 Edina, Minnesota Edina, Edina, Minnesota Bandera Bancshares Inc., First State Bank, Dallas August 8,1980 Bandera, Texas Bandera, Texas Browns Valley Bancshares, Inc., Union State Bank of Browns Minneapolis August 21, 1980 Browns Valley, Minnesota Valley, Browns Valley, Minnesota CBTcorp, Carteret Bank & Trust Company, New York August 21, 1980 Carteret, New Jersey Carteret, New Jersey Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 811 Section 3—Continued Reserve Effective APP'icant Bank(s) Bank date Citizens Banco, Inc., Citizens Bank, Kansas City August 18, 1980 Westminster, Colorado Westminster, Colorado Citizens, Incorporated, Citizens State Bank, Minneapolis August 26, 1980 Enderlin, North Dakota Enderlin, North Dakota Citizen’s National Corp., The Citizens National Bank and Kansas City August 28, 1980 El Reno, Oklahoma Trust Company, El Reno, Oklahoma Continental Bancshares, Inc., Bank of Texas, Dallas August 18, 1980 Dallas, Texas Dallas, Texas Darwin Bancshares, Inc., Farmers State Bank of Darwin, Minneapolis August 26, 1980 Darwin, Minnesota Darwin, Minnesota Durant Bancorp, Inc., The Durant Bank & Trust Com- Dallas August 22, 1980 Durant, Oklahoma pany, Durant, Oklahoma Ellis Banking Corporation, American Bank of Lakeland, Atlanta August 8, 1980 Bradenton, Florida Lakeland, Florida Equitable Bankshares of Colorado, The Women’s Bank, N.A., Kansas City August 7, 1980 Inc., Denver, Colorado Denver, Colorado FNB Bancorp., First National Bank in Chicago Chicago August 11, 1980 Chicago Heights, Illinois Heights, Chicago Heights, Illinois First Alabama Bancshares, Inc., The Talladega National Bank, Atlanta August 25, 1980 Montgomery, Alabama Talladega, Alabama First Alabama Bancshares, Inc., McMillan & Company, Bankers, Atlanta August 8, 1980 Montgomery, Alabama Inc., Livingston, Alabama First Collinsville Corp., The First National Bank of Col- St. Louis August 25, 1980 Collinsville, Illinois lins ville, Collinsville, Illinois The First Mineola Corporation, The First National Bank of Min- Dallas July 30, 1980 Mineola, Texas eola, Mineola, Texas First Mustang Corporation, The First Mustang State Bank, Kansas City July 10,1980 Mustang, Oklahoma Mustang, Oklahoma First National Bancorp, Inc., The First National Bank of Dallas August 19, 1980 Shreveport, Louisiana Shreveport, Shreveport, Louisiana The First National Company, The National Bank of Rockwell Iowa August 19, 1980 Storm Lake, Iowa City, Rockwell City, Iowa First Schiller Bancorp, Inc., First National Bank of Schiller Chicago August 25,1980 Schiller Park, Illinois Park, Schiller Park, Illinois Florida Bancorporation, Inc., Florida Bank of Commerce, Atlanta August 4, 1980 Clearwater, Florida Clearwater, Florida Florida Park Banks, Inc., Park Bank of Florida, Atlanta August 14, 1980 St. Petersburg, Florida St. Petersburg, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

812 Federal Reserve Bulletin □ September 1980 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Hollis Bancshares, Inc., First State Bank and Trust Co., Kansas City August 11, 1980 Hollis, Oklahoma Hollis, Oklahoma Jasper Bancshares, Inc., Bank of Jasper, Kansas City August 18, 1980 Jasper, Missouri Jasper, Missouri Jenks America, Inc., Bank of Commerce, Kansas City August 15, 1980 Jenks, Oklahoma Jenks, Oklahoma Kandiyohi Bancshares, Inc., Home State Bank of Kandiyohi, Minneapolis August 22, 1980 Kandiyohi, Minnesota Kandiyohi, Minnesota KNB Bancshares, Inc., Kansas National Bank and Trust Kansas City August 1, 1980 Prairie Village, Kansas Co., Prairie Village, Kansas La Grange Park Banc Corpo­ Bank of La Grange Park, Chicago July 31,1980 ration, La Grange Park, Illinois Chicago, Illinois Las Vegas Bancorporation, The Bank of Las Vegas, Kansas City July 31,1980 Albuquerque, New Mexico Las Vegas, New Mexico MSB Holding Company, The Mission State Bank and Kansas City July 28,1980 Mission, Kansas Trust Company Mission, Kansas Mark Twain Bancshares, Inc., Progress Bank, St. Louis August 21, 1980 St. Louis, Missouri Fenton, Missouri Mt. Pleasant Company, Mount Pleasant Bank and Trust, Chicago August 6, 1980 Mount Pleasant, Iowa Mount Pleasant, Iowa Mt. Sterling Bancshares Inc., Farmers State Bank & Trust Co., St. Louis August 25, 1980 Mt. Sterling, Illinois Mt. Sterling, Illinois Mountain Banks, Ltd., Louisville Mountain Bank, N.A., Kansas City August 8, 1980 Denver, Colorado Louisville, Colorado Mountain Holding Inc., Jefferson Bank East, Kansas City August 8, 1980 Aurora, Colorado Aurora, Colorado NBA Bankshares, The National Bank of America, Kansas City July 28,1980 Salina, Kansas Salina, Kansas National Bancshares, Inc., Melrose Park National Bank, Chicago August 15, 1980 Melrose Park, Illinois Melrose Park, Illinois National Western Bancorporation, Commerce Bank, Kansas City July 11,1980 Loveland, Colorado Fort Collins, Colorado Newton Bancshares, Inc., The Kansas State Bank, Kansas City August 1, 1980 Newton, Kansas Newton, Kansas Northern Kentucky Bancshares, Inc., The Falmouth Deposit Bank, Cleveland August 1, 1980 Milford, Ohio Falmouth, Kentucky Persons Banking Co., Inc., The Peoples Bank, Atlanta August 12, 1980 Forsyth, Georgia Lithonia, Georgia Security State Bank Shares, Security State Bank, Minneapolis August 11, 1980 Poison, Montana Poison, Montana South Holland Bancorp., Inc., South Holland Trust & Savings Chicago July 29, 1980 South Holland, Illinois Bank, South Holland, Illinois South Ridge Bancshares, Inc., South Ridge Bank, Inc., Kansas City July 18, 1980 Lincoln, Nebraska Lincoln, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 813 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Sterling Bankshares, Inc., Bank of Sterling, Kansas City August 15, 1980 Tecumseh, Nebraska Sterling, Nebraska Tecumseh Bankshares, Inc., Johnson County Bank, Kansas City August 21, 1980 Tecumseh, Nebraska Tecumseh, Nebraska Toledo Trustcorp, The Farmers and Merchants Chicago August 11, 1980 Toledo, Ohio State and Savings Bank, Montpelier, Ohio United Kansas Bancshares, Inc., The City National Bank, Kansas City July 25,1980 Atchison, Kansas Atchison, Kansas United Whitley Corporation, Bank of Williamsburg, Cleveland July 31,1980 Williamsburg, Kentucky Williamsburg, Kentucky Vidor Bancshares, Inc., Vidor State Bank, Dallas August 25, 1980 Vidor, Texas Vidor, Texas The Wilshire Bancorporation, The Wilshire Bank, N.A., San Francisco August 21, 1980 Los Angeles, California Los Angeles, California Wishek Bancorporation, Inc., Security State Bank, Minneapolis August 4, 1980 Wishek, North Dakota Wishek, North Dakota Sections 3 and 4 Nonbanking Reserve Effective Applicant Bank(s) company Bank date (or activity) Escrow Corporation of Pennock Agency, general insurance Minneapolis August 21, 1980 America, Inc., Pennock, Minnesota activities Pennock, Minnesota Section 4 Nonbanking Reserve Effective Applicant company Bank date (or activity) Brainard Agency Company, to continue to engage in general Kansas City July 30,1980 Brainard, Nebraska insurance agency activities Circle Management Company, Guaranty Trust Company, Kansas City July 25,1980 Kearney, Nebraska Kearney, Nebraska Citicorp, NAC Charge Plan New York New York August 1, 1980 New York, New York Crawfordsville Insurance Agency, to continue to engage in the sale Chicago August 19, 1980 Inc., Crawfordsville, Iowa of general insurance Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

814 Federal Reserve Bulletin □ September 1980 Section 4—Continued Nonbanking Reserve Effective Applicant company Bank date (or activity) Cross Financial Corporation, to continue to engage in general Kansas City July 18,1980 Oberlin, Kansas insurance agency activities Ellingson Corporation, to continue to sell insurance as a Minneapolis August 22, 1980 Kenyon, Minnesota general insurance agent First National Agency, Inc., to continue to engage in general Kansas City July 25,1980 Cimarron, Kansas insurance agency activities First Railroad & Banking Company of CMC Group, Inc., Atlanta July 17, 1980 Georgia, Charlotte, North Carolina Augusta, Georgia GEM Agency, Inc., to continue to sell insurance as a Minneapolis August 4, 1980 Amboy, Minnesota general insurance agent Hawkeye Bancorporation, Central Hawkeye Life Insurance Chicago August 7, 1980 bes Moines, Iowa Company, Des Moines, Iowa Hector Securities and Investment Fidelity State Bank of Hector, Minneapolis August 8, 1980 Company, Hector, Minnesota Minneapolis, Minnesota Madison Agency, Inc., to continue to sell insurance as a Minneapolis August 18, 1980 Madison, Minnesota general insurance agent The Marine Corporation, The Marine Trust Company, Chicago August 20, 1980 Milwaukee, Wisconsin N.A., Madison, Wisconsin Mid America Bancshares, Inc., The Lincoln Trail Insurance St. Louis August 18, 1980 Lebanon, Illinois Agency Inc., Lebanon, Illinois Monroe Agency, Inc., to continue to engage in general Kansas City July 25, 1980 Monroe, Nebraska insurance agency activities North Central Banco, Inc., Citizens Bank and Trust Minneapolis August 5, 1980 Hutchinson, Minnesota Company, Hutchinson, Minnesota First Mississippi National Corporation, Continental Leasing Atlanta August 11, 1980 Hattiesburg, Mississippi Corporation, Hattiesburg, Mississippi Old Stone Corporation, to engage in underwriting Boston July 30,1980 Providence, Rhode Island through reinsurance of credit life insurance and credit accident and health insurance in Ohio Spring Grove Investments, Inc., to continue to sell insurance as a Minneapolis August 7,1980 Spring Grove, Minnesota general insurance agent Streeter Insurance Agency, Inc., to continue to sell insurance as a Minneapolis August 14, 1980 Streeter, North Dakota general insurance agent The Verdigre Agency, Inc., to continue to engage in general Kansas City July 10, 1980 Verdigre, Nebraska insurance agency activities Long Island Trust Company, Long Island Bank, New York August 1, 1980 Garden City, New York Hicks ville, New York Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 815 Orders Approved Under Bank Merger Act A n w x Reserve Effective Appl,cant Bank(s) Bank date Manufacturers Hanover Trust Eight Branches of Bankers New York August 5, 1980 Company, Trust Company, New York, New York New York, New York Pending Cases Involving the Board of Governors This list of pending cases does not include suits Edwin F. Gordon v. Board of Governors, et al., filed against the Federal Reserve Banks in which the Board August 1979, U.S.D.C. for the Northern District of of Governors is not named a party. Georgia. Gregory v. Board of Governors, filed July 1979, Consumers Union of the United States, Inc., v. Board U.S.D.C. for the District of Columbia. of Governors et al., filed August 1980, for the Dis­ Donald W. Riegel, Jr. v. Federal Open Market Com­ trict of Columbia. mittee, filed July 1979, U.S.D.C. for the District of A. G. Becker Inc., v. Board of Governors, et al., filed Columbia. August 1980, U.S.D.C. for the District of Columbia. Connecticut Bankers Association, et al., v. Board of Otero Savings and Loan Association v. Board of Gov­ Governors, filed May 1979, U.S.C.A. for the Dis­ ernors, filed August 1980, U.S.D.C. for the District trict of Columbia. of Columbia. Independent Insurance Agents of America, et al., v. J. L. Lewis v. the United States of America, filed July Board of Governors, filed May 1979, U.S.C.A. for 1980, U.S.D.C. for the Central District of Califor­ the District of Columbia. nia. Independent Insurance Agents of America, et al., v. Martin-Trigona v. Board of Governors, filed July 1980, Board of Governors, filed April 1979, U.S.C.A. for U.S.C.A. for the District of Columbia. the District of Columbia. U.S. League of Savings Associations v. Depository Independent Insurance Agents of America, et al., v. Institutions Deregulation Committee, et al., filed Board of Governors, filed March 1979, U.S.C.A. for June 1980, U.S.D.C. for the District of Columbia. the District of Columbia. Edwin F. Gordon v. Board of Governors, et al., filed Credit and Commerce American Investment, et al., v. June 1980, U.S. Supreme Court. Board of Governors, filed March 1979 U.S.C.A. for Mercantile Texas Corporation v. Board of Governors, the District of Columbia. filed May 1980, U.S.C.A. for the Fifth Circuit. Independent Bankers Association of Texas v. First Corbin, Trustee v. United States, filed May 1980, National Bank in Dallas, et al., filed July 1978, United States Court of Claims. U.S.D.C. for the Northern District of Texas. Louis J. Roussel v. Board of Governors, filed April Security Bancorp and Security National Bank v. 1980, U.S.D.C. for the District of Columbia. Board of Governors, filed March 1978, U.S.C.A. for Ulyssess S. Crockett v. United States, et al., filed the Ninth Circuit. April 1980, U.S.D.C. for the Eastern District of Vickars-Henry Corp. v. Board of Governors, filed De­ North Carolina. cember 1977, U.S.C.A. for the Ninth Circuit. Angela Belk v. Government of Iran, et al., filed April Investment Company Institute v. Board of Governors, 1980 , U.S.D.C. for the District for South Carolina, filed September 1977, U.S.D.C. for the District of Columbia Division. Columbia. Independent Bank Corporation v. Board of Gover­ Roberts Farms, Inc. v. Comptroller of the Currency, nors, filed October 1979, U.S.C.A. for the Sixth Cir­ et al., filed November 1975, U.S.D.C. for the South­ cuit. ern District of California. County National Bancorporation and TGB Co. v. David Merrill, et al. v. Federal Open Market Com­ Board of Governors, filed September 1979, mittee, filed May 1975, U.S.D.C. for the District of U.S.C.A. for the Eighth Circuit. Columbia. 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 banks A21 Banks with assets of $ 1 billion or more A6 Federal funds and repurchase agreements of A22 Banks in New York City large member banks A23 Balance sheet memoranda A24 Commercial and industrial loans Policy Instruments A24 Major nondeposit funds of commercial banks A25 Gross demand deposits of individuals, A7 Federal Reserve Bank interest rates partnerships, and corporations A8 Member bank reserve requirements A9 Maximum interest rates payable on time and savings deposits at federally insured institutions Financial Markets A10 Federal Reserve open market transactions A25 Commercial paper and bankers dollar acceptances outstanding Federal Reserve Banks A26 Prime rate charged by banks on short-term business loans Al 1 Condition and Federal Reserve note statements A26 Terms of lending at commercial banks A12 Maturity distribution of loan and security All Interest rates in money and capital markets holdings A28 Stock market—Selected statistics A29 Savings institutions—Selected assets and Monetary and Credit Aggregates liabilities A12 Bank debits and deposit turnover A13 Money stock measures and components Federal Finance A14 Aggregate reserves and deposits of member banks A30 Federal fiscal and financing operations A15 Loans and securities of all commercial banks A31 U.S. budget receipts and outlays A32 Federal debt subject to statutory limitation A32 Gross public debt of U.S. Treasury—Types and Commercial Bank Assets and Liabilities ownership A33 U.S. government marketable securities— A16 Last-Wednesday-of-month series Ownership, by maturity A17 Call-date series A34 U.S. government securities dealers— A18 Detailed balance sheet, September 30, 1978 Transactions, positions, and financing A3 5 Federal and federally sponsored credit agencies—Debt outstanding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A2 Federal Reserve Bulletin □ September 1980 Securities Markets and Reported by Banks in the United States Corporate Finance A58 Liabilities to and claims on foreigners A36 New security issues—State and local A59 Liabilities to foreigners governments and corporations A61 Banks’ own claims on foreigners A37 Open-end investment companies—Net sales and A62 Banks’ own and domestic customers’ claims on asset position foreigners A37 Corporate profits and their distribution A62 Banks’ own claims on unaffiliated foreigners A38 Nonfinancial corporations—Assets and liabilities A63 Claims on foreign countries—Combined A38 Business expenditures on new plant and domestic offices and foreign branches equipment A39 Domestic finance companies—Assets and liabilities; business credit Securities Holdings and Transactions A64 Marketable U.S. Treasury bonds and notes— Real Estate Foreign holdings and transactions A64 Foreign official assets held at Federal Reserve A40 Mortgage markets Banks A41 Mortgage debt outstanding A65 Foreign transactions in securities Consumer Installment Credit Reported by Nonbanking Business Enterprises in the United States A42 Total outstanding and net change A66 Liabilities to unaffiliated foreigners A43 Extensions and liquidations A67 Claims on unaffiliated foreigners Flow of Funds Interest and Exchange Rates A44 Funds raised in U.S. credit markets A68 Discount rates of foreign central banks A45 Direct and indirect sources of funds to credit A68 Foreign short-term interest rates markets A68 Foreign exchange rates Domestic Nonfinancial Statistics A69 Guide to Tabular Presentation and Statistical Releases A46 Nonfinancial business activity—Selected measures A46 Output, capacity, and capacity utilization A47 Labor force, employment, and unemployment A48 Industrial production—Indexes and gross value A50 Housing and construction A51 Consumer and producer prices A52 Gross national product and income A53 Personal income and saving International Statistics A54 U.S. international transactions—Summary A55 U.S. foreign trade A55 U.S. reserve assets A56 Foreign branches of U.S. banks—Balance sheet data A58 Selected U.S. liabilities to foreign official institutions Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Domestic Financial Statistics A3 1.10 MONETARY AGGREGATES AND INTEREST RATES 1979 1980 1980 Item Q3 04 Ql Q2 Mar. Apr. May' June July Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent)1 Member bank reserves 1 Total................................................................ 5.3' 12.3' 4.3' 1.0' 3.8' 1.4' -.1 -.8' 2.7 2 Required ......................................................... 5.0' 11.2' 5.3' 1.2' 4.1' 1.4' 0.3 -1.8 1.0 3 Nonborrowed .................................................. 7.3' 6.2' 3.4' 7.6' -32.6' 13.4' 45.7 18.7' 2.3 4 Monetary base2 ............................................... 9.5' 9.5' 7.6 5.2' 6.8' .9' 8.2 6.6' 8.4 Concepts of money and liquid assets3 5 M-1A.............................................................. 7.8 4.5 4.8 -3.9 -1.9 -17.7 .7 11.4 7.8 6 M-1B .............................................................. 9.6 5.0 5.9 -2.4 -.3 -14.1 -1.2 14.6' 11.1 7 M-2 ................................................................ 10.7 7.1 7.2 5.5' 5.0 -2.5' 9.4 18.1' 17.7 8 M-3 ................................................................ 10.8 9.1 7.8 5.7 4.4 0.0 8.7 13.4' 13.4 9 L ..................................................................... 12.2 8.5 8.3' 7.7 7.8' 5.8' 8.6 7.5' Time and savings deposits Commercial banks 10 Total............................................................ 9.1 12.4 8.4 9.8 8.5 15.0 6.6 -1.6 2.3 11 Savings4 ....................................................... .4 -16.5 -19.3 -22.6 -35.6 -43.3 -7.5 32.9 38.6 12 Small-denomination time5 ............................ 22.5 32.1 29.1 33.9 42.5 54.4 14.1 -3.1 -3.1 13 Large-denomination time6 ............................ 4.5 19.7 11.3 10.1 7.6 16.2 8.5 -24.8 -19.7 14 Thrift institutions7 ........................................... 7.4 6.7 2.7 5.0' 4.0 3.0 7.3 10.8' 9.0 15 Total loans and securities at commercial banks8 13.4 8.6' 9.5' -.5 2.6 -4.3 -6.2' -2.8' 7.6 1979 Q3 Q4 01 Q2 Apr. May June July Aug. Interest rates (levels, percent per annum) Short-term rates 16 Federal funds9 ................................................................................ 10.94 13.58 15.07 12.67 17.61 10.98 9.47 9.03 9.61 17 Federal Reserve discount10 .......................................................... 10.21 11.92 12.51 12.45 13.00 12.94 11.40 10.87 10.00 18 Treasury bills (3-month market yield)11...................................... 9.67 11.84 13.35 9.62 13.20 8.58 7.07 8.06 9.13 19 Commercial paper (3-month)1112................................................ 10.64 13.35 14.54 11.18 15.78 9.49 8.27 8.41 9.57 Long-term rates Bonds 20 U.S. government13...................................................................... 9.03 10.18 11.78 10.58 11.42 10.44 9.89 10.32 11.07 21 State and local government14.................................................... 6.28 7.20 8.23 7.95 8.63 7.59 7.63 8.13 8.67 22 Aaa utility (new issue)15............................................................ 9.64 11.21 13.22 11.78 12.90 11.53 10.97' 11.60 12.32 23 Conventional mortgages16 ............................................................ 11.13 12.38 14.32 12.70 15.55 13.20 12.45 12.45 13.25 1. Unless otherwise noted, rates of change are calculated from average amounts 4. Savings deposits exclude NOW and ATS accounts at commercial banks. outstanding in preceding month or quarter. Growth rates for member bank reserves 5. Small-denomination time deposits are those issued in amounts of less than are adjusted for discontinuities in series that result from changes in Regulations $100,000. D and M. 6. Large-denomination time deposits are those issued in amounts of $100,000 2. Includes total reserves (member bank reserve balances in the current week or more. Eius vault cash held two weeks earlier); currency outside the U.S. Treasury, Federal 7. Savings and loan associations, mutual savings banks, and credit unions. Leserve Banks, and the vaults of commercial banks; and vault cash of nonmember 8. Changes calculated from figures shown in table 1.23. banks. 9. Averages of daily effective rates (average of the rates on a given date weighted 3. M-l A: Averages of daily figures for (1) demand deposits at all commercial by the volume of transactions at those rates). banks other than those due to domestic banks, the U.S. government, and foreign 10. Rate for the Federal Reserve Bank of New York. banks and official institutions less cash items in the process of collection and 11. Quoted on a bank-discount basis. Federal Reserve float; and (2) currency outside the Treasury, Federal Reserve 12. Beginning Nov. 1977, unweighted average of offering rates quoted by at banks, and the vaults of commercial banks. least five dealers. Previously, most representative rate quoted by these dealers. M-1B: M-l A plus negotiable order of withdrawal and automated transfer service Before Nov. 1979, data shown are for 90- to 119-day maturity. accounts at banks and thrift institutions, credit union share draft accounts, and 13. Market yields adjusted to a 20-year maturity by the U.S. Treasury. demand deposits at mutual savings banks. 14. Bond Buyer series for 20 issues of mixed quality. M-2: M-1B plus savings and small-denomination time deposits at all depository 15. Weighted averages of new publicly offered bonds rated Aaa, Aa, and A by institutions, overnight repurchase agreements at commercial banks, overnight Moody’s Investors Service and adjusted to an Aaa basis. Federal Reserve com­ Eurodollars held by U.S. residents other than banks at Caribbean branches of pilations. member banks, and money market mutual fund shares. 16. Average rates on new commitments for conventional first mortgages on new M-3: M-2 plus large-denomination time deposits at all depository institutions homes in primary markets, unweighted and rounded to nearest 5 basis points, from and term RPs at commercial banks and savings and loan associations. Dept, of Housing and Urban Development. L: M-3 plus other liquid assets such as term Eurodollars held by U.S. residents other than banks, bankers acceptances, commercial paper, Treasury bills and other liquid Treasury securities, and U.S. savings bonds. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics □ September 1980 1.11 FACTORS AFFECTING MEMBER BANK RESERVES Millions of dollars Monthly averages of Weekly averages of daily figures for week-ending daily figures Factors 1980 1980 June July Aug. July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 Supplying Reserve Funds 1 Reserve Bank credit outstanding........................ 141,246 141,814 139,277 143,315 142,916 138,456 138,047 138,084 140,962 2 U.S. government securities1 .................................... 122,336 122,060 119,092 123,227 123,114 119,884 117,939 117.604 120.654 119.744 3 Bought outright .................................................... 121,623 121,662 118,823 122,766 122,670 119,654 116,951 117.604 120.654 119.744 4 Held under repurchase agreements .................. 713 398 269 461 AAA 230 988 5 Federal agency securities ........................................ 9,020 8,937 8,978 8,925 8,952 8,920 9,206 ' 8,873 ’ 8,873 8.873 6 Bought outright .................................................... 8,875 8,874 8,873 8,873 8,873 8,873 8,873 8,873 8,873 8.873 7 Held under repurchase agreements ................ 145 63 105 52 79 47 333 8 Acceptances ............................................................ 171 74 71 117 68 49 242 9 Loans ........................................................................ 365 390 687 332 354 629 828 390 ■7. A A 700 10 Float .......................................................................... 3,997 4,777 5,098 5,339 4,879 3,309 4,069 5,387 6,096 5,469 11 Other Federal Reserve assets .............................. 5,357 5,576 5,351 5,375 5,548 5,667 5,762 5,831 4,995 4,934 12 Gold stock................................................................ 11,172 11,172 11,172 11,172 11,172 11,172 11,172 11,172 11,172 11,171 13 Special drawing rights certificate account.......... 2,986 3,053 3,215 3,018 3,061 3,118 3,118 3,161 3,268 3,268 14 Treasury currency outstanding........................ 13,288 13,305 13,310 13,294 13,296 13,301 13,343 13,309 13,311 13,313 Absorbing Reserve Funds 15 Currency in circulation .......................................... 126,334 128,182 128,969 128,655 128,125 127,660 128,354 129,186 129,103 128,928 16 Treasury cash holdings .......................................... 543 512 480 520 508 498 490 488 479 471 Deposits, other than member bank reserves, with Federal Reserve Banks 17 Treasury................................................................ 2,923 3,119 3,297 3,315 2,723 3,206 2,652 3,339 3,630 3,840 18 Foreign.................................................................. 354 324 301 302 282 324 312 300 315 289 19 Other* .................................................................. 1,378 1,051 475 1,067 1,148 793 586 538 425 408 20 Other Federal Reserve liabilities and capital ... 4,971 4,702 4,488 4,693 4,629 4,552 4,567 4,404 4,484 4,472 21 Reserve accounts3 .................................................. 32,189 31,454 28,965 32,247 33,030 29,014 28,718 27,471 30,277 29,066 End-of-month figures Wednesday figures 1980 1980 July Aug. July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 Supplying Reserve Funds 22 Reserve bank credit outstanding ...................... 143,741 138,316 139,791 146,439 144,892 141,019 131,148 136,300 142,696 140,020 23 U.S. government securities1 ........................... 124,515 119,563 119,848 123,519 124,386 119.577 109.332 114.815 120.700 118.690 24 Bought outright ........................................ 124,058 118,497 119,014 122,797 121,275 119.577 109.332 114.815 120.700 118.690 25 Held under repurchase agreements .......... 457 1,066 834 722 3,111 26 Federal agency securities ............................. 8,912 9,404 9,355 8,977 9,426 ’ 8,873 ’ 8,873 ’ 8,873 8.873 ' 8,873 27 Bought outright ........................................ 8,875 8,873 8,873 8,873 8,873 8,873 8,873 8,873 8.873 8,873 28 Held under repurchase agreements .......... 37 531 482 104 553 29 Acceptances ................................................ 373 310 277 173 478 30 Loans .......................................................... 215 562 1,515 559 548 2,620 464 921 821 2,572 31 Float ............................................................ 4,167 2,808 3,468 7,690 4,417 4,025 6,563 5,783 7,417 4,720 32 Other Federal Reserve assets ...................... 5,559 5,669 5,328 5,521 5,637 5,924 5,916 5,908 4,885 5,165 33 Gold stock....................................................... 11,172 11,172 11,172 11,172 11,172 11,172 11,172 11,172 11,171 11,171 34 Special drawing rights certificate account......... 3,018 3,118 3,268 3,018 3,118 3,118 3,118 3,268 3,268 3,268 35 Treasury currency outstanding.......................... 13,523 13,570 13,313 13,295 13,300 13,304 13,309 13,309 13,313 13,313 Absorbing Reserve Funds 36 Currency in circulation .................................... 127,097 128,337 129,364 128,761 128,122 128,238 129,169 129,618 129,151 129,313 37 Treasury cash holdings .................................... 520 489 469 513 504 492 488 484 474 473 Deposits, other than member bank reserves, with Federal Reserve Banks 38 Treasury....................................................... 3,199 3,954 2,742 2,956 2,855 3,073 2,762 3,473 2,491 3,749 39 Foreign......................................................... 691 436 336 294 246 301 285 237 225 199 40 Other° ......................................................... 1,332 500 383 1,103 1,178 415 588 398 377 382 41 Other Federal Reserve liabilities and capital ... 5,003 4,540 4,570 4,563 4,570 4,448 4,260 4,255 4,623 4,367 42 Reserve accounts3 ........................................... 33,612 27,920 29,680 35,734 35,007 31,646 21,195 25,584 33,107 29,290 1. Includes securities loaned—fully guaranteed by U.S. government securities against managed liabilities, and held by any institution in conjunction with the pledged with Federal Reserve Banks—and excludes (if any) securities sold and consumer credit restraint program. scheduled to be bought back under matched sale-purchase transactions. 3. Includes reserves of member banks, Edge Act corporations, and U.S. agencies 2. Includes special deposits under the credit restraint program held by money and branches of foreign banks. market mutual funds ana other financial intermediaries, held by nonmember banks Note: For amounts of currency and coin held as reserves, see table 1.12 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Member Banks A5 1.12 RESERVES AND BORROWINGS Member Banks Millions of dollars Monthly averages of daily figures Reserve classification 1978 1979 1980 Apr. May June/* July? Aug.? All member banks Reserves 1 At Federal Reserve Banks . 31,158 32,473 32,712 31,878 32,400 33,663 32,726 32,189 31,454 28,965 2 Currency and coin--------- 10,330 11,344 12,283 11,063 10,729 10,895 10,998 11,137 11,285 11,262 3 Total held1........................ 41,572 43,972 45,170 43,156 43,352 44,769 43,933 43,531 42,927 40,408 4 Required ...................... 41,447 43,578 44,928 42,966 42,907 44,678 43,793 43,280 42,509 40,077 5 Excess1 .......................... 125 394 242 190 445 91 140 251 418 331 Borrowings at Reserve Banks2 6 Total ................................. 874 1,473 1,241 1,655 2,828 2,443 1,028 365 390 687 7 Seasonal ............................ 134 82 75 96 152 156 64 12 5 9 Large banks in New York City 8 Reserves held ...................... 7,120 7,401 7,758 7,168 7,276 7,603 7,596 7,482 7,272 6,462 9 Required .......................... 7,243 7,326 7,760 7,205 7,194 7,655 7,662 7,600 7,278 6,507 10 Excess............................... -123 75 -2 -37 82 -52 -66 -118 -6 -45 11 Borrowings2.......................... 99 66 26 125 60 81 31 18 54 99 Large banks in Chicago 12 Reserves held ...................... 1,907 2,036 2,051 1,968 1,886 2,150 1,922 1,868 1,785 1,528 13 Required .......................... 1,900 2,005 2,063 1,941 1,961 2,173 1,906 1,868 1,866 1,591 14 Excess............................... 7 31 -12 27 -75 -23 16 0 -81 -63 15 Borrowings2.......................... 10 90 60 97 137 60 28 1 20 26 Other large banks 16 Reserves held ...................... 16,446 17,426 18,078 17,246 17,029 17,644 17,379 17,049 16,642 15,756 17 Required .......................... 16,342 17,390 18,065 17,265 17,135 17,991 17,545 17,199 16,815 15,739 18 Excess............................... 104 36 13 -19 -106 -347 -166 -150 -173 17 19 Borrowings2.......................... 276 707 647 729 1,479 1,287 319 296 479 All other banks 20 Reserves held ...................... 16,099 16,734 16,904 16,403 16,261 16,314 16,271 16,248 16,285 16,031 21 Required ..................... 15,962 16,536 16,692 16,229 16,233 16,367 16,234 16,186 16,137 15,925 22 Excess............................... 137 198 212 174 28 -53 37 62 148 106 23 Borrowings2.......................... 489 610 508 704 1,152 1,015 161 27 20 83 Edge corporations 24 Reserves held ...................... n.a. 336 339 328 317 339 335 374 379 339 25 Required ... ............ n.a. 303 323 303 300 299 295 332 354 315 26 Excess............................... n.a. 33 16 25 17 40 40 42 25 24 U.S. agencies and branches3 27 Reserves held ................... n.a. 39 40 43 90 198 162 106 64 28 Required .......................... n.a. 18 25 23 84 193 151 97 59 29 Excess............................... n.a. 21 15 20 6 5 11 9 5 Weekly averages of daily figures for week (in 1980) ending June 25 July 2 July 9 July 16 July 23 July 30p Aug. 6p Aug. 13p Aug. 20p Aug. 21P All member banks Reserves 30 At Federal Reserve Banks..................... 32,383 32,633 31,339 32,247 33,030 29,014 28,718 27,471 30,277 29,066 31 Currency and coin ................................. 10,692 11,238 11,559 11,502 10,504 11,552 11,542 11,748 11,474 11,135 32 Total held1............................................. 43,284 44,065 43,089 43,936 43,726 40,748 40,442 39,400 40,932 40,382 33 Required ........................................... 43,082 43,794 42,583 43,596 43,742 40,509 39,754 39,311 40,597 40,293 34 Excess1 ............................................... -202 271 506 340 -16 239 688 89 335 89 Borrowings at Reserve Banks2 35 Total ...................................................... 318 348 215 332 354 629 828 390 344 700 36 Seasonal ................................................ 8 7 5 5 5 7 7 6 6 10 Large banks in New York City 37 Reserves held ........................................... 7,362 7,525 7,510 7,605 7,081 6,734 6,599 6,127 6,818 6,427 38 Required ............................................... 7,352 7,680 7,328 7,706 7,334 6,732 6,554 6,332 6,747 6,376 39 Excess.................................................... 10 -155 182 -101 -253 2 45 -205 71 51 40 Borrowings2................... ........................ 0 0 0 0 0 241 214 63 0 161 Large banks in Chicago 41 Reserves held ........................................... 1,591 1,927 1,972 1,849 1,958 1,604 1,606 1,514 1,580 1,382 42 Required ............................................. 1,825 1,891 1,858 2,009 2,005 1,629 1,554 1,570 1,611 1,597 43 Excess.................................................... -234 36 114 -160 -47 -25 52 -56 -31 -215 44 Borrowings2............................................... 0 21 0 64 0 5 21 0 7 80 Other large banks 45 Reserves held ........................................... 17,211 17,381 16,868 17,061 16,874 15,539 15,937 15,111 15,827 15,578 46 Required ............................................... 17,202 17,432 16,896 17,237 17,386 15,751 15,523 15,468 15,908 15,883 47 Excess.................................................... 9 -51 -28 -176 -512 -212 414 -357 -81 -305 48 Borrowings2............................................... 297 299 204 258 342 357 519 311 315 340 All other banks 49 Reserves held ........................................... 16,367 16,501 16,267 16,293 16,516 16,079 16,107 15,679 16,001 16,096 50 Required .............................................. 16,351 16,435 16,097 16,168 16,560 16,051 15,819 15,640 15,991 16,113 51 Excess.................................................... -16 66 170 125 -44 28 288 39 10 -17 52 Borrowings2............................................... 21 28 11 10 12 26 74 16 22 119 Edge corporations 53 Reserves held ........................................... 346 344 364 389 421 361 324 319 355 360 54 Required ............................................... 305 322 331 371 384 346 304 301 340 324 55 Excess.................................................... 41 22 33 18 37 15 20 18 15 36 U.S. agencies and branches3 56 Reserves held ........................................... 57 39 79 114 81 57 Required ............................................... 47 34 73 105 73 58 Excess.................................................... 10 5 6 9 8 1. Adjusted to include waivers of penalties for reserve deficiencies in accordance Reserve System. For weeks for which figures are preliminary, figures by class of with Board policy, effective Nov. 19, 1975, of permitting transitional relief on a bank do not add to total because adjusted data by class are not available, graduated basis over a 24-month period when a nonmember bank merged into an 2. Based on closing figures, Digitized for FexRisAtinSgE Rme mber bank, or wnen a nonmember bank joins the Federal 3. Data not reported after July 23, 1980. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics □ September 1980 1.13 FEDERAL FUNDS AND REPURCHASE AGREEMENTS Large Member Banks i Averages of daily figures, in millions of dollars 1980, week ending Wednesday July 2 July 9 July 16 July 23 July 30 Aug 6 Aug. 13 Aug. 20 Aug. 27 One day and continuing contract 1 Commercial banks in United States........................... 47,657' 54,210' 52,249' 48,501' 47,297 52,838 53,697 52,070 49,725 2 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies 17,036' 16,159' 17,717' 17,789' 17,198 16,867 16,808 17,404 15,687 3 Nonbank securities dealers......................................... 1,242 1,585 2,128 2,332 2,369 3,097 2,369 2,456 2,705 4 All other ................................................................... 15,568 14,992 16,030 16,640 16,119 16,090 15,440 16,253 16,612 All other maturities 5 Commercial banks in United States............................ 3,962 3,670 3,829 3,755 3,746' 3,951 3,659 3,386 3,634 6 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies 6,102 5,950 5,996 5,948 5,843' 5,712 5,825 5,7% 5,553 7 Nonbank securities dealers......................................... 2,956 2,856 2,956 3,036 3,319 3,486 3,669 3,588 3,606 8 All other ................................................................... 9,164 9,444 10,067 9,637 10,921 10,936 11,395 10,164 10,760 Memo: Federal funds and resale agreement loans in ma­ turities of one day or continuing contract 9 Commercial banks in United States........................... 15,642' 16,440' 16,022' 13,073 13,278 15,556 14,374 14,010 11,460 10 Nonbank securities dealers......................................... 2,117 2,444 2,457 2,317 2,507 2,559 2,576 2,852 2,418 1. Banks with assets of $1 billion or more as of December 31, 1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Short-term Extended credit Emergency credit adjustment credit to all others Federal Reserve Seasonal credit Special circumstances! under section 132 Bank Rate on Effective Previous Rate on Effective Previous Rate on Effective Previous Rate on Effective Previous 8/31/80 date rate 8/31/80 date rate 8/31/80 date rate 8/31/80 date rate Boston ............... 10 7/29/80 11 10 7/29/80 11 11 7/29/80 12 13 7/29/80 14 New York .......... 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Philadelphia ......... 10 7/29/80 11 10 7/29/80 11 11 7/29/80 12 13 7/29/80 14 Cleveland ............ 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Richmond............ 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Atlanta ............... 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Chicago............... 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 St. Louis.............. 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Minneapolis ......... 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Kansas City ......... 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Dallas ................. 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 San Francisco ---- 10 7/28/80 11 10 7/28/80 11 11 7/28/80 12 13 7/28/80 14 Range of rates in recent years3 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. B o an f k Effective date A le l v l e F l) . — R. B o an f k Effective date A le l v l e F l) . — R. Ba o n f k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1970 ............ 5Yi 5h 1974— Apr. 25 .............. 7^-8 8 1978— Jan. 9 .............. 6-6V1 6 Yl 1971— Jan. 8 ...................... 5V^5 Yi 30 .............. 8 8 20 .............. 6Y2 6 Yi 15 ...................... 5V4 5V4 Dec. 9 .............. 73/4-8 73/4 May 11 .............. 6Y2r-7 1 19 ...................... 5-51/4 5^4 16 .............. 73/4 73/4 12 .............. 1 7 22 ...................... 5-5V4 5V4 July 3 .............. 1-lYx 71/4 29 ....................... 5 5 1975— Jan. 6 .............. 7V4 1Y\ 10 .............. 7V4-73/4 7V4 Feb. 13 ...................... 43A-5 5 10 .............. IV\ IVa Aug. 21 .............. 73/4 73/4 19 ....................... 4^4 5 24 .............. 7V4 1Y\ Sept. 22 .............. 8 8 July 16 ...................... 43/4-5 43/4 Feb. 5 .............. 63A-7V4 63/4 Oct. 16 .............. 8-8 Yi 8 Yi 23 ...................... 5 5 7 .............. 63/4 63/4 20 .............. 8 Yl 8 Yi Nov. 11 ...................... 4^4-5 5 Mar. 10 .............. 6 ^ 3/4 6Yt Nov. 1 .............. 8J4-9 Yi 9 Yi 19 ...................... 43/4 5 14 .............. 6V4 6V4 3 .............. 9 Yi 9 Yi Dec. 13 ...................... 4V^4 43/4 May 16 .............. 6-65/4 6 17 ...................... 4V^-43/4 43/4 1979— July 20 .............. 10 10 24 ...................... 4 Yl 4 Yi 1976— Jan. 19 .............. 5^2-6 5Y2 Aug. 17 .............. 10-10 Yi 10 Yi 1973- 4 Yi 23 .............. 5 Yi 5 Yi 20 .............. 10 Yi 10 Yi Jan. 15 ...................... 5 Nov. 22 .............. 5^4-5^ 5Y4 Sept. 19 .............. 10Vi-11 11 Feb. 26 ...................... 5-5 Yi 5 26 .............. 5^4 5Y4 21 .............. 11 11 Mar. 2 ...................... 5 Yi 5 Yi Oct. 8 .............. 11-12 12 Apr. 23 ...................... 5&-5^4 5 Yi 1977— Aug. 30 .............. 5V4-53/4 5Va 10 .............. 12 12 May 4 ...................... 5^4 5 Yi 31 .............. 5V4-53/4 53/4 11 ...................... 5^6 5^4 Sept. 2 .............. 5^4 5^4 1980— Feb. 15 .............. 12-13 13 18 ...................... 6 6 Oct. 26 .............. 6 6 19 .............. 13 13 June 11 ...................... 6-6 Yi 6 May 29 .............. 12-13 13 15 ...................... 6 Yi 6 Yi 30 .............. 12 12 6Yi June 13 .............. 11-12 11 July 2 ...................... 7 June 16 .............. 11 11 Aug. 14 ...................... 1-lYi 1 July 28 .............. 10-11 10 23 ....................... lYi lYi July 29 .............. 10 10 lYi In effect August 31, 1980 10 10 1. Applicable to advances when exceptional circumstances or practices involve 3. Rates for short-term adjustment credit (as described above). For description only a particular depository institution as described in section 201.3(b) (2) of and earlier data see the following publications of the Board of Governors: Banking Regulation A. and Monetary Statistics, 1914-1941 and 1941-1970; Annual Statistical Digest, 2. Applicable to emergency advances to individuals, partnerships, and corpo­ 1971-1975, 1972-1976, 1973-1977, and 1974-1978. rations as described in section 201.3(c) of Regulation A. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics □ September 1980 1.15 MEMBER BANK RESERVE REQUIREMENTS1 Percent of deposits Requirements in effect Previous requirements Type of deposit, and deposit interval August 31, 1980 in millions of dollars Percent Effective date Percent Effective date Net demand2 0-2 ....................................................................................................... 7 12/30/76 IVi 2/13/75 2-10 ..................................................................................................... 9 Vi 12/30/76 10 2/13/75 10-100 .................................................................................................. im 12/30/76 12 2/13/75 100-400 ................................................................................................ 12% 12/30/76 13 2/13/75 Over 400 .............................................................................................. 16^4 12/30/76 16 Vi 2/13/75 Time and savings2>3-4 3 3/16/67 3 VS 3/2/67 Time5 0-5, by maturity 30-179 days.................................................................................... 3 3/16/67 3 Vi 3/2/67 180 days to 4 years........................................................................ 2Yi 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........................................................................ 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 Annual 4. The average reserve requirement on savings and other time deposits must be Statistical Digest, 1971-1975 and for prior changes, see Board’s Annual Report for at least 3 percent, the minimum specified by law. 1976, table 13. 5. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent 2. (a) Requirement schedules are graduated, and each deposit interval applies was imposed on large time deposits of $100,000 or more, obligations of affiliates, to that part of the deposits of each bank. Demand deposits subject to reserve and ineligible acceptances. This supplementary requirement was eliminated with requirements are gross demand deposits minus cash items in process of collection the maintenance period beginning July 24, 1980. ana demand balances due from domestic banks. Effective with the reserve maintenance period beginning Oct. 25, 1979, a mar­ (b) The Federal Reserve Act specifies different ranges of requirements for ginal reserve requirement of 8 percent was added to managed liabilities in excess reserve city banks and for other banks. Reserve cities are designated under a of a base amount. This marginal requirement was increased to 10 percent beginning criterion adopted effective Nov. 9, 1972, by which a bank having net demand April 3,1980, was decreased to 5 percent beginning June 12,1980, and was reduced deposits of more than $400 million is considered to have the character of business to zero beginning July 24, 1980. Managed liabilities are defined as large time of a reserve city bank. The presence of the head office of such a bank constitutes deposits, Eurodollar borrowings, repurchase agreements against U.S. government designation of that place as a reserve city. Cities in which there are Federal Reserve and federal agency securities, federal funds borrowings From nonmember insti­ Banks or branches are also reserve cities. Any banks having net demand deposits tutions, and certain other obligations. In general, the base for the marginal reserve of $400 million or less are considered to have the character of business of banks requirement was originally tne greater of (a) $100 million or (b) the average outside of reserve cities and are permitted to maintain reserves at ratios set for amount of the managed liabilities held by a member bank, Edge corporation, or banks not in reserve cities. For details, see the Board’s Regulation D. family of U.S. branches and agencies of a foreign bank for the two statement (c) Effective Aug. 24, 1978, the Regulation M reserve requirements on net weeks ending Sept. 26,1979. For the computation period beginning Mar. 20,1980, balances due from domestic banks to their foreign branches and on deposits that the base was lowered by (a) 7 percent or (b) the decrease in an institution’s U.S. foreign branches lend to U.S residents were reduced to zero from 4 percent and office gross loans to foreigners and gross balances due from foreign offices of other 1 percent, respectively. The Regulation D reserve requirement on borrowings institutions between the base period (Sept. 13-26,1979) and the week ending Mar. from unrelated banks abroad was also reduced to zero from 4 percent. 12, 1980, whichever was greater. For the computation period beginning May (d) Effective with the reserve computation period beginning Nov. 16, 1978, 29,1980, the base was increased by IVi percent above the base used to calculate domestic deposits of Edge corporations are subject to the same reserve require­ the marginal reserve in the statement week of May 14-21, 1980. In addition, ments as deposits of member banks. beginning Mar. 19, 1980, the base was reduced to tne extent that foreign loans 3. Negotiable order of withdrawal (NOW) accounts and time deposits such as and balances declined. Christmas and vacation club accounts are subject to the same requirements as savings deposits. Note. Required reserves must be held in the form of deposits with Federal Reserve banks or vault cash. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.16 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 Aug. 31, 1980 Previous maximum In effect Aug. 31, 1980 Previous maximum Effective Effective Percent Effective Percent Effective date date date date 1 Savings ..................................................................... 5V4 7/1/79 7/1/73 5 Vi 7/1/79 5V4 0) 2 Negotiable order of withdrawal accounts 2............... 5 1/1/74 5 1/1/74 (3) Time accounts 4 Fixed ceiling rates by maturity 4 3 9 3 0 0 - d 8 a 9 y d s a to y s 1 . . y ... e .. a .. r .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 V % 4 8 1 / / 1 1 / / 7 80 9 5 5 Vi 7 7 / / 1 1 / / 7 7 3 3 6 (3) 1/1/80 (3) 5^ . 4 0) 6 5 2 1 t t o o 2 2 V y i e y ar e s a r 5 s . 5 ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7/1/73 5 5 % Vi 1 1 / / 2 2 1 1 / / 7 7 0 0 6V1 (!) 6 5% 1 1/ / 2 2 1 1/ / 7 7 0 0 7 2Vi to 4 years 5..................................................... 6Vi 7/1/73 53/4 1/21/70 63/4 C1) 6 1/21/70 8 4 to 6 years 6......................................................... m 11/1/73 IVi 11/1/73 (7) . 9 6 to 8 years 6......................................................... IVi 12/23/74 1V4 11/1/73 7^4 12/23/74 7Yi li/i/73 10 8 years or more 6.................................................. 7% 6/1/78 6/1/78 (3)\ 11 Issued to governmental units (all maturities)8....... 6/1/78 73/4 ’ 12/23/74 6/1/78 1V4 ’ 12/23/74 12 Individual retirement accounts and Keogh (H.R. 10) plans (3 years or more)8 9............................... 6/1/78 73/4 7/6/77 6/1/78 73/4 7/6/77 Special variable ceiling rates by maturity 13 6-month money market time deposits10................. nn $ 14 2Vz years or more.................................................. 1. July 1, 1973, for mutual savings banks; July 6, 1973, for savings and loan follows: Aug. 7, 9.117; Aug. 14, 9.141; Aug. 21, 10.015; Aug. 28, 10.50 Effective associations. for all six-month money market certificates issued beginning June 5, 1980, the 2. For authorized states only, federally insured commercial banks, savings and interest rate ceilings will be determined by the discount rate (auction average) of loan associations, cooperative banks, and mutual savings banks in Massachusetts most recently issued six-month U.S. Treasury bills as follows: and New Hampshire were first permitted to offer negotiable order of withdrawal Bill rate Commercial bank ceiling Thrift ceiling (NOW) accounts on Jan. 1, 1974. Authorization to issue NOW accounts was 8.75 and above bill rate + V4 percent bill rate + Y4 percent extended to similar institutions throughout New England on Feb. 27, 1976, and 8.50 to 8.75 bill rate + V4 percent 9.00 in New York State on Nov. 10, 1978, and in New Jersey on Dec. 28, 1979. 7.50 to 8.50 bill rate + V4 percent bill rate + Vi percent 3. No separate account category. 7.25 to 7.50 7.75 bill rate + Vi percent 4. For exceptions with respect to certain foreign time deposits see the Federal Below 7.25 7.75 7.75 Reserve Bulletin for October 1962 (p. 1279), August 1965 (p. 1084), and Feb­ The prohibition against compounding interest in these certificates continues. In ruary 1968 (p. 167). addition, during the period Mfay 29, 1980, through Nov. 1,1980, commercial banks 5. No minimum denomination. Until July 1, 1979, a minimum of $1,000 was may renew maturing six-month money market time deposits for the same depositor required for savings and loan associations, except in areas where mutual savings at the thrift institution ceiling interest rate. banks permitted lower minimum denominations. This restriction was removed for 12. Effective Jan. 1, 1980, commercial banks, savings and loan associations, and deposits maturing in less than 1 year, effective Nov. 1, 1973. mutual savings banks were authorized to offer variable-ceiling nonnegotiable time 6. No minimum denomination. Until July 1, 1979, minimum denomination was deposits with no required minimum denomination and with maturities of 2Vi years $1,000 except for deposits representing funds contributed to an Individual Retire­ or more. The maximum rate for commercial banks is 3/4 percentage point below ment Account (IRA) or a Keogh (H.R. 10) plan established pursuant to the the yield on 2Vi-year U.S. Treasury securities; the ceiling rate for thrift institutions Internal Revenue Code. The $1,000 minimum requirement was removed for such is Va percentage point higher than that for commercial banks. Effective Mar. 1, accounts in December 1975 and November 1976 respectively. 1980, a temporary ceiling of 11^4 percent was placed on these accounts at com­ 7. Between July 1, 1973, and Oct. 31, 1973, there was no ceiling for certificates mercial banks; the temporary ceiling is 12 percent at savings and loan associations maturing in 4 years or more with minimum denominations of $1,000; however, and mutual savings banks. Effective for all variable ceiling nonnegotiable time the amount of such certificates that an institution could issue was limited to 5 deposits with maturities of 2Vi years or more issued beginning June 2, 1980, the percent of its total time and savings deposits. Sales in excess of that amount, as ceiling rates of interest will be determined as follows: well as certificates of less than $1,000, were limited to the 6V1 percent ceiling on Treasury yield Commercial bank ceiling Thrift ceiling time deposits maturing in 2Vi years or more. 12.00 and above 11.75 12.00 Effective Nov. 1, 1973, ceilings were reimposed on certificates maturing in 4 9.50 to 12.00 Treasury yield - V4 percent Treasury yield years or more with minimum denomination of $1,000. There is no limitation on Below 9.50 9.25 9.50 the amount of these certificates that banks can issue. Interest may be compounded on these time deposits. The ceiling rates of interest 8. Accounts subject to fixed rate ceilings. See footnote 6 for minimum denom­ at which these accounts may be offered vary biweekly. The maximum allowable ination requirements. rates in August for commercial banks were as follows: Aug. 7, 9.450; Aug. 20, 9. Effective January 1, 1980, commercial banks are permitted to pay the same 10.00. The maximum allowable rates in August for thrift institutions were as rate as thrifts on IRA and Keogh accounts and accounts of governmental units follows: Aug. 7, 9.70; Aug. 20, 10.250. when such deposits are placed in the new 2Vi-year or more variable ceiling cer­ 13. Between July 1, 1979, and Dec. 31, 1979, commercial banks, savings and tificates or in 26-week money market certificates regardless of the level of the loan associations, and mutual savings banks were authorized to offer variable Treasury bill rate. ceiling accounts with no required minimum denomination and with maturities of 10. Must have a maturity of exactly 26 weeks and a minimum denomination of 4 years or more. The maximum rate for commercial banks was IV4 percentage $10,000, and must be nonnegotiable. points below the yield on 4-year U.S. Treasury securities; the ceiling rate for thrift 11. Commercial banks, savings and loan associations, and mutual savings banks institutions was V4 percentage point higher than that for commercial banks. were authorized to offer money market time deposits effective June 1, 1978. The Note. Before Mar. 31, 1980, the maximum rates that could be paid by federally ceiling rate for commercial banks on money market time deposits entered into insured commercial banks, mutual savings banks, and savings and loan associations before June 5, 1980, is the discount rate (auction average) on most recently issued were established by the Board of Governors of the Federal Reserve System, the six-month U.S. Treasury bills. Until Mar. 15, 1979, the ceiling rate for savings Board of Directors of the Federal Deposit Insurance Corporation, and the Federal and loan associations and mutual savings banks was V4 percentage point higher Home Loan Bank Board under the provisions of 12 CFR 217, 329, and 526, than the rate for commercial banks. Beginning March 15,1979, the V4-percentage- respectively. Title II of the Depository Institutions Deregulation and Monetary point interest differential is removed when the six-month Treasury bill rate is 9 Control Act of 1980 (P.L. 96-221) transferred the authority of the agencies to percent or more. The full differential is in effect when the six-month bill rate is establish maximum rates of interest payable on deposits to the Depository Insti­ 8^4 percent or less. Thrift institutions may pay a maximum 9 percent when the six- tutions Deregulation Committee. The maximum rates on time deposits in denom­ month bill rate is between 8% and 9 percent. Also effective March 15, 1979, inations of $100,000 or more with maturities of 30-89 days were suspended in June interest compounding was prohibited on six-month money market time deposits 1970; such deposits maturing in 90 days or more were suspended in May 1973. For at all offering institutions. The maximum allowable rates in August for commercial information regarding previous interest rate ceilings on all types of accounts, see banks were as follows: Aug. 7, 9.117; Aug. 14, 9.141; Aug. 21, 10.015; Aug. 28, earlier issues of the Federal Reserve Bulletin, the Federal Home Loan Bank 10.50. The maximum allowable rates in August for thrift institutions were as Board Journal, and the Annual Report of the Federal Deposit Insurance Corpo­ ration. