Federal Reserve Bulletin, 1984-04

VOLUME 70 • NUMBER 4 • APRIL 1984 FEDERAL RESERVE BULLETIN Board of Governors of the Federal Reserve System Washington, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • Stephen H. Axilrod • Michael Bradfield • S. David Frost Griffith L. Garwood • James L. Kichline • Edwin M. Truman Naomi P. Salus, Coordinator 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. It is assisted by the Economic Editing Unit headed by Mendelle T. Berenson, the Graphic Communications Section under the direction of Peter G. Thomas, and Publications Services supervised by Helen L. Hulen. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 269 U.S. INTERNATIONAL TRANSACTIONS structure the law governing bank and thrift IN 1983 holding company activities, before the Senate Committee on Banking, Housing, and The U.S. merchandise trade and current Urban Affairs, March 27, 1984. account deficits widened considerably during 1983. 309 Nancy H. Teeters, Member, Board of Governors, presents the views of the Board on 279 REVISIONS TO THE MONEY STOCK the issue of whether the Truth in Lending Act should prohibit merchants from charg- Annual revisions to the money stock, which ing higher prices to credit card purchasers were published recently, on balance were than to cash purchasers through use of a larger than normal, especially for Ml. "surcharge," before the Subcommittee on Consumer Affairs and Coinage of the House 286 INDUSTRIAL PRODUCTION Committee on Banking, Finance and Urban Output rose about 0.4 percent in March. Affairs, March 27, 1984. 312 Chairman Volcker reviews a wide range of 288 STATEMENTS TO CONGRESS issues affecting developments in markets Preston Martin, Vice Chairman, Board of for banking and other financial services, Governors, discusses title I of the Second- before the Subcommittee on Telecommuniary Mortgage Market Enhancement Act of cations, Consumer Protection and Finance 1983, before the Subcommittee on Tele- of the House Committee on Energy and communications, Consumer Protection, Commerce, April 4, 1984. and Finance of the House Committee on 319 Vice Chairman Martin discusses the views Energy and Finance, March 14, 1984. of the Board on the issue of delayed avail- 291 Lyle E. Gramley, Member, Board of Gov- ability, the practice of imposing "holds" on ernors, presents the views of the Board on funds representing checks deposited by fully insured brokered deposits, before the customers, before the Subcommittee on Fi- Subcommittee on Commerce, Consumer, nancial Institutions Supervision, Regulaand Monetary Affairs of the House Govern- tion, and Insurance of the House Commitment Operations Committee, March 14, tee on Banking, Finance and Urban Affairs, 1984. April 4, 1984. 324 Chairman Volcker reviews some of the is- 294 Henry C. Wallich, Member, Board of Govsues surrounding the large and growing ernors, discusses the causes of the U.S. U.S. trade and current account deficits and merchandise and current account deficits says that decisive action to deal with the and says that the strong dollar and large internal deficit is needed to restore better external deficits are partly symptoms of balance in the external accounts, before the large budget deficits, before the Senate Subcommittee on Trade of the House Com- Committee on Finance, March 23, 1984. mittee on Ways and Means, April 10, 1984. 298 Paul A. Volcker, Chairman, Board of Governors, emphasizes the urgent need for de- 329 ANNOUNCEMENTS finitive congressional action on legislative proposals now before the Congress to re- Change in the discount rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Measures to reduce risk in large electronic maintaining the existing degree of restraint fund transfers. on reserve positions. The members expected such a policy to be associated with Revision to the private sector adjustment growth of both M2 and M3 at an annual rate factor. of around 8 percent for the period from Adoption of rules regarding fees on interna- December to March and growth of Ml at an tional loans. annual rate of about 7 percent over the three-month period. The rate of expansion Discontinuance of use of bankers accepin total domestic nonfinancial debt was tances by the FOMC. thought likely to be within the Committee's Amendment to Regulation T. monitoring range for 1984. Lesser restraint would be acceptable in the event of a short- Deferment of effective date for revised Regfall in monetary and credit growth from ulation T. current expectations, while somewhat Update to staff commentary on Regulation Z. greater restraint might be acceptable with more rapid growth in the aggregates, both Changes in Board staff. viewed in the context of the strength of the Policy statement on multi-rate time depos- business expansion and of inflationary presits. sures. It was agreed that the intermeeting range for the federal funds rate, which Proposed actions. provides a mechanism for initiating consul- Availability of Supplement 10 to the Com- tation of the Committee, would remain at 6 pliance Handbook. to 10 percent. Availability of report on priced services. 343 LEGAL DEVELOPMENTS Admission of five state banks to membership in the Federal Reserve System. Amendments to Regulation K; amendments to Regulation T; various bank holding com- 335 RECORD OF POLICY ACTIONS OF THE pany and bank merger orders; and pending FEDERAL OPEN MARKET COMMITTEE cases. At its meeting on January 30-31, 1984, the Committee established growth ranges for Ai FINANCIAL AND BUSINESS STATISTICS the broader aggregates of 6 to 9 percent for A3 Domestic Financial Statistics both M2 and M3 for the period from the A42 Domestic Nonfinancial Statistics fourth quarter of 1983 to the fourth quarter A50 International Statistics of 1984. The Committee also considered that a range of 4 to 8 percent for Ml would A65 GUIDE TO TABULAR PRESENTATION, be appropriate for the same period, taking STATISTICAL RELEASES, AND SPECIAL account of the possibility that, in the light of TABLES the changed composition of Ml, its relation- A66 BOARD OF GOVERNORS AND STAFF ship to GNP over time may be shifting. Pending further experience, growth in that A68 FEDERAL OPEN MARKET COMMITTEE aggregate will need to be interpreted in the AND STAFF; ADVISORY COUNCILS light of the growth in the other monetary A70 FEDERAL RESERVE BOARD aggregates, which for the time being would PUBLICATIONS continue to receive substantial weight. The associated range for total domestic nonfi- A73 INDEX TO STATISTICAL TABLES nancial debt was set at 8 to 11 percent for the year 1984. A75 FEDERAL RESERVE BANKS, BRANCHES, MID OFFICES For the short run, the members indicated their acceptance of a policy directed at A76 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1983 Peter Isard of the Board's Division of Interna- Shifts in U.S. fiscal policy since 1980 have had tional Finance prepared this article. major impacts on the factors that influence U.S. current and capital account transactions. Follow- The U.S. merchandise trade and current account ing the introduction of staged reductions in U.S. deficits widened considerably during 1983. For income taxes, reductions in nondefense spend- 1983 as a whole, the trade deficit exceeded $60 ing, and increases in defense spending, the U.S. billion, while the current account deficit reached federal budget deficit expanded from about $60 $40 billion. These deficits, which are projected to billion in 1980 and 1981 to more than $180 billion be substantially larger in 1984, have raised con- in calendar-year 1983 (chart 1). The current cerns about the state of U.S. tradable goods account deficit is linked to the budget deficit in industries. In addition, the prospect that a signifi- the national income accounts. Whenever one cant fraction of the saving of foreign countries sector of the economy runs a deficit, other will continue to flow into the United States in sectors must, on balance, show a matching surconjunction with large U.S. current account defi- plus. In the case of the federal government cits has raised questions about how long large budget deficit, some of the counterpart surplus deficits can be sustained. has been supplied by an excess of private domestic saving over private domestic investment, including the surplus of state and local governments. The remainder has come from a net MAJOR INFLUENCES ON U.S. capital inflow from abroad, which is essentially INTERNATIONAL TRANSACTIONS the counterpart of the current account deficit. U.S. current account transactions in recent years The surpluses that private domestic residents have responded to many factors, including the and foreign residents together must provide to movement of exchange rates, the growth of match a federal budget deficit do not develop economic activity in the United States and the automatically. Historically, moreover, the currest of the world, the decline in the dollar price of rent account and federal budget balances have oil, and the sharp reductions in the imports of debt-ridden countries. Each of these factors has 1. U.S. federal budget and current account balances been influenced in turn by economic policies in Billions of dollars, seasonally adjusted annual rate the United States and abroad. U.S. capital account transactions are sensitive to a somewhat different set of factors ex ante, although apart from errors and omissions in reporting, the current account and capital account balances must be equal (but opposite in sign) ex post. Among the factors that induced large net capital inflows in 1983 were relatively high U.S. interest rates, the relatively attractive outlook for U.S. economic growth and inflation, and the view of the United States as a relatively National income accounts basis. The private domestic surplus equals private domestic saving, insafe haven for investments. These factors were, cluding the surplus of state and local governments, less private also, influenced in turn by economic policies in domestic investment. SOURCE. U.S. Department of Commerce, Bureau of Economic the United States and abroad. Analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

270 Federal Reserve Bulletin • April 1984 2. Real gross national product 1982, a period when the U.S. economy went into a deep recession. The rapid widening of the U.S. 1980=100 current account deficit during 1983 came about largely because the rapid recovery of the U.S. economy stimulated imports at a time when the growth of exports was depressed both by the slow expansion of economic activity in foreign industrial economies and by the contraction of imports into developing countries in response to severe foreign exchange constraints. The net impact of these factors on the U.S. Seasonally adjusted quarterly data. The GNP of foreign industrial countries is the weighted-average current account since the last quarter of 1980 has GNP for the Group of Ten countries and Switzerland. Weights are been outweighed, however, by the impact of proportional to each country's share in world exports plus imports during 1972-76. The same countries and weights are used throughout exchange rate developments. From the fourth this article in weighted-average indexes of consumer prices and quarter of 1980 through March 1984, the dollar interest rates in foreign industrial countries and in indexes of the exchange value of the dollar against the currencies of foreign industrial appreciated in nominal terms nearly 45 percent economies. on average against the currencies of the foreign industrial countries (chart 4). Some of the apprenot moved closely in parallel, as is evident from ciation reflected the fact that in recent years the fact that U.S. current account positions over inflation was less rapid in the United States than the past have accumulated to an international net it was on average in foreign countries: U.S. creditor position, while federal budget imbal- consumer prices rose 18 percent from the fourth ances have led to a large public debt. Over recent years, however, the widening of the structural 4. Average exchange values of the U.S. dollar deficit in the U.S. federal budget has put pres- 1980:4=100 sures on interest rates, exchange rates, economic activity, and other factors, which in turn have helped induce the widening of the current account deficit. The behavior of the U.S. current account during the 1980s is attributable partly to the differences in cyclical behavior of the U.S. and foreign industrial economies (chart 2) and the adjustment of imports by developing countries Monthly data. (chart 3). The U.S. current account remained The nominal dollar is a weighted-average index of the nominal exchange values of the U.S. dollar against the currencies of the close to balance from mid-1981 through mid- foreign industrial countries. The price-adjusted dollar is the nominal dollar multiplied by relative consumer prices (the U.S. consumer price index divided by a weighted-average index of foreign consumer 3. Imports of developing countries prices). For a further description, see the note to chart 2. Billions of dollars quarter of 1980 through the fourth quarter of 1983, while foreign consumer prices rose 24 percent on average. But even in real, or priceadjusted, terms, the weighted average value of the dollar rose almost 40 percent in those three years to a level roughly 25 percent above its average value for the entire eleven-year period of floating rates. The dollar appreciated 30 percent in real terms against the Swiss franc, 45 percent against the German mark, 55 percent against the British pound, and 20 percent against the Japa- Annual data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1983 271 5. U.S. and foreign inflation rates average of comparable foreign interest rates. The chart also shows that the real exchange value of Percent change from year earlier the dollar has varied about 20 percent on each side of its March 1973 level, while the real longterm interest differential (measured in percent per annum) has varied from about 4 percentage points below its level at the beginning of the floating-rate period to around 2Vi percentage points above that level. The magnitudes of these ranges of variation suggest that exchange market participants, however short their actual invest- Seasonally adjusted quarterly data. ment horizons, have bid spot exchange rates to Based on consumer price data. For a further description, see the note to chart 2. levels that implicitly compound changes in interest rates and inflation expectations over horizons much longer than a year. nese yen, while against the Canadian dollar it depreciated slightly on a price-adjusted basis. 7. Price-adjusted dollar and long-term real To the extent that it can be explained, the interest differential dollar's real appreciation since the fourth quarter Percentage points March 1973=100 of 1980 has been associated mainly with two factors: first, the decline in U.S. inflation rates relative to foreign inflation rates (chart 5), which has lowered expected levels of future U.S. inflation rates relative to expected levels of future foreign inflation rates; and second, the attractiveness of investing in the United States, partly because of the outlook for the U.S. economy, and partly because the United States is perceived to be a relatively safe haven for funds. Differen- Quarterly data. The long-term real interest rate for each country is a tials between nominal interest rates on dollargovernment bond yield or nearest equivalent minus an assumed denominated assets and on assets denominated measure of inflation expectations constructed as a 12-quarter centered moving average of changes in the country's consumer price index. For in foreign currencies have shown little net a further description, see the note to chart 2. change since the fourth quarter of 1980 (chart 6). Chart 7 shows that during much of the floating- The correlation and relative ranges of variation rate period, swings in the price-adjusted weight- shown in the chart are only moderately sensitive ed average value of the dollar have been correlat- to the assumed measure of long-term inflation ed with changes in the differential between long- expectations. A large part of the variation in term real U.S. interest rates and a weighted exchange rates since 1973 has been associated with changes in the differential between longterm real interest rates, but those changes have 6. U.S. and foreign long-term nominal interest rates certainly not explained all of the variation. Since Annual rate, percent the middle of 1982, in particular, the dollar has appreciated more than 10 percent, while the real interest differential has declined 1 percentage point. MERCHANDISE TRADE The U.S. merchandise trade deficit exceeded $60 Quarterly data. Government bond yields or nearest equivalents. For a further description, see the note to chart 2. billion in 1983, following a 1982 deficit of $36 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

272 Federal Reserve Bulletin • April 1984 1. U.S. merchandise trade and current accounts Billions of dollars, seasonally adjusted annual rates TTrraaddee Exports Imports CCuurrrreenntt YYeeaarr oorr qquuaarrtteerr bbaallaannccee aaccccoouunntt Agricultural Nonagricultural Oil Non-oil bbaallaannccee 1980 -26 42 182 79 171 0 1981 -28 44 193 78 187 5 1982 -36 37 174 61 186 -11 1983 -61 37 164 54 207 -41 1982:4 -45 33 160 61 178 -27 1983:1 -36 36 162 42 191 -15 2 -59 35 160 52 202 -39 3 -73 37 164 66 209 -48 -75 39 168 56 226 -61 SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis. billion (table 1). On the export side, shipments of 9. U.S. export unit values nonagricultural goods began to rise during the Ratio scale, 1980=100 second half of 1983, and by the fourth quarter they were nearly 5 percent above their level in the fourth quarter of 1982. However, the volume of these exports in the fourth quarter of 1983 was still about 20 percent below the average quarterly level in 1980 (chart 8). About half of the rise in the volume of nonagricultural exports during 1983 was accounted for by increases in shipments to Canada of automotive products, most Seasonally adjusted quarterly data. SOURCE. U.S. Department of Commerce, Bureau of the Census. of which were parts that were to be assembled into cars and sent back to the United States. The to the fourth quarter of 1983, remaining more weak growth of other nonagricultural exports than 10 percent below the average quarterly reflected the sluggishness of economic activity in volume in 1980. These exports have been held most foreign industrial countries, the foreign down by generally good harvests abroad, and by exchange constraints on countries burdened by the damping effects on foreign demand of slow debt, and the continuing impact of the apprecia- growth in the industrial countries, debt problems tion of the dollar on the price competitiveness of in the developing countries, and the translation U.S. goods. of the appreciation of the dollar into increases in The volume of agricultural exports showed prices in foreign currencies. At the end of 1983, little net change from the fourth quarter of 1982 the volume of agricultural exports was also restrained by low U.S. supplies of several major crops, reflecting both the influence of the pay- 8. Volume of U.S. exports ments-in-kind program on crop acreage and the impact of drought on yields per acre. Prices of nonagricultural exports showed little change during 1983 (chart 9), reflecting the moderate rise in U.S. producer prices combined with the restraint that the dollar's appreciation exerted on the prices U.S. exporters charged. Prices of agricultural exports rose more than 15 percent from the fourth quarter of 1982 to the fourth quarter of 1983, as droughts in the northern Seasonally adjusted quarterly data. hemisphere helped force up corn and soybean SOURCES. U.S. Department of Commerce, Bureau of Economic prices about 40 percent. Analysis and Bureau of the Census. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1983 273 On the import side, the rapid growth of the 2. Oil imports, consumption, and prices U.S. economy and the continuing appreciation of Seasonally adjusted data the dollar led to a surge in the volume of non-oil Consumption Imports Value of imports during 1983 to a fourth-quarter level that Year or (millions of (millions of Average import imports price (dollars quarter barrels per barrels per (billions of was 30 percent higher than the average quarterly per barrel) day) day) dollars) volume in 1980 (chart 10). The price of non-oil 1980 .... 17.1 7.1 30.6 79.3 imports held virtually stable during the year as 1981 .... 16.1 6.3 34.0 77.8 the effects of the dollar's appreciation offset the 1982 .... 15.3 5.4 31.2 61.2 1983 .... 15.2 5.2 28.4 53.8 effects of foreign inflation. 1982:4 .. 14.7 5.4 31.0 60.5 Oil imports were $1Vi billion, or 12 percent, 1983:1 .. 14.6 3.9 29.4 41.5 lower in 1983 than in 1982 (table 2). The unit 2 .. 15.2 5.1 27.7 51.6 3 .. 15.5 6.4 28.3 65.8 value of oil imports declined nearly 10 percent; 4 .. 15.4 5.5 28.3 56.3 but the volume was relatively constant, as un- SOURCES. U.S. Department of Commerce, Bureau of Economic usually warm weather largely counterbalanced Analysis, and U.S. Department of Energy. the stimulus from the strong U.S. recovery. Consumption of oil in the United States from agreement on production and prices (bench- October 1982 through March 1983 was 5 percent marked at $29 per barrel for Saudi light crude below that of the previous winter, a result of both oil), and the non-OPEC producers stabilized the depressed level of economic activity and mild their prices in line with the OPEC benchmark. weather. Consequently, the volume of imports Since March 1983 the OPEC producers (Saudi dropped to 3.9 million barrels per day during the Arabia in particular) have allowed their producfirst quarter of 1983. Demand in other major oil- tion to vary in order to prevent substantial price consuming regions was depressed at the start of variation. The volume of U.S. imports expanded the year by the same factors, as well as by the rapidly in the second and third quarters of 1983, lagged responses to the increase in oil prices stimulated by surging economic activity. Unusuduring 1979-80 and to the effect of the dollar's ally warm weather reappeared in October and appreciation on oil prices in foreign currencies. November and, along with a drawdown in pri- This state of depressed demand induced price vate inventories of oil, contributed to a sharp reductions, which began in mid-February when reduction in the volume of oil imports. In the first the United Kingdom and Norway—two major oil quarter of 1984, oil imports remained at relativeproducers that are not members of the Organiza- ly low volumes, despite increased levels of dotion of Petroleum Exporting Countries—endeav- mestic oil consumption, as private inventories ored to expand their sales by reducing prices $3 were drawn down further. to $5.50 per barrel. After Nigeria cut its prices, As an alternative to focusing on exports and fears of a price war mounted. Around the middle imports separately, table 3 shows balances of of March, however, the OPEC cartel reached an exports over imports for major commodity groups. At the end of World War II, the United States had a net export position in virtually every 10. Non-oil imports commodity category. With the subsequent re- Ratio scale, 1980=100 construction and expansion of capacity abroad, the United States expanded its net exports of Volume X agricultural goods, capital goods, and chemicals, while becoming a large net importer of fuels, automotive products, and other consumer goods. During the period from 1973 to 1980, U.S. net exports of capital goods and of agricultural prod- Unit value ucts benefited considerably from the large in- 1 1 i 1980 198J 1982 1983 crease in the revenues of oil-exporting countries Seasonally adjusted quarterly data. and the access of developing countries to inter- SOURCES. U.S. Department of Commerce, Bureau of Economic national credit. Thus, while net imports of fuels Analysis and Bureau of the Census. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

274 Federal Reserve Bulletin • April 1984 3. Commodity trade balances nomic activity. In addition, it reflects a direct link between the export revenues and imports of Billions of dollars oil-exporting countries, and perhaps a link be- Change in Balance balance tween the imports of non-oil developing coun- CCoommmmooddiittyy oorr tries and the surplus that, in the past, oil-exportaaggggrreeggaattee bbaallaannccee 1973 1980 1947 1973 1980 1983 to to ing countries chose to invest in international 1980 1983 financial markets. Commodity balance1 The decline in U.S. exports during recent Agricultural goods 2 9 24 18 15 -6 Capital goods 3 14 43 26 29 -17 years has not been uniform across geographic Chemicals 1 3 12 10 9 -2 regions (table 4). About half the $24 billion Fuels 1 -7 -76 -49 -69 27 Automotive products . 1 -4 -11 -25 -7 -14 decline in exports from 1980 to 1983 was ac- Consumer goods2 1 -8 -18 -31 -10 -13 Other3 1 -6 0 -10 6 -10 counted for by a 35 percent contraction of shipments to Latin America, reflecting the marked Aggregate balance Merchandise trade.... 10 1 -26 -61 -27 -35 slowdown in international lending to countries Other current account transactions -1 6 26 20 20 -6 burdened with debt. Among the industrial areas, Current account 9 7 0 -41 -7 -41 the Western European countries reduced their 1. Commodity balances are exports less imports. purchases of U.S. goods 20 percent. By contrast, 2. Excludes fuels, foods, and automotive products. exports to Canada and Japan increased from 3. Mainly industrial supplies other than fuels and chemicals. SOURCE: U.S. Department of Commerce, Bureau of Economic 1980 to 1983, partly because of the moderate Analysis. expansion of economic activity in those regions expanded $69 billion, net exports of capital and partly because the value of the dollar goods increased $29 billion, and net exports of changed less against the Canadian dollar and the agricultural products rose $15 billion. As it Japanese yen than against the Western European turned out, the U.S. trade balance swung into currencies. deficit, while the surplus on other current ac- The geographic pattern of changes in imports count transactions increased almost as much. between 1980 and 1983 reflected geographical From 1980 to 1983, net imports of fuel declined differences in the sources of non-oil imports, $27 billion, and net exports of capital goods and which increased $36 billion in total, and oil of agricultural products again changed in the imports, which declined $26 billion in total. The same direction. In part, this correlation reflects large decline in U.S. imports of oil mainly affectthe positive association of both U.S. exports and ed imports from the group of "all other" counthe price of oil with the strength of world eco- tries (table 4, last column). Canada, Japan, and 4. U.S. merchandise trade, by area Billions of dollars Other Item All areas Canada W Eu es r t o e p r e n Japan Asian Am L e a r ti i n c a1 c A o l u l n o tr th ie e s r 2 countries Exports 1980 224.2 41.6 67.6 20.8 21.0 38.8 34.4 1983 200.2 43.8 54.9 21.7 23.0 25.6 31.2 Non-oil imports 1980 170.5 38.8 42.7 31.2 23.0 18.9 15.9 1983 206.9 49.1 47.3 41.3 33.7 21.9 13.6 Oil imports 1980 79.3 4.1 4.6 * 5.4 18.6 46.6 1983 53.8 5.1 6.5 * 4.5 20.0 17.7 Trade balance 1980 -25.5 -1.3 20.3 -10.4 -7.4 1.3 -28.1 1983 -60.6 -10.4 1.0 -19.6 -15.2 -16.3 -.1 1. Western Hemisphere except United States and Canada. *Less than $50 million. 2. Includes Australia, New Zealand, the Middle East, Africa, and SOURCE. U.S. Department of Commerce, Bureau of Economic Communist countries. Analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1983 275 the group of other Asian countries each account- OFFICIAL CAPITAL FLOWS ed for nearly 30 percent of the total increase in non-oil imports, while Western Europe account- Net foreign official reserve assets in the United ed for somewhat more than 10 percent. The States increased more than $6 billion in 1983 relatively small increase in the value of non-oil after increasing about $3 billion in 1982 (table 6). imports from Western Europe presumably re- Holdings of OPEC members in the United States sulted in part from a relatively large decline in declined $81/2 billion as the combined current the unit value of these imports (on which data are account deficit of the member countries apnot collected by area), since the European cur- proached an estimated $25 billion. Foreign indusrencies depreciated against the dollar on a price- trial countries as a group added more than $10 adjusted basis considerably more than did the billion to their reserve holdings in the United Canadian dollar and the Japanese yen. States last year, despite substantial net intervention sales of dollars. The difference between the buildup of reserve holdings in the United States NONTRADE CURRENT ACCOUNT and the net intervention sales of dollars reflected TRANSACTIONS interest earnings, borrowings, and perhaps a reduction in foreign official holdings of dollar- The surplus from nontrade current account denominated assets outside the United States. transactions declined to $19.8 billion in 1983, U.S. official assets increased $6.1 billion net in reflecting changes in a number of categories of 1983, of which $1.2 billion was a net increase in service receipts and payments (table 5). Both U.S. official reserve assets and $4.9 billion reprereceipts and payments of portfolio investment sented a net increase in U.S. government loans and other nonreserve assets. The U.S. reserve position in the International Monetary Fund in- 5. Nontrade current account transactions creased $4.4 billion, reflecting the IMF's provision of dollars in connection with members' 1979-81 IItteemm average 11998822 11998833 drawings, along with a U.S. reserve-asset subscription of $1.4 billion equivalent in connection Services receipts Portfolio investment income ... 38.3 61.3 55.9 with the increase in IMF quotas. The increase in Direct investment income 35.9 22.9 22.2 Military sales 8.1 12.1 12.7 the reserve position in the IMF was largely offset ' Exports of other services 36.8 40.9 43.3 by decreases in U.S. holdings of foreign curren- Services payments cies and special drawing rights. Holdings of Portfolio investment income1... 35.1 52.0 4477..33 Direct investment income 7.8 4.8 7.1 foreign currencies fell partly as a result of repay- Military expenditures 10.0 11.9 12.2 Imports of other services 31.5 35.1 39.0 ments by Mexico of its earlier drawings on swap facilities with the Federal Reserve and the U.S. Services balance 34.9 33.2 28.4 Treasury, and repayments by Brazil of drawings Unilateral transfers, net -6.6 -8.0 -8.6 on its swap facilities with the Treasury. In addi- Total, nontrade current account 28.4 25.2 19.8 tion, the last outstanding Carter notes reached maturity and were redeemed during the year, 1. Includes interest paid on U.S. government obligations. which reduced both U.S. official reserve assets income declined from 1982 to 1983, largely be- and Treasury liabilities denominated in marks cause of the declines in dollar interest rates after and Swiss francs. midyear 1982. Direct investment income receipts remained depressed in 1983 as economic activity abroad remained sluggish, while direct invest- PRIVATE CAPITAL FLOWS ment income payments picked up with the strong rise in business profits in the United States. Recorded private capital transactions swung Military sales and expenditures both increased from a net outflow of $22.7 billion in 1982 to a net somewhat in 1983, as did exports and imports of inflow of $33.7 billion in 1983. The change was other services. more than accounted for by flows through U.S. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

276 Federal Reserve Bulletin • April 1984 6. U.S. international transactions Billions of dollars, not seasonally adjusted; + = net inflow 1983 IItteemm 11998822 11998833 1 2 3 4 Current account balance -11.2 -40.8 -3.4 -8.9 -14.1 -14.4 Official capital flows -7.5 .0 -1.9 .8 -3.2 4.3 Foreign official assets in the United States, net 3.2 6.1 .0 2.0 -2.6 6.6 Industrial countries -6.5 10.3 .3 3.7 .5 5.9 OPEC 7.4 -8.6 -1.4 -3.4 -2.1 -1.7 Other countries 2.3 4.3 1.2 1.7 -1.0 2.4 U.S. official assets, net1 -10.7 -6.1 -2.0 -1.1 -.7 -2.3 Reserve assets -5.0 -1.2 -.8 .0 .5 -1.0 Other U.S. government assets -5.7 -4.9 -1.2 -1.2 -1.2 -1.4 Private capital flows -22.7 33.7 -3.7 9.5 14.2 13.7 Net flows into U.S. banking offices -45.1 26.3 -5.3 6.1 13.0 12.5 Foreign net purchases of U.S. securities 13.1 17.2 5.9 5.7 2.9 2.7 U.S. Treasury securities 7.0 8.6 2.9 3.1 1.0 1.6 Corporate bonds 2.5 2.2 .1 .9 .5 .7 Equities 3.6 6.4 2.9 1.8 1.3 .4 U.S. net purchases of foreign securities1 -8.0 -7.5 -1.8 -3.2 -1.5 -.9 Foreign net direct investment in the United States 10.4 9.5 2.1 2.2 3.2 2.1 U.S. net direct investment abroad1 3.0 -7.6 -.0 -1.0 -3.9 -2.7 Other recorded capital flows, net 3.9 -4.2 -4.5 -.3 .6 n.a. Statistical discrepancy 41.4 7.1 9.0 -1.4 3.1 -3.7 1. - = increase (outflow). SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis. banking offices (including international banking $17.2 billion in 1983. Net acquisitions of U.S. facilities), which shifted from a net outflow of Treasury securities rose to a record level of $8.6 $45.1 billion in 1982 to a net inflow of $26.3 billion, despite $1.3 billion in redemptions of billion in 1983. Carter notes, while net acquisitions of U.S. The shift in banking transactions did not begin corporate stocks reached a record $6.4 billion. until the second quarter. In the first quarter, $5.3 U.S. net purchases of foreign securities declined billion net flowed out of U.S. banking offices, from $8.0 billion in 1982 to $7.5 billion in 1983. which experienced a rapid buildup of newly Foreign net direct investment in the United introduced money market deposit accounts and States was recorded at $9.5 billion in 1983, placed some of the deposited funds with related compared with $10.4 billion in 1982. U.S. net banking offices in other countries. In the second direct investment abroad increased to an outflow quarter, an incentive for U.S. banking offices to of $7.6 billion after an unusual net inflow of $3.0 reduce their net claims on foreign residents was billion in 1982. Several factors figured in this provided by the response of interest differentials reversal of U.S. direct investment flows. More to relatively strong credit demands in the United rapid economic growth abroad contributed to an States fostered by the rapid growth in economic increase in reinvested earnings; less reliance by activity and the Treasury's borrowing needs. In U.S. corporations on the Eurobond markets as a particular, yields on placements in the Eurodol- source of funds led to lower inflows of intercomlar market declined during 1983 relative to yields pany account funds from Netherlands Antilles on domestic money market instruments. At the finance affiliates; and finally, net inflows of intersame time, interest rates offered on Eurodollar company trade credits declined sharply. deposits rose relative to foreign-currency interest rates, motivating foreign residents to acquire dollar-denominated deposits with banks in the THE STA TISTICAL DISCREPANC Y Euromarket. Reported private foreign net purchases of U.S. The errors and omissions in the balance of paysecurities increased from $13.1 billion in 1982 to ments accounts netted to an unrecorded inflow Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1983 277 of $7.1 billion in 1983, considerably less than the tradable goods industries. These industries have $41.4 billion statistical discrepancy in 1982. This lost a substantial volume of sales in foreign item includes both unrecorded merchandise markets and at home have faced strong competitrade and services transactions and unrecorded tion from imports. The effects have been felt by capital flows. Presumably, the accuracy in re- the manufacturing sector, agriculture, and some cording current account transactions does not of the service industries. At the same time, shift abruptly from year to year, so most of the however, most tradable goods industries have decline in the statistical discrepancy from 1982 to benefited from the rapid expansion of the Ameri- 1983 probably centered in unrecorded capital can economy since the end of 1982. Thus in flows. Part of the decline may have reflected a February 1984 the industrial production index for change in the composition of capital flows. Capi- manufacturing was IVi percent above its level at tal flows through U.S. banking offices are regard- the end of 1980, when the dollar was beginning to ed as more accurately reported than capital flows appreciate. The increase in manufacturing prothat bypass banks and that in principle should be duction was accompanied by rapid productivity reported by nonbanks. growth, however, so that employment in the manufacturing sector declined about V/i percent over the same period. This experience extended the negative trend in the share of manufacturing THE OUTLOOK employment in total private employment; over The U.S. trade and current account deficits for the past several decades, relatively rapid produc- 1984 seem likely to exceed their 1983 levels tivity growth in the manufacturing sector has considerably, even if the dollar were to depreci- enabled a diminishing share of the nation's work ate substantially. One factor in this outlook is a force to produce a relatively constant share of continuing lagged response of import and export the nation's output. volumes to the substantial appreciation of the Questions have also been raised about the dollar over the past several years. A second sustainability of the large external deficits and factor is the expectation that economic activity the strong dollar. The prospect of a rapidly will continue to expand more rapidly in the expanding U.S. net external indebtedness posi- United States than in the rest of the world, and tion has contributed to sentiment that a substanthus will support a higher percentage growth rate tial depreciation of the dollar is likely unless the of U.S. imports than of U.S. exports. A third external deficits are reduced significantly factor is the initial deficit positions of the trade through other channels. From this perspective, and current accounts. When the external ac- the outlook for the external deficits and the counts begin in deficit, the trade deficit tends to dollar hinges on whether the structural deficits in increase even if exports expand at as rapid a the U.S. federal budget are reduced substantially percentage rate as imports; and the current ac- and on how rapidly economic activity expands count deficit tends to increase still more as abroad. reductions in U.S. net claims on foreigners lead One scenario, if U.S. budget deficits are reto reductions in net investment income receipts. duced significantly, is that the dollar may depre- A depreciation of the dollar, of course, would ciate somewhat as real interest rates in the reduce the U.S. trade and current account defi- United States decline. The short-run contraccits, other things equal, but with a lag of perhaps tionary effects on U.S. economic activity of the several quarters. Such lags, or "J curve" effects, measures taken to reduce the government defidevelop in the trade balance if the rise in the cits would then be cushioned by the stimulus to dollar price of imports in response to a deprecia- the domestic production of tradable goods from tion initially outweighs the more gradual decline the dollar's depreciation, together with the genin the volume of imports and increase in the eral stimulus to private domestic spending from volume of exports. the decline in real interest rates. The strong dollar and growing external deficits In the absence of actions to reduce the struchave raised concerns about the state of U.S. tural budget deficits, the dollar may depreciate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

278 Federal Reserve Bulletin • April 1984 without a decline in real interest rates. Indeed, if lost net capital inflow from abroad. In this case, the dollar depreciated by enough to reduce the the tradable goods sectors of the U.S. economy current account deficit substantially, with no would benefit from the lower dollar, but interestreduction in the budget deficit, a rise in real sensitive sectors would suffer. Moreover, the interest rates in the United States would likely be discouragement of private capital formation ultirequired to induce the increase in the excess of mately could leave the United States with permaprivate domestic saving over private domestic nently lower levels of aggregate output and ininvestment that would be needed to replace the come. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

279 Annual Revisions to the Money Stock Thomas D. Simpson prepared this article with ly large revisions to seasonal factors can be substantial contributions from Wayne Smith. expected. Messrs. Simpson and Smith are in the Board's Benchmark revisions were also quite large. Division of Research and Statistics. Footnotes Typically, benchmark revisions apply to the deappear at the end of the article. posits of institutions that do not submit deposit reports on a frequent and timely basis (such as Annual revisions to the money stock published in weekly); estimates of their deposits are used February 1984 were, on balance, larger than until reported data from these institutions benormal, especially for Ml. These revisions con- come available. Such standard revisions—that sisted of seasonal adjustment and benchmark is, differences between the amounts reported and revisions and a change in the definition of M3 to previous estimates—tend to be fairly uniform include term Eurodollar deposits held by U.S. over any particular period. However, unusual residents. With this latter change, term Eurodol- revisions affecting deposit growth, many of a lar deposits, domestically issued large denomina- one-time nature, arose from reporting changes tion time deposits, and term repurchase agree- made during 1983. Also, some banking instituments are treated on a more consistent basis. tions—New York Investment Companies—had Procedures used in making seasonal and been reporting their demand deposit data incorbenchmark revisions were similar to those em- rectly for some time, and the coin element of the ployed in recent years. Seasonal factors were currency component had been incomplete. The updated using the X-ll ARIMA procedure impact of these three types of revisions need not adopted in 1982. In a departure from the past, the be as uniform as the more conventional type. In nontransactions portions of M2 and M3 were not 1983, benchmark revisions in effect boosted built up from seasonally adjusted components. growth of all measures of the money stock; the The non-Mi portion of M2 was seasonally stronger growth of Ml was concentrated in the adjusted as a whole to reduce distortions to second half of the year. seasonal factors caused by substantial portfolio This article discusses in more detail recent shifts in recent years, most notably the shifts to seasonal and benchmark revisions and their efmoney market deposit accounts in 1983; and a fects on monetary growth in 1983, with particular similar procedure was used to seasonally adjust emphasis on the growth of Ml. Tables in the the remaining portion of M3.1 A comparable appendix illustrate these effects. method had been adopted in 1982 to reduce distortions to the deposit component of Ml caused by shifts to NOW accounts, primarily the SEASONAL FACTOR REVISIONS shift that occurred in 1981. In the past two years, the impact of revisions The basic time unit for seasonal adjustment to seasonal factors for monthly and quarterly Ml continues to be the month. The X-ll ARIMA growth rates has been large, reflecting distor- procedure used to update monthly seasonal adtions in the behavior of deposits in 1980 caused justment factors conforms to a recommendation by credit controls and by shifts in the pattern of made in 1981 by the Committee of Experts on transactions deposit holdings as payment prac- Seasonal Adjustment.2 When seasonal factors tices changed and the menu of monetary assets were reviewed in 1982, a combination of an X-ll expanded. Such circumstances make it difficult and an ARIMA procedure replaced the previous for any seasonal adjustment procedure to identi- X-ll procedure. As shown in table 1, the effects fy underlying variations in deposits, and relative- of revisions to seasonal factors on monthly and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

280 Federal Reserve Bulletin • April 1984 1. Annual revisions to growth rates of the money stock: mean absolute changes1 Percent, annual rates Monthly revision Quarterly revision Semiannual revision YYeeaarr aanndd mmoonneettaarryy aaggggrreeggaattee Total Seasonal Total Seasonal Total Seasonal 19782 Ml 1.39 1.33 .43 .43 .18 .18 M2 .65 .43 .48 .10 .48 .00 1980 Ml 1.66 1.67 .68 .55 .30 .38 M2 1.27 1.32 .88 .78 .63 .68 M3 .86 1.09 .28 .62 .28 .62 1981 Ml 2.68 2.09 .35 .23 .10 .03 M2 1.54 1.16 .95 .73 .30 .53 M3 1.57 1.32 .83 .80 .13 .20 1982 Ml 3.73 3.84 1.48 1.63 .08 .13 M2 1.75 1.67 1.25 .88 1.25 .88 M3 1.57 1.39 .95 .68 .95 .68 1983 Ml 3.06 3.07 1.30 1.10 1.30 1.00 M2 2.07 1.77 .78 .65 .33 .10 M3 1.66 1.72 .98 .68 .53 .08 MEMO: Average3 Ml 2.50 2.40 .85 .79 .39 .34 M2 1.66 1.48 .96 .76 .63 .55 M3 1.42 1.38 .76 .70 .47 .40 1. First revisions to growth rates are published in the year following only money market mutual funds in 1982; the inclusion of tax-exempt the revision. No revisions are shown for the year 1979, as seasonal money market mutual funds in M2 and M3 and the removal of and benchmark revisions to that year that were made in 1980 applied Individual Retirement Accounts and Keogh accounts from balances in to a redefined set of monetary aggregates. M2 and M3 in 1983; and the inclusion of term Eurodollars in M3 in Total revisions include the effects of minor definitional changes. 1984. These changes are: the inclusion of travelers checks of nonbank 2. Old definitions of Ml and M2. issuers in 1981 that affected growth in 1980; the inclusion in M2 of 3. For Ml, the averages apply to 1978 and 1980-83. For M2 and retail purchase agreements and the removal from M2 of institution- M3, the data apply only to 1980-83. quarterly growth rates of M1 have been especial- revisions to seasonal factors can be expected to ly large in the past two years, with revisions to be unusually large as the behavior of the money growth in 1982 (made in early 1983) being the stock adapts, and even after a new pattern largest. Seasonal revisions on semi-annual emerges, because statistical procedures require growth of Ml had the greatest impact in 1983 ample historical experience to estimate reliably because of the unusual tendency for monthly the new seasonal variations. revisions during the first and second halves of A somewhat different picture emerges for the the year to cumulate.3 In general, revisions to broader measures of the money stock.5 The individual seasonal factors tended to be largest in impact of revisions to seasonal factors on monththe spring (April and May). ly growth rates of M2 and M3 in 1983 was much Staff analysis suggests that difficulties in iden- smaller than for Ml, although large by the expetifying evolving seasonal patterns were com- rience of recent years (see table). The impact on pounded in recent years by the effects of the quarterly growth of M2 and M3 was much more credit control program in 1980. Despite efforts to in line with that of past experience; the impact on minimize distortions to computed seasonal fac- semi-annual growth was considerably below that tors, evidence suggests that it took about two of earlier years, especially revisions to 1982. years of subsequent data for the procedure to identify evolving patterns.4 Also contributing to changing seasonal patterns were recent changes BENCHMARK REVISIONS in the composition of money stock measures and accompanying changes in the way the public Effects of benchmark revisions on monetary manages its holdings of liquid assets. As a result, growth in 1983 were also quite large, especially Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Annual Revisions to the Money Stock 281 for Ml. Moreover, benchmark revisions to Ml mid-year 1983, unless it could be determined tended to reinforce seasonal revisions, thereby from other reports that they were well below the causing a larger boost to monetary growth in the exemption level. The subsequent reporting stasecond half of 1983. In addition to ordinary tus of these institutions was determined by those benchmarks to call reports, there were a number reported levels; in some cases, institutions that of extraordinary revisions to deposits.6 had not done so previously began reporting detailed deposit data—and maintaining reserves— on a weekly or quarterly basis. Changes in Reporting Requirements These reporting changes were implemented around mid-year 1983. At the same time, the These extraordinary revisions arose from staggered system for institutions that reported changes in deposit reporting that were imple- quarterly ended, and the Board established a mented during the year, many of which were single "as-of" date for all institutions that report associated with reduced deposit reporting man- quarterly. However, in view of the large number dated by the Garn-St Germain Act of 1982. The of institutions involved and the limited experiact specifies that the first $2 million of reservable ence of many institutions with the content and liabilities at each depository institution be ex- procedures of the reports, processing, editing, empt from reserve requirements (with this ex- and revision times were very long, extending emption being indexed each year to the growth of toward the end of the year.9 reservable liabilities); it also mandates a reduction in the reporting burden of those institutions totally exempt from reserve requirements. Effects of Benchmark Revisions on Ml In response, the Board cut back the frequency of reports due to it from fully exempt institu- These changes in reporting procedures affected tions.7 Previously, depository institutions with the growth of deposits in several ways in 1983. more than $15 million in total deposits (regard- First, it was discovered that a sizable number of less of the amount of their reservable liabilities) institutions had not been included in previous were required to report weekly, and those with estimates and that deposits at these institutions deposits between $2 million (as of December had grown rather rapidly. Second, some of these 1979) and $15 million were to report quarterly.8 institutions, assumed to have been quarterly Because so many institutions reported on a quar- reporters based on Board criteria, in fact had not terly basis, they were divided into three panels, been included in aggregated total deposit figures with one panel reporting each month. The only that were being transmitted to the Board. Third, time when all three panels reported simulta- several other institutions, some of which were neously was January 1981; the relationship im- rapidly growing de novo banks, had not previplied in those data formed the basis of estimates ously been incorporated into deposit estimates. of total deposits for all these institutions using Fourth, simultaneous reporting of deposits by all subsequent staggered monthly reports. With the three panels of quarterly reporters indicated that new reduced reporting procedures, those institu- those institutions as a group held more deposits tions with reservable liabilities below the exemp- than had been estimated previously under stagtion level that had been reporting weekly—that gered reporting. As shown on the first line of is, those whose deposits totaled more than $15 table 2, the net effect of revisions from all of million—started submitting an abbreviated quar- these sources was a $1.1 billion boost in Ml in terly report. Those with reservable liabilities 1983, with the bulk of this increase occurring in below the exemption level that had been report- the second half of the year.10 ing quarterly generally were switched to a re- Fifth, special edits revealed that New York duced annual report. Investment Companies (banking institutions that In addition, depositories that had not been do not report on the same basis as other deposireporting to the Federal Reserve on either a tors) included balances due to own foreign ofweekly or quarterly basis were asked to report fices in their reported figures for demand deposdeposits and other reservable liabilities as of its. Revisions to historical data for these Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

282 Federal Reserve Bulletin • April 1984 2. Contribution of benchmark revisions to increases cy series was revised upward during 1983 and for" in the monetary aggregates in 1983 earlier years because of incomplete reporting of Quarterly averages, millions of dollars the coin component by the mints. Table 2 shows that benchmark revisions as a whole boosted Ml Monetary aggregate 1983:H 1 1983:H2 Total, 1983 growth in 1983 by $1.8 billion, virtually all of Ml which came in the second half of the year. 1. Deposits at nonreporters and quarterly reporters 400 700 1,100 2. Deposits at New York investment companies 100 100 200 3. Deposits at weekly reporters... -700 700 0 4. Currency 300 300 600 Effects of Benchmark Revisions 5. Other 0 -100 -100 on M2 and M3 6. Total Ml 100 1,700 1,800 M2 7. Savings, small time deposits, Benchmark revisions to M2 and M3 were larger and MMDAs (gross) 400 1,400 1,800 in dollar amounts than they were for Ml. Revi- 8. IRAs and retail RPs 1,400 400 1,800 9. Overnight Eurodollars -500 100 -400 sions to growth rates for the year as a whole were 10. Other 500 -800 -300 11. Total M2 1,900 2,800 4,700 smaller for M2 than for Ml because of the much M3 larger size of the former. Deposits in nontransac- 12. Large time deposits (gross) .... 400 700 1,100 tions M2 were boosted, mainly in the second half 13. Consolidation 900 300 1,200 14. Term RPs at thrift of the year (line 7 of table 2). This revision institutions 200 1,300 1,500 15. Other1 200 600 800 stemmed largely from the reporting changes not- 16. Total M31 3,600 5,700 9,300 ed above that affected deposits in Ml.11 Benchmark revisions to Individual Retirement 1. Excluding redefinition to include term Eurodollars. Accounts (IRAs) and Keogh accounts and retail institutions were available in time for the bench- repurchase agreements (RPs) (line 8 of table 2) mark. As shown in the second line of the table, swelled M2 in 1983, especially in the first half of revisions of this type raised Ml growth in 1983, the year. IRA and Keogh account balances are even though they lowered the level of demand removed from small time deposits in M2, while deposits, as deposit levels in the fourth quarter of retail RPs are added to this component. Call 1982 were reduced by more than those in fourth report data on IRA and Keogh balances indicatquarter of 1983. ed that previous estimates had been too large; a Revisions associated with money market de- revision to reported data of retail RPs at thrift posit accounts (MMDAs) significantly affected institutions indicated that previous estimates of the pattern of Ml growth during 1983, although such balances had also been too large, which growth for the year as a whole was not affected. reduced the net effect of the IRA and Keogh- MMDAs were authorized by the Garn-St Ger- retail RP revision. The overnight Eurodollar semain Act of 1982. The surge in MMDAs follow- ries (line 9) was also revised, owing to a change ing their introduction occasioned other changes in the reporting panel that raised the level of such in procedures for reporting deposits, which were balances in 1982.12 implemented in the spring of 1983. At that time, Revisions to M3 were larger than for M2, both these accounts were added to the body of the in dollar amounts and in relative terms. Large weekly (and quarterly) deposit reports; previous- time deposits on a gross basis (line 12 of table 2) ly, they had been reported on a special slip sheet were revised upward for the same reasons that to the regular deposit report. deposits in Ml and M2 were. Shown on line 13 is Editing of the revised deposit reports revealed the impact on the expansion of M3 of revisions to that a large number of institutions had incorrect- consolidation items—mostly large time deposits ly included MMDAs in their demand deposits or held by thrift institutions and, to a lesser degree, other checkable deposit accounts as well as in M3 assets held by money market mutual funds, their MMDA totals. Since these miscalculations both of which are subtracted from gross large were concentrated in the first half of the year, time deposits to avoid double counting. The table Ml balances were lower during that period, indicates that these netting items had previously causing a larger increase in the second half of the been overestimated. year (see line 3, table 2). In addition, the curren- Another substantial change reflected revisions Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Annual Revisions to the Money Stock 283 to term RPs at thrift institutions (line 14 of the which like seasonal revisions had an unusually table). A portion of this revision resulted from large impact on growth in 1983—stemmed from updated benchmarks to call reports from savings recent changes in reporting. To the degree that and loan associations, and the remainder was the pace of reporting changes subsides, which due to temporary disruptions in the flow of data depends on regulatory and other financial that arose when a number of savings and loans changes, future benchmark revisions will probaconverted to federal savings banks. bly have a smaller impact on the measures of the monetary aggregates. CONCLUSION The above discussion suggests that many of the benchmark revisions to money stock measures— FOOTNOTES non-M2 portion of M3 was adjusted upward by the amount that large time deposits were estimated to be depressed by money market deposit accounts (14 percent). 1. In the past, not all components of nontransactions M2 6. Commercial bank deposits were benchmarked to the and M3 had been seasonally adjusted. In view of data September 1982, December 1982, March 1983, and June 1983 difficulties, money market mutual funds, repurchase agree- call reports. ments, money market deposit accounts, and overnight Euro- 7. Edge Act and Agreement Corporations and U.S. dollars entered these measures on a not-seasonally adjusted branches and agencies of foreign banks were deemed ineligibasis. ble for reduced reporting, however. 2. Seasonal Adjustment of the Monetary Aggregates: Re- 8. The quarterly panel also included member banks with port of the Committee of Experts on Seasonal Adjustment deposits below $2 million. Other banks with deposits below Techniques (Board of Governors of the Federal Reserve $2 million were not initially required to report regularly. System, 1981), p. 2. Reserve Banks were to monitor deposit growth at such 3. The effect of revisions to monthly growth rates of the institutions and provide the Board with information on insti- Board's published experimental Ml series, which uses mod- tutions whose deposits had grown to more than $15 million, at el-based seasonal factors, were also relatively large. Growth which time they were to report regularly. in the first half of 1983 was similarly reduced and growth in 9. In view of the massive amount of work involved in the second half boosted by these revisions, but to a lesser completing edits of reports and subsequent benchmarking, extent than for the X-ll ARIMA procedure. not all deposits were benchmarked to the new reports. In 4. See Thomas D. Simpson and John R. Williams, "Recent particular, the benchmarking of savings and time deposits at Revisions in the Money Stock: Benchmark, Seasonal Adjust- thrift insitutions was not completed in time for this benchment and Calculations of Shift-Adjusted Ml-B," FEDERAL mark, but it will be incorporated later. RESERVE BULLETIN, vol. 67 (July 1981), pp. 539-42. For a 10. Some of the increase in the second half of the year more detailed description of the statistical methodology used reflected benchmarking to the September and December for distortions during the credit control period, see David deposit reports of the quarterly reporters; unusual delays in Pierce and William Cleveland, "Intervention Analysis and these benchmarks were caused by difficulties in converting to Seasonal Adjustment of the Monetary Aggregates," Special the new reporting panel. Studies Paper 163 (Board of Governors of the Federal Re- 11. These deposit revisions were primarily to deposits of serve System, Division of Research and Statistics, 1981; pro- commercial banks, as revisions to deposits at thrift institucessed). tions have not been completed. 5. As noted above, the non-Mi portion of M2 and the non- 12. Contributing to other revisions (line 10) were changes M2 portion of M3 were seasonally adjusted as a whole. To to average monthly levels of certain items reported as of a reduce the distortion to seasonal factors caused by shifts at single day each week (such as money market mutual funds) the end of 1982 and throughout 1983 from outside M2 to because of a change occasioned by contemporaneous reserve money market deposit accounts, the level of nontransactions requirements. Previously, levels reported on Wednesdays M2 was adjusted downward by the amount of balances in were treated as weekly averages for the weeks ending on money market deposit accounts estimated to have come from Wednesday. Under the revised procedures, Wednesday levother sources (20 percent). Similarly, in view of the tendency els are treated as weekly averages for weeks ending on the for depository institutions to react to the swelling of inflows following Monday. Average monthly levels constructed from to core deposits by reducing their large time deposits, the the prorated weeks were therefore revised. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

284 Federal Reserve Bulletin • April 1984 A.l. Comparison of revised and old growth rates of Ml, October 1982-January 1984 Percent changes, annual rates Difference RReevviisseedd OOlldd DDiiffffeerreennccee PPeerriioodd MMll MMll ((11 -- 22)) Benchmark Seasonals (1) (2) (3) (4) (5) Monthly 1982—October 17.3 14.2 3.1 ..55 22..66 November 15.8 13.6 2.2 .8 1.4 December 10.3 10.6 -.3 -.4 .1 1983—January 11.5 9.8 1.7 -2.4 4.1 February 14.8 22.4 -7.6 .2 -7.8 March 13.0 15.9 -2.9 0 -2.9 April 3.6 -2.7 6.3 1.7 4.6 May 21.0 26.3 -5.3 .5 -5.8 June 10.2 10.2 0 1.4 -1.4 July 9.4 8.9 .5 .9 -.4 August 5.8 2.8 3.0 0 3.0 September 3.5 .9 2.6 .6 2.0 October 6.2 1.9 4.3 1.6 2.7 November 3.2 .9 2.3 0 2.3 December 5.3 6.5 -1.2 -1.0 -.2 1984—January 10.7 7.4 3.3 .5 2.8 Quarterly 1982:4 15.4 13.1 22..33 .2 22..11 1983:1 12.8 14.1 -1.3 -.7 -.6 2 11.6 12.2 -.6 .8 -1.4 3 9.5 8.9 .6 .8 -.2 4 4.8 2.1 2.7 .6 2.1 Annual 1982:4-1983:4 10.0 9.6 .4 .4 0 Semiannual 1982:4-1983:2 12.4 13.3 -.9 0 -.9 1983:2-1983:4 7.2 5.5 1.7 .7 1.0 A.2. Comparison of revised and old growth rates of M2, October 1982-January 1984 Percent changes, annual rates Difference RReevviisseedd OOlldd DDiiffffeerreennccee PPeerriioodd MM22 MM22 ((11 -- 22)) Benchmark Seasonals (1) (2) (3) (4) (5) Monthly 1982—October 99..33 77..99 11..44 -.1 11..55 November 10.5 9.5 1.0 .4 .6 December 12.1 8.9 3.2 .5 2.7 1983—January 31.9 30.9 1.0 -.6 1.6 February 21.7 24.4 -2.7 -.9 -1.8 March 7.8 11.2 -3.4 0 -3.4 April 8.4 2.8 5.6 1.9 3.7 May 11.8 12.4 -.6 .1 -.7 June 8.4 10.4 -2.0 -.1 -1.9 July 5.4 6.8 -1.4 0 -1.4 August 4.9 6.0 -1.1 0 -1.1 September 7.1 4.8 2.3 .6 1.7 October 10.8 9.1 1.7 .9 .8 November 8.3 7.3 1.0 0 1.0 December 7.7 5.0 2.7 .3 2.4 1984—January 5.6 4.9 .7 .6 .1 Quarterly 1982:4 1100..66 99..33 11..33 ..33 11..00 1983:1 20.5 20.3 .2 -.2 .4 2 10.6 10.1 .5 .5 0 3 6.9 7.8 -.9 .1 -1.0 4 8.5 7.0 1.5 .4 1.1 Annual 1982:4-1983:4 12.1 11.7 .4 .3 .1 February/March 1983-1983:4 8.3 7.8 .5 .6 -.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Annual Revisions to the Money Stock 285 A.3. Comparison of revised and old growth rates of M3, October 1982-January 19841 Percent changes, annual rates Difference RReevviisseedd OOlldd DDiiffffeerreennccee PPeerriioodd MM33 MM33 ((11 ~~ 22)) Benchmark Seasonals (1) (2) (3) (4) (5) Monthly 1982—October 1111..77 99..33 22..44 00 22..44 November 7.7 9.3 -1.6 -.8 -.8 December 5.7 3.7 2.0 -.3 2.3 1983—January 14.4 13.0 1.4 -1.2 2.6 February 13.1 13.7 -.6 1.4 -2.0 March 7.2 8.1 -.9 1.2 -2.1 April 8.7 3.3 5.4 2.8 2.6 May 9.6 10.9 -1.3 .5 -1.8 June 10.3 11.0 -.7 .2 -.9 July 5.1 5.5 -.4 -.2 -.2 August 6.1 88..88 -2.7 -.3 -2.4 September 88..88 77..66 1.2 -.5 1.7 October 99..44 8.6 .8 -1.0 1.8 November 14.4 12.2 2.2 2.7 -.5 December 8.3 6.2 2.1 .2 1.9 1984—January 6.0 5.6 .4 -1.4 1.8 Quarterly 1982:4 1100..00 99..55 ..55 -.3 .8 1983:1 10.8 10.2 .6 -.1 .7 2 9.3 8.1 1.2 1.5 -.3 3 7.4 8.4 -1.0 -.1 -.9 4 10.0 9.0 1.0 .1 .9 Annual 1982:4-1983:4 9.7 9.2 .5 .5 0 1. Revised M3 includes term Eurodollars; the inclusion of term Eurodollars boosted M3 growth in 1983 by no more than 0.1 percentage point. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

286 Industrial Production Released for publication April 13 than 4 percent above its earlier peak reached in July 1981. Industrial production increased an estimated 0.4 In market groupings, output of consumer percent in March following revised increases in goods increased 0.3 percent in March, the same January and February of 1.4 and 1.0 percent as the revised gain for February but substantially respectively. Gains in output were widespread below the gains in other recent months. Producamong most materials and products. After 16 tion of autos and trucks for consumer use rose consecutive monthly increases, the March index moderately; however, output of home goods at 160.7 percent of the 1967 average was more edged downward. Autos were assembled at an 1967 = 100 170 FINAL PRODUCTS MATERIALS 190 190 Nondurable 170 170 150 150 Consumer goods 130 130 Defense and space 110 110 CONSUMER GOODS \ r N /\ / ° Durable \ / J 1969—70=100 Annual rate, millions of units 180 - AUTOS 18 140 Domestic assemblies I I i 1978 1980 1982 1984 All series are seasonally adjusted and are plotted on a ratio scale. Auto sales and stocks include imports. Latest figures Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

287 1967 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, GGGrrrooouuupppiiinnnggg 1984 1983 1984 MMMaaarrr... 111999888333 tttooo MMMaaarrr... Feb. Mar. Nov. Dec. Jan. Feb. Mar. 111999888444 Major market groupings Total industrial production 160.0 160.7 .2 .6 1.4 1.0 .4 14.8 Products, total 160.7 161.2 .1 1.0 1.5 .6 .3 13.8 Final products 158.4 159.0 .3 1.3 1.5 .6 .4 13.7 Consumer goods 159.9 160.3 -.5 1.0 1.1 .3 .3 11.1 Durable 163.2 163.8 -.5 1.7 3.0 -.1 .4 20.2 Nondurable 158.6 158'.9 -.6 .8 .4 .4 .2 7.7 Business equipment 172.5 173.3 1.7 2.0 2.2 .9 .5 20.6 Defense and space 129.0 129.9 .9 1.4 1.5 1.1 .7 11.0 Intermediate products 169.3 169.6 -.6 -.1 1.5 .9 .2 14.7 Construction supplies 157.6 158.0 -.5 -.1 2.6 1.4 .3 18.7 Materials 158.9 159.8 .3 .0 1.3 1.5 .6 16.1 Major industry groupings Manufacturing 161.4 162.1 .1 .3 1.6 1.3 .4 15.5 Durable 150.7 151.5 .6 1.0 2.2 1.7 .5 20.0 Nondurable 177.0 177.3 -.5 -.5 .8 1.0 .2 10.3 Mining 124.6 123.9 2.4 2.1 .7 .0 -.6 10.0 Utilities 177.0 178.8 -.1 3.5 -.8 -2.2 1.0 7.8 NOTE. Indexes are seasonally adjusted. annual rate of 8.2 million units, up more than 1 supplies increased only an estimated 0.3 percent percent from February; current industry sched- following very large gains in January and Februules indicate a seasonally adjusted annual rate of ary. 7.8 million units for April. Production of business Production of materials rose 0.6 percent in equipment, which had reached a low in February March. Durable materials increased 0.8 percent, 1983, showed average monthly increases of with a large gain in output of equipment parts. about 1.8 percent through January 1984. The Production of nondurable materials increased 0.3 advances in March and February were more percent and energy materials, 0.4 percent. moderate, as sizable declines occurred in oil and In industry groupings, manufacturing output gas well drilling activity in both months. Howev- rose 0.4 percent, with a gain of 0.5 percent in er, production increases remained strong in man- durable manufacturing and 0.2 percent in nonduufacturing and commercial equipment. Produc- rables. Utility output increased 1.0 percent, but tion of defense and space equipment continued mining activity was reduced 0.6 percent. to expand in March. Output of construction Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

288 Statements to Congress Statement by Preston Martin, Vice Chairman, better match the duration and interest rate sensi- Board of Governors of the Federal Reserve Sys- tivity of assets with liabilities, thrifts and other tem, before the Subcommittee on Telecommuni- mortgage originators with predominantly shortcations, Consumer Protection, and Finance of term debts may move more and more long-term the Committee on Energy and Commerce, of the mortgages to investors through the secondary U.S. House of Representatives, March 14, 1984. markets. Mortgage pass-through securities, which represent ownership interests in pools of I appreciate the opportunity to appear before this residential loans, can be the most efficient secsubcommittee on behalf of the Federal Reserve ondary market instruments to accomplish this Board to discuss title I of H.R. 4557—the Sec- shift. ondary Mortgage Market Enhancement Act of Since the early 1970s, the thrust of public 1983. This legislation is intended to encourage policy has been to encourage development and and facilitate wider participation by private insti- growth of markets for mortgage pass-through tutions in the markets for mortgage-backed secu- securities guaranteed by federal agencies and rities, primarily by amending federal securities federally sponsored enterprises. By the end of laws and by preempting certain state securities last year, outstanding pass-through securities and investment statutes. guaranteed by the Government National Mort- You have indicated that your subcommittee is gage Association (GNMA), the Federal Home concerned primarily about the implications of Loan Mortgage Corporation (FHLMC), or the such measures for investor protection. You also Federal National Mortgage Association (FNMA) have raised questions about the impact of the totaled $243 billion—equivalent to nearly a fifth proposed legislation on the sectoral allocation of of all residential mortgage debt outstanding. capital and on the performance of the economy By contrast, development of markets for fully as a whole. After briefly reviewing the status of private mortgage pass-through securities—that the markets for private mortgage-backed securi- is, securities without federal sponsorship issued ties, I will turn to the issues of investor protec- against pools of conventional loans—has been tion and economic impact raised by the legisla- quite modest. While a fair number of banks, tion under consideration. Let me say at the thrift institutions, mortgage companies, insuroutset, however, that your emphasis on investor ance companies, and so-called conduit organizaprotection is well placed. It is a vital public tions have issued private pass-throughs, availpolicy concern that the emerging market for able estimates suggest that the total amount private mortage-backed securities be subject to outstanding is only about $10 billion. To date, adequate degrees of federal supervision and reg- private institutions have been successful mainly ulation. Abuses early in the game not only could in the market space left by FNMA and FHLMC. compromise the interests of individual investors Most issues have been private placements taibut also could seriously undermine the process lored to the needs or preferences of individual of development of this market. investors, or public offerings issued against pools Mortgage securities markets, of course, have of those mortgage loans that are individually been an important component of the housing larger in amount than those that may be purfinance system during the past decade. Further- chased by the federally sponsored enterprises more, the need for such markets is likely to under limits established by the Congress. increase in the future, particularly if thrift institu- Private pass-through securities generally have tions utilize the expanded asset powers recently been unable to compete, head to head, against provided to them by law and regulation. To those issued or guaranteed by federal agencies Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

289 and federally sponsored enterprises, largely be- instruments—that is, the amortizing or deprecicause of the market benefits enjoyed by these ating nature of mortgage securities. federally related entities. But development of the Some components of title I of H.R. 4557 also private market also has been hampered by state constitute technical amendments designed to and federal laws and regulations that have in- properly accommodate private mortgage securicreased the cost of issuing private securities or ties. Section 108, which would require the Secuhave constrained investment in private pass- rities and Exchange Commission (SEC) to prothroughs by various types of institutions. The vide a permanent procedure for the delayed or President's Commission on Housing, on which I continuous registration of private mortgageserved as a member before being appointed to backed securities, falls into this category. These the Federal Reserve Board, identified a host of types of registration procedures, which are vital legal and regulatory impediments in its 1982 to the success of a public market in mortgage report. securities, currently are available under an ad- The Federal Reserve Board traditionally sup- ministrative rule of the Commission. A legislaports measures that promise to improve the tive mandate to the SEC would remove any efficiency of private financial markets. In this market uncertainty over the future of these flexicase, we believe that changes in laws and regula- ble registration procedures. tions that encourage a broadening of the mort- The removal of statutory limitations on investgage pass-through securities markets through ment in mortgage pass-through securities by fedmore extensive involvement of the private sector erally chartered financial institutions, leaving the would constitute sound public policy, so long as regulators to specify investment limits as well as other legitimate public policy objectives are not factors relating to the diversity of underlying compromised in the process. It certainly seems mortgage pools, is another appropriate technical appropriate to adjust laws and regulations that adjustment (section 106). The current law for have disadvantaged the competitive position of national banks, for example, limits investment in private mortgage securities in our financial mar- the securities of any one issuer to a percentage of kets with inadvertent or unintended constraints unimpaired capital stock and surplus and, in and obstacles. Indeed, some technical problems effect, treats private mortgage pass-through sehave been caused by state or federal statutes or curities as obligations of the issuer rather than as regulations written long before mortgage-backed shares in pools of loans constituting the obligasecurities were a significant market factor, and tions of many mortgage borrowers. The current some impediments have arisen because of inade- treatment for banks is a good example of law that quate understanding of the unique nature of does not properly accommodate the true nature these securities. of mortgage pass-through securities. Some of these types of technical constraints I understand that this subcommittee is conrecently have been alleviated by regulatory cerned that some of the provisions of title I of changes at the federal level. For example, last H.R. 4557 may go beyond technical adjustments year the Securities and Exchange Commission to law and regulation. Any provisions that in- (SEC) tailored some of its registration and disclo- volve trade-offs of policy objectives, of course, sure requirements to the special characteristics need to be considered carefully. As a general of private mortgage pass-through securities, rec- principle, caution should be exercised whenever ognizing the need for both shelf registration federal or state laws that were intended to proprocedures and sales of these securities on a tect savers, investors, or financial institutions "blind pool" basis. At the Federal Reserve are amended, or preempted, in order to further Board, we have amended Regulation T—which the development of a particular market. Several governs margin credit extended by brokers and provisions of the proposed legislation raise isdealers for the purpose of purchasing or carrying sues along these lines: the exemption of sales of securities—to specify that private mortgage- private mortgage-backed securities from federal backed securities are eligible collateral for such registration and disclosure requirements; the fedcredit. We also have tailored the Regulation T eral preemption of state legal-investment and criterion to fit special features of the mortgage blue-sky laws applicable to private mortgage- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

290 Federal Reserve Bulletin • April 1984 backed securities; and the provisions that seek to tion as well as about the interests of savers in facilitate development of forward-delivery mar- state-chartered depository institutions, life insurkets for such securities by amending federal laws ance companies, and pension funds. Investment relating to the extension of margin credit by grade is not a particularly strict standard, and in securities brokers or dealers. fact, most public offerings of private mortgage The proposed exemption from securities regis- pass-through securities have been rated in the tration requirements (section 101)—applicable top two categories. It may be questionable public only to large sales (those over $250,000) of policy to require the states to treat all mortgage- "investment grade," mortgage-backed securities backed securities rated in the top four categories (those rated in one of the top four categories by a by any nationally recognized rating organization nationally recognized statistical rating organiza- as if they were Treasury or federal agency securition) by financial institutions to investors for ties, even though the proposed legislation would their own accounts—generally appears to be a give the states three years to opt out of the desirable extension of the current transactional federal preemption. Some states eventually may exemption for mortgages and mortgage participa- feel that it is appropriate to apply more stringent tions contained in federal securities law. Such legal investment standards than federal law large transactions presumably involve investors would permit or to require more complete disclowith a high level of sophistication and thus do not sure with respect to the character of the underlyrequire all of the normal investor protections ing mortgage pools. Thus, it may be preferable to provided by the 1933 act. allow the states an unlimited amount of time to The Congress, however, should recognize the override federal preemption of their blue-sky and implications of several aspects of the proposed legal-investment statutes rather than to incorpoexemption. First, reliance would be placed upon rate private rating service standards in federal private rating organizations to set market stan- law and to set a time limit on the state override. dards. There is no assurance that these organiza- The provisions that would facilitate developtions will retain their current rating schemes or ment of forward-delivery markets in private will not adjust their rating categories in a manner mortgage-backed securities, by specifying that inconsistent with the risk levels anticipated by contracts made by brokers and dealers for dethe Congress. Second, the exemption would be layed delivery of such securities (within 180 extended to all mortgagees approved by the days) do not involve extensions of credit (section Department of Housing and Urban Develop- 103-105), appear to constitute sound public poliment, including mortgage companies that are not cy. Forward-delivery arrangements currently are subject to the same levels of supervision, regula- an integral part of the markets for federally tion, and examination applicable to depository related mortgage pass-through securities, and institutions. These factors raise questions about such arrangements clearly are essential to the two important aspects of consumer protection in success of private markets. Furthermore, under the private market for pass-through securities: these provisions both the Federal Reserve Board adequate information about the quality of mort- and the Securities and Exchange Commission gages in the underlying pools, and adequate would have the authority to institute remedial assurance of performance by the issuer-servicer measures if the need should arise, by shortening over the life of the pass-through security. It may the forward-delivery period. The SEC also be appropriate to design a simplified, special- would retain its regulatory authority over selfpurpose set of SEC registration requirements for regulatory broker-dealer organizations to ensure the types of transactions envisioned in section that these organizations maintain adequate mar- 101, specifying pertinent characteristics of the gin deposit rules for forward contracts in private pooled mortgages as well as the responsibilities mortgage-backed securities. And, of course, the of the issuer-servicer. SEC would retain authority to establish minimum net capital requirements that reflect expo- Federal preemption of state blue-sky and legalsure of a broker-dealer in the forward-trading investment laws for large sales of investmentmarket. These types of controls should prevent grade-mortgage-backed securities (section 107) repetition of some of the problems that arose in raises further questions about investor protec- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 291 the unregulated forward market for securities currently under consideration on capital allocaguaranteed by the GNMA several years ago. tion and economic growth could be altered. The potential impact of the package of mea- A shift of secondary market functions from the sures contained in title I on the allocation of public to the private sector may now be a proper capital among the housing sector and other sec- course for public policy, after more than a dectors of the economy, and on the growth of the ade of valuable demonstration and market develeconomy as a whole, is difficult to judge in opment by the federally related entities. Both quantitative terms. It seems safe to say, howev- FNMA and FHLMC have done pathbreaking er, that changes in law that reduce the costs of work by helping to standardize the conventional issuing private mortgage pass-through securities home mortgage instrument and by moving large or enhance the attractiveness of these securities amounts of pass-through securities issued to investors should translate into lower costs of against pools of such loans into a capital market mortgage credit for the ultimate borrowers that had been unaccustomed to conventional whose loans are in the pools behind the securi- pass-throughs. We have now reached a point ties. Thus, enactment of title I should encourage when conventional mortgage documents are more capital to flow into the housing sector and standardized nationally, when mortgage passless to flow to other private sectors. If this through securities are a familiar instrument in process altered capital allocation away from national financial markets, and when the private plant and equipment, there could be some impact mortgage insurance industry is capable of proon business productivity growth over time. viding mortgage pool insurance necessary to These types of conclusions assume, of course, secure high ratings for a large volume of conventhat the provisions in the proposed legislation are tional pass-throughs. These foundations, couthe only adjustments that are made to the struc- pled with the types of legal adjustments conture of the secondary mortgage markets. If the tained in title I of H.R. 4557—and perhaps with measures designed to enhance the development the creation of more flexible mortgage investof the private secondary markets were coupled ment trusts under federal tax law—can provide with measures designed to limit the secondary the basis for a viable private secondary mortgage market activities of the federally sponsored en- market that can serve the needs of the housing terprises, any potential impacts of the legislation industry during the years ahead. • Statement by Lyle E. Gramley, Member, Board Board would not object to the proposal published of Governors of the Federal Reserve System, for comment by the Federal Deposit Insurance before the Subcommittee on Commerce, Con- Corporation (FDIC) and the Federal Savings and sumer, and Monetary Affairs of the Government Loan Insurance Corporation (FSLIC) to limit Operations Committee, U.S. House of Repre- insurance coverage to $100,000 per brokerage sentatives, March 14, 1984. firm. Insured brokered deposits are a relatively new I am happy to have the opportunity to present source of funds to the nation's depository instituthe views of the Board of Governors of the tions. Reliable data on how large the activity Federal Reserve System on proposals to limit the presently is, and how fast it is growing, are use of fully insured brokered deposits. Briefly, sparse. We know, however, that total brokered the Board's position is that brokered deposits deposits at federally insured savings and loan serve a useful function. Excessive reliance on associations (S&Ls) rose from less than $2 bilinsured brokered deposits, however, poses seri- lion at the end of 1979 to something like $25 ous risks to individual depository institutions, to billion to $30 billion at the end of last year. At the financial system, and to the federal deposit commercial banks, brokered deposits at the end insurance funds. The Board believes that legisla- of 1983 amounted to about $22 billion. tion to limit the use of such deposits is needed. It appears from available data that S&Ls rely Until the necessary legislation is passed, the more heavily on brokered deposits than do com- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

292 Federal Reserve Bulletin • April 1984 mercial banks. Not surprisingly, smaller institu- ing up large brokered deposits into amounts of tions rely more heavily on such deposits than do $100,000 or less to achieve fully insured status. larger institutions that have ready access to the Federal insurance, in such cases, removes the market for large-denomination negotiable certifi- incentive for depositors to seek strong, wellcates of deposit. We know, also, that a few managed depository institutions in which to individual S&Ls obtain half or more of their total place their funds. This lack of market discipline deposits through brokers. Moreover, among can have unfortunate consequences. those institutions that rely heavily on brokered Brokered deposits, the Board believes, prodeposits are a number with relatively low ratios vide economic benefits to individual depository of net worth to total liabilities—that is, ratios of institutions and to the nation as a whole—beneless than 3 percent. Such deposits constituted fits that should be preserved. They serve as a approximately one-sixth of total deposits held by conduit—although by no means the only one— banks that failed in the past two years and, in a for transferring funds from capital-rich to capitalfew of those cases, they amounted to more than short areas. They permit smaller depository inone-half of total deposits of the failing institution. stitutions to compete on more equal grounds This development suggests that there is a tenden- with larger ones in the attraction of funds. They cy for the marketing process to direct brokered provide an additional source of liquidity to the deposits toward financially weaker institutions— individual depository institutions in time of need. and, in extreme cases, to failing institutions. And they increase the options open to deposi- The volume of fully insured brokered deposits tors—institutions as well as individuals—in the is still very small in relation to total deposits. placement of funds, and often increase the yields Apparently, however, the proportion is rising available to them. rapidly, and no one can be sure what the limits of I know of no empirical studies that seek to put this market may be. The effects of some of the quantitative dimensions on such benefits. But we factors giving rise to the recent growth of the must recognize that brokered deposits give rise industry—such as regulatory actions permitting to costs as well as benefits, particularly when payment of finder fees to brokers and the effec- they are fully insured. For example, facilitating tive deregulation by the Depository Institutions easy movement of funds from one market to Deregulation Committee (DIDC) of interest rate another through full insurance for brokered deceilings on most time deposits—may be less of a posits loosens the links between depositors and catalyst to growth in the future. Nationwide consumers and their local institutions. The commarketing of brokered deposits, however, stems petitive position of some smaller depository inmore generally from a process of financial inno- stitutions improves, but that of other small instivation—driven by both deregulation and rapid tutions may deteriorate, reducing their ability to technological advances—that is changing finan- meet local needs for credit. Heavy reliance on cial practices dramatically, and the impact of brokered deposits as a source of funds may those forces on financial markets and institutions encourage some institutions to move away from is far from over. Moreover, the element of subsi- their traditional community orientation, with efdy contained in federal deposit insurance will fects that are hard to predict on the economic provide a continuing incentive to growth of in- welfare of those communities. Indeed, it is not sured deposits channeled through brokerage ar- entirely clear that economic efficiency is inrangements. creased when funds are transferred from one use Brokered deposits would be less of a problem to another solely because brokered deposits are from the standpoint of public policy if they were fully insured. The element of subsidy contained not fully insured. Uncertainties prevailing in in federal deposit insurance may, in fact, lead to financial markets in recent years, however, have the opposite result because it erodes market caused depositors to place a high value on safety discipline as regards risktaking. of principal. For example, the failure and liquida- While the economic and social benefits of tion of Penn Square National Bank in July 1982, brokered deposits are mixed, the Board believes in which many depositors incurred losses, served that, on balance, continued use of this financial as an important catalyst to the practice of break- instrument is desirable. The Board also believes, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 293 however, that excessive reliance on fully insured Troubled institutions may end up with relativebrokered funds results in risks that are sufficient- ly large volumes of insured brokered deposits ly serious to warrant prudential measures by the because once an institution is facing difficulties, Congress and the federal regulatory authorities. this may be one of the few sources of funds it can First, there are risks created for individual still attract. Brokered deposits can be used to financial institutions that may not be capable of replace uninsured funds that are being withsafely employing brokered funds on a large scale, drawn by wary depositors, or to finance addiespecially when the attraction of brokered funds tional asset growth in the hope that the earnings permits an institution to grow at a spectacular generated will offset losses in existing operapace, as sometimes happens. To attract brokered tions. Unfortunately, all too often the effort is deposits, an institution often pays above-market futile, and the end result is to prolong the life of a rates to depositors and a fee to the broker. In failing institution, increase its overall size and in order to employ the funds profitably, the institu- particular the volume of insured deposits, and tion must invest them in assets that earn a add to the liabilities faced by the federal insurrelatively high rate of return. Methods by which ance funds. such higher rates of return are earned may in- The danger to the federal deposit insurance clude taking credit risks that are greater than system is a clear and present one. The potential normal and mismatching of maturities. liability to the federal insurance funds is growing Over time, an institution may become overly at a disturbing rate as the reliance on fully dependent on brokered deposits as a source of insured brokered funds increases, particularly funding. Despite efforts to diversify sources of when such deposits are concentrated among fideposits, this dependency may make the institu- nancially weak institutions. tion susceptible to pressures from the principal The proposal published for comment by the funding source, including suggestions that it FDIC and FSLIC, limiting federal insurance to make credit available to particular borrowers. $100,000 per broker, would severely limit the use Failure to make good credit judgements is partic- of brokered deposits. A less disruptive means of ularly likely when an institution obtains funds on addressing this problem would be to impose a a scale that exceeds its capacity to document limit on the total amount of insured brokered properly and control its credit decisions. Experi- deposits that may be accepted by a depository ence has indicated that this can prove to be institution. This limitation could take the form of troublesome. a "cap," calculated as a percentage of insured Brokered deposits, it is sometimes argued, brokered deposits to total deposits, of, say, 5 provide individual depository institutions with percent. Alternatively, the proportion of such the opportunity to restructure their assets and deposits to the total could be made to depend, to liabilities in ways that lead to a better match of some degree, on the ratio of an institution's maturities. That is true. But unfortunately, it is capital to its assets. Although the limit should be also true that the opportunity is provided to clearly set, it would be desirable for the regulacreate a serious mismatch by borrowing short tory authorities to have the flexibility to grant and lending long. exceptions in special situations. When an activity such as brokered deposits Effective implementation of a cap on insured grows as rapidly as it has in recent years, there is brokered deposits on a Systemwide basis could a danger that the problems of individual financial best be done with new legislation. The regulatory institutions may become so widespread as to agencies do have the authority through ceasewarrant concern for the stability of financial and-desist powers to proceed on an institutionmarkets more generally. That is probably not a by-institution basis. However, using this authorconcern at the moment, but the prospect that ity requires proving for each situation a direct even larger numbers of small depository institu- relationship between safety and soundness and a tions might become heavily dependent on a rela- specific level of fully insured brokered deposits, tively higher-cost, and potentially a highly vola- a process that could bog down in litigation and tile, source of deposits to finance their lending delay. activities is clearly worrisome. The Congress faced a similar problem in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

294 Federal Reserve Bulletin • April 1984 field of capital adequacy, and it provided the Board does not believe that grandfathering existregulators with new authority to require specific ing ratios would be appropriate.) It would also be levels of capital in connection with the recent desirable to discourage increases in reliance on legislation concerning the International Mone- such deposits before the effective date of the cap. tary Fund. Similar action is needed in the case of The Board would be happy to work with the fully insured brokered deposits. Because of the Congress in developing legislative language that inevitable pressures that would be brought to would achieve such results. bear on agencies to broaden and make more The Board recognizes that congressional auflexible any administratively established levels thorization may take some time to enact and pursuant to a general grant of authority provided implement. In view of the need to take action by the Congress, we believe that in this instance now to prevent problems from developing later, it would be desirable for the Congress to set a the Board would not object to implementation of specific legislative cap. the proposal made by the FDIC and FSLIC in its Legislative caps have the advantage of allow- current rulemaking process pending the enacting reasonable use of insured brokered deposits, ment of legislation. As with implementation of a while maintaining such use within limits that legislated cap, it would be desirable if their institutions should be able to manage. In view of proposal included arrangements for an orderly the inherent incentive for fully insured brokered phasedown of insured brokered deposits for funds to gravitate to those institutions that are those institutions already significantly dependent prepared to take the greatest risks and to pay the on this source of funding. highest rates, the cap approach takes the prudent If the Congress is disposed to enact new course of limiting access and thus avoiding the legislation imposing a cap on fully insured bronecessity of attempting to correct, with cease- kered deposits, it would be desirable for such and-desist action, a dangerous situation after it legislation to be enacted promptly and to take has occurred. effect before October 1, 1984, when the FDIC- In the design of enabling legislation, thought FSLIC proposal is scheduled to take effect. must be given as to how such a cap should be Depository institutions dependent on such funds phased in to avoid disruptive effects on individ- and brokerage firms engaged in this activity ual institutions whose ratio of fully insured bro- would then be disrupted less by regulatory kered deposits to the total exceeds the cap. (The change. • Statement by Henry C. Wallich, Member, Board CAUSES OF THE EXTERNAL DEFICITS of Governors of the Federal Reserve System, before the Committee on Finance, U.S. Senate, It is customary to analyze changes in the external March 23, 1984. deficits by focusing on proximate causes, such as changes in exchange rates and the growth of The U.S. merchandise trade and current account economic activity at home and abroad. In that deficits widened considerably during 1983. For tradition, the widening of the external deficits 1983 as a whole, the trade deficit exceeded $60 can be related first and foremost to the substanbillion, and by the fourth quarter it had reached tial appreciation of the dollar and the conditions an annual rate of $75 billion. The current account that have given rise to the appreciation. On a was in deficit by more than $40 billion for the weighted-average basis against the currencies of year as a whole, and reached an annual rate of the other major industrial countries, the dollar $60 billion in the fourth quarter. Many are pre- has appreciated more than 45 percent since the dicting that the current account deficit will be fourth quarter of 1980, when our current account about $80 billion for 1984 as a whole and the balance was showing a small surplus. Some of trade deficit will be about $100 billion. the appreciation reflects our relatively good in- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 295 flation performance, but even in real terms— wise have been. In addition, the higher real adjusted for changes in consumer price levels— interest rates have been associated with upward the weighted-average value of the dollar is now pressure on the dollar: such upward pressure has nearly 40 percent higher than it was at the end of prevailed over whatever downward pressure 1980, and roughly 25 percent higher than its may have emanated from the external deficit, average for the entire floating-rate period since which usually is a negative element in the mar- 1973. Against the European currencies, the ap- ket's evaluation of a currency. Thus the dollar preciation in real terms has come to 30 percent has risen. In this way, high real interest rates, the against the Swiss franc, 45 percent against the strong dollar, and large external deficits are all German mark, and higher amounts against the linked to large federal budget deficits. weaker currencies. Against the Japanese yen the dollar has risen 20 percent in real terms; against CONSEQUENCES OF THE DEFICITS the Canadian dollar it has depreciated slightly. AND THE STRONG DOLLAR The cyclical behavior of the U.S. and foreign economies has been a second factor contributing Some of the damaging consequences of the defiboth to the time profile and to the widening of the cits and the strong dollar are reflected in the U.S. trade deficit. The U.S. recession held down decline in our exports. In value terms, exports imports and thus delayed the rise in the trade declined about $25 billion from the fourth quarter deficit until after the middle of 1982, and the of 1980 to the fourth quarter of 1983, with tworelatively rapid expansion of the U.S. economy thirds of the drop accounted for by a 40 percent in 1983 was a dominant element in last year's contraction of shipments to Latin America, trade developments, accounting for more than mainly to Mexico, and the other third reflecting a half the $30 billion increase in the U.S. trade 15 percent reduction in shipments to Western deficit from the fourth quarter of 1982 to the Europe. It is noteworthy that exports to both fourth quarter of 1983. Japan and Canada expanded somewhat from As a third factor, the external financing prob- 1980 to 1983. lems of some countries, especially of our neigh- In volume terms, our merchandise exports bors in Latin America, have resulted in lower were more than 15 percent lower in the fourth exports to these countries. quarter of 1983 than in the fourth quarter of 1980. A fourth factor has been the failure in the past Exports of capital goods declined more than 25 of some of our industries to adjust adequately to percent in volume terms, exports of nonagriculthe pressures of international competition. tural industrial supplies more than 20 percent, While the strong dollar and large external and exports of agricultural products about 10 deficits reflect, in part, our improved macroeco- percent. The longer exports remain depressed, nomic performance and the greater return on the more difficult it becomes to maintain marketfinancial investment in this country, in a more ing networks and the more costly and difficult it fundamental sense they are related to the budget becomes to recover foreign sales. deficit. When the U.S. government runs a defi- If our current account deficit were to continue cit, other sectors must, on balance, finance it. for long at the rate of about $80 billion that is Part of the financing has been provided by for- likely to be recorded in 1984, the United States eigners in the form of the net capital inflow that is would soon become an international debtor the counterpart of the current account deficit. country. At the end of 1983, the United States The remainder of the financing has been provid- had an estimated international net creditor posied by private domestic residents and state and tion of about $125 billion. This balance could be local governments, which has diverted resources pushed to the minus side in little more than one from productive domestic capital formation. year. Our position as an international creditor Naturally, the net capital inflow and the surplus has been a major support to our balance of of private domestic saving over private domestic payments so far. Thanks to the very productive investment have not arisen automatically, but character of some of our foreign assets, the have had to be induced. As a result, real interest United States had a surplus of investment inrates have been higher then they would other- come that averaged more than $30 billion annual- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

296 Federal Reserve Bulletin • April 1984 ly from 1979 through 1981. This surplus has ing from the budget deficit, which now goes in meant that we have been able to tolerate a part against the foreign trade-related sectors of sizable trade deficit without incurring a deficit in the U.S. economy and in part only against other the current account, which combines services sectors of the economy, would then be directed and trade. If our international position shifts to fully against the other sectors. This result needs that of a debtor country, this advantage will be to be emphasized in order to make clear that a eroded; indeed, it is estimated that our surplus of reduction or ending in the external deficit, withinvestment income fell below $25 billion in 1983. out a reduction in the budget deficit, would only Eventually, the United States might find itself in shift the impact of our nation's budget problems the position of having to earn a surplus in the without resolving them. trade balance to cover a deficit on investment The impacts of the external deficit and of the income. Other things being equal, the larger the strong dollar have been felt by our manufacturing net debtor position we build up, the lower will be industries, the agricultural sector, and some of the value of the dollar necessary in the long run our service industries. The effects are adverse to generate the required trade balance. not only for exports but also for domestic import- In addition, I might say that, for one of the competing sectors. On the whole, nevertheless, richest countries in the world, it seems hardly these impacts have been quite well absorbed. appropriate either to be borrowing currently on a The American economy has expanded strongly. massive scale from the rest of the world or to be This has offset some of the pressure of mounting a net debtor to it. import competition that derives from a strong The external deficit also has a strong bearing dollar. Moreover, some of the industries that on the future of the dollar. I have noted the have suffered from import competition are in that severe appreciation the dollar has experienced condition more because of factors specific to against a number of currencies, which has been their industry than because of the high dollar. one—but only one—of the reasons for the trade Industries that have failed to invest and reduce deficit. As the United States continues to borrow costs, that have not kept up with modern techabroad and moves toward net debtor status, nology, and that in some cases have paid wages causing the rest of the world to hold ever-larger far above the national average for production amounts of dollar-denominated assets, the good workers are bound to suffer even at a lower level acceptance that our currency has had in the of the dollar. world may wear out. Nobody can predict the Aside from such industry-specific problems, I timing, but in the longer run it seems probable do not see the United States being deindustrithat the dollar-depressing effect of the external alized. The combined domestic and foreign dedeficit will begin to overwhelm the dollar-sup- mand for U.S. industrial output has increased porting effect of higher interest rates. since 1980. In particular, the industrial produc- I do not believe, therefore, that the current tion index for manufacturing is currently almost value of the dollar is sustainable, although it is IVi percent higher than its level at the end of impossible to predict the sequence or timing of 1980, when the dollar began to appreciate. Emevents that will bring it down. If the dollar does ployment in the manufacturing sector, on the decline substantially while the budget deficit other hand, is currently Vh percent below its remains unchanged, the external deficit will, level at the end of 1980, partly reflecting relativewith a lag, also decline. That would reduce, in a ly rapid productivity growth in the manufacsense, the magnitude of the problem that this turing sector, which historically has contributed committee is addressing. It would also, however, to a negative trend in the share of manufacturing intensify other problems created by the budget employment in total private employment. deficit. With a return of the external sector toward balance, the foreign financing of the ARGUMENTS AGAINST IMPORT budget deficit would cease. It would have to be RESTRICTIONS financed entirely at home, absorbing a still-higher fraction of scarce available savings, thereby My purpose in citing these statistics is to counsel raising interest rates. The "crowding out" resultstrongly against additional import restrictions at Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 297 this juncture as a means of dealing with the trade our nation's budget problems by pushing up real deficit. The type of import-restricting actions interest rates. authorized by section 122 of the Trade Act, You have asked, as well, for an analysis of which would apply on a broad and uniform basis, whether the system of floating exchange rates are certainly contrary to the national interest of itself may have contributed to our problems. In the United States. Thanks to the strong econom- my view, the floating-rate system has served us ic recovery last year, our tradable-goods indus- fairly well. Swings in exchange rates over the tries as a group have not been severely injured on past decade, to be sure, have been extremely balance. Their circumstances cannot justify addi- wide. But many of these swings can be related tional import restrictions, except when foreign mainly to changes in the relative outlooks for competition is judged to be unfair as defined by interest rates, inflation, and real growth in differour trade acts. ent countries. A good part of the changes in The costs of import protection are well known. relative economic outlooks in turn can be related The decision to protect one industry invariably to changes in monetary and fiscal policies. Given imposes costs elsewhere in the economy. It is the stances of monetary and fiscal policies in the costly to other industries if foreign countries United States and abroad during the past four or retaliate against U.S. exports, or if import re- five years, it is hard to believe that the Bretton strictions lead to higher dollar exchange rates Woods system of pegged exchange rates would than would otherwise prevail, or if the prices have survived, and certainly not without major U.S. firms must pay for inputs rise. Protection upward adjustments in the exchange value of the typically leads also to higher prices and less dollar. Greater stability of exchange rates, which choice for consumers. An example of the conse- is greatly to be desired, must be founded in the quences of protection for consumers we now first place on greater domestic stability in all observe in the recent high profits of the automo- countries and on policies supporting this stabilbile industry, which is protected by "voluntary" ity. export restraints in Japan. Finally, protected Finally, you raised the question of whether the industries typically delay making the adjust- dollar is overvalued. In my view, the meaningful ments that are necessary if they are ever to stand answer to this question is yes. It is sometimes on their own feet. These costs should make us argued, to be sure, that whatever exchange rate hesitant even to reciprocate against foreign pro- prevails in the market at any moment balances tectionist actions. Retaliatory measures taken by demand and supply and therefore cannot be us damage our own interests, whatever they overvalued or undervalued. That argument, may do to foreigners. however, begs the question. Interpreting the Reducing the trade deficit by protectionist question as referring to the effect of the exchange methods without reducing the budget deficit rate on the economic magnitudes in which this would not resolve our problems. It would cer- committee is interested, such as the trade baltainly not ease the pressures on our export ance or the current account, it seems evident that industries, which, thanks to the discipline of the recent value of the dollar has been clearly international competition, are bound to be inconsistent with even approximate balance in among our most efficient. either the trade or the current account and that therefore, in this sense, the dollar is overvalued. Given this interpretation of our situation, the OTHER POLICY OPTIONS right policy prescription for dealing with the trade deficit is to deal with the circumstance that The appropriate policy prescription for dealing is at the root of the high dollar. This brings me with the trade deficit and the excessively strong back to the need to reduce the structural deficit dollar, in my view, is to reduce the structural in our federal budget. Such action, of course, deficit in our federal budget. Controls on trade or would not cure all the diverse problems encounon capital inflows, or any other proposals for tered in the various sectors of our economy. But reducing the external deficits without reducing a substantial adjustment of the budget toward the budget deficit, would only shift the impact of balance, other things equal, would lead to de- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

298 Federal Reserve Bulletin • April 1984 clines in real interest rates, a depreciation of the tion. I hope that my remarks have conveyed the dollar in exchange markets, and (with some lag) a message that the strong dollar and large external reduction in the external deficits. Recent state- deficits are partly symptoms, themselves damagments by the President and members of the ing, of large budget deficits. I hope as well that Congress, such as the one by the chairman of this the Congress and the administration will resist committee announcing these hearings, give hope temptations to try to suppress the symptoms that some progress may be made in that direc- without curing the disease. • Statement by Paul A. Volcker, Chairman, Board latory protection against undue risk, and by of Governors of the Federal Reserve System, policies to discourage conflicts of interest and before the Committee on Banking, Housing, and undue concentration of banking resources. As a Urban Affairs, U.S. Senate, March 27, 1984. corollary to these concerns, and as a result of our practical experience in regulating bank holding I am pleased to come before you as one of the companies, we also believe that these basic concluding witnesses in what has been a thor- policies must, to a degree, apply to the holding ough and searching examination of proposals to companies of which banks and other depository restructure the law governing bank and thrift institutions are a part; banking institutions canholding company activities. These hearings are a not be wholly separated from the fortunes of culmination of a long process of evaluation of their affiliates and from the success or failure of legislative proposals to simplify regulatory pro- their business objectives. cedures and to assure a competitive environment A review of the testimony before this commitfor the provision of financial services. tee indicates that these principles are broadly Hearings on various bills of this kind began in accepted. Progress has been made toward the fall of 1981. Since then, this committee has achieving some convergence of views on the held 44 days of hearings, has heard more than definitions of a bank and a thrift institution, on 235 witnesses, and has before it more than 7,000 the scope of regulatory authority, and on possipages of testimony. This extensive record—in- ble simplification of regulatory approaches tocluding analysis of historical problems, present ward bank holding companies. difficulties, and future solutions—provides a sol- In my testimony in January in Salt Lake City, I id foundation on which to build legislative deci- suggested new legislation is urgently needed sions at this session of the Congress. dealing with the following areas: (1) a strength- I have on several occasions emphasized to this ened definition of bank; (2) a definition of a committee the basic framework within which we qualified thrift; (3) new procedures to streamline in the Federal Reserve approach these questions. application of the bank and thrift holding compa- We want to see a competitive and innovative ny acts; (4) the powers of depository institution banking and financial system, providing econom- holding companies; and (5) statutory guidelines ical and efficient services to consumers. At the to govern the division of state and federal authorsame time, we believe that banks, and depository ity in the area of banking organization powers. institutions generally, perform a unique and criti- There are a growing number of issues about cal role in the financial system and the econo- interstate banking that soon will need to be dealt my—as operators of the payments system, as with as well, but, with one exception, those custodians of the bulk of liquid savings, as unbi- questions could be deferred to later legislation. ased suppliers of short-term credit, and as the The exception concerns congressional policy tolink between monetary policy and the economy. ward the present movement toward regional in- This unique role implies continued government terstate banking arrangements. concerns about the stability and impartiality of Our analysis of the bills and much of the these institutions—concerns that are reflected in testimony that have been placed before this the federal "safety net" long provided by the committee indicates elements of agreement in discount window and deposit insurance, by regu- several of the necessary areas. There appears to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 299 be an emerging consensus on defining what is a an understandable sense of competitive unfairbank—a fundamental building block for any leg- ness and could, in time, jeopardize the safety and islation to clarify the role of banks and bank soundness of the banking and payments system. holding companies within our financial and eco- The developments are broad in scope, as reflectnomic system. New procedures for applying the ed in the tabulation in appendix A.1 Bank Holding Company Act and simplifying To deal with this situation, last year we sugregulation seem to be broadly accepted. Some gested a redefinition of the term "bank" to convergence on the appropriate role of thrift include any depository institution (other than an institutions and their holding companies may be institution insured by the Federal Savings and developing, as well as on the need to rewrite Loan Insurance Corporation (FSLIC)) that (1) is guidelines for state-federal relationships. Equal- insured by the Federal Deposit Insurance Corpoly clear, substantial differences in defining the ration, (2) is eligible for FDIC insurance, or (3) appropriate range of powers for bank holding takes transaction accounts and makes commercompanies remain apparent. cial loans. This definition was included in the It seems to me the time has come to consoli- proposed financial institutions deregulation act date areas of agreement, to consider objections (FIDA) and was adopted in Senator Proxmire's to the proposals before the committee, and to bill (S. 2134) and a number of bills introduced in test alternative approaches to bridging the re- the House. maining differences. Today, I would like to share Our review of this proposal in the light of with you our further thinking on the five key comments made at the hearing suggests considproblem areas and, in particular, address some eration should be given to three changes. First, possible solutions to the remaining problems. industrial banks that are not federally insured and do not offer deposit accounts with checking or other third-party transaction capabilities DEFINITION OF BANK should be excluded. Appendix B describes these The definition of "bank" is a crucial provision of institutions and the scope of their activities. the Bank Holding Company Act. It defines those Second, state-chartered thrift institutions (also institutions that are covered by the act, and for described in appendix B), which are not federally them the boundaries for the safeguards against insured and which would have been covered by excessive risk, conflicts of interest, and concen- the definition of bank described above, should be tration of resources deemed appropriate as a encompassed within the same holding company matter of public policy. The application of these rules as federally insured savings and loan assopolicies depends upon a meaningful definition ciations because of the focus of many of these that encompasses all depository institutions that state institutions on home lending. These instituperform essential banking functions. tions could be exempted from coverage by the Marketplace, technological, and regulatory de- Bank Holding Company Act if the relevant state velopments have seriously undermined the pres- regulator certified their activities were approprient definition, which defines a bank as an insti- ately confined. tution that accepts demand deposits and makes Third, the nonfederally insured thrifts and commercial loans. Functional evasion of the industrial banks that would be excluded from the purpose of the act is becoming the rule rather coverage of the Bank Holding Company Act than the rare exception through the creation of should be subject to rules that would prevent "nonbank banks" and other devices that permit "tandem" operation—that is, joint sale of bankcombinations of banking activity and commer- ing or thrift products or integrated operations— cial, retail, insurance, and securities firms. As a of these institutions with owners engaged in result, established policies on conflicts of inter- impermissible activities for bank holding compaest and concentration of resources are undercut nies. This limitation, on which we place considor jeopardized. The same techniques are being erable importance, is explained in detail in apused to undermine the congressional prohibition on interstate banking. The haphazard exploita- 1. The attachments to this statement are available on request from Publications Services, Board of Governors of tion of "loopholes" in existing law is reflected in the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