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics □ September 1980 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS Millions of dollars 1980 Type of transaction 1977 1978 1979 Jan. Feb. Mar. Apr. May June July U.S. Government Securities Outright transactions (excluding matched salepurchase transactions) Treasury bills 1 Gross purchases .................................................. 13,738 16,628 16,623 0 187 1,370 2,428 838 322 0 2 Gross sales ........................................................... 7,241 13,725 7,480 1,722 1,590 0 108 232 0 2,264 3 Exchange ............................................................... 0 0 0 0 0 0 0 0 274 0 4 Redemptions ........................................................ 2,136 2,033 2,900 790 400 0 0 0 0 950 Others within 1 year1 5 Gross purchases .................................................. 3,017 1,184 3,203 0 0 292 109 155 121 0 6 Gross sales ........................................................... 0 0 0 0 0 0 0 0 0 0 7 Maturity shift ....................................................... 4.499 -5,170 17,339 383 1,822 921 179 1,670 412 311 9 8 E R x e c d h e a m n p g t e i on .. s .. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.500 0 -11 2 , , 3 6 0 0 8 0 -403 0 -2,177 0 -809 0 -459 0 -5,276 0 -1,479 0 -788 0 1 to 5 years 10 Gross purchases ................................................... 2,833 4,188 2,148 0 0 355 373 405 465 0 11 Gross sales ........................................................... 0 0 0 0 0 0 0 0 0 0 1 1 3 2 M Ex a c t h u a ri n t g y e sh .. i . ft .. .. . . . . .. . . . . . . . .. . . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . . .. . . . . -6,649 -178 -12 7 , , 6 5 9 0 3 8 -3 4 8 0 3 3 - 1 3 ,3 7 7 4 7 -9 8 2 0 1 9 -1 4 7 5 9 9 -1 3 ,3 ,0 0 0 2 0 - 1 4 ,4 1 7 2 9 -3 7 1 8 1 8 5 to 10 years 14 Gross purchases ......................................... 758 1,526 523 0 0 107 62 133 164 0 15 Gross sales .......................................................... 0 0 0 0 0 0 0 0 0 0 1 17 6 M Ex a c t h u a r n it g y e sh .. i . f . t . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584 2,803 -4 2 ,6 ,1 4 8 6 1 0 0 -1,3 4 6 5 4 0 0 0 0 0 1 - ,3 2 0 5 0 0 0 0 0 Over 10 years 18 Gross purchases ......................................... 553 1,063 454 0 0 81 64 216 129 0 19 Gross sales .......................................................... 0 0 0 0 0 0 0 0 0 0 2 21 0 M Ex a c t h u a r n it g y e sh .. i . f . t .. .. . . . . . . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . . 1,565 2,545 1,619 0 0 0 - 3 8 5 4 0 0 0 0 0 -3 9 4 7 2 6 0 0 0 0 All maturities1 22 Gross purchases ......................................... 20,898 24,591 22,950 0 187 2,206 3,036 1,747 1,200 0 23 Gross sales .......................................................... 7,241 13,725 7,480 1,722 1,590 0 108 232 0 2,264 24 Redemptions ........................................................ 4,636 2,033 5,500 790 400 0 0 0 0 950 Matched sale-purchase transactions 25 Gross sales .......................................................... 425,214 511,126 626,403 53,025 54,541 55,658 57,316 49,934 50,590 48,370 26 Gross purchases ......................................... 423,841 510,854 623,245 55,557 54,584 54,636 57,479 50,965 52,076 46,023 Repurchase agreements 27 Gross purchases ......................................... 178,683 151,618 107,374 5,704 5,407 6,682 3,029 7,717 12,810 10,719 28 Gross sales ............................................... 180,535 152,436 107,291 6,872 4,787 6,379 3,952 4,811 15,258 10,110 29 Net change in U.S. government securities.......... 5,798 7,743 6,896 -1,148 -1,140 1,486 2,168 5,452 238 -4,952 Federal Agency Obligations Outright transactions 30 Gross purchases ......................................... 1,433 301 853 0 0 0 668 0 0 0 31 Gross sales .......................................................... 0 173 399 0 0 0 0 0 0 0 32 Redemptions ........................................................ 223 235 134 0 5 2 0 2 2 Repurchase agreements 33 Gross purchases .................................................. 13,811 40,567 37,321 3,049 2,403 1,883 483 1,611 3,035 1,737 34 Gross sales .......................................................... 13,638 40,885 36,960 3,543 2,372 1,834 563 1,258 3,351 1,242 35 Net change in federal agency obligations............ 1,383 -426 681 -494 31 45 586 353 -318 492 Bankers Acceptances 36 Outright transactions, net...................................... -196 0 0 0 0 0 0 0 0 0 37 Repurchase agreements, net ................................ 159 -366 116 -704 205 -34 -171 366 7 -64 38 Net change in bankers acceptances...................... -37 -366 116 -704 205 -34 -171 366 7 -64 39 Total net change in System Open Market Account ................................................. 7,143 6,951 7,693 -2,345 -903 1,497 2,582 6,171 -73 -4,523 1. Both gross purchases and redemptions include special certificates created Note. Sales, redemptions, and negative figures reduce holdings of the System when the Treasury borrows directly from the Federal Reserve, as follows (millions Open Market Account; all other figures increase such holdings. Details may not of dollars): September 1977, 2,500; March 1979, 2,600. add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Reserve Banks A ll 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month Account 1980 1980 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 June July Aug. Consolidated condition statement Assets 1 Gold certificate account .................................................... 11,171 11,172 11,172 11,171 11,171 11,172 11,172 11,172 2 Special drawing rights certificate account...................... 3,118 3,118 3,268 3,268 3,268 3,018 3,118 3,268 3 Coin ...................................................................................... 391 400 412 407 402 408 399 405 Loans 4 Member bank borrowings.............................................. 2,620 464 921 821 2,572 215 562 1,515 5 Other ................................................................................ 0 0 0 0 0 0 0 0 Acceptances 6 Bought outright .............................................................. 0 0 0 0 0 0 0 0 7 Held under repurchase agreements ............................ 0 0 0 0 0 373 310 277 Federal agency obligations 8 Bought outright .............................................................. 8,873 8,873 8,873 8,873 8,873 8,875 8,873 8,873 9 Held under repurchase agreements ............................ 0 0 0 0 0 37 531 482 U.S. government securities Bought outright 10 Bills .............................................................................. 45,300 35,055 40,538 45,189 43,179 49,781 44,220 43,503 11 Certificates—Special .................................................. 0 0 0 0 0 0 0 0 12 Notes ............................................................................ 58,174 58,174 58,174 58,703 58,703 58,174 58,174 58,703 13 Bonds ............................................................................ 16,103 16,103 16,103 16,808 16,808 16,103 16,103 16,808 14 Total1 ............................................................................ 119.577 109.332 114.815 120.700 118.690 124,058 118,497 119,014 15 Held under repurchase agreements ............................ 0 0 0 0 0 457 1,066 834 16 Total U.S. government securities.................................... 119.577 109.332 114.815 120.700 118.690 124,515 119,563 119,848 17 Total loans and securities.......................................... 131,070 118,669 124,609 130,394 130,135 134,015 129,839 130,995 18 Cash items in process of collection.................................. 9,923 13,013 11,992 13,598 10,629 9,375 8,312 9,721 19 Bank premises .................................................................... 445 447 446 446 449 441 445 449 Other assets 20 Denominated in foreign currencies2............................ 2,215 2,236 2,134 2,135 2,140 2,339 2,201 2,119 21 All other .......................................................................... 3,264 3,233 3,328 2,304 2,576 2,779 3,022 2,761 22 Total assets ................................................................ 161,597 152,288 157,361 163,723 160,770 163,547 158,508 162,890 Liabilities 23 Federal Reserve notes........................................................ 115,816 116,748 117,205 116,719 116,874 114,502 115,654 116,925 Deposits Reserve accounts 24 Member banks ............................................................ 31,183 20,882 25,232 32,740 28,782 33,187 27,548 29,338 25 Edge Act corporations .............................................. 463 313 352 367 508 397 372 342 26 U.S. agencies and branches of foreign banks........ 0 0 0 0 0 28 0 0 27 Total............................................................................... 31,646 21,195 25,584 33,107 29,290 33,612 27,920 29,680 28 Special Deposits—Credit Restraint Program ............ 0 0 0 0 0 578 0 0 29 U.S. Treasury—General account ................................ 3,073 2,762 3,473 2,491 3,749 3,199 3,954 2,742 30 Foreign—Official accounts ............................................ 301 285 237 225 199 691 436 336 31 Other ..................................................................................... 415 588 398 377 382 754 500 383 32 Total deposits ............................................................ 35,435 24,830 29,692 36,200 33,620 38,834 32,810 33,141 33 Deferred availability cash items ...................................... 5,898 6,450 6,209 6,181 5,909 5,208 5,504 6,254 34 Other liabilities and accrued dividends3.......................... 1,880 1,682 1,695 2,059 1,803 2,250 1,957 1,879 35 Total liabilities ........................................................... 159,029 149,710 154,801 161,159 158,206 160,794 155,925 158,199 Capital Accounts 36 Capital paid in .................................................................... 1,175 1,176 1,176 1,177 1,180 1,169 1,175 1,180 37 Surplus ................................................................................... 1,145 1,145 1,145 1,145 1,145 1,145 1,145 1,145 38 Other capital accounts ...................................................... 248 257 239 242 239 439 263 366 39 Total liabilities and capital accounts........................... 161,597 152,288 157,361 163,723 160,770 163,547 158,508 160,890 40 Memo: Marketable U.S. government securities held in custody for foreign and international account........ 82,246 84,350 84,949 82,510 84,408 82,226 82,862 84,331 Federal Reserve note statement 41 Federal Reserve notes outstanding (issued to Bank) .. 134,469 129,121 132,977 134,415 134,749 132,861 134,545 134,781 Collateral held against notes outstanding 42 Gold certificate account ................................................ 11,171 11,172 11,172 11,171 11,171 11,172 11,172 11,172 43 Special drawing rights certificate account.................. 3,118 3,118 3,268 3,268 3,268 3,018 3,118 3,268 44 Eligible paper .................................................................. 1,056 28 249 152 879 29 86 553 45 U.S. government and agency securities...................... 119,124 114,803 118,288 119,824 119,431 118,642 120,169 119,788 46 Total collateral ........................................................... 134,469 129,121 132,977 134,415 134,749 132,861 134,545 134,871 1. Includes securities loaned—fully guaranteed by U.S. government securities 2. Beginning Dec. 29,1978, such assets are revalued monthly at market exchange pledged with Federal Reserve Banks—and excludes (if any) securities sold and rates. scheduled to be bought back under matched sale-purchase transactions. 3. Includes exchange-translation account reflecting, beginning Dec. 29, 1978, the monthly revaluation at market exchange rates of foreign-exchange commit­ ments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics □ September 1980 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month Type and maturity groupings 1980 1980 July 30 Aug. 6 Aug. 13 Aug. 20 Aug. 27 June 30 July 31 Aug. 30 1Loans—Total ............................................................ 2,620 464 921 821 2,572 215 562 1,515 2 Within 15 days....................................................... 2,618 461 918 820 2,571 211 560 1,510 3 16 days to 90 days.................................................. 2 3 3 1 1 4 2 5 4 91 days to 1 year.................................................... 0 0 0 0 0 0 0 0 5Acceptances—Total .................................................... 0 0 0 0 0 373 310 277 6 Within 15 days....................................................... 0 0 0 0 0 373 310 277 7 16 days to 90 days .................................................. 0 0 0 0 0 0 0 0 8 91 days to 1 year.................................................... 0 0 0 0 0 0 0 0 9U.S. government securities—Total............................. 119,577 109,332 114,815 120,700 118,690 124,515 119,563 119,848 10 Within 15 days1 ..................................................... 3,312 5,700 6,097 2,746 2,365 3,633 4,693 3,394 11 16 days to 90 days.................................................. 25,461 12,619 19,022 22,647 21,876 28,039 21,908 20,302 12 91 days to 1 year.................................................... 29,647 29,379 28,062 31,293 30,435 31,686 31,328 32,139 13 Over 1 year to 5 years........................................... 33,418 33,895 33,895 36,037 36,037 33,418 33,895 36,037 14 Over 5 years to 10 years......................................... 13,601 13,601 13,601 13,135 13,135 13,601 13,601 13,134 15 Over 10 years......................................................... 14,138 14,138 14,138 14,842 14,842 14,138 14,138 14,842 16Federal agency obligations—Total ............................. 8,873 8,873 8,873 8,873 8,873 8,912 9,404 9,355 17 Within 15 days1 ..................................................... 83 0 111 207 287 223 615 769 18 16 days to 90 days.................................................. 761 825 714 617 606 518 761 607 19 91 days to 1 year.................................................... 1,310 1,330 1,330 1,330 1,250 1,499 1,310 1,249 20 Over 1 year to 5 years........................................... 4,724 4,770 4,770 4,770 4,802 4,663 4,770 4,802 21 Over 5 years to 10 years......................................... 1,251 1,204 1,204 1,205 1,184 1,265 1,204 1,184 22 Over 10 years......................................................... 744 744 744 744 744 744 744 744 i. 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. 1980' Bank group, or type of customer 1977' 1978' 1979' Mar. Apr. May June July Debits to demand deposits1 (seasonally adjusted) 1 All commercial banks................................................ 34,322.8 40,297.8 49,750.7 59,257.1 57,876.9 61,354.5 61,574.7 63,088.5 2 Major New York City banks...................................... 13,860.6 15,008.7 18,512.2 22,936.8 23,792.6 25,508.0 24,788.9 25,538.8 3 Other banks .............................................................. 20,462.2 25,289.1 31,238.5 36,320.3 34,084.2 35,846.4 36,785.7 37,549.8 Debits to savings deposits2 (not seasonally adjusted) 4 ATS/NOW3............................................................... 5.5 17.1 83.3 125.4 167.7 137.8 158.7 161.6 5 Business4 ................................................................... 21.7 56.7 77.4 84.8 86.8 79.0 80.2 85.1 6 Others5 ..................................................................... 152.3 359.7 557.6 679.0 720.7 604.8 587.5 633.7 7 All accounts .............................................................. 179.5 432.9 718.2 889.2 975.2 821.6 826.4 880.4 Demand deposit turnover1 (seasonally adjusted) 8 All commercial banks................................................ 129.2 139.4 163.4 190.4 196.2 202.9 201.5 203.7 9 Major New York City banks...................................... 503.0 541.9 646.2 738.0 805.9 871.8 817.1 844.5 10 Other banks .............................................................. 85.9 96.8 113.2 129.6 128.4 131.2 133.7 134.4 Savings deposit turnover2 (not seasonally adjusted) 11 ATS/NOW3................................................................ 6.5 7.0 7.8 9.1 12.1 9.9 10.2 9.7 12 Business4 ................................................................... 4.1 5.1 7.2 9.4 10.2 8.9 8.6 8.5 13 Others5 ..................................................................... 1.5 1.7 2.9 3.9 4.2 3.6 3.4 3.6 14 All accounts .............................................................. 1.7 1.9 3.3 4.5 5.1 4.3 4.2 4.3 1. Represents accounts of individuals, partnerships, and corporations, and of Note: Historical data for the period 1970 through June 1977 have been esti­ states and political subdivisions. mated; these estimates are based in part on the debits series for 233 SMSA’S, 2. Excludes special club accounts, such as Christmas and vacation clubs. which were available through June 197/. Back data are available from Publications 3. Accounts authorized for negotiable orders of withdrawal (NOW) and accounts Services, Division of Administrative Services, Board of Governors of the Federal authorized for automatic transfer to demand deposits (ATS). ATS data availability Reserve System, Washington, D.C. 20551. Debits and turnover data for savings starts with December 1978. deposits are not available before July 1977. 4. Represents corporations and other profit-seeking organizations (excluding commercial banks but including savings and loan associations, mutual savings banks, credit unions, the Export-Import Bank, and federally sponsored lending agencies). 5. Savings accounts other than NOW; business; and, from December 1978, ATS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Aggregates A13 1.21 MONEY STOCK MEASURES AND COMPONENTS Billions of dollars, averages of daily figures 1980 Item 1976 1977 1978 1979 Dec. Dec. Dec. Dec. Feb. Mar. Apr. May June July Seasonally adjusted Measures1 1 M-1A ........................................................ 305.0 328.4 351.6 369.7 373.7 373.1 367.6 367.8 371.3 373.7 2 M-1B ........................................................ 307.7 332.5 359.9 386.4 391.3 391.2 386.6 386.2' 390.9 394.5 3 M-2 ...................................................... 1,166.7 1,294.1 1,401.5 1,525.5 1,546.7 1,553.1 1,549.9' 1,562.2' 1,585.9' 1,609.2 4 M-3 .............................. .......................... 1,299.7 1,460.3 1,623.6 1,775.5 1,804.5 1,811.1 1,811.1 1,824.4' 1,844.7' 1,865.0 5 L2 .............................................................. 1,523.5 1,715.5 1,927.7 2,141.1 2,175.9 2,190.1' 2,200.7 2,216.5' 2,230.1' n.a. Components 6 Currency .................................................. 80.7 88.7 97.6 106.3 108.1 108.9 109.0 110.1 111.0 112.0 7 Demand deposits .............. .................. 224.4 239.7 253.9 263.4 265.6 264.2 258.6 257.7' 260.3 261.6 8 Savings deposits ...................................... 447.7 486.5 476.1 416.7 403.1 391.9 377.3 372.7 381.4 393.6 9 Small-denomination time deposits3___ 396.6 454.9 533.8 656.5 671.4 687.6 708.3 718.0' 719.6 717.3 10 Large-denomination time deposits4___ 118.0 145.2 194.7 219.4 228.6 230.7 234.2 235.0 230.7 226.6 Not seasonally adjusted Measures1 11 M-1A ........................................................ 313.5 337.2 360.9 379.2 365.5 366.3 370.9 362.2 370.1 375.6 12 M-1B ........................................................ 316.1 341.3 369.3 396.0 383.1 384.4 389.9 380.7' 389.9' 396.7 13 M-2 ............................................................ 1,169.1 1,295.9 1,403.7 1,527.3 1,538.6 1,550.0 1,558.1 1,559.3' 1,587.7' 1,614.7 14 M-3 ............................................................ 1,303.8 1,464.5 1,629.2 1,780.8 1,796.6 1,808.8 1,817.3' 1,820.3' 1,844.1' 1,868.0 15 L2 .............................................................. 1,527.1 1,718.5 1,931.1 2,143.6 2,173.3 2,190.8 2,208.7' 2,210.3' 2,228.4 n.a. Components 16 Currency .................................................. 82.1 90.3 99.4 108.2 106.8 107.9 108.7 109.9 111.1 112.7 17 Demand deposits .................................... 231.3 247.0 261.5 271.0 258.7 258.4 262.2 252.2 259.0 263.0 18 Other checkable deposits5 .................... 2.7 4.1 8.3 16.7 17.6 18.0 19.0 18.6' 19.8' 21.0 19 Overnight RPs and Eurodollars6.......... 13.6 18.6 23.9 25.3 27.1 24.5 20.3 21.3 22.5 26.0 20 Money market mutual funds................ 3.4 3.8 10.3 43.6 56.7 60.9 60.4 66.8 74.2 80.6 21 Savings deposits ...................................... 444.9 483.2 472.9 413.8 400.0 392.2 379.7 374.4 383.6 396.5 22 Small-denomination time deposits3___ 393.5 451.3 529.8 651.5 674.6 690.9 710.9 719.1' 720.4 717.9 23 Large-denomination time deposits4 .... 119.7 147.7 198.2 223.0 228.8 231.6 232.1 233.8 228.3 224.2 1. Composition of the money stock measures is as follows: 2. L: M-3 plus other liquid assets such as term Eurodollars held by U.S. residents M-1A: Averages of daily figures for (1) demand deposits at all commercial banks other than banks, bankers acceptances, commercial paper, Treasury bills and other other than those due to domestic banks, the U.S. government, and foreign banks liquid Treasury securities, and U.S. savings bonds. and official institutions less cash items in the process of collection and Federal 3. Small-denomination time deposits are those issued in amounts of less than Reserve float; and (2) currency outside the Treasury, Federal Reserve Banks, and $100,000. the vaults of commercial banks. 4. Large-denomination time deposits are those issued in amounts of $100,000 M-1B: M-1A plus negotiable order of withdrawal and automatic transfer service or more and are net of the holdings of domestic banks, thrift institutions, the U.S. accounts at banks and thrift institutions, credit union share draft accounts, and government, money market mutual funds, and foreign banks and official institu­ demand deposits at mutual savings banks. tions. M-2: M-1B plus savings and small-denomination time deposits at all depositary 5. Includes ATS and NOW balances at all institutions, credit union share draft institutions, overnight repurchase agreements at commercial banks, overnight balances, and demand deposits at mutual savings banks. Eurodollars held by U.S. residents other than banks at Caribbean branches of 6. Overnight (and continuing contract) RPs are those issued by commercial member banks, and money market mutual fund shares. banks to the nonbank public, and overnight Eurodollars are those issued by Ca­ M-3: M-2 plus large-denomination time deposits at all depositary institutions ribbean branches of member banks to U.S. nonbank customers. and term RPs at commercial banks and savings and loan associations. Note. Latest monthly and weekly figures are available from the Board’s H.6(508) release. Back data are available from the Banking Section, Division of Research and Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics □ September 1980 1.22 AGGREGATE RESERVES AND DEPOSITS Member Banks Billions of dollars, averages of daily figures 1980 1977 1978 1979 Dec. Dec. Dec. Feb. Apr. May Juner July Seasonally adjusted 1 Reserves1 ......................................................................................... 36.00 41.16 43.57 43.44 43.35 43.69' 44.85' 44.46 43.98 42.80 2 Nonborrowed ................................................................................................ 35.43 40.29 42.10 42.20 41.70 40.86' 42.40' 43.44 43.60 42.40 3 Required ........................................................................................................ 35.81 40.93 43.13 43.19 43.14 43.48' 44.65' 44.27' 43.76 42.51 4 Monetary base2 ............................................................................................ 127.6 142.2 153.8 154.7 155.6 156.7' 157.9 158.5 158.9 158.8 5 Deposits subject to reserve requirements3......................................... 567.6 616.1 644.4 643.7 647.2 649.1 655.4 656.8 658.0 658.5 6 Time and savings.......................................................................................... 385.6 428.8 451.1 451.9 454.4 457.9 464.2 467.7 467.9 467.0 Demand 7 Private ........................................................................................................ 178.5 185.1 191.5 189.5 190.9 189.4 188.7 187.3 188.4 189.1 8 U.S. government ...................................................................................... 3.5 2.2 1.8 2.3 1.9 1.8 2.4 1.8 1.7 2.5 Not seasonally adjusted 9 Monetary base2 ............................................................................................ 129.8 144.6 156.3 155.9 154.0 154.9 157.5' 157.8 158.6 159.6 10 Deposits subject to reserve requirements3......................................... 575.3 624.0 652.6 652.1 643.9 648.0 657.7 651.5 656.9 658.2 11 Time and savings.......................................................................................... 386.4 429.6 452.0 454.6 455.8 460.6 464.7 467.7 467.4 466.0 Demand 12 Private ........................................................................................................ 185.1 191.9 198.6 195.4 186.2 185.5 190.4 182.1 187.2 190.0 13 U.S. government ...................................................................................... 3.8 2.5 2.0 2.1 1.8 1.9 2.6 1.7 2.3 2.2 1. Member bank reserve series reflect actual reserve requirement percentages 2. Includes total reserves (member bank reserve balances in the current week with no adjustment to eliminate the effect of changes in Regulations D and M. plus vault cash held two weeks earlier); currency outside the U.S. Treasury, Federal Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percentage Reserve Banks, and the vaults of commercial banks; and vault cash of nonmember points was imposed on time deposits of $100,000 or more. This action increased banks. required reserves approximately $3.0 billion in the week beginning Nov. 16, 1978. 3. Includes total time and savings deposits and net demand deposits as defined Effective Oct. 11, 1979, an 8 percentage point marginal reserve requirement was by Regulation D. Private demand deposits include all demand deposits except imposed on “managed liabilities” (liabilities that have been actively used to finance those due to the U.S. government, less cash items in process of collection and rapid expansion in bank credit). On Oct. 25, 1979, reserves of Edge Act corpo­ demand balances due from domestic commercial banks. rations were included in member bank reserves. This action raised required re­ serves $318 million. Effective Mar. 12, 1980, the marginal reserve requirement of Note. Latest monthly and weekly figures are available from the Board’s 8 percentage points was raised to 10 percentage points. In addition the base upon H.3(502) statistical release. Back data and estimates of the impact on required which the marginal reserve requirement is calculated was reduced. This action reserves and changes in reserve requirements are available from the Banking increased required reserves about $1,693 million in the week ending April 2, 1980. Section, Division of Research and Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Aggregates A15 1.23 LOANS AND SECURITIES All Commercial Banks' Billions of dollars; averages of Wednesday figures 1980 1980 Category 1977 D 19 e 7 c 8 . 1979 1977 1978 1979 Dec. Dec. Dec. Juner July Juner July Seasonally adjusted Not seasonally adjusted 1 Total loans and securities2........................ 891.1 1,014.33 1,132.54 1,152.1 1,159.4 899.1 1,023.83 1,143.04 1,155.7 1,160.9 2 U.S. Treasury securities .............................. 99.5 93.4 93.8 97.0 100.8 100.7 94.6 95.0 97.4 99.0 3 Other securities ............................................ 159.6 173.I3 191.5 201.5 204.2 160.2 173.93 192.3 202.1 204.0 4 Total loans and leases2................................ 632.1 747.83 847.24 853.6 854.4 638.3 755.43 855.74 856.4 858.0 5 Commercial and industrial loans............ 211.2s 246.5 6 290.54 295.5 296.0 212.6s 248.26 292.44 297.1 297.5 6 Real estate loans ...................................... 175.25 210.5 242.44 250.2 251.3 175.55 210.9 242.94 250.0 251.6 7 Loans to individuals.................................. 138.2 164.9 182.7 174.5 172.4 139.0 165.9 183.8 174.0 172.8 8 Security loans ............................................ 20.6 19.4 18.3 15.8 15.0 22.0 20.7 19.6 15.9 14.5 9 Loans to nonbank financial institutions . 25.8 s 27.17 30.34 27.9 28.0 26.3 s 27.67 30.84 28.1 28.4 10 Agricultural loans...................................... 25.8 28.2 31.0 32.4 32.6 25.7 28.1 30.8 32.6 33.1 11 Lease financing receivables .................... 5.8 7.4 9.5 10.5 10.6 5.8 7.4 9.5 10.5 10.6 12 All other loans .......................................... 29.5 43.63 42.6 46.7 48.5 31.5 46.63 45.9 48.1 49.4 Memo: 13 Total loans and securities plus loans sold2*9 895.9 1,018.I3 1,135.34*8 1,154.9 1,162.2 903.9 1,027.63 1,145.74'8 1,158.5 1,163.7 14 Total loans plus loans sold2-9...................... 636.9 751.63 850.004-8 856.4 857.2 643.0 759.23 858.44-8 859.0 860.7 15 Total loans sold to affiliates9...................... 4.8 3.8 2.8« 2.8 2.8 4.8 3.8 2.88 2.8 2.8 16 Commercial and industrial loans plus loans sold9 ........................................................ 213.9 s 248.5^.10 292.34-8 297.4 297.9 215.3s 250.1610 294.2 4-8 299.0 299.3 17 Commercial and industrial loans sold9 .. 2.7 1.910 1.88 1.9 1.9 2.7 1.910 1.88 1.9 1.9 18 Acceptances held ...................................... 7.5 6.8 8.5 9.0 9.3 8.6 7.5 9.4 8.9 9.0 19 Other commercial and industrial loans .. 203.7 s 239.7 282.0 286.5 286.6 203.9s 240.9 283.1 288.2 288.4 20 To U.S. addressees11 ............................ 193.8 s 226.6 263.2 266.9 267.5 193.7 s 226.5 263.2 268.6 269.0 21 To non-U.S. addressees ...................... 9.9 s 13.1 18.8 19.6 19.4 10.3 s 14.4 19.8 19.6 19.4 22 Loans to foreign banks................................ 13.5 21.2 18.7 19.6 20.1 14.6 23.0 20.1 20.2 20.9 23 Loans to commercial banks in the United States...................................... 54.1 57.3 77.8 93.7 96.3 56.9 60.3 81.9 92.5 91.8 1. Includes domestic chartered banks; U.S. branches, agencies, and New York 7. As of Dec. 1, 1978, nonbank financial loans were reduced $0.1 billion as the investment company subsidiaries of foreign banks; and Edge Act corporations. result of reclassification. 2. Excludes loans to commercial banks in the United States. 8. As of Dec. 1, 1979, loans sold to affiliates were reduced $800 million and 3. As of Dec. 31, 1978, total loans and securities were reduced by $0.1 billion. commercial and industrial loans sold were reduced $700 million due to corrections “Other securities” were increased by $1.5 billion and total loans were reduced by of two banks in New York City. $1.6 billion largely as the result of reclassifications of certain tax-exempt obliga­ 9. Loans sold are those sold outright to a bank’s own foreign branches, non­ tions. Most of the loan reduction was in “all other loans.” consolidated nonbank affiliates of the bank, the bank's holding company (if not 4. As of Jan. 3, 1979, as the result of reclassifications, total loans and securities a bank), and nonconsolidated nonbank subsidiaries of the holding company. and total loans were increased by ^$0.6 billion. Business loans were increased by 10. As of Dec. 31, 1978, commercial and industrial loans sold outright were $0.4 billion and real estate loans by $0.5 billion. Nonbank financial loans were increased $0.7 billion as the result of reclassifications, but $0.1 billion of this reduced by $0.3 billion. amount was offset by a balance sheet reduction of $0.1 billion as noted above. 5. As of Dec. 31, 1977, as the result of loan reclassifications, business loans 11. United States includes the 50 states and the District of Columbia. were reduced $0.2 billion and nonbank financial loans $0.1 billion; real estate loans were increased $0.3 billion. Note. Data are prorated averages of Wednesday data for domestic chartered 6. As of Dec. 31, 1978, commercial and industrial loans were reduced $0.1 banks, and averages of current and previous month-end data for foreign-related billion as a result of reclassifications. institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics □ September 1980 1.24 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series Billions of dollars except for number of banks 1980 Account Oct. Nov. Jan. Feb. Mar. Apr. May June July Aug. Domestically Chartered Commercial Banks1 1 Loans and investments ..................... 1,118.4 1,118.0 1,143.3 1.133.4 1,143.6 1,142.8 1,151.9 1,150.5 1,153.2 1.158.3 1.172.5 2 Loans, gross .................................... 839.0 836.7 860.1 849.7 857.0 854.6 861.2 857.1 857.0 857.4 866.9 3 Interbank ...................................... 54.0 52.6 62.9 57.2 58.0 55.6 62.4 67.4 66.6 66.8 67.8 4 Commercial and industrial ............. 249.8 248.0 253.4 252.6 256.2 258.3 259.2 256.0 256.8 256.4 258.7 5 Other .......................................... 535.3 536.1 543.7 540.0 542.9 540.7 539.6 533.7 533.6 534.1 540.3 6 U.S. Treasury securities .................... 91.5 92.1 92.5 92.4 93.6 94.2 93.5 93.9 95.2 97.6 100.3 7 Other securities ............................... 187.8 189.3 190.7 191.2 192.9 193.9 197.2 199.5 201.0 203.3 205.3 8 Cash assets, total ............................. 160.7 158.1 146.4 148.4 149.9 153.8 168.2 172.4 150.4 154.1 148.7 9 Currency and coin ........................ 16.6 18.2 17.9 17.3 17.1 16.8 16.8 17.8 17.4 17.7 18.4 10 Reserves with Federal Reserve Banks 34.1 34.7 28.4 28.3 30.7 34.2 33.2 37.9 29.5 32.1 28.9 11 Balances with depository institutions 45.5 43.7 37.7 43.7 43.4 43.1 49.7 47.9 45.4 44.7 45.6 12 Cash items in process of collection .. 64.6 61.5 62.4 59.0 58.7 59.8 68.6 68.9 58.0 59.6 55.8 13 Other assets ..................................... 57.8 59.3 61.2 63.1 65.0 66.1 73.3 72.7 77.4 77.0 82.6 14 Total assets/total liabilities and capital . 1,336.9 1,335.4 1,351.0 1,344.9 1,358.4 1,362.7 1,393.5 1,395.7 1,381.0 1.389.4 1,403.8 15 Deposits .......................................... 1,023.6 1,017.6 1,030.6 1.022.5 1,028.9 1,032.1 1,060.0 1,057.3 1,044.7 1,050.1 1.059.5 16 Demand ....................................... 376.6 365.1 377.6 362.4 358.7 354.5 377.4 370.2 358.0 363.6 363.4 17 Savings ......................................... 207.6 205.0 203.4 200.6 199.9 196.5 189.3 192.3 197.8 205.7 208.7 18 Time ............................................ 439.4 447.4 449.7 459.6 470.3 481.1 493.4 494.8 488.9 480.8 487.4 19 Borrowings ..................................... 137.4 135.6 140.5 143.1 145.1 142.1 147.0 154.1 152.5 158.6 160.1 20 Other liabilities................................ 74.0 78.5 74.1 77.5 81.6 84.2 81.2 78.5 76.6 74.8 76.2 21 Residual (assets less liabilities) .......... 101.9 103.7 105.8 101.8 102.9 104.2 105.2 105.7 107.1 106.0 108.0 Memo: 22 U.S. Treasury note balances included in borrowing.................................. 8.4 5.0 12.8 15.0 9.4 14.3 5.1 13.1 7.6 8.7 23 Number of banks............................. 14,605 14,608 14,610 14,594 14,609 14,626 14,629 14,639 14,646 14,658 14,666 All Commercial Banking Institutions2 24 Loans and investments ..................... 1,200.3 1,200.9 1,229.8 1,217.7 1,230.8 1,231.8 1,240.9 1,239.2 1,241.9 25 Loans, gross .................................... 917.6 916.2 943.1 930.7 941.0 940.2 946.8 942.4 942.2 26 Interbank ..................................... 71.6 71.8 80.5 75.4 78.3 75.2 82.1 88.0 84.8 27 Commercial and industrial ............. 288.3 287.9 295.0 295.1 298.5 301.7 302.0 298.1 297.8 28 Other .......................................... 557.7 556.6 567.6 560.1 564.2 563.4 562.7 556.2 559.6 29 U.S. Treasury securities .................... 93.1 93.7 94.5 94.3 95.5 96.2 95.5 95.9 97.2 30 Other securities ............................... 189.5 190.9 192.2 192.7 194.4 195.4 198.6 201.0 202.4 31 Cash assets, total ............................. 179.9 176.7 169.5 166.5 168.8 174.0 187.3 190.7 172.0 32 Currency and coin ........................ 16.6 18.2 17.9 17.3 17.1 16.8 16.8 17.8 17.4 33 Reserves with Federal Reserve Banks 34.9 35.6 29.0 28.9 31.3 35.0 33.9 38.7 30.3 34 Balances with depository institutions 62.5 60.0 59.0 59.8 60.5 61.1 66.6 63.8 64.6 35 Cash items in process of collection .. 65.9 62.9 63.7 60.4 60.0 61.2 69.9 70.4 59.7 36 Other assets..................................... 76.5 78.5 81.0 83.7 91.6 99.0 98.1 105.5 37 Total assets/total liabilities and capital . 1,456.7 1,456.1 1.480.3 1.468.0 1,486.5 1.497.5 1,527.2 1.528.0 1,519.4 38 Deposits .......................................... 1,062.6 1,058.5 1.076.3 1.063.1 1,070.0 1.073.5 1,101.1 1.097.1 1,088.7 39 Demand ....................................... 394.2 384.9 400.5 380.5 376.8 373.6 396.6 387.7 379.1 40 Savings ......................................... 208.3 205.9 204.3 201.3 200.3 196.7 189.5 192.6 198.2 41 Time ............................................ 460.1 467.7 471.5 481.3 492.9 503.2 515.0 516.9 511.4 42 Borrowings ..................................... 171.6 169.5 180.5 179.5 182.9 186.5 190.8 196.3 197.9 43 Other liabilities................................. 118.5 122.2 115.4 121.1 128.4 130.9 127.8 126.6 124.1 44 Residual (assets less liabilities) .......... 104.0 105.8 108.1 104.2 105.2 106.5 107.4 108.1 108.7 Memo: 45 U.S. Treasury note balances included in borrowing.................................. 8.4 5.0 12.8 15.0 8.1 9.4 14.3 5.1 13.1 46 Number of banks............................. 14,963 14,969 14,975 14,962 14,978 14,995 15,004 15,016 15,043 1. Domestically chartered commercial banks include all commercial banks in the Note. Figures are partly estimated. They include all bank-premises subsidiaries United States except branches of foreign banks; included are member and non­ and other significant majority-owned domestic subsidiaries. Data for domestically member banks, stock savings banks, and nondeposit trust companies. chartered commercial banks are for the last Wednesday of the month; data for 2. Commercial banking institutions include domestically chartered commercial other banking institutions are for last Wednesday except at end of quarter, when banks, branches and agencies of foreign banks, Edge Act and Agreement cor­ they are for the last day of the month. porations, and New York state foreign investment corporations. 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 .................................... 827,6% 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 Net ........................................................................ 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 80,583 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 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,%5 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 ..................................................................... 484,467 507,324 536,899 569,020 276,2% 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 investment, gross...................................... 144,000 144,597 152,514 157,464 207,085 221,8% 239,265 256,749 Loans 18 Gross ..................................................................... 102,277 102,117 110,243 115,736 135,766 147,694 162,543 175,894 19 Net ........................................................................ 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 Total assets/total liabilities1......................................... 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 U.S. government .................................................... 429 371 1,241 1,158 917 813 1,8% 2,315 26 Interbank................................................................ 19,295 20,568 22,346 23,117 1,619 1,520 1,849 1,669 27 Other ..................................................................... 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 Other ..................................................................... 75,178 76,827 80,216 85,301 132,993 144,581 153,887 165,502 30 Borrowings ................................................................ 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 Memo: Number of banks........................................... 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 Gross ..................................................................... 16,336 20,865 22,686 26,747 152,103 168,559 185,230 202,641 35 Net ........................................................................ 16,209 20,679 22,484 26,548 146,840 162,694 178,8% 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 Cash assets ............................................................ 6,4% 8,330 9,458 9,360 27,127 28,497 34,367 32,%7 39 Total assets/total liabilities1......................................... 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 U.S. government .................................................... 4 8 10 8 921 822 1,907 2,323 42 Interbank................................................................ 1,277 1,504 1,868 2,067 2,8% 3,025 3,718 3,736 43 Other ..................................................................... 3,236 3,588 4,073 4,814 72,884 74,203 84,518 85,946 Time and savings 44 Interbank................................................................ 1,041 1,164 1,089 1,203 1,997 2,152 2,063 2,123 45 Other ..................................................................... 7,766 8,392 9,802 11,831 140,760 152,974 163,690 177,334 46 Borrowings ................................................................ 4,842 7,056 6,908 8,413 8,401 11,212 11,293 14,649 Al Total capital accounts ................................................ 818 893 917 %2 18,360 19,812 20,823 22,346 48 Memo: Number of banks........................................... 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 1980 1.26 COMMERCIAL BANK ASSETS AND LIABILITIES Detailed Balance Sheet, September 30, 1978 Millions of dollars, except for number of banks Member banks1 Insured Non­ Asset account commercial Large banks member banks Total All other banks1 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 U.S. Treasury...................................................................................... 95,068 65,764 9,524 2,690 22,051 31,499 29,315 10 Other U.S. government agencies .................................................... 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 94 66 19 47 28 14 Trading-account securities ................................................................ 6,833 6,681 3,238 708 2,446 290 151 15 U.S. Treasury.................................................................................. 4,125 4,103 2,407 408 1,210 78 23 16 Other U.S. government agencies ................................................ 825 816 401 82 278 55 9 17 States and political subdivisions .................................................. 1,395 1,381 363 117 794 107 14 18 All other trading account securities............................................ 394 316 67 101 145 3 78 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 Others .................................................................................................. * 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 Less: Unearned income on loans........................................................ 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 34 Real estate loans .................................................................................... 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 Secured by farmland.......................................................................... 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 Conventional .............................................................................. 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 Conventional .............................................................................. 5,103 3,609 613 72 1,350 1,573 1,495 44 Secured by other properties.............................................................. 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 Other depository institutions............................................................ 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 52 Other loans to purchase or carry securities........................................ 4,280 3,532 410 276 1,860 985 747 53 Loans to farmers except real estate.................................................... 28,054 15,296 168 150 3,781 11,196 12,758 54 Commercial and industrial loans.......................................................... 213, 123 171,815 39,633 13,290 67,833 51,059 41,309 55 Loans to individuals .............................................................................. 161,599 110,974 7,100 2,562 40,320 60,993 50,624 56 Installment loans ................................................................................ 131,571 90,568 5,405 1,711 33,640 49,811 41,003 57 Passenger automobiles .................................................................. 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 Credit cards and related plans...................................................... 21,938 19,333 2,268 1,267 9,736 6,062 2,605 60 Charge-account credit cards...................................................... 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 Other retail consumer goods........................................................ 19,689 13,296 427 57 5,242 7,570 6,393 63 Mobile homes.............................................................................. 9,642 6,667 179 19 2,563 3,905 2,976 64 Other ............................................................................................ 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 Single-payment loans to individuals................................................ 30,027 20,406 1,694 851 6,680 11,182 9,621 67 All other loans........................................................................................ 17,360 14,778 3,545 1,290 6,100 3,844 2,582 68 Total loans and securities, net..................................................... 956,579 696,833 102,383 35,536 259,820 299,094 259,867 69 Direct lease financing ............................................................................ 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 72 Customer acceptances outstanding...................................................... 16,557 16,036 8,315 1,258 6,054 409 521 73 Other assets ............................................................................................. 34,559 30,408 11,323 1,000 12,810 5,275 4,249 74 Total assets ................................................................................. 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 Member banks1 Insured Non­ Liability or capital account commercial Large banks member banks Total All other banks1 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 Mutual savings banks .............................................................. 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 States and political subdivisions .............................................. 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 U.S. government ..................................................................... 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 % U.S. government ..................................................................... 82 65 2 3 24 35 17 97 States and political subdivisions .............................................. 4,298 2,682 215 4 437 2,025 1,616 98 All other ................................................................................. 30 27 18 * 8 2 3 99 Total deposits .............................................................................. 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 2,894 104 Other liabilities for borrowed money........................................... 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 8,600 1,525 9,020 4,477 3,494 108 Total liabilities ............................................................................ 1,107,188 836,607 157,026 41,144 314,868 323,569 270,849 109 Subordinated notes and debentures............................................. 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 22,380 111 Preferred stock........................................................................ 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 118 Cash and due from bank............................................................ 146,283 124,916 36,862 6,030 45,731 36,293 21,379 119 Federal funds sold and securities purchased under agreements to resell ................................................................................... 43,873 33,682 4,272 1,887 16,007 11,517 10,307 120 Total loans .........................................................!...................... 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 33,454 122 Total deposits.............................................................................. 944,593 687,543 107,028 28,922 250,804 300,789 257,062 123 Federal funds purchased and securities sold under agreements to repurchase ............................................................................ 92,685 86,635 22,896 9,473 13,725 6,053 124 Other liabilities for borrowed money........................................... 8,716 8,326 3,679 370 3,211 1,067 390 125 Standby letters of credit outstanding........................................... 18,820 17,658 10,063 1,477 4,820 1,297 1,162 126 Time deposits of $100,000 or more ............................................. 186,837 152,553 32,654 13,486 66,684 39,728 34,284 127 Certificates of deposit.............................................................. 160,227 129,667 27,950 11,590 56,383 33,743 30,560 128 Other time deposits................................................................. 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 trust Note. Data include consolidated reports, including figures for all bank-premises companies that are members of the Federal Reserve System. subsidiaries and other significant majority-owned domestic subsidiaries. Securities 2. Demand deposits adjusted are demand deposits other than domestic com­ are reported on a gross basis before deductions of valuation reserves. Back data mercial interbank and U.S. government, less cash items reported as in process of in lesser detail were shown in previous issues of the Bulletin. collection. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics □ September 1980 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 Account July 2 July 9 July 16 July 23 July 30p Aug. 6P Aug. 13p Aug. 20p Aug. 27p 1 Cash items in process of collection............................ 57,210 521,437 58,997 48,650 49,101 47,917 46,672 51,012 45,703 2 Demand deposits due from banks in the United States ...................................................................... 18,728 19,389 18,093 17,497 17,813 17,363 15,993 18,605 17,242 3 AH other cash and due from depository institutions 33,843 33,266 37,000 35,298 33,422 23,816 28,250 35,034 31,393 4 Total loans and securities...................................... 522,621 518,630 516,300 512,736 514,468 527,183 524,138 522,216 521,504 Securities 5 U.S. Treasury securities .............................................. 36,958 37,483 37,434 37,863 38,141 39,843 39,000 40,422 39,375 6 Trading account ........................................................ 4,098 4,466 4,592 4,749 4,909 6,445 5,628 6,363 5,252 7 Investment account, by maturity............................ 32,861 33,016 32,842 33,113 33,232 33,397 33,372 34,059 34,123 8 One year or less.................................................... 6,190 6,226 6,308 6,554 6,698 7,036 7,047 7,436 7,559 9 Over one through five years .............................. 21,752 21,882 21,694 21,745 21,719 21,635 21,552 22,580 22,566 10 Over five years...................................................... 4,918 4,908 4,840 4,814 4,815 4,725 4,773 4,043 3,998 11 Other securities ............................................................ 75,590 75,786 75,471 75,411 75,533 76,506 75,688 75,649 75,956 12 Trading account ........................................................ 3,934 3,957 3,495 3,092 3,051 4,040 2,994 2,904 3,237 13 Investment account .................................................. 71,656 71,829 71,977 72,318 72,481 72,466 72,693 72,745 72,719 14 U.S. government agencies .................................. 16,501 16,443 16,416 16,400 16,397 16,311 16,207 16,086 16,018 15 States and political subdivision, by maturity ... 52,526 52,734 52,944 53,290 53,445 53,484 53,795 53,968 54,028 16 One year or less................................................ 6,382 6,437 6,534 6,612 6,601 6,691 6,805 6,878 6,915 17 Over one year.................................................... 46,145 46,297 46,409 46,678 46,843 46,794 46,989 47,090 47,113 18 Other bonds, corporate stocks and securities .. 2,628 2,652 2,616 2,629 2,640 2,671 2,692 2,691 2,673 Loans 19 Federal funds sold1 ...................................................... 26,923 25,556 23,854 21,526 21,781 28,300 26,908 22,792 22,393 20 To commercial banks .............................................. 22,585 20,508 19,498 16,911 17,431 20,590 19,866 17,468 16,700 21 To nonbank brokers and dealers in securities .... 3,298 3,945 3,438 3,494 3,333 5,349 4,514 4,030 4,258 22 To others.................................................................... 1,040 1,103 918 1,120 1,017 2,361 2,528 1,294 1,435 23 Other loans, gross ........................................................ 395,836 392,530 392,308 390,750 391,791 395,331 395,374 396,196 396,648 24 Commercial and industrial ...................................... 159,557 158,880 158,310 158,213 158,130 159,449 159,800 159,803 160,316 25 Bankers acceptances and commercial paper ... 5,337 5,068 4,980 4,988 5,254 5,191 5,232 4,684 5,011 26 All other ................................................................ 