300 Federal Reserve Bulletin • April 1984 pendix C. Its basic objective is to prevent the Holding Company Act arise when commercial kinds of tying that are judged to be unfair or and industrial firms acquire thrift institutions, unsound for depository institutions, including particularly in the light of the broader powers joint offerings of deposit products or loans with provided such institutions in recent legislation. other products of affiliated industrial and com- Indeed some state initiatives have provided mercial firms. state-chartered thrifts essentially the full panoply We believe that the Congress should not ex- of banking powers and more. At the same time, empt the so-called consumer bank from the defi- there may be institutions with no restrictions on nition of a bank. Such a proposal is contained in the activities of the parent firm, an ability to section 104 of S. 2181, which would allow a obtain long-term government-sponsored credit, consumer bank to take all forms of deposits, favorable tax treatment, and a freedom to branch including transaction accounts, and make con- intrastate and interstate—privileges that are desumer loans, as well as a wide variety of other nied commercial banks. As in the case of nontypes of credit extensions, including some com- bank banks, there has been increasingly clear mercial loans. recognition of the need to adopt rules to assure Such an approach would permit commercial equality of treatment of various kinds of deposiand industrial firms to enter into essential deposi- tory institutions exercising similar or overlapping tory institution activities, including access to the powers. The need for action is reflected in the payments system, in a manner that would inev- strong interest of a variety of financial and nonfiitably undermine public policy objectives incor- nancial businesses in the acquisition of thrifts in porated in the Bank Holding Company Act gen- order to benefit from thrifts' bank-like powers, to erally, and there would be the appearance of gain access to federal deposit insurance, and to unfair competition with banks subject to the act. participate in the payments mechanism. In such circumstances, the regulated banking The administration proposals attempt to deal sector would inevitably wither and much of the with this question by requiring all thrifts, with banking business would take place in institutions certain exceptions for grandfathered service cornot subject to the policy restrictions on risk, porations, to meet the requirements of bank conflicts of interest, and concentration of re- holding companies. This approach has been opsources. The lengthening list of nonbank bank posed mainly on the grounds that it is not necesacquisitions demonstrates that we are beginning sary to apply the same rules applicable to bank to see that migration today. In this connection, I holding companies to those thrifts that concenwould point out that 19 percent of commercial trate their assets in home mortgages. In an banks now have commercial loan portfolios (nar- attempt to recognize these concerns, the concept rowly defined) equal to not more than 5 percent of a "qualified thrift" has been developed, reof assets and that 47 percent have 10 percent or flected in the proposals of both Senators Garn less of their assets in this form. Thus, almost half and Proxmire, to exclude thrifts truly specializof the number of commercial banks in this coun- ing in residential mortgage credit from comparatry could, with some minor restructuring of their ble rules to those limiting the scope of activities portfolios, conduct basically the same activities of bank holding companies. as they do today and escape application of the We would support this general approach. policies of the Bank Holding Company Act. Thrifts that meet an adequate "specialization" Finally, I believe competitive equality requires test rooted in the public policy concern of supthat the recent and current proliferation of non- port for residential mortgage lending could be bank banks not be blessed by grandfather provi- owned by commercial or industrial firms as unisions, subject to a reasonable period of time to tary thrifts are now. permit divestiture when this is necessary. In developing the specifics of such an approach, we would endorse the recommendation DEFINITION OF QUALIFIED THRIFT of the Federal Home Loan Bank Board that an underwriter of corporate debt and equity not be Essentially the same problems of consistency permitted to own a thrift, whether or not it meets with the public policy objectives of the Bank the qualifying assets test. We would also rely Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 301 upon a single direct test of the proportion of not believe such thrifts should be permitted to assets held in residential mortgages or mortgage- operate in tandem with the parent commercial or backed securities. An optional test of limited industrial firms. (The details of this suggestion commercial lending, such as not more than 25 are outlined in the form of legislative language in percent of its assets in certain qualifying com- appendix D. The description of the limitations on mercial loans, as proposed in S. 2181, would tandem operations is, as noted above, contained leave open the clear possibility that institutions in appendix C.) not engaged substantially in home mortgage In general, under this approach, those thrifts lending would retain the liberal treatment with (and their service corporations) not meeting the respect to permissible activities now accorded to asset test (or in transition toward it) would have unitary savings and loans. For example, with to conform to the limitations on ownership of, such a test, 75 percent of all commercial banks and powers provided to, bank holding companies today could be treated as thrifts because they generally. Special tax benefits and the access to have less than 25 percent of their assets in long-term credit from the Home Loan Banks for qualifying commercial loans; only six commer- these nonqualifying institutions should be recial banks would qualify under the part of the viewed. At the same time, methods should be dual test of S. 2181 that requires 60 percent of developed to permit mutual institutions to take assets in residential mortgages. advantage of powers permitted bank or thrift We believe an appropriate test would require holding companies in stock form. that to be eligible for unitary savings and loan holding company treatment, institutions must devote at least 65 percent of their assets to residential mortgages or mortgage-backed secu- BANK HOLDING COMPANY PROCEDURES rities. For this purpose, mortgages would include those on both one- to four-family and multifamily The third core element of legislation is the prodwellings, mortgage-backed securities, mobile visions on bank holding company procedures. home loans, and loans for home improvements, S. 2181, S. 2134, and FIDA contain essentially including participation interests in such instru- identical provisions on this point, and I believe ments. Based on this definition, according to our that this similarity reflects widespread support calculations, almost three-fourths of FSLIC in- for procedural simplification. stitutions would currently meet this test. We also These provisions make improvements in two believe the limits on commercial lending set in major areas: they change the present, somewhat the Garn-St Germain Act remain appropriate for complex applications process into a notice profederally chartered institutions, and in the light cedure; and they put bank holding companies on of the much wider powers provided by some more equal footing with their competitors by states for commercial lending, a supplementary changing the "benefits vs. adverse effects" test (not optional) limit on commercial lending could and formal hearings requirements. Instead, new be considered for eligibility of these state-char- activities could go forward, after notice to the tered institutions. Federal Reserve Board, unless the Board found We recognize some S&Ls and mutual savings grounds for disapproval under specific statutory banks that could not meet the qualified thrift test criteria. Those statutory tests include adequacy currently, but that still wish to emphasize home of financial and managerial resources, protection lending and to retain the privilege of "unitary" of impartiality in the provision of credit, and S&L treatment, should be permitted a substan- avoidance of adverse effects on bank safety and tial period in which to conform their activities. soundness. During this transition period, which could be five The thrust of these provisions, and a provision to ten years, milestones should be set in terms of reducing the scope for judicial review by competmeasuring progress toward achieving the re- itors, is intended to reduce the burden placed quired asset composition. While ownership by an upon bank holding companies by government industrial or commercial firm could be retained regulation to a minimum level consistent with during the transition period and thereafter, we do protection of the public policy interests embod- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

302 Federal Reserve Bulletin • April 1984 ied in the specified criteria. Agency procedures range of suppliers of financial services strongly would not be burdened by formal hearings and suggest a presumption broadening the range of judicial review at the instance of competitors. powers permitted bank holding companies. The Formal rulemaking procedures would, of course, point is reinforced by technological developremain necessary before decisions to add new ments that enhance the options in the delivery of activities to the list of permissible holding com- such services. However, as I stressed at the pany powers, and the Board could continue to outset, those objectives must be balanced against request comment on notices and hold informal other public policy concerns: assurance of fair hearings, where necessary, to obtain information and open competition in the provision of credit necessary to make decisions. and other services, maintenance of impartiality We also believe the new procedures set out in of banks in credit judgments, and avoidance of S. 2181, S. 2134, and FID A provide the Board practices that can undermine the strength of the with adequate supervisory authority over the bank itself. Balancing these objectives is surely activities of the holding company and its non- the most difficult task before you. bank subsidiaries after they are in operation. Certain of the proposed activities, including Those procedures would emphasize the desir- those involving essentially "agency" activities, ability of relying upon other regulatory agencies, such as real estate and insurance brokerage, such as the Commodity Futures Trading Com- raise few questions of safety and soundness. In mission in the area of commodity brokerage and certain other areas, such as real estate developthe Securities and Exchange Commission in the ment, much more significant risks to the holding case of securities activities, for supervisory and company, and potentially to the bank itself, reporting requirements in order to avoid unnec- arise. Questions about conflicts of interest and essary duplication of effort. However, the statute tying for a number of the activities have been provides adequate authority to take whatever discussed in detail by the witnesses that have regulatory or data-gathering steps may be neces- preceded me in recent weeks. sary to ensure compliance with the Bank Holding Review of comments made during these hear- Company Act. ings and other information has suggested a num- My conclusion is that these provisions ade- ber of areas in which the committee might bridge quately balance the need for reducing unneces- differences by modifying or limiting earlier prosary regulatory burdens with the requirements posals. In particular, we have attempted to adfor adequate supervision to enforce fully the dress carefully the safety and soundness and the provisions of the Bank Holding Company Act. competitive fairness considerations that appear These provisions seem to me ready for inclusion to stand in the way of broad agreement on a in legislation. substantial broadening of bank holding company powers. In my testimony today I would like to review each of the categories of proposed new NEW ACTIVITIES OF BANK HOLDING activities in light of those considerations. COMPANIES Securities Activities—Underwriting Municipal The fourth element of needed legislation is ex- Revenue Bonds and Mortgage-Backed Securipanded powers for holding companies. S. 2181 ties, and Sponsoring and Distributing Mutual provides new authority for holding companies to Funds. Both S. 2181 and S. 2134 would authorize do the following: (1) sponsor and distribute mu- bank holding companies to underwrite municipal tual funds and underwrite and distribute revenue revenue bonds and similar instruments and to bonds and mortgage-backed securities, (2) en- sponsor and distribute mutual funds. The Board gage in real estate brokerage and development, supports both of these activities, based on a (3) provide insurance brokerage and underwrit- considerable period of experience with bank ing, (4) own a thrift institution, and (5) take part underwriting of general obligation bonds and in other services of a financial nature. managing trust assets. The Board believes that Considerations of competitive equality and these activities involve a manageable degree of potential benefits to consumers of a broader risk for banking organizations and there is poten- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 303 tial for substantial gain for customers in terms of affiliated bank, and that information on the finana variety of services and lower costs. cial activities of the bank's customers not be At the same time, bank performance of these made available to the securities affiliate and vice services has been opposed because of several versa. Banks might be prohibited from guaranconcerns. One line of concern suggests that the teeing or providing letters of credit to support provision of credit by a bank affiliate, or guaran- obligations that are underwritten by a securities tees of underwritten obligations by bank affili- affiliate. ates, would provide a distinct advantage to bank- So far as mutual funds are concerned, the affiliated underwriters, or that temptations to existing provisions of the Investment Company link underwriting and loan business would be Act, together with the applicable suggestions strong, to the potential detriment of the bank or above, appear generally adequate to assure indeits customers. It is alleged that investment flows pendent investment judgment. However, those might be influenced by the bank's interests, or provisions could be reviewed to determine if any that poor investment or underwriting perform- other special provisions are necessary to assure ance by a holding company affiliate might reflect independence from the bank affiliate. adversely on the bank itself. I have noted in earlier testimony a trend to- We approach these arguments with some care, ward conglomerates of financial services, and taking account of the fact that bank underwriting toward the explicit or implicit tying of various of corporate securities is not proposed and of the financial products by financial conglomerates not rather successful coexistence of bank-affiliated including banks. To assure competitive equality, and independent underwriters of municipal gen- I believe that restrictions of the kind I have eral obligation bonds. Moreover, S. 2181 and described above, if adopted, would need to be S. 2134 already contain a number of provisions accompanied by provisions giving the Board specifically designed to promote competitive eq- certain discretion in their application should nonuity and limit risk to affiliated banks. bank conglomerates develop combinations of Those bills already require that all securities services prohibited bank holding companies. activities of the holding company, including its Questions have also arisen over bank holding subsidiary banks, be conducted in a separate company participation in brokerage services. holding company affiliate. The affiliate must be The Federal Reserve, as you know, has permitseparately capitalized in a manner comparable to ted "discount" brokerage—that is, the passive similar firms not affiliated with a bank holding provision of brokerage services without investcompany. The present rules contained in section ment advice—under present law. Because that 23A of the Federal Reserve Act, and the pro- ruling is under court challenge, we believe it posed new section 23B, would limit intercom- should be explicitly provided for in the proposed pany transactions and require that they be on legislation. You may wish to review, however, market terms. All these provisions provide fun- the further question of the appropriateness of damental protections against conflicts of interest combining such services with investment adand unequal tax and regulatory treatment. vice—that is, providing a full range of brokerage Nevertheless, a cautious approach in this area services—within the framework of a bank holdis justified, and a number of suggestions pro- ing company. posed by others to assure competitive equity and The mortgage market is being transformed by avoid conflicts deserve attention. Thus, it may innovations in communications technology and be reasonable to prohibit a securities or invest- in marketing techniques. Banking organizations ment company affiliate of a bank holding compa- are major mortgage lenders and are familiar with ny from using the name of an affiliated bank or the credit analysis and have other expertise bank holding company (in the interest of appro- necessary to establish mortgage pools and evalupriate disclosure, an indication of company affili- ate the underlying risks of the constituent eleation should be permissible). It may also be ments in the pool. They can already underwrite desirable to require that the officers and employ- mortgage bonds guaranteed by the government ees of a securities affiliate or investment compa- or sold by government-related agencies. ny advisor be separate from those that operate an What is at issue here is whether a bank affiliate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

304 Federal Reserve Bulletin • April 1984 should be permitted to underwrite private securi- subsidiary bank or thrift of a depository holding ties. Should the authority be confined to securi- company to any customer of an affiliated real ties backed by one- to four-family mortgages, estate brokerage firm. potential risks would be substantially defused. It should not be necessary—nor would it seem Risks and conflicts of interest in bank holding fair—to limit loans by a mortgage banking subcompany participation in underwriting in those sidiary of a holding company to the customers of circumstances would appear to be manageable the affiliated broker. Nondepository firms are within the confines of the antitying rules already today permitted to combine ownership of brokercontained in present law and in S. 2181. As in age and mortgage banking subsidiaries. Of other areas, however, questions of competitive course, appropriate supervisory steps would and equity have been raised, particularly in view of could be taken to prevent reciprocal lending the ability of depository institution holding com- arrangements or other steps to evade this limitapanies to provide, through their subsidiary tion. banks, guarantees or letters of credit to support Smaller banks, without mortgage banking submortgage pools established and underwritten by sidiaries, might be put in a difficult competitive securities affiliates. The appropriateness of com- position by such a limitation. Consequently, bining those two aspects of financing services such an approach might be accompanied by an could be reexamined. exemption for smaller banks, reasonably related In summary, we believe adequate techniques to a relative unavailability of competing brokerare available to satisfy legitimate concerns about age services. It should be possible, for instance, bank holding company activity in the securities to draw an analogy to provisions of title VI of area, so long as corporate security underwriting the Garn-St Germain Depository Institutions remains prohibited. The potential benefits to Act of 1982, which permits bank holding compacompetition in terms of reducing underwriting nies to offer insurance brokerage services when costs, in these circumstances, point to action they would otherwise be impermissible if their along the lines proposed by the administration, consolidated assets were $50 million or less, or in and by Senators Garn and Proxmire. towns of under 5,000, provided a brokerage affiliate is required to permit or encourage a Real Estate Brokerage and Development. As I home purchaser to explore other possible suggested earlier, the main issue in providing sources of credit. authority for bank holding companies to engage Technology is providing both independent broin real estate brokerage is not risk but potential kers and those now associated with financial and conflicts of interest and problems of competitive retail conglomerates almost instant access to an equity. It has been suggested that the ability of a array of providers of mortgage credit, enabling real estate broker affiliated with a bank holding their customers to compare terms and condicompany to offer assured bank financing, or even tions. In these circumstances, real estate brokerthe impression that such assured financing is age appears to be an area in which bank holding available because of the ownership tie between companies can draw on relevant experience, affiliated broker and bank lender, could be suffi- undertake little additional risk (particularly if tiecient to divert business away from the indepen- ins are avoided), and increase competitive outdent and toward the bank or thrift-affiliated bro- lets. ker. In my past appearances before this committee, As with the case of securities affiliates, limiting I have expressed serious concern about the pouse by a holding company broker of the same tential risks and conflicts for bank holding comname as the holding company or its subsidiary panies under the general rubric of "real estate bank, strengthening the already strict rules development." Those concerns remain. against explicit or implicit tying, and enhancing Present proposals deal with those risks by enforcement through providing a private right of limiting the capital a bank holding company action could provide considerable protection could apply to real estate development activities against abuse. Possibly, a further step could be or by prohibiting construction activity—limitataken by prohibiting any mortgage loans by a tions that should be reinforced by also limiting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 305 the leverage of the real estate development sub- ers of the availability of insurance products elsesidiary. I would go further by urging you to where, allow customers purchasing insurance consider: (1) confining "real estate develop- products from bank holding subsidiaries an adement" to passive equity participation in projects quate opportunity to reject their contracts, and or developments managed by others, and (2) prohibit banks and their holding companies from limiting bank loans to projects sponsored by offering insurance until the customer is given a affiliates of a bank holding company. commitment that credit will be extended. It does The first change would be consistent with what not seem practically feasible to go much further we understand to be the basic objective of most in this area without destroying completely the bank holding companies in the real estate devel- ability of holding company organizations to paropment area—to participate in the potential ticipate in this activity. We would, however, benefits accruing only to equity participants in a suggest that to the extent the Congress deems real estate project. To achieve this goal, the these provisions necessary when financial instirather broad scope of the authorization for real tutions sell insurance, they should also be apestate development activities contained in FIDA plied to thrift institutions and their holding comor S. 2181 could well be narrower; for example, panies, which are permitted to broker insurance participation could be confined to investment without restrictions such as contained in title VI vehicles such as nonvoting common stock, pre- of the Garn-St Germain Act. ferred stock, or limited partnership interests. Consideration could also be given to possible Some of those testifying have expressed con- approaches for phasing in greater bank participacern about the competitive and risk implications tion in the insurance brokerage area. Again, it of a bank, as lender, participating in a project in might be useful to build upon title VI of the which an affiliate has an equity interest. They Garn-St Germain Act, which permits bank holdsuggest that a bank in those circumstances will ing company participation in insurance brokerbe more willing to extend credit, and to carry a age activities in cases when the holding compaweaker credit longer, to one of its "own" pro- ny's consolidated assets are $50 million or less, jects and perhaps be less willing to extend credit in towns of 5,000 or less, or otherwise when the to competing projects, than if no equity interest holding company demonstrates that existing inis involved. To deal with this situation, it might surance agency facilities are inadequate. For be useful to provide the Board with clear discre- instance, those limitations might be gradually tionary authority to impose an aggregate or par- increased over time by some amount up to a ticular limitation on loans by a bank to projects in limit, which would provide an occasion for furwhich a real estate affiliate of a bank is an equity ther congressional review. participant. If bank holding companies are permitted to engage in underwriting, careful attention will Insurance Brokerage and Underwriting. Insur- have to be given to containing risk, avoiding ance brokerage by bank holding companies, as is concentration of resources, and more subtle conthe case with real estate brokerage, does not flicts of interest. For example, there may be involve major issues of risk; rather, the focus of particular lines of insurance underwriting that the testimony has been on assuring competitive raise issues of risk that require special safeguards equity between bank-affiliated brokers and inde- and limitations on such matters as the amount of pendent distributors of insurance products. capital investment. Moreover, I have earlier sug- Thrift institutions already have unlimited author- gested that banks not be permitted to lend to ity to engage in insurance brokerage, and the companies in which their holding company affilibroadening of this activity for bank holding com- ates had very substantial equity interests. panies should provide competitive benefits so In order to limit the potential for concentration long as abuse of the bank relationship is avoided. of resources associated with large bank holding S. 2181, in section 107, contains a number of companies acquiring large insurance firms or new provisions that attempt to reduce tying and vice versa, S. 2181 would limit bank holding competitive inequity problems. It would, for company investment in nonbanking activities to example, require banks to inform their custom- not more than 25 percent of the holding compa- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

306 Federal Reserve Bulletin • April 1984 ny's capital if the holding company's consolidat- however, that acquisition of thrifts by bank holded assets amount to more than 0.3 percent of ing companies on an interstate basis may, in total domestic deposits. However, our review of some situations, not be fully consistent with the the data indicates that this test does not effec- prohibition on interstate banking contained in the tively limit the ability of some of the largest bank Douglas Amendment. The Board has indicated holding companies to acquire control of some of its views that the Congress should, in the future, the largest insurance companies. address the overall question of interstate banking I recognize that our attempt to devise a numer- in comprehensive legislation. However, pending ical test of that kind must be arbitrary at the congressional action on the overall question, the margin. However, an alternative approach could Board believes it is reasonable to incorporate be to provide specific criteria on the size of bank Douglas- and McFadden-type limitations on holding company participation in insurance un- thrift acquisitions that are proposed in S. 2181. derwriting and insurance underwriter participation in banking. This could be done by requiring Financial Services. S. 2181 authorizes holding that bank holding companies enter insurance companies to engage in "services of a financial underwriting de novo or through relatively small nature." This provision gives useful flexibility acquisitions. Similarly, insurance underwriters for the Board to deal with uncertain and unwould also be confined to de novo or foothold known circumstances in the future. We recomacquisition of banks. This approach would deal mend its inclusion in legislation. with the concentration issues, and it would pro- The decision of the Congress on the inclusion vide time for the participants, the Board, and or exclusion of the various activities that have state insurance regulators to gain experience in been discussed above will provide some guiddealing with combined insurance and banking ance on the intended scope of this provision. entities. Additional guidance would be desirable with An alternative approach would be to expand respect to other activities that the Congress bank holding company participation in insurance might consider to be within the scope of this underwriting in directions that flow naturally authorization. from existing bank functions. For example, it would seem appropriate for bank holding compa- ACTIVITIES OF STATE-CHARTERED BANKS nies to participate in insuring or guaranteeing the credit risk in home mortgages and in real estate Much concern has been expressed about possititle insurance. Dollar limits on individual credit- ble authorizations to state-chartered banks of related property and casualty insurance policies new authorities to conduct nonbanking busiunderwritten by bank holding company nonbank nesses that would not be permitted to bank affiliates could be lifted. After some experience, holding companies under present or new federal the Congress could then consider other areas of laws. It is reasonable to ask the question whether insurance underwriting activity that might be it makes sense for the Congress to work out appropriate as part of a gradual evolution of bank carefully balanced arrangements for the conduct holding company insurance underwriting. of nonbanking activities of bank holding companies only to see far different and inconsistent Ownership of Thrifts. S. 2181 specifically per- arrangements established for state banks under mits bank holding companies to acquire thrifts state law. insured by the FSLIC, subject to the same kind Some states have adopted, and others are of limitations on interstate acquisitions as are considering, legislation to authorize state-charwritten in the Douglas Amendment and the same tered banks to engage in insurance, securities, kind of branching restrictions on the acquired and real estate development activities; and oththrift as are contained in the McFadden Act. The ers have authorized state-chartered thrifts to Board has supported bank holding company ac- engage in virtually unlimited activities. Last quisition of thrift institutions as a reasonable year, South Dakota authorized state-chartered extension of the presently authorized scope of banks to engage in insurance-related activities bank holding company activities. We recognize, essentially in all of the states of the Union except Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 307 South Dakota. The states are motivated in part ruled out of bounds for safety and soundness by a desire to make their financial institutions reasons; the states may optionally authorize othcompetitive with those in other states and in part er activities but only if they are conducted within by a desire to obtain new employment and reve- their borders. We would be prepared to assist the nues—inevitably at the expense of others. As the committee in drafting such a provision. process gains momentum, more and more states will feel themselves forced, in self-defense, to OTHER PROVISIONS OF S. 2181 take similar steps. The threat is obvious—any sense of congressional or federal control over the My comments today have focused only on title I evolution of the banking and financial system of S. 2181 as I believe it is that title that requires will be lost. the priority attention of the Congress. Before my S. 2181 attempts to deal with this problem by concluding remarks, I would like to comment requiring that insurance activities be conducted specifically on the provisions contained in title X in the state and outside the state on the same on regional interstate banking. terms. S. 2134 would go considerably further by Title X provides specific authority, for a fiverequiring that states may only authorize activi- year period, for states to authorize regional interties for state-chartered banks to be conducted state banking acquisitions. Such legislation within the state and for residents of that state. would presumably resolve the question of the In the light of current developments, it now constitutionality of regional arrangements that appears desirable to go somewhat further than have been authorized in New England and have the provisions of S. 2134, while still maintaining been proposed in a number of other areas of the flexibility for state experimentation and innova- country. Yesterday, the Board approved two tion. In balancing these considerations, perhaps bank holding company mergers under the recipit is desirable to distinguish between those activi- rocal arrangements of Massachusetts and Conties that the Congress may decide to prohibit or necticut. Although there is a strong argument limit for banking organizations because of safety that these state laws are not consistent with the and soundness problems, and those that arise prohibitions against discriminatory burdens on from conflicts of interest that are particularly interstate commerce established by the Comimportant for the protection of local customers. merce Clause of the Constitution, there is an For example, if the Congress reaffirms its absence of clear and unequivocal evidence to decision to exclude banking organizations from that effect. Consequently, the Board proceeded participating in underwriting corporate debt and on the assumption of constitutionality and apequity, and limits the participation of these orga- plied the criteria of the Bank Holding Company nizations in real estate development, it would not Act. But plainly, the differing constitutional inseem to be desirable for the states to have the terpretations raised by parties to merger applicaauthority to overrule the judgment of the Con- tions demonstrate the need for congressional gress and expose the insured depository system action to clarify this issue at this time. to the greater risks of these activities. On the We believe this is all the more important other hand, if the Congress decides not to autho- because of our concern about the permanent rize real estate or insurance brokerage because establishment of regional banking areas. If the of reasons of consumer protection and competi- Congress should decide to endorse regional artive equity, it would not seem inconsistent with rangements, in our view it would be desirable to the federal interests if state legislatures authorize limit them to a transitional period. We would also banking organizations to participate in these ac- urge you to consider the interstate banking questivities within the confines of their own state. tion more broadly at an early date, once the Here the state may be in the best position to powers issues are settled. make the judgment about what is necessary to protect local customers and local interests. CONCLUSION Thus, the balance between federal and state interest could be struck as follows: states may I cannot emphasize strongly enough the urgent not authorize activities that the Congress has need for definitive congressional action on the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

308 Federal Reserve Bulletin • April 1984 legislation now before you during the current ed authority. The Board has adopted the broadsession. Decisions cannot be postponed—the est definition of the term bank that it felt was failure to act only means that others have acted feasible under existing law in an effort to carry and will continue to act, to markedly restructure out what it believes to be congressional intent the financial system without the participation of and to preserve the ability of the Congress to act the Congress. These actions, arising out of mar- without being faced with a fait accompli. That ket initiatives, state legislation, court decisions, action is being challenged in the courts with, thus and new federal regulatory rules, are pushing at far, unfavorable results. The SEC has before it a the outer boundaries of the legal framework proposal to consider banks as broker-dealers established by the Congress for the banking and when they engage in discount brokerage, despite financial systems. In my judgment, they are the exclusion of banks from the securities laws pushing beyond the basic policies established by because of the comprehensive system of bank the Congress in setting out a broad distinction regulation. Under existing law, the FDIC is between banking and commerce. considering the question of whether state non- I am not speaking about theoretical concerns. member banks should be authorized by regula- The policies of the Bank Holding Company Act tion to underwrite corporate debt and equity, against excessive risk, conflicts of interest, im- despite long-presumed congressional intent to partiality in the credit-granting process, and con- separate commercial banking and corporate uncentration of resources have long been consid- derwriting. The Comptroller has before it a wellered essential parts of our financial system. They known proposal to authorize a family of "nonare now being undermined by a haphazard pat- bank" national banks in 25 states. We have been tern of interindustry and interstate acquisitions compelled to approve the establishment by a and by new combinations of banking, securities, New York bank holding company of a nonbank insurance, and commercial products. bank in Florida, which would take demand deposits but not make commercial loans as we have The Bank Holding Company and Glass-Steabroadly defined them. gall Acts were intended to prevent combinations of firms that underwrite securities and take de- As things now stand, many of these specific posits. Yet today there are 32 securities firms issues will be decided on a case-by-case basis in that own so-called nonbank banks that can per- the courts—but we cannot expect those deciform many of the essential functions of banks. sions to be guided by a policy perspective on Court and regulatory decisions are opening new how the financial system as a whole should avenues for bank holding companies to under- evolve. That, in the end, is the task of the take securities functions without clear legislative legislature, not of the courts, which must strugguidance. gle to adapt today's circumstances to yesterday's The Bank Holding Company Act was intended laws. Until all of us—the regulators, the banks, to prevent combinations of commercial or indus- other competing industries, and the courts— trial firms from owning banks, yet today there have more congressional guidance, every new are retailers, diversified industrial-commercial decision will be subject to legal challenge. conglomerates, and insurance firms that own If the Congress does not decide, decisions will either nonbank banks or thrifts with banking still be made. But they seem certain to be conpowers. flicting, and not to fit into a coherent whole. One The states are rapidly considering and adopt- clear risk is that the overriding public interest in ing legislation granting state-chartered banks a strong, stable, and competitive financial syspowers that, in some cases, have not even been tem will be lost. contemplated under federal law for banks and The time for action is here. Many elements of bank holding companies, in large part reflecting comprehensive legislation are already broadly interstate competition for jobs and tax revenue accepted. I believe the remaining elements and rather than any judgment of the national interest the necessary compromises can be put together in a stable banking structure. soon. I hope and believe this committee can be The federal financial regulators are also press- the vehicle for moving ahead. • ing against the outer boundaries of their delegat- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 309 Statement by Nancy H. Teeters, Member, Board that discounts for cash need not be considered of Governors of the Federal Reserve System, finance charges for purposes of Truth in Lendbefore the Subcommittee on Consumer Affairs ing. There was, however, a great deal of uncerand Coinage of the Committee on Banking, tainty after that action as to whether the Con- Finance and Urban Affairs, U.S. House of Rep- gress intended to permit additions to prices for resentatives, March 27', 1984. credit card customers (surcharges) as well as reductions in prices for cash customers (dis- I am pleased to appear before you this morning counts). In response, the Congress in 1976 proto present the views of the Board of Governors hibited the imposition of surcharges—that is, on the issue of whether the Truth in Lending Act adding an amount to the regular price of an item should prohibit merchants from charging higher when it was sold to credit card customers.2 At prices to credit card purchasers than to cash the same time, the Congress responded to the purchasers through the use of a "surcharge." concern that state disclosure and usury laws As you know, the purpose of the Truth in presented an obstacle to discount programs by Lending law, which was passed in 1968, is to preempting them to the extent that those laws provide for a uniform disclosure of the cost of treated discounts as finance charges. credit to consumers through the identified "fi- However, because of some uncertainty as to nance charge" and "annual percentage rate." As the effect of the surcharge prohibition, it was a result, the act originally required that any originally scheduled to expire on February 27, differential between the price charged in a cash 1979. Subsequently, the ban was extended until transaction and that charged in a credit transac- February 27, 1984. The principal reason for the tion be treated as a cost of credit and included in temporary nature of the surcharge prohibition the finance charge and annual percentage rate. was to allow the Congress to study the issue This requirement, as well as state disclosure more thoroughly. The Congress wanted to deterand usury laws, however, was viewed in subse- mine whether there is, in fact, a higher cost quent years as an obstacle to merchants wishing associated with the use of credit cards; whether to implement two-tiered pricing systems for cash cash customers do, as a result, subsidize credit and credit card customers—that is, establishing customers; and whether it is necessary to allow two prices for property or services, a lower price surcharges as well as discounts in order to elimifor customers paying cash and a higher price for nate any subsidization. When the prohibition customers paying with a credit card. Consumer was last extended in 1981, the Board was directgroups argued that the fee imposed on merchants ed to prepare a report on the effects of credit by credit card companies was being passed on in cards so that the Congress would have a basis for higher prices to all customers.1 As a result, it was making a permanent decision regarding surargued that cash customers were being forced to charges. The report was to discuss the impact of subsidize credit customers when they were re- credit cards on the costs that merchants incur, on quired to pay the same price for an item. Two- the pricing of goods and services, and on retail tiered pricing systems were thus viewed as po- sales volume. tentially beneficial to consumers as a means of The Board submitted its report in July 1983. eliminating the subsidy. Appendix A contains a more detailed summary The Congress responded to this concern and of the results, but these are the main findings:3 sought to eliminate this subsidy by removing the • The costs to retailers of credit card transac- Truth in Lending and state law obstacles to tions (including point-of-sale, security-related, merchants offering lower prices to cash custom- 2. In amending the act the Congress defined a discount as a ers. It amended the federal act in 1974 to provide reduction in the regular price and a surcharge as an addition to the regular price. The "regular price" was not defined, however. In order to allow merchants to determine whether 1. The charge assessed by a credit card company on a their programs involved discounts or surcharges, the Board merchant's credit card transactions is often referred to as the by regulation defined "regular price." This definition was "merchant discount." If a merchant accepts a credit card for made part of the act in 1981. a $100 purchase, for example, the merchant might be as- 3. The appendixes to this statement are available from sessed a 3 percent fee, thus receiving only $97 when the Publications Services, Board of Governors of the Federal transaction is processed by the credit card company. Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

310 Federal Reserve Bulletin • April 1984 and financial costs) are higher than the costs for card transactions. The Grant study, in order to other types of transactions. The extra cost is conclude that the additional cost of credit card about 2 to 3 percent of the transaction amount. transactions was offset by a reduction in fixed • There is little evidence that credit card usage costs due to increased sales, assumed that credit increases overall retail sales volume. Since credit cards had resulted in a 20 to 30 percent increase cards are so widely accepted, retailers as a whole in incremental sales revenues, an assumption do not recover the added cost of credit card that we find without basis and a position with transactions through increased sales. which we disagree in our study. • The extra cost of credit card transactions (to The Board's study found that the additional the extent it is not recovered directly from credit cost of credit card transactions was between 2 card users) is reflected in retail prices. It appears and 3 percent of the transaction amount, and that on average the price of a given item is estimates the typical size of the subsidy to be increased by something less than 1 percent. between Vi percent and VA percent of the total • About 25 percent of gasoline stations and 6 price. These findings appear to confirm the belief percent of other retailers offer discounts. Ap- held by the Congress in 1974 that cash customers proximately 40 percent of all retailers surveyed subsidize credit card customers. At the same believed that discounts for cash are "a good time, the size of the subsidy may be smaller than idea." many people had assumed, since the additional In finding that credit card transactions cost cost of credit card transactions is spread over all most retailers more than cash or check transac- sales—both cash and credit. The relatively small tions, and that the additional cost is generally not size of the subsidy, as a percent of the price of a offset by higher sales volume but is reflected in particular item, may help to explain why few the price level, the report supports the conclu- retailers have seen fit to adopt two-tiered pricing sion that cash buyers, at least to some extent, systems; at the same time, the total amount of subsidize credit card users when all customers the additional cost due to credit card transactions pay the same price. and the total amount of the subsidy, in the The finding that credit card transactions cost economy as a whole, are probably large. more than cash or check transactions is based on Of the many options available to the Congress, a survey of retailers about the relative costs two are currently being considered in pending associated with cash, check, and credit card bills. One bill, H.R. 5026, would make the surtransactions, as well as a review of other studies charge prohibition permanent, necessitating that dealing with the costs of various means of pay- two-tiered pricing be accomplished through disment. Two of the other studies, one by Payment counts for cash. Under this approach, existing Systems, Inc., (PSI) and one by Robert M. discount programs would be expected to contin- Grant, could be viewed as indicating that credit ue, but there would be little reason to expect card transactions do not cost more than cash and more to be offered in the future. The other bill, check transactions.4 We believe, however, that S. 2336, would discontinue the characterization drawing this conclusion from these studies would of certain price differences as "discounts" and be incorrect because of the limited cost factors others as "surcharges." At the same time, by considered in one of the studies and the assump- excluding the price differences from treatment as tions made in the other. The PSI study looked at a cost of credit under federal and state laws, it only point-of-sale and other handling costs would continue to encourage merchants to offer among the three means of payment—cash, price differences to induce payment by cash check, and credit card—and did not consider instead of by credit card. The Board supports other costs associated with the transactions, this approach, which, by no longer distinguishing most notably the merchant discount in credit between a "discount" and a "surcharge," might promote additional two-tiered pricing. 4. Payment Systems, Inc., Cost of Cash: A Strategic Our position is based on the proposition that Analysis, Atlanta, 1981; Grant, Robert M., "Transaction discounts and surcharges are fundamentally Costs to Retailers of Different Methods of Payment. Result of equivalent, as well as on a number of practical a Pilot Study." Processed. Report prepared at The City considerations. First, while advocates of dis- University, London, 1982. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 311 counts have claimed that discount programs re- their customers what their pricing practices are. sult only in price reductions for cash buyers, Furthermore, there is at least one type of probwithout penalizing credit card users, economic lem with discount programs that would not exist reality is such that prices generally will be re- with surcharges. Some reports indicate that cash structured so that the "new" credit price is customers have not always received the disabove—and the discounted cash price only counts to which they were entitled; this has somewhat below—the "old" single price. The occurred, for example, when customers believed Board's study indicates that if discount programs that the posted price reflected the discount, are to be economically feasible, most are likely when in fact it did not. to involve some increase in the price, from which Although the Board believes that merchants discounts to cash customers are calculated. In should be free to charge different prices without fact, two-tiered pricing through discounts ordi- having to characterize the difference as a cash narily would result in essentially the same level discount instead of a surcharge (a requirement of credit and cash prices as would a surcharge imposed by the previous ban on surcharges), it program. (This is discussed in more detail in believes that the limitations found in the Senate Appendix B.) bill are appropriate. First, the Board agrees that, Second, allowing two alternative methods of in any two-tiered pricing system, the price differpricing may provide merchants the flexibility ence that is excluded from truth in lending rethey need to offer more of the two-tiered pricing quirements and state disclosure and usury laws that the Congress is trying to encourage. Al- should be limited to 5 percent of the cash price of though 40 percent of the retailers surveyed by the property or service. Any difference in the the Board considered cash discounts a good idea, price charged to cash customers and to credit only 6 percent actually offered them. This low customers is a cost of credit and normally would figure may mean that merchants find discount be viewed as a finance charge. In the case of a programs too difficult to administer. Another price difference to induce customers to pay by possible explanation is that the similarity be- cash instead of by credit card, however, the tween discounts and surcharges has caused con- Congress chose to make an exception to encourfusion among merchants about the difference age merchants to eliminate the cash customers' between a permissible discount and an illegal subsidization of credit card customers, even surcharge—as evidenced by many inquiries the though it sacrificed some accuracy in the credit Board has received about the distinction. This cost disclosures and in the protection offered by uncertainty about the law may have discouraged state usury laws. Since this provision involves a merchants from offering discounts. If the lack of trade-off with the goals of the Truth in Lending two-tiered pricing is related to either or both of Act and state laws, we think some limits are these factors, then there is some hope that per- appropriate. Furthermore, we think the 5 percent mitting both pricing schemes might promote the limit would not keep merchants from offering result the Congress originally hoped to achieve. price differences related to the extra cost of A third consideration concerns the claim made credit card transactions. The Board's study indiby some opponents of surcharges that allowing cates that the fee imposed by credit card compaboth types of two-tiered pricing will lead to nies on merchants averages 3.1 percent (with an consumer confusion in a marketplace in which average of 4.1 percent for small businesses), well some merchants offer discounts and others im- within the 5 percent limit. In addition, most cash pose surcharges. While the possibility of some discounts now being offered are in the neighborinitial confusion certainly exists (much like the hood of 3 to 5 percent. confusion that accompanied the introduction of Second, we agree that the two-tiered pricing discount programs at service stations), we do not provision should be limited to credit cards as it is think the problem would be major because mer- in the Senate bill. The purpose of the original chants would still be required to disclose their exception, in fact the only focus of the discuspolicies. In addition, the Board believes that sions over the years, was to provide a means to competition and the merchants' desire for cus- remove the extra cost of credit card transactions tomer goodwill would lead them to make clear to from the price charged to the cash customer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

312 Federal Reserve Bulletin • April 1984 However, in 1981 the Congress changed the warranted extension of the provision and could language of the act to provide special treatment further undercut the accuracy of the Truth in for discounts not only in credit card transactions, Lending disclosures and the effectiveness of but in all open-end credit transactions. The state laws. Board believes that since open-end credit trans- I appreciate the opportunity to address the actions not involving a credit card do not gener- subcommittee and hope that our testimony will ally result in a "merchant discount," this special be of assistance in your efforts to deal with this treatment for discounts may have been an un- difficult question. • Statement by Paul A. Volcker, Chairman, Board What is so disturbing is not that change is of Governors of the Federal Reserve System, taking place. Rather it is that much of the activity before the Subcommittee on Telecommunica- we see is forced into "unnatural" organizational tions, Consumer Protection, and Finance of the forms by provisions of existing law and regula- Committee on Energy and Commerce, U.S. tion, and that some of the fundamental concerns House of Representatives, April 4, 1984. that motivated those laws and regulations are being lost or overlooked without considered I appreciate the opportunity to appear before this judgment about the continued validity of those subcommittee to review with you a wide range of concerns. The old laws and rules may or may not issues affecting developments in markets for serve today's purposes; in some instances, they banking and other financial services. may themselves be a source of distortions, com- I have repeatedly expressed my conviction petitive imbalance, and weakness. But deregulathat the Congress should move with a sense of tion by fiat, by exploitation of loopholes, and by urgency to reform the existing legislative frame- diverse actions taken by individual states is work governing banking organizations. We need hardly an appropriate response, and threatens to assurance that the powerful forces of change in undermine and render ineffective federal overthe marketplace for financial services are chan- sight of banking. For all these reasons, I apprecineled in a manner consistent with the broad ate the opportunity to review with you some public interests at stake—the need to maintain a general considerations that we at the Federal safe and sound financial system, to assure equi- Reserve feel are relevant in assessing what legistable and competitive access to financial services lative steps are necessary and desirable. and credit by businesses and consumers, and to preserve an effective mechanism for transmitting THE CURRENT SITUATION the influence of monetary, credit, and other policies to the economy. The simple fact is that The accelerated pace of change in the structure assurance is lacking today. Quite to the contrary, of our financial system grows out of several we have a system that is changing, helter-skelter, developments. New technology has led to comin response to a variety of economic and other puterization of banking services and has made it forces, but with little sense of the public policy easier for institutions to provide those services issues at stake. or to combine several services. Business and The process has emerged over a number of consumer experience with inflation and related years, but it is accelerating. Much of the change high interest rates of the late 1970s and early is, in fact, a constructive response to technologi- 1980s has increased the premium on moving cal and market pressures and the opportunities money flexibly. Deregulation of interest rate made possible by deregulation. New combina- ceilings on liabilities of depository institutions tions of firms in the financial area, new services, has spurred efforts by those institutions to attain and new packaging of older services can be new asset powers and new sources of income. vehicles for responding more effectively to con- Nonbanks have sought ways to enter the banking sumer needs and new communications tech- business to gain access to insured deposits and nology. the payments mechanism. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 313 There have been numerous reactions to the portfolios of fixed rate mortgages acquired at forces driving change I have just mentioned. We lower interest rates, they have been under particsee new combinations of financial institutions ularly strong earnings pressure and their capital and new services—the rapid growth of the mon- positions have eroded. With their future prosey market mutual fund and, more recently, an pects seeming in jeopardy, the whole orientation explosion in brokerage of insured deposits, are of the industry is in a state of flux. Some individleading cases in point. There is the phenomenon ual institutions respond to immediate concerns of so-called "nonbank banks," providing a vehi- and earnings pressures by taking greater risks, cle by which financial and nonfinancial firms can and others are turning away from their traditional enter the banking business outside the frame- role oriented toward housing finance—a role that work of law and regulation surrounding bank through the years has been the justification for holding companies, and actually or potentially special benefits provided by federal law. violating the policy proscriptions of combina- Deposit-like instruments and payments sertions of banking and commerce. There is a vices are springing up in significant volume parblurring of distinctions among depository institu- tially or wholly outside the framework of governtions themselves, with some thrift institutions mentally protected and supervised depository increasingly assuming the characteristics of com- institutions. Depository institutions themselves mercial banks. At the same time, states are have today—in this highly competitive environenacting banking and thrift legislation that is ment—a potentially more volatile structure of much more permissive than federal law; a nar- liabilities and smaller capital cushions than in the row purpose is often evident—to attract institu- past, and there are strong incentives to take tions and new employment opportunities—rather advantage of the most liberal (or least binding) than broader judgments about sound national legal and regulatory philosophies and framepolicy. works—between thrifts and banks, between fed- New and sometimes conflicting federal regula- eral and state laws, and potentially even among tory initiatives seek to facilitate changes or to federal regulatory authorities. Such anomalies in maintain congressional intent, but those ap- the structure of our regulatory system—and chalproaches are circumscribed and often rendered lenges to long-standing regulatory and legal interineffective by the outmoded character of the pretations—are quickly eroding traditional conbasic legislation. As a result, legal challenges straints intended to separate deposit taking from through the courts to stop or speed the process, other activities. depending upon the particular private interest As regulators and legislators concerned with concerned, are proliferating, and the court rul- the public interest, our task is not to block ings themselves are not guided and informed by responses to real needs in the marketplace. But I any fresh indications of congressional intent. do believe we have a responsibility to see that All of this has naturally been reflected in an change is channeled along constructive lines and unusual sense of uncertainty and uneasiness sensitive to abiding and valid concerns of the among the affected institutions themselves. After public interest. decades of stability in the relative position of Left unattended, there is no assurance that the commercial banks in our financial system, own- process of change now under way will adequateers and managers of those institutions feel their ly address these concerns. In fact, it is clear that position threatened by a situation in which they some of these concerns are being violated as remain heavily regulated but in which other market pressures and competitive instincts play financial or nonfinancial firms can perform basic against an outmoded legal and regulatory strucbanking functions. That is one reason why banks ture. The longer we postpone difficult decisions are driven to exploit "loopholes" in legislation about the direction in which change should be designed to limit their activities or to turn to state encouraged or discouraged by public policy the legislatures. more difficult those decisions will ultimately be- Concerns of the thrifts as to how they could come, and the greater the risk that continuing survive in the highly competitive environment policy concerns—including the safety and soundhave also been acute. In part because of the large ness of the banking system—will be undermined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

314 Federal Reserve Bulletin • April 1984 GENERAL CONSIDERATIONS safety and soundness and competitive equality (such as regulation as bank holding companies or The continuing goals of public policy in this area application of reserve requirements on all types are easy to summarize: of transaction balances). We can, if consistent • We want to encourage competition in the with other objectives, relieve the regulatory burprovision of banking and financial services; den on banks (such as streamlining bank holding • We want to promote efficiency and minimal company applications procedures and paying incost; terest on reserves). Or, we can confine the • We want to protect against discrimination, performance of essential banking functions (such conflicts of interest, and other potential abuses; as third party payments and direct access to the • We want equitable and consistent treatment of clearing mechanism or the coverage, implicit or competing financial institutions; and explicit, of deposit insurance) to banks alone. In • We want a strong and stable banking system, practice, some or all those approaches can be implying continuing attention to safety and adopted. soundness of banks. These "core" goals in some circumstances may be in conflict or point to different approach- BANKS AND THEIR REGULATION es. In normal circumstances—and in most industries—it may be enough to look to the market- The regulation of banks, and the related "safety place to promote competition and efficiency. But net," has long reflected their critical role as when safety and soundness, broad confidence in operators of the payments system, as custodians banking institutions, and continuity in the provi- of the bulk of the liquid savings of the country, as sion of money and payments services are at essential suppliers of credit, and as the link stake, competition alone cannot be relied upon to between monetary policy and the economy. In achieve the goals. In recognition of that fact, the that connection, I must emphasize that individcreation of the Federal Reserve and federal de- ual components of the banking and payments posit insurance systems—both the Federal De- systems are, to a large extent, dependent on the posit Insurance Corporation (FDIC) and the Fed- health of other elements. Adverse developments eral Savings and Loan Insurance Corporation here or abroad affecting one institution, particu- (FSLIC)—have long been accepted as important larly of substantial size, can dramatically and elements in a "safety net" supporting depository suddenly affect other institutions, some of whom institutions. And the existence of that safety net, may not even have a business relationship with and the special privileges it implies, is naturally the institution in difficulty. While secondary and matched by burdens and responsibilities not tertiary effects are, of course, present in some shared by other institutions in our society. degree in the failure of any business firm, seldom The need to protect the integrity of the pay- will the effects be so potentially contagious or so ments system deserves special attention. In disruptive as when the stability of the banking seeking an overall balance between protections system or the payments mechanism is at stake. and restrictions for banking institutions, we can At such times, serious implications for overall and should avoid placing depository institutions output, employment, and prices—indeed, for the at a competitive disadvantage relative to others. entire fabric of the economy—are apparent. To do otherwise would be to erode the vitality The first and most important line of defense is and strength of the very sector of the financial the interest of banking institutions themselves in system deemed of special importance to the maintaining the confidence of their customers. economy. To the extent that other institutions— But long ago, in establishing the Federal Reserve financial or nonfinancial—operating outside the System, the FDIC, and the FSLIC, the governprotected, regulated framework nonetheless tend ment determined that normal market incentives to perform the essential function of banks, there and protections needed to be supplemented by are several alternatives. We can encompass an official support apparatus. Ironically, the conthose institutions within a basic framework of fidence and related competitive advantages ensupervision and regulation designed to assure gendered in the public by that support apparatus Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 315 can, over time, induce greater risk-taking by the tial considerations; experience strongly suggests depository institutions that benefit from it. That the difficulty of insulating a bank from the probis one reason why I believe a comprehensive lems of a company affiliated with a bank through system of examination, supervision and regula- a holding company. To be sure, the fortunes of tion, limitations on permissible activities, and the bank and its affiliates can be (and are) sepainsurance premiums will remain necessary. rated to a degree by restrictions on the transac- The practical and ongoing issues in this area, it tions among them. But I doubt that the insulation seems to me, do not involve a wholesale revolu- can ever be made so complete—at least without tion in past approaches, but a reexamination of defeating the business purpose in the affiliation— the appropriate balance—the balance between as to rely on those rules alone. The holding desirable risk-taking and safety, and the balance companies themselves, the securities markets, among competing depository and nondepository and the general public tend to look upon affiliates institutions—in today's market circumstances. as part of a larger whole. One important area that is beginning to receive Other concerns—potential conflicts of interest attention is the appropriate structure of deposit and concentration of resources, particularly insurance. The insurance agencies are rightly through extensions of credit by the bank to concerned about the proliferation of insured bro- customers of the nonbanking subsidiaries—can kered deposits, which have been particularly also be addressed by law or regulation. But important in the case of a number of failing again, insulation is not likely to be complete at all institutions and those characterized by aggres- times. sive risk-taking, and the unintended effect such At the same time, segregating nonbanking acactivity may have on both the insurance funds tivities of a bank holding company outside the and structure of depository institutions. I share bank itself can provide important advantages. To the concerns of the FDIC and FSLIC. The some degree, the bank may be shielded from the Federal Reserve Board has taken the position activities of other elements of the holding compathat legislation to permit regulatory agencies to ny. Segregation from the banks should, in any set a cap on such deposits—at a low level tied to event, make it easier to assure regulatory consome ratio of deposits or capital—would be an sistency and competitive equity between nonappropriate approach. Absent such legislation, I banking affiliates of a bank holding company and support the action taken recently by the insur- other businesses providing comparable services. ance agencies to limit severely insurance protec- Regulations specific to nonbanking activities tion of brokered deposits. Developments in this may not always reflect certain important prudenarea are one example of how the marketplace can tial concerns of bank supervision; to that degree, respond to one element of government interven- nonbanking activities conducted by banking ortion—in this case deposit insurance—in a man- ganizations may appropriately be subject to rules ner that can, despite some immediate benefits, or surveillance by banking regulators. Conversehave unintended and undesirable effects on the ly, when bank holding companies engage in banking system or the regulatory system general- nonbanking activities, we should seek to avoid ly. More generally, recognizing that deposit in- competitive advantages arising simply from the surance has become such an important element association with a banking institution able, imin the support apparatus for depository institu- plicitly or explicitly, to draw upon government tions, substantial change requires careful assess- support. One consideration in this regard is the ment of the possible consequences. capitalization of the nonbanking activity. The higher degree of leverage common in banking should not automatically extend to nonbanking activities; capitalization of the nonbank subsid- BANK HOLDING COMPANY REGULATION iaries should broadly reflect that required of Concern with the activities of organizations en- nongovernmental protected competitors by marcompassing banks cannot stop with the bank ket forces and other regulatory agencies, federal itself. The restrictions long applied to bank hold- and state. Indeed, adequate capitalization of a bank holding company as a whole, taking acing companies are importantly rooted in pruden- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

316 Federal Reserve Bulletin • April 1984 count of the particular nature of the nonbanking mittees. One general category would be further activities, is important to the safety and sound- extension of "brokerage" or "agency" activiness of the bank. ties, including sales of a variety of real estate, In the end, the appropriate range of activities insurance, and travel products. Insurance underfor a bank holding company should remain, in writing, currently limited largely to credit-related my judgment, a matter for determination by a insurance, is being considered within a framebalance of public policy considerations; it should work that limits concentration of resources and not be solely a matter of market incentives, and risk to the banking organization taken as a some degree of supervisory oversight over the whole. activities of the holding company as a whole will Some activities that have been discussed raise remain important. The traditional presumption considerably greater questions in my mind prihas been that there should be some separation of marily because of risk, but also because possibilbanks from businesses engaged in a general ities of conflicts of interest or concentration of range of commercial and industrial activities, and economic resources might not be contained withvice versa. That presumption still seems to me a out the most elaborate and self-defeating kinds of reasonable starting point in approaching particu- regulation. Corporate securities underwriting, lar questions. At the margin, that separation will some forms of real estate development, and, be arbitrary, but in a broad way it reflects more generally, significant equity positions in legitimate and lasting concerns about risk, about unrelated nonfinancial activities fall into that potential conflicts of interest between a bank as category. owner of a nonfinancial firm and as an impartial In any event, to the extent that regulation is provider of credit to the community, and about needed, the goal should be to minimize the costs the dangers of excessive concentration of ecoand burdens of regulation, consistent with the nomic power. Moreover, to the degree that affilipublic interest. For example, experience has ation with a bank implies the need for some convinced us that some of the present procedural regulatory or supervisory oversight, practical requirements for bank holding company applicaand desirable limitations on the reach of such tions under the Bank Holding Company Act can regulation into industrial and commercial activilead to unnecessary delay. The Federal Reserve ties implies some limitation on the scope of bank Board has gone as far as it feels it can, consistent holding company affiliations. with present law, to speed up procedures and Within this general framework, the precise line lessen regulatory burden. Specifically, present dividing what ought to be permissible for banking statutory requirements for approval of nonbankorganizations to do and what should be pro- ing activities could be modified to permit simpler scribed does need reexamination in the light of "notice" procedures, with a presumption of apcurrent market conditions, changes in technolo- proval unless there is a judgment that "safety gy, consumer needs, and the regulatory and and soundness" and similar considerations are economic environment. Some activities now de- adverse. Such recommendations have been nied banks would seem natural extensions of made in legislation supported by the administrawhat these institutions currently do, involving tion and in bills already introduced in the Senate, little additional risk or new conflicts of interest, and they appear to have broad support. and potentially yielding significant benefits to consumers in the form of increased convenience and lower costs. For some time, for instance, the CONSISTENCY IN BANK-THRIFT Federal Reserve has suggested that banking or- REGULATIONS ganizations be allowed to underwrite municipal revenue bonds and establish and distribute mutu- The observation that thrift institutions have esal funds. Certain brokerage activities have alsentially become bank-like institutions is indisready been approved within existing law, as have putable with respect to the powers they are a wide range of data processing services. allowed to exercise and increasingly accurate Other activities seem ripe for and are being with respect to the powers they do exercise. given consideration by other congressional com- Moreover, in important instances powers avail- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 317 able to thrift institutions extend well beyond FEDERAL-STA TE REGULATIONS those available to banks and call into question the separation of banking and commerce now For over a century this country has maintained a applicable to banks. Considerations of competi- dual system for the regulation and supervision of tive equity alone would seem to dictate that the banking. On the whole, this dual banking system special privileges and restrictions of banks and has played a useful and constructive role in thrifts be brought into a more coherent relation- encouraging innovation in the financial regulaship. tory environment and in helping to accommodate Anomalies go beyond considerations of com- local differences in the needs of banking organipetitive equity. The kind of considerations I just zations and their customers. reviewed with respect to the powers of banking The system has worked as well as it has organizations cannot be valid for commercial because the goals and techniques of regulation banks alone; limitations on bank holding compa- were commonly shared, and the divergences nies could not be effective to the extent thrift between federal and state systems were kept institutions could simply substitute as a vehicle within tolerable bounds. As I mentioned earlier, for combining various activities. I recognize that this commonality of goals appears to be breaking there are difficult questions posed by the firms down, as states consider expansions of powers that already have operations on both sides of the for banks and thrifts—to attract institutions and line between commerce and "thrift banking," jobs—that go far beyond standards allowed by but some way needs to be found to resolve these federal law. Yet, they would still rely on the questions and establish a firmer policy for the federal safety net for their state-chartered institufuture if we are to bring about a rational structure tions. in this regard. Recent developments strongly point to the The implication is not that all thrifts and their need to provide a new framework for the dual holding companies must be regulated in all ways banking system. We need an arrangement for the like commercial banking organizations. There exercise of the discretion of states in authorizing are ways of adequately defining a thrift institu- new powers for state-chartered banking institution that would allow us to achieve necessary tions without that discretion being pushed to the functional consistency and assure the integrity of point of undercutting vital national policies. Othour policy intent, while still permitting the spe- erwise, to the extent the Congress, in the nationcial benefits provided by law for institutions truly al interest, finds it necessary to circumscribe the concentrating on residential mortgage lending. activities of depository institutions and their Various asset tests have been suggested for holding companies, such limitations will be reneligibility for treatment as a "unitary" savings dered null and void over time by unrestrained and loan holding company—a minimum percent- state action. age of assets in residential mortgages and mort- For example, we at the Board, in view of gage-backed securities or such a test in combina- existing law and expressions of congressional tion with a supplemental test of a maximum of intent, and with the knowledge that the matter is assets in commercial loans. currently under intensive congressional review, The interest of investment companies, securi- have recently indicated that we could not apties firms, and commercial companies in acquir- prove the acquisition of state-chartered banks by ing savings and loans suggests that an asset bank holding companies with the apparent intent limitation too broad in nature would not deter of undertaking, under relevant state law, widesubstantial nondepository participation in de- spread insurance activities beyond the state in posit taking and payments services. Specific which the bank is chartered. This is one illustralimitations on such acquisitions—similar to those tion of an area in which the Board needs conlimiting their acquisitions of banks—appear gressional direction in setting appropriate guidenecessary if the basic prohibitions of the Glass- lines. Steagall Act against combining commercial In the area of securities powers, the Glassbanking and the underwriting of corporate secu- Steagall Act presumably was originally intended rities are to remain valid. to apply to virtually all banks. However, even in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

318 Federal Reserve Bulletin • April 1984 this case the statutory framework needs to be ments and their implications for public policy. If examined because, as a result of changes in law the Congress wishes to support these regional in the late 1930s regarding the requirement of arrangements, appropriately limited to a transi- Federal Reserve membership for all insured tional period, legislation explicitly authorizing banks, the question has arisen whether certain that approach should be enacted. sections cover state-chartered nonmember banks. In fact, the FDIC has a proposed rule that would permit holding companies with state nonmember banks to engage in securities activities CONCLUSION that are generally prohibited for banks or bank holding companies. The legislative framework governing the banking system is sorely in need of change—change that can take account of the vast changes in the environment for the conduct of banking and our INTERSTATE BANKING future needs. After long discussion and debate, the time is ripe for action. I believe there is a The geographic scope of depository institutions wide area of "conceptual" consensus, and has long been a key question of federal-state agreement on a critical "core" of legislation—on relations. The proliferation of nonbank affiliates the definition of a bank and a qualified thrift and of bank holding companies operating across state on regulatory simplification—is clearly within lines, loan production and "Edge Act" offices, grasp. The remaining issues surrounding the parintegrated national markets for money and credit ticular powers of a bank holding company are at the wholesale level, the current action of some inevitably more controversial, but nonetheless states themselves to permit entry of out-of-state ready for decision. We should not confuse lack banking organizations, and the broadened power of agreement among affected industry interests of thrift institutions able to operate interstate with absence of necessary information and arguhave by now led to interstate banking de facto for mentation. Workable approaches responsive to many banking services. But, as a general matter, the various concerns elicited by months of dewe have still prohibited on an interstate basis the bate and study can be developed in this legislaprovision of an integrated range of services in a tive session. single office, and we force particular activities I know of the potential difficulties in completinto "unnatural," and less efficient, channels. ing legislation this year. But the simple fact is we Even in the consumer area, restrictions are rap- don't have much time. A failure of the Congress idly breaking down. Recently, we were com- to act only means that the decisionmaking about pelled by existing law to approve the acquisition the evolution of the banking and financial system of a Florida "nonbank bank," designed to en- will fall to others, without congressional direcgage in a full range of deposit-taking and consum- tion. The current framework and intent of banker lending, by an out-of-state bank. We simply, ing law cannot hold in the face of technological under the provisions of the Bank Holding Com- change, intense market pressures, competition pany Act, felt we had no alternative. among states, and potentially conflicting deci- We sorely need a fresh congressional review of sions of courts attempting to apply old law to our entire policy toward interstate banking. today's circumstances. Regulators are being While most of the issues in this controversial pushed to and beyond the outer boundaries of area will need to be held over to a later Congress, the legal framework established by the Congress. the present movement toward regional interstate None of this will stop in the absence of congresbanking arrangements does need to be dealt with sional action. The system will change, but not in now. Just last week the Board approved two ways that fit into a coherent whole, responsive to bank holding company mergers under the recip- national policy. The clear risk is that the overridrocal arrangements of Massachusetts and Con- ing public interest in a strong, stable, and comnecticut, even though there are serious questions petitive financial system will be lost. both about the constitutionality of such arrange- We want competition, and the benefits to the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 319 consumer inherent in competition. We also want If we act—and act promptly—we can further a safe and sound banking system, stable in itself, both those aims. We want to cooperate with you and contributing to a larger economic stability. actively in working toward that end. • Statement by Preston Martin, Vice Chairman, less we fully understand the nature of the prob- Board of Governors of the Federal Reserve Sys- lem and the potential effects of the legislative tem, before the Subcommittee on Financial In- proposals put forward to date, particularly upon stitutions Supervision, Regulation and Insurance smaller depository institutions, we may find that of the Committee on Banking, Finance and Ur- future Congresses are still having to deal with ban Affairs, U.S. House of Representatives, this question. April 4, 1984. I am pleased to appear before this subcommittee SOURCES OF THE PROBLEM to present the views of the Federal Reserve Board on the issue of delayed availability—the While I do not believe it necessary to dwell at practice of some depository institutions (and great length about how checks are collected in other intermediaries such as money market this country, I think it desirable to review the funds) to impose "holds" on funds representing mechanics of how they are collected in order to checks deposited by customers. There is no comment on the problem. The use of checks is subject in consumer banking today that has gen- universally accepted in our society as a means of erated more consumer interest and controversy. making payments of all sorts in large part due to This topic is an extremely complex one, and has the efficiency of our payments mechanism. A been the subject of several congressional hear- customer accepts a check as payment and deposings in the past few years. While there are no its the check into his or her account at a deposieasy solutions to this sometimes frustrating prob- tory institution. The sooner the check is presentlem, I believe that we have begun to see some ed for payment, the sooner the collecting progress in the area, as witnessed by the recently institution has use of the funds, which it then is issued joint policy statement of the federal regu- able to pass back to its customer. Institutions lators and our own recent experience in experi- may give immediate availability to known cusmenting with ways to speed up the return of tomers. Consequently, it is in the best interests dishonored checks. Recent legislation in the of the institution to move that check as quickly states of New York and California as well as as possible through the collection process in proposed legislation now pending before both order to obtain "good funds." Before that hap- Houses of Congress have also addressed this pens, however, the check may pass through problem. several hands—the institution where it is first We at the Federal Reserve recognize that deposited, a correspondent bank, one or more delayed availability can be a source of confusion, Federal Reserve Banks, the payor institution's annoyance, inconvenience, and even embarrass- correspondent bank, and finally, the payor bank. ment to consumers. Let me reaffirm our position Although cumbersome at times, our nation's that we do not sanction the practice of undue check collection system works quite effectively. delays in providing collected funds to depositors. Almost 40 billion checks are collected annually, We are concerned, however, that some solutions and 99 percent of them are collected in one or proposed to date may have results that could be two business days. We estimate that the financial conceivably worse than the problem itself. That industry, including small and large banks, savis why we have spent a considerable amount of ings and loan associations, and credit unions, time studying this issue—easy solutions are just spends approximately $2 billion in operating exnot forthcoming. Even the legislative solutions penses every year to collect these checks. More put forth so far may not be entirely successful in than $1 billion of society's capital is tied up in resolving the problem. I am concerned that un- equipment and other capital resources required Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

320 Federal Reserve Bulletin • April 1984 to process and deliver checks to the payor insti- means that an institution should carefully considtution. er the actual risk of loss that it faces should a The Federal Reserve accepts its responsibility check a customer deposited be returned unpaid. to improve the payments system over time. We We believe that before, say a teller, imposes a have introduced programs, such as "noon pre- delay in availability, he or she should take into sentment," that have resulted in improved col- account the length of time the depositor has been lection times and faster availability for billions of a customer, past experience with the depositor, dollars worth of checks. While we will continue whether the depositor has other deposit accounts to introduce refinements into the system, I must or an overdraft line of credit that could be relied advise you that given the existing legal and upon, the identity of the drawer, and the type of procedural requirements, it is unlikely that the check. Further, we advise that institutions speed with which checks are being collected can should not impose delays on U.S. government be dramatically improved in the short run. As checks beyond the time required to receive credlong as the requirement for the physical presen- it from their correspondent or from the Federal tation of checks continues, there will always be a Reserve. At the same time, the statement rejustification for at least a short delay in availabil- minds institutions to disclose their hold policies ity. to customers when the account is opened and, when practical, frequently when a check is deposited if a hold is to be placed. REASONS FOR DELAYS In any event if an institution imposes a delay in availability on a customer's deposit in an inter- The basic reason that depository institutions est-bearing account, we believe it appropriate for delay availability beyond the one or two days it the institution to begin paying interest at least takes to clear the check is the concern that the from the time it receives credit from its correinstitution will not be able to recover the funds spondent bank or from the Federal Reserve from its depositor, often a new depositor or a Bank. In fact, we understand that many instituvery large deposit, in the event that the check is tions pay interest from the date of deposit. returned unpaid. We recognize that depository We have had extensive discussions concerning institutions point to the operational problems these matters with the financial institution trade associated with the return check process as the associations and have received their unqualified basis for lengthy delays some of them impose. endorsement and support. We believe that this However, 99 percent of all checks are paid the approach has considerable merit and is the best first time through the collection process. Fur- way to proceed at this time. thermore, over 60 percent of the checks that are returned are for amounts of less than $100. Finally, about half of the 1 percent of checks that ONE POSSIBLE SOLUTION are returned are paid when they are presented for payment the second time. It is important to I believe that the most feasible way to eliminate recognize that all of these returns do not actually the problem of delayed availability once and for result in a loss since in most instances the all is to move toward electronic payments and institution is able to recover the funds from its reduce substantially the requirement of moving depositor. This is why we and the other agencies paper from place to place. We have made great have focused our joint policy statement released strides in this country in introducing electronics on March 22 on measures depository institutions into virtually every phase of our lives—from can take to reduce delays in availability without communications to home entertainment, but we increasing the likelihood that they will incur still have not overcome the customer's need for losses. physically moving pieces of paper from deposi- Our statement urges that institutions utilizing tory institution to depository institution until the practice of delayed availability should take they reach the payor. If a check is not paid, it steps to reduce further the delays they impose, then follows the same path back to the institution consistent with prudent banking practices. This of first deposit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 321 The customer in the "wholesale" side of bank- of electronics to make payments and collect ing has moved into the electronic funds transfers checks. In all of this, however, I think that it is in a big way. It is estimated that in 1980 electron- important to recognize that checks will most ic transfers moved $117 trillion in payments, six likely continue to be the principal method used times the $19 trillion moved by checks. Clearly by consumers for the foreseeable future. Therethe large balance transfer sector is on to some- fore, efforts to continue to improve collection thing to which consumers should be alert. In procedures and funds availability to depositors fact, I believe there is strong evidence that are certainly worthwhile. consumers are making greater use of electronics in their financial affairs and I think it would be wrong to underestimate the receptivity of con- THE DALLAS RETURN-ITEM PILOT sumers to electronic improvements in banking. Automated teller machines are intensively used We are also experimenting with programs to on a 24-hour basis. Indeed, many customers speed up the return of unpaid checks. Under the report that they prefer to use an automated teller generally used return-item procedure, a check at their convenience any time during the day or that is dishonored for whatever reason by a night rather than having to go to the bank during payor bank retraces the collection steps that it normal banking hours. followed. By law, the payor bank and each The rapid growth of automated clearinghouse institution that receives it has until its midnight payments is also an indication of the consumer's deadline to pass the check back to the institution responsiveness to electronic fund transfers. from whom it was received. I need not dwell at Each month millions of Americans receive their great length on the process other than to indicate Social Security and other U.S. government pay- that it presently is highly labor intensive, as the ments through direct deposit into their accounts. return-item process has not as yet benefited from These payments are never subject to a delay in the advantages of automation. Further, many availability. Other efforts toward electronic de- institutions merely place the dishonored items in livery of checks seem very promising. The Fed- the mail rather than using the courier services eral Reserve and the banking industry have be- used to collect checks. All of these lead to a gun experiments with various ways of delivering sometimes long and tedious procedure for the checks electronically. While these procedures return of an unpaid check. are in an early stage, we believe that such The Federal Reserve Bank of Dallas has been innovations have the long-run potential of totally conducting a pilot program designed to speed up eliminating the need for delays in availability and the return process. The ultimate objective is to for saving considerable amounts of society's reduce the potential risk of loss to depository resources devoted to check collection. institutions due to dishonored checks. One ap- Consumers have been responsive to programs proach that we have been implementing is to that eliminate the return of checks. In fact, return dishonored checks directly to the institufederal credit unions are required by regulation tion of first deposit rather than through each not to return share drafts to customers. By institution in the collection chain. Another apeliminating the need to return the paper check proach that appears to have considerable merit is and through the increased use of electronic col- to ensure that the institution of first deposit lection, we can improve the efficiency of the promptly receives wire notice of a returned payments system quite dramatically. Informed of check. The Dallas Reserve Bank has approached the faster availability of funds and potentially this objective in stages. We have now gained lower fees due to cost savings, I believe that considerable experience with returning unpaid consumers will be willing to accept over time, checks directly to the institution of first deposit indeed some will even demand, changes in the within the Dallas Reserve Bank's District, and way in which checks are collected. We would be we are now preparing to move to the next stage pleased to determine for the Congress if you so of the pilot. Returning the dishonored check desire the feasibility, benefits, potential conse- directly to the institution of first deposit has quences, and operational aspects of greater uses speeded up the return process by more than one Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

322 Federal Reserve Bulletin • April 1984 day for those checks handled by the Dallas stances, the notice of dishonor must be passed Reserve Bank. on by telephone, a cumbersome and costly pro- During our next phase, Dallas intends to ex- cess. We are making great strides in establishing pand the process to include returned checks from additional automated communication linkages payor banks, regardless of whether or not the with small institutions. We anticipate that addicheck originally cleared through the Reserve tional experience with the wire advice of nonpay- Bank. This will require additional operational ment procedure will result in a low-cost method adjustments at the Reserve Bank and at deposi- for providing more timely information about retory institutions. turned checks to the institution of first deposit. State laws, however, may present a barrier to Based upon what we have learned to date, we the nationwide implementation of direct returns. believe that there are several possibilities for Several jurisdictions (the District of Columbia, providing wire notices for all types of returns, Nebraska, Nevada, New Jersey, Oregon, and including those of amounts below $2,500. Wire Wisconsin) have not adopted a provision in the advice, however, may not be cost effective for Uniform Commercial Code that permits the di- small-denomination checks. Because smallrect return of dishonored checks. We have dis- amount checks do not seem to present the same cussed with state officials the desirability of risks that large-amount checks present, it may be changing their state law to add the direct return easier to handle the question of these checks by option to their state codes. Until these laws are extending the deadline for returns to provide changed, or unless the Congress authorizes the additional time for drawers to cover these direct return of unpaid checks to the institution checks. This could be accomplished through of first deposit, many of the benefits envisioned legislation at the state or federal level. The for programs such as the Dallas pilot could not be expanded use of wire advice for large-amount achieved nationwide because institutions would checks in combination with an extended return be uncertain as to whether the institution they deadline could serve to reduce almost all the send checks to will return the unpaid checks risks of unpaid checks. directly to them or through each institution in the collection chain. STANDARD ENDORSEMENTS WIRE NOTICE OF RETURNED ITEMS There has been a considerable amount of attention devoted to the development of a standard Another procedure that appears to have signifi- form of endorsement for the financial industry. cant potential for further reducing the risk of In 1981 the American National Standards Instireturn items is the expansion of the Federal tute (ANSI) developed a specification for check Reserve's wire notice of return items service to endorsements in conjunction with the financial speed up notification of dishonored checks to the industry and other providers of payment services institution of first deposit. Under our existing and equipment. Our experience with trying to procedures, a depository institution is to provide decipher first endorsements in Dallas indicates a wire notice if it dishonors a check of $2,500 or that considerable time and effort could be saved more. Unfortunately it is difficult to enforce this by the industry if it implemented this standard. standard, particularly since the payor institution However, formal legislation to require this stanis required to incur the expense of providing the dard may not be in the best interests of the notice. Further, the provision does not apply to financial system. checks collected outside of the Federal Reserve. We are concerned that adoption of the ANSI Our Dallas pilot provides for the notification of standard may require extensive investment in nonpayment on all returns of $2,500 or more by new check processing equipment and make the the Reserve Bank to the institution of first depos- current equipment obsolete. Given the already it. Of course not every institution in the Dallas heavy investment in capital equipment of many District is linked to the Reserve Bank by a financial institutions, we would expect that mancomputer terminal. Consequently, in many in- dating the adoption of the ANSI standard would Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 323 result in additional unnecessary expenses that six business days if possible, as they are urged to would likely be passed along to depositors in the do by our policy statement? Should the proposed form of higher service charges. This is of particu- legislation be limited only to consumer accounts? lar concern to smaller institutions that may not After all, small businesses often experience dehave the resources to afford new, expensive lays in availability also. Given the potential risks equipment. A more reasonable approach, there- and special factors associated with business acfore, would be to provide some kind of incen- counts, should different standards apply? Should tives and encourage the gradual phase-in of the small depository institutions be treated different- ANSI standard as old check processing equip- ly, particularly if they use a correspondent bank ment becomes obsolete and as new equipment is for their collection services? Should the legislapurchased. Mr. Chairman, the language con- tion apply to money market mutual funds and tained in your bill, which would have the Board other intermediaries, many of which also delay consider whether to require the ANSI standard, availability? Should the legislation override conin my view is consistent with this approach. flicting or more restrictive state legislation? Who would make the determination as to whether state legislation is in conflict with any federal laws? I believe that these and other fundamental CURRENT LEGISLATIVE EFFORTS questions raised by any legislation should be We believe that the efforts I have outlined carefully addressed to ensure that the problem is above—the joint agency policy statement, con- addressed in a deliberate fashion. tinued improvements in the procedure for returning unpaid checks and further efforts toward electronic presentments—are moving the indus- CONCLUSION try in the direction of reducing delays in availability. Let me emphasize that not all institutions The Congress has charged the Federal Reserve impose delays in availability. A study performed with the responsibility for overseeing the continfor us in 1983 indicated that 89 percent of respon- ued smooth functioning of the payments mechadents who had checking, savings, or money nism. We are all working toward the common market accounts did not experience delays in goal of improving the efficiency of the payments funds availability and 64 percent of the respon- system and providing depositors with the lowestdents to our 1983 survey indicated that their cost methods of making payments. We are now banks do not delay availability. While legislative making considerable progress, in conjunction efforts may force some in the industry to reduce with the financial industry and the other federal delays they now impose, a mandated availability supervisors, toward reducing the problems assoschedule may exacerbate the problem by encour- ciated with delayed availability. We believe that aging institutions that do not delay availability to the current efforts supported by the financial impose delays. I believe that the New York and industry are well-suited to solving the problem of California experiences can provide us with a delayed availability. basis for making an informed judgment on this Some legislative proposals under considerissue, and I encourage you to review the results ation would mandate operational improvements, of these efforts at the state level before decisions such as wire advice of nonpayment, that are now are made on federal legislation. being actively considered by the Federal Reserve It is difficult to estimate what the appropriate and by the industry. As I have indicated, we availability periods should be. The New York have been considering several approaches to- Banking Board regulations establish a schedule ward improving collection times and the returnranging from one business day for checks drawn items process through technological means, and in a face amount of $100 or less to six business we may find it necessary to seek legislation in the days for checks drawn on another institution future to facilitate these changes. We believe located outside New York State. Is this the operational improvements such as those actively appropriate range? Should institutions be en- being considered are quite promising and will couraged to reduce the outside range to less than enable institutions to provide better availability Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

324 Federal Reserve Bulletin • April 1984 of funds to depositors than through legislated greater benefits to depositors and result in a schedules. This cooperative effort between the more competitive and efficient payments mechaindustry and the Federal Reserve will provide nism. • Statement by Paul A. Volcker, Chairman, Board analyzed at two different levels. The most direct of Governors of the Federal Reserve System, approach is to explain trends in the trade balance before the Subcommittee on Trade of the Com- in terms of such proximate causes as the behavmittee on Ways and Means, U.S. House of ior of exchange rates, the strength of economic Representatives, April 10, 1984. activity at home and abroad, and relative rates of inflation. But a full explanation must look be- I am pleased to have this opportunity to discuss yond those considerations to factors determining some of the issues surrounding our large and exchange rates, economic activity, and inflation. growing trade and current account deficits. As That naturally brings us to a consideration of always, the flows of trade and other payments economic policies both in the United States and with the rest of the world reflect a variety of abroad. forces here and abroad. A substantial disequilib- For purposes of analysis, it may be convenient rium, such as at present, can usually be traced to to assess the change in the trade balance from a other difficulties and imbalances in domestic base period of late 1980 when our current aceconomies or economic policies. That is the case count was roughly in balance. U.S. trade, during now. that period, was in deficit at a rate of about $25 To summarize my basic point, our external billion. The difference reflected in large part a deficits currently are linked—not exclusively but sizable surplus of net investment income—inimportantly—to the internal budget deficit. To come built up as a result of net investment restore better balance in our external accounts abroad over many years, but which may be consistent with a healthy and noninflationary dwindling away in the future as a result of our economy at home, we cannot, in my judgment, heavy borrowing abroad. Indeed, available staescape the need for decisive action to deal with tistics suggest that the net creditor position of the our internal deficit. Policies aimed directly at the United States vis-a-vis other countries—a posiexternal deficit that cut against market forces— tion built up over many years—is being reversed: for example, import restrictions or other con- we will shortly be a net debtor. trols—are likely to have limited effects at best on The deterioration in our trade balance since the overall trade or current account balance or the base period of roughly $75 billion took place would work at cross-purposes to other objec- despite a sizable reduction of about $25 billion in tives. In the end, I believe they would be coun- our imports of oil. There has been an adverse terproductive. swing of about $100 billion in the "non-oil bal- Our trade deficit reached the unprecedented ance"—that is, the difference between our paymagnitude of more than $60 billion last year—$75 ments for non-oil imports and our export revebillion at an annual rate in the fourth quarter. It is nues. (See the table attached to my statement.1) now generally expected that our merchandise To put that figure in perspective, the entire imports will exceed our exports by at least $100 residential building sector of the GNP, which billion this year—already in January and Febru- attracts much attention, is some $150 billion; the ary the deficit averaged more than $100 billion at change in the non-oil trade balance over little an annual rate. Consistent with that trade deficit, more than three years was equivalent to twothe entire current account is likely to be in deficit thirds the size of that whole industry. Plainly, the by about $80 billion in 1984, or more than 2 deterioration in our trade position has had propercent of the gross national product. That percentage is nearly twice as large as any U.S. historical experience since World War I. 1. The attachments to this statement are available on request from Publications Services, Board of Governors of The causes of our large external deficits can be the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 325 found effects spread through many firms in all ized countries has been quite moderate, reflectparts of the United States. Those engaged in ing in part relatively restrained fiscal policies—in foreign trade or competing with imports have not the sense of working toward reduced governshared proportionately in the strong expansion in ment deficits. That approach has been motivated economic activity generally, and some important in large part out of concern about inflation, as industries are still operating well below 1980 well as the size of deficits carried over from levels. earlier years. To some extent the depreciation of One factor that has contributed importantly to their currencies relative to the dollar—in which the widening of the U.S. deficit has, in fact, been important import commodities are denominatthe relatively stronger expansion of the U.S. ed—added to price pressures in those countries, economy relative to foreign industrial econo- and some of them probably were constrained to mies. In that sense, part of the deterioration is maintain relatively restrictive monetary as well cyclical, and reflects not loss of markets at home as fiscal policies in the light of those pressures. or abroad but absence of proportionate gains. In By now, increased exports to the United addition, exports have dropped sharply to devel- States, among other factors, have helped encouroping countries that are burdened with large age recovery in the foreign industrial countries external debts and are in the midst of readjusting and expansionary momentum now appears more their own economies and balance of payments. firmly established. Moreover, the process of That is particularly true with respect to our adjustment in some of the deeply indebted develneighbors in Latin America; exports to that area oping countries has reached the point at which have dropped $13 billion since the base period. some resumption of import growth appears to be These two factors appear to explain a third to a developing, although imports will not reach the half of the adverse swing in the non-oil trade levels of a few years ago for some time. As a balance. consequence, prospects for U.S. exports during The third factor directly affecting our non-oil the remainder of 1984 and beyond are improving, trade balance has been the dramatic appreciation albeit moderately. of the dollar over the past three years. Starting at For the time being, the strength of our own a relatively low level historically, the value of the expansion—which is still proceeding more rapiddollar against the currencies of foreign industrial ly than abroad—may continue to be reflected in countries has risen about 45 percent in nominal imports growing as fast or faster than exports. In terms since the end of 1980. Over the same these conditions, and because imports are now period, U.S. price performance has been some- so much larger than exports, significant progress what better than the average in foreign industrial in closing the trade deficit cannot be anticipated economies; U.S. consumer prices, for instance, for some quarters. rose 18 percent from the fourth quarter of 1980 At the same time, stronger growth abroad may through the fourth quarter of 1983, while con- well mean that savings in other countries will be sumer prices in the foreign industrial countries more fully utilized at home so that, other things rose almost 25 percent on average. But even being equal, capital will flow less freely to the allowing for the differential in inflation, the dollar United States. That could pose a problem behas appreciated substantially, and it is now cause we are bound to be dependent upon capital roughly 25 percent higher than its average level inflows from abroad for some time to finance our for the entire 11-year period of floating exchange trade and current account deficits, and those rates. Some calculations suggest that more than inflows are moderating pressures on our financial half the $100 billion change in the non-oil trade markets. balance from the base period can be traced to the There can be little doubt that the ready availdollar's appreciation. ability of imports and the strength of the dollar— Such calculations concern only the proximate together with the related capital inflow—have causes of the growing U.S. trade deficit. The had some short-run beneficial effects during the more relevant questions concern what lay behind past year in support of relatively noninflationary those developments and what are the prospects. expansion. With the huge federal deficit feeding We know economic recovery in other industrial- purchasing power into the economy, domestic Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

326 Federal Reserve Bulletin • April 1984 demand—reflected in consumption, domestic in- difficulty. In terms of the trade balance, the point vestment, and government spending—is estimat- is understandable. But the dollar is where it is ed to have grown over the past five quarters at an because of a balance of forces in the market, annual rate of about 8 percent, faster than during reflecting capital as well as trade flows. There is the equivalent period of any earlier postwar not, in my judgment, evidence that the value has recovery. Some of that demand was absorbed by been manipulated, in any significant way, by our imports; as a consequence, GNP—a comprehen- trading partners, through intervention in the exsive measure of U.S. production—grew more change markets or otherwise. Instead, appreciaslowly than demand. But that growth was still tion of the dollar over the past three years in the large, at a rate of 6V2 percent over the period; and face of larger trade deficits reflects the strength the availability of imports has been a key factor of incentives to place capital in the United in keeping inflation in check and in avoiding States. strong pressures on capacity in some industries. While capital flows do not always closely At the same time, the capital necessary to fi- reflect changing interest rate differentials, there nance the current account deficit has also in- can be no doubt that the persistence of high real creasingly supplemented the supply of domestic interest rates in the United States, relative to savings. In historical terms, interest rates have those prevailing in most other major countries, remained high in the United States; they would contributed importantly to attracting money have been higher still had we been required to from abroad. That was particularly true during a finance our domestic growth and the budget period when, in relative terms, political and deficit from internal sources alone. economic confidence in the United States has That point is illustrated in the chart attached to been strong. In an uncertain world, many indimy statement showing the demands for, and the viduals and businesses in both developed and sources of, savings in recent years and, prospec- developing countries have looked upon the Unittively, in 1984. The combination of rising private ed States as a "safe haven" for their liquid funds investment and the high level of the budget and for their capital. At the same time, U.S. deficit exceeds our savings domestically by an banks and others have curtailed their net lending increasing margin. The difference is increasingly abroad, in the light of stronger demands for made up by savings from abroad, supplementing credit in the United States and of political and domestic savings this year by perhaps 25 per- economic uncertainties in some other countries. cent, or about 2 percent of the GNP. It cannot be in our interest to curtail capital Whatever their benefits at the moment for the inflows and to precipitate a fall in the dollar by economy as a whole—and they are very real— taking actions that undermine confidence in our rising trade deficits and capital inflows are not economic policies and outlook—specifically by sustainable indefinitely. And, of course, those undermining the progress against inflation or industries most exposed to foreign competition prospects for sustained growth. Moreover, as I do not share in the benefits, and they increasing- emphasized a few moments ago, we are, for the ly demand protection. In effect, our trade prob- time being, dependent on capital inflows to help lems do, in my judgment, signal deep-seated finance both domestic growth and the trade imbalances in the world economy and in eco- deficit; neither the budgetary nor the trade deficit nomic policies. will end suddenly. The central thrust of my remarks is that these There is, however, a positive and constructive imbalances must be dealt with in a constructive way to approach the problem—a way entirely way—by going to the source—rather than by consistent with maintaining and indeed reinforcprotectionist measures. The latter are like medi- ing confidence in our economic outlook and our cal tourniquets; they may sometimes seem justi- domestic needs. Specifically, forceful action to fied to stop bleeding, but applied too long and too reduce the federal budget deficit would directly strongly they cripple the limb and threaten the reduce pressures on our financial markets by recovery and good health of the whole body. restoring a better balance between domestic Many have pointed to an "over-valued" or sources and uses of credit and capital. The "artificially high" dollar as a major source of the restraining effects on economic activity of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 327 lower deficits should be wholly or partially offset mands for protection or subsidies. No doubt, by lower interest rates than would otherwise pressed very far, there would be a mixture of prevail, and as interest rates moved lower rela- effects, further complicated by retaliation abroad tive to those abroad, we would be weaned from and international political antagonisms. our dependence on foreign capital. In that con- That is the case—and it seems to me overtext, prospects for foreign growth could im- whelming—for not yielding to generalized deprove, helping our exports, and exchange rates mands for import protection. So long as we fail to should in time reflect a better long-run competi- deal with the underlying causes, our action will tive equilibrium. As we move to restore a sus- not only be ineffective in dealing with the trade tainable international trading position, the im- problem, but also will undermine the broader proved trade balance will also help maintain goal of sustained, noninflationary growth. domestic growth. The hard fact is that, even if trade restrictions No doubt that process will proceed more un- could be pressed far enough to be successful in evenly, and perhaps more slowly, than we would reducing our current account deficit, they would like. But there are enormous dangers in an effort only redistribute the strains and imbalances in to short-circuit the process through more direct the economy so long as we cannot finance rising measures to curtail imports or inflows of capital, domestic investment from domestic savings. We both of which would work at cross-purposes with would assist some industries at the expense of the basic requirements for growth and stability in others more sensitive to interest rates, and in the the United States and elsewhere. process open the way for renewed inflation and Beware, in particular, of those arguments that undercut efforts to improve productivity and suggest import restrictions designed to benefit efficiency. one industry or another will produce more jobs No doubt there may be specific instances in for the economy as a whole. To a particular firm which trade restrictions have been, or are, justior industry, shutting off import competition of- fied to counter subsidies or other unfair competifers immediate advantages; more generally, it is tive practices abroad; carefully assessed and argued that—other things equal—each reduction monitored, such action can be consistent with of $1 billion of the trade deficit represents an encouraging fairer and open trading practices added $1 billion of domestic output. Given the around the world. But there are areas where rule of thumb that each $1 billion worth of existing restrictions can no longer be justified domestic output requires about 25,000 workers, and run the risk of encouraging pricing and wage calculations are made that, say, cutting the trade bargaining inconsistent with the longer-run comdeficit in half, or $50 billion, would produce petitive health of the industries directly affected. nearly VA million jobs. But, from the standpoint Another approach that has been proposed to of the whole economy, the pitfalls in such rea- reduce our external deficit is to intervene in soning at a time when the economy is already foreign exchange markets to bring about a depreexpanding strongly should be clear. ciation of the dollar and subsequent improve- If we should actually succeed in reducing our ment in our trade balance. In my judgment, trade and current account deficits by means of exchange market intervention can occasionally import controls, we would also lose the capital play a useful role in dealing with disturbed marinflow and undoubtedly experience stronger in- ket conditions or even in signaling the desires or flationary pressures. Both of those factors would policy intent of the financial authorities in varitend to push interest rates higher, curtailing jobs ous countries, particularly when the approach is in interest-sensitive sectors of the economy, in- coordinated among them. But its role is subsidcluding both homebuilding and long-term busi- iary; experience strongly suggests that intervenness investment. Alternatively, jobs might be tion alone is a limited tool that cannot itself, created in those industries directly benefiting greatly or for long, change the market results from the controls, but the exchange rate would unless accompanied by changes in more basic be driven still higher than otherwise, hurting policies. And if those policies are appropriate, other import-competing industries and export- continuing intervention on any large scale is not ers, including farmers, and multiplying the de- likely to be necessary. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

328 Federal Reserve Bulletin • April 1984 In that light, some might suggest that monetary Finally, I would like to comment briefly about policy should be directed at bringing about lower the general instability of exchange rates during nominal interest rates and a depreciation of the the past decade and more since the breakdown of dollar by accelerating growth in money and cred- the Bretton Woods system. This is not the time it. But in the United States, with the economy or place, were I capable, of reviewing all the growing strongly and credit growth already large, possibilities for thoroughgoing reform of the insuch an effort would be counterproductive. It ternational monetary system. But I do believe could only rekindle expectations of rising infla- the amplitude of the swings we have seen in tion, with the clear associated danger of a per- exchange rates over that period are excessive verse influence on interest rates as potential and potentially damaging in terms of maintaining lenders withhold funds because of fears of more an open world economy. inflation. In those circumstances, confidence In approaching that problem, I believe we could all too easily be undermined to the point must keep in the forefront of our minds the that declines in the dollar would cumulate on evidence that the instability and uncertainty in themselves in a manner reminiscent of some international markets can in large part be traced earlier years, reinforcing inflationary pressures. back to instability in domestic economies and We have come a long way in bringing down policies, and to lack of coordination in the mix of inflation and inflationary expectations in the policies among countries. United States and in laying the foundations for With great difficulty and pain, we have made sustained expansion. We are beginning to enjoy progress here and abroad in dealing with inflathe fruits of that effort. But it is also clear that tion, and now growth has been restored. We our trade accounts, and our external position must, and we can, deal with the remaining imbalgenerally, reflect basic imbalances in our econo- ances in ways that contribute to those fundamenmy and in our policies that must be dealt with tal goals. As we do so—and only if we do so—we promptly and effectively. The main direction should be able to look forward to greater stability those efforts should take is clear enough, and I in exchange markets. can only be encouraged by the efforts of your In that connection, as we develop our "mix" committee and of many others in the Congress to of economic policies in the United States, and as take steps necessary to deal with our budget other countries approach their economic policy deficit. decisions, the desirability of greater stability in Equally important, we must avoid striking out exchange rates seems to me to deserve real in the wrong directions—toward renewed infla- weight. More often than not, disturbances in tion or toward controls and protectionism. Those exchange markets, and misalignments of currenpaths would only encourage more instability here cy values and trade balances, are symptomatic of and abroad. We would risk substituting new, and more fundamental problems of economic policy. even more intransigent, problems for those now That seems to me to have been the case over a before us—problems that were all too familiar a number of years. We should learn from that few years ago. experience—and the current situation seems to me an apt case in point. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

329 Announcements CHANGE IN THE DISCOUNT RATE more than $500 billion in wire transfers a day: Fedwire—the Federal Reserve's wire transfer The Federal Reserve Board announced an in- system; CHIPS (Clearing House Interbank Paycrease in the discount rate from 8V2 percent to 9 ments System) operated by the New York Clearpercent, effective April 9, 1984. The discount ing House; Cash Wire, operated by a consortium rate is the interest rate that is charged for bor- of banks; and CHESS (Clearing House Electronrowings from the District Federal Reserve ic Settlement System) operated by the Chicago Banks. Clearing House. On Fedwire, average daily vol- The change—the first since late 1982—was ume was about $355 billion in 1983, involving undertaken in the light of the relatively wide some 150,000 transactions a day. spread that has developed in recent weeks be- In taking its actions, the Board said, vis-a-vis tween short-term market rates and the discount the risks involved: rate. In announcing the change, the Board voted on If a transfer is made over Fedwire [the Board's rules] requests submitted by the directors of the Feder- provide that the transfer is final when the receiver's al Reserve Banks of Boston, New York, Phila- Reserve Bank credits the receiver's account or sends advice of credit; at that point the transfer is irrevocadelphia, Richmond, Chicago, St. Louis, Minneble. . . .If the sender's Reserve Bank processes the apolis, and Dallas. transfer when the sender did not have sufficient funds (Subsequently, the Board approved similar in its account to cover the amount of the transfer, the actions by the directors of the Federal Reserve sender incurs a "daylight overdraft" in its account Banks of Cleveland and Atlanta, effective April with the Federal Reserve. The Federal Reserve bears the risk of loss if the sender is unable to cover the 10, 1984, and Kansas City and San Francisco, overdraft. The failure of an institution to cover overeffective April 13, 1984.) drafts on Fedwire, therefore, would by itself have no effect on other institutions, including the receiver; all MEASURES TO REDUCE RISK IN of the loss would be absorbed by the Federal Reserve. Private wire networks (those other than Fedwire) LARGE ELECTRONIC FUND TRANSFERS however, are typically net settlement networks; that is, they operate by the transmission of payment mes- The Federal Reserve Board, on March 29, 1984, sages throughout the day, with settlement of net announced the following actions as part of its positions at the end of the day. The (time) gap between continuing effort to reduce risks involved in the the sending of payment messages and their settlement electronic movement of hundreds of billions of gives rise to intra-day credit exposures among participants in private networks. These exposures are often dollars a day: quite large. Should a participant be unwilling or unable • The Board requested public comment on a to settle a large net debit position (which could be due wide variety of possible measures for reducing to its funds transfer activities, to other activities, or risk in the operations of large-dollar wire transfer even to circumstances such as political developments, that are beyond its control) its corresponding net systems. creditors could experience a sudden, rapid deteriora- • At the same time, the Board issued a policy tion in their financial position. . . .The failure of one statement designed to ensure that depository participant to settle could affect not only other netinstitutions do not use the Federal Reserve's work participants, but also the full range of creditors wire transfer network to avoid the efforts that are of network participants, including bank and nonbank depositors. Sudden, large changes in the financial under consideration to reduce Federal Reserve conditions of both network participants and their or private sector risk. creditors could ultimately lead to serious disruptions There are at present four large-dollar electron- in money and other financial markets, as well as to the ic fund transfer systems that together handle disruption of trade and commercial activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

330 Federal Reserve Bulletin • April 1984 The Board said that it is concerned with the ods. The Board posed a series of questions in possibility of developments that could destabi- connection with each of these methods for the lize financial markets and noted that the Federal consideration and reaction of commenters. The Reserve has already taken a number of actions Board also requested comment on certain specifdesigned to minimize risks associated with day- ic issues (such as how policies should apply to light overdrafts on Fedwire. These and a number Edge Act and Agreement corporations and to of other actions by the Federal Reserve and by U.S. branches and agencies of foreign banks), the private sector during the past several years, and invited commenters to suggest alternative aimed at identifying and minimizing risks of this methods for reducing risks and to comment on nature, are described in the notice requesting any related topic. public comment. The Board said that these developments show a widespread recognition of The Board's policy statement is aimed at enrisks that makes it appropriate for the Board to suring that institutions do not use Fedwire to solicit comment on possible methods for reduc- avoid Federal Reserve or private sector risk ing wire transfer risks. reduction policies. The Board said that the most In issuing its request for comment, the Board likely vehicle for such avoidance would be the stated four policy goals that it seeks to achieve: use of periodic settlement between depository (1) containment of the effects of settlement fail- institutions (probably at the end of the day) ure; (2) reduction of the volume of intra-day through the exchange of Fedwire transfers. credit exposures; (3) control of remaining credit The Board lifted a current moratorium on risk; and (4) smooth operation of the payments private network access to Federal Reserve net system. settlement facilities over the Fedwire, but estab- The Board identified the following three meth- lished the following interim conditions for eligiods of reducing risks as deserving the most bility for such access: (1) all participants must set serious consideration and requested comment on bilateral net credit limits; (2) each network must them by July 27, 1984. adopt a sender cap of 50 percent of capital for each participant, applied to transfers sent over Sender Net Debit Caps. This would be a limit that network; (3) each network must agree to imposing a maximum ceiling or cap on the aggre- provide the Federal Reserve with transaction gate net debit position that an individual sending data. financial institution could incur during the day. As the Board's requirements for access to net (This cap could be applied to the sender's pay- settlement services by large-dollar transfer netments made over a particular network or a single works evolve over time, such policies would cap could be applied to all its transfer activities.) apply to both existing networks and to those given access under the interim requirements. Bilateral Net Credit Limits. Each receiving The statement sets forth measures to enforce financial institution would determine the maxi- the Board's view that it is inappropriate to use mum amount it is willing to receive from any Fedwire to avoid Federal Reserve or other risk sender. reduction measures. The enforcement measures include the following: (1) ex post monitoring of Finality of Payments. Under this arrangement, Fedwire transactions to detect patterns indicatthe receiving financial institution would guaran- ing inappropriate use of the Federal Reserve tee that it will promptly provide the beneficiaries network; (2) counseling of institutions observed of funds transfers with irrevocable credit for using Fedwire to avoid risk-reduction measures; funds transfers. (3) removal of institutions from direct, on-line, access to Fedwire if they repeatedly abuse use of The Board noted that each of these methods the wire, or barring an offending institution from use of the Federal Reserve network. could be used singly or in concert with others and requested commenters to suggest optimum The Board said it anticipates cooperation from combinations of risk reduction with respect to financial institutions in achieving the objectives each of these three possible risk-reduction meth- of this policy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 331 REVISION TO THE The other federal banking regulators—the PRIVATE SECTOR ADJUSTMENT FACTOR Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency—have The Federal Reserve Board, on March 21, 1984, issued similar regulations for institutions they approved revisions to its procedure for calcula- supervise as one facet of a joint program under tion of the private sector adjustment factor the act to strengthen the supervision and regula- (PSAF). The PSAF is an allowance for the taxes tion of foreign lending by U.S. banking organizathat would have been paid and the return on tions. The Board's rules apply to state chartered capital that would have been provided had the banks that are members of the Federal Reserve Federal Reserve's priced services been furnished System and to bank holding companies and Edge by a private sector firm. and Agreement corporations engaged in banking. The revisions to the procedure used in calcu- Nonmember banks and national banks are covlating the PSAF for 1984 are listed below: ered by the rules of the other agencies. • Expansion of the sample used to calculate the The rules as adopted by the three agencies are PSAF from the 12 to the 25 largest bank holding effective June 30, 1984, except for those dealing companies. The bank holding company with the with restructured international loans, which are highest and the lowest return on equity in the effective immediately. sample will be excluded. The rules deal with the following: (1) section • Employment of the direct determination 906(a) of the act, which prohibits a banking methodology for establishing the asset base used institution from charging any fee in connection for computing the PSAF. with a restructuring of an international loan that • Inclusion of the net effect of those assets exceeds the administrative cost of the restructurexpected to be acquired and disposed of during ing; and (2) section 906(b), which provides that 1984 in the priced services asset base. the agencies shall establish rules for accounting • Recovery of the estimated sales taxes that for other fees charged in connection with internawould have been paid on the purchases of certain tional loans to ensure that appropriate portions goods and services if the Reserve Banks were are accrued into income over the life of the loan. subject to such taxes. The Board adopted its rules in final form after • Inclusion of those portions of expenses and consideration of comment received on proposals fixed assets of the Board of Governors related to published in February. The final rules incorpothe development of priced services. rate significant changes based on the comment • Inclusion of an imputation for the assessment received. The principal provisions of the feeof Federal Deposit Insurance Corporation insur- accounting rules as adopted are the following: ance. 1. The proposed rules did not differentiate • Removal of the financing costs of net adjust- among types of international loans. In light of the ment float from the asset base because such float comment received and the legislative history of is not priced explicitly. the act, the final rules distinguish between re- In addition, the tax rate used in the PSAF structured and all other international loans in calculation will be based on the ratio of current establishing accounting treatment for fees. federal, state, and local income taxes to total 2. A "restructured international loan" is detaxable income of the bank holding companies fined as a loan that meets the following criteria: included in the sample. • The borrower cannot service an existing loan and is a resident of a foreign country FEES ON INTERNATIONAL LOANS.- experiencing a generalized inability to service ADOPTION OF RULES external debt due to lack of foreign exchange in the country; and either The Federal Reserve Board, on April 5, 1984, • The loan terms are amended to reduce announced adoption of rules to establish uniform stated interest or extend the schedule of payrequirements for accounting for fees on interna- ments; or a new loan is made to or for the tional loans. The rules implement a part of the benefit of the borrower enabling the borrower International Lending Supervision Act of 1983. to service or refinance the existing debt. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