154,220 153,813 153,330 153,225 152,876 154,257 154,568 155,118 155,305 27 U.S. addressees ................................................ 148,585 148,233 147,742 147,598 147,234 148,343 148,663 149,151 149,266 28 Non-U.S. addressees ........................................ 5,635 5,580 5,588 5,627 5,642 5,914 5,905 5,968 6,039 29 Real estate .................................................................... 105,217 105,276 105,575 105,790 105,932 105,998 106,426 106,747 107,077 30 To individuals for personal expenditures.............. 70,794 70,528 70,444 70,435 70,500 70,471 70,545 70,624 70,684 To financial institutions 31 Commercial banks in the United States............ 3,971 3,552 3,455 3,342 3,559 3,699 3,891 3,446 3,324 32 Banks in foreign countries .................................. 7,546 7,232 7,035 6,695 6,767 6,968 6,712 7,014 7,338 33 Sales finance, personal finance companies, etc . 8,552 8,384 8,668 8,352 8,510 8,197 8,256 8,458 8,273 34 Other financial institutions.................................. 14,409 14,474 14,627 14,487 14,633 14,900 15,088 15,136 15,031 35 To nonbank brokers and dealers in securities .... 5,794 4,903 4,797 4,431 4,395 5,641 5,065 5,335 5,047 36 To others for purchasing and carrying securities2 2,071 2,036 2,027 2,056 2,055 2,047 2,066 2,059 2,055 37 To finance agricultural production ........................ 5,188 5,188 5,234 5,336 5,389 5,418 5,432 5,426 5,379 38 All other .................................................................... 12,736 12,077 12,137 11,613 11,920 12,543 12,092 12,148 12,124 39 Less: Unearned income .............................................. 7,168 7,198 7,222 7,255 7,229 7,175 7,197 7,198 7,225 40 Loan loss reserve .............................................. 5,518 5,528 5,546 5,559 5,549 5,621 5,635 5,644 5,643 41 Other loans, net............................................................ 383,149 379,805 379,540 377,937 379,013 382,534 382,542 383,353 383,780 42 Lease financing receivables ........................................ 8,692 8,718 8,737 8,745 8,756 8,784 8,781 8,806 8,810 43 All other assets.............................................................. 80,267 77,578 75,174 77,064 74,777 78,988 79,270 78,534 80,148 44 Total assets .......................................................... 721,362 709,018 714,301 699,989 698,338 704,049 703,105 714,208 704,801 Deposits 45 Demand deposits .......................................................... 208,631 196,456 203,881 187,481 187,725 190,256 186,196 94,081 184,864 46 Mutual savings banks .............................................. 769 819 657 601 681 675 644 633 635 47 Individuals, partnerships, and corporations.......... 141,960 134,957 139,172 130,454 131,371 133,616 132,867 132,971 129,169 48 States and political subdivisions ............................ 5,008 4,535 4,923 4,316 4,962 4,595 4,468 4,545 4,606 49 U.S. government ...................................................... 1,061 1,243 873 707 817 1,143 858 3,262 1,829 50 Commercial banks in the United States................ 39,637 36,204 38,591 33,364 30,413 32,473 31,135 33,630 31,547 51 Banks in foreign countries ...................................... 8,232 8,818 8,381 7,873 8,218 7,501 7,242 7,628 8,146 52 Foreign governments and official institutions .... 1,959 1,506 1,655 1,236 2,042 1,319 1,591 1,644 1,615 53 Certified and officers' checks.................................. 10,005 8,375 9,629 8,929 9,219 8,933 7,391 9,769 7,317 54 Time and savings deposits .......................................... 276,789 275,381 275,157 275,503 273,708 275,665 278,112 279,380 279,771 55 Savings ........................................................................ 73,377 74,167 74,324 74,491 74,574 75,474 75,350 75,528 75,400 56 Individuals and nonprofit organizations............ 68,835 69,560 69,759 69,826 69,863 70,748 70,675 70,845 70,641 57 Partnerships and corporations operated for profit................................................................ 3,762 3,862 3,847 3,958 4,030 4,062 4,040 4,053 4,120 58 Domestic governmental units.............................. 764 727 704 690 666 641 622 614 624 59 All other ................................................................ 16 19 14 17 15 24 14 15 15 60 Time ............................................................................ 203,412 201,213 200,832 201,012 199,135 200,191 202,761 203,852 204,372 61 Individuals, partnerships, and corporations----- 172,887 170,946 170,674 170,573 168,630 169,561 171,728 172,710 173,043 62 States and political subdivisions ........................ 18,764 18,739 18,733 18,977 19,055 19,078 19,484 19,447 19,495 63 U.S. government .................................................. 269 243 255 242 275 280 284 335 351 64 Commercial banks in the United States............ 5,519 5,324 5,236 5,199 5,153 5,198 5,225 5,421 5,535 65 Foreign governments, official institutions, and banks .............................................................. 5,973 5,961 5,934 6,021 6,022 6,073 6,040 5,939 5,948 Liabilities for borrowed money 66 Borrowings from Federal Reserve Banks............ 397 270 556 546 2,556 437 881 774 2,468 67 Treasury tax-and-loan notes.................................... 4,678 1,415 3,245 3,839 4,370 2,886 2,288 4,667 5,513 68 All other liabilities for borrowed money3............ 120,889 126,824 123,887 124,244 122,495 127,071 128,444 126,714 123,051 69 Other liabilities and subordinated note and debentures .............................................................. 62,179 60,749 59,758 60,506 59,674 59,236 58,802 60,350 60,841 70 Total liabilities ..................................................... 673,564 661,094 666,484 652,120 650,528 655,551 654,723 665,965 656,508 71 Residual (total assets minus total liabilities)4.......... 47,797 47,924 47,817 47,869 47,810 48,498 48,382 48,243 48,293 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy analysis 2. Other than financial institutions and brokers and dealers. or for other analytic uses. 3. Includes federal funds purchased and securities sold under agreements to repurchase; for information on these liabilities at banks with assets of $1 billion Digitized for FRoAr mSoEreR o n Dec. 31. 1977, see table 1.13. 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 $1 Billion or More on December 31, 1977 Assets and Liabilities Millions of dollars, Wednesday figures July 2 July 9 July 16 July 23 July 30p Aug. 6p Aug. 13? Aug. 20? Aug. 21p 1 Cash items in process of collection...................................... 54,496 49,020 56,429 46,341 46,879 45,454 44,282 48,485 43,376 2 Demand deposits due from banks in the United States .. 18,065 18,668 17,376 16,993 17,192 16,792 15,480 18,022 16,681 3 AH other cash and due from depository institutions........ 32,056 31,568 34,806 33,056 31,181 22,249 26,410 32,731 29,223 4 Total loans and securities...................................................... 487,697 483,549 481,499 478,185 479,728 491,534 488,444 487,164 486,163 Securities 5 U.S. Treasury securities ........................................................ 34,424 34,935 34,882 35,299 35,575 37,260 36,420 37,820 36,765 6 Trading account .................................................................. 4,045 4,416 4,548 4,700 4,868 6,391 5,578 6,320 5,216 7 Investment account, by maturity...................................... 30,379 30,520 30,335 30,599 30,707 30,869 30,842 31,500 31,549 8 One year or less ............................................................... 5,796 5,817 5,886 6,112 6,251 6,582 6,590 6,978 7,098 9 Over one through five years ........................................ 20,074 20,204 20,023 20,088 20,035 19,956 19,873 20,865 20,840 10 Over five years................................................................ 4,509 4,498 4,426 4,399 4,420 4,331 4,378 3,656 3,611 11 Other securities ...................................................................... 69,610 69,787 69,419 69,374 69,426 70,346 69,535 69,448 69,736 12 Trading account .................................................................. 3,805 3,858 3,375 2,996 2,933 3,917 2,886 2,789 3,114 13 Investment account ............................................................ 65,805 65,929 66,044 66,378 66,493 66,429 66,649 66,659 66,622 14 U.S.government agencies .............................................. 15,379 15,305 15,271 15,249 15,240 15,145 15,046 14,925 14,856 15 States and political subdivision, by maturity.............. 47,967 48,140 48,324 48,666 48,781 48,784 49,084 49,216 49,265 16 One year or less.......................................................... 5,746 5,789 5,884 5,964 5,943 6,024 6,138 6,183 6,217 17 Over one year.............................................................. 42,221 42,351 42,440 42,702 42,838 42,759 42,946 43,032 43,049 18 Other bonds, corporate stocks and securities............ 2,459 2,483 2,449 2,462 2,472 2,500 2,519 2,518 2,501 Loans 19 Federal funds sold1 ................................................................ 24,104 22,461 21,135 19,035 19,218 24,949 23,575 20,184 19,538 20 To commercial banks ........................................................ 20,017 17,828 17,114 14,799 15,280 17,857 16,978 15,252 14,231 21 To nonbank brokers and dealers in securities.............. 3,060 3,543 3,162 3,129 2,942 4,804 4,097 3,669 3,904 22 To others............................................................................... 1,028 1,090 860 1,106 996 2,287 2,500 1,263 1,404 23 Other loans, gross.................................................................. 371,303 368,145 367,880 366,327 367,336 370,829 370,794 371,602 372,041 24 Commercial and industrial ................................................ 151,407 150,769 150,207 150,133 150,050 151,316 151,630 151,613 152,129 25 Bankers’ acceptances and commercial paper............ 5,232 4,961 4,882 4,893 5,155 5,045 5,083 4,544 4,868 26 All other ........................................................................... 146,174 145,808 145,325 145,239 144,895 146,270 146,547 147,069 147,260 27 U.S. addressees .......................................................... 140,598 140,288 139,798 139,677 139,324 140,427 140,701 141,162 141,283 28 Non-U.S. addressees.................................................. 5,576 5,520 5,527 5,562 5,570 5,843 5,846 5,907 5,978 29 Real estate ........................................................................... 98,957 99,043 99,322 99,539 99,679 99,735 100,143 100,469 100,812 30 To individuals for personal expenditures........................ 62,489 62,251 62,167 62,148 62,208 62,174 62,239 62,310 62,359 To financial institutions 31 Commercial banks in the United States...................... 3,888 3,468 3,368 3,237 3,455 3,598 3,794 3,354 3,235 32 Banks in foreign countries............................................ 7,457 7,140 6,933 6,580 6,641 6,872 6,614 6,902 7,243 33 Sales finance, personal finance companies, etc.......... 8,384 8,210 8,506 8,187 8,347 8,030 8,093 8,290 8,087 34 Other financial institutions............................................ 14,058 14,113 14,263 14,113 14,239 14,514 14,690 14,742 14,626 35 To nonbank brokers and dealers in securities.............. 5,740 4,832 4,726 4,372 4,342 5,589 5,009 5,281 4,989 36 To others for purchasing and carrying securities2........ 1,840 1,818 1,819 1,837 1,836 1,829 1,845 1,838 1,836 37 To finance agricultural production.......... .................. 5,026 5,026 5,070 5,171 5,219 5,249 5,263 5,257 5,211 38 All other ............................................................................... 12,056 11,474 11,499 11,010 11,321 11,924 11,472 11,548 11,512 39 Less: Unearned income ........................................................ 6,552 6,578 6,598 6,616 6,606 6,557 6,575 6,574 6,602 40 Loan loss reserve ........................................................ 5,193 5,201 5,219 5,234 5,222 5,292 5,306 5,316 5,315 41 Other loans, net...................................................................... 359,558 356,366 356,063 354,477 355,508 358,980 358,913 359,711 360,123 42 Lease financing receivables .................................................. 8,448 8,475 8,494 8,501 8,512 8,536 8,534 8,558 8,561 43 All other assets ....................................................................... 78,249 75,532 73,157 75,040 72,718 76,895 77,116 76,352 77,912 44 Total assets ............................................................................... 679,012 666,813 671,762 658,116 656,210 661,460 660,265 671,312 661,916 Deposits 45 Demand deposits .................................................................... 196,383 184,404 191,808 175,065 176,215 178,445 174,420 182,183 173,125 46 Mutual savings banks ........................................................ 735 788 628 575 655 643 618 606 610 47 Individuals, partnerships, and corporations .................. 132,300 125,386 129,506 121,306 122,205 124,226 123,392 123,622 119,945 48 States and political subdivisions ...................................... 4,404 4,007 4,348 3,745 4,357 4,072 3,936 3,995 3,986 49 U.S. government ................................................................ 951 1,085 782 620 746 1,004 758 2,959 1,689 50 Commercial banks in the United States.......................... 38,220 34,804 37,247 32,112 29,141 31,106 29,848 32,314 30,199 51 Banks in foreign countries................................................ 8,137 8,757 8,311 7,805 8,152 7,435 7,181 7,558 8,056 52 Foreign governments and official institutions................ 1,954 1,503 1,652 1,233 2,033 1,318 1,585 1,643 1,599 53 Certified and officer’s checks............................................ 9,683 8,074 9,334 8,669 8,926 8,640 7,103 9,486 7,043 54 Time and savings deposits .................................................... 257,412 256,020 255,857 256,224 254,546 256,384 258,682 259,802 260,189 55 Savings ................................................................................... 67,840 68,589 68,716 68,867 68,938 69,790 69,656 69,810 69,696 56 Individuals and nonprofit organizations...................... 63,658 64,320 64,510 64,571 64,603 65,414 65,347 65,499 65,319 57 Partnerships and corporations operated for profit ... 3,486 3,580 3,563 3,671 3,736 3,764 3,738 3,751 3,808 58 Domestic governmental units........................................ 680 671 628 608 584 587 557 545 554 59 All other ........................................................................... 16 18 14 17 15 24 14 15 15 60 Time ....................................................................................... 189,571 187,431 187,141 187,357 185,608 186,594 189,026 189,992 190,494 61 Individuals, partnerships, and corporations .............. 161,088 159,196 158,995 158,982 157,165 158,042 160,103 161,004 161,296 62 States and political subdivisions .................................. 16,994 16,977 16,988 17,172 17,245 17,238 17,609 17,530 17,584 63 U.S. government ............................................................ 254 228 240 227 260 265 269 319 336 64 Commercial banks in the United States...................... 5,262 5,068 4,985 4,954 4,915 4,976 5,005 5,200 5,330 65 Foreign governments, official institutions, and banks 5,973 5,961 5,934 6,021 6,022 6,073 6,040 5,939 5,948 Liabilities for borrowed money 66 Borrowings from Federal Reserve Banks ...................... 397 270 552 542 2,552 437 881 743 2,402 67 Treasury tax-and-loan notes.............................................. 4,352 1,298 2,983 3,538 4,047 2,667 2,096 4,335 5,113 68 All other liabilities for borrowed money3...................... 115,046 120,666 117,521 117,883 115,913 120,302 121,538 120,177 116,541 69 Other liabilities and subordinated note and debentures 60,776 59,387 58,365 59,157 58,316 57,884 57,440 58,993 59,420 70 Total liabilities ......................................................................... 634,366 622,046 627,087 613,409 611,589 616,119 615,057 626,233 616,790 71 Residual (total assets minus total liabilities)4.................... 44,646 44,766 44,676 44,707 44,621 45,341 45,209 45,078 45,126 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy analysis 2. Other than financial institutions and brokers and dealers. or for other analytic uses. 3. Includes federal funds purchased and securities sold under agreement to repurchase; for information on these liabilities at banks with assets of $1 billion or more on Dec. 31, 1977, see table 1.13. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Financial Statistics □ September 1980 1.29 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures Account July 2 July 9 July 16 July 23 July 30p Aug. 6p Aug. 13 p Aug. 20p Aug. 21 p 1 Cash items in process of collection................................. 22,429 19,963 25,206 18,766 19,062 17,158 15,597 19,643 15,809 2 Demand deposits due from banks in the United States .. 13,702 14,185 12,507 12,806 12,903 12,572 11,359 13,152 12,349 3 All other cash and due from depository institutions ... 9,606 9,689 10,868 8,465 8,794 4,961 7,541 9,389 6,848 4 Total loans and securities1 ............................................. 115,351 112,765 112,570 111,391 111,634 115,538 114,611 114,820 115,914 Securities 5 U.S. Treasury securities2 .............................................. 6 Trading account2 ....................................................... 7 Investment account, by maturity................................. 7,648 7,670 7,657 7,823 7,952 8,285 8,155 8,662 8,656 8 One year or less..................................................... 440 436 540 735 793 1,051 1,046 1,059 1,053 9 Over one through five years.................................. 6,273 6,282 6,219 6,194 6,239 6,323 6,178 7,006 7,005 10 Over five years....................................................... 936 951 898 894 920 911 931 596 598 11 Other securities2............................................................ 12 Trading account2 ....................................................... 13 Investment account .................................................... 13,302 13,321 13,324 13,407 13,445 13,415 13,520 13,522 13,503 14 U.S. government agencies ...................................... 2,626 2,587 2,608 2,584 2,584 2,579 2,554 2,495 2,466 15 States and political subdivision, by maturity............ 10,074 10,120 10,100 10,216 10,248 10,230 10,361 10,436 10,476 16 One year or less.................................................. 1,624 1,645 1,616 1,638 1,649 1,634 1,679 1,750 1,758 17 Over one year..................................................... 8,450 8,475 8,485 8,578 8,599 8,596 8,683 8,685 8,718 18 Other bonds, corporate stocks and securities.......... 603 613 615 607 613 605 604 592 562 Loans 19 Federal funds sold3 ....................................................... 7,038 6,035 6,146 5,606 4,879 6,994 7,144 6,132 6,851 20 To commercial banks ................................................ 5,265 3,862 4,228 3,681 3,083 4,324 4,234 3,497 3,988 21 To nonbank brokers and dealers in securities............ 1,464 1,643 1,559 1,444 1,359 1,678 1,715 2,000 2,155 22 To others ................................................................... 310 530 359 481 436 992 1,195 635 708 23 Other loans, gross ......................................................... 90,092 88,490 88,200 87,352 88,158 89,662 88,631 89,347 89,755 24 Commercial and industrial......................................... 47,429 47,447 46,889 46,898 47,208 47,634 47,413 47,386 47,748 25 Bankers’ acceptances and commercial paper.......... 2,265 2,065 1,931 1,986 2,079 2,089 1,833 1,630 1,660 26 All other............................................................... 45,164 45,382 44,958 44,912 45,129 45,545 45,580 45,756 46,088 27 U.S. addressees .................................................. 43,263 43,545 43,137 43,107 43,308 43,627 43,666 43,832 44,091 28 Non-U.S. addressees ........................................... 1,901 1,837 1,822 1,804 1,821 1,918 1,914 1,924 1,996 29 Real estate ................................................................ 13,291 13,283 13,338 13,378 13,470 13,481 13,576 13,695 13,760 30 To individuals for personal expenditures..................... 8,826 8,818 8,806 8,800 8,817 8,855 8,870 8,890 8,914 To financial institutions 31 Commercial banks in the United States................... 1,426 1,182 1,088 1,059 1,129 1,244 1,286 1,200 981 32 Banks in foreign countries...................................... 3,599 3,216 3,125 2,954 2,968 3,099 2,839 2,873 3,259 33 Sales finance, personal finance companies, etc.......... 3,457 3,390 3,508 3,455 3,539 3,178 3,329 3,502 3,367 34 Other financial institutions...................................... 4,462 4,508 4,563 4,411 4,462 4,450 4,490 4,492 4,460 35 To nonbank brokers and dealers in securities............ 3,207 2,651 2,753 2,584 2,565 3,129 2,924 3,296 3,177 36 To others for purchasing and carrying securities4....... 352 333 329 345 350 350 349 351 363 37 To finance agricultural production ............................. 246 257 273 377 396 395 406 409 391 38 All other ................................................................... 3,797 3,405 3,528 3,092 3,253 3,847 3,149 3,253 3,334 39 Less: Unearned income ................................................ 1,040 1,055 1,057 1,084 1,092 1,082 1,085 1,088 1,098 40 Loan loss reserve................................................ 1,690 1,696 1,701 1,714 1,709 1,735 1,754 1,755 1,753 41 Other loans, net............................................................ 87,362 85,740 85,442 84,555 85,358 86,844 85,792 86,504 86,904 42 Lease financing receivables ........................................... 1,660 1,686 1,690 1,691 1,673 1,682 1,681 1,684 1,686 43 All other assets^............................................................ 35,518 33,339 30,202 31,778 29,721 34,552 34,050 32,855 33,014 44 Total assets ................................................................... 198,265 191,627 193,043 184,897 183,786 186,463 184,840 191,542 185,620 Deposits 45 Demand deposits ........................................................... 75,241 66,588 70,880 63,066 61,387 60,909 57,834 64,812 59,792 46 Mutual savings banks ................................................ 396 462 288 279 309 302 301 317 283 47 Individuals, partnerships, and corporations ............... 35,823 31,627 33,050 30,142 30,318 30,778 29,052 30,361 29,068 48 States and political subdivisions ................................. 556 474 722 399 505 454 531 542 436 49 U.S. government ....................................................... 136 306 124 119 123 174 142 767 381 50 Commercial banks in the United States...................... 25,096 21,572 23,922 20,479 17,259 17,793 17,733 20,578 18,684 51 Banks in foreign countries......................................... 6,378 7,092 6,480 5,997 6,282 5,642 5,338 5,725 6,255 52 Foreign governments and official institutions.............. 1,624 1,099 1,331 926 1,645 988 1,169 1,326 1,305 53 Certified and officers’ checks...................................... 5,231 3,955 4,963 4,724 4,946 4,778 3,567 5,194 3,380 54 Time and savings deposits ............................................. 48,492 47,875 48,117 47,590 46,765 47,121 47,856 48,282 48,608 55 Savings....................................................................... 9,641 9,752 9,788 9,750 9,752 9,848 9,839 9,835 9,803 56 Individuals and nonprofit organizations................... 9,150 9,271 9,313 9,272 9,282 9,382 9,384 9,374 9,344 57 Partnerships and corporations operated for profit ... 327 333 329 338 341 347 347 351 353 58 Domestic governmental units.................................. 159 143 140 133 125 113 105 106 102 59 All other ................................................................ 5 5 5 7 5 6 4 4 4 60 Time .......................................................................... 38,851 38,123 38,329 37,839 37,012 37,272 38,017 38,447 38,805 61 Individuals, partnerships, and corporations ............ 33,193 32,400 32,515 31,976 31,143 31,254 31,936 32,346 32,555 62 States and political subdivisions ............................ 1,191 1,249 1,318 1,361 1,386 1,391 1,486 1,511 1,580 63 U.S. government ................................................... 45 47 48 41 41 46 38 32 30 64 Commercial banks in the United States................... 1,552 1,571 1,606 1,580 1,565 1,681 1,676 1,749 1,849 65 Foreign governments, official institutions, and banks 2,870 2,856 2,843 2,882 2,876 2,901 2,881 2,809 2,791 Liabilities for borrowed money 66 Borrowings from Federal Reserve Banks ................... 1,685 410 1,124 67 Treasury tax-and-loan notes........................................ 1,201 268 772 918 1,063 700 501 986 1,322 68 AH other liabilities for borrowed money6 ................... 36,449 39,788 36,069 36,215 36,345 39,904 41,378 39,118 36,846 69 Other liabilities and subordinated note and debentures .. 22,215 22,358 22,476 22,394 21,930 22,734 21,912 23,447 23,047 70 Total liabilities .......................................................... 183,598 176,878 178,314 170,183 169,175 171,368 169,891 176,645 170,740 71 Residual (total assets minus total liabilities)7................. 14,667 14,748 14,729 14,714 14,611 15,095 14,949 14,898 14,880 1. Excludes trading account securities. 5. Includes trading account securities. 2. Not available due to confidentiality. 6. Includes federal funds purchased and securities sold under agreements to 3. Includes securities purchased under agreements to resell. repurchase. 4. Other than financial institutions and brokers and dealers. 7. This is not a measure of equity capital for use in capital adequacy 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 July 2 July 9 July 16 July 23 July 30p Aug. 6P Aug. 13 P Aug. 20p Aug. 21p Banks with Assets of $750 Million or More 1 Total loans (gross) and securities adjusted1 .................. 508,750 507,295 506,115 505,296 506,255 515,691 513,212 514,145 514,348 2 Total loans (gross) adjusted1 ....................................... 396,202 394,026 393,209 392,023 392,582 399,342 398,525 398,074 399,017 3 Demand deposits adjusted2 ......................................... 110,723 107,572 105,420 104,760 107,393 108,723 107,531 106,176 105,785 4 Time deposits in accounts of $100,000 or more............. 128,468 126,638 126,328 126,714 125,220 126,232 128,744 129,827 130,360 5 Negotiable CDs ...................................................... 91,794 90,196 90,044 90,263 88,977 89,781 91,931 93,118 93,469 6 Other time deposits................................................. 36,674 36,442 36,284 36,451 36,243 36,451 36,813 36,709 36,891 7 Loans sold outright to affiliates3.................................. 2,788 2,817 2,831 2,736 2,809 2,890 2,897 2,902 2,933 8 Commercial and industrial ....................................... 1,843 1,899 1,836 1,826 1,894 1,927 1,901 1,891 1,944 9 Other ..................................................................... 945 919 995 911 915 962 996 1,010 989 Banks with Assets of $1 Billion or More 10 Total loans (gross) and securities adjusted1 .................. 475,537 474,033 472,834 471,999 472,820 481,929 479,553 480,448 480,615 11 Total loans (gross) adjusted1 ....................................... 371,503 369,311 368,533 367,326 367,819 374,323 373,597 373,180 374,113 12 Demand deposits adjusted2 ......................................... 102,715 99,494 97,349 96,993 99,449 100,881 99,532 98,426 97,860 13 Time deposits in accounts of $100,000 or more............. 120,540 118,770 118,537 118,954 117,567 118,527 120,915 121,891 122,388 14 Negotiable CDs ...................................................... 86,086 84,523 84,403 84,681 83,510 84,283 86,369 87,466 87,802 15 Other time deposits................................................. 34,454 34,246 34,134 34,273 34,057 34,244 34,546 34,425 34,586 16 Loans sold outright to affiliates3.................................. 2,755 2,781 2,794 2,698 2,771 2,843 2,852 2,857 2,890 17 Commercial and industrial....................................... 1,822 1,875 1,812 1,800 1,868 1,900 1,875 1,868 1,923 18 Other .................................................................... 933 906 982 898 903 943 977 990 967 Banks in New York City 19 Total loans (gross) and securities adjusted1-4................ 111,390 110,471 110,012 109,448 110,221 112,787 111,930 112,967 113,796 20 Total loans (gross) adjusted1 ....................................... 90,440 89,481 89,031 88,218 88,824 91,087 90,256 90,782 91,637 21 Demand dejx>sits adjusted2 ......................................... 27,580 24,746 21,628 23,702 24,943 25,784 24,362 23,823 24,918 22 Time deposits in accounts of $100,000 or more............. 29,547 28,888 29,143 28,862 28,119 28,426 29,201 29,670 30,068 23 Negotiable CDs ...................................................... 21,844 21,180 21,370 21,034 20,319 20,504 21,184 21,610 22,000 24 Other time deposits................................................. 7,702 7,709 7,773 7,829 7,800 7,921 8,016 8,060 8,068 1. Exclusive of loans and federal funds transactions with domestic commercial 3. Loans sold are those sold outright to a bank’s own foreign branches, non­ banks. consolidated nonbank affiliates of the bank, the bank’s holding company (if not 2. All demand deposits except U.S. government and domestic banks less cash a bank), and nonconsolidated nonbank subsidiaries of the holding company. items in process of collection. 4. Excludes trading account securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Financial Statistics □ September 1980 1.31 LARGE WEEKLY REPORTING COMMERCIAL BANKS Domestic Classified Commercial and Industrial Loans Millions of dollars Outstanding Net change during Adjust­ Industry classification 1980 1980 ment bank Apr. 30 May 28 June 25 July 30 Aug. 27 Ql Q2 June July Aug. 1 Durable goods manufacturing.............. 24,081 22,939 22,729 22,477 22,966 1,422 -2,332 -210 -252 488 46 2 Nondurable goods manufacturing........ 18,683 18,075 18,338' 18,552 18,821 580 -1,486' 262' 214 268 39 3 Food, liquor, and tobacco.................. 4,176 3,859 3,701 3,899 3,912 -302 -1,222 -158 198 13 6 4 Textiles, apparel, and leather .......... 4,614 4,668 4,934 5,066 5.231 132 454 267 131 165 6 5 Petroleum refining .............................. 2,611 2,490 2,715 2,616 2,694 461 -424 225 -98 77 1 6 Chemicals and rubber ........................ 3,903 3,761 3,704' 3,723 3,707 61 -208' -57' 20 -16 14 7 Other nondurable goods.................... 3,379 3,299 3,284 3,248 3,277 229 -86 -15 -36 29 12 8 Mining (including crude petroleum and natural gas) .............................. 13,272 13,588 13,758 13,650 13,562 585 1,162 170 -108 -88 14 9 Trade ........................................................ 25,406 24,833 24,600' 24,330 24,796 450 -857' -234' -269 466 121 10 Commodity dealers ............................ 1,784 1,639 1,531 1,670 1,858 -323 -285 -108 139 187 6 11 Other wholesale .................................. 12,050 11,645 11,679' 11,573 11,626 71 -418' 34' -106 52 34 12 Retail .................................................... 11,572 11,549 11,389 11,087 11,313 702 -154 -160 -302 226 82 13 Transportation, communication, and other public utilities................ 18,832 18,507 18,745 18,996 19,215 448 453 238 251 219 14 14 Transportation .................................... 7,692 7,543 7,600 7,753 7,646 376 83 57 154 -108 7 15 Communication.................................... 2,846 2,800 2,839 2,883 2,918 224 92 39 44 35 1 16 Other public utilities .......................... 8,293 8,164 8,306 8,359 8,651 -152 278 142 53 292 5 17 Construction ............................................ 5,902 5,832 5,970 5,790 5,888 73 96 138 -180 98 23 18 Services .................................................... 20,444 19,977 20,299 20,616 20,827 715 89 323 317 211 % 19 All other1.................................................. 15,640 15,125 14,999 14,912 15,208 550 -656 -126 -87 296 288 20 Total domestic loans............................ 142,260 138,876 139,438 139,324 141,283 4,823 -3,531 561 -113 1,958 641 21 Memo: Term loans (original maturity more than 1 year) included in do­ mestic loans ...................................... 76,192 74,862 74,295 74,783 74,978 3,514 -1,702 -567 488 194 33 1. Includes commercial and industrial loans at a few banks with assets of $1 Note. New series. The 134 large weekly reporting commercial banks with dobillion or more that do not classify their loans. mestic assets of $1 billion or more as of December 31, 1977, are included in this series. The revised series is on a last-Wednesday-of-the-month basis. 1.311 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars December outstanding Outstanding in 1979 and 1980 Source 1976 1977 1978 Dec. Jan. Feb. Mar. Apr. May June July Total nondeposit funds 1 Seasonally adjusted2 .................................................................. 54.7 61.8 85.4 118.8 122.5 129.2 133.4 124.2 120.0' 113.9 113.7 2 Not seasonally adjusted ............................................................ 53.3 60.4 84.4 117.4 121.2 125.9 130.4 121.1' 123.2 114.1 117.7 Federal funds, RPs, and other borrowings from nonbanks 3 Seasonally adjusted3 .................................................................. 47.1 58.4 74.8 88.0 92.0 97.2 97.9 94.7' 94.2 96.1 100.1 4 Not seasonally adjusted ............................................................ 45.8 57.0 73.8 86.5 90.6 93.9 94.8 91.7 97.4 96.2 104.2 5 Net Eurodollar borrowings, not seasonally adjusted................ 3.7 -1.3 6.8 28.1 27.9 29.4 32.9 26.8' 23.2 15.1 10.7 6 Loans sold to affiliates, not seasonally adjusted4 5.................. 3.8 4.8 3.8 2.8 2.7 2.6 2.6 2.6 2.6 2.8 2.8 Memo 7 Domestic chartered banks net positions with own foreign branches, not seasonally adjusted6...................................... -6.0 -12.5 -10.2 6.4 5.9 6.6 9.3 6.0 2.7 -5.2 -8.1 8 Gross due from balances .......................................................... 12.8 21.1 24.9 22.9 23.0 23.4 23.6 24.4 27.3 29.7 32.3 9 Gross due to balances................................................................ 6.8 8.6 14.7 29.3 28.9 29.8 32.9 30.4 30.0 24.7 24.2 10 Foreign-related institutions net positions with directly related institutions, not seasonally adjusted7.................................. 9.7 11.1 17.0 21.7 22.0 22.8 23.6 20.9 20.5 19.9 18.8 11 Gross due from balances .......................................................... 8.3 10.3 14.2 28.9 29.6 30.4 31.9 28.5 28.4' 28.5 30.6 12 Gross due to balances................................................................ 18.1 21.4 31.2 50.5 51.6 53.2 55.6 49.4 48.8' 48.4' 49.4 13 Security RP borrowings, seasonally adjusted8 .......................... 27.9 36.3 44.8 49.2 51.0 49.5 45.0 41.5 40.1 45.0 50.4 14 Not seasonally adjusted ............................................................ 27.0 35.1 43.6 47.9 48.3 48.2 44.1 40.6 42.1 44.7 50.1 15 U.S. Treasury demand balances, seasonally adjusted9............ 3.9 4.4 8.7 8.1 12.7 11.3 7.5 8.6 9.4 8.6 10.7 16 Not seasonally adjusted ............................................................ 4.4 5.1 10.3 9.6 12.7 11.7 7.8 9.0 8.4- 10.0 9.2 17 Time deposits, $100,000 or more, seasonally adjusted10........ 137.7 162.0 213.0 227.7 229.1 235.6 237.1 240.3 242.0 237.0 233.1 18 Not seasonally adjusted ............................................................ 140.0 165.4 217.9 233.0 233.0 236.8 239.2 238.4 240.1 234.9 229.2 1. Commercial banks are those in the 50 states and the District of Columbia 4. Loans initially booked by the bank and later sold to affiliates that are still with national or state charters plus U.S. branches, agencies, and New York in­ held by affiliates. Averages of Wednesday data. vestment company subsidiaries of foreign banks and Edge Act corporations. 5. As of Dec. 1, 1979, loans sold to affiliates were reduced $800 million due to 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from corrections of two New York City banks. nonbanks and not seasonally adjusted net Eurodollars and loans to affiliates. 6. Includes averages of daily figures for member banks and quarterly call report Includes averages of Wednesday data for domestic chartered banks and averages figures for nonmember banks. of current and previous month-end data for foreign-related institutions. 7. Includes averages of current and previous month-end data until August 1979; 3. Other borrowings are borrowings on any instrument, such as a promissory beginning September 1979 averages of daily data. note or due bill, given for the purpose of borrowing money for the banking business. 8. Based on daily average data reported by 122 large banks beginning February This includes borrowings from Federal Reserve Banks and from foreign banks, 1980 and 46 banks before February 1980. term federal funds, overdrawn due from bank balances, loan RPs, and partici­ 9. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at Digitized for FRApaStioEnRs i n pooled loans. Includes averages of daily figures for member banks and commercial banks. Averages of daily data. averages of current and previous month-end data for foreign-related institutions. 10. Averages of Wednesday figures. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Deposits and Commercial Paper A25 1.32 GROSS DEMAND DEPOSITS of Individuals, Partnerships, and Corporations! Billions of dollars, estimated daily-average balances Commercial banks Type of holder 1978 19792 1980 1975 1976 1977 Dec. Dec. Dec. Dec. Mar. June Sept. Dec. Mar. June 1 All holders—Individuals, partnerships, and corporations.................................................. 236.9 250.1 274.4 294.6 270.4 285.6 292.4 302.2 288.4 288.6 2 Financial business ............................................... 20.1 22.3 25.0 27.8 24.4 25.4 26.7 27.1 28.4 27.7 3 Nonfinancial business ......................................... 125.1 130.2 142.9 152.7 135.9 145.1 148.8 157.7 144.9 145.3 4 Consumer ........................................................... 78.0 82.6 91.0 97.4 93.9 98.6 99.2 99.2 97.6 97.9 5 Foreign................................................................ 2.4 2.7 2.5 2.7 2.7 2.8 2.8 3.1 3.1 3.3 6 Other .................................................................. 11.3 12.4 12.9 14.1 13.5 13.7 14.9 15.1 14.4 14.4 Weekly reporting banks 1978 19793 1980 1975 1976 1977 Dec. Dec. Dec. Dec. Mar. June Sept. Dec. Mar. June 7 All holders—Individuals, partnerships, and corporations.................................................. 124.4 128.5 139.1 147.0 121.9 128.8 132.7 139.3 133.6 133.9 8 Financial business ............................................... 15.6 17.5 18.5 19.8 16.9 18.4 19.7 20.1 20.1 20.2 9 Nonfinancial business ......................................... 69.9 69.7 76.3 79.0 64.6 68.1 69.1 74.1 69.1 69.2 10 Consumer ........................................................... 29.9 31.7 34.6 38.2 31.1 33.0 33.7 34.3 34.2 33.9 11 Foreign................................................................ 2.3 2.6 2.4 2.5 2.6 2.7 2.8 3.0 3.0 3.1 12 Other .................................................................. 6.6 7.1 7.4 7.5 6.7 6.6 7.4 7.8 7.2 7.5 1. Figures include cash items in process of collection. Estimates of gross deposits 3. After the end of 1978 the large weekly reporting bank panel was changed to are based on reports supplied by a sample of commercial banks. Types of depositors 170 large commercial banks, each of which had total assets in domestic offices in each category are described in the June 1971 Bulletin, p. 466. exceeding $750 million as of Dec. 31, 1977. See “Announcements,” p. 408 in the 2. Beginning with the March 1979 survey, the demand deposit ownership survey May 1978 Bulletin. Beginning in March 1979, demand deposit ownership esti­ sample was reduced to 232 banks from 349 banks, and the estimation procedure mates for these large banks are constructed quarterly on the basis of 97 sample was modified slightly. To aid in comparing estimates based on the old and new banks and are not comparable with earlier data. The following estimates in billions reporting sample, the following estimates in billions of dollars for December 1978 of dollars for December 1978 have been constructed for the new large-bank panel; have been constructed using the new smaller sample; financial business, 27.0; financial business, 18.2; nonfinancial business, 67.2; consumer, 32.8; foreign, 2.5; nonfinancial business, 146.9; consumer, 98.3; foreign, 2.8; and other, 15.1 other, 6.8. 1.33 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period 1980 Instrument 1976 1977 1978 19791 Dec. Dec. Dec. Dec. Feb. Mar. Apr. May June July Commercial paper (seasonally adjusted) 1 All issuers ........................................................... 53,010 65.036 83,420 112,803 116,465' 119,915' 120,887' 121,032' 123,937 122,259 Financial companies2 Dealer-placed paper3 2 Total................................................................ 7,263 8,888 12,300 17,579 17,308 18,254 18,881 18,526 19,100 18,207 3 Bank-related .................................................... 1,900 2,132 3,521 2,784 3,010 3,142 3,467 3,591 3,188 3,198 Directly placed paper4 4 Total................................................................ 32,622 40,612 51,755 64,931 65,387' 64,462' 66,110' 63,813' 62,623 63,777 5 Bank-related .................................................... 5,959 7,102 12,314 17,598 19,941' 19,360' 19,166' 18,845' 19,436 19,239 6 Nonfinancial companies5...................................... 13,125 15,536 19,365 30,293 33,770 37,199 35,896 38,693 42,214 40,275 Bankers dollar acceptances (not seasonally adjusted) 7 Total ................................................................... 22,523 25,450 33,700 45,321 50,269 49,317 50,177 52,636 54,356 54,334 Holder 8 Accepting banks.................................................. 10,442 10,434 8,579 9,865 9,343 8,159 8,159 9,262 10,051 9,764 9 Own bills ......................................................... 8,769 8,915 7,653 8,327 8,565 7,560 7,488 8,768 9,113 8,603 10 Bills bought...................................................... 1,673 1,519 927 1,538 778 598 670 493 939 1,161 Federal Reserve Banks 11 Own account.................................................... 991 954 1 704 205 171 0 366 373 310 12 Foreign correspondents.................................. 375 362 664 1,382 1,417 1,373 1,555 1,718 1,784 1,899 13 Others ............................................................ 10,715 13,700 24,456 33,370' 39,303' 39,614 40,463 41,290 42,147' 42,361 Basis 14. Imports into United States................................... 4,992 6,378 8,574 10,270 11,393 10,926 10,946 11,651 11,536 12,109 15 Exports from United States................................. 4,818 5,863 7,586 9,640 11,102 11,001 11,221 11,347 11,339 12,401 16 All other ............................................................ 12,713 13,209 17,540 25,411 27,774 27,389 28,010 29,637 31,480 29,824 1. A change in reporting instructions results in offsetting shifts in the dealer- 3. Includes all financial company paper sold by dealers in the open market. placed and directly placed financial company paper in October 1979. 4. As reported by financial companies that place their paper directly with inves­ 2. Institutions engaged primarily in activities such as, but not limited to, com­ tors. mercial, savings, and mortgage banking; sales, personal, and mortgage financing; 5. Includes public utilities and firms engaged primarily in such activities, as factoring, finance leasing, and other business lending; insurance underwriting; and communications, construction, manufacturing, mining, wholesale and retail trade, Digitized for oFthRerA inSvEesRtm ent activities. transportation, and reserves. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Financial Statistics □ September 1980 1.34 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Effective date Rate Effective Date Rate Month Average Month Average rate rate 1980—Apr. 2 ................ 20 June 6 .................. 13 1979—Jan............................ 11.75 1979—Nov 15.55 18 ................ 19 Vi 13.................. 12-12 Vi Feb........................... 11.75 Dec 15.30 May 1 .................. lSVi-19 20.................. 12 Mar........................... 11.75 1980—Jan 15.25 18 Yi July 7 .................. 11.50 Apr........................... 11.75 Feb 15.63 7 .................. YlVi 25 .................. 11.00 May ........................ 11.75 Mar 18.31 16 .................. 16Vt> Aug 22 .................. 11.25 June........................ 11.65 Apr 19.77 23 .................. 14^ 27 .................. 11.50 July ........................ 11.54 May ........................ 16.57 30 .................. 14 Aug.......................... 11.91 12.63 Sept.......................... 12.90 July ........................ 11.48 Oct............................ 14.39 Aug.......................... 11.12 1.35 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 5-10, 1980 Size of loan (in thousands of dollars) All sizes 1,000 1-24 25-49 50-99 100-499 50Q-999 and over Short-Term Commercial and Industrial Loans 1 Amount of loans (thousands of dollars).................. 11,316,521 885,614 518,102 697,310 2,159,297 720,502 6,335,696 2 Number of loans ................................................. 164,331 123,866 15,129 10,596 11,950 1,134 1,656 3 Weighted-average maturity (months)..................... 2.8 3.2 4.0 3.4 2.7 3.0 2.6 4 Weighted-average interest rate (percent per annum) 17.75 17.90 18.78 18.95 18.49 19.13 17.10 5 Interquartile range1 .......................................... 15.62-19.82 15.12-20.23 17.72-20.28 17.50-20.99 17.50-19.82 18.50-20.39 14.09-19.59 Percentage of amount of loans 6 With floating rate................................................. 43.8 23.0 33.2 44.2 33.4 64.5 48.8 7 Made under commitment ..................................... 50.3 26.0 34.7 48.5 47.9 60.6 54.9 8 With no stated maturity....................................... 19.0 13.9 10.7 32.2 14.1 34.5 18.8 Long-Term Commercial and Industrial Loans 9 Amount of loans (thousands of dollars).................. 1,339,749 171,216 181,145 105,761 881,627 10 Number of loans ................................................. 15,243 13,992 845 152 254 11 Weighted-average maturity (months) ..................... 42.8 33.9 44.6 42.4 44.2 12 Weighted-average interest rate (percent per annum) 18.37 18.26 18.64 18.62 18.30 13 Interquartile range1 .......................................... 17.50-20.00 15.00-21.34 17.75-20.50 18.00-20.06 17.51-19.75 Percentage of amount of loans 14 With floating rate................................................. 74.0 30.1 76.7 69.4 82.5 15 Made under commitment ..................................... 71.1 29.4 68.6 71.8 79.7 Construction and Land Development Loans 16 Amount of loans (thousands of dollars).................. 1,110,511 91,724 114,305 199,312 494,589 210,581 17 Number of loans ................................................. 16,924 8,317 3,208 2,904 2,292 203 18 Weighted-average maturity (months) ..................... 7.4 3.7 4.3 7.3 8.0 9.5 19 Weighted-average interest rate (percent per annum) 18.32 17.14 15.68 18.69 19.56 16.99 20 Interquartile range1 .......................................... 17.50-20.40 14.75-19.56 13.10-18.00 18.00-20.48 20.00-20.32 13.00-19.66 Percentage of amount of loans 21 With floating rate................................................. 71.0 23.2 35.8 48.3 92.4 82.3 22 Secured by real estate.......................................... 94.4 82.0 96.9 97.9 97.5 87.7 23 Made under commitment..................................... 45.1 74.3 64.4 39.7 25.9 72.2 24 With no stated maturity ....................................... 11.9 11.0 10.0 7.2 7.8 27.1 Type of construction 25 1- to 4-family ...................................................... 35.5 77.0 86.0 70.9 8.7 19.5 26 Multifamily ......................................................... 5.5 1.9 3.3 4.4 5.5 9.5 27 Nonresidential .................................................... 58.9 21.1 10.7 24.7 85.8 70.9 All 250 sizes 1-9 10-24 25-49 50-99 100-249 and over Loans to Farmers 28 Amount of loans (thousands of dollars).................. 1,211,479 163,850 168,002 168,990 133,979 241,236 335,423 29 Number of loans ................................................ 64,652 44,177 11,340 5,257 1,931 1,600 347 30 Weighted-average maturity (months) ..................... 6.6 6.4 6.1 7.0 5.7 5.2 8.7 31 Weighted-average interest rate (percent per annum) 17.38 16.46 16.98 17.10 17.38 17.40 18.14 32 Interquartile range1 .......................................... 16.64-18.50 14.84-17.81 15.79-18.67 15.56-18.40 16.54-18.68 16.60-18.27 17.24-18.64 By purpose of loan 33 Feeder livestock .................................................. 17.67 16.35 17.01 17.63 17.74 17.56 17.98 34 Other livestock................................................... 16.64 16.54 14.89 16.62 17.37 (2) (2) 35 Other current operating expenses.......................... 17.49 16.54 17.20 17.45 18.48 17.27 18.61 36 Farm machinery and equipment ............................ 16.44 16.23 16.41 16.64 (2) (2) (2) 37 Other ................................................................. 17.15 16.36 17.28 15.31 15.35 17.36 18.02 1. Interest rate range that covers the middle 50 percent of the total dollar amount Note. For more detail, see the Board’s E.2(416) statistical release, of loans made. 2. Fewer than 10 sample loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets A ll 1.36 INTEREST RATES Money and Capital Markets Averages, percent per annum 1980 1980, week ending Instrument 1977 1978 1979 May June July Aug. Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 Money market rates 1 Federal funds1 ............................................ 9.35 10.03 Commercial paper2-3 2 1-month .................................................... 5.42 7.76 10.86 9.60 8.56 8.53 9.48 8.75 8.93 9.02 9.73 10.24 3 3-month .................................................... 5.54 7.94 10.97 9.49 8.27 8.41 9.57 8.68 8.92 9.14 9.87 10.40 4 6-month .................................................... 5.60 7.99 10.91 9.29 8.03 8.29 9.61 8.61 8.84 9.20 9.94 10.52 Finance paper, directly placed2-3 5 1-month .................................................... 5.38 7.73 10.78 9.30 8.01 8.37 9.30 8.55 8.69 8.89 9.58 10.12 6 3-month .................................................... 5.49 7.80 10.47 9.09 7.59 8.03 9.08 8.25 8.58 8.77 9.19 9.93 7 6-month .................................................... 5.50 7.78 10.25 9.01 7.42 8.03 9.08 8.25 8.60 8.77 9.21 9.89 8 Prime bankers acceptances, 90-day3-4 ... 5.59 8.11 11.04 9.60 8.31 8.58 9.85 8.97 9.14 9.39 10.14 10.77 Certificates of deposit, secondary market5 9 1-month .................................................... 5.48 7.88 11.03 9.77 8.53 8.59 9.62 8.82' 9.16 9.21 9.82 10.31 10 3-month .................................................... 5.64 8.22 11.22 9.79 8.49 8.65 9.91 8.93 9.29 9.46 10.13 10.80 11 6-month .................................................... 5.92 8.61 11.44 9.78 8.33 8.73 10.29 9.11 9.43 9.85 10.62 11.34 12 Eurodollar deposits, 3-month6 ................ 6.05 8.74 11.96 11.20 9.41 9.33 10.82 9.30 10.09 10.33 10.64 11.54 U.S. Treasury bills3-7 Secondary market 13 3-month ................................................ 5.27 7.19 10.07 8.58 7.07 3.06 9.13 8.44 8.58 8.60 9.41 10.01 14 6-month ................................................ 5.53 7.58 10.06 8.65 7.30 3.06 9.41 8.49 8.69 8.91 9.83 10.36 15 1-year .................................................... 5.71 7.74 9.75 8.66 7.54 3.00 9.39 8.43 8.61 8.94 9.85 10.28 Auction average8 16 3-month ................................................ 5.265 7.221 10.041 9.150 6.995 3.126 9.259 8.221 8.877 8.723 9.411 10.025 17 6-month ................................................ 5.510 7.572 10.017 9.149 7.218 3.101 9.443 8.276 8.867 8.891 9.765 10.250 Capital market rates U.S. Treasury Notes and Bonds Constant maturities9 18 1-year ....................................................... 6.09 8.34 10.67 9.39 8.16 8.65 10.24 9.13 9.35 9.71 10.79 11.28 19 2-year...................................................... 6.45 8.34 10.12 9.45 8.73 9.03 10.53 9.47 9.70 10.06 11.03 11.47 20 2Vi-year10 .............................................. 9.05 9.70 10.25 11.50 21 3-year ...................................................... 6.69 8.29 9.71 ' 9.44 8.91 ' 9.27 ' 10.63 ' 9.72 9.90 ' 10.18 11.06 11.52 22 5-year...................................................... 6.99 8.32 9.52 9.95 9.21 9.53 10.84 9.92 10.12 10.47 11.21 11.69 23 7-year...................................................... 7.23 8.36 9.48 10.09 9.45 9.84 10.95 10.20 10.39 10.66 11.20 11.65 24 10-year .................................................... 7.42 8.41 9.44 10.18 9.78 10.25 11.10 10.59 10.75 10.93 11.20 11.59 25 20-year.................................................... 7.67 8.48 9.33 10.44 9.89 10.32 11.07 10.64 10.78 10.97 11.15 11.41 26 30-year.................................................... 8.49 9.29 10.36 9.81 10.24 11.00 10.58 10.74 10.94 11.09 11.28 Composite11 27 3 to 5 years12 ........................................ 6.85 8.30 9.58 28 Over 10 years (long-term) .................. 7.06 7.89 8.74 9.82 10.84 State and Local Notes and Bonds Moody’s series13 29 Aaa ............................................................ 5.20 5.52 5.92 6.80 7.11 7.35' 8.03 8.15 8.00 8.00 8.00 8.00 30 Baa.............................................................. 6.12 6.27 6.73 8.02 7.98 8.46' 9.25 9.30 9.25 9.25 9.25 9.20 31 Bond Buyer series14 ................................ 5.68 6.03 6.52 7.59 7.63 8.13 8.67 8.59 8.61 8.53 8.68 8.85 Corporate Bonds 32 Seasoned issues, all industries15............ 8.43 9.07 10.12 12.11 11.64 11.77 12.33 11.94 12.14 12.26 12.43 12.56 By rating group 33 Aaa ........................................................ 8.02 8.73 9.63 10.99 10.58 11.07 11.64 11.33 11.44 11.57 11.70 11.88 34 Aa .......................................................... 8.24 8.92 9.94 11.91 11.39 11.43 12.09 11.61 11.91 12.03 12.15 12.36 35 A ............................................................ 8.49 9.12 10.20 12.35 11.89 11.95 12.44 12.09 12.25 12.37 12.56 12.65 36 Baa.......................................................... 8.97 9.45 10.69 13.17 12.71 12.67 13.15 12.70 12.97 13.07 13.28 13.37 Aaa utility bonds16 37 New issue .............................................. 8.19 8.96 10.03 11.53 10.96 11.60 12.32 11.92 12.03 12.36 12.48 12.62 38 Recently offered issues........................ 8.19 8.97 10.02 11.64 11.00 11.41 12.31 12.00 12.10 12.27 12.36 12.86 Memo: Dividend/price ratio17 39 Preferred stocks .................................... 7.60 8.25 9.07 10.20 9.78 9.81 10.04 9.70 10.03 10.16 9.94 10.01 40 Common stocks .................................... 4.56 5.28 5.46 5.77 5.39 5.20 5.06 5.09' 5.12 5.05 5.03 5.04 1. Weekly figures are seven-day averages of daily effective rates for the week 2, 1980. Each weekly figure shown is calculated on a biweekly basis and is the ending Wednesday; the daily effective rate is an average of the rates on a given average of five business days ending on the Monday following the calendar week. day weighted by the volume of transactions at these rates. Beginning June 2, the biweekly rate is used to determine the maximum interest 2. Beginning November 1977, unweighted average of offering rates quoted by rate payable in the following two-week period on small saver certificates. (See at least five dealers (in the case of commercial paper), or finance companies (in table 1.16.) the case of finance paper). Previously, most representative rate quoted by those 11. Unweighted averages for all outstanding notes and bonds in maturity ranges dealers and finance companies. Before November 1979, maturities for data shown shown, based on daily closing bid prices. “Long-term” includes all bonds neither are 30-59 days, 90—119 days, and 120-179 days for commercial paper; and 30-59 due nor callable in less than 10 years, including several very low yielding “flower” days, 90-119 days, and 150-179 days for finance paper. bonds. 