332 Federal Reserve Bulletin • April 1984 3. No banking institution may charge any fee percent of System repurchase agreements was in connection with a restructured international arranged against bankers acceptances compared loan unless the portion of the fee exceeding with an average of about 16 percent in the administrative costs is deferred and amortized previous three years. over the effective life of the loan. The Committee's action also recognizes that 4. Administrative costs are defined to include the market for bankers acceptances has reached only specifically identified direct costs. Supervi- a scale of activity that does not require or justify sory and administrative expenses or other indi- continuing Federal Reserve support. It continues rect expenses such as occupancy may not be the disengagement from the market begun in included. 1977, when the Federal Reserve ceased buying 5. In an international syndicated loan, a bank- these private instruments on an outright basis. ing institution may not take into income immedi- Since then, the System's involvement has been ately that portion of a syndication fee that repre- limited to the use of repurchase agreements on sents an interest yield adjustment, but must acceptances for managing bank reserves as a recognize the yield adjustment over the life of the modest supplement to operations in Treasury loan. For the managing banks of an international and federal agency securities. syndicated loan, the final rule adopts a presump- Repurchase agreements are used by the Federtion that the yield adjustment portion of the fee is al Reserve to meet short-term reserve needs. In at least equal to the largest fee received by a these transactions, the System purchases govnonmanaging loan participant on a pro rata basis. ernment securities, federal agency issues, or 6. The remainder of any fee received by a bankers acceptances from dealers under an managing bank in an international syndicated agreement that requires the dealer to buy back loan may be taken into income immediately only the securities after a fixed period, usually one to if the bank can identify and document the ser- seven days. Interest rates in these transactions vices for which it received the fee. Such docu- are determined by competitive bidding. mentation would at a minimum include the loan The market for bankers acceptances has conagreement signed by all parties to the loan. tinued to grow since 1977. The outstanding vol- 7. Commitment fees may be taken into income ume of acceptances at the end of 1983 was $78 over the commitment period. Commitment fees billion compared with $23 billion at the end of must be recognized as income over the combined 1976, and $642 million at the end of 1955 when commitment and loan period only when it is not the Federal Reserve resumed operations in acpracticable to identify that portion of the fee ceptances after a lapse of more than 20 years. related to making the commitment as compared Bankers acceptances are negotiable instruwith any portion related to lending funds. ments generally drawn to finance the export, import, shipment, or storage of goods. They are termed ""accepted" when a bank agrees to pay DISCONTINUANCE OF USE the draft at maturity. OF BANKERS ACCEPTANCES BY THE FOMC The Federal Open Market Committee on April 9, REGULATION T: AMENDMENT 1984, announced that as of July 2, 1984, it will discontinue use of repurchase agreements on The Federal Reserve Board, on March 12, 1984, bankers acceptances in open market operations amended Regulation T (Credit by Brokers and to manage reserves. The Federal Reserve Bank Dealers) to permit an options clearing agency to of New York will continue to serve as agent in accept margin securities to meet its deposit rebuying and selling acceptances for the accounts quirements. The new rule becomes effective of foreign central banks. April 13, 1984. In taking the action, the Committee noted that The Board acted to facilitate regulatory coorthe use of repurchase agreements on acceptances dination with the recent Securities and Exchange for reserve management has declined in relative Commission (SEC) approval of an options clearimportance in recent years. In 1983, about 7 ing corporation program. An options clearing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 333 corporation issues options contracts and guaran- Elizabeth B. Riggs has been promoted to Astees their performance. sistant Director of the Software Applications The Board's amendment, in concert with the Branch. related action taken by the SEC, will generally Ms. Riggs came to the Board as an Applicapermit brokers and dealers to use the same tions Analyst in October 1967, having worked securities for the clearing deposit as they now previously as a Computer Specialist at the Nause at banks in connection with loans secured by tional Bureau of Standards and as an Analystcustomer securities. Programmer and Management Intern for the Department of the Navy. She assumed her present position as Chief, International Finance-Business Conditions Section, in July 1981. Ms. Riggs REVISED REGULATION T: has B.A. and M.A. degrees in Economics from DEFERMENT OF EFFECTIVE DATE the University of Michigan. The Federal Reserve Board, on March 26, 1984, announced that it is deferring the effective date for compliance with the completely revised Reg- POLICY STATEMENT ON ulation T to June 30, 1984. MULTI-RATE TIME DEPOSITS The Board said it deferred the effective date of the completely revised regulation in response to The Federal Reserve Board, on March 23, 1984, requests by broker-dealers encountering opera- issued a policy statement concerning advertisetional problems in conforming their computer ments for time deposits that pay more than one systems to the requirements of the revised regu- fixed rate over the term of the account. lation. The effective date had previously been At the same time, the Board published for deferred from November 21, 1983, to March 31, public comment a proposal to amend its Regula- 1984. tion Q (Interest on Deposits) that would incorpo- The revised regulation governing credit ex- rate the substance of the policy statement into tended by brokers and dealers was adopted by the regulation. The Board requested comment by the Board on May 16, 1983. May 22, 1984, on alternatives to the policy statement and on other advertising and disclosure issues that may warrant consideration under Regulation Q. REGULATION Z: UPDATE The policy statement provides that advertise- TO STAFF COMMENTARY ments for time deposits that pay more than one The Federal Reserve Board, on April 3, 1984, fixed interest rate should set forth, in equal size made public an update to the official staff com- type, each rate of interest to be paid together mentary on Regulation Z (Truth in Lending). with the length of time each rate will be paid and This interpretation represents final action on the average effective annual yield for the entire proposed changes in the commentary published term of the account. Further, advertisements for in November 1983, and takes account of com- deposits to be used in connection with Individual ment received. Retirement Accounts (IRAs) should not refer to such accounts as being tax-free or tax-exempt. The Board's action was taken in response to CHANGES IN BOARD STAFF recent advertisements in which an initial high rate of interest appears in large print while a The Board of Governors has announced the lower rate to be paid for the predominant part of following changes in its official staff in the Divi- the account appears in much smaller type. The sion of Data Processing: Board expressed concern that such advertise- Neal H. Hillerman, Assistant Director, has ments are potentially misleading and confusing transferred from the Software Applications to depositors. The Board anticipates that the Branch to the Data Applications Branch in the Federal Deposit Insurance Corporation, the Fed- Division of Data Processing. eral Home Loan Bank Board, and the Comptrol- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

334 Federal Reserve Bulletin • April 1984 ler of the Currency will issue similar policy REPORT ON PRICED SERVICES statements in the near future. The Federal Reserve Board issued on April 9, 1984, a report summarizing developments in the PROPOSED ACTIONS priced services areas for 1983 and providing detailed financial results of providing those ser- The Federal Reserve Board, on March 12, 1984, vices. The report is available on request from published for public comment a proposal that Publications Services, Board of Governors of the would automatically permit brokers and dealers Federal Reserve System, Washington, D.C. to lend on over-the-counter securities designated 20551. for trading in the National Market System por- A report on priced services is expected to be tion of NASDAQ (the National Association of issued annually, and a financial statement con- Securities Dealers Automated Quotation Sys- sisting of the Federal Reserve's priced service tem) in conformance with the Board's margin balance sheet and income statement will be isrequirements. The proposal would amend the sued quarterly. The pro forma financial state- Board's margin regulations (Regulations G, T, ments are designed to reflect standard accountand U). Comment is requested by April 27. ing practices, taking into account the nature of the Federal Reserve's activities and its unique position in this field. AVAILABILITY OF SUPPLEMENT 10 TO THE COMPLIANCE HANDBOOK Supplement 10 to the Board's Compliance Hand- SYSTEM MEMBERSHIP: book is now available from Publications Ser- ADMISSION OF STATE BANKS vices, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. It re- The following banks were admitted to memberplaces pages in Part I that discuss Regulation Z ship in the Federal Reserve System during the and pages in Part II that describe workpapers for period March 10 through April 10, 1984: consumer compliance examinations. This supplement also contains new and revised work- California papers. The new workpapers include a checklist Anaheim Pacific Inland Bank for disclosures in deposit contracts, a worksheet Hollister San Benito Bank for use in checking interest calculation and early Illinois withdrawal penalties, an applicant profile Fairview Heights Midamerica Bank and spreadsheet, and a worksheet for checking inter- Trust Company of Fairview Heights est for savings and time deposit accounts. A list Mascoutah Midamerica Bank and Trust of the pages that have been replaced by the new Company supplement is also available from Publications Pennsylvania Services. Claysburg Central Bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

335 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON JANUARY30-31, 1984 Although the reported data for retail sales in the pre-holiday weeks proved weaker than had been Domestic Policy Directive suggested by qualitative reports, real personal consumption expenditures for the fourth quarter The information reviewed at this meeting indicat- as a whole rose at an annual rate of about 6V2 ed that growth in real gross national product had percent. One factor in that rise was a strengthenmoderated to an annual rate of about AVI percent ing in automobile demand; sales of new domestic in the fourth quarter of 1983, following expansion autos rose to an annual rate of about 13A million at annual rates of about 93A percent and IV.2 units in December, after averaging about 7 milpercent in the second and third quarters respec- lion units in other recent months. In the last 20 tively. Strength in personal consumption expen- days of December, auto sales were at an annual ditures and further substantial expansion in busi- rate of nearly 8 million units, a selling pace that ness fixed investment in the fourth quarter were was maintained through the first 20 days of major factors in the continued growth of eco- January. nomic activity. Price and wage increases general- Private housing starts declined about 5 percent ly remained moderate, though advances in some in December, but for the fourth quarter were at a indexes were somewhat larger than in the spring rate close to the 1.7 million units recorded for the and summer. year as a whole. Sales of new and existing The index of industrial production increased V2 homes, which had changed little in November, percent in December, following gains of about 3A rose about 28 percent and 8V2 percent respectivepercent in October and November. Production of ly in December. The exceptional rise in sales of consumer durable goods strengthened in Decem- new homes reflected a record volume of activity ber, as auto assemblies increased substantially, in the South; sales in other regions held steady or and output of business equipment continued to declined. rise at a relatively rapid pace; production Recent data indicate very considerable changed little in most other major market group- strength in business capital spending. Shipments ings. of nondefense capital goods increased markedly Nonfarm payroll employment advanced about in November and December. Real expenditures 230,000 further in December, compared with an on equipment rose at an exceptionally rapid pace average monthly increase of about 325,000 since in the fourth quarter, when they registered one of the first quarter. Employment gains continued to the largest quarterly increases in the postwar be widespread across industry groupings and period. Strong sales of heavy industrial machinwere particularly marked in manufacturing and ery and communications equipment and a continservice industries. The civilian unemployment ued brisk pace of truck sales contributed to the rate declined 0.2 percentage point further to 8.2 fourth-quarter gain. percent. The producer price index for finished goods The nominal value of retail sales was reported was unchanged on balance in November and to have changed little in December, after large December. For the year 1983 the index increased gains in preceding months. Sales at furniture and about V2 percent. The consumer price index rose appliance stores and at automotive outlets re- marginally less in November and December than mained strong, but were about offset by declines the 33/4 percent rate recorded for the year as a at food and apparel stores and gasoline stations. whole. The rise in the index of average hourly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

336 Federal Reserve Bulletin • April 1984 earnings was somewhat larger in the fourth quar- growth. By the fourth quarter of 1983, M2 was at ter than in the preceding two quarters, but over a level close to the midpoint of the Committee's 1983 the index rose a little less than 4 percent, range for the year, M3 was around the upper compared with 6 percent over 1982. limit of its range, and Ml was near the middle of In foreign exchange markets the trade-weight- the Committee's monitoring range for the second ed value of the dollar against major foreign half of the year. currencies had appreciated on balance by about 1 The debt of domestic nonfinancial sectors expercent further since the latter part of December, panded at an annual rate of about 10 percent in with most of the rise occurring in early January. both November and December. For the year After mid-January the dollar receded from its ending December 1983, debt grew 10'/2 percent, peak and then moved somewhat erratically, part- well within the Committee's monitoring range of ly reflecting uncertainties among market partici- 8V2 percent to IIV2 percent. Growth in total pants regarding the outlook for economic activity credit at U.S. commercial banks remained strong and interest rates in the United States. The U.S. in December, at an annual rate of about 13 foreign trade deficit was higher in the fourth percent, as additional lending activity offset a quarter than in the third; a sharp rise in non-oil reduced pace of securities acquisition. The inimports accounted for the increase, as oil im- creased loan demand reflected a further pickup ports declined and exports changed little. in all major categories of loans—business, con- At its meeting on December 19-20, 1983, the sumer, and real estate. Businesses continued to Federal Open Market Committee had decided rely heavily on external financing as expendithat in the short run, open market operations tures for inventories and fixed investment evishould be directed toward maintaining at least dently began to outpace growth in internally the existing degree of reserve restraint. The generated funds. In addition to the expansion in members anticipated that such a policy would be borrowing from banks, commercial paper issued associated with growth of both M2 and M3 at by nonfinancial corporations rose sharply in Deannual rates of around 8 percent from November cember. to March, and that growth of Ml at an annual Nonborrowed reserves expanded at a modest rate of around 6 percent over the four-month rate on average in December and January while period was likely to be consistent with the objec- total reserves grew only slightly, as the average tives for the broader aggregates. Expansion in level of adjustment plus seasonal borrowing detotal domestic nonfinancial debt was expected to clined somewhat. Borrowing temporarily bulged be within the tentative range of 8 to 11 percent to $1.3 billion in the reserve statement week that established for the year 1984. It was agreed that, encompassed the year-end statement date, but depending on evidence about the continuing averaged about $650 million during the other strength of economic recovery and other factors weeks of the intermeeting interval. bearing on the business and inflation outlook, The federal funds rate averaged close to 9'/2 somewhat greater restraint would be acceptable percent over the intermeeting period, little should the aggregates expand more rapidly. changed from the level prevailing just before the M2 and M3 expanded at annual rates of about 8 percent and 8V2 percent respectively in Decem- issuers, negotiable order of withdrawal (NOW) and automatic ber and apparently continued to grow at moder- transfer service (ATS) accounts at banks and thrift institutions, and credit union share draft accounts. M2 contains Ml ate rates in January.1 Expansion in Ml accelerand savings and small-denomination time deposits (including ated in January, after several months of reduced money market deposit accounts (MMDAs)) at all depository institutions, overnight repurchase agreements (RPs) at commercial banks, overnight Eurodollars held at foreign 1. The growth rates cited are based on revised data for the branches of U.S. banks by U.S. residents other than banks, monetary aggregates, reflecting new benchmarks and revised and money market mutual fund shares other than those seasonal factors and a minor change in the definition of restricted to institutions. M3 is M2 plus large-denomination M3 to include term Eurodollars that U.S. residents hold in time deposits at all depository institutions, large-denomina- Canada and the United Kingdom and at foreign branches of tion term RPs at commercial banks and savings and loan U.S. banks elsewhere. associations, institution-only money market mutual funds, The monetary aggregates are defined as follows: Ml com- and term Eurodollars held by U.S. residents in Canada and prises demand deposits at commercial banks and thrift insti- the United Kingdom and at foreign branches of U.S. banks tutions, currency in circulation, travelers checks of nonbank elsewhere. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 337 December meeting. Most other market rates time when the economy had a reduced margin of moved somewhat lower, reflecting a perception idle capacity. of a slowing in the economic expansion and an For this meeting, the individual members of abatement of seasonal pressures after the mid- the Committee had prepared specific projections December tax date. Yields on private short-term of economic activity, the rate of unemployment, debt and on corporate and municipal bonds de- and average prices. For the period from the clined about Vi to 5/s percentage point while fourth quarter of 1983 to the fourth quarter of yields on most Treasury securities fell about XA 1984, the central tendency of the members' propercentage point. Average rates on new commit- jections for growth in real GNP was in a range of ments for fixed-rate conventional home mort- 4 to 43A percent, while the range for all members gage loans also fell slightly over the intermeeting was 3V2 to 5 percent. The central tendency for period. the GNP deflator was a range of 4l/> to 5 percent, The staff projections presented at this meeting and for growth in nominal GNP it was a range of continued to indicate that real GNP would grow 9 to 10 percent. Projections for the rate of at a moderate pace in 1984. Consumption expen- unemployment in the fourth quarter of 1984 ditures, new residential construction, and busi- varied from 7lA to 8 percent, with a central ness inventory investment were projected to tendency of 7lA to 73A percent. These projections expand at reduced rates in 1984. Business fixed were based on the Committee's objectives for investment was expected to remain a source of monetary and credit growth established at this strength, and export demand was believed likely meeting, and on the assumption that any legislato improve in conjunction with rising world eco- tion to reduce substantially the deficit in the nomic activity and an expected drop in the federal budget would affect mainly the years foreign exchange value of the dollar. A decline in beyond 1984. the unemployment rate was anticipated over the The members expressed a great deal of conprojection period. Prices were expected to in- cern at this meeting about the risks that unprececrease marginally more than in 1983. dented deficits in the federal budget posed for the In the Committee's discussion of the economic sustainability of the economic expansion and the situation and outlook, the members agreed that stability of financial markets, domestic and intergrowth in real GNP was likely to moderate in national. Unless decisive action were taken to 1984 and that the rate of unemployment would reduce the deficits, federal financing needs probably fall somewhat further by year-end. The would continue to absorb a large part of available members referred to the performance of real net savings in the economy and curtail the avail- GNP in the fourth quarter and to other recent ability of credit to private borrowers at a time in data that suggested slower economic expansion. the cyclical expansion when business credit de- On the other hand, it was observed that domestic mands were likely to be growing. The result final demands were well maintained in the fourth would be to increase pressures in financial marquarter and that economic activity would con- kets with potentially adverse consequences for tinue to be sustained by a stimulative fiscal interest-sensitive sectors of the economy such as policy. housing and long-term business investment. Most of the members expected prices to rise Moreover, unprecedented net capital inflows somewhat faster on average in 1984 than in 1983, from abroad, which helped to finance domestic reflecting growing cost pressures likely to be credit needs, might well prove to be unsustainassociated with the cyclical rise in capacity utili- able and their eventual diminution or reversal zation rates and declining unemployment and could have highly unsettling effects on domestic special circumstances such as the impact of credit markets. Concern was also expressed adverse weather conditions on food prices. Con- about the risks to the domestic economy and cern was also expressed that a possible decline in financial markets from other international condithe foreign exchange value of the dollar could tions, such as the severe debt-servicing problems also tend to have some inflationary impact on the of several developing countries. domestic economy; that impact, one member At this meeting the Committee completed the commented, would be greater if it occurred at a review, begun at the December meeting, of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

338 Federal Reserve Bulletin • April 1984 1984 growth ranges for the monetary and credit desirability of interpreting actual monetary aggregates that it had tentatively set in July growth in the context of the emerging performwithin the framework of the Full Employment ance of the economy, the outlook for inflation, and Balanced Growth Act of 1978 (the Hum- and conditions in domestic and international phrey-Hawkins Act). Those tentative ranges in- financial markets. The members also recognized cluded growth of 6V2 to 9Vi percent for M2 and 6 that recent regulatory and institutional developto 9 percent for M3 during the period from the ments might be reflected in some permanent fourth quarter of 1983 to the fourth quarter of changes in the underlying trends of velocity, 1984. The Committee had indicated that growth particularly that of Ml. Those changes were not of Ml in a range of 4 to 8 percent over the same yet knowable, given the limited experience under period was likely to be consistent with the ranges the deregulated institutional structure. for the broader aggregates. The associated range In this situation most members agreed that for for total domestic nonfinancial debt was provi- the time being substantial weight should continue sionally set at 8 to 11 percent for 1984. to be placed on M2 and M3 in policy implementa- In the Committee's discussion, nearly all the tion, while growth in Ml should be evaluated in members indicated that the ranges tentatively light of the performance of the broader aggreestablished for 1984 remained acceptable, al- gates. The view was expressed that emphasis on though some expressed a preference for slightly the broader aggregates appropriately recognized lower ranges for one or more of the aggregates. the remaining uncertainties with respect to the The members viewed the various ranges under relationship between Ml and economic activity, consideration as broadly consistent with the ob- and it was also observed that the use of a jectives of promoting sustainable growth in eco- relatively wide range for Ml tended to work in nomic activity and encouraging progress toward the same direction. However, one member urged price stability. While all of the tentative ranges placing primary emphasis on Ml and also supfor 1984 represented reductions from the 1983 ported a narrower range for that aggregate, notranges, slight further reductions would, in the ing that the introduction of contemporaneous view of some members, help to underscore the reserve accounting provided an opportunity to Committee's commitment to an anti-inflationary exert closer control over its short-run behavior. policy. With regard to the range for M2, a small A number of other members supported giving Ml additional reduction was also favored on techni- greater weight, if not primary emphasis, in light cal grounds to make the resulting range for 1984 of what they viewed as the emergence of a more more consistent with the reduced ranges contem- predictable pattern in its velocity, at least in plated for the other monetary aggregates. The relation to that of M2 and of M3. Still other 1983 range for M2 had been set slightly on the members were not prepared to increase the polihigh side to allow for some residual shifting of cy role of Ml, at least at this time. In the view of funds into that aggregate associated with the these members, the prospective behavior of Ml introduction of money market deposit accounts; velocity remained subject to unusual uncertainthose shifts had in fact occurred to about the ties, in part because of the institutional changes extent expected, but they now appeared to have reflected in the increased role in Ml of NOW been virtually completed. (negotiable order of withdrawal account) and The ranges under consideration for 1984 as- Super NOW components, which bear interest sumed that the relationships between the mone- and serve both a transactions and a longer-term tary aggregates and nominal GNP—the velocity savings function. These and related changes of money—would be broadly consistent with made it difficult to anticipate the public's demand past trends and cyclical patterns following atypi- for cash balances under varying circumstances cal behavior in 1982 and early 1983. A tendency or the response of depository institutions in for velocity to rise as 1983 progressed suggested altering terms on the newer components of Ml. a return toward earlier velocity patterns, but Nearly all the members agreed that the Comseveral Committee members believed that more mittee should not increase the weight given to experience was needed before that trend was the behavior of total domestic nonfinancial debt confirmed. Accordingly, they emphasized the but should continue to monitor the expansion in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 339 such debt. However, one member favored giving pate any further regulatory or statutory changes primary emphasis to this variable. Most of the that would significantly affect monetary growth members endorsed a reduction in its range for rates in 1984. However, if some outstanding 1984 in light of its historical relationship with proposals for change were enacted and took nominal GNP. The upper part of the tentative effect in 1984, such as the payment of interest on range allowed for the possibility that its growth demand deposits and/or on reserve balances, the might outpace that of nominal GNP in 1984 as Committee would have to reconsider its monehad often occurred in the second year of past tary growth ranges, especially for Ml. cyclical recoveries. The following paragraphs relating to the long- After further discussion most of the members er-run ranges were approved: indicated that they favored or found acceptable the reduced ranges for monetary and credit The Committee established growth ranges for the growth that the Committee had tentatively ap- broader aggregates of 6 to 9 percent for both M2 and proved in July for 1984, subject to a further M3 for the period from the fourth quarter of 1983 to the reduction of xh percentage point in the range for fourth quarter of 1984. The Committee also considered that a range of 4 to 8 percent for Ml would be M2. A few members would have preferred an appropriate for the same period, taking account of the additional reduction of Vi percentage point in the possibility that, in the light of the changed composition range for Ml. It was anticipated that actual of Ml, its relationship to GNP over time may be growth of the broader aggregates and total debt shifting. Pending further experience, growth in that aggregate will need to be interpreted in the light of the of domestic nonfinancial sectors might fluctuate growth in the other monetary aggregates, which for the in the upper part of their ranges. For Ml, growth time being would continue to receive substantial around the midpoint of its range appeared likely weight. The associated range for total domestic nonfion the assumption of relatively normal growth in nancial debt was set at 8 to 11 percent for the year its velocity, but if velocity growth remained 1984. weak compared with historical experience, Ml The Committee understood that policy implementation would require continuing appraisal of the relationexpansion might appropriately be higher in the ships not only among the various measures of money range. The actual growth of M2 and M3 would be and credit but also between those aggregates and affected by the aggressiveness with which depos- nominal GNP, including evaluation of conditions in itory institutions sought to influence their share domestic credit and foreign exchange markets. of total credit growth in an environment where interest rate ceilings had largely been deregulat- Votes for this action: Messrs. Volcker, Solomon, Gramley, Guffey, Keehn, Martin, Partee, Rice, ed. Growth in the broader aggregates was also Roberts, Mrs. Teeters, and Mr. Wallich. Vote thought likely to be affected by inflows of capital against this action: Mr. Morris. from abroad. In particular, a portion of bank credit expansion during 1984 might be funded Mr. Morris dissented from this action because through nonresident placements in the Eurodol- he believed that regulatory changes and financial lar market rather than directly in domestic deinnovations had made Ml, M2, and M3 unsuitposits. Such expansion would not be reflected in able targets for monetary policy since, in his M2 or M3, and growth in those aggregates would view, they were no longer predictably related to therefore tend to be somewhat restrained relative nominal GNP. Accordingly, he preferrred to to growth in bank credit and nominal GNP. focus on total domestic nonfinancial debt and At the conclusion of its discussion the Com- total liquid assets as intermediate targets for mittee adopted the ranges for monetary and monetary policy. credit growth in 1984 that had been tentatively In the Committee's discussion of policy for the approved in July, but with a reduction of Vi short run, all of the members indicated that they percentage point in the range for M2 from the could support a policy directed toward maintaintentative target. The behavior of all of the aggre- ing essentially the existing degree of restraint on gates would be interpreted against the back- reserve positions. Such a policy was thought ground of economic and financial developments, likely to be associated with short-run growth in including conditions in domestic credit and inter- the monetary aggregates consistent with the national markets. The Committee did not antici- Committee's objectives for the year. With regard Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

340 Federal Reserve Bulletin • April 1984 to deviations in pressure on reserve positions the aggregates over the period ahead, while toward lesser or greater restraint in response to somewhat greater restraint might be acceptable incoming information, many members endorsed in the context of more rapid growth in the a symmetrical approach that would relate any aggregates. In either case, the need for lesser or deviation in either direction to the behavior of greater restraint on reserves would also be evaluthe monetary aggregates and to emerging indica- ated against the background of developments tions of the strength of the business expansion relating to the strength of the business expansion and inflationary pressures in the economy. Other and of inflationary pressures. It was agreed that members preferred somewhat more asymmetri- the intermeeting range for the federal funds rate, cal approaches. A few members would give more which provides a mechanism for initiating conweight to the potential need for easing of reserve sultation of the Committee, would remain at 6 to conditions should monetary growth prove weak- 10 percent. er than anticipated, while being a bit more toler- The following directive, embodying the Comant, up to a point, of some tendency for the mittee's longer-run ranges and its short-run operaggregates to strengthen. Other members be- ating instructions, was issued to the Federal lieved the Committee should be prepared to Reserve Bank of New York: move promptly toward restraint if monetary growth should accelerate, particularly in the con- The information reviewed at this meeting indicates text of a more ebullient economy. No member that the advance in real GNP moderated in the fourth quarter, following rapid expansion in the spring and anticipated developments that would call for a summer. In December, industrial production and nonsubstantial change in the degree of reserve presfarm payroll employment increased somewhat further sure over the weeks ahead. and the civilian unemployment rate declined 0.2 percentage point to 8.2 percent. Retail sales were report- In their discussion the members took note of ed to have changed little in December following sizuncertainties associated with the introduction of able gains in preceding months. Housing starts contemporaneous reserve accounting on Febru- declined in December but for the fourth quarter as a ary 2. The members agreed that no substantial whole were close to their average for the year. Recent changes would be made in open market operating data indicate substantial strength in business capital spending. Producer prices were about unchanged on procedures at this time, but they anticipated the average in November and December, and consumer passage of some time before depository instituprices increased at about the moderate pace recorded tions fully adjusted their reserve management to for the year as a whole. The index of average hourly the new accounting system. In that interval, for earnings rose somewhat faster in the fourth quarter instance, depository institutions might want to than in the previous quarter, but for the year 1983 the index increased more slowly than in 1982. hold more excess reserves than usual. The mem- The foreign exchange value of the dollar against a bers agreed that such developments would need trade-weighted average of major foreign currencies to be accommodated by adjustments to reserve has appreciated somewhat further since the latter part paths. of December, with most of the rise occurring in early At the conclusion of the Committee's discus- January. In the fourth quarter the U.S. foreign trade deficit was markedly higher than in the third quarter, sion, the members indicated their acceptance of reflecting a sharp rise in non-oil imports. a short-run policy directed at maintaining the M2 and M3 have expanded at moderate rates over existing degree of restraint on reserve positions. the past two months. Expansion in Ml apparently The members expected such a policy to be accelerated in January, following several months of associated with growth of both M2 and M3 at an reduced growth. By the fourth quarter M2 was at a annual rate of around 8 percent for the period level close to the midpoint of the Committee's range for 1983, M3 was around the upper limit of its range, from December to March and growth of M1 at an and Ml was around the middle of the Committee's annual rate of about 7 percent over the threemonitoring range for the second half of the year. Most month period. The rate of expansion in total interest rates have declined somewhat since the latter domestic nonfinancial debt was thought likely to part of December. be within the Committee's monitoring range for The Federal Open Market Committee seeks to fos- 1984. The members agreed that lesser restraint ter monetary and financial conditions that will help to reduce inflation further, promote growth in output on a on reserve conditions would be acceptable in the sustainable basis, and contribute to an improved patevent of a significant shortfall in the growth of tern of international transactions. The Committee es- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 341 tablished growth ranges for the broader aggregates of 6 The Chairman may call for Committee consultation to 9 percent for both M2 and M3 for the period from if it appears to the Manager for Domestic Operations the fourth quarter of 1983 to the fourth quarter of 1984. that pursuit of the monetary objectives and related The Committee also considered that a range of 4 to 8 reserve paths during the period before the next meetpercent for Ml would be appropriate for the same ing is likely to be associated with a federal funds rate period, taking account of the possibility that, in the persistently outside a range of 6 to 10 percent. light of the changed composition of Ml, its relationship to GNP over time may be shifting. Pending Votes for the short-run operational paragraphs: further experience, growth in that aggregate will need Messrs. Volcker, Solomon, Gramley, Guffey, to be interpreted in the light of the growth in the other Keehn, Martin, Morris, Partee, Rice, Roberts, monetary aggregates, which for the time being would Mrs. Teeters, and Mr. Wallich. Votes against this continue to receive substantial weight. The associated action: None. range for total domestic nonfinancial debt was set at 8 to 11 percent for the year 1984. On March 20, the Committee held a telephone The Committee understood that policy implementaconference to review monetary and economic tion would require continuing appraisal of the relationships not only among the various measures of money developments following the January 30-31 meetand credit but also between those aggregates and ing, including some increase in interest rates nominal GNP, including evaluation of conditions in over the period. It was noted that economic domestic credit and foreign exchange markets. activity in most sectors was rising with consider- In the short run, the Committee seeks to maintain able momentum, helping to generate strong dethe existing degree of pressure on bank reserve positions, anticipating that approach will be consistent mands for credit. While measures of monetary with growth of M2 and M3 each at annual rates of growth have remained broadly in line with objecabout 8 percent and Ml at an annual rate of about 7 tives for the year, it was also felt that, in the light percent during the period from December to March. of current and prospective developments, the Growth in nonfinancial debt is expected to be within Committee would need to remain alert to the the range established for the year. Lesser restraint would be acceptable in the context of a shortfall in possibility of excessive growth in credit and monetary and credit growth from current expecta- money. Against that background, it was the tions, while somewhat greater restraint might be ac- consensus of the Committee that, in the short ceptable with more rapid expansion of the aggregates, interval until the next scheduled meeting, pursuit both viewed in the context of the strength of the of the degree of reserve restraint and associated business expansion and inflationary pressures. reserve paths, consistent with the money and In implementing policy in the weeks ahead, the Manager was instructed to take account of the uncer- credit objectives set at the January 30-31 meettainties associated with the introduction of the system ing, should not be constrained by a federal funds of more contemporaneous reserve requirements, par- rate at or above the monitoring range set at that ticularly including the possibility that depository instimeeting. tutions, during a transition period, may desire to hold more excess reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

343 Legal Developments AMENDMENTS TO REGULATION K (1) The borrower is unable to service the existing loan according to its terms and is a resident of a The Board of Governors has amended 12 CFR Part foreign country in which there is a generalized 211, Regulation K, to establish uniform requirements inability of public and private sector obligors to for the accounting for fees associated with the restruc- meet their external debt obligations on a timely basis turing of international lending arrangements and non- because of a lack of, or restraints on the availability refundable fees charged by banking institutions in of, needed foreign exchange in the country; and connection with other international loans. These regu- (2) the terms of the existing loan are amended to lations implement one aspect of the joint program of reduce stated interest or extend the schedule of the Federal banking agencies to strengthen the super- payments; or visory and regulatory framework relating to foreign (3) a new loan is made to, or for the benefit of, the lending by U.S. banking institutions, incorporated in borrower, enabling the borrower to service or refisection 906 of the International Lending Supervision nance the existing debt. Act of 1983. The effective date of the regulations is June 30, 1984, except for subsection 211.45(a) which is effective 2. By adding a new section 211.45, to read as follows: March 29, 1984. The Board has amended 12 CFR Part 211, Subpart D, as follows: Section 211.45—Accounting for Fees on International Loans Part 211—International Banking Operations (a) Restrictions on fees for restructured international 1. By redesignating paragraph 211.42(d) as 211.42(h) loans. No banking institution shall charge any fee in and by adding new paragraphs 211.42(d), (e), (f) and connection with a restructured international loan un- (g), to read as follows: less all fees exceeding the banking institution's administrative costs, as described in subsection (c)(2) of this section, are deferred and recognized over the term of Section 211.42—Definitions the loan as an interest yield adjustment. (b) Amortizing fees. Except as otherwise provided by this section, fees received on international loans shall (d) "International loan" means a loan as defined in the be deferred and amortized over the term of the loan. instructions to the "Report of Condition and Income" The interest method should be used during the loan for the respective banking institution (FFIEC Nos. period to recognize the deferred fee revenue in relation 031, 032, 033 and 034) and made to a foreign govern- to the outstanding loan balance. If it is not practicable ment, or to an individual, a corporation, or other entity to apply the interest method during the loan period, not a citizen of, resident in, or organized or incorporat- the straight-line method shall be used. ed in the United States. (c) Accounting treatment of international loan or (e) "International syndicated loan" means a loan syndication administrative costs and corresponding characterized by the formation of a group of "manag- fees. ing" banking institutions and, in the usual case, as- (1) Administrative costs of originating, restructursumption by them of underwriting commitments and ing, or syndicating an international loan shall be participation in the loan by other banking institutions. expensed as incurred. A portion of the fee income (f) "Loan agreement" means the documents signed by equal to the banking institution's administrative all of the parties to a loan, containing the amount, costs may be recognized as income in the same terms and conditions of the loan, and the interest and period such costs are expensed. fees to be paid by the borrower. (2) The administrative costs of originating, restruc- (g) "Restructured international loan" means a loan turing, or syndicating an international loan include that meets the following criteria: those costs which are specifically identified with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

344 Federal Reserve Bulletin • April 1984 negotiating, processing and consummating the loan. (f) Agency fees. Fees paid to an agent banking institu- These costs include, but are not necessarily limited tion for administrative services in an international to: legal fees; costs of preparing and processing loan syndicated loan shall be recognized at the time of the documents; and an allocable portion of salaries and loan closing or as the service is performed, if later. related benefits of employees engaged in the international lending function and, where applicable, the syndication function. No portion of supervisory and AMENDMENTS TO REGULATION T administrative expenses or other indirect expenses such as occupancy and other similar overhead costs The Board of Governors has amended 12 CFR Part shall be included. 220—Credit By Brokers and Dealers to permit an (d) Fees received by managing banking institutions in options clearing agency to accept margin securitites to an international syndicated loan. Fees received on meet its deposit requirements. This action is being international syndicated loans representing an adjust- taken to facilitate regulatory coordination with the ment of the yield on the loan shall be recognized over recent SEC approval of an Options Clearing Corporathe loan period using the interest method. If the tion program whereby the class of securities eligible interest yield portion of a fee received on an interna- for the options clearing agency's deposit requirements tional syndicated loan by a managing banking institu- were expanded. tion is unstated or differs materially from the pro rata Effective April 13, 1984, Regulation T is amended by portion of fees paid other participants in the syndica- removing paragraphs 220.14(b)(3) and (4), and adding a tion, an amount necessary for an interest yield adjust- new paragraph 3 as set forth below: ment shall be recognized. This amount shall at least be equivalent (on a pro rata basis) to the largest fee Part 220—Credit By Brokers and Dealers received by a loan participant in the syndication that is not a managing banking institution. The remaining Section 220.14—Clearance of Securities portion of the syndication fee may be recognized as income at the loan closing date to the extent that it is identified and documented as compensation for ser- (b)*** vices in arranging the loan. Such documentation shall (3) The deposit consists of any margin security and include the loan agreement. Otherwise, the fee shall be complies with the rules of the clearing agency which deemed an adjustment of yield. have been approved by the SEC. (e) Loan commitment fees. (1) Fees which are based upon the unfunded portion of a credit for the period until it is drawn and BANK HOLDING COMPANY, BANK MERGER, AND represent compensation for a binding commitment BANK SERVICE CORPORATION ORDERS ISSUED to provide funds or for rendering a service in issuing BY THE BOARD OF GOVERNORS the commitment shall be recognized as income over the term of the commitment period using the Orders Issued under Section 3 of Bank Holding straight-line method of amortization. Such fees for Company Act revolving credit arrangements, where the fees are received periodically in arrears and are based on the Avenue Financial Corporation amount of the unused loan commitment, may be Oak Park, Illinois recognized as income when received provided the income result would not be materially different. Order Approving Formation of Bank (2) If it is not practicable to separate the commit- Holding Company ment portion from other components of the fee, the entire fee shall be amortized over the term of the Avenue Financial Corporation, Oak Park, Illinois, has combined commitment and expected loan period. applied for the Board's approval under section 3(a)(1) The straight-line method of amortization should be of the Bank Holding Company Act ("Act")(12 U.S.C. used during the commitment period to recognize the § 1842(a)(1)) to become a bank holding company by fee revenue. The interest method should be used acquiring Transworld Corporation, Lake Forest, Illiduring the loan period to recognize the remaining fee nois ("Transworld"), and thereby acquiring Transrevenue in relation to the outstanding loan balance. world's subsidiary banks, Dempster Plaza State Bank, If the loan is funded before the end of the commit- Niles, Illinois ("Dempster Bank"), and Northlake ment period, any unamortized commitment fees Bank, Northlake, Illinois ("Northlake Bank"). Applishall be recognized as revenue at that time. cant also proposes to acquire Avenue Bank of Elk Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Grove, Elk Grove Village, Illinois ("Elk Grove The financial and managerial resources and future Bank"). prospects of the companies and banks involved in this Notice of the application, affording an opportunity proposal are generally satisfactory, and considerations for interested persons to submit comments, has been relating to banking factors under the Act are consistent given in accordance with section 3(b) of the Act. The with approval of Applicant's proposal. Applicant has time for filing comments has expired and the Board proposed no new services for any of the banks inhas considered the application and all comments re- volved in its proposal. However, there is no evidence ceived in light of the factors set forth in section 3(c) of that the banking needs of the community to be served the Act (12 U.S.C. § 1842(c)). are not being met. Accordingly, considerations relat- Applicant is a nonoperating corporation formed to ing to the convenience and needs of the communities acquire Transworld and Avenue Bank. Upon consum- to be served are consistent with approval of Applimation of this proposal, Applicant would control 0.05 cant's proposal. percent of total commercial bank deposits in Illinois, Based on the foregoing, and other facts of record, it and thus consummation of the proposal would not is the Board's judgment that consummation of this have a significant effect on the concentration of bank- transaction is consistent with the public interest and ing resources in the state. Principals of Applicant are that the application should be approved. On the basis affiliated with First National Bank of Deerfield, Deer- of the record, the application is approved for the field, Illinois ("Deerfield Bank"), and with Avenue reasons summarized above. The transaction shall not Bank and Trust Company, Oak Park, Illinois ("Oak be consummated before the thirtieth calendar day Park Bank"). following the effective date of this Order, or later than Dempster Bank, Northlake Bank, Elk Grove Bank, three months following the effective date of this Order, Deerfield Bank, and Oak Park Bank all compete in the unless such latter period is extended for good cause by Chicago banking market.1 Dempster Bank controls the Board or by the Federal Reserve Bank of Chicago, total deposits of $24.6 million, representing 0.04 per- acting pursuant to delegated authority. cent of total deposits in commercial banks in the By order of the Board of Governors, effective market.2 Northlake Bank controls total deposits of March 16, 1984. $13.6 million, or 0.02 percent of market deposits, and Elk Grove Bank controls total deposits of $10.1 mil- Voting for this action: Chairman Volcker and Governors lion, which also represents approximately 0.02 percent Martin, Partee, Teeters, Rice, and Gramley. Absent and not of market deposits. Thus, upon consummation of this voting: Governor Wallich. proposal, Applicant will control total deposits of $48.3 million, representing 0.08 of market deposits. Deer- JAMES MCAFEE, [SEAL] Associate Secretary of the Board field Bank controls total deposits of $48.5 million, or 0.08 percent of market deposits, and Oak Park Bank controls total deposits of $119.2 million, or 0.20 percent of market deposits. The five banks combined Bankers' Bancorporation of Wisconsin, Inc. control total deposits of $216 million, representing 0.36 Madison, Wisconsin percent of total deposits in commercial banks in the market. Order Approving Formation of a The Chicago banking market is not highly concen- Bank Holding Company trated and there are numerous competitors in the market significantly larger than the combination of Bankers' Bancorporation of Wisconsin, Inc., Madithese five banks. In view of the small relative and son, Wisconsin, has applied for the Board's approval absolute size of the banks involved and other facts of under section 3(a)(1) of the Bank Holding Company record, the Board finds that consummation of this Act ("Act") (12 U.S.C. § 1842(a)(1)) to become a bank proposal would not have a significant effect on existing holding company by acquiring all of the voting shares competition, nor would it adversely affect the concen- of Wisconsin Independent Bank, Madison, Wisconsin tration of banking resources in any relevant area. ("Bank"). Accordingly, considerations relating to competitive Notice of the application, affording opportunity for factors under the Act are consistent with approval of interested persons to submit comments and views, has Applicant's proposal. been given in accordance with section 3(b) of the Act. The time for filing comments and views has expired, and the Board has considered the application and all 1. The Chicago banking market is defined as Cook, Lake, and comments received in light of the factors set forth in DuPage Counties, Illinois. 2. Banking data are as of June 30, 1983. section 3(c) of the Act (12 U.S.C. § 1842(c)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

346 Federal Reserve Bulletin • April 1984 Applicant is a nonoperating corporation organized consummated before the thirtieth calendar day followfor the purpose of acquiring Bank, with total deposits ing the effective date of this Order or later than three of $4 million.1 Bank, a Wisconsin-chartered "bankers' months after the effective date of this Order, unless bank," is owned by 122 Wisconsin state and national such period is extended for good cause by the Board or banks and may only engage in providing banking and the Federal Reserve Bank of Chicago, acting pursuant banking-related services to other banks.2 to delegated authority. Bank does not do business with the general public; By order of the Board of Governors, effective instead, it operates as a correspondent bank for 122 March 8, 1984. Wisconsin community banks, providing services including cash letter clearing, loan participations, short- Voting for this action: Chairman Volcker and Governors term investment services, and coin and currency oper- Wallich, Partee, Rice, and Gramley. Absent and not voting: Governors Martin and Teeters. ations. Accordingly, Bank only competes with other banks that offer correspondent banking services in Wisconsin. Based on total deposits in commercial JAMES MCAFEE, [SEAL] Associate Secretary of the Board banks in the state, Bank is the smallest of 12 Wisconsin banks that offer correspondent banking services in the state.3 Further, Applicant's proposal is essentially a corporate reorganization. The Board has determined Concord Bancshares, Inc. that consummation of this proposal will have no Overland Park, Kansas significant effect on competition, either existing or potential, and will not affect the concentration of Order Approving Formation of a Bank Holding banking resources in Wisconsin. Company The financial and managerial resources of Applicant and Bank are considered generally satisfactory, in Concord Bancshares, Inc., Overland Park, Kansas, view of the nature of the activities of a bankers' bank, has applied for the Board's approval under section and the prospects of each appear favorable. Although 3(a)(1) of the Bank Holding Company Act of 1956, as Applicant has proposed no new correspondent activi- amended ("Act")(12 U.S.C. § 1842(a)(1)), to become a ties for Bank upon consummation of this proposal, bank holding company by acquiring all of the voting acquisition of Bank by Applicant would allow greater shares of College Boulevard National Bank, Overland flexibility in providing the services that Bank's com- Park, Kansas. petitors deliver through their nonbank affiliates. More- Notice of the application, affording opportunity for over, a bank holding company structure would expand interested persons to submit comments, has been the sources of capital available to Bank and any future given in accordance with section 3(b) of the Act. The nonbank affiliates, and could make Bank more com- time for filing comments has expired, and the Board petitive with other banks offering correspondent bank- has considered the application and all comments reing services in Wisconsin. Accordingly, factors relat- ceived in light of the factors set forth in section 3(c) of ing to the convenience and needs of the community to the Act (12 U.S.C. § 1842(c)). be served are consistent with approval of this propos- Applicant, a nonoperating company, was organized al. for the purpose of becoming a bank holding company Based on the foregoing and other facts of record, the by acquiring Bank. Bank, with deposits of $4.5 mil- Board has determined that this application should be lion, is one of the smallest banks in Kansas, holding and hereby is approved. This transaction shall not be 0.03 percent of the total deposits in commercial banks in the state.1 Bank is the smallest of 134 banks in the Kansas City banking market2 and controls less than 0.01 percent of the total deposits in commercial banks 1. Banking data are as of June 30, 1983. in that market. One of Applicant's principals is also 2. Wisconsin law allows the establishment of "bankers' banks," provided all of their stock is owned by two or more state or national affiliated with two other banking organizations that banks whose home offices are located in Wisconsin or by a bank operate in the market. On a combined basis, the three holding company owned by two or more state or national banks whose organizations control 0.4 percent of the total deposits home offices are located in Wisconsin. Wis. Stat. §§ 221.04(4g) and 221.57. "Bankers' banks" have all the powers of other Wisconsin in commercial banks in the market. In light of these state banks, except that their activities are restricted solely to facts, the Board concludes that consummation of this providing banking and banking-related services to other banks. Wis. Stat. § 221.57. "Bankers' banks" are defined in section 2(c) of the Act as "banks" for the purposes of the Act. 12 U.S.C. § 1841(c). 3. In addition, several money center banks located in New York, 1. Banking data are as of December 31, 1982. Chicago, and Minneapolis offer correspondent banking services to 2. The Kansas City banking market is defined as the Kansas City, Wisconsin banks. Missouri, Ranally Metro Area. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 transaction would not result in any significant adverse its of $186.8 million, representing 3.5 percent of the effects upon competition or increase the concentration total deposits in commercial banks in the state.1 Upon of banking resources in any relevant area. acquisition of Bank, with deposits of $18.6 million, The financial and managerial resources of Applicant Applicant's share of deposits in commercial banks in and Bank are considered satisfactory and their pros- South Dakota would increase by only 0.4 percent. pects appear favorable. Although Applicant will incur Accordingly, consummation of this proposal would some debt in connection with the proposed acquisi- not have an appreciable effect upon the concentration tion, it appears that Applicant will have sufficient of commercial banking resources in South Dakota. resources to service the debt without adversely affect- Bank is located in Walworth County, South Dakota. ing Bank. Considerations relating to the convenience Applicant currently has one banking subsidiary locatand needs of the community to be served are also ed in Walworth County, Citizens Bank of Mobridge, consistent with approval. Mobridge, South Dakota ("Mobridge Bank"). Wal- On the basis of these and other facts of record, it is worth County and the counties surrounding it are the Board's judgment that the application should be, sparsely populated, rural areas in the north-central and hereby is, approved for the reasons summarized part of South Dakota. The primary industry in the above. The transaction shall not be consummated counties is agriculture. before the thirtieth calendar day following the effective Applicant contends that Walworth County should date of this Order, or later than three months after the be divided into two separate banking markets, with the effective date of this Order, unless such period is eastern three-fourths of the county, where Bank is extended for good cause by the Board, or by the located, plus the adjoining southern one-half of Camp- Federal Reserve Bank of Kansas City pursuant to bell County, less the western one-fourth of that coundelegated authority. ty, regarded as the relevant geographic banking mar- By order of the Board of Governors, effective ket for the purposes of analyzing the competitive March 8, 1984. effects of the proposed transaction. Applicant's proposed market would exclude the northwestern one- Voting for this action: Chairman Volcker and Governors fourth of Walworth County, including the town of Wallich, Partee, Rice, and Gramley. Absent and not voting: Mobridge where Mobridge Bank is located, and the Governors Martin and Teeters. southeastern one-fifth of the county. Bank would be the only commercial bank located in this geographic JAMES MCAFEE, market proposed by Applicant. Applicant bases its [SEAL] Associate Secretary of the Board contention on the lack of significant primary service area overlap between Bank and Mobridge Bank, and the absence of characteristics that encourage commer- Dacotah Bank Holding Company cial interaction between the towns of Mobridge and Aberdeen, South Dakota Selby. Alternatively, Applicant asserts that, if the Board Order Denying Acquisition of Bank were to find that Bank and Mobridge Bank were in the same banking market, then the relevant banking mar- Dacotah Bank Holding Company, Aberdeen, South ket would have to be expanded to include the city of Dakota, a bank holding company within the meaning Aberdeen, South Dakota,—80 miles from Selby—and of the Bank Holding Company Act ("Act") (12 U.S.C. all of the five intervening rural counties of Walworth, § 1841 et seq.), has applied for the Board's approval Potter, Campbell, McPherson, and Edmunds, as well under section 3(a)(3) of the Act (12 U.S.C. as the western one-half of Brown County, South § 1842(a)(3)) to acquire 100 percent of the voting Dakota, where Aberdeen is located. Applicant bases shares of The First National Bank of Selby, Selby, its contention on the reasoning that Selby residents South Dakota ("Bank"). could turn to banks as far away as Aberdeen for Notice of the application, affording opportunity for banking services because there is some evidence that interested persons to submit comments and views, has Selby and Mobridge residents occasionally travel to been given in accordance with section 3(b) of the Act. Aberdeen, primarily for the purpose of shopping. The time for filing comments and views has expired, The Board has indicated that the relevant geographand the Board has considered the application and all ic banking market must reflect commercial and bankcomments received in light of the factors set forth in section 3(c) of the Act (12 U.S.C. § 1842(c)). Applicant, the fourth largest banking organization in South Dakota, controls seven banks with total depos- 1. All state banking data are as of March 31, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