5. Yields are quoted on a bank-discount basis. 12. The three- to five-year series has been discontinued. 4. Average of the midpoint of the range of daily dealer closing rates offered for 13. General obligations only, based on figures for Thursday, from Moody’s domestic issues. Investors Service. 5. Five-day average of rates quoted by five dealers (three-month series was 14. Twenty issues of mixed quality. previously a seven-day average). 15. Averages of daily figures from Moody’s Investors Service. 6. Averages of daily quotations for the week ending Wednesday. 16. Compilation of the Board of Governors of the Federal Reserve System. 7. Except for auction averages, yields are computed from daily closing bid prices. Issues included are long-term (20 years or more). New-issue yields are based on 8. Rates are recorded in the week in which bills are issued. quotations on date of offering; those on recently offered issues (included only for 9. Yield on the more actively traded issues adjusted to constant maturities by first 4 weeks after termination of underwriter price restrictions), on Friday closethe U.S. Treasury, based on daily closing bid prices. of-business quotations. 10. Each monthly figure is an average of only five business days near the end 17. Standard and Poor's corporate series. Preferred stock ratio based on a sample Digitized for oFfR thAe SmEoRnt h. The rate for each month was used to determine the maximum of ten issues: four public utilities, four industrials, one financial, and one trans­ interest rate payable in the following month on small saver certificates, until June portation. Common stock ratios on the 500 stocks in the price index. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics □ September 1980 1.37 STOCK MARKET Selected Statistics 1980 1977 1978 1979r Feb. Mar. Apr. May. June July August Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) . 53.67 53.76 55.67 66.05 59.52 58.47 61.38 65.43 68.56 70.87 2 Industrial ................................................................... 57.84 58.30 61.82 76.42 68.71 66.31 69.39 74.47 78.67 82.15 3 Transportation ........................................................ 41.07 43.25 45.20 57.92 51.77 48.62 51.07 54.04 59.14 62.48 4 Utility......................................................................... 40.91 39.23 36.46 36.22 33.38 35.29 37.31 38.50 38.77 38.18 5 Finance .................................................................... 55.23 56.74 58.65 61.84 54.71 57.32 61.47 65.16 66.76 67.22 6 Standard & Poor’s Corporation (1941-43 = 10)1 . 98.18 96.11 98.34 115.34 104.69 102.97 107.69 114.55 119.83 123.50 7 American Stock Exchange (Aug. 31, 1973 = 100) 116.18 144.56 186.56 288.99 259.79 242.60 258.45 286.21 310.29 321.87 Volume of trading (thousands of shares) 8 New York Stock Exchange ...................................... 20,936 28,591 32,233 47,827 41,736 32,102 36,425 39,518 46,444 45,984 9 American Stock Exchange ........................................ 2,514 3,622 4,182 6,903 5,947 3,428 3,799 5,240 6,195 6,452 Customer financing (end-of-period balances, in millions of dollars) 10 Regulated margin credit at brokers/dealers2 9,993 11,035 11,619' 12,638 11,914 11,309 11,522 11 Margin stock3 .................................................. 9,740 10,830 11,450' 12,460 11,740 11,140 11,270 11,200 11,320 12 Convertible bonds .......................................... 250 205 167r 175 171 167 167 166 198 13 Subscription issues .......................................... 3 1 2' 3 3 2 4 4 4 Free credit balances at brokers4 14 Margin-account................................................ 640 835 1,105' 1,320 1,365 1,290 1,270 1,345 1,664 15 Cash-account.................................................... 2,060 2,510 4,060' 4,755 5,000 4,790 4,750 4,790 4,907 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 ............................ 18.0 33.0 16.0 16.0 45.0 28.0 19.0 17.0 12.0 18 40-49 .................................. 36.0 28.0 29.0' 29.0 22.0 31.0 3222..00 31.0 27.0 2 1 0 9 6 50 0- - 6 5 9 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 3 1 . . 0 0 1 10 8. .0 0 2 14 7 . . 0 0' 2 1 5 4 . . 0 0 1 9 3 . . 0 0 1 10 8. .0 0 12.0 2 1 3 3 . . 0 0 2 1 8 6 . . 0 0 21 70-79 .................................. 6.0 6.0 8.0 9.0 6.0 7.0 7.0 8.0 9.0 22 80 or more.......................... 5.0 5.0 7.0 7.0 5.0 6.0 7.0 7.0 8.0 Special miscellaneous-account balances at brokers (end of period) 23 Total balances (millions of dollars)6 . 9,910 13,092 16,150 16,498 16,687 16,339 16,543 16,920 17,886 Distribution by equity status (percent) 24 Net credit status.................................. 43.4 41.3 44.2 44.1 45.7 44.3 45.8 47.6 48.7 Debt status, equity of 25 60 percent or more ...................... 44.9 45.1 47.0 47.4 41.9 44.0 43.6 43.4 43.8 26 Less than 60 percent.................... 11.7 13.6 8.8 8.4 12.4 11.7 10.6 9.0 8.0 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 65 55 65 50 28 Convertible bonds 50 50 50 50 50 29 Short sales.......... 70 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance 5. Each customer’s equity in his collateral (market value of collateral less net companies. With this change the index includes 400 industrial stocks (formerly debit balance) is expressed as a percentage of current collateral values. 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 6. Balances that may be used by customers as the margin deposit required for financial. additional purchases. Balances may arise as transfers based on loan values of other 2. Margin credit includes all credit extended to purchase or carry stocks or collateral in the customer’s margin account or deposits of cash (usually sales pro­ related equity instruments and secured at least in part by stock. Credit extended ceeds) occur. is end-of-month data for member firms of the New York Stock Exchange. 7. Regulations G, T, and U of the Federal Reserve Board of Governors, pre­ In addition to assigning a current loan value to margin stock generally, Regu­ scribed in accordance with the Securities Exchange Act of 1934, limit the amount lations T and U permit special loan values for convertible bonds and stock acquired of credit to purchase and carry margin stocks that may be extended on securities through exercise of subscription rights. as collateral by prescribing a maximum loan value, which is a specified percentage 3. A distribution of this total by equity class is shown on lines 17-22. of the market value of the collateral at the time the credit is extended. Margin 4. Free credit balances are in accounts with no unfulfilled commitments to the requirements are the difference between the market value (100 percent) and the brokers and are subject to withdrawal by customers on demand. 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 1979 1980 Account 1977 1978 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Julyp Savings and loan associations 1 Assets ..............•..................... 459,241 523,542 576,251 578,922 579.307 582.252 585.685 589.498 591.108 593,321 594,792 596,992 2 Mortgages ............................. 381,163 432,808 472,198 474,678 475,797 476,448 477,303 479,078 480,165 480,092 481,184 482,985 3 Cash and investment securities1 39,150 44,884 49,220 48,180 46,541 48,473 50,168 50,899 50,576 52,670 52.613 52,352 4 Other .................................... 38,928 45,850 54,833 56,064 56,969 57,331 58,214 59,521 60,367 60,559 60,995 61,655 5 Liabilities and net worth......... 459,241 523,542 576,251 578,922 579.307 582.252 585.685 589.498 591.108 593,321 594,792 596,992 6 Savings capital........................ 386,800 430,953 464,489 465,646 470,171 472,236 473,862 478,265 478,591 481,613 486,900 489,133 7 Borrowed money ................... 27,840 42,907 54,268 54,433 55,375 55,233 55,276 57,346 57,407 55,353 54,950 53,600 8 FHLBB ............................. 19,945 31,990 39,223 39,638 40,441 40,364 40,337 42,413 42,724 41,529 40.613 39,884 9 Other ................................. 7,895 10,917 15,045 14,795 14,934 14,869 14,939 14,933 14,683 13,824 14,337 13,716 10 Loans in process..................... 9,911 .10,721 10,766 10,159 9,511 8,735 8,269 8,079 7,660 7,126 6,974 7,060 11 Other .................................... 9,506 9,904 14,673 16,324 11,684 13,315 15,385 12,683 14,260 16,246 13,056 14,423 12 Net worth2............................. 25,184 29,057 32,055 32,360 32,566 32,733 32,893 33,125 33,190 32,983 32,912 32,776 13 Memo: Mortgage loan com­ mitments outstanding3 19,875 18,911 20,930 18,029 16,007 15,559 16,744 15,844 14,193 13,929 15,368 18,039 Mutual savings banks4 14 Assets ......................................... 14,287 158,174 163,133 163,205 163,405 163,252 164,270 165,107 165,366 166,340 167,002 Loans 15 Mortgage ................................. 88,195 95,157 98,304 98,610 98,908 98,940 99,220 99,151 99,045 99,163 99,150 16 Other ...................................... 6,210 7,195 9,510 9,449 9,253 9,804 10,044 10,131 10,187 10,543 11,115 Securities 17 U.S. government5..................... 5,895 4,959 7,750 7,754 7,658 7,387 7,436 7,629 7,548 7,527 7,530 18 State and local government---- 2,828 3,333 3,100 3,003 2,930 2,887 2,853 2,824 2,791 2,727 2,701 19 Corporate and other6................ 37,918 39,732 37,210 37,036 37,086 37,114 37,223 37,493 37,801 38,246 38,325 n.a. 20 Cash ........................................... 2,401 3,665 2,909 3,010 3,156 2,703 3,012 3,361 3,405 3,588 3,575 21 Other assets................................. 3,839 4,131 4,351 4,343 4,412 4,417 4,481 4,518 4,588 4,547 4,606 22 Liabilities .................................... 147,287 158,174 163,133 163,205 163,405 163,252 164,270 165,107 165,366 166,340 167,002 23 Deposits ...................................... 134,017 142,701 145,096 144,828 146,006 145,044 145,171 146,328 145,821 146,637 148,563 24 Regular7 ................................... 132,744 141,170 143,263 143,064 144,070 143,143 143,284 144,214 143,765 144,646 146,394 25 Ordinary savings................... 78,005 71,816 62,672 61,156 61,123 59,252 58,234 56,948 54,247 54,669 56,329 26 Time and other..................... 54,739 69,354 80,591 81,908 82,947 83,891 85,050 87,266 89,517 89,977 90,065 27 Other ...................................... 1,272 1,531 1,834 1,764 1,936 1,901 1,887 2,115 2,056 1,990 2,169 28 Other liabilities............................ 3,292 4,565 6,600 6,872 5,873 6,665 7,485 7,135 7,916 8,161 6,975 29 General reserve accounts............ 9,978 10,907 11,437 11,504 11,525 11,544 11,615 11,643 11,629 11,542 11,465 30 Memo: Mortgage loan com­ mitments outstanding8.......... 4,066 4,400 3,749 3,619 3,182 2,919 2,618 2,397 2,097 1,883 1,849 Life insurance companies 31 Assets ......................................... 351,722 389,924 423,760 427,496 431,453 436,226 438,638 439,733 442,932 447,020 450,858 Securities 32 Government ............................ 19,553 20,009 20,429 20,486 20,294 20,378 20,438 20,545 20,470 20,529 20,395 33 United States9....................... 5,315 4,822 5,075 5,122 4,984 4,878 4,898 5,004 5,059 5,107 4,990 34 State and local ..................... 6,051 6,402 6,339 6,354 6,392 6,433 6,488 6,454 6,351 6,352 6,349 35 Foreign10 ............................. 8,187 8,785 9,015 9,010 8,918 9,067 9,052 9,087 9,060 9,070 9,056 36 Business .................................. 175,654 198,105 216,183 217,856 218,284 222,332 223,423 221,214 222,175 223,556 224,874 n.a. 37 Bonds ................................... 141,891 162,587 178,633 179,158 178,828 181,820 182,521 182,536 182,750 183,356 184,329 38 Stocks ................................... 33,763 35,518 37,550 38,698 39,456 40,512 40,902 38,678 39,425 40,200 40,545 39 Mortgages ................................... 96,848 106,167 115,991 117,253 118,784 119,885 120,926 122,314 123,587 124,563 125,455 40 Real estate................................... 11,060 11,764 12,816 12,906 13,047 13,083 13,201 13,512 13,696 13,981 14,085 41 Policy loans ................................. 27,556 30,146 33,574 34,220 34,761 35,302 35,839 36,901 38,166 38,890 39,354 42 Other assets................................. 21,051 23,733 24,767 24,775 26,283 25,246 24,811 25,247 24,838 25,501 26,695 Credit unions 43 Total assets/liabilities and capital ................................... 53,755 62,348 65,063 65,419 65,854 64,506 64,857 65,678 65,190 66,103 68,102 68,429 44 Federal ........................................ 29,564 34,760 35,537 35,670 35,934 35,228 35,425 36,091 35,834 36,341 37,555 37,573 45 State .......................................... 24,191 27,588 29,526 29,749 29,920 29,278 29,432 29,587 29,356 29,762 30,547 30,856 46 Loans outstanding ...................... 41,845 50,269 53,533 56,267 53,125 52,089 51,626 51,337 50,344 49,469 48,172 47,829 47 Federal .................................... 22,634 27,687 29,020 30,613 28,698 28,053 27,783 27,685 27,119 26,550 25,773 25,435 48 State ........................................ 19,211 22,582 24,513 25,654 24,426 24,036 23,843 23,652 23,225 22,919 22,399 22,394 49 Savings ........................................ 46,516 53,517 55,739 55,797 56,232 55,447 55,790 56,743 56,338 57,197 59,310 60,574 50 Federal (shares) ...................... 25,576 29,802 30,366 30,399 35,530 30,040 32,256 30,948 30,851 31,403 32,764 33,472 51 State (shares and deposits)....... 20,940 23,715 25,373 25,398 25,702 25,407 25,534 25,795 25,487 25,794 26,546 27,102 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 1980 1.39 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year Fiscal Fiscal Fiscal Type of account or operation year year year 1979 1980 1980 1977 1978 1979 HI H2 HI May June July U.S. budget 1 Receipts1 ....................................................... 357,762 401,997 465,940 246,574 233,952 270,864 36,071 59,055 37,348 2 Outlays1 ......................................................... 402,725 450,836 493,673 245,616 263,044 289,899 50,198 46,702 52,409 3 Surplus, or deficit(-) ................................ -44,963 -48,839 -27,733 958 -29,093 -19,035 -14,127 12,353 -15,062 4 Trust funds ............................................... 9,497 12,693 18,335 4,041 9,679 4,383 6,463 1,361 -8,224 5 Federal funds2........................................... -54,460 -61,532 -46,069 -3,083 -38,773 -23,418 -20,590 10,992 -6,838 Off-budget entities (surplus, or deficit 6 Federal Financing Bank outlays .............. -8,415 -10,661 -13,261 -7,712 -5,909 -7,735 -1,827 -511 -1,214 7 Other3 ........................................................... -269 334 832 -447 805 -528 -364 121 -107 U.S. budget plus off-budget, including Federal Financing Bank 8 Surplus, or deficit (-) .............................. -53,647 -59,166 -40,162 -7,201 -34,197 -27,298 -16,318 11,963 -16,383 Source or financing 9 Borrowing from the public.................... 53,516 59,106 33,641 6,039 31,320 24,435 5,350 -4,615 9,737 10 Cash and monetary assets (decrease, or increase (-))*.................................. -2,247 -3,023 -408 -8,878 3,059 -3,482 9,841 -7,135 3,346 11 Other5 ...................................................... 2,378 3,083 6,929 10,040 -182 6,345 -1,127 -213 3,300 Memo; 12 Treasury operating balance (level, end of period) .................................................. 19,104 22,444 24,176 17,485 15,924 14,092 10,662 14,092 10,432 13 Federal Reserve Banks.......................... 15,740 16,647 6,489 3,290 4,075 3,199 4,523 3,199 3,954 14 Tax and loan accounts....................... 3,364 5,797 17,687 14,195 11,849 10,893 6,139 10,893 6,478 1.Effective June 1978, earned income credit payments in excess of an individual’s 5.Includes accrued interest payable to the public; deposit funds; miscellaneous tax liability, formerly treated as income tax refunds, are classified as outlays re­ liability (including checks outstanding) and asset accounts; seignorage; increment troactive to January 1976. on gold; net gain/loss for U.S. currency valuation adjustment; net gain/loss for 2.Half-year figures are calculated as a residual (total surplus/deficit less trust IMF valuation adjustment; and profit on the sale of gold. fund surplus/deficit). 3.Includes Pension Benefit Guaranty Corporation; Postal Service Fund; Rural Source. “Monthly Treasury Statement of Receipts and Outlays of the U.S. Electrification and Telephone Revolving Fund; and Rural Telephone Bank. Government,” Treasury Bulletin, and the Budget of the United States Government, 4.1ncludes U.S. Treasury operating cash accounts; special drawing rights; gold Fiscal Year 1981. 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 “other 10.Issues of foreign governments and their subdivisions and bonds of the Inter­ assets.” national Bank for Reconstruction and Development. 2.Includes net undistributed income, which is accrued by most, but not all, associations. Note. Savings and loan associations: Estimates by the FHLBB for all associa­ 3.Excludes figures for loans in process, which are shown as a liability. tions in the United States. Data are based on monthly reports of federally insured 4.The NAMSB reports that, effective April 1979, balance sheet data are not associations and annual reports of other associations. Even when revised, data for strictly comparable with previous months. Beginning April 1979, data are reported current and preceding year are subject to further revision. on a net-of-valuation-reserves basis. Prior to that date, data were reported on a Mutual savings banks: Estimates of National Association of Mutual Savings gross-of-valuation-reserves basis. Banks for all savings banks in the United States. 5.Beginning April 1979, includes obligations of U.S. government agencies. Be­ Life insurance companies: Estimates of the American Council of Life Insurance fore that date, this item was included in “Corporate and other.” for all life insurance companies in the United States. Annual figures are annual- 6.Includes securities of foreign governments and international organizations and, statement asset values, with bonds carried on an amortized basis and stocks at prior to April 1979, nonguaranteed issues of U.S. government agencies. year-end market value. Adjustments for interest due and accrued and for differ­ 7.Excludes checking, club, and school accounts. ences between market and book values are not made on each item separately but 8.Commitments outstanding (including loans in process) of banks in New York are included, in total, in “other assets.” State as reported to the Savings Banks Association of the state of New York. Credit unions: Estimates by the National Credit Union Administration for a 9.Direct and guaranteed obligations. Excludes federal agency issues not guar­ group of federal and state-chartered credit unions that account for about 30 percent anteed, which are shown in the table under “Business” securities. of credit union assets. Figures are preliminary and 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 Calendar year Fiscal Fiscal Fiscal Source or type year year year 1979 1980 1980 1977 1978 1979 HI H2 HI May June July Receipts 1 All sources1 ........................................... 357,762 401,997 465,940 246,574 233,952 270,864 36,071 59,055 37,348 2 Individual income taxes, net .................... 157,626 180,988 217,841 111,603 115,488 119,988 9,275 27,791 19,773 3 Withheld .................................................. 144,820 165,215 195,295 98,683 105,764 110,394 18,104 19,791 19,513 4 Presidential Election Campaign Fund . 37 39 36 32 3 34 7 4 4 5 Nonwithheld ............................................ 42,062 47,804 56,215 44,116 12,355 49,707 2,101 9,380 1,580 6 Refunds1 .................................................. 29,293 32,070 33,705 31,228 2,634 40,147 10,937 1,385 1,324 Corporation income taxes 7 Gross receipts .......................................... 60,057 65,380 71,448 42,427 29,169 43,434 1,866 16,251 2,673 8 Refunds .................................................... 5,164 5,428 5,771 2,889 3,306 4,064 635 447 537 9 Social insurance taxes and contributions, net.......................................................... 108,683 123,410 141,591 75,609 71,031 86,597 20,787 10,793 10,253 10 Payroll employment taxes and contributions2 .................................. 88,196 99,626 115,041 59,298 60,562 69,077 15,376 9,702 8,697 11 Self-employment taxes and contributions3 .................................. 4,014 4,267 5,034 4,616 417 5,535 376 395 -231 12 Unemployment insurance ...................... 11,312 13,850 15,387 8,623 6,899 8,690 4,495 177 1,229 13 Other net receipts4.................................. 5,162 5,668 6,130 3,072 3,149 3,294 540 519 558 14 Excise taxes.................................................. 17,548 18,376 18,745 8,984 9,675 11,383 2,502 2,497 2,662 15 Customs deposits ........................................ 5,150 6,573 7,439 3,682 3,741 3,443 557 611 663 16 Estate and gift taxes .................................. 7,327 5,285 5,411 2,657 2,900 3,091 623 502 623 17 Miscellaneous receipts5 .............................. 6,536 7,413 9,237 4,501 5,254 6,993 1,098 1,057 1,240 Outlays 18 All types1 ............................................... 402,725 450,836 493,673 245,616 263,044 289,899 50,198 46,702 52,409 19 National defense.......................................... 97,501 105,186 117,681 57,643 62,002 69,132 11,543 11,885 11,666 20 International affairs .................................... 4,813 5,922 6,091 3,538 4,617 4,602 648 325 1,445 21 General science, space, and technology .. 4,677 4,,742 5,041 2,461 3,299 3,150 516 527 503 22 Energy ........................................................... 4,172 5,861 6,856 4,417 3,281 3,126 624 657 619 23 Natural resources and environment ........ 10,000 10,925 12,091 5,672 7,350 6,668 1,130 1,159 1,316 24 Agriculture .................................................. 5,532 7,731 6,238 3,020 1,709 3,193 478 623 -247 25 Commerce and housing credit.................. -44 3,324 2,565 60 3,002 3,878 1,133 924 781 26 Transportation ............................................ 14,636 15,445 17,459 7,688 10,298 9,582 1,419 1,846 1,948 27 Community and regional development ... 6,348 11,039 9,482 4,499 4,855 5,302 836 966 593 28 Education, training, employment, social services .................................................. 20,985 26,463 29,685 14,467 14,579 16,686 2,521 2,560 2,435 29 Health .......................................................... 38,785 43,676 49,614 24,860 26,492 29,299 4,970 4,948 5,043 30 Income security1 .......................................... 137,915 146,212 160,198 81,173 86,007 94,600 16,115 15,150 17,941 31 Veterans benefits and services.................. 18,038 18,974 19,928 10,127 10,113 9,758 2,795 632 1,715 32 Administration of justice .......................... 3,600 3,802 4,153 2,096 2,174 2,291 397 363 400 33 General government .................................. 3,312 3,737 4,153 2,291 2,103 2,422 382 426 413 34 General-purpose fiscal assistance ............ 9,499 9,601 8,372 3,890 4,286 3,940 238 53 1,830 35 Interest6 ........................................................ 38,009 43,966 52,556 26,934 29,045 32,658 5,299 9,565 4,602 36 Undistributed offsetting receipts6-7.......... -15,053 -15,772 -18,489 -8,999 -12,164 -10,387 -845 c -5,905 -594 1. Effective June 1978, earned income credit payments in excess of an indi­ 6. Effective September 1976, “Interest” and “Undistributed offsetting receipts” vidual’s tax liability, formerly treated as income tax refunds, are classified as reflect the accounting conversion for the interest on special issues for U.S. gov­ outlays retroactive to January 1976. ernment accounts from an accrual basis to a cash basis. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. 7. Consists of interest received by trust funds, rents and royalties on the Outer 3. Old-age, disability, and hospital insurance. Continental Shelf, and U.S. government contributions for employee retirement. 4. Supplementary medical insurance premiums, federal employee retirement contributions, and Civil Service retirement and disability fund. Source. “Monthly Treasury Statement of Receipts and Outlays of the U.S. 5. Deposits of earnings by Federal Reserve Banks and other miscellaneous re­ Government” and the Budget of the U.S. Government, Fiscal Year 1981. ceipts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Financial Statistics □ September 1980 1.41 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1977 1978 1979 1980 Item Dec. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31. Mar. 31 1 Federal debt outstanding............................................. 729.2 758.8 780.4 797.7 804.6 812.2 833.8 852.2 870.4 2 Public debt securities.................................................. 718.9 749.0 771.5 789.2 796.8 804.9 826.5 845.1 863.5 3 Held by public ....................................................... 564.1 587.9 603.6 619.2 630.5 626.4 638.8 658.0 677.1 4 Held by agencies .................................................... 154.8 161.1 168.0 170.0 166.3 178.5 187.7 187.1 186.3 5 Agency securities ....................................................... 10.2 9.8 8.9 8.5 7.8 7.3 7.2 7.1 7.0 6 Held by public....................................................... 8.4 8.0 7.4 7.0 6.3 5.9 5.8 5.6 5.5 7 Held by agencies .................................................... 1.8 1.8 1.5 1.5 1.5 1.5 1.5 1.5 1.5 8 Debt subject to statutory limit.................................... 720.1 750.2 772.7 790.3 797.9 806.0 827.6 846.2 864.5 9 Public debt securities.................................................. 718.3 748.4 770.9 788.6 796.2 804.3 825.9 844.5 862.8 10 Other debt1 ................................................................ 1.7 1.8 1.8 1.7 1.7 1.7 1.7 1.7 1.7 11 Memo. Statutory debt limit........................................ 752.0 752.0 798.0 798.0 798.0 830.0 830.0 879.0 879.0 1. Includes guaranteed debt of government agencies, specified participation Note. Data from Treasury Bulletin (U.S. Treasury Department), certificates, notes to international lending organizations, ana District of Columbia stadium bonds. 1.42 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1980 Type and holder 1976 1977 1978 1979 Apr. May June July Aug. 1 Total gross public debt............................................... 653.5 718.9 789.2 845.1 870.0 877.9 877.6 881.7 893.4 By type 2 Interest-bearing debt.................................................. 652.5 715.2 782.4 844.0 868.9 873.5 876.3 880.4 888.7 3 Marketable ................................................................ 363.2 459.9 487.5 530.7 564.9 567.6 566.7 576.1 583.4 4 Bills ....................................................................... 164.0 161.1 161.7 172.6 195.3 195.4 184.7 191.5 199.3 5 Notes ..................................................................... 216.7 251.8 265.8 283.4 291.8 291.5 301.5 302.6 300.3 6 Bonds ..................................................................... 40.6 47.0 60.0 74.7 77.7 80.6 80.6 82.0 83.9 7 Nonmarketable1 ......................................................... 231.2 255.3 294.8 313.2 304.0 306.0 309.5 304.3 305.3 8 Convertible bonds2 ................................................ 2.3 2.2 2.2 2.2 — — — — — 9 State and local government series........................... 4.5 13.9 24.3 24.6 23.7 23.6 23.6 23.5 23.6 10 Foreign issues3 ....................................................... 22.3 22.2 29.6 28.8 26.3 25.9 25.5 25.8 25.8 11 Government ....................................................... 22.3 22.2 28.0 23.6 19.8 19.5 19.0 19.3 19.4 12 Public ................................................................. 0 0 1.6 5.3 6.4 6.4 6.4 6.4 6.4 13 Savings bonds and notes......................................... 72.3 77.0 80.9 79.9 74.2 73.6 73.4 73.3 73.2 14 Government account series4.................................... 129.7 139.8 157.5 177.5 179.7 182.6 186.8 181.5 182.4 15 Non-interest-bearing debt........................................... 1.1 3.7 6.8 1.2 1.1 4.4 1.3 1.3 4.7 By holder5 16 U.S. government agencies and trust funds................. 147.1 154.8 170.0 187.1 188.2 190.7 17 Federal Reserve Banks............................................... 97.0 102.5 109.6 117.5 118.8 124.0 18 Private investors......................................................... 409.5 461.3 508.6 540.5 563.0 562.9 19 Commercial banks ..................................................... 103.8 101.4 94.7 97.0 99.2 100.0 20 Mutual savings banks ................................................ 5.9 5.9 5.0 4.2 4.1 4.1 21 Insurance companies .................................................. 12.7 15.5 14.9 14.4 14.2 13.7 22 Other companies ....................................................... 27.7 22.7 20.5 23.9 25.7 25.0 n.a. n.a. n.a. 23 State and local governments ...................................... 41.6 54.8 70.1 68.2 73.9 74.8 Individuals 24 Savings bonds......................................................... 72.0 76.7 80.7 79.9 74.2 73.4 25 Other securities ...................................................... 28.8 28.6 30.1 34.2 43.8 43.0 26 Foreign and international6 ......................................... 78.1 109.6 137.8 123.8 116.4 117.2 27 Other miscellaneous investors7 .................................. 38.9 46.0 54.9 94.8 111.5 111.7 1. Includes (not shown separately): Securities issued to the Rural Electrification 6. Consists of the investments of foreign balances and international accounts in Administration, depository bonds, retirement plan bonds, and individual retire­ the United States. Beginning with July 1974, the figures exclude non-interestment bonds. bearing notes issued to the International Monetary Fund. 2. These nonmarketable bonds, also known as Investment Series B Bonds, may 7. Includes savings and loan associations, nonprofit institutions, corporate pen­ be exchanged (or converted) at the owner’s option for IVi percent, 5-year mar­ sion trust funds, dealers and brokers, certain government deposit accounts, and ketable Treasury notes. Convertible bonds that have been so exchanged are re­ government sponsored agencies. moved from this category and recorded in the notes category (line 5). 3. Nonmarketable dollar-denominated and foreign currency-denominated series Note. Gross public debt excludes guaranteed agency securities and, beginning held by foreigners. in July 1974, includes Federal Financing Bank security issues. 4. Held almost entirely by U.S. government agencies and trust funds. Data by type of security from Monthly Statement of the Public Debt of the United 5. Data for Federal Reserve Banks and U.S. government agencies and trust States (U.S. Treasury Department); data by holder from Treasury Bulletin. funds are actual holdings; data for other groups are Treasury estimates. 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 1980 1980 Type of holder 1978 1979 1978 1979 May June May June All maturities 1 to 5years 1 AH holders............................................................................... 487,546 530,731 567,560 566,735 162,886 164,198 176,354 184,000 2 U.S. government agencies and trust funds............................... 12,695 11,047 10,382 10,327 3,310 2,555 2,558 2,541 3 Federal Reserve Banks............................................................ 109,616 117,458 124,003 124,515 31,283 28,469 32,962 33,703 4 Private investors....................................................................... 365,235 402,226 433,175 431,893 128,293 133,173 140,835 147,756 5 Commercial banks ................................................................ 68,890 69,076 68,366 69,535 38,390 38,346 38,490 42,026 6 Mutual savings banks ........................................................... 3,499 3,204 3,083 3,023 1,918 1,668 1,523 1,474 7 Insurance companies ............................................................ 11,635 11,496 11,029 11,075 4,664 4,518 4,217 4,137 8 Nonfinancial corporations .................................................... 8,272 8,433 7,972 6,948 3,635 2,844 2,795 2,565 9 Savings and loan associations ............................................... 3,835 3,209 3,198 3,088 2,255 1,763 1,859 1,812 10 State and local governments ................................................ 18,815 15,735 18,088 17,997 3,997 3,487 4,186 4,189 11 All others ............................................................................ 250,288 291,072 321,438 320,226 73,433 80,546 87,765 91,553 Total, within 1 year 5 to 10 years 12 All holders............................................................................... 228,516 255,252 274,175 262,450 50,400 50,440 51,460 54,736 13 U.S. government agencies and trust funds............................... 1,488 1,629 1,086 1,047 1,989 871 1,398 1,398 14 Federal Reserve Banks............................................................ 52,801 63,219 63,190 63,038 14,809 12,977 13,745 13,623 15 Private investors....................................................................... 174,227 190,403 209,899 198,365 33,601 36,592 36,317 39,715 16 Commercial banks ................................................................ 20,608 20,171 20,636 17,584 7,490 8,086 6,745 7,354 17 Mutual savings banks ........................................................... 817 836 868 833 496 459 458 478 18 Insurance companies ............................................................ 1,838 2,016 1,714 1,659 2,899 2,815 2,956 3,006 19 Nonfinancial corporations .................................................... 4,048 4,933 4,032 3,205 369 308 348 345 20 Savings and loan associations .............................................. 1,414 1,301 1,204 1,123 89 69 68 96 21 State and local governments ................................................ 8,194 5,607 6,640 6,412 1,588 1,540 1,749 1,874 22 All others ............................................................................ 137,309 155,539 174,806 167,550 20,671 23,314 23,993 26,561 Bills, within 1 year 10 to 20 years 23 All holders............................................................................... 161,747 172,644 195,387 184,684 19,800 27,588 29,454 29,432 24 U.S. government agencies and trust funds............................... 2 0 1 1 3,876 4,520 3,608 3,608 25 Federal Reserve Banks............................................................ 42,397 45,337 49,195 49,905 2,088 3,272 3,577 3,596 26 Private investors....................................................................... 119,348 127,306 146,191 134,778 13,836 19,796 22,270 22,229 27 Commercial banks ................................................................ 5,707 5,938 7,057 4,739 956 993 1,049 1,054 28 Mutual savings banks ........................................................... 150 262 176 144 143 127 161 158 29 Insurance companies ............................................................ 753 473 386 373 1,460 1,305 1,228 1,352 30 Nonfinancial corporations .................................................... 12 2,793 1,906 988 86 218 306 332 31 Savings and loan associations .............................................. 262 219 273 203 60 58 53 45 32 State and local governments ................................................ 5,524 3,100 4,378 3,906 1,420 1,762 2,259 2,302 33 All others ............................................................................ 105,161 114,522 132,016 124,426 9,711 15,332 17,215 16,988 Other, within 1 year Over 20 years 34 All holders............................................................................... 66,769 82,608 78,788 77,766 25,944 33,254 36,117 36,117 35 U.S. government agencies and trust funds............................... 1,487 1,629 1,085 1,046 2,031 1,472 1,734 1,734 36 Federal Reserve Banks............................................................ 10,404 17,882 13,996 13,133 8,635 9,520 10,529 10,556 37 Private investors....................................................................... 54,879 63,097 63,707 63,587 15,278 22,262 23,855 23,828 38 Commercial banks ................................................................ 14,901 14,233 13,579 12,844 1,446 1,470 1,445 1,518 39 Mutual savings banks ........................................................... 667 574 692 690 126 113 73 80 40 Insurance companies ............................................................ 1,084 1,543 1,328 1,285 774 842 914 921 41 Nonfinancial corporations .................................................... 2,256 2,140 2,126 2,217 135 130 492 500 42 Savings and loan associations .............................................. 1,152 1,081 931 920 17 19 15 14 43 State and local governments ................................................ 2,670 2,508 2,262 2,506 3,616 3,339 3,254 3,220 44 All others ............................................................................ 32,149 41,017 42,790 291,765 9,164 16,340 17,660 17,574 Note. Direct public issues only. Based on Treasury Survey of Ownership from 460 mutual savings banks, and 724 insurance companies, each about 80 percent; Treasury Bulletin (U.S. Treasury Department). (2) 415 nonfinancial corporations and 481 savings and loan associations, each about Data complete for U.S. government agencies and trust funds and Federal Re­ 50 percent; and (3) 492 state and local governments, about 40 percent. serve Banks, but data for other groups include only holdings of those institutions “All others,” a residual, includes holdings of all those not reporting in the that report. The following figures show, for each category, the number and pro­ Treasury Survey, including investor groups not listed separately. portion reporting as of June 30, 1980: (1) 5,362 commercial banks, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Financial Statistics □ September 1980 1.44 U.S. GOVERNMENT SECURITIES DEALERS Transactions Par value; averages of daily figures, in millions of dollars 1980 1980, week ending Wednesday Item 1977 1978 Apr. May' Apr. 30 May 7 May 14 May 21 May 28 June 4 1 U.S. government securities 10,838 10,285 13,183r 19,725 19,370 17,742 19,620 22,669 21,019 17,283 18,262 17,931 By maturity 2 Bills.......................... 6,746 6,173 7,915 12,885 11,664 9,996 12,995 13.487 11,524 10,183 12,370 11,221 3 Other within 1 year 237 392 454 372 500 560 429 557 558 428 464 520 4 1-5 years ................ 2,320 1,889 2,417 3,610 3,967 3,718 3,846 5,563 4,499 3,551 2,748 3,546 5 5-10 years .............. 1,148 965 1,121 1.138 1,394 1,770 847 1,174 2,054 1,391 1,105 1,325 6 Over 10 years........ 388 867 1,276 1,720 1,846 1,697 1,503 1,887 2,384 1,730 1,576 1,319 By type of customer 7 U.S. government securities dealers ........................ 1,268 1,438 1,382 1,562 1,862 1,137 1,228 1,690 8 U.S. government securities brokers ........................ 3,709 3,838 5,170 8,128 8,243 7,184 8,221 10,004 8,758 7,672 7,409 6,946 9 Commercial banks ............ 2,294 1,804 1,904 2,875 2,825 2,312 3,044 3,763 2,904 2,249 2,532 2,390 10 All others1 .......................... 3,567 3,508 4,660 7,115 6,863 6,864 6,793 7,255 7,495 6,225 7,093 6,904 11 Federal agency securities 1,729 1,894 2,723 4,497 4,352 3,689 4,334 6,360 4,235 3,515 3,037 3,966 1. Includes, among others, all other dealers and brokers in commodities and Transactions are market purchases and sales of U.S. government securities deal­ securities, foreign banking agencies, and the Federal Reserve System. ers reporting to the Federal Reserve Bank of New York. The figures exclude allotments of, and exchanges for, new U.S. government securities, redemptions Note. Averages for transactions are based on number of trading days in the of called or matured securities, or purchases or sales of securities under repurchase, period. 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 1980 1980 week ending Wednesday Item 1977 1978 1979 Apr. May June Apr. 9 Apr. 16 Apr. 23 Apr. 30 May 7 May 14 Positions1 1 U.S. government securities ....... 5,172 2,656 3,223 8,036 5,398' 5,156 8,002 8,765 7,575 8,504 5,891 5,890 2 Bills................................................ 4,772 2,452 3,813 7,870 4,025' 3,720 7,769 8,864 7,487 7,950 4,754 3,948 3 Other within 1 year .................... 99 260 -325 -1,082 -843 -731 -1,028 -1,051 -1,136 -1,114 -876 -817 4 1-5 years ...................................... 60 -92 -455 683 726 916 614 318 623 1,098 1,140 747 5 5-10 years .................................... 92 40 160 61 361 504 31 87 21 .143 65 638 6 Over 10 years .............................. 149 -4 30 505 1,128 747 616 546 580 427 808 1,374 7 Federal agency securities.......... 693 606 1,471 1,207 1,254 1,411 907 1,067 1,506 1,561 1,406 1,314 Financing2 8 All sources ............................... 9,877 10,204 16,003 19,829 19,358 2,676 17,801 21,376 21,149 20,835 18,748 18,452 Commercial banks 9 New York City ........................ 1,313 599 1,396 574 851 105 588 1,021 515 447 686 1,204 10 Outside New York City.......... 1,987 2,174 2,868 4,215 3,266 496 3,622 4,417 4,672 4,368 3,793 3,017 11 Corporations3 .............................. 2,358 2,379 3,373 4,387 4,651 628 3,793 5,112 4,272 4,755 4,635 4,517 12 All others...................................... 4,158 5,052 4,104 10,653 10,590 1,447 9,798 10,827 11,690 11,266 9,634 9,714 1. Net amounts (in terms of par values) of securities owned by nonbank dealer agency securities (through both collateral loans and sales under agreements to firms and dealer departments of commercial banks on a commitment, that is, repurchase), plus internal funds used by bank dealer departments to finance po­ trade-date basis, including any such securities that have been sold under agree­ sitions in such securities. Borrowings against securities held under agreeement to ments to repurchase. The maturities of some repurchase agreements are sufficiently resell are excluded when the borrowing contract and the agreement to resell are long, however, to suggest that the securities involved are not available for trading equal in amount and maturity, that is, a matched agreement. purposes. Securities owned, and hence dealer positions, do not include securities 3. All business corporations except commercial banks and insurance companies. purchased under agreement to resell. 2. Total amounts outstanding of funds borrowed by nonbank dealer firms and Note. Averages for positions are based on number of trading days in the period; dealer departments of commercial banks against U.S. government and federal those for financing, on the number of calendar days in the 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 1979 1980 Agency 1976 1977 1978 Nov. Dec. Jan. Feb. Mar. Apr. 1 Federal and federally sponsored agencies1 ...................... 103,848 112,472 137,063 161,653 163,290 165,819 167,813 173,216 176,880 2 Federal agencies.................................................................. 22,419 22,760 23,488 24,224 24,715 24,883 25,013 25,583 25,776 3 Defense Department2 .................................................... 1,113 983 968 748 738 729 719 709 688 4 Export-Import Bank3-4 .................................................. 8,574 8,671 8,711 8,812 9,191 9,176 9,144 9,627 9,615 5 Federal Housing Administration5 ................................ 575 581 588 545 537 539 546 550 537 6 Government National Mortgage Association participation certificates6 ...................................... 4,120 3,743 3,141 3,004 2,979 2,979 2,979 2,979 2,937 7 Postal Service7 ................................................................ 2,998 2,431 2,364 1,837 1,837 1,837 1,837 1,837 1,837 8 Tennessee Valley Authority.......................................... 4,935 6,015 7,460 8,825 8,997 9,182 9,347 9,440 9,695 9 United States Railway Association7............................ 104 336 356 453 436 441 441 441 467 10 Federally sponsored agencies1 .......................................... 81,429 89,712 113,575 137,429 138,575 140,936 142,800 147,633 151,104 11 Federal Home Loan Banks .......................................... 16,811 18,345 27,563 33,296 33,330 33,122 33,102 35,309 36,352 12 Federal Home Loan Mortgage Corporation.............. 1,690 1,686 2,262 2,621 2,771 2,769 2,764 2,644 2,643 13 Federal National Mortgage Association...................... 30,565 31,890 41,080 47,278 48,486 49,031 50,139 51,614 52,456 14 Federal Land Banks ...................................................... 17,127 19,118 20,360 16,006 16,006 15,106 15,106 15,106 13,940 15 Federal Intermediate Credit Banks ............................ 10,494 11,174 11,469 2,676 2,676 2,144 2,144 2,144 2,144 16 Banks for Cooperatives ................................................ 4,330 4,434 4,843 584 584 584 584 584 584 17 Farm Credit Banks1 .................................................... 2,548 5,081 33,547 33,216 36,584 37,240 38,446 41,039 18 Student Loan Marketing Association8........................ 410 515 915 1,420 1,505 1,595 1,720 1,785 1,945 19 Other ................................................................................. 2 2 2 1 1 1 1 1 1 Memo: 20 Federal Financing Bank debt7-9........................................ 28,711 38,580 51,298 66,281 67,383 68,294 69,268 71,885 74,009 Lending to federal and federally sponsored agencies 21 Export-Import Bank4 ........................................................ 5,208 5,834 6,898 7,953 8,353 8,353 8,353 8,849 8,849 22 Postal Service7 .................................................................... 2,748 2,181 2,114 1,587 1,587 1,587 1,587 1,587 1,587 23 Student Loan Marketing Association8 ............................ 410 515 915 1,420 1,505 1,595 1,720 1,785 1,945 24 Tennessee Valley Authority.............................................. 3,110 4,190 5,635 7,100 7,272 7,457 7,622 7,715 7,970 25 United States Railway Association7................................ 104 336 356 453 436 441 441 441 467 Other Lending10 26 Farmers Home Administration ........................................ 10,750 16,095 23,825 31,950 32,050 32,145 32,565 33,410 34,755 27 Rural Electrification Administration .............................. 1,415 2,647 4,604 6,272 6,484 6,701 6,874 7,039 7,155 28 Other ..................................................................................... 4,966 6,782 6,951 9,546 9,696 10,015 10,106 11,059 11,281 1. In September 1977 the Farm Credit Banks issued their first consolidated of Housing and Urban Development; Small Business Administration; and the bonds, and in January 1979 they began issuing these bonds on a regular basis to Veterans Administration. replace the financing activities of the Federal Land Banks, the Federal Interme­ 7. Off-budget. diate Credit Banks, and the Banks for Cooperatives. Line 17 represents those 8. Unlike other federally sponsored agencies, the Student Loan Marketing As­ consolidated bonds outstanding, as well as any discount notes that have been sociation may borrow from the Federal Financing Bank (FFB) since its obligations issued. Lines 1 and 10 reflect the addition of this item. are guaranteed by the Department of Health, Education, and Welfare. 2. Consists of mortgages assumed by the Defense Department between 1957 9. The FFB, which began operations in 1974, is authorized to purchase or sell and 1963 under family housing and homeowners assistance programs. obligations issued, sold, or guaranteed by other federal agencies. Since FFB incurs 3. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. debt solely for the purpose of lending to other agencies, its debt is not included 4. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter. in the main portion of the table in order to avoid double counting. 5. Consists of debentures issued in payment of Federal Housing Administration 10. Includes FFB purchases of agency assets and guaranteed loans; the latter insurance claims. Once issued, these securities may be sold privately on the se­ contain loans guaranteed by numerous agencies with the guarantees of any par­ curities market. ticular agency being generally small. The Farmers Home Administration item 6. Certificates of participation issued prior to fiscal 1969 by the Government consists exclusively of agency assets, while the Rural Electrification Administration National Mortgage Association acting as trustee for the Farmers Home Admin­ entry contains both agency assets and guaranteed loans. istration; Department of Health, Education, and Welfare; Department Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Financial Statistics □ September 1980 1.47 NEW SECURITY ISSUES of State and Local Governments Millions of dollars 1980 Type of issue or issuer, 1977 1978 1979 Jan. Feb. Mar. Apr. May JuneP 1 All issues, new and refunding1.............................................. 46,769 48,607 43,490 3,049 2,390 2,385 4,833 4,570 5,960 Type of issue 2 General obligation................................................................ 18,042 17,854 12,109 1,166 935 731 1,662 1,534 1,886 3 Revenue .............................................................................. 28,655 30,658 31,256 1,875 1,445 1,648 3,170 3,032 4,071 4 Housing Assistance Administration2 .................................... 5 U.S. government loans......................................................... 72 95 125 8 10 6 1 4 3 Type of issuer 6 State .................................................................................... 6,354 6,632 4,314 699 327 393 466 749 897 7 Special district and statutory authority................................. 21,717 24,156 23,434 1,392 1,224 1,200 2,175 2,276 3,414 8 Municipalities, counties, townships, school districts.............. 18,623 17,718 15,617 951 830 786 2,192 1,539 1,647 9 Issues for new capital, total.................................................. 36,189 37,629 41,505 3,022 2,357 2,379 4,704 4,501 5,886 Use of proceeds 10 Education ............................................................................ 5,076 5,003 5,130 231 356 191 488 297 783 11 Transportation ................................................................. 2,951 3,460 2,441 172 178 156 299 193 329 12 Utilities and conservation................................................... 8,119 9,026 8,594 552 360 440 607 688 563 13 Social welfare ....................................................................... 8,274 10,494 15,968 1,290 1,021 1,133 2,062 1,801 2,986 14 Industrial aid ....................................................................... 4,676 3,526 3,836 63 103 211 315 484 332 15 Other purposes..................................................................... 7,093 6,120 5,536 714 339 248 933 1,038 893 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 contri­ butions to the local authority. 1.48 NEW SECURITY ISSUES of Corporations Millions of dollars 1979 1980 Type of i o s r s u u e s e or issuer, 1977 1978 1979 Nov. Dec. Jan. Feb. Mar. Apr. May 1 All issues1 .................................................................... 53,792 47,230 51,464 3,831 3,801 6,210 4,452 4,353 5,646 8,966 2 Bonds ............................................................................ 42,015 36,872 40,139 2,612 2,475 4,834 2,856 2,771 4,744 7,234 Type of offering 3 Public ............................................................................ 24,072 19,815 25,814 1,583 1,500 2,450 1,426 1,985 3,828 6,810 4 Private placement ...................................................... 17,943 17,057 14,325 1,029 975 2,384 1,430 786 916 424 Industry group 5 Manufacturing ............................................................ 12,204 9,572 9,667 319 308 943 960 693 1,718 2,373 6 Commercial and miscellaneous ................................ 6,234 5,246 3,941 207 375 634 262 215 429 554 7 Transportation ............................................................ 1,996 2,007 3,102 289 194 431 227 94 158 338 8 Public utility ................................................................ 8,262 7,092 8,118 658 763 1,338 635 1,423 596 702 9 Communication .......................................................... 3,063 3,373 4,219 854 74 483 533 196 590 1,155 10 Real estate and financial............................................ 10,258 9,586 11,095 287 762 1,006 238 152 1,252 2,113 11 Stocks ............................................................................ 11,777 10,358 11,325 1,219 1,326 1,376 1,596 1,582 902 1,732 Type 12 Preferred ...................................................................... 3,916 2,832 3,574 443 282 287 88 525 223 202 13 Common ...................................................................... 7,861 7,526 7,751 776 1,044 1,089 1,508 1,057 679 530 Industry group 14 Manufacturing ............................................................ 1,189 1,241 1,679 158 224 333 380 598 81 215 15 Commercial and miscellaneous ................................ 1,834 1,816 2,623 286 430 313 426 404 374 512 16 Transportation ............................................................ 456 263 255 2 59 58 36 9 27 17 Public utility ................................................................ 5,865 5,140 5,171 607 365 535 627 408 319 615 18 Communication .......................................................... 1,379 264 303 2 1 39 27 53 25 19 Real estate and financial............................................ 1,049 1,631 1,293 165 306 135 65 109 67 338 1. Figures, which represent gross proceeds of issues maturing in more than one 1933, employee stock plans, investment companies other than closed-end, intra­ year, sold for cash in the United States, are principal amount or number of units corporate transactions, and sales to foreigners, multiplied by offering price. Excludes offerings of less than $100,000, secondary offerings, undefined or exempted issues as defined in the Securities Act of Source. Securities and Exchange Commission. 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 1980 Item 1978 1979 Dec. Jan. Feb. Mar. Apr. May June July Investment Companies1 1 Sales of own shares2 .................................................. 6,645 7,495 748 957 773 723 1,010 1,175 1,772 1,496 2 Redemptions of own shares3.................................... 7,231 8,393 743 776 882 892 762 647 775 863 3 Net sales ...................................................................... -586 -898 5 181 -109 -169 248 528 997 633 4 Assets4 ........................................................................... 44,980 49,493 49,277 51,278 49,512 44,581 47,270 50,539 52,946 54,269 5 Cash position5.......................................................... 4,507 4,983 4,983 5,702 5,895 5,644 5,862 6,209 6,495 5,523 6 Other ......................................................................... 40,473 44,510 44,294 45,576 43,617 38,937 41,708 44,330 46,451 48,746 1.Excluding money market funds. 5.Also includes all U.S. government securities and other short-term debt se­ 2.Includes reinvestment of investment income dividends. Excludes reinvestment curities. 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 members, which 3.Excludes share redemption resulting from conversions from one fund to an­ comprise substantially all open-end investment companies registered with the Se­ other in the same group. curities and Exchange Commission. Data reflect newly formed companies after 4.Market value at end of period, less current liabilities. their initial offering of securities. 1.50 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1978 1979 1980 Account 1977 1978 1979 Q4 Ql Q2 03 Q4 Ql Q7P 1 Profits before tax................................................ 177.1 206.0 236.6 227.4 233.3 227.9 242.3 243.0 260.4 208.8 2 Profits tax liability...................................................... 72.6 84.5 92.5 95.1 91.3 88.7 94.0 96.1 102.4 79.5 3 Profits after tax .......................................................... 104.5 121.5 144.1 132.3 142.0 139.3 148.3 146.9 158.0 129.3 4 Dividends ................................................................. 42.1 47.2 52.7 49.7 51.5 52.3 52.8 54.4 56.7 58.6 5 Undistributed profits .............................................. 62.4 74.4 91.4 82.6 90.5 86.9 95.5 92.5 101.3 70.7 6 Capital consumption allowances ............................... 109.3 119.8 131.0 123.0 125.4 130.4 132.8 135.2 137.4 139.3 7 Net cash flow ............................................................... 171.7 194.1 222.3 205.6 215.9 217.3 228.3 227.7 238.7 210.0 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 1980 1.51 NONFINANCIAL CORPORATIONS Current Assets and Liabilities Billions of dollars, except for ratio 1978 1979 1980 Account 1975 1976 1977 Q3 Q4 Ql 02 Q3 04 Ql 1 Current assets..................................................... 759.0 826.3 900.9 992.6 1,028.0 1,079.1 1,106.7 1,165.3 1,197.7 1,233.2 2 Cash .............................................................................. 82.1 87.3 94.3 91.7 103.7 102.1 99.7 103.3 115.8 110.5 3 U.S. government securities ..................................... 19.0 23.6 18.7 16.1 17.8 19.1 20.7 17.7 17.6 17.2 4 Notes and accounts receivable.................................. 272.1 293.3 325.0 376.4 381.9 405.6 418.1 447.8 451.8 465.9 5 Inventories .................................................................. 315.9 342.9 375.6 415.5 428.3 453.0 466.9 490.3 503.0 521.2 6 Other ............................................................................ 69.9 79.2 87.3 92.9 96.3 99.3 101.3 106.1 109.5 118.4 7 Current liabilities ................................................ 451.6 492.7 546.8 626.0 661.9 701.3 720.4 770.0 801.7 831.4 8 Notes and accounts payable...................................... 264.2 282.0 313.7 356.2 375.1 393.4 409.2 441.6 460.5 473.3 9 Other ............................................................................ 187.4 210.6 233.1 269.7 286.8 307.9 311.2 328.3 341.2 358.1 10 Net working capital ............................................. 307.4 333.6 354.1 366.6 366.1 377.8 386.3 395.3 396.0 401.8 11 Memo: Current ratio 1 .............................................. 1.681 1.677 1.648 1.586 1.553 1.539 1.536 1.513 1.494 1.483 1. Ratio of total current assets to total current liabilities. All data in this table reflect the most current benchmarks. Complete data are available upon request from the Flow of Funds Section, Division of Research and Note: For a description of this series, see “Working Capital of Nonfinancial Statistics. 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. 1979 1980 Industry 1978 1979 Ql Q2 Q3 Q4 Ql Q2 Q32 Q42 1 All industries....................................................... 153.82 177.09 165.94 173.48 179.33 186.95 191.36 193.89 191.24 193.17 Manufacturing 2 Durable goods industries .......................................... 31.66 38.23 34.00 36.86 39.72 41.30 42.30 42.80 40.35 41.55 3 Nondurable goods industries .................................... 35.96 40.69 37.56 39.56 40.50 43.88 45.01 45.98 46.90 47.33 Nonmanufacturing 4 Mining .......................................................................... 4.78 5.56 5.46 5.31 5.42 6.06 6.02 6.56 6.40 6.75 Transportation 5 Railroad .................................................................... 3.32 3.93 4.02 3.66 4.03 4.20 4.40 3.97 3.90 4.75 6 Air ............................................................................ 2.30 3.24 3.35 3.26 3.10 3.39 2.98 4.11 3.73 3.75 7 Other ........................................................................ 2.43 2.95 2.71 2.79 3.16 3.15 2.94 2.73 2.93 2.72 Public utilities 8 Electric...................................................................... 29.48 32.56 27.70 28.06 28.32 26.02 28.78 27.86 26.84 25.95 9 Gas and other.......................................................... 4.70 5.07 4.66 5.18 5.01 5.50 5.57 5.43 5.32 5.78 10 Communication .......................................................... 18.16 20.56 18.75 20.29 20.41 22.71 22.48 22.65 11 Commercial and other1 .............................................. 25.71 29.35 27.73 28.51 29.66 30.72 30.86 31.80 } 54.87 } 54.60 1. Includes trade, service, construction, finance, and insurance. ture; real estate operators; medical, legal, educational, and cultural service; and 2. Anticipated by business. nonprofit organizations. Note: Estimates for corporate and noncorporate business, excluding agricul- 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 1979 1980 Account 1974 1975 1976 1977 1978 Q2 Q3 Q4 Ql Q2 Assets Accounts receivable, gross 1 Consumer ........................................................ 36.1 36.0 38.6 44.0 52.6 58.7 62.3 65.7 67.7 70.2 2 Business ........................................................... 37.2 39.3 44.7 55.2 63.3 70.1 68.1 70.3 70.6 70.3 3 Total............................................................ 73.3 75.3 83.4 99.2 116.0 128.8 130.4 136.0 138.4 140.4 4 Less: Reserves for unearned income and losses ... 9.0 9.4 10.5 12.7 15.6 17.7 18.7 20.0 20.4 21.4 5 Accounts receivable, net.................................... 64.2 65.9 72.9 86.5 100.4 111.1 111.7 116.0 118.0 119.0 6 Cash and bank deposits .................................... 3.0 2.9 2.6 2.6 3.5 7 Securities ......................................................... .4 1.0 1.1 .9 1.3 24.61 25.8 24.9 23.7 26.1 8 All other ......................................................... 12.0 11.8 12.6 14.3 17.3 9 Total assets ......................................................... 79.6 81.6 89.2 104.3 122.4 135.8 137.4 140.9 141.7 145.1 Liabilities 10 Bank loans ...................................................... 9.7 8.0 6.3 5.9 6.5 7.3 7.8 8.5 9.7 10.1 11 Commercial paper ............................................ 20.7 22.2 23.7 29.6 34.5 41.0 39.2 43.3 40.8 40.7 Debt 12 Short-term, n.e.c............................................. 4.9 4.5 5.4 6.2 8.1 8.8 9.1 8.2 7.4 7.9 13 Long-term n.e.c.............................................. 26.5 27.6 32.3 36.0 43.6 46.0 47.5 46.7 48.9 50.5 14 Other ............. ........................................... 5.5 6.8 8.1 11.5 12.6 14.4 15.4 14.2 15.7 16.0 15 Capital, surplus, and undivided profits............... 12.4 12.5 13.4 15.1 17.2 18.2 18.4 19.9 19.2 19.9 16 Total liabilities and capital.................................. 79.6 81.6 89.2 104.3 122.4 135.8 137.4 140.9 141.7 145.1 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 ou J t u s n ta e n 3 d 0 in , g 1980 1980 1980 19801 Apr. May June Apr. May June Apr. May June 1 Total ............................................................ 70,255 277 -507 -336 14,754 14,422 14,376 14,477 14,929 14,712 2 Retail automotive (commercial vehicles)....... 13,831 -364 -491 -389 844 699 782 1,208 1,190 1,171 3 Wholesale automotive ................................... 12,398 39 -136 -10 4,502 3,846 4,316 4,463 3,982 4,326 4 Retail paper on business, industrial and farm equipment .................................... 20,079 403 -13 -105 1,304 1,267 1,201 901 1,280 1,306 5 Loans on commercial accounts receivable and 6,318 factored commercial accounts receivable . 7,292 -233 88 -235 6,269 6,814 6,083 6,502 6,766 6 All other business credit............................... 16,655 432 45 403 1,835 1,796 1,994 1,403 1,751 1,591 1. Not seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Financial Statistics □ September 1980 1.55 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1977 Feb. Mar. Apr. May July Terms and yields in primary and secondary markets Primary Markets Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars).......... 48.4 54.3 62.6 79.8 77.7 83.1 88.0 81.3 89.0 2 Amount of loan (thousands of dollars) 35.9 40.5 45.9 56.6 55.1 59.4 61.3 58.0 63.7 3 Loan/price ratio (percent) ............................ 74.2 76.3 75.3 72.5 72.0 73.6 72.4 74.1 73.5 4 Maturity (years) .............................................. 27.2 27.9 28.0 28.8 27.4 28.3 28.8 28.4 28.9 56 F C e o e n s t r a a n c d t r c a h t a e r g (p es e r ( c p e e n r t c e p n e t r o a f n l n oa u n m a ) m .... o .. u .. n .. t .. ) . 2 . 8 1 . . 7 4 6 4 1.33 9 1 . . 3 3 0 9 11 1 . . 6 7 0 9 12 1 . . 2 9 5 8 1 2 2 . . 0 6 4 4 1 2 3 . . 1 2 7 6 1 2 2 . . 2 2 1 4 1 2 2 . . 1 11 3 Yield (percent per annum) I 8 F H H U L D B B se r s i e e r s i 4 e s^ .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8 . . 9 9 9 9 9 8 . . 0 9 1 5 9 9 . . 5 6 4 8 1 1 1 4 . . 9 1 3 0 1 16 2 . . 0 6 5 2 1 15 3 . . 5 0 5 3 1 13 3 . . 2 6 0 8 1 1 2 2 . . 6 45 6 1 1 2 2 . . 5 4 1 5 Secondary Markets Yield (percent per annum) 9 FHA mortgages (HUD series)5.................... 8.82 8.68 n.a. 14.63 13.45 11.99 11.85 12.39 10 GNMA securities6 .......................................... 8.17 8.04 13.16 13.79 12.55 11.30 11.04 11.53 FNMA auctions7 II Government-underwritten loans .............. 8.99 8.73 9.77 14.48 15.64 14.61 12.87 12.35 12.65 12 Conventional loans .................................... 9.11 10.01 14.12 16.62 16.29 13.54 12.93 12.80 Activity in secondary markets Federal National Mortgage Association Mortgage holdings (end of period) 13 Total ..................................................................... 32,904 34,370 43,311 53,063 53,990 54,843 55,328 55,419 55,362 14 FHA-insured ..................................................... 18,916 18,457 21,243 25,146 n.a. n.a. n.a. n.a. n.a. 15 VA-guaranteed .................................................. 9,212 9,315 10,544 10,885 n.a. n.a. n.a. n.a. n.a. 16 Conventional ..................................................... 4,776 6,597 11,524 16,853 17,079 17,453 17,858 18,001 18,034 Mortgage transactions (during period) 17 Purchases.............................................................. 3,606 4,780 12,303 1,087'’ 1,063 1,021 589 206 100 18 Sales ..................................................................... 86 67 5 0 0 0 0 0 0 Mortgage commitments8 19 Contracted (during period) .................................. 6,247 9,729 18,960 999 825 507 391 441 734 20 Outstanding (end of period) ................................. 3,398 4,698 9,201 5,504 5,078 4,371 4,064 4,215 4,230 Auction of 4-month commitments to buy Government-underwritten loans 21 Offered9 ............................................................ 4,929.8 7.974.1 12,978 1,169.4 1,267.3 493.7 608.7 602.5 1,055.6 22 Accepted .......................................................... 2,787.2 4,846.2 6,747.2 563.7 426.1 199.4 214.1 266.5 430.3 Conventional loans 23 Offered9 ............................................................ 2,595.7 5,675.2 9,933.0 412.1 918.6 135.2 279.7 169.7 228.7 24 Accepted ........................................................... 1,879.2 3.917.8 5,110.9 147.8 239.9 65.8 109.1 76.0 140.9 Federal Home Loan Mortgage Corporation Mortgage holdings (end of period)10 25 Total ..................................................................... 4,269 3,276 3,064 4,145 4,235 4,255 4,031 4,014 4,151 26 FHA/VA ........................................................... 1,618 1,395 1,243 1,092 1,086 1,080 1,076 1,072 1,066 27 Conventional..................................................... 2,651 1,881 1,822 3,052 3,149 3,175 2,955 2,942 3,085 Mortgage transactions (during period) 28 Purchases .............................................................. 1,175 3,900 6,524 248 193 231 176 225 440 29 Sales ..................................................................... 1,396 4.131 6,211 207 106 199 391 232 288 Mortgage commitments11 30 Contracted (during period) .................................. 1,477 5,546 7,451 197 186 189 491 577 708 31 Outstanding (end of period) ................................. 333 1,063 1,410 726 700 643 932 1,246 1,386 1. Weighted averages based on sample surveys of mortgages originated by major securities, assuming prepayment in 12 years on pools of 30-year FHA/VA mort­ institutional lender groups. Compiled by the Federal Home Loan Bank Board in gages carrying the prevailing ceiling rate. Monthly figures are unweighted averages cooperation with the Federal Deposit Insurance Corporation. of Monday quotations for the month. 2. Includes all fees, commissions, discounts, and “points" paid (by the borrower 7. Average gross yields (before deduction of 38 basis points for mortgage or the seller) in order to obtain a loan. servicing) on accepted bids in Federal National Mortgage Association's auctions 3. Average effective interest rates on loans closed, assuming prepayment at the of 4-month commitments to purchase home mortgages, assuming prepayment in end of 10 years. 12 years for 30-year mortgages. No adjustments are made for FNMA commitment 4. Average contract rates on new commitments for conventional first mortgages, fees or stock related requirements. Monthly figures are unweighted averages for rounded to the nearest 5 basis points; from Department of Housing and Urban auctions conducted within the month. Development. 8. Includes some multifamily and nonprofit hospital loan commitments in ad­ 5. Average gross yields on 30-year, minimum-downpayment, Federal Housing dition to 1- to 4-family loan commitments accepted in FNMA's free market auction Administration-insured first mortgages for immediate delivery in the private sec­ system, and through the FNMA-GNMA tandem plans. ondary market. Any gaps in data are due to periods of adjustment to changes in 9. Mortgage amounts offered by bidders are total bids received. maximum permissible contract rates. 10. Includes participation as well as whole loans. 6. Average net yields to investors on Government National Mortgage Associ­ 11. Includes conventional and government-underwritten loans. ation guaranteed, mortgage-backed, fully modified pass-through 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 1979 1980 Type of holder, and type of property 1977 1978 1979 Q2 Q3 Q4 Ql Q2P 1All holders................................................................. 1,023,505 1,172,754 1,333,550' 1,252,426 1,295,935 1,333,550 1,363,787' 1,386,249 7 1- to 4-family ....................................................................... 656,566 761,843 872,068' 816,940 846,287 872,068 890,121' 903,116 3Multifamily .......................................................................... 111,841 121,972 130,713' 125,916 128,270 130,713 132,795 134,377 4Commercial .......................................................................... 189,274 212,746 238,412' 224,499 232,208 238,412 243,839 247,225 5 65,824 76,193 92,357' 85,071 89,170 92,357 97,032' 101,377 6Major financial institutions .............................................. 745,011 848,095 939,487' 894,385 920,231 939,487 951,898 958,803 7 Commercial banks1 ........................................................ 178,979 213,963 245,998' 229,564 239,627 245,998 251,198 253,098 8 1- to 4-family .............................................................. 105,115 126,966 145,975' 136,223 142,195 145,975 149,061 150,188 9 Multifamily .................................................................. 9,215 10,912 12,546' 11,708 12,221 12,546 12,811 12,908 10 Commercial .................................................................. 56,898 67,056 77,096' 71,945 75,099 77,096 78,725 79,321 11 Farm............................................................................... 7,751 9,029 10,381' 9,688 10,112 10,381 10,601 10,681 12 Mutual savings banks .................................................... 88,104 95,157 98,908' 97,155 97,929 98,908 99,151 99,101 13 1- to 4-family ............................................................... 57,637 62,252 64,706' 63,559 64,065 64,706 64,865 64,832 14 Multifamily .................................................................. 15,304 16,529 17,180' 16,876 17,010 17,180 17,223 17,214 15 Commercial .................................................................. 15,110 16,319 16,963' 16,662 16,795 16,963 17,004 16,996 16 Farm............................................................................... 53 57 59 58 59 59 59 59 17 Savings and loan associations........................................ 381,163 432,808 475,797 456,543 468,307 475,797 479,078 481,149 18 1- to 4-family ............................................................... 310,686 356,114 394,436 377,516 387,992 394,436 397,156 398,872 19 Multifamily .'............................................................... 32,513 36,053 37,588 37,071 37,277 37,588 37,847 38,011 20 Commercial ................................................................... 37,964 40,641 43,773 41,956 43,038 43,773 44,075 44,266 21 Life insurance companies.............................................. 96,765 106,167 118,784 111,123 114,368 118,784 122,471 125,455 22 1- to 4-family .............................................................. 14,727 14,436 16,193 14,489 14,884 16,193 16,850 17,796 23 Multifamily ................................................................... 18,807 19,000 19,274 19,102 19,107 19,274 19,590 19,284 24 Commercial ................................................................... 54,388 62,232 71,137 66,055 68,513 71,137 73,618 75,693 25 Farm ................................. .......................................... 8,843 10,499 12,180 11,477 11,864 12,180 12,413 12,682 26 Federal and related agencies............................................ 70,006 81,853 97,293 90,095 93,143 97,293 104,133' 108,742 27 Government National Mortgage Association ............ 3,660 3,509 3,852 3,425 3,382 3,852 3,919 4,466 28 1- to 4-family .............................................................. 1,548 877 763 800 780 763 749 736 29 Multifamily ........................................................ 2,112 2,632 3,089 2,625 2,602 3,089 3,170 3,730 30 Farmers Home Administration .................................... 1,353 926 1,274 1,200 1,383 1,274 2,845' 3,375 31 1- to 4-family .............................................................. 626 288 417 363 163 417 1,139 1,383 32 Multifamily .................................................................. 275 320 71 75 299 71 408 636 33 Commercial ................................................................... 149 101 174 278 262 174 409 402 34 Farm............................................................................... 303 217 612 484 659 612 889' 954 35 Federal Housing and Veterans Administration ........ 5,212 5,419 5,764 5,597 5,672 5,764 5,833 5,894 36 1- to 4-family .............................................................. 1,627 1,641 1,863 1,744 1,795 1,863 1,908 1,953 37 Multifamily ................................................................... 3,585 3,778 3,901 3,853 3,877 3,901 3,925 3,941 38 Federal National Mortgage Association...................... 34,369 43,311 51,091 48,206 49,173 51,091 53,990 55,419 39 1- to 4-family .............................................................. 28,504 37,579 45,488 42,543 43,534 45,488 48,394 49,837 40 Multifamily .................................................................. 5,865 5,732 5,603 5,663 5,639 5,603 5,596 5,582 41 Federal Land Banks ...................................................... 22,136 25,624 31,277 28,459 29,804 31,277 33,311 35,574 42 1- to 4-family ............................................................... 670 927 1,552 1,198 1,374 1,552 1,708 1,893 43 Farm............................................................................... 21,466 24,697 29,725 27,261 28,430 29,725 31,603 33,681 44 Federal Home Loan Mortgage Corporation.............. 3,276 3,064 4,035 3,208 3,729 4,035 4,235 4,014 45 1- to 4-family .............................................................. 2,738 2,407 3,059 2,489 2,850 3,059 3,210 3,037 46 Multifamily ................................................................... 538 657 976 719 879 976 1,025 977 47 Mortgage pools or trusts2.................................................. 70,289 88,633 119,278 102,259 110,648 119,278 124,632' 129,647 48 Government National Mortgage Association ............ 44,896 54,347 76,401 63,000 69,357 76,401 80,843' 84,282 49 1- to 4-family .............................................................. 43,555 52,732 74,546 61,246 67,535 74,546 78,872' 82,208 50 Multifamily .................................................................. 1,341 1,615 1,855 1,754 1,822 1,855 1,971 2,074 51 Federal Home Loan Mortgage Corporation.............. 6,610 11,892 15,180 13,708 14,421 15,180 15,454 16,120 52 1- to 4-family .............................................................. 5,621 9,657 12,149 11,096 11,568 12,149 12,359 12,886 53 Multifamily ................................................................... 989 2,235 3,031 2,612 2,853 3,031 3,095 3,234 54 Farmers Home Administration .................................... 18,783 22,394 27,697 25,551 26,870 27,697 28,335' 29,245 55 1- to 4-family .............................................................. 11,397 13,400 14,884 14,329 14,972 14,884 14,926 15,224 56 Multifamily .................................................................. 759 1,116 2,163 1,764 1,763 2,163 2,159 2,159 57 Commercial ................................................................... 2,945 3,560 4,328 3,833 4,054 4,328 4,495 4,763 58 Farm ............................................................................... 3,682 4,318 6,322 5,625 6,081 6,322 6,755' 7,099 59 Individual and others3........................................................ 138,199 154,173 177,492' 165,687 171,913 177,492 183,124' 189,057 60 1- to 4-family ................................................................... 72,115 82,567 96,037' 89,345 92,580 96,037 98,924' 102,271 61 Multifamily ....................................................................... 20,538 21,393 23,436' 22,094 22,921 23,436 23,975 24,627 62 Commercial ....................................................................... 21,820 22,837 24,941' 23,770 24,447 24,941 25,513 25,938 63 Farm................................................................................... 23,726 27,376 33,078' 30,478 31,965 33,078 34,712' 36,221 1.Includes loans held by nondeposit trust companies but not bank trust depart­ Note. Based on data from various institutional and governmental sources, with ments. some quarters estimated in part by the Federal Reserve in conjunction with the 2.Outstanding principal balances of mortgages backing securities insured or Federal Home Loan Bank Board and the Department of Commerce. Separation guaranteed by the agency indicated. of nonfarm mortgage debt by type of property, if not reported directly, and in­ 3.Other holders include mortgage companies, real estate investment trusts, state terpolations and extrapolations when required, are estimated mainly by the Federal and local credit agencies, state and local retirement funds, noninsured pension Reserve. Multifamily debt refers to loans on structures of five or more units. funds, credit unions, and U.S. agencies for which 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 1980 1.57 CONSUMER INSTALLMENT CREDIT' Total Outstanding, and Net Change Millions of dollars 1980 Holder, and type of credit Apr. May July Amounts outstanding (end of period) 1 Total .............................. 230,829 311,122 308,984 308,190 307,621 306,131 303,759 301,754 By major holder 2 Commercial banks 112,373 136,189 149,604 148,868 148,249 147,315 145,405 143,174 140,922 140,489 3 Finance companies----- 44,868 54,298 68,318 68,724 69,545 70,421 71,545 72,101 73,118 73,909 4 Credit unions .............. 37,605 45,939 48,186 47,270 46,707 46,521 45,731 44,907 43,740 43,390 5 Retailers2 ...................... 23,490 24,876 27,916 26,985 26,309 25,841 25,746 25,792 25,724 25,707 6 Savings and loans........ 7,354 8,394 10,361 10,320 10,543 10,755 10,887 10,930 10,995 11,204 7 Gasoline companies ... 2,963 3,240 4,316 4,433 4,467 4,421 4,503 4,581 4,664 4,888 8 Mutual savings banks .. 2,176 2,693 2,421 2,384 2,370 2,347 2,314 2,274 2,215 2,167 By major type of credit 9 Automobile .................. 82,911 102,468 115,022 114,761 115,007 115,281 115,014 114,318 113,174 113,604 10 Commercial banks . 49,577 60,564 65,229 64,824 64,544 64,047 62,978 61,928 60,584 60,466 11 Indirect paper 27,379 33,850 37,209 37,020 36,949 36,821 36,325 35,791 34,929 34,704 12 Direct loans.......... 22,198 26,714 28,020 27,804 27,595 27,226 26,653 26,137 25.655 25,762 13 Credit unions............ 18,099 21,967 23,042 22,604 22,335 22,246 21,868 21,474 20,916 20,749 14 Finance companies .. 15,235 19,937 26,751 27,333 28,128 28,988 30,168 30,916 31,674 32,389 15 Revolving...................... 39,274 47,051 55,330 54,420 53,522 52,662 52,217 51,823 51,246 51,330 16 Commercial banks .. 18,374 24,434 28,954 28,841 28,575 28,241 27,889 27,456 26,926 26,841 17 Retailers.................... 17,937 19,377 22.060 21,146 20,480 20,000 19,825 19,786 19.656 19,601 18 Gasoline companies . 2,963 3,240 4,316 4,433 4,467 4,421 4,503 4,581 4,664 4,888 19 Mobile home................ 15,141 16,042 17,409 17,387 17,476 17,596 17,668 17,642 17,779 17,809 20 Commercial banks .. 9,124 9,553 9,991 9,968 9,974 9,978 9,965 9,927 10,039 10,000 21 Finance companies .. 3,077 3,152 3,390 3,415 3,428 3,475 3,523 3,529 3,544 3,546 22 Savings and loans ... 2,538 2,848 3,516 3,502 3,578 3,650 3,694 3,709 3,731 3,802 23 Credit unions............ 402 489 512 502 496 494 486 477 465 461 24 Other ............................ 93,503 110,068 123,361 122,416 122,185 122,082 121,232 119,976 119,179 119,011 25 Commercial banks .. 35,298 41,638 45,430 45,235 45,156 45,049 44,573 43,863 43,373 43,182 26 Finance companies .. 26,556 31,209 38,177 37,976 37,989 37,958 37,854 37,656 37,900 37,974 27 Credit unions............ 19,104 23,483 24,632 24,164 23,876 23,781 23,377 22,956 22,359 22,180 28 Retailers.................... 5,553 5,499 5,856 5,839 5,829 5,841 5,921 6,006 6,068 6,106 29 Savings and loans ... 4,816 5,546 6,845 6,818 6,965 7,106 7,193 7,221 7,264 7,402 30 Mutual savings banks 2,176 2,693 2,421 2,384 2,370 2,347 2,314 2,274 2,215 2,167 Net change (during period)3 31 Total .................................................. 35,278 44,810 35,491 1,372 2,295 1,437 -1,985 -3,434 -3,463 -609 By major holder 32 Commercial banks .................................. 18,645 23,813 13,414 433 783 17 -2,237 -2,495 -2,659 -972 33 Finance companies.................................. 5,948 9,430 14,020 1,096 1,376 1,174 984 105 625 418 34 Credit unions .......................................... 6,436 8,334 2,247 -324 -373 -215 -743 -977 -1,362 -381 35 Retailers2 .................................................. 2,654 1,386 3,040 120 53 243 -65 -58 -108 140 36 Savings and loans.................................... 1,111 1,041 1,967 7 306 204 83 75 89 196 37 Gasoline companies ................................ 132 276 1,076 50 166 48 14 -42 8 36 38 Mutual savings banks.............................. 352 530 -273 -10 -16 -34 -21 -42 -56 -46 By major type of credit 39 Automobile .............................................. 15,204 19,557 12,554 972 881 395 -645 -1,343 -1,738 -93 40 Commercial banks .............................. 9,956 10,987 4,665 83 22 -412 -1,335 -1,246 -1,519 -413 41 Indirect paper .................................. 5,307 6,471 3,359 72 48 -86 -698 -626 -945 -365 42 Direct loans...................................... 4,649 4,516 1,306 11 -26 -326 -637 -620 -574 -48 43 Credit unions........................................ 2,861 3,868 1,075 -134 -177 -82 -373 -482 -660 -175 44 Finance companies.............................. 2,387 4,702 6,814 1,023 1,036 889 1,063 385 441 495 45 Revolving.................................................. 6,248 7,776 8,279 289 575 611 -388 -488 -748 14 46 Commercial banks .............................. 4,015 6,060 4,520 109 383 395 -260 -308 -562 -131 47 Retailers................................................ 2,101 1,440 2,683 130 26 168 -142 -138 -194 109 48 Gasoline companies ............................ 132 276 1,076 50 166 48 14 -42 8 36 49 Mobile home ............................................ 565 897 1,366 120 198 128 36 -33 97 26 50 Commercial banks .............................. 387 426 437 68 57 17 -30 -54 74 -43 51 Finance companies .............................. -189 74 238 48 32 57 41 5 13 -6 52 Savings and loans................................ 297 310 668 10 115 57 33 23 23 78 53 Credit unions........................................ 70 87 23 -6 -6 -3 -8 -7 -13 -3 54 Other ........................................................ 13,261 16,580 13,292 -9 641 303 -988 -1,570 -1,074 -556 55 Commercial banks .............................. 4,287 6,340 3,792 173 321 17 -612 -887 -652 -385 56 Finance companies.............................. 3,750 4,654 6,968 25 308 228 -120 -285 171 -71 57 Credit unions........................................ 3,505 4,379 1,149 -184 -190 - 130 -362 -488 -689 -203 58 Retailers................................................ 553 -54 357 -10 27 75 77 80 86 31 59 Savings and loans................................ 814 731 1,299 -3 191 147 50 52 66 118 60 Mutual savings banks.......................... 352 530 -273 -10 -16 -34 -21 -42 -56 -46 1. The Board's series cover most short- and intermediate-term credit extended Note. Total consumer noninstallment credit outstanding—credit scheduled to to individuals through regular business channels, usually to finance the purchase be repaid in a lump sum, including single-payment loans, charge accounts, and of consumer goods and services or to refinance debts incurred for such purposes, service credit—amounted to $70.9 billion at the end of 1979, $64.7 billion at the and scheduled to be repaid (or with the option of repayment) in two or more end of 1978, $58.6 billion at the end of 1977, and $55.4 billion at the end of 1976. installments. 2. Includes auto dealers and excludes 30-day charge credit held by travel and entertainment companies. 3. Net change equals extensions minus liquidations (repayments, charge-offs, and other credit); figures for all months are seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Consumer Debt A43 1.58 CONSUMER INSTALLMENT CREDIT Extensions and Liquidations Millions of dollars; monthly data are seasonally adjusted. 1980 Holder, and type of credit 1977 1978 1979 Jan. Feb. Mar. Apr. May June July Extensions 1 Total ................................................................... 254,071 298,351 322,558 26,702 27,076 26,620 22,548 21,239 20,698 24,497 By major holder 2 Commercial banks ...................................................... 117,896 142,720 149,599 12,126 12,004 11,315 9,338 8,812 8,574 10,548 3 Finance companies...................................................... 41,989 50,505 61,518 5,540 5,639 5,700 4,841 4,304 4,324 4,888 4 Credit unions ............................................................... 34,028 40,023 36,778 2,527 2,495 2,501 1,865 1,615 1,302 2,267 5 Retailers1 ....................................................................... 39,133 41,619 46,092 4,010 4,042 4,358 3,870 3,880 3,881 4,032 6 Savings and loans........................................................ 4,485 5,050 7,333 485 775 665 555 536 576 711 7 Gasoline companies.................................................... 14,617 16,125 19,607 1,889 2,004 1,987 1,978 2,011 1,971 1,971 8 Mutual savings banks ................................................ 1,923 2,309 1,631 125 117 94 101 81 70 80 By major type of credit 9 Automobile ................................................................... 75,641 88,987 91,847 7,780 7,659 7,240 5,725 5,192 4,770 6,609 10 Commercial banks .................................................. 46,363 53,028 50,596 4,026 3,936 3,394 2,398 2,354 2,160 3,239 11 Indirect paper ...................................................... 25,149 29,336 28,183 2,154 2,096 1,978 1,433 1,353 1,092 1,645 12 Direct loans........................................................... 21,214 23,692 22,413 1,872 1,840 1,416 965 1,001 1,068 1,594 13 Credit unions .......................................................... 16,616 19,486 18,301 1,348 1,338 1,306 962 838 708 1,178 14 Finance companies.................................................. 12,662 16,473 22,950 2,406 2,385 2,540 2,365 2,000 1,902 2,192 15 Revolving ..................................................................... 86,756 104,587 120,728 10,475 10,458 11,038 10,293 10,089 9,635 10,522 16 Commercial banks .................................................. 38,256 51,531 60,406 5,030 4,920 5,200 4,929 4,745 4,342 4,974 17 Retailers ................................................................... 33,883 36,931 40,715 3,556 3,534 3,851 3,386 3,333 3,322 3,577 18 Gasoline companies................................................ 14,617 16,125 19,607 1,889 2,004 1,987 1,978 2,011 1,971 1,971 19 Mobile home................................................................. 5,425 6,067 6,395 558 597 506 436 324 464 421 20 Commercial banks .................................................. 3,466 3,704 3,720 351 304 263 220 166 302 195 21 Finance companies.................................................. 643 886 797 87 80 90 84 52 53 49 22 Savings and loans.................................................... 1,120 1,239 1,687 112 207 143 128 103 110 169 23 Credit unions ........................................................... 196 238 191 8 6 10 4 3 -1 8 24 Other ............................................................................. 86,249 98,710 103,588 7,889 8,362 7,836 6,094 5,634 5,829 6,945 25 Commercial banks .................................................. 29,811 34,457 34,877 2,719 2,844 2,458 1,791 1,547 1,770 2,140 26 Finance companies.................................................. 28,684 33,146 37,771 3,047 3,174 3,070 2,392 2,252 2,369 2,647 27 Credit unions ........................................................... 17,216 20,299 18,286 1,171 1,151 1,185 899 774 595 1,081 28 Retailers ................................................................... 5,250 4,688 5,377 454 508 507 484 547 559 455 29 Savings and loans.................................................... 3,365 3,811 5,646 373 568 522 427 433 466 542 30 Mutual savings banks ............................................ 1,923 2,309 1,631 125 117 94 101 81 70 80 Liquidations 31 Total ................................................................... 218,793 253,541 287,067 25,330 24,781 25,183 24,533 24,673 24,161 25,106 By major holder 32 Commercial banks ...................................................... 99,251 118,907 136,185 11,693 11,221 11,298 11,575 11,307 11,233 11,520 33 Finance companies...................................................... 36,041 41,075 47,498 4,444 4,263 4,526 3,857 4,199 3,699 4,470 34 Credit unions ............................................................... 27,592 31,689 34,531 2,851 2,868 2,716 2,608 2,592 2,664 2,648 35 Retailers1 ....................................................................... 36,479 40,233 43,052 3,890 3,989 4,115 3,935 3,938 3,989 3,892 36 Savings and loans........................................................ 3,374 4,009 5,366 478 469 461 472 461 487 515 37 Gasoline companies..................................................... 14,485 15,849 18,531 1,839 1,838 1,939 1,964 2,053 1,963 1,935 38 Mutual savings banks ................................................ 1,571 1,779 1,904 135 133 128 122 123 126 126 By major type of credit 39 Automobile ................................................................... 60,437 69,430 79,293 6,808 6,778 6,845 6,370 6,535 6,508 6,702 40 Commercial banks .................................................. 36,407 42,041 45,931 3,943 3,914 3,806 3,733 3,600 3,679 3,652 41 Indirect paper....................................................... 19,842 22,865 24,824 2,082 2,048 2,064 2,131 1,979 2,037 2,010 42 Direct loans........................................................... 16,565 19,176 21,107 1,861 1,866 1,742 1,602 1,621 1,642 1,642 43 Credit unions ........................................................... 13,755 15,618 17,226 1,482 1,515 1,388 1,335 1,320 1,368 1,353 44 Finance companies.................................................. 10,275 11,771 16,136 1,383 1,349 1,651 1,302 1,615 1,461 1,697 45 Revolving ..................................................................... 80,508 96,811 112,449 10,186 9,883 10,427 10,681 10,577 10,383 10,508 46 Commercial banks .................................................. 34,241 45,471 55,886 4,921 4,537 4,805 5,189 5,053 4,904 5,105 47 Retailers ................................................................... 31,782 35,491 38,032 3,426 3,508 3,683 3,528 3,471 3,516 3,468 48 Gasoline companies................................................ 14,485 15,849 18,531 1,839 1,838 1,939 1,964 2,053 1,963 1,935 49 Mobile home................................................................. 4,860 5,170 5,029 438 399 378 400 357 367 395 50 Commercial banks .................................................. 3,079 3,278 3,283 283 247 246 250 220 228 238 51 Finance companies.................................................. 832 812 559 39 48 33 43 47 40 55 52 Savings and loans..................................................... 823 929 1,019 102 92 86 95 80 87 91 53 Credit unions ........................................................... 126 151 168 14 12 13 12 10 12 11 54 Other ............................................................................. 72,988 82,130 90,296 7,898 7,721 7,533 7,082 7,204 6,903 7,501 55 Commercial banks .................................................. 25,524 28,117 31,085 2,546 2,523 2,441 2,403 2,434 2,422 2,525 56 Finance companies.................................................. 24,934 28,492 30,803 3,022 2,866 2,842 2,512 2,537 2,198 2,718 57 Credit unions ........................................................... 13,711 15,920 17,137 1,355 1,341 1,315 1,261 1,262 1,284 1,284 58 Retailers ................................................................... 4,697 4,742 5,020 464 481 432 407 467 473 424 59 Savings and loans.................................................... 2,551 3,080 4,347 376 377 375 377 381 400 424 60 Mutual savings banks ............................................ 1,571 1,779 1,904 135 133 128 122 123 126 126 1. Includes auto dealers and excludes 30-day charge credit held by travel and entertainment companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Financial Statistics □ September 1980 1.59 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1977 1978 1979 1980 Transaction category, sector 1974 1975 1976 1977 1978 1979 H2 HI H2 HI H2 HI Nonfinancial sectors 1Total funds raised................................................ 191.3 210.8 271.9 338.5 400.3 394.9 378.9 384.5 416.1 380.5 408.2 311.8 2Excluding equities ...................................................... 187.4 200.7 261.1 335.4 398.2 390.6 373.8 387.1 409.3 377.7 402.3 303.6 By sector and instrument 3U.S. government ........................................................ 11.8 85.4 69.0 56.8 53.7 37.4 67.4 61.4 46.0 28.6 46.1 63.2 4 Treasury securities.................................................. 12.0 85.8 69.1 57.6 55.1 38.8 68.6 62.3 47.9 30.9 46.6 63.8 5 Agency issues and mortgages................................ -.2 -.4 -.1 -.9 -1.4 -1.4 -1.2 -.9 -1.9 -2.3 -.5 -.6 6All other nonfinancial sectors .................................. 179.5 125.4 202.9 281.8 346.6 357.6 311.5 323.1 370.2 351.9 362.1 248.6 7 Corporate equities .................................................. 3.8 10.1 10.8 3.1 2.1 4.3 5.1 -2.6 6.8 2.8 5.9 8.2 8 Debt instruments .................................................... 175.6 115.3 192.0 278.6 344.5 353.2 306.4 325.7 363.4 349.1 356.2 240.4 9 Private domestic nonfinancial sectors.................. 164.1 112.1 182.0 267.9 314.4 336.4 294.2 302.5 326.3 338.6 333.0 223.9 10 Corporate equities .............................................. 4.1 9.9 10.5 2.7 2.6 3.5 4.9 -1.8 7.0 2.8 4.1 6.1 11 Debt instruments ................................................ 160.0 102.1 171.5 265.1 311.8 333.0 289.3 304.3 319.2 335.8 328.9 217.9 12 Debt capital instruments................................ 98.0 98.4 123.5 175.6 196.6 199.9 192.5 188.0 205.1 198.8 201.1 167.0 13 State and local obligations ........................ 16.5 16.1 15.7 23.7 28.3 18.9 25.0 27.8 28.7 16.0 21.8 19.0 14 Corporate bonds.......................................... 19.7 27.2 22.8 21.0 20.1 21.2 25.4 20.6 19.6 22.4 19.9 32.9 15 Home ........................................................ 34.8 39.5 63.7 96.4 104.5 109.1 103.1 99.8 109.2 109.8 108.5 72.7 16 Multifamily residential .......................... 6.9 * 1.8 7.4 10.2 8.9 8.4 9.3 11.2 8.1 9.7 7.9 17 Commercial .............................................. 15.1 11.0 13.4 18.4 23.3 25.7 21.9 21.2 25.4 26.0 25.4 20.5 18 Farm .......................................................... 5.0 4.6 6.1 8.8 10.2 16.2 8.7 9.3 11.1 16.6 15.9 14.1 19 Other debt instruments.................................. 62.0 3.8 48.0 89.5 115.2 133.0 96.7 116.3 114.1 137.0 127.8 50.9 20 Consumer credit .......................................... 9.9 9.7 25.6 40.6 50.6 44.2 44.5 50.1 51.0 48.3 39.0 -9.2 21 Bank loans n.e.c............................................ 31.7 -12.3 4.0 27.0 37.3 50.6 26.7 43.1 31.4 48.2 52.9 9.8 22 Open market paper.................................... 6.6 -2.6 4.0 2.9 5.2 10.9 2.4 5.3 5.1 12.0 9.7 30.0 23 Other ............................................................ 13.7 9.0 14.4 19.0 22.2 27.3 23.2 17.8 26.5 28.4 26.2 20.2 24 By borrowing sector .......................................... 164.1 112.1 182.0 267.9 314.4 336.4 294.2 302.5 326.3 338.6 333.0 223.9 25 State and local governments.......................... 15.5 13.7 15.2 20.4 23.6 15.5 25.0 21.0 26.1 13.0 18.0 16.6 26 Households ...................................................... 51.2 49.5 90.7 139.9 162.6 165.0 150.4 156.1 169.1 168.1 161.0 78.9 27 Farm .............................................................. 8.0 8.8 10.9 14.7 18.1 25.8 13.8 15.3 20.8 23.5 28.1 21.6 28 Nonfarm noncorporate .................................. 7.7 2.0 5.4 12.5 15.4 15.8 12.5 16.3 14.5 15.3 16.0 11.8 29 Corporate ........................................................ 81.7 38.1 59.8 80.3 94.7 114.3 92.4 93.7 95.8 118.7 109.8 95.0 30 Foreign...................................................................... 15.4 13.3 20.8 13.9 32.3 21.1 17.3 20.6 43.9 13.3 29.1 24.7 31 Corporate equities .............................................. -.2 .2 .3 .4 -.5 .9 .2 -.8 -.2 * 1.7 2.2 32 Debt instruments ................................................ 15.7 13.2 20.5 13.5 32.8 20.3 17.1 21.4 44.1 13.3 27.3 22.5 33 Bonds ................................................................ 2.1 6.2 8.6 5.1 4.0 3.9 5.7 5.0 3.0 3.0 4.7 2.2 34 Bank loans n.e.c................................................ 4.7 3.9 6.8 3.1 18.3 2.3 6.5 9.3 27.3 1.0 3.5 -1.6 35 Open market paper ........................................ 7.3 .3 1.9 2.4 6.6 11.2 2.2 3.6 9.6 6.1 16.3 16.2 36 U.S. government loans .................................. 1.6 2.8 3.3 3.0 3.9 3.0 2.9 3.6 4.2 3.1 2.8 5.7 Financial sectors 37Total funds raised................................................ 39.2 12.7 24.1 54.0 81.4 87.4 60.3 80.7 82.1 87.0 87.8 47.7 By instrument 38 U.S. government related .......................................... 23.1 13.5 18.6 26.3 41.4 52.4 29.9 38.5 44.3 45.8 59.0 41.0 39 Sponsored credit agency securities ...................... 16.6 2.3 3.3 7.0 23.1 24.3 6.8 21.9 24.3 21.5 27.0 25.2 40 Mortgage pool securities........................................ 5.8 10.3 15.7 20.5 18.3 28.1 23.1 16.6 20.1 24.2 32.0 15.7 41 Loans worn U.S. government .............................. .7 .9 -.4 -1.2 0 0 0 0 0 0 0 0 42 Private financial sectors ............................................ 16.2 -.8 5.5 27.7 40.0 35.0 30.4 42.2 37.8 41.2 28.8 6.7 43 Corporate equities .................................................. .3 .6 1.0 .9 1.7 1.2 .8 2.2 1.1 2.8 -.4 2.6 44 Debt instruments .................................................... 15.9 -1.4 4.4 26.9 38.3 33.8 29.6 40.0 36.7 38.4 29.2 4.1 45 Corporate bonds.................................................. 2.1 2.9 5.8 10.1 7.5 7.8 10.1 8.5 6.4 8.7 7.0 10.3 46 Mortgages ............................................................ -1.3 2.3 2.1 3.1 .9 -1.2 3.0 2.1 -.3 -.5 -1.9 -6.7 47 Bank loans n.e.c.................................................... 4.6 -3.7 -3.7 -.3 2.8 -.4 1.2 2.5 3.1 -.7 -.2 * 48 Open market paper and repurchase 3.8 1.1 2.2 9.6 14.6 18.4 9.5 13.5 15.7 23.0 13.8 -3.5 49 Loans from Federal Home Loan Banks.......... 6.7 -4.0 -2.0 4.3 12.5 9.2 5.8 13.2 11.8 7.8 10.5 4.1 By sector 50 Sponsored credit agencies.......................................... 17.3 3.2 2.6 5.8 23.1 24.3 6.8 21.9 24.3 21.5 27.0 25.2 51 Mortgage pools............................................................ 5.8 10.3 15.7 20.5 18.3 28.1 23.1 16.6 20.1 24.2 32.0 15.7 52 Private financial sectors ............................................ 16.2 -.8 5.5 27.7 40.0 35.0 42.2 37.8 41.2 28.8 6.7 53 Commercial banks .................................................. 1.2 1.2 2.3 1.1 1.3 1.6 1.5 1.1 1.3 1.8 1.9 54 Bank affiliates.......................................................... 3.5 .3 -.8 1.3 6.7 4.5 5.8 7.6 6.2 2.9 4.5 55 Savings and loan associations................................ 4.8 -2.3 .1 9.9 14.3 11.4 11.5 16.4 12.2 9.9 12.9 -2.9 56 Other insurance companies .................................. .9 1.0 .9 .9 1.1 1.0 1.0 1.1 1.0 .9 .8 57 Finance companies.................................................. 6.0 .5 6.4 17.6 18.6 18.9 18*5 18.9 18.2 23.5 14.3 3.3 58 REITs ...................................................................... .6 -1.4 -2.4 -2.2 -1.0 -.4 — 2.0 -1.0 -1.0 -.6 -.1 -.5 59 Open-end investment companies.......................... -.7 -.1 -1.0 -.9 -1.0 -2.1 —1.3 -.5 -1.5 -.3 -3.9 -.3 All sectors 60 Total funds raised, by instrument........................ 230.5 223.5 296.0 392.5 481.7 482.3 439.2 465.2 498.3 467.4 496.0 359.5 61 Investment company shares ................................ -.7 -.1 -1.0 -.9 -1.0 -2.1 -1.3 -.5 -1.5 -.3 -3.9 -.3 62 Other corporate equities............................................ 4.8 10.8 12.9 4.9 4.7 7.6 7.2 .1 9.4 5.8 9.3 11.1 63 Debt instruments ......................................................... 226.4 212.8 284.1 388.5 478.0 476.8 433.3 465.5 490.4 461.9 490.5 348.7 64 U.S. government securities .................................. 34.3 98.2 88.1 84.3 95.2 89.9 97.4 100.0 90.4 74.5 105.2 104.3 65 State and local obligations.................................... 16.5 16.1 15.7 23.7 28.3 18.9 25.0 27.8 28.7 16.0 21.8 19.0 66 Corporate and foreign bonds................................ 23.9 36.4 37.2 36.1 31.6 32.9 41.1 34.2 29.1 34.1 31.5 45.4 67 Mortgages ................................................................. 60.5 57.2 87.1 134.0 149.0 158.6 145.1 141.6 156.4 159.8 157.4 108.3 68 Consumer credit....................................................... 9.9 9.7 25.6 40.6 50.6 44.2 44.5 50.1 51.0 48.3 39.0 -9.2 69 Bank loans n.e.c........................................................ 41.0 -12.2 7.0 29.8 58.4 52.5 34.4 54.9 61.8 48.6 56.2 8.3 70 Open market paper and RPs................................ 17.7 -1.2 8.1 15.0 26.4 40.5 14.0 22.4 30.4 41.1 39.8 42.6 71 Other loans ............................................................... 22.7 8.7 15.3 25.2 38.6 39.5 31.8 34.6 42.5 39.4 39.5 30.0 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 1977 1978 1979 1980 Transaction category, or sector 1974 1975 1976 1977 1978 1979 H2 HI H2 HI H2 HI 1 Total funds advanced in credit markets to nonfinancial sectors ................................................................ 187.4 200.7 261.1 355.4 398.2 390.6 373.8 387.1 409.3 377.7 402.3 303.6 By public agencies and foreign 2 Total net advances............................................................... 53.7 44.6 54.3 85.1 109.7 80.1 104.2 102.8 116.6 47.6 112.5 105.1 3 U.S. government securities .......................................... 11.9 22.5 26.8 40.2 43.9 2.0 53.3 43.7 44.0 -22.1 26.2 27.4 4 Residential mortgages .................................................... 14.7 16.2 12.8 20.4 26.5 36.1 22.0 22.2 30.7 32.6 39.6 34.0 5 FHLB advances to savings and loans.......................... 6.7 -4.0 -2.0 4.3 12.5 9.2 5.8 13.2 11.8 7.8 10.5 4.1 6 Other loans and securities ............................................ 20.5 9.8 16.6 20.2 26.9 32.8 23.1 23.7 30.1 29.2 36.3 39.7 Total advanced, by sector 7 U.S. government ................................................................. 9.8 15.1 8.9 11.8 20.4 22.5 17.8 19.4 21.4 23.8 21.3 34.5 8 Sponsored credit agencies ................................................ 26.5 14.8 20.3 26.8 44.6 57.5 32.0 39.4 49.8 49.9 65.2 40.5 9 Monetary authorities.......................................................... 6.2 8.5 9.8 7.1 7.0 7.7 4.0 13.4 .5 .9 14.5 13.6 10 Foreign ................................................................................. 11.2 6.1 15.2 39.4 37.7 -7.7 50.4 30.6 44.9 -27.0 11.7 16.6 11 Agency borrowing not included in line 1........................ 23.1 13.5 18.6 26.3 41.4 52.4 29.9 38.5 44.3 45.8 59.0 41.0 Private domestic funds advanced 12 Total net advances............................................................... 156.8 169.7 225.4 276.5 330.0 362.9 299.6 322.8 337.1 375.9 348.8 239.4 13 U.S. government securities .......................................... 22.4 75.7 61.3 44.1 51.3 87.9 44.1 56.3 46.4 96.6 79.1 76.9 14 State and local obligations............................................ 16.5 16.1 15.7 23.7 28.3 18.9 25.0 27.8 28.7 16.0 21.8 19.0 15 Corporate and foreign bonds........................................ 20.9 32.8 30.5 22.5 22.5 25.6 27.0 24.1 20.9 26.9 24.3 30.9 16 Residential mortgages .................................................... 26.9 23.2 52.7 83.3 88.2 81.8 89.4 86.7 89.6 85.1 78.5 46.4 17 Other mortgages and loans .......................................... 76.8 17.9 63.3 107.3 152.2 157.9 119.7 141.1 163.3 159.1 155.6 70.3 18 Less: Federal Home Loan Bank advances................ 6.7 -4.0 -2.0 4.3 12.5 9.2 5.8 13.2 11.8 7.8 10.5 4.1 Private financial intermediation 19 Credit market funds advanced by private financial institutions ..................................................................... 125.5 122.5 190.3 255.9 296.9 291.4 265.0 301.7 292.0 308.2 274.5 213.3 20 Commercial banking ...................................................... 66.6 29.4 59.6 87.6 128.7 121.1 90.7 132.5 125.0 124.6 117.6 44.5 21 Savings institutions ........................................................ 24.2 53.5 70.8 82.0 75.9 56.3 82.6 75.8 75.9 57.7 54.9 32.7 22 Insurance and pension funds ........................................ 29.8 40.6 49.9 67.9 73.5 70.4 70.6 76.9 70.2 75.4 65.5 78.9 23 Other finance ................................................................... 4.8 -1.0 10.0 18.4 18.7 43.6 21.2 16.6 20.8 50.6 36.6 57.2 24 Sources of funds................................................................... 125.5 122.5 190.3 255.9 296.9 291.4 265.0 301.7 292.0 308.2 274.5 213.3 25 Private domestic deposits .............................................. 67.5 92.0 124.6 141.2 142.5 136.7 143.8 138.3 146.7 121.7 151.6 132.6 26 Credit market borrowing .............................................. 15.9 -1.4 4.4 26.9 38.3 33.8 29.6 40.0 36.7 38.4 29.2 4.1 27 Other sources ................................................................... 42.1 32.0 61.3 87.8 116.0 120.9 91.7 123.5 108.6 148.1 93.7 76.6 28 Foreign funds ............................................................... 10.3 -8.7 -4.6 1.2 6.3 26.3 .8 5.7 6.9 49.4 3.2 -10.7 29 Treasury balances ....................................................... -5.1 -1.7 -.1 4.3 6.8 .4 8.5 1.9 11.6 5.1 -4.3 -1.9 30 Insurance and pension reserves................................ 26.2 29.7 34.5 49.4 62.7 49.0 53.4 66.2 59.2 53.9 44.0 53.2 31 Other, net ..................................................................... 10.6 12.7 31.4 32.9 40.3 45.2 29.0 49.6 31.0 39.6 50.8 36.0 Private domestic nonfinancial investors 32 Direct lending in credit markets...................................... 47.2 45.8 39.5 47.5 71.4 105.4 64.1 61.1 81.7 106.1 103.5 30.3 33 U.S. government securities .......................................... 18.9 24.1 16.1 23.0 33.2 57.8 34.2 32.1 34.4 64.1 51.5 12.3 34 State and local obligations............................................ 9.3 8.4 3.8 2.6 4.5 -2.5 5.7 7.0 2.0 -2.3 -2.7 -3.0 35 Corporate and foreign bonds........................................ 5.1 8.4 5.8 -3.3 -1.4 12.2 -6.5 -3.7 1.0 7.1 17.2 7.9 36 Commercial paper .......................................................... 5.8 -1.3 1.9 9.5 16.3 10.7 10.8 8.2 24.4 12.5 9.0 -8.6 37 Other ................................................................................. 8.0 6.2 11.8 15.7 18.7 27.1 19.9 17.5 20.0 24.7 28.5 21.7 38 Deposits and currency......................................................... 73.8 98.1 131.9 149.5 151.8 144.7 154.5 148.7 154.8 131.1 158.1 141.3 39 Security RPs ..................................................................... -2.2 .2 2.3 2.2 7.5 6.6 .2 9.8 5.1 18.5 -5.3 -8.3 40 Money market fund shares............................................ 2.4 1.3 * .2 6.9 34.4 .9 6.1 7.7 30.2 38.6 61.9 41 Time and savings accounts............................................ 65.4 84.0 113.5 121.0 115.2 84.7 126.7 110.7 119.8 71.4 97.9 89.7 42 Large at commercial banks ...................................... 32.4 -15.8 -13.2 23.0 45.9 .4 49.6 33.9 57.9 -25.3 26.0 -5.1 43 Other at commercial banks ...................................... 11.3 40.3 57.6 29.0 8.2 39.3 11.4 18.4 -1.9 41.3 37.3 52.9 44 At savings institutions................................................ 21.8 59.4 69.1 69.0 61.1 45.1 65.7 58.5 63.8 55.4 34.7 41.8 4 4 5 6 Mo D n e e m y an . d ... .. d .. e .. p .. o .. s .. i . t . s .. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 . . 2 9 1 6 2 . . 4 6 1 8 6 . .1 8 2 1 6 7 . . 1 8 2 1 2 2 . . 2 9 1118..09 2 1 6 6 . . 8 1 2 1 2 1 . . 1 6 2 1 2 4 . . 3 2 10 1 . . 9 6 2 2 0 6 . . 3 8 - - 2 10 .1 .8 47 Currency ....................................................................... 6.3 6.2 7.3 8.3 9.3 7.9 10.8 10.5 8.1 9.3 6.5 8.7 48 Total of credit market instruments, deposits and currency .............................................................. 121.0 143.9 171.4 197.0 223.2 250.0 218.6 209.8 236.6 237.1 261.6 171.5 49 Public support rate (in percent) .................................. 28.7 22.2 20.8 25.4 27.5 20.5 27.9 26.5 28.5 12.6 28.0 34.6 50 Private financial intermediation (in percent) ............ 80.0 72.2 84.4 92.5 90.0 80.3 88.5 93.5 86.6 82.0 78.7 89.1 51 Total foreign funds ......................................................... 21.5 -2.6 10.6 40.5 44.0 18.6 51.2 36.3 51.8 22.4 14.9 5.9 Memo: Corporate equities not included above 52 Total net issues........................................................... 4.1 10.7 11.9 4.0 3.7 5.5 5.9 -.4 7.9 5.5 5.4 10.8 5 5 3 4 M Ot u h t e u r a l e q fu u n i d ti e s s h . a .. r .. e . s .. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 . . 7 8 1 - 0 .1 .8 - 1 1 2 . . 0 9 - 4 . . 9 9 -1 4 . . 0 7 -2 7 . . 1 6 -1 7 . . 3 2 -.5 .1 -1 9 . . 5 4 - 5 . . 3 8 -3 9 . . 9 3 1-1..31 55 Acquisitions by financial institutions .............................. 5.8 9.6 12.3 7.4 7.6 15.7 8.1 .4 14.7 12.5 18.9 18.4 56 Other net purchases ........................................................... -1.7 1.1 -.4 -3.4 -3.8 -10.2 -2.2 -.8 -6.8 -7.0 - 13.5 -7.6 Notes by line number. 30. Excludes net investment of these reserves in corporate equities. 1. Line 2 of p. A-44. 31. Mainly retained earnings and net miscellaneous liabilities. 2. Sum of lines 3-6 or 7-10. 32. Line 12 less line 19 plus line 26. 6. Includes farm and commercial mortgages. 33-37. Lines 13-17 less amounts acquired by private finance. Line 37 includes 11. Credit market funds raised by federally sponsored credit agencies, and net mortgages. issues of federally related mortgage pool securities. Included below in lines 47. Mainly an offset to line 9. 3, 13, 33. 48. Lines 32 plus 38, or line 12 less line 27 plus 45. 12. Line 1 less line 2 plus line 11. Also line 19 less line 26 plus line 32. Also sum 49. Line 2/line 1. of lines 27, 32, 39, 40, 41, and 46. 