348 Federal Reserve Bulletin • April 1984 ing realities and be economically significant.2 In situa- The towns of Mobridge and Selby are connected by tions such as presented by this application, the Board U.S. Route 12, a direct and well-maintained highway has stated that the relevant geographic market consists which is the main east-west route in northern South of the area in which the banks involved offer their Dakota. South Dakota Department of Transportation services and to which their customers can practicably statistics show that the average daily traffic count on turn for alternatives.3 As the Supreme Court has the road between Selby and Mobridge is approximatestated, "the proper question is not where the parties to ly 1,635 vehicles, but only 910 vehicles west of Mothe merger do business or even where they compete, bridge and 1,425 east of Selby.6 but where, within the area of competitive overlap, the A survey commissioned by Applicant and conducteffect of the merger on competition will be direct and ed in July 1983 showed that over 50 percent of the immediate." United States v. Philadelphia National Mobridge respondents had made at least one visit to Bank, 374 U.S. 321, 357 (1963). This area "must be Selby in the past 12 months, and all of the Selby charted by careful selection of the market area in respondents had visited Mobridge at least once during which the seller operates and to which the purchaser that period. can practicably turn for supplies." Id. at 359. In addition, each town has characteristics that en- Applying these principles to the facts of this case, courage commercial interaction between them. Mothe Board concludes that the relevant geographic bridge offers medical services that Selby lacks, includmarket within which to evaluate the competitive ef- ing a hospital, medical clinics, doctors and fects of this proposal consists of Walworth and Camp- optometrists. Mobridge, which is situated on the Misbell Counties, South Dakota, plus the northern one- souri River, offers recreational opportunities, such as half of Potter County, the eastern three-fourths of fishing, boating, and other sports associated with the Dewey County, and the eastern one-half of Corson Missouri River and Lake Oahe to the south of Mo- County, all in South Dakota. bridge. Mobridge has certain commercial facilities that This market delineation is supported in part by a are not available in Selby. Selby is the Walworth study done in 1966 by South Dakota State University County seat and, therefore, is the center for governwhich identified Mobridge as a trade center with a ment facilities in the county. A number of county trade area that included the relevant banking market.4 offices, on the other hand, are located in Mobridge, In addition, the facts show that Mobridge and Selby including the State's Attorney's office, the circuit are located 21 miles apart with no intervening geo- judge's office, and a courtroom.7 Selby has the only graphic barriers, and that Mobridge is the primary Farmers Home Administration office in Walworth population center for Walworth County and the sur- County, while Mobridge has the county's only Federal rounding areas included in the relevant geographic Land Bank office. Finally, Walworth County's only market.5 The closest towns of at least similar size in radio station is located in Mobridge. South Dakota with at least comparable commercial A study of checks and other cash items conducted alternatives to Mobridge are Pierre and Aberdeen, by Applicant at both Bank and Mobridge Bank during which were identified in the South Dakota State Uni- a nine-day period in June 1983 shows that an average versity study as the nearest alternative trade areas. of 125.4 cash items per day flow from Bank to both the Pierre is approximately 109 road miles from Mobridge Mobridge Bank and the only other commercial bank and 88 road miles from Selby, while Aberdeen is about located in Mobridge, Norwest Bank-Mobridge. The 101 road miles from Mobridge and 80 road miles from study also reveals that an average of 77.4 cash items Selby. per day flow from Mobridge Bank alone to Bank. Assuming that Bank receives cash items from Norwest Bank-Mobridge in proportion to that bank's deposits, Bank would have received an additional 95.2 cash 2. St. Joseph Valley Bank, 68 FEDERAL RESERVE BULLETIN 673 items per day from Norwest Bank-Mobridge, or a total (1982); Pennbancorp, 69 FEDERAL RESERVE BULLETIN 548 (1983). average of 172.6 cash items per day from both Mo- 3. E.g., Wyoming Bancorporation, 68 FEDERAL RESERVE BULLE- bridge banks. In view of the fact that there are only TIN 313 (1982), afFd sub nom., Wyoming Bancorporation v. Board of Governors, No. 82-1634, slip op. (10th Cir. Mar. 12, 1984). Independent Bank Corporation, 67 FEDERAL RESERVE BULLETIN 436 (1981). 4. Some Guidelines for Organizing Economic Development Efforts in South Dakota Along Trade Area Lines, by John T. Stone, Coopera- 6. Applicant disputed the reliability of the traffic count, primarily tive Extension Service, South Dakota State University, Extension on the basis that U.S. Route 84 joins U.S. Route 12 from the north Circular 651 (1966). The Mobridge trade area was larger than the about three miles northwest of Selby. Although the Board recognizes relevant banking market, as defined by the Board. However, the that exact data for traffic flow between Mobridge and Selby cannot be localized nature of banking services suggests that the radius of a obtained, the traffic counts available indicate that a substantial banking market should be smaller than that of a trade area. amount of traffic passes between Mobridge and Selby on a daily basis. 5. Mobridge has a population of 4,174. Selby has a population of 7. The record indicates that most sessions of the circuit court are 884. held in Mobridge. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 about 884 residents of Selby, this activity indicates a Applicant contends that the differences in interest substantial reliance on Mobridge by residents of Selby rates charged on loans by Bank and Mobridge Bank for goods and services. The data also indicate a over the 12 months of 1983 indicate a lack of competismaller, but significant, reliance on Selby by Mobridge tion between the two banks. Numerous other factors residents for goods and services. also affect interest rates, however, such as the maturi- The Board has also considered the areas from which ty of a loan, the level of monthly or other payments, Bank and Mobridge Bank derive their business. Appli- the amount of collateral required, and the level of any cant has indicated that Bank derives 3.0 percent of its compensating balances required. Applicant's contendeposits and 2.1 percent of its loans from Mobridge tion that the relative interest rates prove a lack of Bank's primary service area, while Mobridge Bank competition between Bank and Mobridge Bank is derives 8.8 percent of its deposits and 3.4 percent of its inconclusive and not supported by the evidence. loans from Selby Bank's primary service area. These In the Board's judgment, based on the relative statistics demonstrate that some customers in each proximity of Selby and Mobridge, the ready accessibiltown have found it practical to do banking business in ity of each to the other, their relative positions as the the other town and that there is existing competition economic, recreational, trade and governmental cenbetween the two banks.8 This evidence also indicates ters of the Walworth County region, the substantial that neither Bank nor Mobridge Bank has regarded the distance to other comparable commercial centers, and other town as being so far removed from its major the interaction between the two towns, each town service area as to warrant a refusal to extend credit to offers to residents of the other an available and practiborrowers there.9 cal alternative for a variety of services, including Applicant argues that neither Bank nor Mobridge banking services. These facts contradict Applicant's Bank solicits business from the other's service area, as thesis that Selby and Mobridge are located in two evidenced by the fact that neither bank advertises in separate banking markets, each of which is sufficiently the newspaper outside of the town where it is located. isolated from competitive forces in the other such that In addition, Applicant asserts that, because the per- residents of one would not turn to the other nearby centage of the total circulation that the Selby and community for banking services. In the Board's view, Mobridge weekly newspapers each have in the other Applicant's proposed market definition disregards the town is less than five percent, advertising in one paper economic reality and market forces presently existing does not reach a significant portion of households in between the towns of Selby and Mobridge and the other town. While the Board believes that these throughout the Walworth County, South Dakota, area. data show that a relatively insignificant proportion of Based on these and all of the other facts of record, Mobridge residents read the Selby newspaper, they the Board concludes that the towns of Selby and reveal that a substantial percentage of Selby residents Mobridge are part of the same relevant geographic read the Mobridge paper. Although Applicant correct- market and that this area includes Walworth and ly points out that the percentage of the Mobridge Campbell Counties, South Dakota, the northern onenewspaper's total circulation in Selby is less than five half of Potter County, the eastern three-fourths of percent, the percentage of Selby residents in terms of Dewey County, and the eastern one-half of Corson population that read the Mobridge newspaper is at County, all in South Dakota. least 23.4 percent. This number, in itself not insignifi- With respect to Applicant's alternative contention cant, would be much higher if taken as a proportion of that, if the Board finds that Bank and Mobridge Bank Selby households. Consequently, the Board concludes are in the same banking market, then the market that advertising in the Mobridge paper reaches a should be expanded to include the city of Aberdeen, significant portion of Selby households. Finally, it South Dakota, and all or part of six intervening rural appears that the radio station broadcasting from Mo- counties, the Board believes that Applicant's alternabridge is received in Selby, so that advertising on the tive expanded market definition is unrealistically large Mobridge radio station reaches residents of both and not supported by substantial evidence. The Sutowns. preme Court has indicated that banking is a localized activity and that customers "find it impractical to conduct their banking business at a distance." United 8. It is likely that Norwest Bank-Mobridge and the only other financial institution in Mobridge, a thrift institution, also obtain a States v. Philadelphia National Bank, 374 U.S. 321, at significant percentage of their deposits from Selby Bank's service 357-58 (1963). area. 9. Applicant itself has previously indicated that Mobridge Bank's While Bank, which is 21 miles from Mobridge, "local community" for purposes of the Community Reinvestment Act represents a "practicable alternative" for Mobridge includes the town of Selby. Delineation of a bank's "local communi- Bank customers, the Board concludes that Aberdeen ty" for this purpose involves many of the same considerations involved in delineating a geographic market. banks, which are about 101 miles from Mobridge and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

350 Federal Reserve Bulletin • April 1984 80 miles from Selby, do not represent practicable commercial banking organizations in the market would banking alternatives for Mobridge and Selby residents. increase from 73.0 percent to 84.3 percent, and the Applicant submitted the results of a telephone survey Herfindahl-Hirschman Index ("HHI") would inwhich indicated that the 15 Selby respondents traveled crease by 526 points to 2251. Thus, the relevant as frequently to Aberdeen as to Mobridge during a banking market would become highly concentrated one-year period. However, the Board does not believe upon consummation of this proposal, and would be that this fact indicates that Aberdeen and Mobridge subject to challenge under the United States Departare in the same geographic banking market. While ment of Justice Merger Guidelines (June 14, 1982).12 occasional travel over distances as great as 80 to 100 In its evaluation in previous cases of the competitive miles for shopping trips may be reasonable in a rural, effects of a proposal, the Board has indicated that sparsely-populated area, the Board believes that it is thrift institutions have become, or at least have the unlikely that people would maintain their primary potential to become, major competitors of commercial banking relationships at institutions located at dis- banks.13 In this case, only one thrift institution comtances of that magnitude. petes in the relevant banking market. It is the smallest There are a total of seven banking organizations in of all the financial institutions in the market and the geographic banking market delineated by the controls deposits of $9.2 million, which represents Board; these provide customers of Bank and Mobridge only 6.3 percent 14 of the total deposits in commercial Bank with more convenient and accessible alterna- banks and thrift institutions in the market.15 tives than the banks in Aberdeen. The Board also Based upon the foregoing and all the facts of record, notes that available evidence indicates that Aberdeen the Board concludes that the effect of consummation and Mobridge are two separate trade centers. of this proposal may be substantially to lessen compe- Finally, Applicant submitted evidence showing that tition in the relevant banking market,16 and that the banks in Aberdeen have some loan customers in the inclusion of the single thrift institution as a competitor geographic banking market defined by the Board. in the market does not significantly mitigate the anti- However, Applicant provided no relevant deposit competitive effects of the proposal. data, and the number of loans and loan customers are The financial and managerial resources of Applitoo few to substantiate the existence of meaningful cant, its subsidiaries and Bank are generally satisfaccompetition.10 tory and consistent with approval. The record of this Accordingly, the Board concludes that the relevant application indicates that Applicant would increase geographic market within which to evaluate the com- Bank's lending limit, expand the types of loans offered petitive effects of this proposal consists of Walworth by Bank, and offer Bank's customers various trust and Campbell Counties, South Dakota, the northern services not currently available through Bank. In the one-half of Potter County, the eastern three-fourths of Board's view, these considerations do not outweigh Dewey County, and the eastern one-half of" Corson the substantially adverse competitive effects of this County, all in South Dakota. proposal. Within the relevant banking market, Applicant is the second largest of seven banking organizations, with total deposits of about $29.5 million, which represents 12. Under these Merger Guidelines, a market in which the post- 21.5 percent of the total deposits in commercial banks merger HHI is above 1800 is considered highly concentrated. In such in the market.11 Bank is the fourth largest banking markets, the Justice Department is likely to challenge a merger that produces an increase in the HHI of 100 points or more, as in this case. organization in the market, controlling 12.2 percent of 13. Comerica, Inc. (Bank of Commonwealth), 69 FEDERAL REthe total deposits in commercial banks in the market. SERVE BULLETIN 797 (1983); General Bancshares Corporation, 69 As a result of the proposed acquisition of Bank, FEDERAL RESERVE BULLETIN 802 (1983); First Tennessee National Corporation, 69 FEDERAL RESERVE BULLETIN 298 (1983). Applicant would become the largest commercial bank- 14. Thrift data are as of September 30, 1982. ing organization in the market, and its share of market 15. If the deposits of the one thrift institution were taken into deposits would increase from 21.5 percent to 33.7 account in computing market shares, Applicant and Bank's combined market share would be 31.9 percent, the HHI would increase 461 percent. The share of deposits held by the four largest points to 2016, and the share of deposits held by the four largest financial institutions in the market would be 79.0 percent. 16. The Board notes that the Justice Department has analyzed the proposed transaction and, using Walworth County, South Dakota, as the relevant banking market, has determined that the proposed transaction would have a significantly adverse effect on competition. Under the Justice Department geographic market definition, Appli- 10. The Board notes that Applicant's large alternative market cant and Bank's combined market share would be 56.1 percent, and definition excludes three of Applicant's banking subsidiaries that are the HHI would increase 1455 points to 5074. While the Board located within a radius of about 40 miles from Aberdeen, even though disagrees with the Justice Department's definition of the relevant it includes Mobridge 101 miles to the west. banking market, the Board agrees with the conclusion that the 11. All market data are as of June 30, 1982. proposal would have a significantly adverse effect on competition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Based on the foregoing and other considerations in the market. In our view, permitting acquisitions and reflected in the record, it is the Board's judgment that mergers among smaller competitors in markets domithe proposed acquisition is not in the public interest nated by large organizations is essential in order to and that the application should be, and hereby is, maintain a competitive environment in such markets. denied. Accordingly, we dissent from the Board's decision By order of the Board of Governors, effective to deny this application. March 23, 1984. March 23, 1984 Voting for this action: Chairman Volcker and Governors Wallich and Partee. Voting against this action: Governors Martin and Rice. Absent and not voting: Governors Teeters First Chicago Corporation and Gramley. Chicago, Illinois JAMES MCAFEE, ISEAL] Associate Secretary of the Board Order Approving Acquisition of Bank Holding Company and its Subsidiary Banks Dissenting Statement of Vice Chairman Martin and Governor Rice First Chicago Corporation, Chicago, Illinois ("Applicant"), a bank holding company within the meaning of We agree with the Board's definition of the relevant the Bank Holding Company Act of 1956, as amended banking market in this case. However, we would (12 U.S.C. § 1841 et seq.) ("Act"), has applied for the approve this application because we believe that, Board's approval under section 3(a)(3) of the Act notwithstanding the substantial market shares that (12 U.S.C. § 1842(a)(3)) to acquire 100 percent of the would result from consummation of this proposal, the voting shares of American National Corporation, Chianticompetitive effects of the transaction are substan- cago, Illinois ("Company"), and thereby indirectly to tially mitigated by the presence in the relevant banking acquire Company's five subsidiary banks: American market of the largest commercial banking organization National Bank and Trust Company of Chicago, Chicaoperating in South Dakota, Norwest Bancorporation go, Illinois ("ANB"); First American Bank of Bensen- ("Norwest"), which commands total assets of nearly ville, Bensenville, Illinois; First National Bank of $18 billion. Norwest controls the largest commercial Libertyville, Libertyville, Illinois; First Arlington Nabank in the market, Norwest Bank-Mobridge, with tional Bank, Arlington Heights, Illinois ("Arlington $36.3 million in deposits, representing 26.4 percent of Bank");1 and Elgin National Bank, Elgin, Illinois the total deposits in commercial banks in the market. ("Elgin Bank").2 In our view, this bank's competitive influence in the Notice of the application, affording opportunity for relevant market is much greater than its market share interested persons to submit comments and views, has would suggest because of its affiliation with Norwest. been given in accordance with section 3(b) of the Act. Specifically, Norwest can and does provide to all its The time for filing comments and views has expired, subsidiary banks, including Norwest Bank-Mobridge, and the Board has considered the application and all a substantial array of consumer and business banking comments received in light of the factors set forth in services, as well as a central pricing system for those section 3(c) of the Act. services determined by prices offered in the competi- Applicant, the largest commercial banking organizative Minneapolis-St. Paul banking market, where Nor- tion in Illinois, controls one banking subsidiary with west is headquartered. Similarly, we believe that the total domestic deposits of approximately $13.3 billion, presence in a banking market of a large organization, representing 13.6 percent of the total deposits in such as Norwest, prevents banking organizations of commercial banks in the state.3 Company, with total limited size and resources, such as Applicant and The domestic deposits of approximately $2.0 billion, is the First National Bank of Selby, from using their market power to take advantage of their customers through higher prices or other anticompetitive practices. Consequently, in our view, the degree of anticompetitive 1. Upon consummation of this proposal, Arlington Bank's name effect that might normally be expected to result from a would be changed to American National Bank of Arlington Heights, combination of banking organizations with market Arlington Heights, Illinois. shares of the size involved here is not likely to result 2. ANB, one of Company's bank subsidiaries, acquired 90.8 percent of the voting shares of Arlington Bank and 80 percent of the upon consummation of this proposal. Indeed, we voting shares of Elgin Bank in satisfaction of debts previously believe that the smaller banking organizations in the contracted. In connection with the acquisition of Company by Applimarket, such as Applicant, are placed at a competitive cant, Company intends to acquire these voting shares of the Arlington and Elgin Banks. disadvantage relative to Norwest's banking subsidiary 3. All banking data are as of June 30, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

352 Federal Reserve Bulletin • April 1984 fifth largest commercial banking organization in Illi- tions in the market is 50.6 percent and would increase nois and controls 2.0 percent of the total deposits in to 53.5 percent upon consummation of the proposal. commercial banks in the state. Upon consummation of The Herfindahl-Hirschman Index ("HHI") in the this transaction, Applicant would remain the largest market is 862 and would increase by 116 points to 978 commercial banking organization in Illinois and would upon consummation of the transaction.5 In addition, control 15.6 percent of the total deposits in commer- numerous commercial banking organizations, includcial banks in the state. Although the Board is con- ing four of the state's five largest, would remain in the cerned about the effect of the combination of the first market after consummation of the proposal. and fifth largest banking organizations in Illinois on the Finally, in its evaluation of the competitive effects of concentration of banking resources within the state, previous proposals, the Board has indicated that thrift certain conditions that would exist after the proposed institutions have become, or at least have the potential acquisition mitigate that concern. A number of other to become, major competitors of commercial banks.6 large bank holding companies would remain in the On this basis, in a number of cases the Board has state upon consummation of this proposal. In addition, accorded substantial weight to the influence of thrift the share of commercial bank deposits held by the four institutions in its evaluation of the competitive effects largest banking organizations in Illinois would increase of a proposal. In this case, the anticompetitive effects to only 36.8 percent after consummation of the pro- of this transaction in the Chicago banking market are posed merger, and Illinois would remain one of the further mitigated by the presence of 140 thrift instituleast concentrated states in the United States. Accord- tions in the market, controlling $26.5 billion in deposingly, it is the Board's view that consummation of this its, which represents approximately 28.4 percent of transaction would not have any significantly adverse the total deposits in the market.7 Four of these thrift effects on the concentration of commercial banking institutions are among the ten largest financial instituresources in Illinois. tions in the Chicago banking market with over $1 Both Applicant and Company compete in the Chica- billion in deposits. The record indicates that most of go banking market.4 Applicant holds 19.9 percent of the thrift institutions in the market currently offer a full the total deposits in commercial banks in the market, range of consumer services, NOW accounts and other and Company holds 2.9 percent of the total deposits in transaction accounts, and some of them are currently commercial banks in the market. Upon consummation involved in commercial lending activities.8 On the of this transaction, Applicant's share of the total basis of these and other facts of record, the Board deposits in commercial banks in the market would concludes that the effects of consummation of the increase to 22.8 percent. proposal on existing competition in the Chicago bank- This proposal represents an acquisition by the larg- ing market would not be significantly adverse.9 est commercial banking organization in the Chicago Company also competes in the Elgin banking market banking market to acquire the fifth largest organization where Applicant is not represented.10 Because the in the market and involves a combination of competitors having significant shares of the total deposits in commercial banks in the market. As a general matter, 5. Under the United States Department of Justice Merger Guidelines (June 14, 1982), a market in which the post-merger HHI is below the Board is concerned about proposals that would 1000 is considered unconcentrated, and the Department is unlikely to result in the largest competitors in a market acquiring challenge mergers in such markets. banking organizations with a significant share of the 6. Comerica Inc. (Bank of the Commonwealth), 69 FEDERAL RESERVE BULLETIN 797 (1983); General Bancshares Corporation, 69 total deposits in commercial banks in the market. In FEDERAL RESERVE BULLETIN 802 (1983); First Tennessee National the absence of the mitigating circumstances discussed Corporation, 69 FEDERAL RESERVE BULLETIN 298 (1983). below, the competitive effects of such an acquisition 7. All deposit data for thrifts are as of September 30, 1982. 8. Under the provisions of the Thrift Institutions Restructuring Act, could well be so adverse as to warrant denial of the Title III of the Garn-St Germain Depository Institutions Act of 1982, proposal and the Board will carefully scrutinize the 96 Stat. 1469, 1499-1500, the commercial lending powers of federally chartered thrift institutions were significantly expanded. A provision effect of any such proposal on competition and the in Illinois law grants state-chartered thrift institutions the same concentration of banking resources in the market. lending powers accorded to federal thrift institutions. 32 111. Stat. Ann. § 706(c)(1970). The Chicago banking market is not concentrated 9. If thrift institutions in the Chicago banking market are included now and would not become concentrated after conin the calculation of market concentration, the share of total deposits summation of this transaction. The share of deposits held by the four largest organizations in the market (one of which is a held by the four largest commercial banking organiza- thrift institution) would be 39.7 percent, the HHI would be 540, and the combined market share of Applicant and Company would be 16.3 percent. 10. The Elgin banking market is approximated by the southern half of McHenry County, Illinois, excluding the town of Woodstock, and 4. The Chicago banking market is approximated by Cook, DuPage, by the northern third of Kane County, Illinois, including the town of and Lake Counties, all in Illinois. Elgin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Elgin banking market is not highly concentrated (the Hartford National Corporation four largest banking organizations in the market hold Hartford, Connecticut 47.5 percent of the total deposits in commercial banks in the market) and there are numerous other probable Order Approving Acquisition of a Bank Holding future entrants into the market, the Board concludes Company that consummation of this proposal would not have any significant adverse effects on probable future Hartford National Corporation, Hartford, Connecticut competition in any relevant market.11 ("HNC"), a bank holding company within the mean- The financial and managerial resources of Appli- ing of the Bank Holding Company Act of 1956, as cant, Company and their subsidiaries are regarded as amended (12 U.S.C. § 1841 et seq.) ("BHC Act"), has generally satisfactory and their future prospects ap- applied for the Board's approval under section 3(a)(3) pear favorable. The record of this application indicates of the Act (12 U.S.C. § 1842(a)(3)), to acquire Arltru that Company's existing commercial customers, typi- Bancorporation, Lawrence, Massachusetts ("Arlcally small and mid-sized businesses, would benefit tru"), also a bank holding company, and thereby to from a number of products and services not conve- acquire indirectly The Arlington Trust Company, niently available to them now. These new products Lawrence, Massachusetts. include advanced cash management services, capital Notice of this application, affording an opportunity market and financial advisory services, and export for interested persons to submit comments, has been trading services. Applicant also proposes to increase given in accordance with section 3(b) of the Act. The the percentage of its income that it devotes to neigh- time for filing comments has expired and the Board borhood development projects. Consequently, consid- has considered the application and all comments reerations relating to the convenience and needs of the ceived in light of the factors set forth in section 3(c) of community to be served lend weight toward approval the Act (12 U.S.C. § 1842(c)), including the comments of the application and outweigh any anticompetitive of Citicorp, New York, New York. effects that may result from consummation of this HNC, the second largest commercial banking orgaproposal. Accordingly, the Board has determined that nization in Connecticut, has consolidated assets of consummation of the transaction would be consistent $5.9 billion.1 Its sole subsidiary bank, The Connecticut with the public interest and that the application should National Bank ("CNB"), has deposits of $3.1 billion, be approved. representing 23.8 percent of the total deposits in On the basis of the record, this application is ap- commercial banks in the state.2 Arltru, which has total proved for the reasons summarized above. The trans- assets of $819 million and total deposits of $689 action shall not be consummated before the thirtieth million, is the eighth largest bank holding company in calendar day following the effective date of this Order, Massachusetts. Arltru holds 2.4 percent of all deposits or later than three months after the effective date of in commercial banks in Massachusetts. this Order, unless such period is extended for good Section 3(d) of the Act (12 U.S.C. 1842(d)), the cause by the Board or by the Federal Reserve Bank of Douglas Amendment, prohibits the Board from ap- Chicago, acting pursuant to delegated authority. proving any application by a bank holding company to By order of the Board of Governors, effective acquire any bank located outside of the state in which March 23, 1984. operations of the bank holding company's banking subsidiaries are principally conducted, unless such Voting for this action: Chairman Volcker and Governors acquisition is "specifically authorized by the statute Martin, Wallich, Partee, and Rice. Absent and not voting: laws of the state in which such bank is located, by Governors Teeters and Gramley. language to that effect and not merely by implication." The statute laws of Massachusetts authorize the acqui- JAMES MCAFEE, sition of a banking institution in Massachusetts by a [SEAL] Associate Secretary of the Board bank holding company that controls a bank located in another New England state, if that other New England 1. Banking data are as of September 30, 1983. 2. These figures do not reflect the mergers of CNB with The Mattatuck Bank and Trust Company, Waterbury, Connecticut, or with the three subsidiary banks of First Bancorp, Inc., New Haven, 11. Elgin Bank is the tenth largest banking organization in the Elgin Connecticut, which would increase CNB's deposits by approximately banking market, controlling $27.5 million in deposits, which repre- $825 million and make HNC the largest commercial banking organizasents 3.8 percent of the total deposits in commercial banks in the tion in Connecticut, with 29 percent of the deposits in commercial market. banks in the state. 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354 Federal Reserve Bulletin • April 1984 state authorizes on a reciprocal basis the acquisition of believes that its reasoning with respect to the Connecta bank in that state by a Massachusetts bank holding icut Act's constitutionality applies directly to the company.3 Connecticut has passed such a reciprocal Massachusetts Interstate Banking Act. Therefore, for statute.4 the reasons set forth in detail in the Appendix to the The Massachusetts Board of Bank Incorporation Board's Order approving the application of Bank of has approved the proposed merger pursuant to these New England Corporation, the Board concludes that reciprocal Interstate Banking Acts, thus finding that the Massachusetts Interstate Banking Act is not unthe transaction satisfies the reciprocity requirements constitutional. Accordingly, the Board will not deny of the respective statutes authorizing the interstate this application on the grounds of unconstitutionality acquisition of banks. Based upon its review of the urged by protestant. Massachusetts Interstate Banking Act, the Board con- In addition to determining that the merger of HNC cludes that Massachusetts has by statute expressly and Arltru is expressly authorized by a valid statute, authorized a Connecticut bank holding company, such as required by section 3(d) of the Bank Holding as HNC, to acquire a Massachusetts bank or bank Company Act, the Board must decide whether this holding company, such as Arltru. Thus, the Massachu- acquisition is consistent with the statutory standards setts Act meets the requirement of express authoriza- of section 3 of the Act. Arltru's single banking subsidtion for interstate bank acquisitions imposed by sec- iary, The Arlington Trust Company, operates in the tion 3(d) of the Bank Holding Company Act. Boston banking market,8 the largest and the least Citicorp has protested this application and has chal- concentrated of the banking markets in Massachulenged the constitutionality of the Massachusetts In- setts. Arltru is the sixth largest of sixty-four commerterstate Banking Act, in particular, its provision that cial banking organizations in the Boston market and allows only New England bank holding companies5 to controls 3.1 percent of the total deposits in commercial acquire banks or bank holding companies located in banks in that market.9 Inasmuch as none of HNC's Massachusetts. banking subsidiaries operates in Massachusetts and The Board has stated that in the absence of clear and Arltru's banking subsidiary does not operate in Conunequivocal evidence of the inconsistency of a state necticut, the proposed transaction would not eliminate law with the United States Constitution, it will not any significant existing competition in any relevant hold the state statute to be unconstitutional.6 In the banking market. HNC does control a loan production Board's Order issued today with respect to the appli- office that operates in the Boston market, but it cation of Bank of New England Corporation, Boston, opened in April 1983, and is not a significant competi- Massachusetts, to merge with CBT Corporation, Hart- tor. ford, Connecticut, the Board considered the validity of The Board has considered the effects of this proposthe Connecticut Interstate Banking Act under the al on probable future competition and has also exam- Commerce Clause, Compact Clause, and Equal Pro- ined the proposal in light of its proposed guidelines for tection Clause of the United States Constitution and did not find there to be clear and unequivocal evidence that the Connecticut statute was unconstitutional. In language and effect, the challenged provisions of the Massachusetts statute parallel the provisions of the Connecticut Interstate Banking Act, and the legislatestimony before the Connecticut Senate Banking Committee, that the tive history of both acts confirms that the two states proposed Connecticut bill bore a "remarkable similarity" to the intended complementary statutes.7 The Board thus Massachusetts Act. Transcript of Hearings before the Connecticut Joint Standing Committee on Banks, March 3, 1983, at 14. Further, the committee summary of the revised Senate bill that became the Massachusetts Interstate Banking Act stated that the purpose of the legislation was "to establish the necessary authority ... for a regional, New England, banking system" and that the bill's revision was meant to "ensure that only New England based financial institu- 3. Mass. Ann. Laws Ch. 167A ("Massachusetts Interstate Banking tions can avail themselves of this authority." Massachusetts Joint Act"), § 2. Standing Committee on Banks & Banking, Research Staff Summary at 4. 1983 Conn. Acts 411 (Reg. Sess.) entitled "An Act Concerning 1 (November 9, 1982). Interstate Banking" ("Connecticut Interstate Banking Act"), § 2. 8. The Boston banking market includes all of Suffolk and Essex 5. New England bank holding companies include those located in Counties, most of Middlesex, Norfolk, and Plymouth Counties, and Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, small parts of Bristol and Worcester Counties. The market extends and Vermont. over the entire eastern coast of Massachusetts, excluding Cape Cod, 6. Bank of New England Corporation, Federal Reserve Board and also includes 13 towns in southern New Hampshire. Order of March 26, 1984; NCNB Corp., 68 FEDERAL RESERVE 9. Market deposit data are as of June 30, 1982. Over 200 thrift BULLETIN 54 (1982). institutions compete in the market. Arltru is the tenth largest deposi- 7. Massachusetts State Senator John A. Brennan, Jr., the primary tory institution in the market and it controls only 1.4 percent of all sponsor of the Massachusetts Interstate Banking Act, stated, in deposits in financial institutions in the market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 assessing the competitive effects of market-extension expand The Arlington Trust Company's trust departmergers or acquisitions.10 In evaluating the effects of a ment as well as its mortgage lending, municipal financproposal on probable future competition, the Board ing, and commercial banking services. The considerconsiders market concentration, the number of proba- ations related to the convenience and needs of the ble future entrants into the market, the size of the bank communities to be served weigh in favor of approval. to be acquired, and the attractiveness of the market for Based on the foregoing and other facts of record, the entry on a de novo or foothold basis absent approval of Board concludes that the proposed acquisition is in the the acquisition. After consideration of these factors in public interest and that the application should be and the context of the specific facts of this case, the Board hereby is approved. The acquisition shall not be made concludes that consummation of this proposal would before the thirtieth calendar day following the effective not have any significant adverse effects on probable date of this Order or later than three months after the future competition in any relevant market. effective date of this Order, unless such period is The record shows that the Boston banking market, extended for good cause by the Board or by the in which Arltru operates, is not highly concentrated. Federal Reserve Bank of Boston, pursuant to delegat- In view of this consideration and other facts of record, ed authority. the Board concludes that elimination of HNC as a By order of the Board of Governors, effective probable future entrant into the Boston market would March 26, 1984. not have a substantial anticompetitive effect in that market. HNC's banking subsidiaries operate in the ten Voting for this action: Chairman Volcker and Governors Connecticut banking markets.11 There are numerous Martin, Wallich, Partee, Teeters, Rice, and Gramley. probable future entrants into nine of these markets, since bank holding companies located in Rhode Island JAMES MCAFEE, and Massachusetts are now eligible for entry. The [SEAL] Associate Secretary of the Board tenth market is not highly concentrated. Based on the foregoing and other facts of record, the Independent Financial, Inc. Board concludes that consummation of the proposed Lubbock, Texas acquisition of Arltru's banking subsidiary would not have any significant adverse effects on existing or Order Approving Formation of a Bank Holding probable future competition and would not increase Company the concentration of banking resources in any relevant area. Independent Financial, In^., Lubbock, Texas, has The financial and managerial resources of HNC and applied for the Board's approval under section 3(a)(1) Arltru are considered satisfactory and their prospects of the Bank Holding Company Act of 1956, as amendappear favorable. HNC has made a commitment, as a ed ("Act") (12 U.S.C. § 1842(a)(1)), to become a bank part of this transaction, to increase the capital of holding company by acquiring all of the voting shares Arltru's subsidiary, The Arlington Trust Company. of Whisperwood National Bank, Lubbock, Texas. The Board considers financial considerations to be Notice of the application, affording opportunity for positive. interested persons to submit comments, has been With respect to convenience and needs considergiven in accordance with section 3(b) of the Act. The ations, both HNC and Arltru have a satisfactory time for filing comments has expired, and the Board record of Community Reinvestment Act compliance. has considered the application and all comments re- Consummation of this merger would permit Arltru to ceived in light of the factors set forth in section 3(c) of provide additional credit capacity to serve more and the Act (12 U.S.C. § 1842(c)). larger commercial customers. HNC also proposes to Applicant, a nonoperating company, was organized for the purpose of becoming a bank holding company by acquiring Bank. Bank, with deposits of $10.3 million, is the 935th largest of 1129 commercial bank- 10. "Proposed Policy Statement of the Board of Governors of the ing organizations in Texas, holding 0.01 percent of the Federal Reserve System for Assessing Competitive Factors under the total deposits in commercial banks in the state.1 Bank Bank Merger Act and the Bank Holding Company Act," 47 Federal is the 14th largest of 15 banks in the Lubbock, Texas, Register 9017 (March 3, 1982). Although the proposed policy statement has not been adopted by the Board, the Board is using the policy guidelines in its analysis of the effects of a proposal on probable future competition. 11. The ten Connecticut banking markets are Hartford, New Haven, Bridgeport, Waterbury, New London, Danbury, Torrington, Danielson, Willimantic, and Old Saybrook. 1. Banking data are as of June 30, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

356 Federal Reserve Bulletin • April 1984 banking market and controls 0.6 percent of the total nonvoting preferred shares of First Glasco Bancdeposits in commercial banks in that market.2 None of shares, Inc., Glasco, Kansas ("Glasco"), and thereby Applicant's principals are affiliated with any other indirectly to acquire an interest in First National Bank banking organizations that operate in the market. In of Glasco, Glasco, Kansas ("Glasco Bank"). light of these facts, the Board concludes that consum- Notice of the application, affording opportunity for mation of this transaction would not result in any interested persons to submit comments, has been significant adverse eifects upon competition or in- given in accordance with section 3(b) of the BHC Act. crease the concentration of banking resources in any The time for filing comments has expired, and the relevant area. Board has considered the application and all com- The financial and managerial resources of Applicant ments received in light of the factors set forth in and Bank are considered satisfactory and their pros- section 3(c) of the BHC Act. pects appear favorable. Although Applicant will incur Applicant's investment in the nonvoting preferred some debt in connection with the proposed acquisi- shares of Glasco amounts to $450,000 and will repretion, in light of certain commitments made by Appli- sent approximately 84 percent of the total equity of cant, it appears that Applicant will have sufficient Glasco. Applicant's principals will become officers resources to service the debt without adversely affect- and directors of Glasco and Glasco Bank. In addition, ing Bank. Considerations relating to the convenience Applicant's principals will purchase all of the voting and needs of the community to be served are also shares of Glasco.1 consistent with approval. Applicant, the 79th largest commercial banking or- On the basis of these and other facts of record, it is ganization in Kansas, controls First Bank and Trust, the Board's judgment that the application should be, Concordia, Kansas, with deposits of $50.7 million, and hereby is, approved for the reasons summarized representing 0.3 percent of the total deposits in comabove. The transaction shall not be consummated mercial bank in the state.2 Glasco Bank, the 414th before the thirtieth calendar day following the effective largest commercial banking organization in the state, date of this Order, or later than three months after the holds $10.9 million in deposits. After consummation of effective date of this Order, unless such period is the proposal, Applicant's share of the total deposits in extended for good cause by the Board, or by the commercial banks in the state would increase to 0.4 Federal Reserve Bank of Dallas pursuant to delegated percent. Accordingly, consummation of the proposed authority. transaction would not have a significant effect on the By order of the Board of Governors, effective concentration of banking resources in Kansas. March 21, 1984. Glasco Bank competes in the Mitchell County banking market,3 where it is the fourth largest bank in the Voting for this action: Chairman Volcker and Governors market, with 10.7 percent of the total deposits in Martin, Wallich, Partee, and Rice. Absent and not voting: commercial banks. Applicant's subsidiary bank is lo- Governors Teeters and Gramley. cated in a separate banking market and is prohibited from branching into the Mitchell County banking JAMES MCAFEE, market by state law.4 Accordingly, consummation of [SEAL] Associate Secretary of the Board the proposal would not have any significant effect on competition in the relevant banking markets. Kansas Bancorp II, Inc. The financial and managerial resources of these Concordia, Kansas organizations are regarded as generally satisfactory, Order Approving Acquisition of Shares of a Bank Holding Company 1. Glasco proposes to redeem 89 percent of its current outstanding Kansas Bancorp II, Inc., Corcordia, Kansas, a bank voting shares before consummation of this transaction. Applicant's holding company within the meaning of the Bank principals propose to acquire the remaining 11 percent of Glasco's Holding Company Act of 1956, as amended, 12 U.S.C. shares, effecting a complete change in the control of Glasco. Applicant will not extend funds or in any way guarantee the principals' purchase § 1841 et seq. ("BHC Act"), has applied for the of Glasco's shares. For the reasons discussed in the Board's Order Board's approval under section 3(a)(3) of the BHC approving the application of Fourth Financial Corporation, 69 FEDER- Act, 12 U.S.C. § 1842(a)(3), to acquire all of the AL RESERVE BULLETIN 95 (1983), the Board has determined that this proposal would not violate Kansas Law. 2. All banking data are as of June 30, 1983. 3. The Mitchell County banking market is defined as Mitchell County and the southwestern portion of Cloud County, including the 2. The Lubbock banking market is defined as the Lubbock, Texas, town of Glasco. Metropolitan Statistical Area. 4. Kan. Stat. Ann. section 9-1111. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 and their prospects appear favorable. Considerations tion in the market.2 Accordingly, consummation of relating to the convenience and needs of the communi- this proposal would have no significant effect on ties involved are also consistent with approval. competition or the concentration of banking resources On the basis of the record, and for the reasons in any relevant area. discussed above, the application is hereby approved. The financial and managerial resources of Applicant The transaction shall not be made before the thirtieth and Bank are regarded as generally satisfactory and day following the effective date of this Order or later their prospects appear favorable, particularly in light than three months after the effective date of this of certain financial commitments by Applicant's prin- Order, unless such period is extended for good cause cipals. Considerations relating to the convenience and by the Board or by the Federal Reserve Bank of needs of the community to be served also are consis- Kansas City, pursuant to delegated authority. tent with approval of the proposal. By order of the Board of Governors, effective On the basis of the record, the application is ap- March 7, 1984. proved for the reasons summarized above. The transaction shall not be consummated before the thirtieth Voting for this action: Chairman Volcker and Governors calender day following the effective date of this Order, Wallich, Partee, Rice, and Gramley. Absent and not voting: or later than three months after the effective date of Governors Martin and Teeters. this Order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of JAMES MCAFEE, Cleveland, acting pursuant to delegated authority. [SEAL] Associate Secretary of the Board By order of the Board of Governors, effective March 16, 1984. McKeesport National Corporation Voting for this action: Chairman Volcker and Governors McKeesport, Pennsylvania Martin, Partee, Teeters, Rice, and Gramley. Absent and not voting: Governor Wallich. Order Approving Formation of a Bank Holding JAMES MCAFEE, Company [SEAL] Associate Secretary of the Board McKeesport National Corporation, McKeesport, Pennsylvania, has applied for the Board's approval under section 3(a)(1) of the Bank Holding Company Med Center Bancshares, Inc. Act ("Act"), 12 U.S.C. § 1842(a)(1), to become a bank Houston, Texas holding company by acquiring McKeesport National Bank, McKeesport, Pennsylvania ("Bank"). Order Approving Formation of Bank Holding Notice of the application, affording opportunity for Company interested persons to submit comments, has been given in accordance with section 3(b) of the Act. The Med Center Bancshares, Inc., Houston, Texas, has time for filing comments has expired, and the Board applied for the Board's approval pursuant to section has considered the application and all comments re- 3(a)(1) of the Bank Holding Company Act (12 U.S.C. ceived in light of the factors set forth in section 3(c) of § 1842(a)(1)) to become a bank holding company by the Act. acquiring Medical Center Bank, Houston, Texas Applicant is a nonoperating Pennsylvania corpora- ("Bank"). tion organized for the purpose of becoming a bank Notice of the application, affording opportunity for holding company by acquiring Bank. Bank, which interested persons to submit comments, has been holds deposits of approximately $86 million, is one of given in accordance with section 3(b) of the Act. The the smaller banks in Pennsylvania.1 This proposal time for filing comments has expired and the Board involves the restructuring of Bank's ownership from has considered the application and all comments reindividuals to a corporation owned by the same indi- ceived in light of the factors set forth in section 3(c) of viduals. Bank operates in the Pittsburgh banking mar- the Act (12 U.S.C. § 1842(c)). ket and neither Applicant nor any of its principals has an ownership interest in any other banking organiza- 2. The Pittsburgh banking market consists of all of Allegheny County and adjoining portions of Butler, Armstrong, Westmoreland, 1. Deposit data are as of December 31, 1983. Washington, and Beaver Counties, all in Pennsylvania. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

358 Federal Reserve Bulletin • April 1984 Applicant, a nonoperating corporation, was orga- Midland Bancorp, Inc. nized for the purpose of acquiring Bank. Bank, with Chicago, Illinois deposits of $133.4 million, is the 51st largest banking organization in Texas and controls 0.11 percent of the Order Approving Acquisition of a Bank total deposits in commercial banks in the state.1 Principals of Applicant are associated with another Midland Bancorp, Inc., Chicago, Illinois, a bank holdbanking organization in Texas, United Bancshares, ing company within the meaning of the Bank Holding Inc., Rosenburg, Texas, a one-bank holding company Company Act ("Act"), has applied for the Board's with respect to Rosenburg Bank and Trust ("Rosen- approval under section 3(a)(3) of the Act (12 U.S.C. burg Bank"). Both Bank and Rosenburg Bank operate § 1842(a)(3)) to acquire all of the voting shares of in the Houston banking market.2 Bank is the 20th Hawthorne Bank of Wheaton, Wheaton, Illinois. largest bank in the Houston banking market, control- Notice of the application, affording opportunity for ling 0.42 percent of the total deposits in commercial interested persons to submit comments, has been banks in the market. Rosenburg Bank is the 67th given in accordance with section 3(b) of the Act. The largest banking organization in that market, control- time for filing comments has expired, and the Board ling 0.10 percent of the total deposits in commercial has considered the application and all comments rebanks in the market. In light of the small share of the ceived in light of the factors set forth in section 3(c) of market's deposits held by Bank and Rosenburg Bank, the Act (12 U.S.C. § 1842(c)). the Board concludes that consummation of the pro- Applicant controls one bank subsidiary with deposposed transaction would not have a significant effect its of $385.1 million, representing 0.4 percent of the on existing competition in any relevant area. The total deposits in commercial banks in Illinois.1 Appli- Board also concludes that consummation of the pro- cant seeks to acquire Bank, with deposits of $36.3 posal would not have any significant effects on the million, representing 0.04 percent of statewide deposconcentration of banking resources in any relevant its. Consummation of this proposal would not have a area. significant effect on the concentration of commercial The financial and managerial resources and future bank deposits in the state. prospects of Applicant and Bank are generally satis- Applicant and Bank are both represented in the factory. Although no new services would result from Chicago banking market. Applicant is the 14th largest consummation of this proposal, considerations with banking organization in the market, controlling 0.6 respect to the convenience and needs of the communi- percent of commercial bank deposits in the market; ty to be served are consistent with approval. Bank is the 252nd largest banking organization in the On the basis of the record, this application is ap- market, controlling 0.06 percent of market deposits. proved for the reasons summarized above. The trans- Upon consummation of this proposal, Applicant action shall not be made before the thirtieth calendar would become the twelfth largest banking organization day following the effective date of this Order or later in the Chicago banking market, controlling 0.66 perthan three months after the effective date of this cent of deposits. It is the Board's view that consum- Order, unless such period is extended for good cause mation of this proposal would not have a significant by the Board or by the Federal Reserve Bank of adverse effect upon competition in the market. Dallas, acting pursuant to delegated authority. The financial and managerial resources and pros- By order of the Board of Governors, effective, pects of Applicant and Bank are consistent with ap- March 26, 1984. proval of this application, in light of certain financial commitments made by Applicant. Although Bank will provide no new services as a result of this transaction, Voting for this action: Chairman Volcker and Governors there is no evidence that the needs of the relevant Martin, Wallich, Partee, Teeters, Rice, and Gramley. community are not being met, and considerations relating to convenience and needs of the community to JAMES MCAFEE, be served are consistent with approval. [SEAL] Associate Secretary of the Board Based on the foregoing and all of the other facts of record, the Board has determined that the application should be, and hereby is, approved. The transaction shall not be consummated before the thirtieth day 1. All banking data are as of December 31, 1982. 2. The Houston banking market is approximated by the Houston RMA. 1. All banking data are as of March 31, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 following the effective date of this Order, or later than The transaction may be consummated immediately three months after the effective date of this Order, but in no event later than three months after the unless such period is extended for good cause by the effective date of this Order unless such period is Board or by the Federal Reserve Bank of Chicago, extended for good cause by the Board or by the pursuant to delegated authority. Federal Reserve Bank of Chicago acting pursuant to By order of the Board of Governors, effective delegated authority. March 7, 1984. By order of the Secretary of the Board, acting pursuant to delegated authority for the Board of Gov- Voting for this action: Chairman Volcker and Governors ernors, effective March 9, 1984. Wallich, Partee, Rice, and Gramley. Absent and not voting: Governors Martin and Teeters. JAMES MCAFEE, [SEAL] Associate Secretary of the Board JAMES MCAFEE, [SEAL] Associate Secretary of the Board The One Bancorp Portland, Maine NBD Bancorp, Inc. Detroit, Michigan Order Approving Formation of a Bank Holding Company Order Approving Acquisition of Bank The One Bancorp, Portland, Maine, has applied for NBD Bancorp, Inc., Detroit, Michigan, a bank holding the Board's approval under section 3(a)(1) of the Bank company within the meaning of the Bank Holding Holding Company Act ("BHC Act") (12 U.S.C. Company Act, has applied for the Board's approval § 1841(a)(1)) to become a bank holding company under section 3(a)(3) of the Act (12 U.S.C. through acquisition of all of the voting shares of the § 1842(a)(3)) to acquire National Bank & Trust Compa- Maine Savings Bank, Portland, Maine. The Maine ny of Traverse City, Traverse City, Michigan. Savings Bank ("Bank") is an FDIC insured state- Public notice of the application before the Board is chartered mutual savings bank that, in connection with not required by the Act, and in view of the emergency this proposal, will convert to a stock savings bank. situation, the Board has not followed its normal prac- Notice of the application, affording opportunity for tice of affording interested parties the opportunity to interested persons to submit comments and views, has submit comments and views. In view of the emergency been given in accordance with section 3(b) of the Act. situation involving Bank, the Comptroller of the Cur- The time for filing comments has expired, and the rency has recommended immediate action by the Board has considered the application and all com- Board to prevent the probable failure of Bank. ments received. In connection with the application, the Secretary of The Board has previously determined that a state the Board has taken into consideration the competitive guaranty savings bank is a "bank" for purposes of the effects of the proposed transaction, the financial and BHC Act if that state savings bank accepts demand managerial resources and future prospects of the deposits (which includes NOW accounts), engages in banks concerned, and the convenience and needs of the business of making commercial loans, and is not the communities to be served. On the basis of the covered by the exemption created by the Garn-St information before the Board, the Secretary of the Germain Depository Institutions Deregulation Act of Board finds that an emergency situation exists so as to 1982 for FSLIC insured thrift institutions.1 Bank acrequire that the Secretary of the Board act immediate- cepts demand deposits and NOW accounts and enly pursuant to the provisions of section 3(b) of the Act gages in the business of making commercial loans. Its (12 U.S.C. § 1842(b)) in order to safeguard depositors deposits are not insured by the FSLIC. Accordingly, of Bank. Having considered the record of this applica- Bank is a "bank" for purposes of the BHC Act. The tion in light of the factors contained in the Act, the Secretary of the Board has determined that consummation of the transaction would be in the public interest and that the application should be approved on a basis that would not preclude immediate consummation of the proposal. On the basis of these consider- 1. Amoskeag Bank Shares, Inc., 69 FEDERAL RESERVE BULLETIN 860 (1983); First NH Banks, Inc., 69 FEDERAL RESERVE BULLETIN ations, the application is approved. 874 (1983). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

360 Federal Reserve Bulletin • April 1984 application has therefore been considered in light of Shickley State Company the requirements of section 3 of the Act pertaining to Shickley, Nebraska the acquisition of banks. Applicant is a recently organized corporation Order Approving Formation of a Bank Holding formed for the purpose of becoming a bank holding Company company through the acquisition of Bank. Bank, which holds $722.3 million in total deposits, is the Shickley State Company, Shickley, Nebraska, has second largest depository institution in Maine, con- applied for the Board's approval under section 3(a)(1) trolling 10.9 percent of the total deposits in all deposi- of the Bank Holding Company Act ("BHC Act") tory institutions in the state. Bank is the largest 12 U.S.C. § 1842(a)(1), to become a bank holding depository institution in the Portland banking market, company by acquiring at least 80 percent of the voting holding 22.3 percent of total deposits in all depository shares of Shickley State Bank, Shickley, Nebraska institutions in the banking market.2 Neither Applicant ("Bank"). nor any of its principals is affiliated with any other Notice of the application, affording opportunity for banking organization in the market or any other rele- interested persons to submit comments, has been vant market. Applicant's proposal represents simply a given in accordance with section 3(b) of the Act. The corporate reorganization and will not result in any time for filing comments has expired, and the Board adverse effects upon competition in any relevant area. has considered the application and all comments re- The financial and managerial resources and future ceived in light of the factors set forth in section 3(c) of prospects of Applicant and Bank are regarded as the Act. satisfactory and consistent with approval. Consider- Applicant is a nonoperating Nebraska corporation ations relating to the convenience and needs of the organized for the purpose of becoming a bank holding community to be served are also consistent with company by acquiring Bank, which holds deposits of approval. $7.5 million.1 Upon acquisition of Bank, Applicant Based on the foregoing and other facts of record, the would control the 336th largest of 461 commercial Board has determined that consummation of the pro- banking organizations in Nebraska and approximately posed transaction would be in the public interest and 0.1 percent of the total deposits in commercial banks that the application should be, and hereby is, ap- in the state. This proposal involves a restructuring of proved. The transaction shall not be consummated Bank's ownership from individuals to a corporation before the thirtieth calendar day following the effective owned by the same individuals. Accordingly, consumdate of this Order or later than three months after the mation of this proposal would have no significant effective date of this Order, unless such period is effect on the concentration of banking resources in extended for good cause by the Board or by the Nebraska. Federal Reserve Bank of Boston, acting pursuant to Bank is located in the Fillmore County banking delegated authority. market.2 Applicant's principals, who control 61 per- By order of the Board of Governors, effective cent of Bank's outstanding shares, also control two March 28, 1984. other banks in the market: Geneva State Bank, Geneva, Nebraska ("Geneva Bank") and Farmers State Voting for this action: Chairman Volcker and Governors Bank, Fairmont, Nebraska, ("Fairmont Bank"). Bank Martin, Wallich, Partee, and Rice. Abstaining from this is currently the fourth largest of seven banking organiaction: Governor Gramley. Absent and not voting: Governor zations in the Fillmore County banking market, with Teeters. total deposits of $7.5 million, representing 8.1 percent of the total deposits in commercial banks in the JAMES MCAFEE, market. Geneva Bank is the largest commercial bank [SEAL] Associate Secretary of the Board in the market, with total deposits of $44.9 million, representing 48.2 percent of the total deposits in commercial banks in the market. Fairmont Bank is the 2. All banking data are as of December 31, 1983. The Portland banking market is approximated by the Portland, Maine MSA, as well as the cities of Kennebunk, North Kennebunk Port, Kennebunk Port, 1. Deposit data are as of December 31, 1982. Lyman, Dayton, Limington, Baldwin, Sebago, Naples, Casco, Paw- 2. The Fillmore County banking market is defined as Fillmore nal, Saco, and Biddeford, all in Maine. County, Nebraska. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 sixth largest bank in the market, with total deposits of ment, consideration of these factors mitigate the com- $5.5 million, representing 6.0 percent of the total petitive effects of this proposal. deposits in commercial banks in the market. Together, At the time of their affiliation, Bank, Geneva Bank these three banks control $57.9 million in deposits, and Fairmont Bank were relatively small, with the representing 62.2 percent of the total deposits in deposits in two of the banks being less than $1 million. commercial banks in the market. Currently, the banks continue to be among the smaller Section 3(c) of the Act precludes the Board from banking organizations in the state. The affiliation in approving any proposed acquisition that may tend to this case has been in existence for 36 years and did not create a monopoly or may substantially lessen compe- represent an attempt to evade the antitrust laws. tition or be in restraint of trade in any part of the Common control was effected in 1947, before the United States, unless the Board finds that such anti- enactment of the Celler-Kefauver Antimerger Act of competitive effects are clearly outweighed by the 1950 and before the enactment of the Bank Merger Act convenience and needs of the community to be served. of 1960, which required regulatory agencies to take In analyzing a case under these standards where, as competitive factors into account in approving prohere, the principals of an applicant control another posed mergers. banking organization in the same market as the bank to After considering the facts of record, including the be placed in the holding company, the Board considers length of the affiliation of Bank, Geneva Bank and the competitive effects of the transaction whereby Fairmont Bank, the Board concludes that competitive common control of the formerly competing institutions considerations are consistent with approval of the was established.3 application. Bank and Geneva Bank came under common con- Where principals of an applicant are engaged in trol in 1945. At that time, Bank was the fifth largest operating a chain of banking organizations, the Board, and Geneva Bank was the largest bank in the Fillmore in addition to analyzing the one-bank holding company County market, and together the banks controlled 58.8 proposal before it, also considers the entire chain and percent of the total deposits in the market. Fairmont analyzes the financial and managerial resources and Bank became affiliated with Bank and Geneva Bank in future prospects of the chain under the Board's Capital 1947. At that time, Fairmont Bank was the fifth largest Adequacy Guidelines. Based upon such analysis in commercial bank in the market and controlled $907.0 this case, the financial and managerial resources and thousand in deposits, representing 9.6 percent of the future prospects of Applicant, Bank and the chain total deposits of commercial banks in the market. banking organization appear to be satisfactory. There- Geneva Bank was the largest of the six commercial fore, considerations relating to banking factors are banks in the market, with deposits of $4.4 million, consistent with approval of the application. Considerrepresenting 46.5 percent of the market's deposits, and ations relating to convenience and needs of the com- Bank was the fourth largest bank in the market, with munity to be served also are consistent with approval deposits of $982.0 thousand, representing 10.4 percent of this application. Accordingly, it is the Board's of the total deposits in commercial banks in the judgment that the proposed acquisition is in the public market. Together, the three banks held 66.5 percent of interest and that the application should be approved. the total deposits in commercial banks in the market. On the basis of the record, the application is ap- Ordinarily, a proposal of this type would raise proved for the reasons summarized above. The transsignificant concerns under the standards in section 3(c) action shall not be consummated before the thirtieth of the Act. However, in its consideration of recent calendar day following the effective date of this Order applications involving affiliated banks in the same or later than three months after the effective date of market, the Board approved the formation of a bank this Order, unless such period is extended for good holding company for one of the affiliated banks relying cause by the Board or by the Federal Reserve Bank of on the small absolute size of the banks at the time of Kansas City acting pursuant to delegated authority. affiliation, the substantial number of years that the By order of the Board of Governors, effective institutions had been affiliated, and the existence of March 2, 1984. the affiliation before the application of certain of the antitrust laws to bank mergers.4 On the Board's judg- Voting for this action: Chairman Volcker and Governors Martin, Wallich, Partee, Rice, and Gramley. Absent and not voting: Governor Teeters. 3. Mid-Nebraska Bankshares, Inc., v. Board of Governors of the Federal Reserve System, 627 F.2d 266 (D.C. Cir. 1980). 4. Texas East Bancorp, 69 FEDERAL RESERVE BULLETIN 636 WILLIAM W. WILES, (1983); First Monco Bancshares, Inc., 69 FEDERAL RESERVE BULLE- TIN 293 (1983). [SEAL] Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

362 Federal Reserve Bulletin • April 1984 Southwest Bancshares, Inc. The Board also has considered the effects of Appli- Houston, Texas cant's proposal on probable future competition in the San Antonio market in light of its proposed guidelines Order Approving Acquisition of a for determining whether an intensive examination of a Bank Holding Company and Banks proposed market extension merger or acquisition is warranted.3 The proposal does not trigger an intensive Southwest Bancshares, Inc., Houston, Texas, a bank analysis under the Board's proposed guidelines beholding company within the meaning of the Bank cause San Antonio Bank is not a leader in the San Holding Company Act (12 U.S.C. § 1841 et seq.) Antonio market and the market is only moderately ("Act"), has applied under section 3(a)(3) of the Act concentrated. Accordingly, consummation of this pro- (12 U.S.C. § 1842(a)(3)) to acquire Southwest Texas posal will have no significant effect on probable future Bankers, Inc., San Antonio, Texas ("Bankers"), and competition in the San Antonio banking market. thereby indirectly acquire San Antonio Bank and Los Colinas Bank will compete in the Dallas bank- Trust, San Antonio, Texas ("San Antonio Bank"). ing market.4 Applicant is the seventh largest of 113 Applicant also has applied under section 3(a)(3) of the banking organizations in the Dallas banking market, Act to acquire Bank of the Southwest, N.A., Los controlling eight banks holding 3.34 percent of total Colinas, Irving, Texas ("Los Colinas Bank"). deposits in commercial banks in the market. As a Notice of the applications, affording an opportunity de novo bank, Los Colinas Bank represents a new for interested persons to submit comments and views, source of competition in the Dallas banking market. has been given in accordance with section 3(b) of the Consummation of this proposal thus will increase Act. The time for filing comments and views has competition in the Dallas banking market. expired, and the Board has considered the applications The financial and managerial resources of Applicant and all comments received in light of the factors set are considered to be consistent with approval of these forth in section 3(c) of the Act (12 U.S.C. § 1842(c)). proposals. The financial and managerial resources of Applicant is the sixth largest commercial banking Bankers will be improved as a result of its acquisition organization in Texas, controlling 37 banks with total by Applicant. The future prospects of Los Colinas deposits of $5.71 billion, representing 4.7 percent of Bank are favorable. Affiliation between Applicant and total deposits in commercial banks in the state.1 Bank- San Antonio Bank will permit San Antonio Bank to ers controls one bank, San Antonio Bank, with total offer additional services to its customers through Apdeposits of $119 million, representing 0.10 percent of plicant. Los Colinas Bank, as a de novo bank, repredeposits in commercial banks in Texas and ranking it sents a new source of banking services in the Dallas as the 64th largest commercial banking organization in banking market. Accordingly, considerations relating the state. Los Colinas Bank is a de novo bank being to the convenience and needs of the communities to be organized by Applicant. served are consistent with approval of the proposals. Upon consummation of these proposals, Appli- Based on the foregoing, and other facts of record, it cant's share of statewide deposits in commercial banks is the Board's judgment that the proposed transactions will increase by .10 percent to 4.8 percent and its would be in the public interest and that the applicastatewide ranking will remain unchanged. According- tions should be and are hereby approved. The proly, consummation of these proposals will have no posed transactions shall not be consummated before significant effect on the concentration of banking re- the thirtieth calendar day following the effective date sources in Texas. of this Order, or later than three months after the San Antonio Bank is the ninth largest of 37 commer- effective date of this Order, unless such period is cial banks in the San Antonio banking market,2 controlling 2.0 percent of total deposits in commercial banks in the market. Applicant does not compete in the San Antonio banking market. Accordingly, the proposal would not result in the elimination of any existing competition in this market. 3. "Proposed Policy Statement of the Board of Governors of the Federal Reserve System for Assessing Competitive Factors Under the Bank Merger Act and the Bank Holding Company Act," 47 Federal Register 9017 (March 3, 1982). 4. The Dallas banking market is defined as Dallas County, the southeast quadrant of Denton County (including Denton and Lewisville), the southwest quadrant of Collin County (including McKinney and Piano), the northern half of Rockwall County, the communities of 1. Banking data are as of December 31, 1982. Forney and Terrell in Kaufman County, Midlothian, Waxahatchie, 2. The San Antonio banking market is defined as the San Antonio and Ferris in Ellis County, and Grapevine and Arlington in Tarrant Ranally Metro Area. County, Texas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 extended for good cause by the Board or the Federal banking market, controlling 11 banks with total depos- Reserve Bank of Dallas, acting pursuant to delegated its of $1.1 billion, representing 4.2 percent of total authority. deposits in commercial banks in the market. Richard- By order of the Board of Governors, effective son Bank and Brookhollow Bank, as de novo banks, March 16, 1984. would represent new sources of competition in the Dallas banking market. Accordingly, considerations Voting for this action: Chairman Volcker and Governors relating to competitive factors under the Act lend Martin, Partee, Teeters, Rice, and Gramley. Absent and not weight toward approval of these proposals. voting: Governor Wallich. The financial and managerial resources of Applicant, its subsidiary banks, Richardson Bank, and JAMES MCAFEE, Brookhollow Bank are generally satisfactory, and the [SEAL] Associate Secretary of the Board future prospects of each appear favorable. Accordingly, considerations relating to banking factors under the Act are consistent with approval of these proposals. Texas Commerce Bancshares, Inc. Richardson Bank and Brookhollow Bank, as de novo Houston, Texas banks, represent new sources of a full range of banking services in the Dallas banking market. Accordingly, Order Approving Acquisition of Banks considerations relating to the convenience and needs of the community to be served lend weight toward Texas Commerce Bancshares, Inc., Houston, Texas, approval of these proposals. has applied for the Board's approval under section On the basis of the record and for the reasons 3(a)(3) of the Bank Holding Company Act (12 U.S.C. discussed above, the Board has determined that these § 1842(a)(3)) to acquire all of the voting shares of applications should be and hereby are approved. The Texas Commerce Bank-Richardson, N.A., Richard- transactions shall not be consummated before the son, Texas ("Richardson Bank"); and Texas Com- thirtieth calendar day following the effective date of merce Bank-Brookhollow, N.A., Dallas, Texas this Order or not later than three months after the ("Brookhollow Bank"). effective date of this Order, unless such period is Notice of these applications, affording interested extended for good cause by the Board or by the persons an opportunity to submit comments and Federal Reserve Bank of Dallas, acting pursuant to views, has been given in accordance with section 3(b) delegated authority. of the Act. The time for filing comments and views has By order of the Board of Governors, effective expired and the Board has considered the applications March 6, 1984. and all comments received in light of the factors set Voting for this action: Vice Chairman Martin and Goverforth in section 3(c) of the Act (12 U.S.C. § 1842(c)). nors Wallich, Partee, Rice, and Gramley. Absent and not Applicant, the third largest commercial banking voting: Chairman Volcker and Governor Teeters. organization in Texas, controlling 65 banks with total deposits of $11.7 billion, representing 9.7 percent of WILLIAM W. WILES, total deposits in commercial banks in the state, has [SEAL] Secretary of the Board applied to acquire Richardson Bank and Brookhollow Bank, both newly chartered institutions.1 Consummation of these proposals would not immediately in- Orders Issued Under Section 4 of Bank Holding crease Applicant's share of deposits in commercial Company Act banks in Texas. Both Richardson Bank and Brookhollow Bank will A.S.B. Bancshares, Inc. compete in the Dallas banking market, where Appli- Archie, Missouri cant also competes.2 Applicant is the fifth largest of 113 commercial banking organizations in the Dallas Order Approving Application to Engage in Insurance Activities 1. Banking data are as of December 31, 1982. A.S.B. Bancshares, Inc., Archie, Missouri, a bank 2. The Dallas banking market is defined as Dallas County; the holding company within the meaning of the Bank southeast quadrant of Denton County (including Denton and Lewis- Holding Company Act ("Act"), has applied for the ville); the southwest quadrant of Collin County (including McKinney and Piano); the northern half of Rockwall County; the communities of Board's approval under section 4(c)(8) of the Act Forney and Terrell in Kaufman County; Midlothian, Waxahachie, and (12 U.S.C. § 1843(c)(8)) and section 225.25 of the Ferris in Ellis County; and Grapevine and Arlington in Tarrant County, Texas. Board's Regulation Y (12 CFR § 225.25), to engage Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

364 Federal Reserve Bulletin • April 1984 de novo, through a proposed subsidiary, in general in the provision of insurance services in the geographic insurance agency activities (except the sale of life area to be served. Given the relative ease of entry into insurance and annuities) in a community with a popu- the market for insurance agency activities, possible lation greater than 5,000. Applicant, as a bank holding adverse effects, such as undue concentration of recompany with total assets under $50 million, relies on sources or decreased or unfair competition, appear to the statutory language contained in section 601(F) of be limited. the Garn-St Germain Depository Institutions Act of Based upon the foregoing and all the facts of record, 1982 as authorization for this activity.1 the Board has determined that the public benefits Notice of the application, affording interested per- associated with consummation of this proposal can sons an opportunity to submit comments on the pro- reasonably be expected to outweigh possible adverse posal, has been duly published. (49 Federal Register effects, and that the balance of the public interest 4039 (Feb. 1, 1984)). The time for filing comments has factors favors approval of this application. Accordingexpired and the Board has considered the application ly, the application is hereby approved. in light of the public interest factors set forth in section This determination is subject to all of the conditions 4(c)(8) of the Act. set forth in Regulation Y, including sections 225.4(d) Applicant, with total assets of $13.8 million as of and 225.23(b), and the Board's authority to require September 30, 1983, proposes to engage in general such modification or termination of the activities of a insurance agency activities in Harrisonville, Missouri, holding company or any of its subsidiaries as the a community with a population of approximately 6,300 Board finds necessary to assure compliance with the as of the 1980 census. Applicant states that the activi- provisions and purposes of the Act and the Board's ties will be conducted from offices to be located in regulations and orders issued thereunder, or to pre- Applicant's subsidiary bank, the Archie State Bank, vent evasion thereof. Harrisonville, Missouri (total deposits of $12.39 mil- The proposed activities shall commence not later lion as of September 30, 1983), and that its service area than three months after the effective date of this will be Bates, Cass and adjacent counties in the State Order, unless such period is extended for good cause of Missouri. by the Board or by the Federal Reserve Bank of In order to approve an application under section Kansas City. 4(c)(8) of the Act, the Board is required to determine By order of the Board of Governors, effective that a proposed activity is "so closely related to March 19, 1984. banking or managing or controlling banks as to be a proper incident thereto . . ." 12U.S.C. § 1843(c)(8). Voting for this action: Chairman Volcker and Governors In this regard, the Board has recently found that the Martin, Partee, Teeters, Rice, and Gramley. Absent and not voting: Governor Wallich. sale of general insurance by bank holding companies with total assets of $50 million or less is an activity JAMES MCAFEE, closely related to banking within the meaning of sec- [SEAL] Associate Secretary of the Board tion 4(c)(8). Whitewater Bancorp, Inc., 69 FEDERAL RESERVE BULLETIN 815 (1983). Under section 4(c)(8), the Board also must deter- BankAmerica Corporation mine that the proposed activity's performance by an San Francisco, California individual applicant "can reasonably be expected to produce benefits to the public, such as greater conve- Order Approving the Sale and Issuance of nience, increased competition, or gains in efficiency, Payment Instruments and Related Activities that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair com- BankAmerica Corporation, San Francisco, California, petition, conflicts of interests, or unsound banking a bank holding company within the meaning of the practices." 12 U.S.C. § 1843(c)(8). Upon a review of Bank Holding Company Act ("Act"), has applied for the record of this application, the Board views Appli- the Board's approval under section 4(c)(8) of the Act cant's proposal as procompetitive and in the public (12 U.S.C. § 1843(c)(8)) and section 225.23 of the interest because de novo entry will provide greater Board's Regulation Y (12 CFR § 225.23) to engage convenience to the public and increased competition de novo in the issuance and sale of variably denominated payment instruments with a maximum face value of $10,000. These instruments will be sold by BankAmerica's subsidiaries and unaffiliated financial institutions. In connection with this application, Bank- 1. Applicant has committed to divest itself of such activities if its assets exceed the statutory limitation of $50 million. America has applied to engage, through its subsidiary, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 BA Cheque Corporation, in certain management con- proposed activity by a nonbank affiliate of Applicant sulting, data processing, marketing, and other services "can reasonably be expected to produce benefits to related to the issuance and sale of the payment instru- the public such as greater convenience, increased ments. competition, or gains in efficiency, that outweigh Notice of the application, affording interested per- possible adverse effects, such as undue concentration sons an opportunity to submit comments on the relat- of resources, decreased or unfair competition, conedness of the proposed activity to banking, and on the flicts of interests, or unsound banking practices." balance of public interest factors regarding the applica- The facts of record on this proposal indicate that tion, has been published (48 Federal Register 52077 official checks and consumer-type payment instru- (1983)). The time for filing comments has expired, and ments, such as traditional money orders, are marketed the Board has considered the application and all nationally on the wholesale level by a few large comments received in light of the public interest organizations and locally on a retail level by a wide factors set forth in section 4(c)(8) of the Act. variety of financial and nonfinancial institutions. On BankAmerica is a bank holding company by virtue the national scale, the market is concentrated, being of its control of Bank of America NT & SA, San dominated by only a few large organizations.3 Entry Francisco, California, the largest commercial banking into this business on a national scale involves overorganization in California. With total assets of $121 coming significant barriers because a potential entrant billion as of December 31, 1983, BankAmerica is the must possess the capability for managing the extensive second largest bank holding company in the United sales and servicing operation necessary for handling a States. BankAmerica also engages in certain nonbank- low unit price, high volume product. Such capabilities ing activities, including mortgage banking, commercial frequently are associated with banking organizations lending and leasing, credit-related insurance activities, of significant size such as BankAmerica. BankAmeriinvestment advisory activities, and management con- ca's entry into this market would result in increased sulting to depository institutions. competition in this industry and may be expected ultimately to result in increased prospects for some BankAmerica proposes to engage de novo in the deconcentration of the industry in the future. Accordissuance and sale of variably denominated payment ingly, the Board views BankAmerica's proposal as instruments with a face value of up to $10,000. These procompetitive and in the public interest insofar as it instruments will include domestic and international relates to the issuance of instruments that are intended money orders and official checks. BankAmerica also primarily for use by consumers. proposes to use these instruments for certain internal transactions, such as payroll. These instruments will In its past consideration of the issuance of variably be issued in U.S. and foreign currency and will be sold denominated payment instruments, the Board has by BankAmerica's subsidiaries, unaffiliated banks, been concerned that the issuance of such instruments savings and loan associations, and other financial with a face value of over $1,000 would result in an institutions. The Board has approved the sale and adverse effect on the reserve base. Because reserve issuance of these types of instruments with a face requirements serve as an essential tool of monetary value not exceeding $1,000.' The Board also has policy, the Board is concerned that this proposal may recently amended Regulation Y to include the issuance result in adverse effects due to the erosion of the or sale of money orders and other similar consumer- reservable deposits of the banking system. type payment instruments with a face value not ex- However, in order to assess the effects of the ceeding $1,000 on the list of permissible nonbanking proposal on the reserve base, the Board has deteractivities.2 Banks have historically been in the busi- mined to approve the application and to closely moniness of issuing money orders and similar payment tor the effects of this proposal and any other similar instruments such as cashier's checks. An increase in proposals by bank holding companies on the Board's the denomination of such instruments would not effect conduct of monetary policy. To this end, the Board their fundamental nature, and the Board concludes will require BankAmerica and any other bank holding that the issuance and sale of the proposed instruments company that receives approval to engage in this is closely related to banking. In order to approve the subject application, the Board must also find that the performance of the 3. Money orders are primarily used to transmit money by members of the consumer public who do not or cannot maintain checking accounts. Official checks can be used as a substitute for a variety of 1. Citicorp, 63 FEDERAL RESERVE BULLETIN 416 (1977); Republic payment instruments, such as cashier's checks, and could be used by of Texas Corporation, 63 FEDERAL RESERVE BULLETIN 414 (1977). businesses as part of their cash management strategy. Traditionally, 2. 49 Federal Register 828 (1984) (to be codified at 12 CFR money orders have a maximum face value printed on the instrument, § 225.25(b)(12)). which is generally at or lower than the limit set by Regulation Y. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

366 Federal Reserve Bulletin • April 1984 activity to file with the Board weekly reports of daily assure compliance with the provisions and purposes of data on this activity. If it later appears that the result of the Act and the Board's regulations and orders issued this proposal is a significant reduction in the reserve thereunder, or to prevent evasion thereof. base or other adverse effect on the conduct of mone- The activities approved hereby shall be commenced tary policy, the Board may impose reserve require- not later than three months after the effective date of ments on such transactions, pursuant to section 19 of this Order, unless such period is extended for good the Federal Reserve Act, (12 U.S.C. § 461 (a)) and the cause by the Board or by the Federal Reserve Bank of Board's Regulation D, (12 CFR Part 204). San Francisco. In addition to increased competition, BankAmerica By order of the Board of Governors, effective states that its proposal should provide benefits to the March 16, 1984. public through reduced costs and increased convenience to the purchaser. BankAmerica states that it Voting for this action: Chairman Volcker and Governors will provide telephone access to customer service Martin, Partee, Teeters, and Gramley. Voting against this action: Governor Rice. Absent and not voting: Governor centers, reissue lost or stolen instruments, provide Wallich. photocopying of paid instruments, and the selling institution will be required to disclose to purchasers if JAMES MCAFEE, a right to stop payment exists and how that right can [SEAL] Associate Secretary of the Board be exercised. The Board believes that such services would benefit the purchasers of these instruments. In summary, the Board finds that these instruments, Dissenting Statement of Governor Rice which will be issued by a large financial organization and will enjoy ready acceptability, will offer greater I dissent from the Board's action regarding this appliconvenience and benefits to the public and foster cation. The Board's decision to allow BankAmerica to increased competition in the industry. issue money orders and official checks in denomina- BankAmerica also has applied to engage, though its tions up to $10,000 will enable BankAmerica, and subsidiary, BA Cheque, in marketing and servicing ultimately other banking organizations, to transfer a support for its payment instruments. These services significant amount of money orders and official checks will include the training of personnel in marketing, to a nonbank subsidiary that would not be subject to sales and consumer service procedures, and certain reserve requirements. Reserve requirements serve as data processing activities, such as computerized track- a basic device for the implementation of monetary ing of instruments from issuance to storage, account policy, and I am reluctant to take any step that reconciliation and audit, and the preparation of activi- diminishes the effectiveness of this device unless there ty reports. Ongoing support also will include market- are persuasive reasons to do so. The Board has ing services, such as processing consumer requests for previously recognized the potential adverse effects on stop payments and for photocopies of paid instru- the reserve base that would be associated with permitments. The Board believes that these activities are ting bank holding companies to issue money orders either permissible under Regulation Y or may be without any denominational limits, and has imposed a performed as incidental to the principal activity of $1,000 ceiling on such instruments. Although I believe issuing and selling payment instruments.4 that the amount of inflation that has occurred since Based upon the foregoing and other considerations that ceiling was initially imposed in 1977 would justify reflected in the record, the Board has determined that a moderate increase of that limitation, perhaps to the balance of the public interest factors the Board is $2,000, no further increase appears appropriate. required to consider under section 4(c)(8) is favorable The adverse effect on the reserve base that is with respect to the activity of issuing consumer- associated with this particular application is certainly oriented payment instruments. This determination is not large, and even if other bank holding companies subject to all of the conditions set forth in Regulation follow BankAmerica's example the resulting diminu- Y, including section 225.4(d) and 225.23(b), and to the tion of the Board's ability to conduct monetary policy Board's authority to require such modification or is not likely to be overwhelming, at least on the basis termination of the activities of a holding company or of the current uses for money orders and official any of its subsidiaries as the Board finds necessary to checks. A ten-fold increase in the ceiling for such instruments may, however, encourage other uses for these instruments that could enhance the adverse effect on reserve requirements. In addition, the excep- 4. 12 CFR § 225.4(a)(8) and (a)(12) (1983). See also 49 Federal tion to reserve requirements that the Board has effec- Register 827-28 (1984) (to be codified at 12 CFR § 225.25(a)(7) and (a)(ll)). tively authorized by its action is only one in a series of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 events and developments resulting in erosion of the Lawton (assets of $53.5 million) is a bank holding reserve base. I believe that the cumulative effect of company by virtue of its control of Citizens Bank, these exceptions could possibly undermine the Lawton, Oklahoma ("Bank").2 First Frederick (assets Board's ability to conduct monetary policy, and for of $82.1 million), also controls one bank, The First this reason I would approve BankAmerica's applica- National Bank and Trust Company, Frederick, Oklation only if a much smaller increase in the ceiling for homa ("Frederick Bank"). Neither Lawton nor First these instruments were involved. Frederick engages in any other nonbanking activities. Lawton and First Frederick initially formed South- March 16, 1984 west de novo as a general partnership in August 1982 to better serve the data processing needs of Bank and Lawton Financial Corporation Frederick Bank. Applicant is now providing data Lawton, Oklahoma processing services for another bank in the area and proposes to offer its services to the other banks in the First Frederick Corporation state.3 Frederick, Oklahoma In its consideration of this proposal, the Board regards the standards of section 4(c)(8) for the reten- Order Approving Retention of Interest in tion of shares in a nonbanking company to be the same Southwest Data Management as the standards for a proposed acquisition. The extent to which this joint venture eliminated competition is Lawton Financial Corporation, Lawton, Oklahoma determined by the facts at the time the co-venturers ("Lawton"), and First Frederick Corporation, Freder- entered into the activity. In this case, Southwest was ick, Oklahoma ("First Frederick") (together "Appli- begun de novo and thus did not eliminate any existing cants"), bank holding companies within the meaning competition in any relevant market. Accordingly, conof the Bank Holding Company Act of 1956, as amend- summation of this proposal would have no adverse ed ("Act") (12 U.S.C. §§ 1841 et seq.), have applied effects upon existing competition in any relevant marfor the Board's approval under section 4(c)(8) of the ket. Act (12 U.S.C. § 1843(c)(8)) and section 225.21(a) of With respect to potential competition, the Board the Board's Regulation Y (12 CFR § 225.21(a)), for finds that, absent the joint venture, neither Lawton each to retain a 50 percent ownership interest in nor First Frederick is likely to engage in data process- Southwest Data Management, Chattanooga, Oklaho- ing activities independently because both companies ma ("Southwest"). Southwest was formed as a lack the financial resources to enter the data processde novo joint venture by Applicant to provide data ing market separately. Thus, the Board concludes that processing services, such as check and deposit post- consummation of this proposal would not have signifiing; computation and posting of interest and other cantly adverse effects upon competition in any market. credits and charges; preparation of statements, no- In addition, in view of the small size of the cotices, and similar items; and other clerical, bookkeep- venturers and the limited nature of the proposed ing, accounting, or similar functions for financial insti- activity, retention of Southwest would not result in an tutions in Oklahoma. Such activities have been undue concentration of economic resources. determined by the Board to be closely related to Retention of Southwest may be expected to result in banking and permissible for bank holding companies. public benefits because the joint venture will provide 12 CFR § 225.25(b)(7). an additional source of data processing services to Notice of the application, affording interested per- Oklahoma financial institutions and offer services that sons an opportunity to submit comments, has been will enable such institutions to reduce the costs associduly published. The time for filing comments has ated with processing loans, checks, deposits, and expired, and the Board has considered the application other similar functions. Further, there is no evidence and all comments received in light of the public in the record to indicate that retention of Southwest interest factors set forth in section 4(c)(8) of the Act.1 1. The Board has received comments from The Association of Data Processing Service Organizations ("ADAPSO") requesting that the Board suspend action on this application pending the outcome of 2. Banking data are as of September 30, 1983. ADAPSO v. Board of Governors of the Federal Reserve System, Nos. 3. Lawton and First Frederick failed to secure the Board's approval 82-1910 and 82-2108 (D.C. Cir. filed August 6, 1982). The Board does before acquiring Southwest. After reviewing the relevant facts, the not believe that such suspension is appropriate. If any of Applicants' Board concludes that this failure was inadvertent, and in view of activities are found to be improper as a result of that litigation, the certain assurances provided by Lawton and First Frederick, the Board is authorized to take whatever action is necessary to ensure Board has determined that it should not be regarded as reflecting Applicants comply with the court's order. adversely on the management of Applicants. 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368 Federal Reserve Bulletin • April 1984 would result in any conflicts of interests, unsound $5.2 billion.1 Applicant, through its subsidiaries, enbanking practices, or other adverse effects. gages in various permissible nonbanking activities. Based upon the foregoing and certain commitments The capitalization of Fidelcor Trading is adequate for by Applicants that are reflected in the record, the it to engage in these nonbanking activities. Board has determined that the balance of the public In order to approve an application submitted pursuinterest factors it is required to consider under section ant to section 4(c)(8) of the BHC Act, the Board is first 4(c)(8) is favorable. Accordingly, the application is required to determine that the proposed activities are hereby approved. This determination is subject to all closely related to banking or managing or controlling of the conditions set forth in Regulation Y, including banks. In this case Applicant proposes to broker those contained in sections 225.4(d) and 225.23(b), and options in foreign currency on exchanges regulated by to the Board's authority to require such modification the Securities and Exchange Commission ("SEC").2 or termination of the activities of a holding company or The Board has previously determined by order that the any of its subsidiaries as the Board finds necessary to brokering of options on certain financial physicals, assure compliance with the provisions of and purposes i.e., securities issued or guaranteed by the U.S. govof the Act, and the Board's regulations and orders ernment and on money market instruments is closely issued thereunder, or to prevent evasion thereof. related to banking.3 The rationale for the Board's prior By order of the Board of Governors, effective action is equally applicable to brokerage of options in March 27, 1984. foreign exchange. Moreover, the record indicates that Fidelity Bank has been active in the cash and forward Voting for this action: Chairman Volcker and Governors markets for foreign currency and has the expertise to Martin, Partee, Teeters, and Rice. Abstaining from this provide the proposed services to customers. Accordaction: Governors Wallich and Gramley. ingly, the Board concludes that in the manner proposed, Applicant's proposal to broker options in for- JAMES MCAFEE, eign currency is closely related to banking. [SEAL] Associate Secretary of the Board In order to approve this application, the Board is also required to determine that the performance of the proposed activities by Applicant "can reasonably be Fidelcor, Inc. expected to produce benefits to the public, such as Rosemont, Pennsylvania greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, Order Approving Application to Broker such as undue concentration of resources, decreased Options in Foreign Currency or unfair competition, conflicts of interests, or unsound banking practices" (12 U.S.C. § 1843(c)(8)). Fidelcor, Inc., Rosemont, Pennsylvania, a bank hold- Consummation of Applicant's proposal would proing company within the meaning of the Bank Holding vide added convenience to those clients of Applicant Company Act, 12 U.S.C. § 1841 et seq. ("BHC Act"), and its subsidiaries that trade in the cash, forward and has applied pursuant to section 4(c)(8) of the BHC Act futures markets for these instruments. The Board and section 225.21(a) of the Board's Regulation Y, 49 expects that the de novo entry of Applicant into the Federal Register 794 (1984) (to be codified at 12 CFR market for these services would increase the level of § 225.21(a)), to engage de novo through its wholly competition among providers of these services already owned subsidiary, Fidelcor Trading Inc., in executing in operation. Accordingly, the Board concludes that and clearing options in foreign currency. the performance of the proposed activities by Appli- Notice of the application, affording interested per- cant can reasonably be expected to produce benefits to sons an opportunity to submit comments on the rela- the public. tion of the proposed activity to banking and on the balance of the public interest factors regarding the 1. All banking data are as of June 30, 1983. application, has been duly published, 48 Federal Reg- 2. Pursuant to an accord between the SEC and the Commodity ister 52634 (1983). The time for filing comments has Futures Trading Commission ("CFTC"), the substance of which was adopted by Congress (Pub. L. No. 97-444, 96 Stat. 2294 (codified as expired and the Board has considered the application amended at 7 U.S.C. § 2(a) January 11, 1982) and Pub. L. No. 97-303, and all comments received in light of the public % Stat. 1409 (codified as amended at 15 U.S.C. § 77b (October 13, interest factors set forth in section 4(c)(8) of the BHC 1982)), options on securities are regulated by the SEC while options on futures and commodities are regulated by the CFTC. Although Act. foreign exchange options may be traded on either commodity or Applicant is a bank holding company by virtue of its security exchanges, Applicant's proposal is limited to brokering options in foreign currency on SEC-regulated exchanges. control of Fidelity Bank and Southeast National Bank 3. Security Pacific Corporation, 70 FEDERAL RESERVE BULLETIN of Pennsylvania. Applicant's total assets approximate 53 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 The Board has also considered the potential for sidiary, Manufacturers Hanover Futures, Inc., in actadverse effects that may be associated with this pro- ing as a futures commission merchant ("FCM") with posal. In particular, the Board has taken into account respect to certain financial futures. These activities, and has relied on the regulatory framework established subject to certain conditions, have been determined by pursuant to law by the SEC for the trading of options. the Board to be permissible for bank holding compa- Moreover, the Board notes that Applicant will not nies under section 225.25(b)(18) of Regulation Y. Aptrade for its own account any of the options involved. plicant has also applied for the Board's approval to Based on the foregoing and all the facts of record, the provide certain futures advisory services to both its Board concludes there is no evidence in the record FCM customers and others. that consummation of the proposal would result in any Notice of the application, affording interested pereffects that would be adverse to the public interest. sons an opportunity to submit comments on the rela- Based upon a consideration of all the relevant facts, tion of the proposed activities to banking and on the the Board concludes that the balance of the public balance of the public interest factors has been duly interest factors that the Board is required to consider published (48 Federal Register 52643 (1983)). The time under section 4(c)(8) is favorable. Accordingly, the for filing comments has expired and the Board has application is hereby approved. This determination is considered the application and all comments received subject to all of the conditions set forth in Regulation in light of the public interest factors set forth in section Y, including section 225.4(d) and 225.23(b), and to the 4(c)(8) of the Act. Board's authority to require such modification or Applicant is a bank holding company by virtue of its termination of the activities of a bank holding compa- control of Manufacturers Hanover Trust Company, ny or any of its subsidiaries as the Board finds New York, New York ("Bank"). Bank holds deposits necessary to assure compliance with the provisions of approximately $42 billion and is the third largest and purposes of the Act and the Board's regulations banking organization in New York.1 Applicant, and orders issued thereunder, or to prevent evasion through its subsidiaries, engages in various permissithereof. ble nonbanking activities. Applicant's financial and The transaction shall be made not later than three managerial resources, and, in particular, its capitalizamonths after the effective date of this Order, unless tion, are adequate for it to engage in additional nonsuch period is extended for good cause by the Board or banking activities. by the Federal Reserve Bank of Philadelphia pursuant Applicant proposes to engage through Futures in to delegated authority. FCM activities to the extent these activities are gener- By order of the Board of Governors, effective ally permissible for bank holding companies in the March 19, 1984. Board's Regulation Y (12 CFR § 225.25(b)(18)).2 In connection with its FCM activities, Applicant also Voting for this action: Chairman Volcker and Governors proposes to offer investment advice to its FCM cus- Martin, Wallich, Partee, and Rice. Absent and not voting: tomers. In addition, Applicant proposes to provide Governors Teeters and Gramley. certain advisory services to non-FCM customers. Applicant indicates that it will charge a separate fee to its JAMES MCAFEE, FCM customers and to non-FCM customers for its [SEAL] Associate Secretary of the Board advisory services. The Board has previously determined that the provision of investment advice to FCM customers on a Manufacturers Hanover Corporation nonfee basis and as part of an integrated package is New York, New York incidental to FCM activities.3 The Board's decision was based on the record which, at that time, indicated Order Approving Application to Engage in that customers generally expected FCM to provide Certain Futures Commission Merchant investment advice, making the offering of investment and Futures Advisory Activities advice necessary to the performance of FCM activi- Manufacturers Hanover Corporation, New York, New York, a bank holding company within the meaning of the Bank Holding Company Act, has applied 1. All banking data are as of December 31, 1983. pursuant to section 4(c)(8) of the Act (12 U.S.C. § 1843 2. Specifically, Applicant intends to execute and clear futures (c)(8)) and section 225.21(a) of the Board's Regulation contracts in securities issued or guaranteed by the U.S. government, money market instruments and foreign exchange, and options on Y (49 Federal Register 794, to be codified at 12 CFR futures contracts for U.S. government securities. § 225.21(a)) to engage through its wholly owned sub- 3. E.g., Citicorp, 68 FEDERAL RESERVE BULLETIN 776, 778 (1982). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

370 Federal Reserve Bulletin • April 1984 ties. At this time, there is evidence that while many would enable Applicant to compete with other FCMs customers expect advice, a significant number no which provide these services. longer do. It is not necessary to resolve at this time the Based on the foregoing and other considerations issue of whether the provision of investment advice is reflected in the record, the Board has determined that incidental to permissible FCM activities if the provi- the balance of the public benefits associated with sion of such advice is otherwise closely related to consummation of this proposal can reasonably be banking. expected to outweigh possible adverse effects, and Under section 4(c)(8) of the Act, bank holding that the balance of the public interest factors which the companies may engage in activities that the Board Board is required to consider under section 4(c)(8) is determines to be so closely related to banking as to be favorable. Accordingly, the application is hereby apa proper incident thereto. The record demonstrates proved. that banks, including Applicant's lead bank, create This determination is subject to the conditions set certain types of financial futures-based hedging strate- forth in the Board's Regulation Y and the Board's gies for their internal use. The record also indicates authority to require such modification or termination that banks have established subsidiaries which provide of the activities of a holding company or any of its futures advisory services exclusive of any FCM ser- subsidiaries as the Board finds necessary to assure vices. Moreover, the proposed advisory services ap- compliance with the provisions and purposes of the pear to be functionally similar to the investment advis- Act and the Board's regulations and orders issued ory activities the Board has approved for bank holding thereunder, or to prevent evasion thereof. companies generally in section 225.25(b)(4) of Regula- The proposed activities shall not commence later tion Y. Based on the foregoing, the Board concludes than three months after the effective date of this that, in the manner proposed by Applicant, the provi- Order, unless such period is extended for good cause sion of futures advisory services is closely related to by the Board or by the Federal Reserve Bank of New banking. York acting pursuant to delegated authority. The Board has also considered whether adverse By order of the Board of Governors effective March effects may be associated with the provision of invest- 8, 1984. ment advice in connection with futures transactions. The Board believes a number of factors reduce the Voting for this action: Chairman Volcker and Governors incentive for conflicts in this case: Applicant and its Wallich, Partee, Rice, and Gramley. Absent and not voting: Governors Martin and Teeters. subsidiary bank are authorized to hold and deal in both the underlying financial instruments as well as the futures on these instruments, Applicant will charge a JAMES MCAFEE, [SEAL] Associate Secretary of the Board separate fee for its advice, Applicant will not be a principal with respect to any of the instruments involved, and Applicant will deal solely with major corporations and other financial institutions. The Security Pacific Corporation Board is of the view that charging a separate fee for Los Angeles, California advice reduces the possibility for churning because it reduces the incentive to recommend additional trades Order Approving Acquisition of Factoring Assets to generate fees. Moreover, the possibility for other conflicts is reduced because Applicant will not be a Security Pacific Corporation, Los Angeles, California, principal or dealer with respect to any of the instru- a bank holding company within the meaning of the ments involved and, therefore, would not benefit if Bank Holding Company Act (12 U.S.C. § 1841, et any one futures or option contract was selected over seq.), has applied for the Board's approval under another. In addition, Applicant's customers will be section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) and major corporations and financial institutions that are section 225.23(a)(2) of the Board's Regulation Y experienced in dealing in the underlying financial (12 CFR § 225.23(a)(2)) to acquire, through its subsidinstruments. Moreover, there is no evidence that iary, Security Pacific Business Credit Inc., Los Angeconsummation would result in any other adverse ef- les, California ("SPBCI"), the factoring assets of: fects within the meaning of section 4(c)(8). Citicorp Industrial Credit, Inc., Harrison, New York; Finally, the record indicates that consummation is Citicorp Business Credit, Inc., New York, New York; reasonably likely to result in public benefits. Appli- and Citibank, N.A., New York, New York (collectivecant's performance of these activities would result in ly "Companies"). This activity has been determined an added competitor in the market, providing addition- by the Board to be closely related to banking (12 CFR al services to existing customers of Applicant and § 225.25(b)(1)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Notice of the application, affording opportunity for On the basis of these and other facts of record, the interested persons to submit comments on the public Board concludes that the benefits to the public that interest factors, has been duly published (49 Federal would result from Applicant's acquisition of Compa- Register 4150 (1984)). The time for filing comments nies are consistent with approval. Moreover, there is has expired, and the Board has considered the applica- no evidence in the record that consummation of the tion and all comments received in light of the factors proposal would result in any undue concentration of set forth in section 4(c)(8) of the Act. resources, decreased or unfair competition, conflicts Applicant is a bank holding company by virtue of its of interests, unsound banking practices, or other adcontrol of Security Pacific National Bank, Los Ange- verse effects. les, California, the second largest commercial bank in Based upon the foregoing and other considerations California, with domestic deposits of $20.9 billion, reflected in the record, the Board has determined that representing 12.7 percent of the total deposits in the balance of the public interest factors it is required commercial banks in the state.1 Applicant also engages to consider under section 4(c)(8) is favorable. Accordin a number of nonbanking activities, including dis- ingly, the application is hereby approved. This detercount brokerage, commercial leasing, mortgage bank- mination is subject to the conditions set forth in ing, and insurance activities. § 225.23(b)(3) of Regulation Y and to the Board's The Board has determined that the relevant market authority to require such modification or termination for factoring activities is national.2 On the basis of the of the activities of a holding company or any of its total volume of factoring in 1982, Applicant factored subsidiaries as the Board finds necessary to assure $370 million in receivables, or 1.26 percent of the total compliance with the provisions and purposes of the of factored receivables in the United States, while Act and the Board's regulations and orders issued Companies handled a volume of $700 million, or 2.38 thereunder, or to prevent evasion thereof. The transpercent of the total of factored receivables.3 Upon action shall not be made later than three months after consummation of the proposal, Applicant would rank the effective date of this Order, unless such period is as the 10th largest factoring firm in the United States, extended for good cause by the Board or by the with 3.64 percent of the total volume of factored Federal Reserve Bank of San Francisco, acting pursureceivables.4 There are numerous firms engaged in ant to delegated authority. factoring activities and the market for these activities By order of the Board of Governors, effective is unconcentrated. In view of the number of factoring March 8, 1984. firms competing nationwide and the small market share that would result from consummation of this Voting for this action: Chairman Volcker and Governors proposal, the Board concludes that the consummation Wallich, Partee, Rice, and Gramley. Absent and not voting: of the proposal would not have any adverse effects on Governors Martin and Teeters. existing competition. Recently, Companies announced their intention to JAMES MCAFEE, [SEAL] Associate Secretary of the Board withdraw from the factoring business and thus, they have not been vigorous competitors in the provision of factoring services. This acquisition would enable U.S. Trust Corporation SPBCI to continue to serve Companies' current fac- New York, New York toring customers. In addition, the acquisition of Companies by SPBCI would result in lower overhead costs Order Approving Expansion of Activities of Trust and permit it to expand its customer base geographi- Company to Include Checking Accounts cally and in terms of the type of customers that it and Consumer Lending serves. U.S. Trust Corporation, New York, New York, a bank holding company within the meaning of the Bank 1. Deposit data are as of March 31, 1983. 2. Barclays Bank Limited, 66 FEDERAL RESERVE BULLETIN 980 Holding Company Act (12 U.S.C. § 1841 et seq.) (1980). ("Act"), has applied for approval under section 4(c)(8) 3. Daily News Record, February 14, 1983. of the Act (12 U.S.C. § 1843(c)(8)) and section 4. Based on the amount of factored receivables held by the 29 largest factoring firms as of December 31, 1982, Applicant, through its 225.23(a)(1) of the Board's Regulation Y (12 CFR subsidiary SPBCI, is the 23rd largest factoring firm, holding receiv- § 225.23(a)(1)) to expand the activities of its subsidables of approximately $45 million, representing 1.08 percent of the iary, U.S. Trust Company, Palm Beach, Florida total factored receivables in the United States. Companies held receivables of $70 million, representing 1.68 percent of all factored ("Trust Company"), to include the acceptance of time receivables in the United States. Based on these data, upon consum- and demand deposits, including checking accounts, mation of the proposal, SPBCI would become the 15th largest factoring firm in the country. and the making of consumer loans. These activities Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