50. Line 19/line 12. 17. Includes farm and commercial mortgages. 51. Sum of lines 10 and 28. 25. Sum of lines 39, 40, 41, and 46. 52. 54. Includes issues by financial institutions. 26. Excludes equity issues and investment company shares. Includes line 18. Note. Full statements for sectors and transaction types quarterly, and annually 28. Foreign deposits at commercial banks, bank borrowings from foreign branches, for flows and for amounts outstanding, may be obtained from Flow of Funds and liabilities of foreign banking agencies to foreign affiliates. Section, Division of Research and Statistics, Board of Governors of the Federal 29. Demand deposits at commercial banks. Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics □ September 1980 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures 1967 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1980 Measure 1977 1978 1979 Jan. Feb. Mar.' Apr. May June July Aug.'’ 1 Industrial production i ............................................... 138.2 146.1 152.5' 152.7' 152.6' 152.1 148.3' 144.0' 141.4 139.8 140.5 Market groupings 2 Products, total ............................................................ 137.9 144.8 150.0' 149.9' 150.1' 150.0 146.6' 143.7' 142.5 141.8 142.3 3 Final, total .............................................................. 135.9 142.2 147.2' 147.0 147.7' 147.7 145.4' 143.1 142.1 141.7 141.7 4 Consumer goods .................................................. 145.3 149.1 150.8' 147.9' 148.4' 148.6 145.3' 142.4 142.2 141.6 141.7 5 Equipment ........................................................... 123.0 132.8 142.2' 145.8' 146.6' 146.6 145.6' 144.0' 142.1 141.8 141.6 6 Intermediate ............................................................ 145.1 154.1 160.5' 160.8 159.2' 158.3 150.8' 146.2' 143.6 142.4 144.4 7 Materials................................................................... 138.6 148.3 156.4' 157.0' 156.5' 155.3 151.0' 144.3' 139.8 136.5 137.8 Industry groupings 8 Manufacturing ............................................................ 138.4 146.8 153.6' 153.4 153.0' 152.1 147.9 143.4' 140.3 138.2 138.9 Capacity utilization (percent)1-2 9 Manufacturing ......................................................... 81.9 84.4 85.7 83.9' 83.5' 82.8 80.3' 77.6' 75.7 74.4 74.5 10 Industrial materials industries.................................. 82.7 85.6 87.4' 86.1' 85.6' 84.7 82.1' 78.3' 75.7 73.7 74.2 11 Construction contracts (1972 = 100)3 ........................ 155.0 123.0c 125.0 160.5 174.3 183.0 190.0 171.0 145.0 148.0 n.a. 12 Nonagricultural employment, total4............................. 125.3 131.4 136.0 138.3 138.6 138.5 138.2 137.5 136.8' 136.6' 136.9 13 Goods-producing, total............................................. 104.5 109.8 114.0 114.6' 114.2' 113.6' 112.1 110.5 109.1' 107.9' 108.4 14 Manufacturing, total .......................................... 101.2 105.3 107.9 107.8 107.8 107.7 106.1 104.3 102.9' 101.9' 102.3 15 Manufacturing, production-worker....................... 98.8 102.8 104.9 104.2 103.9 103.8 101.7 99.1 97.4' 96.1' 96.8 16 Service-producing ................................................. 136.7 143.2 148.1 151.3 151.9 152.2' 152.6 152.3 152.1' 152.3' 152.5 17 Personal income, total5 ............................................ 244.4 274.1 307.1 326.6 328.1 330.4 330.6 331.6 331.6 333.4 338.0 18 Wages and salary disbursements ............................. 230.2 258.1 287.2 302.5 305.1 307.4 306.2 306.2 306.4 307.0 306.6 19 Manufacturing ................................................... 198.3 222.4 246.8 256.7 259.2 260.8 257.8 254.4 254.4 252.8 251.5 20 Disposable personal income ........................................ 194.8 217.7 242.5 259.4 262.0' n.a. 21 Retail sales6 ................................................................ 229.8 253.8 281.6' 303.6' 298.0 292.4 286.6 285.0 290.4 299.5 303.9 Prices7 22 Consumer ................................................................ 181.5 195.4 217.4 233.2 236.4 239.8 242.5 244.9 247.6 247.8 n.a. 23 Producer finished goods........................................... 180.6 194.6 216.1 232.4 235.7 238.5' 240.5' 241.0 242.6 246.6 249.0 1. The industrial production and capacity utilization series have been revised 5. Based on data in Survey of Current Business (U.S. Department of Commerce). back to January 1979. Series for disposable income is quarterly. 2. Ratios of indexes of production to indexes of capacity. Based on data from 6. Based on Bureau of Census data published in Survey of Current Business. Federal Reserve, McGraw-Hill Economics Department, and Department of Com­ 7. Data without seasonal adjustment, as published in Monthly Labor Review. merce. Seasonally adjusted data for changes in the price indexes may be obtained from 3. Index of dollar value of total construction contracts, including residential, the Bureau of Labor Statistics, U.S. Department of Labor. nonresidential, and heavy engineering, from McGraw-Hill Information Systems Company, F. W. Dodge Division. Note: Basic data (not index numbers) for series mentioned in notes 4, 5, and 4. Based on data in Employment and Earnings (U.S. Department of Labor). 6, and indexes for series mentioned in notes 3 and 7 may also be found in the Series covers employees only, excluding personnel in the Armed Forces. Survey of Current Business. Monthly data for lines 12 throuth 16 reflect March 1979 benchmarks; only sea­ Figures for industrial production for the last two months are preliminary and sonally adjusted data are presently available. estimated, respectively. 2.11 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION! Seasonally adjusted 1979' 1980' 1979' 1980' 1979' 1980' Series Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Output (167 = 100) Capacity (percent of 1967 output) Utilization rate (percent) 1 Manufacturing ............................................. 153.7 153.4 152.8 143.9 180.1 181.7 183.3 184.8 85.3 84.4 83.4 77.9 2 Primary processing.............................................. 163.9 162.5 160.5 145.0 185.6 187.1 188.5 190.0 88.3 86.9 85.1 76.3 3 Advanced processing.......................................... 148.3 148.5 148.8 143.3 177.3 178.9 180.5 182.0 83.7 83.0 82.5 78.7 4 Materials ..................................................... 156.9 156.5 156.3 145.0 179.8 181.2 182.8 184.3 87.2 86.3 85.5 78.7 5 Durable goods .................................................... 158.6 156.3 155.0 140.6 184.3 185.7 187.2 188.6 86.0 84.1 82.8 74.5 6 Metal materials................................................ 126.3 119.6 117.1 100.6 140.3 140.6 140.7 140.8 90.0 85.1 83.2 71.4 7 Nondurable goods .............................................. 176.8 179.2 179.3 165.8 195.6 197.6 199.8 202.0 90.4 90.6 89.7 82.1 8 Textile, paper, and chemical ........................ 185.0 187.9 187.5 171.8 203.7 205.8 208.3 211.0 90.8 91.2 90.0 81.4 9 Textile .......................................................... 122.7 123.8 120.6 116.4 137.9 138.4 138.8 139.2 89.0 89.4 86.9 83.7 10 Paper ............................................................ 146.8 148.9 146.1 141.8 * 151.9 153.3 154.7 156.0 96.7 97.1 94.5 90.8 11 Chemical ...................................................... 227.7 231.8 233.6 208.3 253.6 256.8 260.4 264.6 89.8 90.2 89.7 78.7 12 Energy .................................................................. 128.2 129.0 130.8 130.2 149.2 150.3 151.1 151.8 85.9 85.9 86.6 85.7 1. The capacity utilization series has been revised back to January 1979. 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. 1980 Category 1977 1978 1979 Feb. Mar. Apr. May June July' Aug. Household Survey Data 1 Noninstitutional population1 ...................... 158,559 161,058 163,620 165,298 165,506 165,693 165,886 166,105 166,391 166,578 2 Labor force (including Armed Forces)1 .. 99,534 102,537 104,996 106,346 106,184 106,511 107,230 106,634 107,302 107,139 3 Civilian labor force ................................ 97,401 100,420 102,908 104,260 104,094 104,419 105,142 104,542 105,203 105,025 Employment 4 Nonagricultural industries2 ................ 87,302 91,031 93,648 94,626 94,298 93,912 93,609 93,346 93,739 93,826 5 Agriculture .......................................... 3,244 3,342 3,297 3,326 3,358 3,242 3,379 3,191 3,257 3,180 6 Unemployment Number ................................................ 6,855 6,064.70 5,963 6,360.70 6,463.82 7,265 8,154 8,006 8,207 8,019 7 Rate (percent of civilian labor force) 7.0 5.8 7.0 7.8 7.7 7.8 7.6 8 Not in labor force........................................ 59,025 58,521 58,623 58,951 59,322 59,182 58,657 59,471 59,091 59,439 Establishment Survey Data 9 Nonagricultural payroll employment3 .... 82,423 86,446 89,497 91,186 91,144 90,951 90,468 90,047' 89,865 90,066 1 11 0 M Mi a n n in u g f ac . t .. u .. r .. i . n .. g ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,6 8 8 13 2 20.4 8 7 51 6 20,9 9 7 5 9 8 20 1 , , 9 0 5 07 7 20 1 , , 9 0 3 09 8 201,,604122 20 1 , , 2 02 8 3 6 20 1 , , 0 0 1 2 4 9 ' ' 191,,081112 19 1 , , 9 0 0 1 3 7 12 Contract construction ................................ 3,851 4,271 4,642 4,659 4,529 4,467 4,436 4,379' 4,319 4,355 13 Transportation and public utilities .......... 4,713 4,927 5,154 5,198 5,202 5,178 5,167 5,134 5,110 5,121 14 Trade ............................................................ 18,516 19,499 20,140 20,637 20,610 20,531 20,487 20,459' 20,487 20,555 15 Finance........................................................... 4,467 4,727 4,964 5,101 5,115 5,119 5,137 5,150 5,166 5,171 16 Service ........................................................... 15,303 16,220 17,047 17,540 17,580 17,618 17,659 17,652' 17,748 17,773 17 Government ................................................ 15,079 15.476 15,613 16,087 16,161 16,384 16,273 16,230' 16,212 16,171 1. Persons 16 years of age and over. Monthly figures, which are based on sample 3. Data include all full- and part-time employees who worked during, or data, relate to the calendar week that contains the 12th day; annual data are received pay for, the pay period that includes the 12th day of the month, and averages of monthly figures. By definition, seasonality does not exist in population exclude proprietors, self-employed persons, domestic servants, unpaid family figures. Based on data from Employment and. Earnings (U.S. Department of La­ workers, and members of the Armed Forces. Data are adjusted to the March 1979 bor). benchmark and only seasonally adjusted data are available at this time. Based on 2. Includes self-employed, unpaid family, and domestic service workers. data from Employment and Earnings (U.S. Department of Labor). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics □ September 1980 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value' Monthly data are seasonally adjusted. Grouping 1 p 9 r 6 o 7 ­ 1979 1979 1980 por­ tion age Aug. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June JulyP Aug/ Index (1967 = 100) Major Market 1 Total index.................................................... 100.00 152.5 152.1 152.7 152.3 152.5 152.7 152.6 152.1 148.3 144.0 141.4 139.8 140.5 2 Products ......................................................... 60.71 150.0 149.1 150.1 149.8 149.8 149.1 150.1 150.0 146.6 143.7 142.5 141.8 142.3 3 Final products .......................................... 47.82 147.2 145.8 147.3 147.1 147.2 147.0 147.7 147.7 145.4 143.1 142.1 141.7 141.7 4 Consumer goods.................................. 27.68 150.8 148.7 150.0 149.1 148.6 147.9 148.4 148.6 145.3 142.4 142.2 141.6 141.7 5 Equipment ............................................. 20.14 142.2 141.9 143.6 144.2 145.2 145.8 146.6 146.6 145.6 144.0 142.1 141.8 141.6 6 Intermediate products ............................ 12.89 160.5 161.3 160.6 160.2 159.6 160.8 159.2 158.3 150.8 146.2 143.6 142.4 144.4 7 Materials ....................................................... 39.29 156.4 156.6 156.6 156.2 156.6 157.0 156.5 155.3 151.0 144.3 139.8 136.5 137.8 Consumer goods 8 Durable consumer goods .......................... 7.89 155.8 148.0 153.1 149.6 146.7 142.3 144.5 144.1 136.3 128.8 128.2 127.8 126.6 9 Automotive products.............................. 2.83 167.7 147.0 159.2 150.6 141.8 131.3 142.1 141.0 126.3 118.5 121.6 128.2 118.1 10 Autos and utility vehicles.................. 2.03 154.3 125.1 142.4 131.0 121.4 108.7 124.6 122.0 102.3 92.6 97.1 106.1 92.0 11 Autos ................................................. 1.90 136.7 118.5 129.0 118.3 110.2 98.0 116.8 114.9 97.1 88.4 95.7 105.0 90.1 12 Auto parts and allied goods.............. 80 201.5 202.7 202.1 200.3 193.6 188.5 186.7 189.1 187.2 184.0 183.7 184.2 184.4 13 Home goods ............................................. 5.06 149.2 148.6 149.7 149.0 149.4 148.5 145.8 145.8 142.0 134.6 132.0 127.6 131.3 14 Appliances, A/C, and TV............... 1.40 127.4 123.3 128.0 129.8 133.1 128.9 122.3 122.1 114.8 102.8 105.6 103.1 117.1 15 Appliances and TV ..................... 1.33 129.3 126.1 130.2 132.4 135.5 130.0 124.4 125.0 117.5 106.0 108.5 104.3 16 Carpeting and furniture...................... 1.07 173.0 173.4 173.1 171.6 170.8 170.9 168.2 169.1 165.8 154.2 146.7 136.1 17 Miscellaneous home goods................ 2.59 151.1 152.1 151.7 150.0 149.4 149.8 149.4 149.0 146.8 143.8 140.2 137.3 137.9 18 Nondurable consumer goods .................... 19.79 148.8 149.0 148.8 149.0 149.3 150.1 150.0 150.3 148.8 147.7 147.7 147.1 147.8 19 Clothing ..................................................... 4.29 131.9 130.8 130.4 132.3 131.3 130.2 130.7 131.8 128.7 127.9 127.7 20 Consumer staples .................................... 15.50 153.5 154.0 153.9 153.6 154.3 155.6 155.4 155.5 154.5 153.2 153.3 153.2 153.8 21 Consumer foods and tobacco............ 8.33 145.0 145.4 145.9 144.8 145.8 146.9 146.5 147.3 146.2 146.1 146.0 145.5 22 Nonfood staples .................................. 7.17 163.4 164.0 163.1 163.8 164.3 165.8 165.6 165.0 164.0 161.5 161.7 162.1 162.7 23 Consumer chemical products........ 2.63 205.5 208.8 206.4 207.9 207.8 210.5 211.8 208.9 206.9 203.0 201.6 201.4 24 Consumer paper products.............. 1.92 120.8 121.2 121.7 119.3 121.0 124.1 122.5 121.6 120.4 120.2 120.1 120.2 25 Consumer energy products............ 2.62 152.2 150.6 150.1 152.2 152.4 151.5 150.9 152.7 152.8 150.1 152.1 153.5 26 Residential utilities...................... 1.45 163.8 161.8 162.2 166.5 165.0 161.9 162.5 169.6 172.5 169.8 Equipment 27 Business ........................................................ 12.63 171.3 171.6 172.3 172.6 174.1 174.9 176.0 176.1 174.2 171.9 169.0 168.1 167.3 28 Industrial .................................................. 6.77 152.2 151.7 151.8 153.5 153.2 157.2 159.2 159.3 159.3 157.8 154.6 153.6 153.4 29 Building and mining............................ 1.44 206.3 210.6 203.2 205.1 205.0 222.1 231.6 235.6 239.5 242.2 240.5 242.7 243.5 30 Manufacturing...................................... 3.85 130.3 131.1 130.8 132.5 132.1 132.6 133.1 133.1 131.9 129.5 125.6 123.9 124.1 31 Power .................................................... 1.47 156.3 147.7 156.3 157.6 157.8 157.9 156.4 153.2 152.3 149.1 146.1 143.9 141.5 32 Commercial transit, farm ...................... 5.86 193.4 194.6 196.0 194.7 198.1 195.2 195.5 195.5 191.5 188.2 185.6 184.8 183.5 33 Commercial .......................................... 3.26 228.1 231.4 234.5 232.5 237.2 238.2 238.7 240.4 235.6 232.0 226.8 225.0 224.0 34 Transit .................................................. 1.93 151.6 148.5 154.6 150.1 151.9 142.8 145.4 142.5 143.0 136.3 138.2 139.0 137.2 35 Farm ...................................................... 67 144.9 148.3 128.0 139.5 141.0 137.1 129.9 129.7 116.4 124.6 121.6 121.0 36 Defense and space...................................... 7.51 93.4 91.9 95.4 96.4 96.7 97.0 97.2 97.1 97.6 97.2 96.9 97.8 98.4 Intermediate products 37 Construction supplies.................................. 6.42 158.0 158.7 157.9 157.4 155.7 156.4 153.8 152.3 139.4 133.0 128.5 127.2 130.3 38 Business supplies ........................................ 6.47 163.1 163.9 163.3 163.0 163.5 165.1 164.5 164.3 162.0 159.4 158.6 157.5 39 Commercial energy products................ 1.14 172.0 170.9 172.4 172.7 173.8 172.4 171.7 174.1 174.8 172.0 169.9 Materials 40 Durable goods materials............................ 20.35 157.8 157.7 157.2 155.8 155.8 156.0 154.8 154.2 148.2 139.8 133.8 129.0 131.1 41 Durable consumer parts ........................ 4.58 137.1 129.7 131.5 126.1 125.1 120.8 119.9 120.3 110.6 100.1 96.0 94.1 99.7 42 Equipment parts...................................... 5.44 189.9 191.5 193.2 195.1 196.7 199.8 198.9 199.2 195.8 190.8 182.5 179.2 179.0 43 Duraole materials n.e.c............................ 10.34 150.1 152.3 149.5 148.3 147.8 148.5 147.0 145.5 139.8 130.5 124.9 118.1 119.8 44 Basic metal materials.......................... 5.57 124.1 127.1 121.3 119.9 118.1 118.8 116.4 116.6 109.3 100.0 95.9 84.9 45 Nondurable goods materials...................... 10.47 175.9 177.1 178.8 178.5 180.2 181.0 179.9 177.0 173.2 165.2 159.0 155.6 156.4 46 Textile, paper, and chemical materials . 7.62 183.7 185.4 187.6 187.0 189.2 189.3 188.1 185.2 180.7 171.5 163.2 158.7 159.8 47 Textile materials.................................. 1.85 121.0 121.6 124.4 123.2 123.8 120.1 121.1 120.7 117.7 117.6 114.0 110.5 48 Paper materials.................................... 1.62 143.5 146.2 148.1 148.5 150.1 148.2 146.0 144.2 141.2 141.7 142.4 137.5 49 Chemical materials.............................. 4.15 227.4 229.2 231.2 230.5 233.6 236.3 234.5 230.1 224.3 207.3 193.3 188.6 50 Containers, nondurable.......................... 1.70 167.4 166.4 169.1 168.1 168.2 172.7 170.6 167.1 166.8 155.8 155.0 155.4 51 Nondurable materials n.e.c..................... 1.14 136.8 137.5 134.6 137.6 138.8 137.5 138.7 137.4 133.0 136.4 136.9 133.5 52 Energy materials ........................................ 8.48 128.9 128.7 128.1 129.4 129.4 130.0 131.5 130.9 130.1 129.6 130.8 131.0 130.9 53 Primary energy ........................................ 4.65 113.5 114.6 113.6 114.0 113.7 114.4 113.7 115.6 116.4 116.2 117.7 117.1 54 Converted fuei materials........................ 3.82 147.7 145.9 145.7 148.2 148.5 149.0 153.1 149.6 146.9 145.8 146.6 147.9 Supplementary groups 55 Home goods and clothing.......................... 9.35 141.3 140.4 140.8 141.3 141.1 140.1 138.9 139.4 135.9 131.5 130.0 126.4 128.9 56 Energy, total................................................ 12.23 137.9 137.3 136.9 138.3 138.4 138.6 139.4 139.6 139.1 137 9 139.0 139.6 139.1 57 Products .................................................... 3.76 158.2 156.7 156.8 158.4 158.9 157.8 157.2 159.1 159.5 156.7 157.5 158.9 58 Materials .................................................. 8.48 128.9 128.7 128.1 129.4 129.4 130.0 131.5 130.9 130.1 129.6 130.8 131.0 130.9 For notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Output A49 2.13 Continued 1967 1979 1980 Grouping SIC p p r o o r­ ­ A 19 v 7 g 9 . code tion Aug. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June JulyP Aug.* Index (1967 = 100) Major Industry 1 Mining and utilities .................... 12.05 144.7 144.7 145.7 147.5 148.2 148.2 149.0 151.4 150.1 149.6 150.6 150.7 151.2 2 Mining ...................................... 6.36 125.5 126.8 127.8 129.9 131.4 133.5 132.9 133.0 133.1 133.4 133.2 131.3 131.7 3 Utilities...................................... 5.69 166.0 164.6 165.7 167.2 166.9 164.8 167.1 172.0 169.1 167.7 170.0 172.4 173.0 4 Electric .................................. 3.88 185.8 183.3 184.5 186.6 186.0 183.4 185.7 192.4 187.9 186.0 5 Manufacturing.............................. 87.95 153.6 152.9 153.7 153.3 153.2 153.4 153.0 152.1 147.9 143.4 140.3 138.2 138.9 6 Nondurable .............................. 35.97 164.0 165.2 164.8 165.0 165.3 166.0 165.9 164.7 161.6 158.0 155.3 153.4 154.0 7 Durable .................................... 51.98 146.4 144.4 146.0 145.2 144.8 144.7 144.1 143.4 138.4 133.3 129.9 127.6 128.4 Mining 8 Metal ............................................ 10 .51 127.0 127.1 124.2 132.2 136.9 137.6 136.6 132.7 123.5 120.8 119.8 90.5 9 Coal .............................................. 11,12 .69 135.6 144.1 146.0 143.3 143.4 141.0 136.0 137.2 143.4 145.0 150.0 149.8 150.7 10 Oil and gas extraction................ 13 4.40 121.7 122.2 123.6 125.7 127.2 129.9 130.4 131.8 132.5 133.9 133.8 134.8 135.3 11 Stone and earth minerals .......... 14 .75 137.6 138.3 138.2 140.5 141.4 144.6 142.3 136.0 133.1 128.1 123.9 121.7 Nondurable manufactures 12 Foods ............................................ 20 8.75 147.5 147.5 147.7 147.9 148.4 148.5 149.0 149.3 147.8 149.5 149.0 147.5 13 Tobacco products ........................ 21 .67 117.8 114.8 115.6 113.0 116.6 118.7 120.0 122.2 121.9 116.2 113.9 14 Textile mill products .................. 22 2.68 145.0 145.7 147.7 148.5 148.0 143.4 144.0 142.0 139.9 137.1 133.6 131.8 15 Apparel products ........................ 23 3.31 134.4 132.5 131.5 133.5 131.1 131.5 133.8 136.1 131.3 128.6 128.1 16 Paper and products .................... 26 3.21 151.0 154.0 154.2 154.3 155.7 157.4 153.6 152.7 148.2 145.7 146.2 142.5 17 Printing and publishing.............. 27 4.72 136.9 137.7 137.2 136.2 137.8 138.9 139.9 139.2 136.5 135.5 134.9 134.5 134.9 18 Chemicals and products.............. 28 7.74 211.8 214.8 212.9 215.3 216.8 218.0 217.4 213.6 209.1 199.2 191.1 189.9 19 Petroleum products .................... 29 1.79 143.9 143.1 142.6 142.1 145.4 147.5 144.6 140.7 137.4 133.0 132.0 131.1 127.5 20 Rubber and plastic products----- 30 2.24 272.2 278.5 278.0 271.3 263.8 265.5 266.8 264.4 261.8 248.1 242.2 238.6 21 Leather and products.................. 31 .86 71.7 69.7 70.1 70.4 71.2 74.2 73.3 72.8 69.9 70.1 68.5 66.0 Durable manufactures 22 Ordnance, private and government .......................... 19,91 3.64 75.2 73.9 77.1 78.0 77.5 77.1 77.2 76.9 77.5 77.9 77.5 77.6 78.0 23 Lumber and products.................. 24 1.64 136.9 138.5 138.7 135.9 132.4 131.6 130.2 125.3 105.2 104.5 108.7 108.9 24 Furniture and fixtures ................ 25 1.37 161.5 161.7 163.3 162.9 161.0 160.8 159.2 159.5 157.1 149.5 143.1 138.3 25 Clay, glass, stone products........ 32 2.74 163.9 162.5 163.6 164.1 163.8 165.0 162.4 156.4 148.8 140.8 134.5 133.3 26 Primary metals ............................ 33 6.57 121.3 121.1 118.4 117.1 115.3 116.4 111.9 113.7 106.4 96.1 90.4 80.8 83.9 27 Iron and steel .......................... 331.2 4.21 113.2 112.0 108.8 108.1 106.6 107.2 103.4 105.9 97.4 84.4 75.4 68.9 28 Fabricated metal products.......... 34 5.93 148.5 147.6 147.5 146.9 146.2 145.0 145.7 145.5 141.4 133.2 125.8 122.7 125.7 29 Nonelectrical machinery ............ 35 9.15 163.7 166.3 162.9 162.9 163.0 167.1 167.0 166.5 163.2 162.1 158.4 156.8 156.9 30 Electrical machinery .................. 36 8.05 175.0 172.1 177.3 179.5 181.6 181.7 179.2 179.2 177.0 171.4 166.8 165.5 167.2 31 Transportation equipment.......... 37 9.27 135.4 125.2 133.3 128.3 127.3 122.1 125.7 123.8 115.1 109.8 110.2 110.6 107.3 32 Motor vehicles and parts........ 371 4.50 159.9 138.5 150.1 139.3 137.1 126.2 133.9 130.1 114.7 105.9 106.8 107.9 100.8 33 Aerospace and miscellaneous transportation equipment 372-9 4.77 112.2 112.6 117.4 117.9 118.1 118.3 118.1 117.8 115.5 113.5 113.3 113.1 113.5 34 Instruments .................................. 38 2.11 174.9 173.9 175.0 173.4 175.0 175.9 174.8 173.5 173.8 171.0 169.2 166.5 169.0 35 Miscellaneous manufactures----- 39 1.51 153.7 155.7 154.5 155.3 153.7 153.8 151.6 152.8 151.2 147.3 143.7 142.0 141.6 Gross value (billions of 1972 dollars, annual rates) Major Market 36 Products, total.............................. 507.4 625.3 615.0 623.7 618.8 619.7 615.8 619.8 619.0 599.5 588.6 584.5 579.9 578.3 37 Final .............................................. 390.92 480.8 469.9 479.3 475.1 476.1 471.2 476.4 475.9 464.5 457.3 455.5 452.0 448.6 38 Consumer goods...................... 277.52 327.1 320.0 325.3 322.5 322.1 317.6 320.0 321.3 312.5 306.3 306.0 304.3 302.3 39 Equipment ................................ 113.42 153.6 149.9 154.0 152.6 154.0 153.6 156.3 154.6 152.0 151.0 149.4 147.7 146.3 40 Intermediate ................................ 116.62 144.6 145.1 144.4 143.7 143.6 144.6 143.4 143.1 135.0 131.3 129.0 128.0 129.7 1. The industrial production series has been revised back to January 1979. Note. Published groupings include some series and subtotals not shown sepa- 2. 1972 dollars. rately. For description and historical data, see Industrial Production—1976 Revision (Board of Governors of the Federal Reserve System: Washington, D.C.), Decem­ ber 1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics □ September 1980 2.14 HOUSING AND CONSTRUCTION Monthly figures are at seasonally adjusted annual rates except as noted. 1979 1980 Item 1977 1978 1979 Dec. Jan. Feb. Mar. Apr. May June' July Private residential real estate activity (thousands of units) New Units 1 Permits authorized .............................. 1,677 1,801 1,552 1,247 1,271 1,168 968 789 825 1,078 1,240 2 1-family ................................................. 1,125 1,183 981 776 780 708 556 473 495 628 792 3 2-or-more-family .............................. 551 618 570 471 491 460 412 316 330 450 448 4 Started .................................................. 1,987 2,020 1,745 1,548 1,419 1,330 1,041 1,030 906' 1,208 1,266 5 1-family ............................................ 1,451 1,433 1,194 1,055 1,002 786 617 628 628 760 865 6 2-or-more-family .............................. 536 587 551 493 417 544 424 402 278' 448 401 7 Under construction, end of period1 . 1,310 1,140 1,160 1,163 1,095 1,062 978' 914' 877 n.a. 8 1-family ............................................ 730 765 639 662 669 622 589 535' 496' 477 n.a. 9 2-or-more-family .............................. 478 546 501 498 494 473 473 443' 418' 400 n.a. 1,868 10 Completed ............................................ 1,656 1,855 1,880 1,787 1,832 1,669 1,897' 1,529' 1,481 11 1-family ................................................. 1,258 1,369 1,286 1,328 1,276 1,230 1,093 1,135' 996' 886 n.a. 12 2-or-more-family .............................. 399 499 570 552 511 602 576 762' 563' 595 n.a. 13 Mobile homes shipped........................ 276 277 163 Merchant builder activity in 1-family units 14 Number sold ........................................ 820 818 709 571 584 548 458 345' 462' 536 659 15 Number for sale, end of period1----- 408 419 402 398 396 384 377 364' 350' 342 334 Price (thousand of dollars)2 Median 16 Units sold ........................................ 49.0 55.8 62.7 61.5 63.2 64.8 62.3 62.8' 63.6' 66.9 64.3 Average 17 Units sold ........................................ 54.4 62.7 71.9 72.6 72.5 76.6 71.1 74.1' 73.5' 77.9 76.8 Existing Units (1-family) 18 Number sold ........................................ 3,572 3,905 3,742 3,350 3,210 2,990 2,750 2,420 2,310 2,480 2,920 Price of units sold (thous. of dollars)2 19 Median .................................................. 42.8 48.7 55.5 56.5 57.9 59.0 59.5 60.4 61.2 63.4 64.1 20 Average ................................................ 47.1 55.1 64.0 65.2 68.2 69.4 69.4 70.6 71.2 75.7 75.7 Value of new construction3 (millions of dollars) Construction 21 Total put in place...................... 228.948 244,045 237,132 226,529 220,088r 216,318 214,268 22 Private ............................................ 135,799 159,555 179.948 191,191 198,097 191,732 180,616 172,362 166,129' 163,036 160,568 23 Residential.................................. 80,957 93,423 99,029 102,127 105,814 101,519 93,991 84,495 78,448' 75,207 75,838 24 Nonresidential, total ................ 54,842 66,132 80,919 89,064 92,283 90,213 86,625 87,867 87,681 87,829 84,730 Buildings 25 Industrial ............................ 7,713 10,993 14,953 15,879 15,810 15,690 13,916 13,611 14,197 15,022 13,052 26 Commercial ........................ 14,789 18,568 24,924 29,422 31,614 30,727 29,911 30,878 30,149 29,609 28,564 27 Other .................................. 6,200 6,739 7,427 8,274 9,207 8,508 8,515 8,220 8,571 8,256 8,019 28 Public utilities and other 26,140 29,832 33,615 35,489 35,652 35,288 34,283 35,158 34,764 34,942 35,095 29 Public .............................................. 38,172 45,901 49,001 52,855 61,483 57,023 56,516 54,167 53,959 53,282 53,700 30 Military ...................................... 1,428 1,501 1,641 1,743 1,773 1,530 1,895 1,931 1,551 1,600 1,680 31 Highway ...................................... 9,380 10,713 11,915 12,858 16,892 15,693 13,606 14,393 12,470 n.a. n.a. 32 Conservation and development 3,862 4,457 4,586 5,121 5,141 5,325 5,686 5,000 6,147 n.a. n.a. 33 Other4.......................................... 23,502 29,230 30,859 33,133 37,677 34,475 35,329 32,843 33,791 n.a. 1. Not at annual rates. Note. Census Bureau estimates for all series except (a) mobile homes, which 2. Not seasonally adjusted. are private, domestic shipments as reported by the Manufactured Housing Institute 3. Value of new construction data in recent periods may not be strictly com­ and seasonally adjusted by the Census Bureau, and (b) sales and prices of existing parable with data in prior periods due to changes by the Bureau of the Census in units, which are published by the National Association of Realtors. AH back ana its estimating techniques. For a description of these changes see Construction current figures are available from originating agency. Permit authorizations are Reports (C-30-76-5), issued by the Bureau in July 1976. those reported to the Census Bureau from 14,000 jurisdictions through 1977, and 4. Beginning January 1977 “Highway” imputations are included in “Other”. 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 July Item 1979 1980 1980 1980 1979 1980 (1967 July July = 100)1 Sept. Dec. Mar. June Mar. Apr. May June July Consumer Prices2 1 All items................................................ 11.3 13.2 13.8 13.7 18.1 11.6 1.4 .9 .9 1.0 0.0 247.8 2 Commodities ................................................ 11.6 11.2 13.3 12.5 16.1 5.0 1.2 .5 .3 .3 .6 234.1 3 Food .......................................................... 10.2 7.6 6.5 12.1 3.8 5.6 1.0 .5 .3 .5 1.0 254.8 4 Commodities less food .......................... 12.3 12.8 16.4 12.7 22.1 4.7 1.3 .5 .4 .3 .5 222.2 5 Durable ................................................ 9.9 8.9 9.1 13.2 7.6 6.8 .2 .5 .6 .5 .5 209.8 6 Nondurable .......................................... 15.5 17.7 25.2 12.8 39.8 3.5 2.4 .6 .2 .1 .3 236.6 7 Services ........................................................ 10.9 16.1 14.3 15.8 20.9 21.6 1.9 1.5 1.6 1.8 -.8 272.4 8 Rent .......................................................... 7.1 9.2 10.2 9.0 8.3 10.0 .5 .2 1.0 1.2 .5 192.1 9 Services less rent .................................... 11.4 17.1 14.9 16.9 22.8 23.3 2.0 1.7 1.7 1.9 -.9 287.6 Other groupings 10 All items less food...................................... 11.6 14.4 15.4 14.2 21.7 13.0 1.5 1.1 1.0 1.1 -.2 245.1 11 All items less food and energy.................. 9.5 12.4 10.9 13.9 15.7 13.5 1.2 1.1 1.0 1.1 -.2 233.1 12 Homeownership .......................................... 15.2 19.9 19.5 25.6 24.1 26.6 2.1 1.9 1.8 2.3 -1.8 315.4 Producer Prices 13 Finished goods ............................................ 10.3 14.1 16.1 13.3 19.3' 6.0 1.4' .6' 0.0' .8 1.7 246.6 14 Consumer ................................................. 10.8 15.5 20.7 14.6 21.6' 4.0 1.6' .1' .2' .7 1.8 249.1 15 Foods .................................................... 6.9 6.5 15.3 8.6 -1.2' 7.8 1.0 -2.8 .1 .7 3.8 239.5 16 Excluding foods .................................. 13.0 20.3 23.4 17.9 34.8' 10.1 1.8' 1.5' .2' .7 .9 251.4 17 Capital equipment .................................. 9.0 10.6 5.9 10.0 13.4' 10.9 .9' 1.8' -.1' .9 1.3 240.2 18 Intermediate materials3.............................. 13.2 15.0 19.4 17.0 24.0' 4.4 .7' .3 -.1' .8 .7 282.3 Crude Materials 19 Nonfood..................................................... 20.7 19.3 25.1 27.8 21.9' -3.9 -1.4' -.5 0.0' -.5 3.2 416.8 20 Food .......................................................... 14.5 3.6 16.4 5.7 -16.7' -10.5 -2.7 -6.1 2.4 1.1 9.0 263.3 1. Not seasonally adjusted. 3. Excludes intermediate materials for food manufacturing and manufactured 2. Figures for consumer prices are those for all urban consumers. 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 1980 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1979 1980 Account 1977 1978 1979 Ql Q2 Q3 Q4 Ql Q2 p Gross National Product 1 1,899.5 2,127.6 2,368.8 2,292.1 2,329.8 2,396.5 2,456.9 2,524.6 2,524.6 By source 2 Personal consumption expenditures ............................ 1,210.0 1,350.8 1,509.8 1,454.2 1,475.9 1,528.6 1,580.4 1,629.5 . 1,628.6 3 Durable goods ............................................................ 178.8 200.3 213.0 213.8 208.7 213.4 216.2 220.2 195.7 4 Nondurable goods ...................................................... 481.3 530.6 596.9 571.1 581.2 604.7 630.7 652.0 654.8 5 Services ........................................................................ 549.8 619.8 699.8 669.3 686.0 710.6 733.5 757.3 778.0 6 Gross private domestic investment .............................. 303.3 351.5 387.2 373.8 395.4 392.3 387.2 387.7 370.3 7 Fixed investment ........................................................ 281.3 329.1 369.0 354.6 361.9 377.8 381.7 383.0 356.7 8 Nonresidential ........................................................ 189.4 221.1 254.9 243.4 249.1 261.8 265.2 272.6 267.7 9 Structures .............................................................. 62.6 76.5 92.6 84.9 90.5 95.0 100.2 103.3 103.8 10 Producers’ durable equipment .......................... 126.8 144.6 162.2 158.5 158.6 166.7 165.1 169.4 163.9 11 Residential structures ............................................ 91.9 108.0 114.1 111.2 112.9 116.0 116.4 110.4 89.0 12 Nonfarm................................................................ 88.8 104.4 110.2 107.8 109.1 112.0 112.1 105.9 85.3 13 Change in business inventories ................................ 21.9 22.3 18.2 19.1 33.4 14.5 5.6 4.7 13.6 14 Nonfarm .................................................................. 20.7 21.3 16.5 18.8 32.6 12.6 2.1 4.4 14.2 15 Net exports of goods and services................................ -9.9 -10.3 -4.6 4.0 -8.1 -2.3 -11.9 -13.6 -2.5 16 Exports ........................................................................ 175.9 207.2 257.5 238.5 243.7 267.3 280.4 308.1 307.1 17 Imports ........................................................................ 185.8 217.5 262.1 234.4 251.9 269.5 292.4 321.7 309.7 18 Government purchases of goods and services............ 396.2 435.6 476.4 460.1 466.6 477.8 501.2 517.2 528.3 19 Federal .......................................................................... 144.4 152.6 166.6 163.6 161.7 162.9 178.4 186.2 193.3 20 State and local ............................................................ 251.8 283.0 309.8 296.5 304.9 314.9 322.8 331.0 335.0 By major type of product 21 Final sales, total.............................................................. 1,877.6 2,105.2 2,350.6 2,272.9 2,296.4 2.381.9 2,451.4 2,516.1 2,511.0 22 Goods............................................................................ 842.2 930.0 1,030.5 1,011.8 1,018.1 1,036.0 1,056.3 1,086.2 1,082.1 23 Durable .................................................................... 345.9 380.4 423.1 425.5 422.4 424.4 420.2 421.5 419.2 24 Nondurable .............................................................. 496.3 549.6 607.4 586.2 595.7 611.6 636.1 664.8 662.9 25 Services ........................................................................ 866.4 969.3 1,085.1 1,041.4 1,064.2 1,100.6 1,134.0 1,169.5 1,200.5 26 Structures .................................................................... 190.9 228.2 253.2 238.9 247.5 259.8 266.6 265.1 241.9 27 Change in business inventories.................................... 21.9 22.3 18.2 19.1 33.4 14.5 5.6 4.7 13.6 28 Durable goods ............................................................ 11.9 13.9 13.0 18.4 24.3 7.3 1.8 -9.3 10.3 29 Nondurable goods ...................................................... 10.0 8.4 5.2 .7 9.1 7.2 3.8 14.0 3.3 30 Memo: Total GNP in 1972 dollars.......................... 1,340.5 1,399.2 1,431.6 1,430.6 1,422.3 1,433.3 1,440.3 1,444.7 1,410.9 National Income 31 Total ...................................................................... 1,525.8 1,724.3 1,924.8 1,869.0 1,897.9 1,941.9 1,990.4 2,035.4 2,026.9 32 Compensation of employees ........................................ 1,156.9 1,304.5 1,459.2 1,411.2 1,439.7 1,472.9 1,513.2 1,555.2 1,567.2 33 Wages and salaries...................................................... 984.0 1,103.5 1,227.4 1,189.4 1,211.5 1,238.0 1,270.7 1,303.6 1,310.4 34 Government and government enterprises.......... 201.3 218.0 233.5 228.1 231.2 234.4 240.2 243.5 247.5 35 Other ........................................................................ 782.7 885.5 993.9 961.3 980.3 1,003.6 1,030.5 1,060.1 1,062.8 36 Supplement to wages and salaries............................ 172.9 201.0 231.8 221.8 228.2 234.8 242.5 251.6 256.8 37 Employer contributions for social insurance----- 81.2 94.6 109.1 105.8 107.9 109.9 113.0 117.2 118.1 38 Other labor income ................................................ 91.8 106.5 122.7 116.0 120.3 124.9 129.6 134.4 138.7 39 Proprietors’ income1 ...................................................... 100.2 116.8 130.8 129.0 129.3 130.3 134.5 130.0 119.5 40 Business and professional1 ........................................ 80.5 89.1 98.0 94.8 95.5 99.4 102.1 102.3 97.3 41 Farm1 ............................................................................ 19.6 27.7 32.8 34.2 33.7 30.9 32.5 27.7 22.2 42 Rental income of persons2............................................ 24.7 25.9 26.9 27.3 26.8 26.6 27.0 27.0 27.3 43 Corporate profits1 .......................................................... 150.0 167.7 178.2 178.9 176.6 180.8 176.4 175.0 156.0 44 Profits before tax3 ...................................................... 177.1 206.0 236.6 233.3 227.9 242.3 243.0 260.4 208.8 45 Inventory valuation adjustment................................ -15.2 -25.2 -41.8 -39.9 -36.6 -44.0 -46.5 -63.2 -28.2 46 Capital consumption adjustment................................ -12.0 -13.1 -16.7 -14.5 -14.7 -17.6 -20.1 -22.2 -24.6 47 Net interest ...................................................................... 94.0 109.5 129.7 122.6 125.6 131.5 139.2 148.1 157.0 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 (Department 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. 1979 1980 Account 1977 1978 1979 Ql Q2 Q3 Q4 Ql Q2 Personal Income and Saving 1 Total personal income.................................................... 1,531.6 1,717.4 1,924.2 1,852.6 1,892.5 1,946.6 2,005.0 2,057.4 2,079.5 2 Wage and salary disbursements.................................... 984.0 1,103.3 1,227.6 1,189.3 1,212.4 1,238.1 1,270.5 1,303.7 1,310.4 3 Comipodity-producing industries.............................. 343.1 387.4 435.2 423.0 431.7 438.3 447.8 460.0 454.4 4 Manufacturing.......................................................... 266.0 298.3 330.9 324.8 328.5 331.9 338.3 347.2 342.0 5 Distributive industries................................................ 239.1 269.4 300.8 291.1 295.8 304.0 312.4 320.1 321.0 6 Service industries......................................................... 200.5 228.7 257.9 247.2 252.8 261.3 270.2 280.0 287.5 7 Government and government enterprises.............. 201.3 217.8 233.7 228.0 232.1 234.5 240.1 243.6 247.5 8 Other labor income........................................................ 91.8 106.5 122.7 116.0 i20.3 124.9 129.6 134.4 138.7 9 Proprietors’ income1 ...................................................... 100.2 116.8 130.8 129.0 129.3 130.3 134.5 130.0 119.5 10 Business and professional1 ........................................ 80.5 89.1 98.0 94.8 95.5 99.4 102.1 102.3 97.3 11 Farm1 ............................................................................. 19.6 27.7 32.8 34.2 33.7 30.9 32.5 27.7 22.2 12 Rental income of persons2............................................ 24.7 25.9 26.9 27.3 26.8 26.6 27.0 27.0 27.3 13 Dividends ......................................................................... 42.1 47.2 52.7 51.5 52.3 52.8 54.4 56.7 58.6 14 Personal interest income................................................ 141.7 163.3 192.1 181.0 187.6 194.4 205.5 217.2 228.9 15 Transfer payments ........................................................... 208.4 224.1 252.0 237.3 243.6 260.8 266.5 274.9 282.4 16 Old-age survivors, disability, and health insurance benefits ................................................................. 105.0 116.3 132.4 123.8 127.1 138.7 140.0 142.0 143.6 17 Less: Personal contributions for social insurance .. 61.3 69.6 80.7 78.7 79.8 81.2 82.9 86.6 86.3 18 Equals: Personal income ............................................ 1,531.6 1,717.4 1,924.2 1,852.6 1,892.5 1,946.6 2,005.0 2,057.4 2,079.5 19 Less: Personal tax and nontax payments................ 226.4 259.0 299.9 280.4 290.7 306.6 321.9 320.0 324.6 20 Equals: Disposable personal income ........................ 1,305.1 1,458.4 1,624.3 1,572.2 1,601.7 1,640.0 1,683.1 1,737.4 1,755.0 21 Less: Personal outlays................................................ 1,240.2 1,386.4 1,550.5 1,493.0 1,515.8 1,569.7 1,623.4 1,672.9 1,671.4 22 Equals: Personal saving .............................................. 65.0 72.0 73.8 79.2 85.9 70.3 59.7 64.4 83.6 Memo: Per capita (1972 dollars) 23 Gross national product.............................................. 6,181 6,402 6,494 6,514 6,459 6,494 6,509 6,514 6,348 24 Personal consumption expenditures ........................ 3,974 4,121 4,194 4,197 4,155 4,195 4,227 4,222 4,106 25 Disposable personal income...................................... 4,285 4,449 4,512 4,536 4,510 4,501 4,502 4,502 4,425 26 Saving rate (piercent)...................................................... 5.0 4.9 4.5 5.0 5.4 4.3 3.5 3.7 4.8 Gross Saving 27 Gross saving ..................................................................... 276.1 324.6 363.9 362.2 374.3 367.3 351.9 346.6 345.8 28 Gross private saving ...................................................... 295.6 324.9 349.6 345.2 360.5 352.1 340.7 343.7 372.5 29 Personal saving................................................................. 65.0 72.0 73.8 79.2 85.9 70.3 59.7 64.4 83.6 30 Undistributed corporate profits1 .................................. 35.2 36.0 32.9 36.1 35.6 34.0 25.9 15.9 17.9 31 Corporate inventory valuation adjustment................ -15.2 -25.2 -41.8 -39.9 -36.6 -44.0 -46.5 -63.2 -28.2 Capital consumption allowances 32 Corporate ......................................................................... 121.3 132.9 147.7 139.9 145.1 150.4 155.3 159.6 163.9 33 Noncorporate .............................. ................................ 74.1 84.0 95.3 89.9 93.9 97.5 99.8 103.7 107.1 34 Wage accruals less disbursements................................ 35 Government surplus, or deficit (-), national income and product accounts.............................................. -19.5 -.3 13.2 15.8 12.7 14.0 10.0 1.7 -27.8 36 Federal........................................................................... -46.3 -27.7 -11.4 -11.7 -7.0 -11.3 -15.7 -22.9 -48.0 37 State and local ............................................................. 26.8 27.4 24.6 27.6 19.7 25.3 25.8 24.6 20.2 38 Capital grants received by the United States, net ... 1.1 1.1 1.1 1.1 1.1 1.2 1.2 39 Gross investment ............................................................. 283.6 327.9 367.6 362.8 373.1 375.6 359.1 357.5 351.9 40 Gross private domestic.................................................. 303.3 351.5 387.2 373.8 395.4 392.3 387.2 387.7 370.3 41 Net foreign ....................................................................... -19.6 -23.5 -19.5 -11.0 -22.3 -16.7 -28.1 -30.2 -18.3 42 Statistical discrepancy .................................................... 7.5 3.3 2.9 .6 -1.3 8.3 7.2 11.0 6.1 1. With inventory valuation and capital consumption adjustments. Source. Survey of Current Business (Department of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics □ September 1980 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1979 1980 Item credits or debits 1977 1978 1979 Ql Q2 Q3 Q4 Ql 1 Balance on current account ............................................. -14,068 -14,259 -788 1,408 -1,493 1,099 -1,802 -2,567 2 Not seasonally adjusted................................................ 1,697 -61 -2,909 486 -2,405 3 Merchandise trade balance2 ......................................... -30,873 -33,759 -29,469 -5,114 -8,070 -7,060 -9,225 -10,875 4 Merchandise exports ................................................ 120,816 142,054 182,055 41,805 42,815 47,198 50,237 54,708 5 Merchandise imports ................................................ -151,689 -175,813 -211,524 -46,919 -50,885 -54,258 -59,462 -65,583 6 Military transactions, net ............................................. 1,628 886 -1,274 -29 -102 -443 -700 -700 7 Investment income, net3 .............................................. 17,988 20,899 32,509 7,038 7,271 9,319 8,883 10,123 8 Other service transactions, net...................................... 1,794 2,769 3,112 837 791 690 792 761 9 Memo: Balance on goods and services3-4...................... -9,464 -9,204 4,878 2,732 -110 2,506 -250 -691 10 Remittances, pensions, and other transfers................... -1,830 -1,884 -2,142 -464 -484 -529 -665 -564 11 U.S. government grants (excluding military)................. -2,775 -3,171 -3,524 -860 -899 -878 -887 -1,312 12 Change in U.S. government assets, other than official re­ serve assets, net (increase, -).................................. -3,693 -4,644 -3,783 -1,102 -991 -766 -925 -1,461 13 Change in U.S. official reserve assets (increase, -)......... -375 732 -1,106 -3,585 343 2,779 -644 -3,246 14 Gold ............................................................................ -118 -65 -65 0 0 0 -65 0 15 Special drawing rights (SDRs)...................................... -121 1,249 -1,136 -1,142 6 0 0 -1,152 16 Reserve position in International Monetary Fund......... -294 4,231 -189 -86 -78 -52 27 -34 17 Foreign currencies ....................................................... 158 -4,683 283 -2,357 415 2,831 -606 -2,060 18 Change in U.S. private assets abroad (increase, -)3....... -31,725 -57,279 -56,858 -3,081 -14,631 -27,228 -11,918 -7,110 19 Bank-reported claims.................................................... -11,427 -33,631 -25,868 6,181 -7,839 -16,997 -7,213 -978 20 Nonbank-reported claims ............................................. -1,940 -3,853 -2,029 -2,442 935 -932 410 n.a. 21 U.S. purchase of foreign securities, net........................ -5,460 -3,450 -4,643 -1,001 -513 -2,143 -986 -787 22 U.S. direct investments abroad, net3........................... -12,898 -16,345 -24,318 -5,819 -7,214 -7,156 -4,129 -5,345 23 Change in foreign official assets in the United States (increase, +)............................................................ 36,574 33,292 -14,270 -8,744 -10,095 5,789 -1,221 -7,765 24 U.S. Treasury securities .............................................. 30,230 23,523 -22,356 -8,752 -12,859 5,024 -5,769 -5,503 25 Other U.S. government obligations ............................. 2,308 666 465 -5 94 335 41 801 26 Other U.S. government liabilities5 ............................... 1,159 2,220 -714 -128 122 216 -924 -43 27 Other U.S. liabilities reported by U.S. banks............... 773 5,488 7,219 -72 2,354 56 4,881 -3,365 28 Other foreign official assets6 ........................................ 2,105 1,395 1,116 213 195 158 550 345 29 Change in foreign private assets in the United States (increase, + ) ........................................................... 14,167 30,804 51,845 10,945 16,502 19,152 5,246 12,781 30 U.S. bank-reported liabilities........................................ 6,719 16,259 32,668 7,001 12,082 13,185 400 5,902 31 U.S. nonbank-reported liabilities.................................. 473 1,640 1,692 -543 579 606 1,050 ii.a. 32 Foreign private purchases of U.S. Treasury securities, net ........................................................................ 534 2,197 4,830 2,564 -120 1,466 920 3,279 33 Foreign purchases of other U.S. securities, net............ 2,713 2,811 2,942 803 1,149 677 313 2,477 34 Foreign direct investments in the United States, net3 ... 3,728 7,896 9,713 1,120 2,812 3,217 2,564 1,123 35 Allocation of SDRs ......................................................... 0 0 1,139 1,139 0 0 0 1,152 36 Discrepancy ..................................................................... -880 11,354 23,822 3,020 10,364 -825 11,264 8,215 37 Owing to seasonal adjustments.................................... 74 1,167 -3,641 2,400 -115 38 Statistical discrepancy in recorded data before seasonal adjustment ............................................................ -880 11,354 23,822 2,946 9,197 2,816 8,864 8,330 Memo: Changes in official assets 39 U.S. official reserve assets (increase, -)...................... -375 732 -1,106 -3,585 343 2,779 -644 -3,246 40 Foreign official assets in the United States (increase, + ) ......................................................... 35,416 31,072 -13,556 -8,616 -10,216 5,573 -297 -7,722 41 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 23 above) ....................................................................... 6,351 -1,137 5,508 -1,361 238 1,676 4,955 2,721 42 Transfers under military grant programs (excluded from lines 4, 6, and 11 above)........................................... 204 236 305 29 49 88 139 91 1. Seasonal factors are no longer calculated for lines 13 through 42. 5. Primarily associated with military sales contracts and other transactions ar­ 2. Data are on an international accounts (IA) basis. Differs from the census ranged with or through foreign official agencies. basis primarily because the IA basis includes imports into the U.S. Virgin Islands, 6. Consists of investments in U.S. corporate stocks and in debt securities of and it excludes military exports, which are part of line 6. 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 the Note. Data are from Bureau of Economic Analysis, Survey of Current Business national income and product (GNP) account. The GNP definition makes various (U.S. Department of Commerce). adjustments to merchandise trade and service transactions. 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 1980 Item 1977 1978 1979 Dec. Feb. Mar. Apr. May June July 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments .................................... 121,150 143,578 181,637 16,742 17,233 18,534 18,468 17,678 18,642 18,075 2 GENERAL IMPORTS including mer­ chandise for immediate consump­ tion plus entries into bonded warehouses ................................. 147,685 171,978 206,326 19,665 21,640 20,607 19,308 20,528 19,893 18,995 .................................... -26,535 -28,400 -24,6903 Tra-2d,e9 2b3alance-4,407 -2,073 -840 -2,850 -1,251 -920 Note. Bureau of Census data reported on a free-alongside-ship (f.a.s.) value On the import side, the largest single adjustment is the addition of imports into basis. Effective January 1978, major changes were made in coverage, reporting, the Virgin Islands (largely oil for a refinery on St. Croix), which are not included and compiling procedures. The intemational-accounts-basis data adjust the Census in Census statistics. basis data for reasons of coverage and timing. On the export side, the largest adjustments are: fa) the addition of exports to Canada not covered in Census Source. FT 900 “Summary of U.S. Export and Import Merchandise Trade” statistics, and (b) tne exclusion of military exports (which are combined with other (U.S. Department of Commerce, Bureau of the Census). military transactions and are reported separately in the “service account”). 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1980 Type 1977 1978 1979 Feb. Mar. Apr. May June July Aug .p 1 Total* ................................................ 19,312 18,650 18,928 20,840 21,448 21,521 21,794 21,921 21,828 22,581 2 Gold stock, including Exchange Stabili­ zation Fund1 ............................... 11,719 11,671 11,172 11,172 11,172 11,172 11,172 11,172 11,172 11,172 3 Special drawing rights2-3..................... 2,629 1,558 2,724 3,836 3,681 3,697 3,744 3,782 3,842 4,009 4 Reserve position in International Mone­ tary Fund2 ................................... 4,946 1,047 1,253 1,287 1,222 1,094 1,157 1,385 1,410 1,564 5 Foreign currencies4 ............................ 18 4,374 3,779 4,545 5,373 5,558 5,721 5,582 5,404 5,836 1. Gold held under earmark at Federal Reserve Banks for foreign and inter­ 3. Includes allocations by the International Monetary Fund of SDRs as follows: national accounts is not included in the gold stock of the United States; see table $867 million on Jan. 1, 1970; $717 million on Jan. 1, 1971; $710 million on Jan. 3.22. 1, 1972; $1,139 million on Jan. 1, 1979; and $1,152 million Jan. 1, 1980; plus net 2. Beginning July 1974, the IMF adopted a technique for valuing the SDR based transactions in SDRs. on a weighted average of exchange rates for the currencies of 16 member countries. 4. Beginning November 1978, valued at current market exchange rates. The U.S. SDR holdings and reserve position in the IMF also are valued on this basis beginning July 1974. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics □ September 1980 3.13 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data Millions of dollars, end of period 1979 1980 Asset account 1976 1977 19781 Dec. Jan. Feb. Mar. Apr. May JuneP All foreign countries 1 Total, all currencies............................ 219,420 258,897 306,795 364,166 360,373 372,099 371,483 375,885' 378,605 376,630 2 Claims on United States..................... 7,889 11,623 17,340 32,302 31,603 39,736 35,681'' 34,180' 35,598 28,996 3 Parent bank.................................... 4,323 7,806 12,811 25,929 24,788 32,192 28,249' 26,290' 26,139 18,613 4 Other ............................................. 3,566 3,817 4,529 6,373 6,815 7,544 7,432 7,890 9,459 10,383 5 Claims on foreigners .......................... 204,486 238,848 278,135 317,109 313,816 316,993 319,748 325,367 326,109 330,166 6 Other branches of parent bank....... 45,955 55,772 70,338 79,661 75,419 78,185 80,574 79,541 76,322 76,084 7 Banks ............................................. 83,765 91,883 103,111 123,344 125,070 124,417 125,983 130,067 130,208 132,701 8 Public borrowers2............................ 10,613 14,634 23,737 26,060 25,797 26,045 25,473 25,202 25,412 25,556 9 Jfonbank foreigners ........................ 64,153 76,560 80,949 88,044 87,530 88,346 87,718 90,557 94,167 95,825 7,045 8,425 11,320 14,755 14,954 15,370 16,054'' 16,338 16,898 17,468 11 Total payable in U.S. dollars.............. 167,695 193,764 224,940 267,645 265,157 276,017 276,711 277,637r 277,438 275,262 12 Claims on United States..................... 7,595 11,049 16,382 31,171 30,518 38,519 34,501r 32,896' 34,353 27,805 13 Parent bank.................................... 4,264 7,692 12,625 25,632 24,516 31,812 27,897' 25,920' 25,819 18,302 14 Other ............................................. 3,332 3,357 3,757 5,539 6,002 6,707 6,604 6,976 8,534 9,503 15 Claims on foreigners.......................... 156,896 178,896 203,498 229,053 226,781 229,013 233,717 235,804 234,028 238,294 16 Other branthes of parent bank....... 37,909 44,256 55,408 61,525 58,084 60,217 63,434 61,787 58,898 58,468 17 Banks ............................................. 66,331 70,786 78,686 96,192 97,905 97,188 99,318 103,148 102,631 105,057 18 Public borrowers2............................ 9,022 12,632 19,567 21,618 21,536 21,790 21,369 20,985 21,208 21,345 19 Nonbank foreigners ........................ 43,634 51,222 49,837 49,718 49,256 49,818 49,596 49,884 51,291 53,424 20 Other assets........................................ 3,204 3,820 5,060 7,421 7,858 8,485 8,493' 8,937 9,057 9,163 United Kingdom 21 Total, all currencies ........................... 81,466 90,933 106,593 130,873 128,41 133,793 136,654 138,915 138,930 139,066 22 Claims on United States ..................... 3,354 4,341 5,370 11,117 10,147 10,697 11,990 11,533 11,399 9,157 23 Parent bank ................................... 2,376 3,518 4,448 9,338 8,207 8,584 9,838 9,300 9,140 6,870 24 Other ............................................. 978 823 922 1,779 1,940 2,113 2,152 2,233 2,259 2,287 25 Claims on foreigners.......................... 75,859 84.016 98,137 115,123 113,617 118,212 119,290 122,105 121,851 124,059 26 Other branches of parent bank....... 19,753 22.017 27,830 34,291 31,995 35,187 35,536 36,015 34,305 34,824 27 Banks ............................................. 38,089 39,899 45,013 51,343 52,177 53,127 52,509 54,020 54,076 54,855 28 Public borrowers2 . ........................ 1,274 2,206 4,522 4,919 4,559 4,499 5,860 5,578 5,591 5,897 29 Nonbank foreigners ........................ 16,743 19,895 20,772 24,570 24,886 25,399 25,385 26,492 27,879 28,483 30 Other assets........................................ 2,253 2,576 3,086 4,633 4,653 4,884 5,374 5,277 5,680 5,850 31 Total payable in U.S. dollars.............. 61,587 66,635 75,860 94,287 91,760 96,228 99,711 100,628 98,809 98,013 32 Claims on United States..................... 3,275 4,100 5,113 10,746 9,820 10,285 11,620 11,071 10,988 8,790 33 Parent bank.................................... 2,374 3,431 4,386 9,297 8,161 8,467 9,778 9,179 9,059 6,810 34 Other ............................................. 902 669 727 1,449 1,659 1,818 1,842 1,892 1,929 1,980 35 Claims on foreigners .......................... 57,488 61,408 69,416 81,294 79,740 83,603 85,452 86,818 85,013 86,404 36 Other branches of parent bank....... 17,249 18,947 22,838 28,928 26,842 29,907 30,204 29,980 28,466 28,692 37 Banks ............................................. 28,983 28,530 31,482 36,760 37,487 38,185 37,768 39,159 38,594 39,050 38 Public borrowers2............................ 846 1,669 3,317 3,319 3,274 3,253 4,589 4,277 4,277 4,3% 39 Nonbank foreigners ........................ 10,410 12,263 11,779 12,287 12,137 12,258 12,891 13,402 13,676 14,266 40 Other assets........................................ 824 1,126 1,331 2,247 2,200 2,340 2,639 2,739 2,808 2,819 Bahamas aiid Caymans 41 Total, all currencies............................ 66,774 79,052 91,735 108,910 110,946 117,839 114,748 115,742 116,461 115,347 42 Claims on United States..................... 3,508 5,782 9,635 19,124 19,680 27,154 21,831' 20,057 21,404 17,622 43 Parent bank.................................... 1,141 3,051 6,429 15,196 15,366 22,414 17,323' 15,269 15,334 10,705 44 Other ............................................. 2,367 2,731 3,206 3,928 4,314 4,740 4,508 4,788 6,070 6,917 45 Claims on foreigners .......................... 62,048 71,671 79,774 86,652 87,838 86,829 89,279 91,590 90,921 93,565 46 Other branches of parent bank....... 8,144 11,120 12,904 9,689 10,242 10,265 13,659 13,438 12,454 12,977 47 Banks ............................................. 25,354 27,939 33,677 43,120 44,062 42,435 44,450 47,131 46,720 48,183 48 Public borrowers2............................ 7,105 9,109 11,514 12,893 12,908 13,121 11,324 11,345 11,626 11,519 49 Nonbank foreigners ........................ 21,445 23,503 21,679 20,950 20,626 21,008 19,846 19,676 20,121 20,886 50 Other assets........................................ 1,217 1,599 2,326 3,134 3,428 3,856 3,638' 4,095 4,136 4,160 51 Total payable in U.S. dollars.............. 62,705 73,987 85,417 102,302 105,013 111,504 108,550 109,631 110,837 109,799 For notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Overseas Branches A57 3.13 Continued 1979 1980 Liability account 1976 1977 19781 Dec. Jan. Feb. Mar. Apr. May Jun eP All foreign countries S2 Total, all currencies............................ 219,420 258,897 306,795 364,166 360,373 372,099 371,483 375,885' 378,605 376,630 53 To United States ............................... 32,719 44,154 57,948 66,573 70,341 71,118 67,624 69,487' 73,204 76,417 54 Parent bank.................................... 19,773 24,542 28,464 24,275 24,763 22,866 22,383 24,265' 26,545 31,110 5 5 5 6 O N t 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 .. . . . . . . . . . . . . . . . . . . . . 12,946 19,613 1 1 2 7 , , 3 1 3 4 8 6 2 1 8 4 , , 1 1 8 1 8 0' ' 3 1 3 2 , , 5 0 2 5 7 1 ' ' 3 1 4 3 , , 4 8 3 2 1 1' ' 3 1 2 2, , 3 8 5 9 1 0 3 1 2 2 , , 3 8 9 3 0 2 3 1 3 3 , , 5 09 6 1 8 3 1 2 2 , , 8 45 5 1 6 57 To foreigners...................................... 179,954 206,579 238,912 283,324 276,189 286,262 289,466 290,944 289,591 284,307 58 Other branches of parent bank....... 44,370 53,244 67,496 77,601 72,846 73,602 76,695' 75,041 72,490 71,932 59 Banks ............................................. 83,880 94,140 97,711 122,829 122,044 130,252 129,320' 130,701 130,804 127,806 60 Official institutions.......................... 25,829 28,110 31,936 35,664 33,073 34,221 34,806 35,007 34,838 33,934 61 Nonbank foreigners ........................ 25,877 31,085 41,769 47,230 48,226 48,187 48,645 50,195 51,459 50,635 62 Other liabilities................................... 6,747 8,163 9,935 14,269 13,843 14,719 14,393 15,454 15,810 15,906 63 Total payable in U.S. dollars.............. 173,071 198,572 230,810 273,752 270,597 282,200 282,666 283,690' 284,830 282,517 64 To United States ............................... 31,932 42,881 55,811 64,485 67,957 68,599 65,363 67,133' 70.718 73,774 65 Parent bank.................................... 19,559' 24,213 27,393 23,216 23,624 21,636 21,195 23,020' 25,222 29,740 6 67 6 O N t o h n e b r a b n a k nk s. s . . i . n .. . U ... n .. i . t . e .. d .. . S ... t . a .. t . e .. s .. . . . . . . . . . . . . . . . . . . . . 12,373 18,669 1 1 2 6 , , 0 3 8 3 4 4 2 1 7 3 , , 3 9 5 1 6 3 ' ' 3 1 2 1 , , 6 7 1 2 2 1 ' ' 3 1 3 3 , , 5 4 4 1 9 4 ' ' 3 1 2 2 , , 1 0 6 0 4 4 3 1 1 2 , , 5 5 3 83 0 3 1 2 2 . , 7 7 1 7 9 7 3 1 1 2 , , 9 13 0 1 3 68 To foreigners...................................... 137,612 151,363 169,927 201,456 195,229 205,511 209,157 207,742 205,083 199,745 69 Other branches of parent bank....... 37,098 43,268 53,396 60,513 56,779 57,714 61,240' 59,375 56,532 56,129 70 Banks ............................................. 60,619 64,872 63,000 80,671 80,988 89,238 88,064' 87,622 86,939 84,340 71 Official institutions.......................... 22,878 23,972 26,404 29,048 26,691 27,727 28,321 28,612 28,316 26,927 72 Nonbank foreigners ........................ 17,017 19,251 27,127 31,224 30,771 30,832 31,532 32,133 33,296 32,349 73 Other liabilities................................... 3,527 4,328 5,072 7,811 7,411 8,090 8,146 8,815' 9,029 8,998 United Kingdom 74 Total, all currencies............................ 81,466 90,933 106,593 130,873 128,417 133,793 136,654 138,915 138,930 139,066 75 To United States ............................... 5,997 7,753 9,730 20,986 20,378 20,808 19,921 20,838 19,877 20,194 76 Parent bank.................................... 1,198 1,451 1,887 3,104 3,014 2,758 2,140 2,301 2,118 2,509 7 7 8 7 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 .. . . . . . . . . . . . . . . . . . . . . 4,798 6,302 3 4 , , 6 2 1 3 1 2 1 7 0 , , 6 18 9 9 3 ' ' 1 6 0 , , 5 85 0 7 7 ' ' 1 6 1 , , 5 4 5 91 9 ' ' 1 6 1, , 2 5 7 0 9 2 1 6 2 , ,1 3 5 8 5 2 1 6 1 , , 2 4 6 9 5 4 1 6 1 , , 2 4 1 7 3 2 79 To foreigners...................................... 73,228 80,736 93,202 104,032 102,117 106,524 110,473 111,375 111,769 111,873 80 Other branches of parent bank....... 7,092 9,376 12,786 12,567 11,458 11,099 14,799 14,268 13,824 13,668 81 Banks ............................................. 36,259 37,893 39,917 47,620 48,872 53,031 53,204 53,955 54,309 54,844 82 Official institutions.......................... 17,273 18,318 20,963 24,202 21,822 22,890 23,303 23,453 23,628 22,577 83 Nonbank foreigners ........................ 12,605 15,149 19,536 19,643 19,965 19,504 19,167 19,699 20,008 20,784 84 Other liabilities................................... 2,241 2,445 3,661 5,855 5,922 6,461 6,260 6,702 7,284 6,999 85 Total payable in U.S. dollars.............. 63,174 67,573 77,030 95,449 92,771 97,391 101,293 101,679' 101,170 100,117 86 To United States ............................... 5,849 7,480 9,328 20,552 19,827 20,206 19,381 20,337 19,284 19,503 87 Parent bank.................................... 1,182 1,416 1,836 3,054 2,968 2,724 2,089 2,252 2,060 2,414 8 8 9 8 N Ot o h n e b r a b n a k n s k . s . .. in .. .. U .. n .. i . t . e .. d .. . S ... t . a .. t . e .. s .. . . . . . . . . . . . . . . . . . . . . 4,667 6,064 4 3 , , 1 34 4 8 4 9 7 , , 8 6 4 5 7 1' ' 1 6 0 , , 4 4 4 1 5 4 ' ' 1 6 1 , , 3 0 9 8 9 3' ' 1 6 0 , , 3 9 5 4 1 1 1 6 1 , , 3 7 1 6 8 7 1 6 1 , , 2 0 1 1 0 4 1 6 0 , , 1 9 4 4 0 9 90 To foreigners...................................... 56,372 58,977 66,216 72,397 70,597 74,705 79,251 78,296 78,278 77,140 91 Other branches of parent bank....... 5,874 7,505 9,635 8,446 7,793 7,322 10,894 10,468 10,021 9,659 92 Banks ............................................. 25,527 25,608 25,287 29,424 30,988 34,694 35,300 34,485 34,488 35,311 93 Official institutions.......................... 15,423 15,482 17,091 20,192 17,995' 18,923 19,255 19,554 19,558 18,300 94 Nonbank foreigners ........................ 9,547 10,382 14,203 14,335 13,821 13,766 13,802 13,789 14,211 13,870 95 Other liabilities................................... 953 1,116 1,486 2,500 2,347 2,480 2,661 3,046' 3,608 3,474 Bahamas and Caymans % Total, all currencies............................ 66,774 79,052 91,735 108,910 110,946 117,839 114,748 115,742 116,461 115,347 97 To United States ............................... 22,721 32,176 39,431 37,674 43,092 43,580 40,896 41,841 45,561 48,523 98 Parent bank.................................... 16,161 20,956 20,356 15,080 16,801 15,099 15,341 16,989 19,114 22,840 99 Other banks in United States.......... 6,199 5,346 4,609 6,351 4,778 5,417 5,720 5,312 100 Nonbanks........................................ 6,560 11,220 12,876 17,248 21,682 22,130 20,777 19,435 20,727 20,371 101 To foreigners...................................... 42,899 45,292 50,447 68,578 65,229 71,132 70,804 70,583 67,953 63,917 102 Other branches of parent bank....... 13,801 12,816 16,094 20,875 20,559 22,150 22,387' 22,470 20,009 20,137 103 Banks ............................................. 21,760 24,717 23,104 33,611 30,504 34,701 33,774' 33,028 32,156 28,864 104 Official institutions.......................... 3,573 3,000 4,208 4,866 5,020 5,016 4,958 5,435 5,461 5,096 105 Nonbank foreigners ........................ 3,765 4,759 7,041 9,226 9,146 9,265 9,685 9,650 10,327 9,820 106 Other liabilities................................... 1,154 1,584 1,857 2,658 2,625 3,127 3,048 3,318 2,947 2,907 107 Total payable in U.S. dollars.............. 63,417 74,463 87,014 103,393 105,997 112,929 110,074 111,389 112,383 111,520 1. In May 1978 the exemption level for branches required to report was in- rowers, including corporations that are majority owned by foreign governments, creased, which reduced the number of reporting branches. replaced the previous, more narrowly defined claims on foreign official institutions. 2. In May 1978 a broader category of claims on foreign public bor- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics □ September 1980 3.14 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1980 Item 1977 1978 1979 Jan. Feb. Mar. Apr. May JuneP JulyP 1 Total1 .............................................................. 131,097 162,589 149,466 145,999 145,037 142,069 140,500 143,460 148,852 152,244 By type 2 Liabilities reported by banks in the United States2 18,003 23,290 30,411 24,739 24,491 27,226 27,923 28,486 28,786 28,749 3 U.S. Treasury bills and certificates3..................... 47,820 67,671 47,666 48,864 48,234 42,797 40,527 42,731 45,907 47,785 U.S. Treasury bonds and notes 4 Marketable ..................................................... 32,164 35,894 37,669 38,152 37,888 37,785 37,718 38,104 39,821 40,583 5 Nonmarketable4 .............................................. 20,443 20,970 17,387 17,434 17,384 16,784 16,384 16,184 15,954 15,954 6 U.S. securities other than U.S. Treasury securities5 12,667 14,764 16,333 16,810 17,040 17,477 17,948 17,955 18,384 19,173 By area 7 Western Europe1 ................................................ 70,748 93,089 85,602 82,628 79,852 77,119 74,154 74,159 75,191 77,898 8 Canada ................................................................ 2,334 2,486 1,898 1,922 2,347 1,644 1,903 2,134 2,157 1,907 9 Latin America and Caribbean............................. 4,649 5,046 6,371 4,780 4,916 6,099 5,979 6,035 6,023 6,329 10 Asia ................................................................... 50,693 58,817 52,697 53,456 54,602 53,997 54,403 57,317 61,921 62,470 11 Africa ................................................................. 1,742 2,408 2,412 2,480 2,392 2,419 3,316 2,889 2,694 2,930 12 Other countries6............................................... 931 743 486 733 928 791 745 926 866 710 1. Includes the Bank for International Settlements. 5. Debt securities of U.S. government corporations and federally sponsored 2. Principally demand deposits, time deposits, bankers acceptances, commercial agencies, and U.S. corporate stocks and bonds. paper, negotiable time certificates of deposit, and borrowings under repurchase 6. Includes countries in Oceania and Eastern Europe. agreements. 3. Includes nonmarketable certificates of indebtedness (including those payable Note: Based on Treasury Department data and on data reported to the Treasury in foreign currencies through 1974) and Treasury bills issued to official institutions Department by banks (including Federal Reserve Banks) and securities dealers of foreign countries. 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 1979 1980 Item 1977 1978 June Sept. Dec. Mar. JuneP 1 Banks’ own liabilities ................................................................................ 925 2,347 1,978 2,393 1,870 2,237 2,562 2 Banks’ own claims1 .................................................................................... 2,356 3,663 2,559 2,700 2,438 2,812 2,994 3 Deposits .................................................................................................. 941 1,798 1,371 1,356 1,032 1,212 1,048 4 Other claims............................................................................................ 1,415 1,864 1,189 1,344 1,406 1,600 1,946 5 Claims of banks’ domestic customers2.................................................... 367 573 616 592 1,056 797 1. Includes claims of banks’ domestic customers through March 1978. Note: Data on claims exclude foreign currencies held by U.S. monetary au- 2. Assets owned by customers of the reporting bank located in the United States thorities. 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 1980 Holder and type of liability 1977 1978 1979 Jan. Feb. Mar. Apr. May June July/7 1 AH foreigners ..................................................... 126,168 166,796 187,339 184,844 193,998 185,977 180,552 182,847 186,661 187,319 78,699 117,146 113,543 122,689 119,118 115,586 116,323 116,460 115,598 3 Demand deposits ..................................................... 18,996 19,211 23,308 20,791 22,520 22,678 22,319 22,511' 25,967 22,207 4 Time deposits1 ........................................................ 11,521 12,441 13,671 12,504 12,741 12,877 12,627 12,668 12,748 12,753 5 Other2 ....................................................................... 9,693 16,277 12,692 12,471 14,611 15,020 15,944' 16,630 18,512 37,353 63,890 67,556 74,957 68,951 65,620 65,200 61,116 62,125 88,098 70,193 71,301 71,309 66,859 64,966 66,524 70,201 71,722 8 U.S. Treasury bills and certificates5.................... 48,906 68,202 48,573 49,860 49,360 44,408 42,232 44,088 48,193 49,677 9 Other negotiable and readily transferable 17,396 19,270 18,931 19,407 19,701 19,944 19,643 19,433 19,291 2,499 2,350 2,509 2,542 2,750 2,790 2,793 2,575 2,753 11 Nonmonetary international and regional organizations7 ............................................... 3,274 2,607 2,351 1,227 1,712 1,758 1,968 1,775' 3,499 2,888 906 709 444 393 383 648 377' 842 597 13 Demand deposits .................................................... 231 330 260 164 153 160 241 144 99 214 14 Time deposits1 ......................................................... 139 84 151 89 78 79 93 88 92 93 492 298 191 162 144 314 145' 652 289 1,701 1,643 783 1,319 1,376 1,320 1,398 2,657 2,291 17 U.S. Treasury bills and certificates...................... 706 201 102 102 114 157 87 82 1,106 604 18 Other negotiable and readily transferable instruments6 .................................................... 1,499 1,538 681 1,206 1,218 1,233 1,317 1,551 1,687 19 Other ......................................................................... 1 2 0 0 0 0 0 0 0 20 Official institutions8 ............................................. 65,822 90,706 78,077 73,603 72,725 70,023 68,450 71,218' 74,693 76,534 21 Banks’ own liabilities ................................................ 12,129 18,163 12,347 12,151 14,527 14,547 15,363' 16,246 16,733 22 Demand deposits .................................................... 3,528 3,390 4,704 3,725 3,680 3,928 4,734 4,484 5,043 4,298 23 Time deposits1 ......................................................... 1,797 2,550 3,041 2,309 2,367 2,397 2,392 2,581 2,640 2,639 24 Other2 ....................................................................... 6,189 10,418 6,313 6,104 8,202 7,421 8,297' 8,563 9,797 25 Banks’ custody liabilities4.......................................... 78,577 59,914 61,256 60,575 55,497 53,903 55,854 58,447 59,801 26 U.S. Treasury bills and certificates5.................... 47,820 67,415 47,666 48,864 48,234 42,797 40,527 42,731 45,907 47,785 27 Other negotiable and readily transferable instruments6 .................................................... 10,992 12,196 12,357 12,303 12,668 13,341 13,084 12,494 11,965 28 Other ......................................................................... 170 52 35 37 32 35 40 45 51 29 Banks9 ................................................................ 42,335 57,464 88,384 91,389 100,450 95,162 92,013 92,106 89,471 89,714 30 Banks’ own liabilities ................................................ 52,674 83,383 86,007 94,974 89,381 86,198 86,279 84,019 84,162 31 Unaffiliated foreign banks .................................... 15,320 19,493 18,451 20,017 20,430 20,578 21,079 22,904 22,037 32 Demand deposits ................................................ 10,933 11,249 13,257 11,820 13,345 13,371 12,681 13,003' 14,986 12,946 33 Time deposits1 ..................................................... 2,040 1,453 1,724 1,278 1,304 1,574 1,498 1,423 1,479 1,476 34 Other2 ................................................................... 2,618 4,512 5,353 5,369 5,485 6,399 6,653' 6,438 7,615 35 Own foreign offices3 .............................................. 37,353 63,890 67,556 74,957 68,951 65,620 65,200 61,116 62,125 36 Banks’ custody liabilities4.......................................... 4,790 5,000 5,382 5,475 5,781 5,815 5,828 5,452 5,552 37 U.S. Treasury and certificates.............................. 141 300 422 533 566 675 771 764 594 607 38 Other negotiable and readily transferable instruments6 .......................................................... 2,425 2,405 2,573 2,559 2,559 2,462 2,491 2,582 2,406 39 Other ......................................................................... 2,065 2,173 2,276 2,350 2,547 2,582 2,574 2,277 2,539 40 Other foreigners .................................................. 14,736 16,020 18,526 18,625 19,110 19,033 18,121 17,748 18,999 18,183 41 Banks’ own liabilities ................................................ 12,990 14,890 14,746 15,171 14,828 14,193 14,305 15,353 14,105 42 Demand deposits .................................................... 4,304 4,242 5,087 5,082 5,343 5,219 4,663 4,880 5,839 4,749 43 Time deposits ........................................................... 7,546 8,353 8,755 8,828 8,992 8,827 8,645 8,576 8,537 8,545 44 Other2 ....................................................................... 394 1,048 835, 836 781 886 849 977 812 45 Banks’ custody liabilities4.......................................... 3,030 3,636 3,880 3,939 4,205 3,928 3,443 3,646 4,078 46 U.S. Treasury bills and certificates...................... 240 285 382 361 446 777 847 511 586 682 47 Other negotiable and readily transferable instruments6 .................................................... 2,481 3,131 3,320 3,339 3,256 2,908 2,752 2,806 3,233 48 Other ......................................................................... 264 123 199 154 172 173 180 254 164 49 Memo: Negotiable time certificates of deposit in custody for foreigners.................................... 11,007 10,974 10,906 11,395 11,236 11,670 11,685 11,773 10,500 1. Excludes negotiable time certificates of deposit, which are included in “Other 5. Includes nonmarketable certificates of indebtedness and Treasury bills issued negotiable and readily transferable instruments.” Data for time deposits before to official institutions of foreign countries. April 1978 represent short-term only. 6. Principally bankers acceptances, commercial paper, and negotiable time cer­ 2. Includes borrowing under repurchase agreements. tificates of deposit. 3. U.S. banks: includes amounts due to own foreign branches and foreign sub­ 7. Principally the International Bank for Reconstruction and Development, and sidiaries consolidated in “Consolidated Report of Condition” filed with bank reg­ the Inter-American and Asian Development Banks. ulatory agencies. Agencies, branches, and majority-owned subsidiaries of foreign 8. Foreign central banks and foreign central governments and the Bank for banks: principally amounts due to head office or parent foreign bank, and foreign International Settlements. branches, agencies or wholly owned subsidiaries of head office or parent foreign 9. Excludes central banks, which are included in “Official institutions.” bank. 4. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics □ September 1980 3.16 LIABILITIES TO FOREIGNERS Continued 1980 Area and country 1977 1978 1979 Jan. Feb. Mar. Apr. May June Julyp 1 Total ................................................................... 126,168 166,7% 187,339 184,844 193,998 185,977 180,552 182,847' 186,661 187,319 2 Foreign countries ................................................ 122,893 164,190 184,987 183,617 192,285 184,218 178,584 181,072' 183,163 184,431 3 Europe .......................................................................... 60,295 85,159 90,904 86,731 85,753 85,278 82,806 82,726' 82,937 83,550 4 Austria ...................................................................... 318 513 413 378 379 335 444 352 383 442 5 Belgium-Luxembourg ............................................ 2,531 2,552 2,375 2,109 2,407 2,365 2,369 2,795 4,097 3,827 6 Denmark .................................................................. 770 1,946 1,092 955 587 613 615 588 553 534 7 Finland...................................................................... 323 346 398 455 5444 484 522 435 438 433 8 France ...................................................................... 5,269 9,208 10,401 10,534 11,247 11,004 11,303 10,839 11,199 12,171 9 Germany .................................................................. 7,239 17,286 12,935 10,345 8,960 8,618 5,320 5,427 6,951 7,620 10 Greece ...................................................................... 603 826 635 832 627 618 617 610 626 566 11 Italy .......................................................................... 6,857 7,739 7,782 7,825 7,394 7,399 7,429 6,942 5,778 7,137 12 Netherlands .............................................................. 2,869 2,402 2,327 2,529 2,485 2,377 2,022 2,128 2,676 2,828 13 Norway .................................................................... 944 1,271 1,267 1,229 1,156 1,500 1,391 1,221 1,282 1,140 14 Portugal .................................................................... 273 330 557 550 438 314 537 339 391 398 15 Spain ........................................................................ 619 870 1,259 1,192 1,146 1,242 1,418 1,386 1,366 1,370 16 Sweden ...................................................................... 2,712 3,121 2,005 1,845 1,978 1,692 1,847 1,632 1,999 1,795 17 Switzerland .............................................................. 12,343 18,225 17,954 16,745 16,950 15,625 14,859 14,517 14,736 14,468 18 Turkey ...................................................................... 130 157 120 232 118 138 136 136 153 164 19 United Kingdom...................................................... 14,125 14,265 24,694 25,083 25,300 26,810 27,187 27,247 24,192 22,347 20 Yugoslavia................................................................ 232 254 266 157 149 115 122 144 254 190 21 Other Western Europe1 ........................................ 1,804 3,440 4,070 3,474 3,455 3,693 4,301 5,591' 5,453 5,811 22 U.S.S.R....................................................................... 98 82 52 46 41 37 33 40 49 36 23 Other Eastern Europe2.......................................... 236 325 302 217 390 300 334 354 357 272 24Canada .......................................................................... 4,607 6,969 7,379 9,541 9,556 8,507 8,048 8,201 8,902 8,792 25 Latin America and Caribbean.................................. 23,670 31,606 49,633 50,843 57,933 51,583 48,874 48,953 46,938 49,113 26 Argentina ................................................................ 1,416 1,484 1,582 1,635 1,632 1,582 1,679 1,903 1,705 1,840 27 Bahamas .................................................................. 3,596 6,752 15,354 16,629 22,288 16,352 14,454 16,535 12,887 12,988 28 Bermuda .................................................................. 321 428 430 447 560 534 479 512 576 464 29 Brazil ........................................................................ 1,396 1,125 1,005 1,405 1,156 1,367 1,645 1,527 1,454 1,473 30 British West Indies ................................................ 3,998 5,991 11,074 11,908 12,958 11,812 11,585 9,571 10,332 12,068 31 Chile .......................................................................... 360 399 469 396 471 445 444 416 450 456 32 Colombia .................................................................. 1,221 1,756 2,617 2,882 2,840 2,825 2,905 2,780 2,854 2,931 33 Cuba.......................................................................... 6 13 13 10 5 6 23 7 6 6 34 Ecuador .................................................................... 330 322 425 386 412 459 357 337 455 346 35 Guatemala3 .............................................................. 416 414 394 391 426 403 350 360 379 36 Jamaica3.................................................................... 52 76 96 90 97 132 138 91 137 37 Mexico ...................................................................... 2,876 3,417 4,096 3,980 3,973 4,001 4,302 4,111 3,918 4,198 38 Netherlands Antilles .............................................. 196 308 499 344 524 419 411 335 250 332 39 Panama .................................................................... 2,331 2,968 4,483 4,770 4,663 4,418 4,505 4,082 4,176 4,688 40 Peru .......................................................................... 287 363 383 376 388 363 392 412 346 350 41 Uruguay .................................................................... 243 231 202 216 210 240 216 208 232 232 42 Venezuela ................................................................ 2,929 3,821 4,192 3,083 3,518 4,075 3,104 3,953 4,707 4,350 43 Other Latin America and Carribbean................ 2,167 1760 2,318 1,886 1,856 2,161 1,837 1,775 2,139 1,875 44 Asia .............................................................................. 30,488 36,492 32,928 32,056 34,510 34,222 33,519 35,984 39,388 37,937 China 45 Mainland ..................................................................... 53 67 49 46 32 34 35 30 44 38 46 Taiwan .................................................................. 1,013 502 1,393 1,386 1,567 1,888 1,076 1,3%' 1,534 1,440 47 Hong Kong .............................................................. 1,094 1,256 1,672 1,694 1,776 1,897 1,857 1,944' 2,260 2,186 48 India .......................................................................... 961 790 527 544 579 558 576 740 633 494 49 Indonesia .................................................................. 410 449 504 743 693 658 935 670 807 849 50 Israel ........................................................................ 559 688 707 517 507 759 560 570 584 472 51 Japan ........................................................................ 14,616 21,927 8,907 9,434 10,663 9,651 9,383 10,792 12,430 12,544 52 Korea ........................................................................ 602 795 993 959 1,019 1,069 1,008 988 1,087 1,493 53 Philippines ................................................................ 687 644 800 729 772 669 789 885 883 940 54 Thailand.................................................................... 264 427 277 408 284 414 407 472 405 405 55 Middle-East oil-exporting countries4 .................. 8,979 7,534 15,217 14,089 14,992 15,686 15,189 15,724 16,712 15,283 56 Other Asia .............................................................. 1,250 1,414 1,881 1,506 1,625 1,638 1,704 1,771 2,010 1,794 57 Africa ............................................................................ 2,535 2,886 3,239 3,332 3,170 3,325 4,203 3,810 3,708 3,800 58 Egypt ........................................................................ 404 404 475 449 332 318 438 376 346 447 59 Morocco.................................................................... 66 32 33 50 33 31 41 31 35 33 60 South Africa ............................................................ 174 168 184 270 195 313 294 316 325 360 61 Zaire.......................................................................... 39 43 110 128 93 102 84 86 107 78 62 Oil-exporting countries5 ........................................ 1,155 1,525 1,635 1,503 1,665 1,660 2,462 2,231 2,100 2,100 63 Other Africa............................................................ 698 715 804 932 852 901 885 768 796 781 64Other countries .......................................................... 1,297 1076 904 1,114 1,363 1,304 1,133 1,397 1,290 1,239 65 Australia .................................................................. 1,140 838 684 853 1,054 992 881 1,150 1,019 958 66 All other .................................................................. 158 239 220 261 309 312 252 247 271 281 67 Nonmonetary international and regional organizations ........................................................ 3,274 2,607 2,351 1,227 1,712 1,758 1,968 1,775' 3,499 2,888 68 International ............................................................ 2,752 1,485 1,238 829 618 652 863 696' 2,394 1,804 69 Latin American regional........................................ 278 808 806 84 780 746 813 790 802 775 70 Other regional6........................................................ 245 314 308 314 315 361 292 289 302 309 1.Includes the Bank for International Settlements. Beginning April 1978, also 4.Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and includes Eastern European countries not listed in line 23. United Arab Emirates (Trucial States). 2.Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German Dem­ 5.Comprises Algeria, Gabon, Libya, and Nigeria. ocratic Republic, Hungary, Poland, and Romania. 6. Asian, African, Middle Eastern, and European regional organizations, except 3.Included in “Other Latin America and Caribbean” through March 1978. the Bank for International Settlements, which is included in “Other Western Europe.” 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 1980 Area and country 1977 1978 1979 Jan. Feb. Mar. Apr. May June JulyP 1Total ................................................................... 90,206 115,479 133,762 127,614 131,088 130,775 133,331 139,730' 149,020 151,181 2Foreign countries ................................................ 90,163 115,423 133,730 127,579 131,055 130,739 133,298 139,696' 148,987 151,150 3Europe ................................................................ 18,114 24,232 28,389 24,906 25,592 25,810 24,525 26,206' 29,843 28,758 4 Austria ............................................................ 65 140 284 258 315 331 337 292' 305 321 5 Belgium-Luxembourg ...................................... 561 1,200 1,339 1,416 1,524 1,631 1,590 1,471 1,997 1,610 6 Denmark ......................................................... 173 254 147 126 156 207 203 168 167 149 7 Finland............................................................ 172 305 202 262 237 188 223 273 306 230 8 France ............................................................ 2,082 3,735 3,302 3,086 3,197 2,984 2,811 2,740 2,685 2,576 9 Germany ......................................................... 644 845 1,159 921 1,209 1,308 1,153 1,104 1,131 998 10 Greece ............................................................ 206 164 154 136 141 191 244 329 346 279 11 Italy ................................................................ 1,334 1,523 1,631 1,390 1,407 1,488 1,462 1,748 1,937 2,293 12 Netherlands ..................................................... 338 677 514 472 610 535 480 457 589 491 13 Norway ........................................................... 162 299 276 177 175 254 170 172 218 270 14 Portugal ........................................................... 175 171 330 288 213 227 247 246 300 349 15 Spain .............................................................. 722 1,120 1,051 948 1,015 914 1,020 1,106 1,195 1,016 16 Sweden............................................................ 218 537 542 747 702 593 618 661 682 571 17 Switzerland ..................................................... 564 1,283 1,166 939 1,363 1,356 826 916 1,236 1,319 18 Turkey ............................................................ 360 300 149 128 131 123 132 151 143 143 19 United Kingdom............................................... 8,964 10,172 13,789 11,370 10,886 10,950 10,462 11,851' 14,024 13,460 20 Yugoslavia....................................................... 311 363 611 569 565 598 593 614 658 648 21 Other Western Europe1 .................................. 86 122 175 203 227 225 330 266 208 170 22 U.S.S.R............................................................. 413 366 290 263 265 253 257 247 289 529 23 Other Eastern Europe2.................................... 566 657 1,277 1,205 1,254 1,453 1,366 1,394 1,426 1,335 24Canada ................................................................ 3,355 5,152 4,143 4,023 4,142 4,186 3,923 4,283 5,024 4,199 25Latin America and Caribbean............................. 45,850 57,443 67,925 65,600 ' 66,251 65,152 68,257 71,653' 73,886 78,922 26 Argentina ....................................................... 1,478 2,281 4,417 4,683 4,899 4,969 4,992 5,117 5,190 5,232 27 Bahamas ......................................................... 19,858 21,428 18,828 20,743 ' 19,214 19,262 21,045 23,297' 25,098 28,763 28 Bermuda ......................................................... 232 184 496 434 314 313 321 296 181 194 29 Brazil .............................................................. 4,629 6,251 7,731 7,555 7,618 8,010 8,112 8,064 8,318 8,980 30 British West Indies ......................................... 6,481 9,692 9,762 7,819 10,136 7,364 8,584 9,042' 8,648 8,917 31 Chile................................................................ 675 972 1,442 1,376 1,430 1,367 1,334 1,355 1,323 1,359 32 Colombia ......................................................... 671 1,012 1,614 1,655 1,698 1,526 1,539 1,408 1,426 1,448 33 Cuba................................................................ 10 0 4 4 4 4 5 4 4 4 34 Ecuador ........................................................... 517 705 1,025 1,001 1,025 1,023 1,011 1,007 1,053 1,052 35 Guatemala3 ...................................................... 94 134 114 105 109 108 107 120 151 36 Jamaica3........................................................... 40 47 51 44 42 43 43 36 31 37 Mexico ............................................................ 4,909 5,479 9,095 8,957 9,021 9,231 9,191 9,726' 10,185 10,664 38 Netherlands Antilles ........................................ 224 273 248 325 397 513 663 693' 728 760 39 Panama ........................................................... 1,410 3,098 6,031 4,432 3,919 4,652 4,643 4,538 4,951 4,461 40 Peru ................................................................ 962 918 652 585 634 701 654 628 696 647 41 Uruguay ........................................................... 80 52 105 100 82 90 84 154 101 91 42 Venezuela ....................................................... 2,318 3,474 4,695 4,246 4,196 4,457 4,231 4,528 4,276 4,467 43 Other Latin America and Caribbean............... 1,394 1,490 1,598 1,518 1,515 1,520 1,6% 1,646 1,553 1,700 44 19,236 25,386 30,625 30,173 32,337 32,827 33,912 34,902 37,163 36,156 China 45 Mainland ..................................................... 10 4 35 28 51 49 48 40 75 77 46 Taiwan ......................................................... 1,719 1,499 1,821 1,700 1,691 1,524 1,626 1,889 2,104 2,218 47 Hong Kong...................................................... 543 1,479 1,804 1,804 2,127 1,888 2,001 2,362 2,280 2,162 48 India ................................................................ 53 54 92 136 90 120 87 61 83 97 49 Indonesia ......................................................... 232 143 131 117 128 132 166 128 154 205 50 Israel .............................................................. 584 888 990 812 787 734 829 828 1,023 949 51 Japan .............................................................. 9,839 12,671 16,921 17,027 18,899 19,433 20,311 20,395' 21,595 20,552 52 Korea .............................................................. 2,336 2,282 3,796 4,080 4,356 4,726 4,853 5,057 5,337 5,477 53 Philippines ....................................................... 594 680 737 649 645 696 693 717 780 869 54 Thailand........................................................... 633 758 935 971 993 877 857 918 921 938 55 Middle East oil-exporting countries4 ............... 1,746 3,125 1,548 1,400 1,211 1,437 1,178 978 1,255 1,107 56 Other Asia ...................................................... 947 1,804 1,813 1,448 1,359 1,211 1,263 1,530 1,558 1,506 57Africa .................................................................. 2,518 2,221 1,795 1,899 1,775 1,729 1,800 1,770 2,015 2,164 58 Egypt .............................................................. 119 107 112 130 154 128 135 134 93 112 59 Morocco........................................................... 43 82 103 106 109 118 128 107 121 134 60 South Africa.................................................... 1,066 860 445 412 342 337 362 465 617 689 61 Zaire................................................................ 98 164 144 146 144 143 143 108 107 107 62 Oil-exporting countries5 .................................. 510 452 391 507 451 353 443 325 364 365 63 Other .............................................................. 682 556 600 599 574 649 588 632 714 757 64Other countries .................................................. 1,090 988 855 978 958 1,035 880 883 1,056 950 65 Australia ......................................................... 905 877 673 803 789 803 713 695 860 743 66 All other ......................................................... 186 111 182 175 170 232 167 187 196 207 67Nonmonetary international and regional organizations6 ............................................... 43 56 32 35 33 36 33 34 33 31 1. Includes the Bank for International Settlements. Beginning April 1978, also 5. Comprises Algeria, Gabon, Libya, and Nigeria. includes Eastern European countries not listed in line 23. 6. Excludes the Bank for International Settlements, which is included in “Other 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German Dem­ Western Europe.” ocratic Republic, Hungary, Poland, and Romania. 3. Included in “Other Latin America and Caribbean” through March 1978. Note. Data for period prior to April 1978 include claims of banks’ domestic 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and customers on foreigners. United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics □ September 1980 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 1980 Type of claim 1977 1978 1979 Jan. Feb. Mar. Apr May June July? 1 Total ............................................................ 90,206 126,698 153,710 153,147 174,136 2 Banks’ own claims on foreigners...................... 115,479 133,762 127,614 131,088 130,775 133,331 139,730' 149,020 151,181 3 Foreign public borrowers................................. 10,263 15,434 14,932 15,052 15,428 15,151 15,105' 15,692 16,232 4 Own foreign offices1 ........................................ 41,502 47,305 46,414 47,003 45,248 46,163 50,108' 56,040 58,668 5 Unaffiliated foreign banks ............................... 40,538 41,016 36,281 39,018 39,692 40,990 42,896' 43,773 41,847 6 Deposits....................................................... 5,480 6,253 4,933 5,153 5,479 6,093 6,504' 6,555 6,088 7 Other ........................................................... 35,058 34,762 31,349 33,864 34,213 34,897 36,392' 37,218 35,759 8 All other foreigners......................................... 23,176 30,007 29,986 30,015 30,407 31,027 31,621' 33,514 34,435 9 Claims of banks’ domestic customers2.............. 11,219 19,948 22,372 25,116 10 Deposits........................................................... 480 955 1,208 910 11 Negotiable and readily transferable instruments3 5,385 12,974 14,559 17,410 12 Outstanding collections and other claims4........ 6,176 5,353 6,019 6,605 6,796 13 Memo: Customer liability on acceptances........ 14,969 18,044 20,095 22,134 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 .................................................................. 12,924 21,259 23,874' 25,483' 24,873' 24,100' 24,669' 22,883 1. U.S. banks: includes amounts due from own foreign branches and foreign 4. Data for March 1978 and for period prior to that are outstanding collections subsidiaries consolidated in “Consolidated Report of Condition” filed with bank only. regulatory agencies. Agencies, branches, and majority-owned subsidiaries of foreign 5. Includes demand and time deposits and negotiable and nonnegotiable certif­ banks: principally amounts due from head office or parent foreign bak, and icates of deposit denominated in U.S. dollars issued by banks abroad. For de­ foreign Branches, agencies, or wholly owned subsidiaries of head office or parent scription of changes in data reported by nonbanks, see July 1979 Bulletin, p. 550. foreign bank. 2. Assets owned by customers of the reporting bank located in the United States Note: Beginning April 1978, data for banks’ own claims are given on a monthly that represent claims on foreigners held by reporting banks for the account of their basis, but the data for claims of banks’ own domestic customers are available on domestic customers. a quarterly basis only. 3. Principally negotiable time certificates of deposit and bankers acceptances. 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 1980 Maturity; by borrower and area Dec. Mar. June Sept. Dec. Mar. June? 1Total........................................................................................... 73,773 71,638 77,738 87,571 86,209 85,265 92,145 By borrower 2Maturity of 1 year or less1 .................................................................... 58,481 55,459 60,069 68,390 65,195 63,901 70,772 3 Foreign public borrowers.................................................................. 4,583 4,627 4,604 6,062 7,033 6,843 6,913 4 All other foreigners............................................................................ 53,898 50,832 55,465 62,329 58,162 57,058 63,859 5Maturity of over 1 year1........................................................................ 15,291 16,179 17,669 19,181 21,014 21,364 21,373 6 Foreign public borrowers.................................................................. 5,361 5,948 6,433 7,652 8,103 8,419 8,536 7 All other foreigners............................................................................ 9,930 10,231 11,236 11,529 12,911 12,945 12,838 By area Maturity of 1 year or less1 8 Europe.................................................................................................. 15,176 12,396 14,028 16,794 15,209 13,850 17,121 9 Canada .................................................................................................. 2,670 2,514 2,703 2,471 1,777 1,818 2,099 10 Latin America and Caribbean.......................................................... 20,990 21,724 23,144 25,687 24,964 23,177 24,241 11 17,579 16,992 18,191 21,515 21,673 23,386 25,299 12 Africa.................................................................................................... 1,496 1,290 1,438 1,399 1,078 1,043 1,307 13 All other2 ............................................................................................ 569 541 565 524 493 627 705 Maturity of over 1 year1 14 Europe.................................................................................................. 3,142 3,103 3,488 3,658 4,145 4,253 4,058 15 Canada .................................................................................................. 1,426 1,456 1,221 1,364 1,317 1,214 1,194 16 Latin America and Caribbean.......................................................... 8,466 9,325 10,279 11,771 12,821 13,397 13,846 17 1,407 1,486 1,884 1,578 1,911 1,728' 1,562 18 Africa.................................................................................................... 637 629 614 623 652 620 567 19 All other2 ............................................................................................ 214 180 183 188 169 152 146 1. Remaining time to maturity. 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 1978 1979 1980 Area or country 1976 1977 June2 Sept. Dec. Mar. June Sept. Dec. Mar. June? 1 Total........................................................................................ 206.8 240.0 247.1 247.6 266.3' 264.0' 275.6' 294.0' 303.8' 307.5' 326.8 2 G-10 countries and Switzerland ...................................................... 100.3 116.4 112.6 113.5 124.8 119.1' 125.3 135.8 138.4' 140.4' 153.7 3 Belgium-Luxembourg .................................................................... 6.1 8.4 8.3 8.4 9.0 9.4 9.7 10.7 11.1 10.8 13.2 4 France ............................................................................................... 10.0 11.0 11.4 11.7 12.2 11.7 12.7 12.0 11.6 12.0 14.1 5 Germany .......................................................................................... 8.7 9.6 9.1 9.7 11.3 10.5 10.8 12.8 12.2 11.4 12.7 6 Italy ................................................................................................... 5.8 6.5 6.4 6.1 6.7 5.7 6.1 6.1 6.4' 6.2 6.9 7 Netherlands....................................................................................... 2.8 3.5 3.4 3.5 4.4 3.9 4.0 4.7 4.8 4.3 4.5 8 Sweden ............................................................................................. 1.2 1.9 2.1 2.2 2.1 2.0 2.0 2.3 2.4 2.4 2.7 9 Switzerland ....................................................................................... 3.0 3.6 4.1 4.3 5.4 4.5 4.8 5.0 4.8 4.4 3.4 10 United Kingdom ............................................................................ 41.7 46.5 44.9 44.2 47.3 46.4 50.3 53.7 56.4' 57.5' 64.6 11 Canada ............................................................................................... 5.1 6.4 5.1 4.9 6.0 5.9 5.5 6.0 6.3' 6.8 6.9 12 Japan ................................................................................................. 15.9 18.8 17.9 18.5 20.6 19.0 19.5' 22.3' 22.4 24.7' 24.8 13 Other developed countries................................................................ 15.0 18.6 19.4 18.7' 19.4 18.2 18.2 19.7 19.8' 18.8 20.3 14 Austria............................................................................................... 1.2 1.3 1.5 1.5 1.7 1.7 1.8 2.0 2.0 1.7 1.8 15 Denmark ........................................................................................... 1.0 1.6 1.7 1.9 2.0 2.0 1.9 2.0 2.2 2.1' 2.2 16 Finland............................................................................................... 1.1 1.2 1.1 1.0 1.2 1.2 1.1 1.2 1.2 1.1 1.3 17 Greece ............................................................................................... 1.7 2.2 2.3 2.2 2.3 2.3 2.2 2.3 2.4 2.4 2.5 18 Norway ............................................................................................. 1.5 1.9 2.1 2.1 2.1 2.1 2.1 2.3 2.3 2.4 2.4 19 Portugal ............................................................................................. .4 .6 .6 .5 .6 .6 .5 .7 .7 .6 .6 20 Spain ................................................................................................. 2.8 3.6 3.6 3.5 3.5' 3.0 3.0 3.3 3.5 3.5 3.9 21 Turkey ............................................................................................... 1.3 1.5 1.4 1.5 1.5 1.4 1.4 1.4 1.4 1.4 1.4 22 Other Western Europe .................................................................. .7 .9 1.2 .9 1.3 1.1 1.0' 1.5' 1.4 1.4 1.6 23 South Africa..................................................................................... 2.2 2.4 2.4 2.2 2.0 1.7 1.8 1.7 1.3 1.1 1.5 24 Australia ........................................................................................... 1.2 1.4 1.4 1.3 1.4 1.3 1.4 1.3 1.3 1.2' 1.2 25 Oil-exporting countries3 .................................................................... 12.6 17.6 19.2 20.4 22.7 22.6 22.7 23.4 22.9' 21.9 20.9 26 Ecuador ............................................................................................. .7 1.1 1.4 1.6 1.6 1.5 1.6 1.6 1.7 1.8 1.8 27 Venezuela ......................................................................................... 4.1 5.5 5.6 6.2 7.2 7.2 7.6 7.9 8.7 7.9 7.9 28 Indonesia........................................................................................... 2.2 2.2 1.9 1.9 2.0 1.9 1.9 1.9 1.9 1.9 1.9 29 Middle East countries.................................................................... 4.2 6.9 8.4 8.7 9.5 9.4 9.0 9.2 8.0 7.8 6.9 30 African countries ............................................................................ 1.4 1.9 1.9 2.0 2.5 2.6 2.6 2.8 2.6 2.5 2.5 31 Non-oil developing countries............................................................ 44.2 48.7 49.1 49.6 52.6' 53.9' 55.9' 58.8' 62.8' 63.8' 67.1 Latin America 32 Argentina ......................................................................................... 1.9 2.9 3.0 2.9 3.0 3.1 3.5 4.1 5.1 5.6 5.5 33 Brazil ................................................................................................. 11.1 12.7 13.3 14.0 14.9 14.9 15.1 15.1 15.2' 15.0' 15.4 34 Chile................................................................................................... .8 .9 1.3 1.3 1.6 1.7 1.8 2.2 2.5 2.5 2.6 35 Colombia........................................................................................... 1.3 1.3 1.3 1.3 1.4 1.5 1.5 1.7 2.2 2.1' 2.2 36 Mexico ............................................................................................... 11.7 11.9 11.0 10.7 10.8' 10.9 10.7 11.4' 12.0' 12.2 13.4 37 Peru ................................................................................................... 1.8 1.9 1.8 1.8 1.7 1.6 1.4 1.4 1.5 1.3' 1.4 38 Other Latin America .................................................................... 2.8 2.6 3.3 3.4 3.6 3.5 3.3 3.6 3.7 3.6' 3.6 Asia China 39 Mainland ....................................................................................... .0 .0 .0 .0 .0 .1 .1 .1 .1 .1 .1 40 Taiwan ........................................................................................... 2.4 3.1 2.5 2.4 2.9 3.1 3.3 3.5 3.4 3.6 3.8 41 India................................................................................................... .2 .3 .2 .3 .2 .2 .2 .2 .2 .2 .2 42 Israel ................................................................................................. 1.0 .9 .7 .7 1.0 1.0 .9 1.0 1.3 .9 1.2 43 Korea (South) ................................................................................ 3.1 3.9 3.6 3.5 3.9 4.2 5.0 5.3 5.5 6.5' 7.0 44 Malaysia4........................................................................................... .5 .7 .6 .6 .6 .6 .7 .7 .9 .8 .9 45 Philippines......................................................................................... 2.2 2.5 2.7 2.8 2.8 3.2 3.7 3.7 4.2 4.4 4.6 46 Thailand ........................................................................................... .7 1.1 1.1 1.1 1.2 1.2 1.4 1.6 1.6 1.4 1.5 47 Other Asia ....................................................................................... .5 .4 .3 .3 .2 .3 .4 .3 .4 .4 .5 Africa 48 Egypt ................................................................................................. .4 .3 .3 .4 .4 .5 .7 .6 .6 .7 .7 49 Morocco ........................................................................................... .3 .5 .5 .5 .6 .6 .5 .5 .6 .5 .5 50 Zaire ................................................................................................. .2 .3 .2 .2 .2 .2 .2 .2 .2 .2 .2 51 Other Africa5 ................................................................................... 1.2 .7 1.2 1.3 1.4 1.4 1.5 1.6 1.7 1.8 1.9 52 Eastern Europe .................................................................................. 5.2 6.3 6.4 6.6 6.9 6.7 6.7 7.2 7.3' 7.3 7.2 53 U.S.S.R............................................................................................... 1.5 1.6 1.4 1.4 1.3 1.1 .9 .9 .7' .6 .5 54 Yugoslavia......................................................................................... .8 1.1 1.3 1.3 1.5 1.6 1.7 1.8 1.8 1.9 2.1 55 Other ................................................................................................. 2.9 3.7 3.7 3.9 4.1 4.0 4.1 4.6 4.8 4.9 4.6 56 Offshore banking centers.................................................................. 24.7 26.1 32.4 30.2 30.9' 33.7 37.0' 38.6' 40.4 42.4' 43.4 57 Bahamas ........................................................................................... 10.1 9.8 12.1 11.6 10.3 12.1 14.3 12.9 13.7' 13.7' 13.0 58 Bermuda ........................................................................................... .5 .6 .7 .7 .7 .6 .7 .7 .8 .6 .6 59 Cayman Islands and other British West Indies........................ 3.8 3.8 7.2 6.8 7.4 7.2 7.5 9.5 9.4' 11.3' 9.7 60 Netherlands Antilles ...................................................................... .6 .7 .6 .6 .8 .8 1.0 1.1 1.2 .9 1.2 61 Panama6 ........................................................................................... 3.0 3.1 3.3 3.1 3.0 3.4 3.8 3.4 4.3 4.9 5.6 62 Lebanon .......................................................................................... .1 .2 .1 .1 .1 .1 .1 .2 .2 .2 .2 63 Hong Kong...................................................................................... 2.2 3.7 4.1 4.0 4.2' 4.8 4.9 5.5 6.0 5.7 6.9 64 Singapore ........................................................................................ 