372 Federal Reserve Bulletin • April 1984 have been previously determined by the Board to be "Bank" Definition closely related to banking. 12 CFR § 225.25(b)(1); First Bancorporation (Beehive Thrift & Loan), 68 FEDERAL This proposal raises a significant issue as to whether RESERVE BULLETIN 253 (1982); Citizens Fidelity Cor- the acceptance of demand deposits through an FDIC poration, 69 FEDERAL RESERVE BULLETIN 556 (1983). insured national bank can be regarded as a permissible Notice of the application, affording opportunity for nonbanking activity under the Act. The Board on a interested persons to comment, has been duly pub- number of occasions has expressed its views that an lished (48 Federal Register 55178 (1983)). The time for institution that is chartered as a bank and that accepts filing comments and views has expired and the Board transaction accounts from the public should be subject has considered the application and all comments re- to the policies that Congress has established for banks ceived, including those submitted by the State of in the BHC Act.2 Nevertheless, although the Board Florida, the Florida Bankers Association, the Confer- believes that approval of this proposal presents a ence of State Bank Supervisors, and Sun Bank/Palm serious potential for undermining the policies of the Beach ("Protestants") in opposition to the proposal, Act, the Board is constrained by the definition of bank in light of the factors set forth in section 4(c)(8) of the in the Act to approve the application. Act (12 U.S.C. § 1843(c)(8)). The Act defines a "bank" as an institution that both Applicant is the 19th largest commercial banking accepts demand deposits and engages in the business organization in New York, with total consolidated of making commercial loans. (12 U.S.C. § 1841(c)). In assets of $1.8 billion. Applicant operates one subsid- its recent action defining the term "bank," (12 CFR iary bank with total deposits of $1.2 billion.1 § 225.2(a)(1)), the Board acted to the extent possible Trust Company at present is a state chartered non- consistent with the language, legislative history and depository trust company that engages in the provision policies of the Act to bring within the scope of the Act of fiduciary, investment advisory, agency, and custo- those institutions that the Board believes Congress dy services for local customers in Florida. Applicant intended to subject to the Act's limitations on conflicts has stated that Trust Company will convert to a of interests, concentration of resources, and excessive national bank charter prior to engaging in the proposed risk. It was the Board's intention, in part, to bring activities and will obtain FDIC insurance for its depos- within the scope of the policies of the Bank Holding its. Trust Company proposes to olfer a number of Company Act those institutions that engage in essendifferent types of deposit accounts to the general tial banking functions that the Board believes Conpublic, including checking accounts with a minimum gress intended to be covered by these policies. deposit of $10,000. Trust Company also will offer loans The activities proposed by Trust Company have to individuals for personal, family, household, or been tested against this definition of bank. As noted charitable purposes. above, Trust Company will accept demand deposits Applicant has stated that Trust Company will not but not make commercial loans as defined by the engage in the business of making commercial loans, Board in Regulation Y. Thus, Trust Company will not including the purchase of commercial paper or certifi- be a bank within the meaning of the Bank Holding cates of deposit, the sale of federal funds, or any Company Act. In this situation, where the applicant transactions that the Board has defined as commercial will not make commercial loans in Florida either loans in its recent revisions to Regulation Y. Applicant directly or indirectly through any affiliate, the Board states that Trust Company's excess funds will be does not have the discretion to find that the proposal invested in investment securities permitted for nation- falls within the prohibitions on interstate acquisial banks under 12 U.S.C. section 24 (seventh). Appli- tions contained in section 3(d) of the Act (12 U.S.C. cant does not currently engage in any commercial § 1842(d)), which only applies to the acquisition of lending activities or operate any other subsidiaries in banks as defined in section 2(c) of the Act. Florida and has stated that it will seek the Board's The Board also has considered that companies other prior approval before engaging in any commercial than bank holding companies have acquired banks that lending activities in Florida. Moreover, Applicant has offer transaction accounts without being subject to the stated that trust company will not channel funds to any Act. The Board believes that it would be ineffective commercial lending affiliate or engage in any transac- and inequitable to impose a competitive limitation only tions with affiliates without the Board's approval. on bank holding companies by denying this proposal. Accordingly, it appears that Trust Company will not engage in the business of making commercial loans either directly or indirectly. 2. Citizens Fidelity Corporation, supra. See also Citicorp,70 FED- ERAL RESERVE BULLETIN 231 (1984); Mellon National Corporation, 1. Deposit data are as of September 30, 1983. 70 FEDERAL RESERVE BULLETIN 234 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Protestants' Comments transaction accounts to the public. The recent decision of the Tenth Circuit Court of Appeals reversing the Protestants argue, however, that the Board should Board's interpretation of NOW accounts as demand view U.S. Trust Corporation as a single entity engaged deposits in connection with a bank holding company in commercial banking operations by accepting de- acquisition of a Utah industrial loan company,6 and mand deposits through U.S. Trust Company and in the continued acquisition of nonbank banks by securicommercial lending through other subsidiaries in Flor- ties, insurance, and other nonbanking organizations ida in violation of section 3(d) of the Act. As noted, present the potential for a significant, haphazard, and however, Applicant does not directly or indirectly possibly dangerous alteration of the banking structure engage in commercial lending through any subsidiary without Congressional action on the underlying policy in Florida. Under these circumstances, the Board issues. cannot conclude that Trust Company is a bank under If the nonbank bank concept, particularly as exthe Act subject to the restrictions of section 3(d). panded by the interpretation of demand deposit adopt- Protestants also argue that the proposal would vio- ed by the Tenth Circuit, becomes broadly generalized, late the provision in Florida law that prohibits an out- a bank holding company or commercial or industrial of-state bank holding company from acquiring "any company, through exploitation of an unintended loopbank or trust company having a place of business in hole, could operate "banks" that offer NOW accounts [Florida] where the business of banking or trust busi- and make commercial loans in every state, thus defeatness or functions are conducted." Florida Statutes, ing Congressional policies on commingling of banking § 658.29(1). It is the Board's general policy to presume and commerce, conflicts of interest, concentration of the constitutionality of state statutes unless there is resources and excessive risk, or with respect to limitaclear and unequivocal evidence of the inconsistency of tions on interstate banking. Congressional action thus the state law with the federal Constitution.3 In this is urgently needed to ensure that the policies of the Act case, the Supreme Court has held a predecessor to the are maintained. In this regard, the Board does not Florida statute unconstitutional to the extent that it believe that any public policy would be served by prohibited out-of-state bank holding companies from grandfathering proposals such as this that occur subseoffering investment advisory services.4 Moreover, a quent to the introduction of legislation that would U.S. district court has recently held that the very otherwise prohibit such transactions. Florida statute at issue in this case constitutes an unconstitutional burden on interstate commerce to the Other Considerations extent that it seeks to prevent out-of-state bank holding companies from operating in Florida entities that There is no evidence that consummation of this prodo not meet the definition of "bank" in the Bank posal would result in any conflicts of interest, unsound Holding Company Act.5 Accordingly, the proposal banking practices, or other adverse effects. The Board does not appear to be barred by any valid provision of believes it is appropriate, however, to take action to state law. ensure that Trust Company is not used by Applicant as a vehicle for evasion of section 3(d). Accordingly, the Need for Congressional Action Board has determined to make its approval subject to the conditions that: The requirement of Board approval of this application (1) Applicant will not operate Trust Company's under the provisions of existing law is one of a number demand deposit taking activities in tandem with any of recent developments that underscore the critical other subsidiary or other financial institutions; need for Congressional action on legislation to apply (2) Applicant will not link in any way the demand the policies of the Bank Holding Company Act to deposit and commercial lending services that define institutions that are chartered as banks and that offer a bank under the Act; and (3) Trust Company will not engage in any transactions with affiliates, other than the payment of 3. NCNB Corp.,68 FEDERAL RESERVE BULLETIN 54, 56 (1982). dividends to Applicant or the infusion of capital by The Board has previously stated that it is doubtful that a state has the Applicant into Trust Company, without the Board's authority to impose a more stringent burden on interstate commerce than that contained in section 3(d). KSAD, Inc., 70 FEDERAL RESERVE approval. BULLETIN 44 (1984). Protestants have requested a hearing because of the 4. Lewis v. B.T. Investment Managers, All U.S. 27 (1980). 5. Continental Illinois Corporation v. Lewis, TCA 81-0944-WS serious policy issues raised by the subject proposal (slip opinion dated December 13, 1983). and because they claim that there are certain factual 6. First Bancorporation v. Board of Governors, (10th Cir. 1984, slip questions that need clarification. The Board has conopinion dated February 21, 1984). The Board is seeking a rehearing of the case before the Tenth Circuit. cluded that the issues in this case are legal in nature Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

374 Federal Reserve Bulletin • April 1984 and that there are no material factual issues in dispute In my view, the Board is not limited by the technical that would warrant a hearing on the application. definition of "bank" and has authority to deny this Accordingly, Protestants' hearing request is denied. application using its broad discretionary powers to Based upon the foregoing and all the facts of record, take appropriate action to prevent evasions of the Act. the Board has determined that the balance of public Moreover, under section 4(c)(8) of the Act, the Board interest factors it is required to consider under section may deny a proposal if it determines that the adverse 4(c)(8) is favorable. Accordingly, the application is effects of the proposal are not outweighed by any hereby approved. This determination is subject to the public benefits associated with the proposal. I believe conditions set forth in this Order with respect to that the adverse effects of this proposal are so serioustransactions and operations in tandem with any other ly adverse as to outweigh any public benefits. Accordsubsidiary of Applicant or other financial institutions ingly, I would deny the proposal. and the conditions set forth in section 225.23(b) of Regulation Y (12 CFR § 225.23(b)). The approval is March 23, 1984 also subject to the Board's authority to require modification or termination of the activities of the holding Orders Issued Under Sections 3 and 4 of the company or any of its subsidiaries as the Board finds Bank Holding Company Act necessary to assure compliance with the provisions and purposes of the Act and the Board's regulations Bank of New England Corporation and orders issued thereunder, or to prevent evasion Boston, Massachusetts thereof. This transaction shall not be consummated later Order Approving Merger of Bank Holding than three months after the effective date of this Companies and Acquisition of Companies Engaged Order, unless such period is extended for good cause in Commercial Finance, Leasing, Real Estate by the Board, or by the Federal Reserve Bank of New Lending, Factoring and General Trust Company York, pursuant to delegated authority. Activities By order of the Board of Governors, effective March 23, 1984. Bank of New England Corporation, Boston, Massachusetts ("BNE"), a bank holding company within the Voting for this action: Chairman Volcker and Governors meaning of the Bank Holding Company Act of 1956, as Martin, Wallich, and Partee. Voting against this action: amended (12 U.S.C. § 1841 et seq.) ("BHC Act"), has Governor Rice. Absent and not voting: Governors Teeters and Gramley. applied for the Board's approval under section 3(a)(5) of the Act (12 U.S.C. § 1842(a)(5)), to merge with CBT JAMES MCAFEE, Corporation, Hartford, Connecticut ("CBT"), also a [SEAL] Associate Secretary of the Board bank holding company, and thereby to acquire indirectly The Connecticut Bank and Trust Company, N.A., Hartford, Connecticut. In addition, BNE has Dissenting Statement of Governor Rice applied for the Board's approval under section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) and section I agree with the Board's order to the extent that it 225.23(a)(2) of the Board's Regulation Y (12 U.S.C. recognizes the serious implications of this proposal § 225.23(a)(2)) to acquire CBT's nonbanking subsidiarand makes strong recommendations for Congressional ies: CBT Trust Company of Florida, N.A., West Palm action. Although the majority feels compelled to ap- Beach, Florida ("CBT Trust"); Lazere Financial Corprove the application on grounds that U.S. Trust poration, New York, New York ("Lazere"); CBT Company does not come within the Board's broad Business Credit Corporation, Hartford, Connecticut definition of "bank," I would deny the proposal ("BCC"); CBT Factors Corporation, New York, New because it would have the practical effect of permitting York ("Factors"): CBT Realty Corporation, Harta bank holding company to engage in interstate bank- ford, Connecticut ("Realty"); and General Discount ing without express authorization of state law in a Corporation, Boston, Massachusetts ("GDC"). These manner that would otherwise be prohibited by the companies, with the exception of CBT Trust, are Douglas Amendment. It also provides a precedent for subsidiaries of CBT Financial Corporation, Hartford, acquisitions of national banks that accept demand Connecticut, a company organized as a holding comdeposits by nonbanking organizations without regard pany for CBT's nonbanking subsidiaries. CBT Trust to the fundamental policy of the Bank Holding Compa- engages in general trust company activities in Florida. ny Act against commingling of banking and commerce. Lazere and BCC offer accounts receivable, inventory Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 and equipment financing. Factors engages in "ad- another New England state, if that other New England vance" and "maturity" factoring, and Realty in real state authorizes on a reciprocal basis the acquisition of estate lending. GDC, with subsidiaries in Maine, Mas- a bank in that state by a Connecticut bank holding sachusetts and Canada, engages in capital equipment company.2 Massachusetts has passed a reciprocal financing through lending and leasing, and its Canadi- statute that authorizes such an acquisition.3 an subsidiary, CBT Leasing Limited, conducts such The Banking Commissioner of Connecticut and the lending and leasing activities outside the United States Massachusetts Board of Bank Incorporation have appursuant to section 4(c)(13) of the Act (12 U.S.C. proved this proposed merger pursuant to these recip- § 1843(c)(13)). All of these activities have been deter- rocal Interstate Banking Acts, thus finding that the mined by the Board to be closely related to banking transaction satisfies the requirements of the respective under sections 225.25(b)(1), (3) and (5) of Regulation Y statutes authorizing the interstate acquisition of banks. (12 CFR § 225.25(b)(1), (3) and (5)). Based upon its review of the Connecticut Interstate Notice of these applications, affording an opportuni- Banking Act ("CIBA"), the Board concludes that ty for interested persons to submit comments, has Connecticut has by statute expressly authorized a Massachusetts bank holding company, such as BNE, been given in accordance with sections 3 and 4 of the to acquire a Connecticut bank or a Connecticut bank Act (48 Federal Register 41524). The time for filing holding company, such as CBT. Thus, the Connecticut comments has expired and the Board has considered Act meets the requirement of express authorization for the applications and all comments received in light of interstate bank acquisitions imposed by section 3(d) of the factors set forth in section 3(c) (12 U.S.C. the Bank Holding Company Act. § 1842(c)) and the considerations specified in section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)). In particu- The Connecticut and Massachusetts statutes are the lar, the Board has considered the comments of Citi- first to be enacted that provide explicitly for limited corp, New York, New York, and Northeast Bancorp, interstate banking on a regional basis. Rhode Island Inc., New Haven, Connecticut, as well as the com- has also enacted regional interstate banking legislation ments of several community groups located in Hart- that limits entry into Rhode Island to bank holding ford, Connecticut. companies located in New England.4 The restriction in BNE, with twelve bank subsidiaries, has consolidat- the Rhode Island statute, however, is of limited duraed assets of $5.9 billion and deposits of $3.7 billion, tion. After two years the Rhode Island statute prorepresenting 13.3 percent of the total deposits in vides for national reciprocity, permitting entry of bank commercial banks in Massachusetts.1 BNE is the holding companies from any state that will admit fourth largest commercial banking organization in Rhode Island bank holding companies. Massachusetts. CBT, which has total assets of $5.9 The regional interstate banking system developing billion and total deposits of $3.4 billion, is the largest in New England raises issues of considerable imporbank holding company in Connecticut. CBT holds 24.8 tance because no fewer than 15 state legislatures are percent of all deposits in commercial banks in Con- considering proposals that, if enacted, would create necticut. Upon consummation of the proposed merg- regional banking systems in every part of the country. er, BNE would become the second largest bank hold- The Georgia legislature has already passed a regional ing company in New England in terms of assets and interstate banking statute, and there are proposals for the largest in terms of domestic deposits. regional banking systems in the Southeast (Florida and Section 3(d) of the Act (12 U.S.C. 1842(d)), the Georgia and a combination of other states as far north Douglas Amendment, prohibits the Board from ap- as Virginia), the Northwest (Washington, Oregon and proving any application by a bank holding company to Idaho), the Mid-Atlantic (New Jersey, Pennsylvania acquire any bank located outside of the state in which and several other states as far south as Virginia) and the Mid-West (several different regional groupings the operations of the bank holding company's banking under discussion). Both the increasing number of subsidiaries are principally conducted, unless such states considering such proposals and the progress of acquisition is "specifically authorized by the statute the proposed legislation toward enactment suggest laws of the State in which such bank is located, by language to that effect and not merely by implication." The statute laws of Connecticut authorize the acquisition of a banking institution in Connecticut by a bank holding company that controls a bank located in 2. 1983 Conn. Acts 411 (Reg. Sess.) entitled "An Act Concerning Interstate Banking" ("Connecticut Interstate Banking Act" or "CIBA"), § 2. 3. Mass. Ann. Laws ch. 167A ("Massachusetts Interstate Banking Act"), § 2. 1. Banking data are as of June 30, 1983. 4. R.I. Gen. Laws §§ 19-30-1, 19-30-2 (Supp. 1983). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

376 Federal Reserve Bulletin • April 1984 that, should the New England interstate banking zone (1975), that it felt constrained "to register . . . substanbe upheld, a system of regional zones may develop tial doubt that the Board can continue to presume involving major areas of the nation.5 conclusively the constitutional validity of state or federal laws in light of the Supreme Court's opinion in The Constitutionality of the Connecticut Statute [Whitney] While in cases prior to Iowa Independent Bankers, Protestants, Citicorp and Northeast Bancorp, Inc., supra, the Board declined to consider constitutional have challenged the constitutionality of the Connecti- issues, NCNB Corp., 59 FEDERAL RESERVE BULLEcut Interstate Banking Act6 and, in particular, the TIN 305, 307 (1973),12 the reservations about this provisions of CIBA that allow only New England bank course of action expressed by the D.C. Circuit in that holding companies7 to acquire banks or bank holding case has led the Board to review the constitutionality companies located in Connecticut. The Protestants of state statutes, although the Board has decided that it assert that such discriminatory legislation is unconsti- will not "hold a state statute to be unconstitutional tutional under the provisions of the Compact Clause,8 without clear and unequivocal evidence of the inconthe Equal Protection Clause9 and the Commerce sistency of the state law with the federal Constitu- Clause10 of the United States Constitution. tion." NCNB Corp., 68 FEDERAL RESERVE BULLETIN The requirement that the Board address these issues 54, 56 (1982).13 The Board believes this standard to be derives from a series of judicial decisions beginning consistent with the principle of statutory construction with Whitney National Bank in Jefferson Parish v. that legislatures are presumed to have acted within Bank of New Orleans and Trust Company, 379 U.S. constitutional limits,14 as well as with the historic role 411 (1965), which required that the Board make a of the judicial branch of government in balancing state finding in the first instance on the applicability and and federal interests in construing the scope of the validity of state laws that purport to authorize the constitutional powers of the states. This approach is particular transaction before the Board.11 The United also consistent with the Board's primary expertise and States Court of Appeals for the District of Columbia delegated responsibility under the Act—to review Circuit confirmed that this requirement applied to bank holding company expansion proposals for comconstitutional issues when it stated in Iowa Indepen- pliance with the public benefits test of section 4(c)(8) dent Bankers Association v. Board of Governors of the of the Act, including financial, competitive and com- Federal Reserve System, 511 F.2d 1288, 1293 n.4 munity convenience and needs criteria. Thus, the Board will require evidence of a clear conflict with the United States Constitution before the 5. To date, only Maine (Me. Rev. Stat. Ann. tit. 9-B, § 1013 (as Board will find that CIBA constitutes an invalid authoamended February 7, 1984)) and Alaska (Alaska Stat. § 06.05.235 rization for the interstate merger of bank holding (Supp. 1983)) permit interstate banking without restriction, although New York permits entry of bank holding companies from any state on companies proposed in this case. a reciprocal basis (N.Y. Banking Law § 142-b (McKinney Supp. The Board has examined carefully the arguments 1983)). advanced by Protestants and the unique and funda- 6. By letter of November 16, 1983, counsel for BNE asserts that Citicorp is not a party in interest to this proceeding with standing to mental constitutional issues presented by CIBA in the raise issues concerning the constitutionality of CIBA. Pursuant to context of the extensive record before the Board. section 105 of the BHC Act, 12 U.S.C. § 1850, Northeast clearly will become a competitor to BNE upon consummation of this acquisition. After review of the record, the Board concludes that, Moreover, the Board believes that Citicorp, too, is a party in interest for purposes of this proceeding before the Board since Citicorp competes in Connecticut and Massachusetts with BNE and CBT, although on a somewhat limited basis, and, except for the restrictions ality." 379 U.S. at 431. See also First State Bank ofClute v. Board of contained in the very statute it challenges, it has the potential to Governors, 553 F.2d 950 (5th Cir. 1977), and Gravois Bank v. Board of become a more substantial competitor. Governors, 478 F.2d 546 (8th Cir. 1973), which do not deal with 7. New England bank holding companies include those with their constitutional issues but require a decision by the Board as to the principal place of business in Connecticut, Maine, Massachusetts, applicability of state laws to bank holding company acquisitions. New Hampshire, Rhode Island, and Vermont. The Connecticut 12. See also Bankers Trust New York Corp. ,59 FEDERAL RESERVE statute further restricts the definition of "New England bank holding BULLETIN 364 (1973) and Northwest Bancorporation, 38 Federal company" to exclude bank holding companies directly or indirectly Register 21530 (1973). controlled by bank holding companies outside of New England. CIBA 13. See also Florida Coast Banks, Inc., 68 FEDERAL RESERVE thus prohibits non-New England bank holding companies from "leap- BULLETIN 781 (1982); Florida Coast Banks, Inc., 69 FEDERAL REfrogging" into the Connecticut market through Maine or other New SERVE BULLETIN 454 (1983). Moreover, the Board has indicated on England states that may enact interstate banking statutes without one occasion that were it to follow the interpretation of a state statute regional restrictions. urged by a party to an application it would be compelled to declare the 8. U. S. Const., Article I, section 10, clause 3. statute to be unconstitutional. KSAD, Inc., 70 FEDERAL RESERVE 9. U. S. Const., Amendment XIV, section 1. BULLETIN 44 (1984). 10. U. S. Const., Article I, section 8, clause 3. 14. See Clements v. Fashing, 102 S. Ct. 2836, 2843 (1982); South 11. Justice Douglas in his dissent in Whitney noted that the specific Carolina State Highway Department v. Barnwell Bros., Inc., 303 U.S. issue with respect to the Louisiana statute at issue in that case would 177, 195 (1938); Atchison, Topeka & Santa Fe Ry. Co. v. Matthews, require the Board to decide a "bare, bald question of. . . constitution- 174 U.S. 96 (1899). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 while the issue is not free from doubt, there is no clear attractiveness of the market for entry on a de novo or and unequivocal basis for a determination that CIB A is foothold basis absent approval of the acquisition. inconsistent with the Commerce Clause, Compact With respect to the ten banking markets in Connect- Clause or Equal Protection Clause of the United States icut in which CBT operates, the record shows that Constitution.15 Accordingly, the Board will not deny either the markets are not highly concentrated or there this application on the grounds urged by Protestants are numerous other probable future entrants into the that CIB A is unconstitutional. The analysis of this markets. Connecticut permits the acquisition of banks proposal under sections 3 and 4 of the Bank Holding in Connecticut by bank holding companies located in Company Act is based upon this finding. other New England states, and there are a number of commercial banking organizations, including five in Considerations Under Sections 3 and 4 of the Massachusetts (other than BNE) and three in Rhode Bank Holding Company Act Island, with assets over $1 billion each that can be identified as probable future entrants into the Connect- In addition to determining that the merger of BNE and icut banking markets. Moreover, the Board notes that CBT is expressly authorized by a valid statute as market concentration ratios and CBT's rank and marrequired by section 3(d) of the BHC Act, the Board ket share drop significantly in each Connecticut marmust decide whether this acquisition is consistent with ket when deposits of thrift institutions are considered. the standards of sections 3 and 4 of the Act. In view of these considerations and other facts of Section 3 Considerations. BNE's twelve banking record, the Board concludes that elimination of BNE subsidiaries operate in nine of the fourteen Massachu- as a probable future entrant into markets served by setts banking markets,16 while CBT's single bank CBT would not have a substantial anticompetitive subsidiary operates in each of the ten Connecticut effect in those markets. banking markets.17 Since BNE's banking subsidiaries With respect to the nine Massachusetts19 banking do not operate in Connecticut and CBT's banking markets in which BNE operates, the record shows that subsidiary does not operate in Massachusetts, the there are a number of commercial banking organizaproposed transaction would not eliminate any signifi- tions, including three commercial banking organizacant existing competition in any relevant banking tions in Connecticut (other than CBT) and three in market. Rhode Island with assets over $1 billion each, that can The Board also has considered the effects of this be identified as probable future entrants into each of proposal on probable future competition in light of its the nine relevant markets. The markets with the proposed guidelines for assessing the competitive ef- fewest number of potential entrants, Boston and Cape fects of market-extension mergers or acquisitions.18 In Cod, are also not concentrated. Moreover, BNE is not evaluating the effects of a proposal on probable future a market leader in several markets, particularly when competition, the Board considers market concentra- the deposits of thrift institutions are considered. On tion, the number of probable future entrants into the the basis of these and other facts of record, the Board market, the size of the bank to be acquired, and the concludes that the elimination of CBT as a probable future entrant would not have a substantial anticompetitive effect in the nine markets served by BNE. The financial and managerial resources of BNE, CBT, and their subsidiaries are considered satisfactory and their prospects appear favorable. This finding 15. The staff analysis of the constitutional issues raised by Protes- is based, in part, on the fact that BNE has committed tants is contained in an appendix to this Order and is made a part of to a program to raise additional capital through a the Board's findings in this case. common stock offering and, in particular, to improve 16. These Massachusetts banking markets include Boston, Springfield, Cape Cod, Fall River, New Bedford, Amherst-Northhampton, the capital position of its lead bank, Bank of New Greenfield, North Adams-Williamstown and Athol. BNE also oper- England, N.A., Boston, Massachusetts. ates in the Massachusetts portion of the Providence, Rhode Island, banking market. 17. These Connecticut banking markets include Hartford, New Haven, Bridgeport, Waterbury, New London, Danbury, Torrington, Danielson, Willimantic and Old Saybrook. CBT also operates in the Connecticut portion of the New York market. 18. "Proposed Policy Statement of the Board of Governors of the Federal Reserve System for Assessing Competitive Factors under the Bank Merger Act and the Bank Holding Company Act," 47 Federal 19. BNE has less than a one percent market share in the Provi- Register 9017 (March 3, 1982). Although the proposed policy state- dence, Rhode Island, banking market and CBT has less than a one ment has not been adopted by the Board, the Board is using the policy percent market share in the New York, New York, banking market. guidelines in its analysis of the effects of a proposal on probable future As a result, only Massachusetts and Connecticut markets are discompetition. cussed in this Order. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

378 Federal Reserve Bulletin • April 1984 The Board has considered the convenience and issues raised by Protestants and the extensive reneeds of the communities to be served. Although both sponse CBT has provided with respect to its lending BNE and CBT offer a complete range of banking history and practices in Protestants' neighborhoods. services, consummation of this merger would provide The record demonstrates that, pursuant to a July 1982 more favorable access to the capital markets and commitment, CBT has established a special housingthereby permit BNE to provide expanded access to related lending program for the Frog Hollow commuconsumer banking services in Connecticut and Massa- nity and has made a significant commitment of funds at chusetts, additional credit capacity for growing com- favorable rates and without ancillary costs. CBT has mercial customers and the presence of a substantial also documented its commitment to meet the housing New England based competitor to meet growing com- needs of low- and moderate-income neighborhoods petition from nonbanking financial conglomerates in through housing ventures with other companies and the financial services industry. neighborhood groups. In considering the convenience and needs of the In the neighborhoods of the other two Protestants, communities to be served, the Board has also exam- Behind the Rocks and Southwest, CBT has a strong ined the record of BNE and CBT and their banking record of home improvement loans and it ranks among subsidiaries in meeting the credit needs of their com- the leading lending institutions in those areas in terms munities, as provided in the Community Reinvestment of the number of home improvement loans. CBT has Act of 1977 (12 U.S.C. §§ 2901-05)("CRA") and the also documented a low demand for first mortgages in Board's Regulation BB (12 CFR § 228). The CRA and these two areas. CBT has made a commitment to Regulation BB require the Board to assess the record increase its efforts to make residents of Protestants' of the banking subsidiaries of any applicant in meeting communities aware of its loan programs. Based on the the credit needs of their local communities, including foregoing and other facts in the record, the Board low- and moderate-income neighborhoods, consistent concludes that CBT and BNE have satisfactory recwith safe and sound operations. Although the Board ords of compliance with the CRA. The considerations does not ordinarily consider the CRA record of the relating to the convenience and needs of the communiacquiree, the Board, for purposes of this case, has ties to be served weigh in favor of approval. considered the CRA records not only of BNE's bank- Section 4(c)(8) Considerations. BNE has also aping subsidiaries but also that of CBT because this plied under section 4(c)(8) of the BHC Act to acquire merger involves two bank holding companies of ap- the nonbanking subsidiaries of CBT, including Lazere, proximately equal size. BCC, Factors, GDC and Realty, which are all orga- Three Hartford, Connecticut, neighborhood citizens nized as subsidiaries of CBT Financial.21 BNE has associations, Frog Hollow Residents Coalition, Con- only one active nonbanking subsidiary operating purcerned Citizens of Southwest and Behind the Rocks suant to section 4(c)(8).22 CBT's only nonbanking Neighborhood Association, have protested this appli- subsidiary that operates in Massachusetts is GDC, cation on the basis of an alleged failure of CBT to meet which is engaged in leasing and lending activities. the housing financing needs of the low- and moderate- GDC derives approximately $14 million in commercial income neighborhoods of Hartford.20 In addition, the loans and leasing activities from the entire state of Frog Hollow Residents Coalition alleged that CBT has Massachusetts. failed to honor a commitment made in July 1982 to This proposal would have only minimal impact on provide a special fund for mortgage, home improve- actual competition among nonbanking subsidiaries of ment and housing rehabilitation loans to owner-occu- BNE and CBT. Moreover, this proposal will have no pants of the Frog Hollow community. significant impact on existing competition between The community group Protestants have failed to BNE's subsidiary banks and GDC. Given the size of present any substantial evidence to support their posi- CBT's equipment financing subsidiary and the limited tion. Nevertheless, the Board has considered the 20. The Small Business Association of New England requested a hearing on the application to explore a concern that the merger of 21. CBT's nonbanking subsidiaries will represent less than two major New England banks would result in larger institutions that percent of the consolidated assets of the merged corporation. might not be responsive to the credit needs of small business enter- 22. BNE received approval after the filing of this application to prises. After a meeting with officials of CBT and BNE, the Small acquire de novo a subsidiary to engage in leasing activities. That Business Association of New England was satisfied and it withdrew subsidiary, BNE Capital Corporation, Boston, Massachusetts, began its request for a hearing. operations on December 28, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 scope of its activities in Massachusetts, the Board Appendix to the Order Approving the Application of does not believe this transaction will result in any Bank of New England Corporation, Boston, significant decreased competition. Massachusetts, to Merge with CBT Corporation, There is no evidence in the record that this transac- Hartford, Connecticut tion will result in any undue concentration of resources, unfair competition, unsound banking practices, conflicts of interest or other adverse effects. Citicorp, New York, New York, and Northeast Ban- Based upon these and other considerations reflected in corp, Inc., New Haven, Connecticut, have protested the record, the Board has determined that the balance the application of Bank of New England Corporation, of public interest factors that it is required to consider Boston, Massachusetts, to merge with CBT Corporaunder section 4(c)(8) of the Act is favorable. tion, Hartford, Connecticut. Citicorp and Northeast Based on the foregoing and other facts of record, the argue that the application should be denied because Board has determined that the applications under the Connecticut Interstate Banking Act ("CIBA") is section 3 and 4 of the Act should be and hereby are unconstitutional and therefore insufficient to authorize approved for the reasons set forth above. the proposed merger. Protestants challenge the provi- In approving this application the Board does not sions of CIBA that allow only New England bank intend to express any conclusion concerning the desir- holding companies1 to acquire banks or bank holding ability, as a matter of national policy, of the regional companies located in Connecticut. The Protestants arrangements provided for by CIBA. The Board rec- assert that such discriminatory legislation is unconstiognizes that interstate banking is a highly complex tutional under the provisions of the Compact Clause,2 issue that unavoidably involves the balancing of a the Equal Protection Clause3 and the Commerce number of different considerations. However, if the Clause4 of the United States Constitution. New England regional approach to interstate banking CIBA (and the similar statute enacted in Massachuis emulated in other parts of the country, there is a setts) raises unique constitutional issues. There are potential danger that the result could be to divide the many decided cases defining the permissible scope of country into a number of banking regions. The Board state regulations favoring their own residents against believes that the public policy issues that are raised by those of all other states, but apparently no judicial the regional approach are inherently national and decisions testing the constitutionality of state regulawould be best resolved by Congressional action. tory arrangements which discriminate in favor of resi- The acquisition of CBT's banking subsidiaries pur- dents of selected regional groupings of states and suant to section 3 of the Act shall not be made before exclude residents of all other states from the benefits the thirtieth calendar day following the effective date provided to the regional groups.5 of this Order or later than three months after the effective date of this Order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Boston, pursuant to delegated authority. The approval of BNE's proposal to acquire CBT's nonbank subsidiaries and to engage in equipment financing, leasing, real estate lending, factoring, and accounts receivable financing is subject to 1. New England bank holding companies include those with their principal place of business in Connecticut, Maine, Massachusetts, all the conditions set forth in Regulation Y, including New Hampshire, Rhode Island, and Vermont. The Connecticut section 225.4(d) and section 225.23(b), and to the statute further restricts the definition of "New England bank holding Board's authority to require modification or termina- company" to exclude bank holding companies directly or indirectly controlled by bank holding companies outside of New England. CIBA tion of the activities of a holding company or any of its thus prohibits non-New England bank holding companies from "leapsubsidiaries as the Board finds necessary to assure frogging" into the Connecticut market through Maine or other New England states that may enact interstate banking statutes without compliance with the provisions and purposes of the regional restrictions. Act and Board's regulations and orders issued there- 2. U.S. Const., Article I, section 10, clause 3. under, or to prevent evasion thereof. 3. U.S. Const., Amendment XIV, section 1. 4. U.S. Const., Article I, section 8, clause 3. By order of the Board of Governors, effective 5. While there are judicial decisions upholding interstate agree- March 26, 1984. ments, these agreements have not had the objective of discrimination but rather that of cooperation on a subject matter of exclusive interest to the states that are parties to these agreements. See, e.g., Washing- Voting for this action: Chairman Volcker and Governors ton Metropolitan Area Transit Authority v. One Parcel of Land, 706 Martin, Wallich, Partee, Teeters, Rice, and Gramley. F.2d 1312, 1314 (4th Cir.), cert, denied, 104 S. Ct. 238 (1983); Jacobson v. Tahoe Regional Planning Agency, 566 F.2d 1353, 1357 (9th Cir. 1977), afiTd in part and rev'd in part sub nom. Lake Country JAMES MCAFEE, Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391 [SEAL] Associate Secretary of the Board (1979). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

380 Federal Reserve Bulletin • April 1984 Considerations Under the Compact Clause reciprocal legislation may present opportunities for enhancement of state power at the expense of the The Compact Clause of the United States Constitution federal supremacy similar to the threats inherent in a states that "[n]o State shall, without the Consent of more formalized 'compact'. ..." The Court empha- Congress . . . enter into any Agreement or Compact sized that the federal impact rather than the form of with another State, or with a foreign Power. . . ."6 the agreement is the critical inquiry under the Com- The Supreme Court has indicated that an interstate pact Clause. Accordingly, while in form CIBA can be agreement is within the parameters of the Compact considered to be part of an implicit compact or agree- Clause and thus subject to the requirement of congres- ment that has never been approved or authorized by sional consent only when: (1) an interstate compact or Congress, as the cases cited above indicate, CIBA agreement exists, (2) that tends to increase the power would violate the Compact Clause only if it constitutes of the compacting states in such a manner as to an enhancement of state powers at the expense of interfere with federal supremacy.7 federal supremacy. CIBA, when considered in light of its legislative No such claim of infringement upon federal supremhistory and the actions of other New England states, is acy could be maintained, however, if CIBA has been part of an effort to create a regional banking zone. The authorized by Congress in the Douglas Amendment. regional banking acts of Connecticut, Massachusetts The compatibility of CIBA with the Compact Clause and Rhode Island contain very similar provisions, and turns on whether Congress in the Douglas Amendment they were enacted within a six-month period between granted the states plenary power to regulate entry of December, 1982, and June, 1983. Passage of the acts out-of-state bank holding companies, thereby rewas preceded during a four-month period by a formal nouncing a federal interest in such regulation for meeting of representatives of the New England states purposes of the Compact Clause. The intent of Conto discuss regional interstate banking, by the forma- gress in enacting the Douglas Amendment is more tion of a New England Committee to Study and fully discussed below, infra at 15-27, and, for reasons Promote Regional Interstate Banking, by testimony of stated therein, the Douglas Amendment should be legislators at hearings on the issue before legislative read as a renunciation of federal interest in regulating committees in other New England states, and by the interstate acquisition of banks by bank holding apparent review and comments on the proposed Con- companies. As a result CIBA does not appear to necticut legislation by the Massachusetts Banking violate the Compact Clause. Department. The debate on the Connecticut bill refers to an "agreement" or "compact" on regional inter- Considerations Under the Equal Protection Clause state banking.8 The Supreme Court in Virginia v. Tennessee, 148 Protestants also challenge the constitutionality of U.S. 503, 517-518 (1893), stated that the terms "agree- CIBA as a violation of the Equal Protection Clause of ment" and "compact" as used in the Compact Clause the Fourteenth Amendment, which provides "[n]o are "sufficiently comprehensive to embrace all forms State shall . . . deny to any person within its jurisdicof stipulation, written or verbal, and relating to all tion the equal protection of the laws." Protestants kinds of subjects." In United States Steel Corp. v. argue that CIBA's exclusion of non-New England Multistate Tax Commission, 434 U.S. 452, 470 (1978), bank holding companies is an arbitrary restriction the Court specifically addressed the issue of reciprocal unrelated to any legitimate state purpose. statutes and stated that "agreements effected through The Supreme Court in New Orleans v. Dukes, All U.S. 297, 303 (1976) (per curiam), articulated the following, frequently cited standard of judicial scrutiny under the Equal Protection Clause:9 Unless a classification trammels fundamental personal rights or is drawn upon inherently suspect distinctions such as race, 6. Art. I, § 10, cl. 3. This clause has been invoked infrequently, religion, or alienage, our decisions presume the constitutionparticularly in recent years when expanded interpretation of what ality of the statutory distinctions and require only that the constitutes interstate commerce has meant that agreements among states more frequently might be invalidated as burdening interstate classification challenged be rationally related to a legitimate commerce in violation of the Commerce Clause. state purpose. 7. See United States Steel Corporation v. Multistate Tax Commission, 434 U.S. 452 (1978); Virginia v. Tennessee, 148 U.S. 503 (1893). 8. See Transcripts of Connecticut Senate Debate, May 18, 1983 ("Conn. Sen. Debate") at 61, 96 (Sen. Sullivan); Transcripts of Connecticut House of Representatives Debate, May 26, 1983 ("Conn. House Debate") at 224, 234, 236 (Rep. Onorato) and 276, 277 (Rep. 9. See also Dandridge v. Williams, 397 U.S. 471, 484-486 (1971); Jaekle). Iowa Independent Bankers Association v. Board of Governors, supra. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Application of the test of whether economic legisla- gent scrutiny of the courts under the "rational purtion is "rationally related to a legitimate state pur- pose" test. On this basis, CIBA does not appear to pose" involves two inquiries: (1) whether the chal- violate the Equal Protection Clause of the Fourteenth lenged statute has a legitimate purpose, and (2) Amendment. whether it was reasonable for the legislature to believe the challenged classification would promote that pur- Considerations Under the Commerce Clause pose.10 In answering these inquiries, the Supreme Court has BNE and CBT assert that Congress, in the Douglas afforded great deference to a state's statements of Amendment, conferred upon each state complete aulegislative purpose and its statutory classifications to thority to permit, regulate or condition the entry into achieve those purposes. The Supreme Court has ordi- the state by out-of-state bank holding companies for narily been willing to uphold any classification based the purpose of engaging in banking activities. BNE "upon a state of facts that reasonably can be con- and CBT argue that Congress authorized the states not ceived to constitute a distinction, or difference in state only to determine whether to permit acquisitions of policy. . . " Allied Stores of Ohio, Inc. v. Bowers, 358 banks across state lines but also to determine the U.S. 522, 530 (1959). The court will sustain economic extent to which to permit such acquisitions. Proteslegislation "if any set of facts reasonably may be tants, on the other hand, assert that the Douglas conceived to justify it." McGowan v. Maryland, 366 Amendment does not authorize states to place dis- U.S. 420, 426 (1961). criminatory restrictions on the admission of out-of- For the purpose of analysis under the Equal Protec- state bank holding companies, particularly on a statetion Clause, CIB A appears to be rationally related to by-state basis. an attempt to maintain a banking system responsive to local needs in New England. The Hebb Report, a 1. CIBA Under the Commerce Clause. Absent conreport prepared by a Commission appointed by the gressional authorization of CIBA in the Douglas Connecticut legislature to study interstate banking, Amendment, it appears that CIBA would be inconsisindicates that the purposes of CIBA include avoiding tent with the standards for state action under the undue concentration of resources, maintaining the Commerce Clause as established by the Supreme responsiveness of the banking system to local credit Court. The central concern behind the Commerce needs and providing an opportunity for a limited Clause, according to the Court, is a desire "to avoid interstate banking experiment.11 A finding of a rational the tendencies toward economic Balkanization that basis for CIBA is consistent with the decision of the had plagued relations between the Colonies and later Court of Appeals for the District of Columbia Circuit among the States under the Articles of Confederain Iowa Independent Bankers, supra, upholding an tion," Hughes v. Oklahoma, 441 U.S. 322, 325-326 Iowa statute against an Equal Protection Clause argu- (1978), and to create a "federal free trade unit" based ment although that statute permitted only one out-of- on a principle that "our economic unit is the Nation" state bank holding company to operate in Iowa. This and that "the states are not separable economic case held that state statutes, such as CIBA, governing units." H. P. Hood & Sons, Inc. v. DuMond, 336 U.S. admission of out-of-state bank holding companies into 525, 537-538 (1947). a particular state, such as Connecticut, involve essen- The Court has applied the Commerce Clause as tially economic legislation and do not raise issues of granting Congress the power "[to] regulate commerce fundamental rights or draw upon suspect classifica- . . . among the several states,"12 and also as a limitations. Since CIBA does not impinge those rights found tion on the power of the states to impose barriers to or to be fundamental by the Supreme Court or employ burdens on interstate commerce.13 The basic rationale inherently suspect classifications, it will not be closely for this interpretation is both economic and political, scrutinized by the courts under the Equal Protection and these concerns are particularly applicable to state Clause. statutes that selectively confer benefits on one or more Thus, Connecticut can advance a sufficiently ratio- other states and deny these same benefits to still other nal purpose in enacting CIBA to meet the less strin- states. The Court has forcefully stated these core concerns: 10. See Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 461-463(1981); Western and Southern Life Insurance Co.,451 U.S. at 668. 11. ' 'The Report to the General Assembly of the State of Connecticut of The Commission to Study Legislation to Limit the Conduct of 12. U. S. Const., Art. I, § 8, cl. 3. Business in Connecticut by Subsidiaries of Bank Holding Compa- 13. Great Atlantic and Pacific Tea Company v. Cottrell, 424 U.S. nies," January 5, 1983 ("The Hebb Report"), pp. 10, 12-13. 366, 370-71 (1976). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

382 Federal Reserve Bulletin • April 1984 This Court has not only recognized this disability of the state Absent authorization by the Douglas Amendment, it to isolate its own economy as a basis for striking down would appear that, under the standards applied by the parochial legislative policies designed to do so, but it has Court,18 CIBA imposes a burden on interstate comrecognized the incapacity of the state to protect its own merce of the type that would be found by the courts to inhabitants from competition as a reason for sustaining particular exercises of the commerce power of Congress to violate the Commerce Clause. CIBA permits only reach matters in which states were so disabled. bank holding companies located in New England to The material success that has come to inhabitants of the engage in banking activities in Connecticut while destates which make up this federal free trade unit has been the nying that right to bank holding companies located most impressive in the history of commerce, but the estabelsewhere. The discriminatory nature of CIBA is aplished interdependence of the states only emphasizes the necessity of protecting interstate movement of goods against parent from its legislative history, which demonstrates local burdens and repressions. We need only consider the the intention of the Connecticut legislature to permit consequences if each of the few states that produce copper, Connecticut banks and bank holding companies to lead, high-grade iron ore, timber, cotton, oil or gas should develop and consolidate on a regional basis before decree that industries located in that state shall have priority. What fantastic rivalries and dislocations and reprisals would having to compete with banks outside the region.19 ensue if such practices were begun! BNE and CBT contend that CIBA does not conflict Our system, fostered by the Commerce Clause, is that with the Commerce Clause decisions of the Supreme every farmer and every craftsman shall be encouraged to Court because CIBA relieves the ban or burden on produce by the certainty that he will have free access to every market in the Nation, that no home embargoes will withhold interstate commerce imposed by Congress to the exhis exports, and no foreign state will by customs, duties or tent that it would replace six different banking zones in regulations exclude them. Likewise, every consumer may the individual New England states with a single barrilook to the free competition from every producing area in the er-free New England zone. They argue that Congress Nation to protect him from exploitation by any. Such was the has imposed a restriction on interstate banking in the vision of the Founders; such has been the doctrine of this Court which has given it reality. Douglas Amendment and that it has permitted the states to lift that ban by a specific statutory enactment. In support of this position, BNE and CBT cite H. P. Hood & Sons, 336 U.S. at 538-39 (citations omitted). Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 815— 816 (Stevens, J. concurring)(1976). In Alexandria Scrap, the Supreme Court upheld a Maryland statute The states retain the authority, particularly pursuant that paid a bounty for destruction of any junked car to their powers to safeguard the health and safety of formerly titled in Maryland despite a challenge that the their residents, to regulate matters of legitimate local statute made it easier for Maryland scrap processors to concern in such a way as may impose incidental prove that a vehicle had been titled in Maryland than it burdens on interstate commerce. However, the states did for out-of-state processors. The Court held that may not regulate in a manner that imposes more than where a state acted as a market participant the Coman incidental burden on interstate commerce14 or that merce Clause did not apply.20 The Connecticut regiondiscriminates against articles of commerce from out- al banking zone at issue in this case is clearly an side a given state unless there is some reason apart from their origin to treat them differently.15 In those instances where the states have acted to effect purposes of simple economic protectionism or in a manner that is patently discriminatory, the Supreme 18. See Dean Milk Co. v. Madison, 340 U.S. 349 (1951) (ordinance of the City of Madison, Wisconsin, requiring all milk sold in Madison Court has held such state statutes to be per se uncon- to be processed and bottled at a plant within five miles of the city); stitutional.16 In those cases where the states credibly Pennsylvania v. West Virginia, 262 U.S. 553 (1923) (West Virginia advance a legitimate state purpose other than protec- requirement that all local needs for natural gas be met before natural gas could be shipped out of the state); H. P. Hood & Sons v. DuMond, tion of local business, the Court has applied a balanc- 336 U.S. 525 (1949) (denial of a milk receiving plant in New York to a ing test, weighing whether the statute in question Massachusetts distributor because it would injure local competition); Philadelphia v. New Jersey, 437 U.S. 617 (1978) (New Jersey law serves a legitimate state purpose and whether it could prohibiting the import of liquid or solid waste which originated or was accomplish that purpose in a manner less burdensome collected outside the State of New Jersey); Lewis v. BT Investment to interstate commerce.17 Managers, Inc., 447 U.S. 27 (1980) (Florida law prohibiting out-ofstate bank holding companies from engaging in investment advisory activities). 19. The Hebb Report, supra, at 12. See also Conn. Sen. Debate, 14. Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978). supra, at 60, 64, 70 (Statement of Senator Sullivan) and Conn. House 15. Lewis v. BTInvestment Managers, Inc., 447 U.S. at 27, (1980). Debate at 241, 258 (Statement of Representative Onorato). See also Philadelphia v. New Jersey, supra, at 626-627. 20. In his concurring opinion, Justice Stevens suggested that the 16. Philadelphia v. New Jersey, supra, at 624. decision in effect held that, since Maryland "created a market that did 17. Hughes v. Oklahoma, 441 U.S. 322, 336 (1979); Pike v. Bruce not previously exist," it could not be found to burden commerce. 426 Church, Inc., 397 U.S. 137, 142 (1970). U.S. at 815-816. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 example of the regulatory rather than proprietary mate local concerns. This conclusion is consistent function of the State of Connecticut, and Connecticut with the Supreme Court's finding in the Lewis case is not itself creating commerce by its own direct that Florida's interest in local control did not justify a intervention in the marketplace. The reliance of BNE prohibition on entry of non-resident trust companies and CBT on the Alexandria Scrap rationale thus because of the discriminatory burden which the limitaappears to be misplaced and, in fact, succeeding tion imposed on interstate commerce. Thus, CIBA Supreme Court decisions seem to limit the Alexandria does not appear to be consistent with the prohibition in Scrap reasoning to those situations where the states the Commerce Clause on discrimination against interare "market participants" rather than "market regula- state commerce by the states.22 tors." See Reeves, Inc. v. Stake, 447 U.S. 429, 436 (1980).21 2. Discrimination Authorized by the Douglas Amend- Even if CIBA were not to be considered a per se ment. BNE and CBT, however, contend that the unconstitutional burden on interstate commerce, the Douglas Amendment authorizes the discrimination disparate treatment of non-New England bank holding provided for by CIBA. The Douglas Amendment companies does not appear to be justified "as an provides: incidental burden necessitated by legitimate local concerns." Lewis v. BT Investment Managers, supra, 447 Notwithstanding any other provision of this section, no U.S. at 42. The Supreme Court suggested in the Lewis application shall be approved under this section which will permit any bank holding company or any subsidiary thereof case that with respect to banking there are legitimate to acquire, directly or indirectly, any voting shares of, state interests in "discouraging undue economic coninterest in, or all or substantially all of the assets of any centration," "maximizing local control" and "regulat- additional bank located outside of the State in which the ing financial practices presumably to protect local operations of such bank holding company's banking subsidresidents from fraud." Id. at 43. The Court, however, iaries were principally conducted on July 1, 1966, or the date on which such company became a bank holding company, found in that case that a complete ban on out-of-state whichever is later, unless the acquisition of such shares or entry into the trust business in Florida could not be assets of a State bank by an out-of-State bank holding justified as an incidental burden necessitated by legiti- company is specifically authorized by the statute laws of the mate local concerns. The Court noted that there were State in which such bank is located, by language to that effect other regulatory techniques available to deal with local and not merely by implication. For the purposes of this section, the State in which the operations of a bank holding concerns that non-resident bank holding companies company's subsidiaries are principally conducted is that were more likely to be sources of monopoly power or State in which total deposits of all such banking subsidiaries fraud than local companies. are largest. Similarly, in this case, there are less restrictive means than a discriminatory geographic restriction to 12 U.S.C. § 1842(d)(1). accomplish the objectives of the Connecticut legislature. There is no indication that all New York or New Jersey companies, for example, raise greater problems The Supreme Court in Lewis, supra, 447 U.S. at 47, with respect to local control and economic concentra- described this language as establishing a general federtion than those of Massachusetts and Rhode Island. To al prohibition on acquisition or expansion of banking accomplish the objective of avoiding concentration of subsidiaries across state lines and as conferring on the resources in a non-discriminatory manner limitations states only "authority to create exceptions to this could be placed on total banking assets or total depos- general prohibition.'' its that a bank holding company may hold in order to It is clear that if Congress, in the Douglas Amendqualify for additional acquisitions within Connecticut. ment, authorized discriminatory state action, CIBA These and other less discriminatory alternatives sug- would not be unconstitutional under the Commerce gest that CIBA would not be viewed as an incidental Clause. In the specific context of the Douglas Amendburden on interstate commerce necessitated by legiti- ment, the Supreme Court has stated that Congress may prohibit as well as promote commerce23 and may 21. "[T]he Commerce Clause responds principally to state taxes 22. In Northeast Bancorp v. Wolf, (Civil Action H-83-654), the and regulatory measures impeding private trade in the national U.S. District Court for the District of Connecticut in an opinion issued marketplace. . . . There is no indication of a constitutional plan to December 16, 1983, dismissed a challenge to the Connecticut Act on limit the ability of the States themselves to operate freely in the free standing grounds but it described the Act as ". . . statutory provisions market." Id. at 436-437 (citations omitted). See also White v. Massa- that discriminate between New England and non-New England chusetts Council of Construction Employers, 103 S. Ct. 1042 (1983); banks. ..." United Building & Construction Trades Council v. Mayor & Council 23. See Prudential Insurance Company v. Benjamin, 328 U.S. 408, of Camden, 52 U.S.L.W. 4187 (U.S. Feb. 21, 1984). 434 (1946). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

384 Federal Reserve Bulletin • April 1984 exercise its plenary power under the Commerce 37 federal statutes in which Congress had indicated its Clause "by conferring upon the States an ability to intent not to preempt state water laws and by congresrestrict the flow of interstate commerce that they sional authorization of certain interstate surface water would not otherwise enjoy." Lewis v. BT Investment compacts. The Court rejected this argument, holding Managers, Inc., 447 U.S. 27, 44 (1980).24 The issue that these federal statutes did not show an "expressly presented by CIBA is the extent of a state's powers stated" intention to remove Commerce Clause rewhen it decides to lift the Douglas Amendment prohi- straints on state water laws. Similarly, in New Engbition. Does the Douglas Amendment, which estab- land Power Company v. New Hampshire, 455 U.S. lishes a total prohibition on acquisitions by out-of- 331, 341 (1982), and in Lewis, supra, the Court held state bank holding companies, authorize a state to that federal statutes reserving to the states