4.4 3.7 3.8 2.9 3.9 4.2 4.2 4.9 4.5 4.7 5.9 65 Others7 ............................................................................................ .0 .5 .5 .5 .5 .4 .4 .4 .4 .4 .4 66 Miscellaneous and unallocated8........................................................ 5.0 5.3 8.1 8.6 9.1 9.5 9.9 10.6 11.7 13.1 14.4 1. The banking offices covered by these data are the U.S. offices and foreign in this table include only banks’ own claims payable in dollars. For earlier dates branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. the claims of the U.S. offices also include customer claims and foreign currency Offices not covered include (1) U.S. agencies and branches of foreign banks, and claims (amounting in June 1978 to $10 billion). (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are 3. Includes Algeria, Bahrain, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Oman, adjusted to exclude the claims on foreign branches held by a U.S. office or another Qatar, Saudi Arabia, and United Arab Emirates in addition to countries shown foreign branch of the same banking institution. The data in this table combine individually. foreign branch claims in table 3.13 (the sum of lines 7 through 10) with the claims 4. Foreign branch claims only through December 1976. of U.S. offices in table 3.17 (excluding those held by agencies and branches of 5. Excludes Liberia. foreign banks and those constituting claims on own foreign branches). However, 6. Includes Canal Zone beginning December 1979. see also footnote 2. 7. Foreign branch claims only. 2. For June 1978 and subsequent dates, the claims of the U.S. offices 8. Includes New Zealand, Liberia, and international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics □ September 1980 3.21 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Holdings and Transactions Millions of dollars 1980 Country or area 1978 1979 Jan- JulyP Jan. Feb. Mar. Apr. May June JulyP Holdings (end of period)1 1 Estimated total2 .................................... 44,938 50,307 52,831 53,202 52,997 52,091 51,371 53,131" 53,819 2 Foreign countries2 ...................................... 39,817 44,875 46,780 46,557 46,534 46,430 46,907 48,727 49,523 3 Europe2 ............................................ 17,072 23,705 25,353 24,902 24,611 24,008 24,075 24,377 24,157 4 Belgium-Luxembourg .......................... 19 60 60 55 27 28 28 28 45 5 Germany2 ................................................ 8,705 12,937 14,081 13,797 13,489 13,207 13,225 12,976 12,578 6 Netherlands ............................................ 1,358 1.466 1,407 1,414 1,453 1,473 1,412 1,437 1,547 7 Sweden .................................................... 285 647 640 636 633 642 653 647 650 8 Switzerland2 .......................................... 977 1,868 1,894 1,564 1,534 1,528 1,574 1,731 1,675 9 United Kingdom.................................... 5,373 6,236 6,757 6,923 6,995 6,603 6,665 7,001 7,091 10 Other Western Europe ........................ 354 491 514 512 478 527 519 556 571 11 Eastern Europe .................................... 12 Canada .......................................................... 152 232 231 389 394 381 385 423 481 13 Latin America and Caribbean................ 416 546 546 547 552 581 592 696 770 14 Venezuela .............................................. 144 183 183 183 183 183 183 280 328 15 Other Latin American and Caribbean 110 200 200 201 206 199 209 215 242 16 Netherlands Antilles ............................ 162 163 163 164 164 199 200 200 200 17 Asia .............................................................. 21,488 19,804 20,061 20,130 20,390 20,872 21,269 22,751 23,534 18 Japan ...................................................... 11,528 11,175 10,844 10,420 9,631 9,533 9,543 9,545 9,614 19 Africa .......................................................... 691 591 591 591 591 593 593 492 592 20 All other .................................................... -3 -3 -3 -3 -3 -6 -7 -11 -11 21 Nonmonetary international and regional organizations ...................................... 5,121 5,432 6,051 6,645 6,463 5,661 4,464 4,404 4,296 22 International .......................................... 5,089 5,388 6,016 6,592 6,407 5,606 4,401 4,338 4,234 23 Latin American regional...................... 33 40 35 53 53 53 63 63 63 Transactions (net purchases, or sales (-), during period) 24 Total2 ............................................................................ 6,297 5,368 3,516 2,527 371 -207 -906 -717 1,757 692 25 Foreign countries2 ...................................................... 5,921 5,059 4,648 1,904 -223 -22 -105 478 1,820 795 26 Official institutions.................................................. 3,729 1,776 2,915 483 -264 -103 -67 386 1,718r 762 27 Other foreign2 .......................................................... 2,193 3,284 1,731 1,421 41 79 -37 92 102r 33 28 Nonmonetary international and regional organizations ........................................................ 375 311 -1,131 624 594 -185 -802 -1,195 -63 -104 Memo: Oil-exporting countries 29 Middle East3................................................................ -1,785 -1-,101050 5,023 550 500 1,014 471 462 1,427 598 30 Africa4 .......................................................................... 329 -100 100 1. Estimated official and private holdings of marketable U.S. Treasury securities 2. Beginning December 1978, includes U.S. Treasury notes publicly issued to with an original maturity of more than 1 year. Data are based on a benchmark private foreign residents denominated in foreign currencies. survey of holdings as of Jan. 31, 1971, and monthly transactions reports. Excludes 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and nonmarketable U.S. Treasury bonds and notes held by official institutions of for­ United Arab Emirates (Trucial States). eign countries. 4. Comprises Algeria, Gabon, Libya, and Nigeria. 3.22 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS Millions of dollars, end of period 1980 Assets 1977 1978 1979 Feb. Mar. Apr. May June July Aug .P 1 Deposits........................................................................ 424 367 429 450 468 618 380 691 436 336 Assets held in custody 2 U.S. Treasury securities1 .......................................... 91,962 117,126 95,075 96,200 89,290 85,717 88,489 93,661 95,525 96,504 3 Earmarked gold2 ........................................................ 15,988 15,463 15,169 15,109 15,087 15,057 15,037 15,034 15,034 15,025 1. Marketable U.S. Treasury bills, notes, and bonds; and nonmarketable U.S. Note. Excludes deposits and U.S. Treasury securities held for international and Treasury securities payable in dollars and in foreign currencies. regional organizations. Earmarked gold is gold held for foreign and international 2. The value of earmarked gold increased because of the changes in par value accounts and is not included in the gold stock of the United States, of the U.S. dollar in May 1972 and in October 1973. 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 1980 1980 Transactions, and area or country 1978 1979 Jan.- JulyP Jan. Feb. Mar. Apr. May June JulyP U.S. corporate securities Stocks 1 Foreign purchases ...................................................... 20,145 22,643 19,887 3,128 4,477 2,724 1,985 1,940 2,550 3,083 2 Foreign sales................................................................. 17,723 21,017 17,022 2,439 3,355 2,380 1,719 1,958 2,390 2,781 1,121 3 Net purchases, or sales (-) ...................................... 2,423 1,627 2,865 689 344 266 -17 160 302 688 4 Foreign countries ........................................................ 2,469 1,610 2,858 1,124 342 263 -19 162 300 5 Europe .......................................................................... 1,283 217 1,989 506 856 156 129 105 118 118 6 France ...................................................................... 47 122 262 71 133 -49 14 23 9 62 7 Germany .................................................................. 620 -221 63 35 52 -25 3 14 -5 -10 8 Netherlands ............................................................... -22 -71 -161 8 -41 -6 -30 -40 -25 -27 9 Switzerland ............................................................... -585 -519 300 153 375 -36 -75 -17 -19 -82 10 United Kingdom...................................................... 1,230 964 1,473 215 333 277 194 106 160 188 11 Canada .......................................................................... 74 552 429 42 130 130 66 -42 24 81 12 Latin America and Caribbean.................................. 151 -19 82 92 34 -49 6 -4 27 -25 13 Middle East1 ................................................................ 781 656 335 15 50 97 145 -60 -42 130 14 Other Asia .................................................................. 189 211 17 30 58 8 -81 -21 28 -5 15 Africa ............................................................................. -13 -14 -3 0 -1 2 0 0 -2 -1 16 Other countries .......................................................... 3 7 8 2 -3 -2 -2 3 8 2 17 Nonm or o g n a e n ta iz r a y t i i o n n t s e rn .. a .. t . i . o .. n .. a .. l .. . a .. n .. d .. .. r . e .. g .. i . o .. n .. a .. l ..................... -46 17 7 1 -2 2 3 2 -2 2 Bonds2 18 Foreign purchases ...................................................... 7,975 8,826 9,732 1,149 934 1,237 1,654 1,329' 1,734 1,695 19 Foreign sales................................................................. 5,681 7,575 6,178 548 594 838 1,137 1,011' 1,152 898 20 Net purchases, or sales ( —) ...................................... 2,294 1,251 3,555 601 340 399 518 318r 582 797 21 Foreign countries ........................................................ 1,885 1,351 3,264 469 275 407 568 249' 525 769 22 Europe ........................................................................... 744 639 1,085 151 42 315 251 92' 105 129 23 France ....................................................................... 30 11 99 8 1 15 7 47 12 8 24 Germany ................................................................... 6 72 157 -5 6 11 104 104 -14 -50 25 Netherlands ............................................................... 12 -202 -82 -3 -30 0 -14 -14 6 -26 26 Switzerland ............................................................... -202 -118 40 6 8 3 79 -29' -10 -16 27 United Kingdom...................................................... 930 814 838 195 71 265 36 -34 110 196 28 Canada ........................................................................... 102 89 75 25 28 8 2 9 5 -2 29 Latin America and Caribbean.................................. 98 109 123 14 10 9 13 25 23 29 30 Middle East1 ................................................................ 810 424 1,923 280 181 79 295 104 383 600 31 Other Asia ................................................................... 131 88 41 -1 3 -4 7 17 5 13 32 Africa ............................................................................ -1 1 4 0 2 0 0 1 0 0 33 Other countries .......................................................... 1 1 13 0 8 0 0 0 4 1 34 Nonm or o g n a e n ta iz r a y t i i o n n t s e rn .. a .. t . i . o .. n .. a .. l . .. a .. n .. d .. .. r . e .. g .. i . o .. n .. a .. l ..................... 409 -101 291 132 65 -8 -50 68 ' 57 28 Foreign securities 35 Stocks, net purchases, or sales (-)........................ 527 -786 -1,181 -233 -425 -2 -40 -241 -164 -76 36 Foreign purchases .................................................. 3,666 4,615 4,093 625 805 665 402 450 491 654 37 Foreign sales............................................................ 3,139 5,401 5,274 858 1,230 667 442 691 655 731 38 Bonds, net purchases, or sales (-) ........................ -4,054 -3,970 -610 -48 -74 17 -12 -251 -618 376 39 Foreign purchases .................................................. 11,043 12,375 9,716 1,264 1,379 1,181 1,072 1,479 1,637 1,703 40 Foreign sales............................................................ 15,096 16,345 10,326 1,313 1,453 1,164 1,084 1,730 2,255 1,327 41 Net purchases, or sales (—), of stocks and bonds .. -3,527 -4,756 -1,791 -281 -499 15 -52 -491 -781 299 42 Foreign countries ........................................................ -3,340 -4,006 -2,293 -359 -500 -33 -72 -498 -800 -30 43 Europe ........................................................................... -65 -1,640 -668 176 -126 54 -80 -214 -474 -4 44 Canada........................................................................... -3,238 -2,609 -1,471 -330 -415 -161 3 -256 -283 -29 45 Latin America and Caribbean.................................. 201 348 214 5 101 29 14 45 -25 44 46 Asia ............................................................................... 349 -108 -409 -204 -46 49 -12 -82 -65 -49 47 Africa ............................................................................ -441 -23 7 -2 -1 0 3 4 3 0 48 Other countries .......................................................... -146 25 36 -4 -13 -3 0 5 44 7 49 Nonm or o g n a e n ta iz r a y t i i o n n t s e rn .. a .. t . i . o .. n .. a .. l . .. a .. n .. d .. .. r . e .. g .. i . o .. n .. a .. l ..................... -187 -750 502 78 1 48 20 7 19 330 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, 2. Includes state and local government securities, and securities of U.S. gov- Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). ernment agencies and corporations. Also includes issues of new debt 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 1980 3.24 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1978 1979 1980 Type, and area or country 1978 Sept. Mar. June Sept. Dec. Mar. 1 Total ............................................................... 10,099 11,085 14,808 12,786 14,418 15,305 15,490 16,905 17,245 2 Payable in dollars......................................... 9,390 10,284 11,500 11,955 11,497 12,528 12,578 13,911 14,351 3 Payable in foreign currencies2.................. 709 801 3,308 831 2,921 2,777 2,912 2,994 2,894 By type 4 Financial liabilities...................................... 6,253 5,995 5,890 5,951 7,281 7,739 5 Payable in dollars.................................... 3,844 3,793 3,822 3,790 5,078 5,583 6 Payable in foreign currencies................ 2,409 2,202 2,068 2,161 2,203 2,156 7 Commercial liabilities ................................ 8,555 8,423 9,415 9,539 9,624 9,506 8 Trade payables ........................................ 4,062 3,569 4,317 4,084 4,369 4,104 9 Advance receipts and other liabilities . 4,493 4,854 5,098 5,455 5,255 5,401 10 Payable in dollars.................................... 7,656 7,703 8,706 8,788 8,834 8,768 11 Payable in foreign currencies................ 899 719 709 750 790 738 By area or country Financial liabilities 12 Europe ....................................................... 3,855 3,601 3,429 3,553 4,549 4,764 13 Belgium-Luxembourg ........................ 289 266 315 277 345 303 14 France ................................................... 167 139 134 126 168 188 15 Germany ............................................... 366 311 283 381 497 520 16 Netherlands .......................................... 389 422 401 520 834 858 17 Switzerland .......................................... 248 244 235 190 168 172 18 United Kingdom.................................. 2,063 2,007 1,842 1,860 2,342 2,519 19 Canada ...................................................... 244 252 290 300 445 368 20 Latin America and Caribbean............ 1,353 1,343 1,389 1,330 1,483 1,770 21 Bahamas .............................................. 426 411 442 345 347 436 22 Bermuda .............................................. 56 41 37 37 109 106 23 Brazil .................................................... 10 13 19 14 18 22 24 British West Indies ............................ 190 197 185 194 514 693 25 Mexico .................................................. 102 101 131 122 121 108 26 Venezuela ............................................ 49 55 68 71 72 70 27 Asia .......................................................... 791 790 772 757 795 816 28 Japan .................................................... 714 714 706 700 723 732 29 Middle East oil-exporting countries3 32 23 25 19 31 26 30 Africa ........................................................ 5 5 6 5 4 12 31 Oil-exporting countries4 .................... 2 1 2 1 1 1 32 All other5 ................................................ 5 5 5 5 4 10 Commercial liabilities 33 Europe ...................................................... 3,033 3,003 3,306 3,395 3,625 3,683 34 Belgium-Luxembourg ........................ 75 70 81 103 137 118 35 France .................................................. 321 350 353 394 467 503 36 Germany .............................................. 529 395 471 539 534 532 37 Netherlands .......................................... 246 224 230 206 227 288 38 Switzerland .......................................... 302 329 439 348 310 382 39 United Kingdom.................................. 824 870 997 1,015 1,078 995 40 Canada ...................................................... 667 614 645 709 852 686 41 Latin America ........................................ 997 1,168 1,322 1,387 1,323 1,257 42 Bahamas .............................................. 25 16 65 89 69 4 43 Bermuda .............................................. 97 42 82 48 32 47 44 Brazil .................................................... 74 61 165 186 203 228 45 British West Indies ............................ 53 89 121 21 21 20 46 Mexico .................................................. 106 236 203 256 257 235 47 Venezuela ............................................ 303 356 323 359 301 211 48 Asia .......................................................... 2,912 2,622 3,007 2,985 2,859 2,875 49 Japan .................................................... 429 401 489 506 481 568 50 Middle East oil-exporting countries3 1,523 1,122 1,225 1,070 1,021 878 51 Africa ........................................................ 743 779 891 775 728 742 52 Oil-exporting countries4 .................. 312 343 410 370 384 382 53 All other5 .............................................. 203 237 243 287 237 263 1. For a description of the changes in the International Statistics tables, see July 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 1979 Bulletin, p. 550. United Arab Emirates (Trucial States). 2. Before December 1978, foreign currency data include only liabilities denom­ 4. Comprises Algeria, Gabon, Libya, and Nigeria. inated in foreign currencies with an original maturity of less than one year. 5. Includes nonmonetary international and regional organizations. 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 States1 Millions of dollars, end of period 1978 1979 1980 Type, and area or country 1976 1977 1978 Sept. Mar. June Sept. Dec. Mar. 1 Total....................................................................................... 19,350 21,298 27,655 23,260 30,117 29,522 30,072 30,141 31,617 2 Payable in dollars................................................................. 18,300 19,880 24,600 21,292 27,307 26,627 27,407 27,098 28,857 3 Payable in foreign currencies2.......................................... 1,050 1,418 2,994 1,968 2,811 2,895 2,665 3,044 2,760 By type 16,323 19,400 18,534 18,296 17,456 18,928 10,847 13,933 12,905 12,886 11,810 13,257 9,785 13,013 11,967 11,987 10,927 12,496 1,062 920 938 899 883 761 5,476 5,467 5,629 5,410 5,646 5,671 3,880 3,920 4,042 4,013 3,883 4,108 1,597 1,547 1,587 1,397 1,763 1,563 11,332 10,718 10,988 11,776 12,685 12,689 10,744 10,012 10,330 11,016 11,997 12,000 588 706 658 760 688 689 10,995 10,374 10,618 11,407 12,287 12,253 336 344 370 369 398 436 By area or country Financial claims 5,050 5,180 5,475 6,403 6,066 5,827 48 63 54 33 32 19 178 171 183 191 177 290 510 266 361 391 401 296 20 Netherlands ................................................................... 103 85 62 51 53 39 21 Switzerland ................................................................... 98 96 81 85 73 89 22 United Kingdom........................................................... 3,856 4,261 4,488 5,365 5,009 4,779 23 Canada ............................................................................... 4,521 5,196 5,132 4,736 4,777 4,735 24 Latin America and Carribbean.................................... 5,594 7,939 6,839 5,993 5,624 7,382 25 Bahamas ....................................................................... 2,902 4,148 3,216 2,831 2,294 3,325 26 Bermuda ....................................................................... 80 63 57 31 30 34 27 Brazil ............................................................................. 151 156 141 133 163 128 28 British West Indies .................................................... 1,280 2,443 2,281 1,717 1,851 2,591 29 Mexico .......................................................................... 162 160 158 155 158 161 30 Venezuela ..................................................................... 150 142 151 139 133 132 31 Asia ................................................................................... 922 829 800 818 693 675 32 Japan ............................................................................. 307 207 216 222 190 205 33 Middle East oil-exporting countries3 ...................... 18 16 17 21 16 18 34 Africa................................................................................. 181 204 227 277 253 265 35 Oil-exporting countries4 ............................................ 10 26 23 41 49 40 36 All other5 ......................................................................... 55 52 61 69 44 43 Commercial claims 37 Europe ............................................................................... 3,979 3,805 3,827 4,121 4,891 4,748 38 Belgium-Luxembourg ................................................ 144 173 170 179 203 209 39 France ........................................................................... 609 490 470 518 727 703 40 Germany ....................................................................... 399 504 421 448 580 513 41 Netherlands ................................................................... 267 275 307 262 298 345 42 Switzerland ................................................................... 198 230 232 224 269 348 43 United Kingdom........................................................... 827 676 731 818 905 923 44 Canada............................................................................... 1,094 1,109 1,104 1,171 840 851 45 Latin America and Caribbean...................................... 2,547 2,395 2,406 2,598 2,859 2,999 46 Bahamas ....................................................................... 109 117 98 21 16 30 47 Bermuda ....................................................................... 215 241 118 154 197 135 48 Brazil ............................................................................. 629 495 503 568 647 655 49 British West Indies ..................................................... 9 10 25 13 16 11 50 Mexico ........................................................................... 506 489 584 650 704 832 51 Venezuela ..................................................................... 292 274 296 346 342 349 52 Asia ................................................................................... 3,085 2,765 2,970 3,116 3,299 3,346 53 Japan ............................................................................. 979 896 1,005 1,128 1,127 1,242 54 Middle East oil-exporting countries3 ...................... 717 682 685 701 700 657 55 Africa ................................................................................. 447 443 487 549 556 519 56 Oil-exporting countries4 ............................................ 136 131 139 140 133 114 57 All other5 ......................................................................... 179 200 194 220 240 226 1. For a description of the changes in the International Statistics tables, see July 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 1979 Bulletin, p. 550. United Arab Emirates (Trucial States). 2. Prior to December 1978, foreign currency data include only liabilities de­ 4. Comprises Algeria, Gabon, Libya, and Nigeria. nominated in foreign currencies with an original maturity of less than one year. 5. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 International Statistics □ September 1980 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per annum Rate on Aug. 31, 1980 Rate on Aug. 31, 1980 Rate on Aug. 31, 1980 Country Country Country Per­ Month Per­ Month Per­ Month cent effective cent effective cent effective Austria .............................. 6.75 Mar. 1980 Germany, Fed. Rep. of .. 7.5 May 1980 Switzerland ...................... 3.0 Feb. 1980 Belgium ............................ 12.0 July 1980 Italy.................................... 15.0 Dec. 1979 United Kingdom.............. 16.0 July 1979 Brazil ................................ 40.0 June 1980 Japan ................................ 8.25 Aug. 1980 12.0 Mar. 1980 Canada .............................. 10.74 Aug. 1980 Netherlands ...................... 9.0 June 1980 Denmark .......................... 13.0 Feb. 1980 Norway .............................. 9.0 Nov. 1979 France ................................ 9.5 Aug. 1977 Sweden .............................. 10.0 Jan.1980 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 1980 Country, or type 1977 1978 1979 Feb. Mar. Apr. May June July Aug. 1 Eurodollars .............................................. 6.03 8.74 11.% 15.33 18.72 17.81 11.20 9.41 9.33 10.82 2 United Kingdom...................................... 8.07 9.18 13.60 17.72 18.07 17.70 16.97 16.68 15.82 16.45 3 Canada ...................................................... 7.47 8.52 11.91 13.96 14.72 16.31 13.23 11.73 10.91 10.47 4 Germany .................................................. 4.30 3.67 6.64 8.94 9.51 10.12 10.18 10.00 9.59 8.93 5 Switzerland .............................................. 2.56 0.74 2.04 5.19 6.57 6.87 5.85 5.64 5.29 5.52 6 Netherlands .............................................. 4.73 6.53 9.33 11.99 11.48 10.76 11.18 10.72 10.06 9.97 7 France ...................................................... 9.20 8.10 9.44 12.63 13.94 12.84 12.62 12.37 11.87 11.20 8 Italy .......................................................... 14.26 11.40 11.85 17.88 18.12 16.91 17.20 17.25 17.49 17.30 9 Belgium .................................................... 6.95 7.14 10.48 14.45 16.23 17.10 16.31 14.69 13.30 12.52 10 Japan ........................................................ 6.22 4.75 6.10 9.10 12.37 13.51 13.63 13.51 12.89 12.04 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 1980 Country/currency 1977 1978 1979 Feb. Mar. Apr. May June July Aug. 1 Australia/dollar ........................ 110.82 114.41 111.77 110.41 109.03 109.10 113.02 115.29 115.85 115.77 2 Austria/schilling ...................... 6.0494 6.8958 7.4799 7.9815 7.5539 7.4513 7.8112 7.9421 8.0578 7.8840 3 Belgium/franc .......................... 2.7911 3.1809 3.4098 3.5221 3.3395 3.3156 3.4759 3.5335 3.5766 3.4883 4 Canada/dollar .......................... 94.112 87.729 85.386 86.546 85.255 84.311 85.178 86.836 86.783 86.263 5 Denmark/krone ........................ 16.658 18.156 19.010 18.326 17.325 17.104 17.859 18.215 18.487 18.070 6 Finland/markka ........................ 24.913 24.337 27.732 26.912 25.998 26.158 27.084 27.448 27.699 27.353 7 France/franc.............................. 20.344 22.218 23.504 24.413 23.188 22.985 23.920 24.310 24.657 24.106 8 Germany/deutsche mark ........ 43.079 49.867 54.561 57.203 54.039 53.310 55.828 56.584 57.245 55.867 9 India/rupee .............................. 11.406 12.207 12.265 12.529 12.270 12.395 12.727 12.751 12.875 12.849 10 Ireland/pound .......................... 174.49 191.84 204.65 211.59 202.25 198.98 207.41 211.16 214.74 210.62 11 Italy/lira .................................... .11328 .11782 .12035 .12346 .11635 .11417 .11860 .11973 .12026 .11801 12 Japan/yen .................................. .37342 .47981 .45834 .40934 .40246 .39980 .43766 .45894 .45232 .44666 13 Malaysia/ringgit........................ 40.620 43.210 45.720 45.896 44.956 43.817 45.691 46.625 46.658 46.484 14 Mexico/peso.............................. 4.4239 4.3896 4.3826 4.3789 4.3739 4.3779 4.3763 4.3684 4.3511 4.3389 15 Netherlands/guilder ................ 40.752 46.284 49.843 51.886 49.270 48.570 50.673 51.578 52.337 51.305 16 New Zealand/dollar ............. 96.893 103.64 102.23 97.960 95.451 94.704 97.641 98.729 98.643 97.738 17 Norway/krone ..................... 18.789 19.079 19.747 20.483 19.815 19.739 20.377 20.608 20.762 20.555 18 Portugal/escudo........................ 2.6234 2.2782 2.0437 2.0634 2.0116 1.9798 2.0298 2.0422 2.0466 2.0163 19 South Africa/rand.................... 114.99 115.01 118.72 122.90 123.59 123.88 126.43 129.00 130.79 131.55 20 Spain/peseta.............................. 1.3287 1.3073 1.4896 1.5006 1.4446 1.3918 1.4104 1.4280 1.4122 1.3810 21 Sri Lanka/rupee .................. 11.964 6.3834 6.4226 6.4350 6.4098 6.1500 6.1900 6.2186 6.3288 6.2980 22 Sweden/krona .......................... 22.383 22.139 23.323 23.974 23.008 22.872 23.731 23.995 24.238 23.953 23 Switzerland/franc .................... 41.714 56.283 60.121 60.966 56.710 56.857 60.131 61.207 62.203 60.527. 24 United Kingdom/pound.......... 174.49 191.84 212.24 228.91 220.45 220.94 230.20 233.59 237.32 237.04 Memo: 25 United States/dollar1 .............. 103.31 92.39 88.09 86.37 90.26 91.09 86.% 85.29 84.65 86.09 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 page rencies of other G-10 countries plus Switzerland. March 1973 = 100. 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

A69 Guide to Tabular Presentation and Statistical Releases G uide to Tabular P resentation 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 heading IPCs Individuals, partnerships, and corporations when more than half of figures in that column REITs Real estate investment trusts are changed.) RPs Repurchase agreements * Amounts insignificant in terms of the last decimal SMSAs Standard metropolitan statistical areas place shown in the table (for example, less than Cell not applicable 500,000 when the smallest unit given is mil­ lions) General Information Minus signs are used to indicate (1) a decrease, (2) a negative gations of the Treasury. “State and local government” also figure, or (3) an outflow. includes municipalities, special districts, and other political “U.S. government securities” may include guaranteed is­ subdivisions. sues of U.S. government agencies (the flow of funds figures In some of the tables details do not add to totals because of also include not fully guaranteed issues) as well as direct obli­ rounding. Statistical Releases List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases ......................... August 1980 A-80 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Federal Reserve Board of Governors Paul A. Volcker, Chairman Henry C. Wallich Frederick H. Schultz, Vice Chairman J. Charles Partee Office of Board M embers Office of Staff D irector for M onetary and Financial P olicy Joseph R. Coyne, Assistant to the Board Jay Paul Brenneman, Special Assistant to the Board Stephen H. Axilrod, Staff Director Frank O’Brien, Jr., Special Assistant to the Board Edward C. Ettin, Deputy Staff Director Joseph S. Sims, Special Assistant to the Board Murray Altmann, Assistant to the Board Donald J. Winn, Special Assistant to the Board Peter M. Keir, Assistant to the Board Stanley J. Sigel, Assistant to the Board Normand R. V. Bernard, Special Assistant to the Board Legal Division Neal L. Petersen, General Counsel D ivision of Research and S tatistics Robert E. Mannion, Deputy General Counsel Charles R. McNeill, Assistant to the General Counsel James L. Kichline, Director J. Virgil Mattingly, Assistant General Counsel Joseph S. Zeisel, Deputy Director Gilbert T. Schwartz, Assistant General Counsel Michael J. Prell, Associate Director Robert A. Eisenbeis, Senior Deputy Associate Director tJoHN J. Mingo, Senior Deputy Associate Director O ffice of the Secretary Eleanor J. Stockwell, Senior Deputy Associate Director Jared J. Enzler, Deputy Associate Director Theodore E. Allison, Secretary J. Cortland G. Peret, Deputy Associate Director Griffith L. Garwood, Deputy Secretary Helmut F. Wen del, Deputy Associate Director Barbara R. Lowrey, Assistant Secretary Martha Bethea, Assistant Director *Cathy L. Petryshyn, Assistant Secretary Robert M. Fisher, Assistant Director Frederick M. Struble, Assistant Director Stephen P. Taylor, Assistant Director Division of Consum er Levon H. Garabedian, Assistant Director (Administration) and Com munity A ffairs Janet O. Hart, Director D ivision of International Finance Jerauld C. Kluckman, Associate Director Glenn E. Loney, Assistant Director Edwin M. Truman, Director Dolores S. Smith, Assistant Director Robert F. Gemmill, Associate Director George B. Henry, Associate Director Charles J. Siegman, Associate Director D ivision of Banking Samuel Pizer, Staff Adviser S upervision and Regulation Jeffrey R. Shafer, Deputy Associate Director Dale W. Henderson, Assistant Director John E. Ryan, Director Larry J. Promisel, Assistant Director Frederick R. Dahl, Associate Director Ralph W. Smith, Jr., Assistant Director William Taylor, Associate Director William W. Wiles, Associate Director Jack M. Egertson, Assistant Director Robert A. Jacobsen, Assistant Director Don E. Kline, Assistant Director Robert S. Plotkin, Assistant Director Thomas A. Sidman, Assistant Director Samuel H . Talley, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 and Official Staff Nancy H. Teeters Lyle E. Gramley Emmett J. Rice O ffice of Office of S taff D irector for Staff D irector for M anagem ent Federal R eserve Bank A ctivities John M. Denkler, Staff Director William H. Wallace, Staff Director Edward T. Mulrenin, Assistant Staff Director Harry A. Guinter, Assistant Director for Contingency Joseph W. Daniels, Sr. , Director of Equal Employment Op- Planning portunity D ivision of Federal Reserve D ivision of D ata P rocessing Bank Operations Charles L. Hampton, Director James R. Kudlinski, Director Bruce M. Beardsley, Associate Director Clyde H. Farnsworth, Jr., Deputy Director Uyless D. Black, Assistant Director W alter Althausen, Assistant Director Glenn L. Cummins, Assistant Director Charles W. Bennett, Assistant Director Robert J. Zemel, Assistant Director Lorin S. Meeder, Assistant Director P. D. Ring, Assistant Director David L. Robinson, Assistant Director D ivision of P ersonnel Raymond L. Teed, Assistant Director David L. Shannon, Director John R. Weis, Assistant Director Charles W. Wood, Assistant Director Office of the Controller John Kakalec, Controller George E. Livingston, Assistant Controller D ivision of S upport Services Donald E. Anderson, Director Robert E. Frazier, Assistant Director W alter W. Kreimann, Associate Director *On loan from the Federal Reserve Bank of Cleveland. tOn leave of absence. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All Federal Reserve Bulletin □ September 1980 FOMC and Advisory Councils Federal Open M arket C ommittee Paul A. Volcker, Chairman Anthony M. Solomon, Vice Chairman Lyle E. Gramley J. Charles Partee Nancy H. Teeters Roger Guffey Emmett J. Rice Henry C. Wallich Frank E. Morris Lawrence K. Roos Willis J. Winn Frederick H. Schultz Murray Altmann, Secretary Richard G. Davis, Associate Economist Normand R. V. Bernard, Assistant Secretary Thomas Davis, Associate Economist Neal L. Petersen, General Counsel Robert Eisenmenger, Associate Economist James H. Oltman, Deputy General Counsel Edward C. Ettin, Associate Economist Robert E. Mannion, Assistant General Counsel George B. Henry, Associate Economist Stephen H. Axilrod, Economist Peter M. Keir, Associate Economist Alan R. Holmes, Adviser for Market Operations James L. Kichline, Associate Economist Anatol Balbach, Associate Economist Edwin M. Truman, Associate Economist John 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 A dvisory C ouncil Clarence C. Barksdale, Eighth District, President James D. Berry, Eleventh District, Vice President Henry S. Woodbridge, Jr., First District Robert Strickland, Sixth District Donald C. Platten, Second District Roger E. Anderson, Seventh District William B. Eagleson, Jr., Third District Clarence G. Frame, Ninth District Merle E. Gilliand, Fourth District Gordon E. Wells, Tenth District J. Owen Cole, Fifth District Chauncey E. Schmidt, Twelfth District Herbert V. Prochnow, Secretary William J. Korsvik, Associate Secretary Consumer A dvisory Council William D. Warren, Los Angeles, California, Chairman Marcia A. Hakala, Omaha, Nebraska, Vice Chairman Julia H. Boyd, Washington, D.C. Harvey M. Kuhnley, Minneapolis, Minnesota Roland E. Brandel, San Francisco, California The Rev. Robert J. McEwen, S.J., Boston, Massachusetts Ellen Broadman, Washington, D.C. R. C. Morgan, El Paso, Texas James L. Brown, Milwaukee, Wisconsin Margaret Reilly-Petrone, Upper Montclair, New Jersey Mark E. Budnitz, Atlanta, Georgia Rene Reixach, Rochester, New York Robert V. Bullock, Frankfort, Kentucky Florence M. Rice, New York, New York Richard S. D’Agostino, Philadelphia, Pennsylvania Ralph J. Rohner, Washington, D.C. Joanne Faulkner, New Haven, Connecticut Henry B. Schechter, Washington, D.C. Vernard W. Henley, Richmond, Virginia Peter D. Schellie, Washington, D.C. Juan Jesus Hinojosa, McAllen, Texas E. G. Schuhart, II, Amarillo, Texas Shirley T. Hosoi, Los Angeles, California Charlotte H. Scott, Charlottesville, Virginia F. Thomas Juster, Ann Arbor, Michigan Richard A. Van Winkle, Salt Lake City, Utah Richard F. Kerr, Cincinnati, Ohio Richard D. Wagner, Simsbury, Connecticut Robert J. Klein, New York, New York Mary W. Walker, Monroe, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 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, Esq. Anthony M. Solomon 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 J. L. Jackson Walter H. MacDonald Cincinnati.................... 45201 Lawrence H. Rogers, II Robert E. Showaiter Pittsburgh.....................15230 William H. Knoell Robert D. Duggan RICHMOND* ................23261 Maceo A. Sloan Robert P. Black Steven Muller Jimmie R. Monhollon Baltimore......................21203 Catherine Byrne Doehler Robert D. McTeer, Jr. Charlotte ......................28230 Robert E. Elberson Stuart P. Fishburne Culpeper Communications and Records Center 22701 Albert D. Tinkelenberg ATLANTA .................... 30301 William A. Fickling, Jr. William F. Ford John H. Weitnauer, Jr. Robert P. Forrestal Birmingham ............... 35202 Harold B. Blach, Jr. Hiram J. Honea Jacksonville .............. 32231 Joan W. Stein Charles D. East Miami ...........................33152 David G. Robinson F. J. Craven, Jr. Nashville .................... 37203 Robert C. H. Mathews, Jr. Jeffrey J. Wells New Orleans...............,70161 George C. Cortright, Jr. Pierre M.Viguerie CHICAGO*.................... 60690 John Sagan Robert P. Mayo Stanton R. Cook Daniel M. Doyle Detroit.......................... 48231 Howard F. Sims William C. Conrad ST. LOUIS .................... 63166 Armand C. Stalnaker Lawrence K. Roos William B. Walton Donald W. Moriarty, Jr. Little Rock................. 72203 E. Ray Kemp, Jr. John F. Breen Louisville.................... 40232 Richard O. Donegan Donald L. Henry Memphis .................... 38101 Charles S. Youngblood Robert E. Matthews MINNEAPOLIS............,55480 Stephen F. Keating E. Gerald Corrigan William G. Phillips Thomas E. Gainor Helena.......................... 59601 Patricia P. Douglas Betty J. Lindstrom KANSAS CITY ............ 64198 Joseph H. Williams Roger Guffey Paul H. Henson Henry R. Czerwinski Denver.......................... 80217 Caleb B. Hurtt Wayne W. Martin Oklahoma City.............73125 Christine H. Anthony William G. Evans Omaha..........................,68102 Robert G. Lueder Robert D. Hamilton DALLAS ....................... 75222 Irving A. Mathews Ernest T. Baughman Gerald D. Hines Robert H. Boykin El Paso.......................... 79999 Chester J. Kesey Joel L. Koonce, Jr. Houston....................... 77001 Gene M. Woodfin J. Z. Rowe San Antonio ............... 78295 Carlos A. Zuniga Carl H. Moore SAN FRANCISCO...... 94120 Cornell C. Maier John J. Balles Caroline L. Ahmanson John B. Williams Los Angeles ................90051 Harvey A. Proctor Richard C. Dunn Portland........................97208 Loran L. Stewart Angelo S. Carella Salt Lake City............ 84125 Wendell J. Ashton A. Grant Holman Seattle..........................,98124 Vacancy 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

A74 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES. request and be made payable to the order of the Board of ROOM MP-510, BOARD OF GOVERNORS OF THE FED­ Governors of the Federal Reserve System. Remittance from ERAL RESERVE SYSTEM, WASHINGTON, D.C. 20551. foreign residents should be drawn on a U.S. bank. Stamps When a charge is indicated, remittance should accompany and coupons are not accepted. The Federal Reserve System—Purposes and Func­ Bank Credit-Card and Check-Credit Plans. 1968. 102 tions. 1974. 125 pp. pp. $1.00 each; 10 or more to one address, $.85 each. Annual Report. Survey of Changes in Family Finances. 1968. 321 pp. Federal Reserve Bulletin. Monthly. $20.00 per year or $1.00 each; 10 or more to one address, $.85 each. $2.00 each in the United States, its possessions, Canada, Report of the Joint Treasury-Federal Reserve Study and Mexico; 10 or more of same issue to one address, of the U.S. Government Securities Market. 1969. $18.00 per year or $1.75 each. Elsewhere, $24.00 per 48 pp. $.25 each; 10 or more to one address, $.20 each. year or $2.50 each. Joint Treasury-Federal Reserve Study of the Gov­ Banking and Monetary Statistics, 1914-1941. (Reprint ernment Securities Market: Staff Studies—Part of Part I only) 1976. 682 pp. $5.00. 1. 1970. 86 pp. $.50 each; 10 or more to one address, $.40 Banking and Monetary Statistics, 1941-1970. 1976. each. Part 2, 1971. 153 pp. and Part 3. 1973. 131 pp. Each 1,168 pp. $15.00. volume $1.00; 10 or more to one address, $.85 each. Annual Statistical Digest Open Market Policies and Operating Procedures— 1971-75. 1976. 339 pp. $4.00 per copy for each paid sub­ Staff Studies. 1971. 218 pp. $2.00 each; 10 or more to scription to Federal Reserve Bulletin; all others $5.00 one address, $1.75 each. each. Reappraisal of the Federal Reserve Discount Mecha­ 1972-76. 1977. 377 pp. $10.00 per copy. nism. Vol. I. 1971. 276 pp. Vol. 2. 1971. 173 pp. Vol. 3. 1973-77. 1978. 361 pp. $12.00 per copy. 1972. 220 pp. Each volume $3.00; 10 or more to one ad­ 1974-78. 1980. 305 pp. $10.00 per copy. dress, $2.50 each. Federal Reserve Chart Book. Issued four times a year in The Econometrics of Price Determination Confer­ February, May, August, and November. Subscription ence, October 30-31, 1970, Washington, D.C. 1972. 397 includes one issue of Historical Chart Book. $7.00 per pp. Cloth ed. $5.00 each; 10 or more to one address, year or $2.00 each in the United States, its possessions, $4.50 each. Paper ed. $4.00 each; 10 or more to one ad­ Canada, and Mexico. Elsewhere, $10.00 per year or dress, $3.60 each. $3.00 each. Federal Reserve Staff Study: Ways to Moderate Historical Chart Book. Issued annually in Sept. Subscrip­ Fluctuations in Housing Construction. 1972. 487 tion to Federal Reserve Chart Book includes one issue. pp. $4.00 each; 10 or more to one address, $3.60 each. $1.25 each in the United States, its possessions, Canada, Lending Functions of the Federal Reserve Banks. and Mexico; 10 or more to one address, $1.00 each. Else­ 1973 . 271 pp. $3.50 each; 10 or more to one address, where, $1.50 each. $3.00 each. Capital Market Developments. Weekly. $15.00 per year Improving the Monetary Aggregates: Report of the or $.40 each in the United States, its possessions, Cana­ Advisory Committee on Monetary Statistics. da, and Mexico; 10 or more of same issue to one address, 1976. 43 pp. $1.00 each; 10 or more to one address, $.85 each. $13.50 per year or $.35 each. Elsewhere, $20.00 per year Annual Percentage Rate Tables (Truth in Lending— or $.50 each. Selected Interest and Exchange Rates—Weekly Se­ Regulation Z) Vol. I (Regular Transactions). 1969. 100 ries of Charts. Weekly. $15.00 per year or $.40 each in pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each volume $1.00; 10 or more of same volume to one ad­ the United States, its possessions, Canada, and Mexico; dress, $.85 each. 10 or more of same issue to one address, $13.50 per year or $.35 each. Elsewhere, $20.00 per year or $.50 each. Federal Reserve Measures of Capacity and Capacity Utilization. 1978. 40 pp. $1.75 each; 10 or more to one The Federal Reserve Act, as amended through December address, $1.50. each. 1976, with an appendix containing provisions of certain The Bank Holding Company Movement to 1978: A other statutes affecting the Federal Reserve System. 307 Compendium. 1978. 289 pp. $2.50 each; 10 or more to pp. $2.50. one address, $2.25 each. Regulations of the Board of Governors of the Fed­ Improving the Monetary Aggregates: Staff Papers. eral Reserve System 1978. 170 pp. $4.00 each; 10 or more to one address, Published Interpretations of the Board of Gover­ $3.75 each. nors, as of Dec. 31, 1979. $7.50. 1977 Consumer Credit Survey. 1978. 119 pp. $2.00 each. Industrial Production: 1976 Edition. 1977. 304 pp. $4.50 Flow of Funds Accounts. 1949-1978. 1979. 171 pp. each; 10 or more to one address, $4.00 each. $1.75 each; 10 or more to one address, $1.50 each. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 Consumer Education Pamphlets Measurement of Capacity Utilization: Problems and Short pamphlets suitable for classroom use. Multiple Tasks, by Frank de Leeuw, Lawrence R. Forest, Jr., copies available without charge. Richard D. Raddock, and Zoltan E. Kenessey. July 1979. 264 pp. Alice in Debitland The GNMA-Guaranteed Passthrough Security: Mar­ The Board of Governors of the Federal Reserve System ket Development and Implications for the Growth Consumer Handbook To Credit Protection Laws and Stability of Home Mortgage Lending, by The Equal Credit Opportunity Act and . . . Age David F. Seiders. Dec. 1979. 65 pp. The Equal Credit Opportunity Act and . . . Credit Rights in Foreign Ownership and The Performance of U.S. Housing Banks, by James V. Houpt. July 1980. 27 pp. The Equal Credit Opportunity Act and . . . Doctors, Lawyers, Small Retailers, and Others Who May Provide Printed in Full in the Bulletin Incidental Credit The Equal Credit Opportunity Act and . . . Women Fair Credit Billing An Assessment of Bank Holding Companies, by Robert J. Lawrence and Samuel H. Talley. January 1976. The Federal Open Market Committee Federal Reserve Bank Board of Directors Federal Reserve Banks Federal Reserve Glossary R eprints How to File A Consumer Credit Complaint If You Borrow To Buy Stock Most of the articles reprinted do not exceed 12 pages. If You Use A Credit Card Truth in Leasing Measures of Security Credit. 12/70. U.S. Currency Revision of Bank Credit Series. 12/71. What Truth in Lending Means to You Assets and Liabilities of Foreign Branches of U.S. Banks. 2/72. Bank Debits, Deposits, and Deposit Turnover—Revised Staff Studies Series. 7/72. Studies and papers on economic and financial subjects that Yields on Newly Issued Corporate Bonds. 9/72. are of general interest. Yields on Recently Offered Corporate Bonds. 5/73. Rates on Consumer Instalment Loans. 9/73. Summaries Only Printed in the Bulletin New Series for Large Manufacturing Corporations. 10/73. Requests to obtain single copies of the full text or to be The Structure of Margin Credit. 4/75. added to the mailing list for the series may be sent to Pub­ Industrial Electric Power Use. 1/76. lications Services. Revision of Money Stock Measures. 2/76. Revised Series for Member Bank Deposits and Aggregate Re­ The Relationship Between Reserve Ratios and the serves. 4/76. Monetary Aggregates Under Reserves and Fed­ Industrial Production— 1976 Revision. 6/76. eral Funds Rate Operating Targets, by Kenneth J. Federal Reserve Operations in Payment Mechanisms: A Kopecky. Dec. 1978. 58 pp. Summary. 6/76. Tie-ins Between the Granting of Credit and Sales of New Estimates of Capacity Utilization: Manufacturing and Insurance by Bank Holding Companies and Other Materials. 11/76. Lenders, by Robert A. Eisenbeis and Paul R. Schweitzer. The Commercial Paper Market. 6/77. Feb. 1979. 75 pp. The Federal Budget in the 1970’s. 9/78. Geographic Expansion of Banks and Changes in Bank­ Redefining the Monetary Aggregates. 1/79. ing Structure, by Stephen A. Rhoades. Mar. 1979. 40 Implementation of the International Banking Act. 10/79. pp. Changes in Bank Lending Practices, 1977-79. 10/79. Innovations in Bank Loan Contracting: Recent Evi­ U.S. International Transactions in 1979: Another Round of dence by Paul W. Boltz and Tim S. Campbell. May 1979. Oil Price Increases. 4/80. 40 pp. Perspectives on Personal Saving. 8/80. 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, 10, 25, 27 Deposits (,See also specific types) Agricultural loans, commercial banks, 18, 20-22, 26 Banks, by classes^ 3, 16, 17, 19, 20-23, 29 Assets and liabilities (See also Foreigners) Federal Reserve Banks, 4,11 Banks, by classes, 16, 17, 18, 20-23, 29 Subject to reserve requirements, 14 Domestic finance companies, 39 Turnover, 12 Federal Reserve Banks, 11 Discount rates at Reserve Banks (See Interest rates) Nonfinancial corporations, current, 38 Discounts and advances by Reserve Banks (See Loans) Automobiles Dividends, corporate, 37 Consumer installment credit, 42,43 Production, 48,49 EMPLOYMENT, 46, 47 Eurodollars, 27 BANKERS balances, 16, 18, 20, 21, 22 (See also Foreigners) Banks for Cooperatives, 35 FARM mortgage loans, 41 Bonds (See also U.S. government securities) Farmers Home Administration, 41 New issues, 36 Federal agency obligations, 4, 10, 11, 12, 34 Yields, 3 Federal and federally sponsored credit agencies, 35 Branch banks Federal finance Assets and liabilities of foreign branches of U.S. banks, 56 Debt subject to statutory limitation and types and Liabilities of U.S. banks to their foreign branches, 23 ownership of gross debt, 32 Business activity, 46 Receipts and outlays, 30, 31 Business expenditures on new plant and equipment, 38 Treasury operating balance, 30 Business loans (See Commercial and industrial loans) 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, 11 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, 11 Weekly reporting banks, 20, 21, 22, 23, 24 Discount rates (See Interest rates) Commercial banks U.S. government securities held, 4, 11, 12, 32, 33 Assets and liabilities, 3, 15-19, 20-23 Federal Reserve credit, 4, 5, 11, 12 Business loans, 26 Federal Reserve notes, 11 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, 11 Consumption expenditures, 52, 53 Deposits in U.S. banks, 4, 11, 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, 13 GOLD Customer credit, stock market, 28 Certificates, 11 Stock, 4,55 DEBITS to deposit accounts, 12 Government National Mortgage Association, 35,40,41 Debt (See specific types of debt or securities) Gross national product, 52, 53 Demand deposits Adjusted, commercial banks, 12, 15, 19 HOUSING, new and existing units, 50 Banks, by classes, 16, 17, 19, 20-23, 69-72 Ownership by individuals, partnerships, and INCOME, personal and national, 46, 52, 53 corporations, 25 Industrial production, 46,48 Subject to reserve requirements, 14 Installment loans, 42,43 Turnover, 12 Insurance companies, 29, 32, 33,41 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A77 Insured commercial banks, 17, 18, 19 Real estate loans—Continued Interbank loans and deposits, 16, 17 Life insurance companies, 29 Interest rates Mortgage terms, yields, and activity, 3,40 Bonds, 3 Type of holder and property mortgaged, 41 Business loans of banks, 26 Repurchase agreements and federal funds, 6 Federal Reserve Banks, 3, 7 Reserve requirements, member banks, 8 Foreign countries, 68 Money and capital markets, 3, 27 Commercial banks, 16, 18, 20,21, 22 Mortgages, 3,40 Federal Reserve Banks, 11 Prime rate, commercial banks, 26 Member banks, 3, 4, 5, 14, 16, 18 Time and savings deposits, 9 U.S. reserve assets, 55 International capital transactions of the United States, 56-67 Residential mortgage loans, 40 International organizations, 56-61,64-67 Retail credit and retail sales, 42,43,46 Inventories, 52 Investment companies, issues and assets, 37 SAVING Investments (See also specific types) Flow of funds, 44,45 Banks, by classes, 16, 17, 18,20,21,22, 29 National income accounts, 53 Commercial banks, 3, 15, 16, 17,18 Savings and loan assns., 3, 9, 29, 33, 41, 44 Federal Reserve Banks, 11, 12 Savings deposits (See Time deposits) Life insurance companies, 29 Savings institutions, selected assets, 29 Savings and loan associations, 29 Securities (See also U.S. government securities) Federal and federally sponsored agencies, 35 LABOR force, 47 Foreign transactions, 65 Life insurance companies (See Insurance companies) New issues, 36 Loans (See also specific types) Prices, 28 Banks, by classes, 16, 17, 18, 20-23, 29 Special drawing rights, 4, 11, 54, 55 Commercial banks, 3,15-18,20-23,24, 26 State and local governments Federal Reserve Banks, 3, 4, 5, 7, 11, 12 Deposits, 19, 20, 21, 22 Insurance companies, 29,41 Holdings of U.S. government securities, 32, 33 Insured or guaranteed by United States, 40,41 New security issues, 36 Savings and loan associations, 29 Ownership of securities of, 18, 20,21, 22, 29 Yields of securities, 3 MANUFACTURING State member banks, 17 Capacity utilization, 46 Stock market, 28 Production, 46,49 Stocks (See also Securities) Margin requirements, 28 New issues, 36 Member banks Prices, 28 Assets and liabilities, by classes, 16,17,18 Borrowings at Federal Reserve Banks, 5, 11 TAX receipts, federal, 31 Federal funds and repurchase agreements, 6 Time deposits, 3, 9, 12, 14, 16, 17, 19, 20, 21, 22, 23 Number, by classes, 16, 17, 19 Trade, foreign, 55 Reserve requirements, 8 Treasury currency, Treasury cash, 4 Reserves and related items, 3, 4, 5, 14 Treasury deposits, 4, 11, 30 Mining production, 49 Treasury operating balance, 30 Mobile home shipments, 50 Monetary aggregates, 3, 14 UNEMPLOYMENT, 47 Money and capital market rates (See Interest rates) U.S. balance of payments, 54 Money stock measures and components, 3, 13 U.S. government balances Mortgages (See Real estate loans) Commercial bank holdings, 19,20,21,22 Mutual funds (See Investment companies) Member bank holdings, 14 Mutual savings banks, 3, 9, 20-22, 29, 32, 33, 41 Treasury deposits at Reserve Banks, 4, 11, 30 U.S. government securities NATIONAL banks, 17 Bank holdings, 16, 17, 18,20,21,22,29,32,33 National defense outlays, 31 Dealer transactions, positions, and financing, 34 National income, 52 Federal Reserve Bank holdings, 4, 11, 12, 32, 33 Nonmember banks, 17,18,19 Foreign and international holdings and transactions, 11, 32, 64 OPEN market transactions, 10 Open market transactions, 10 Outstanding, by type and ownership, 32, 33 PERSONAL income, 53 Rates, 3,27 Prices Utilities, production, 49 Consumer and producer, 46, 51 Stock market, 28 VETERANS Administration, 40,41 Prime rate, commercial banks, 26 Production, 46,48 WEEKLY reporting banks, 20-24 Profits, corporate, 37 Wholesale prices, 46, 51 REAL estate loans YIELDS (See Interest rates) Banks, by classes, 18, 20-22, 29,41 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories Detroit Chicago Clevc'?"f jSa/t Lake Denver Kansas Louisville 't. Louis 'harlot^ Oklahoma Citj lemphis Sashviljt 'n8eles MU Rock Birmi"to*Afiani£ Houston! tan Antonio January 1978 ALASKA Legend “ “ Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities Boundaries of Federal Reserve Branch • Federal Reserve Branch Cities Territories * Federal Reserve Bank Facility © Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis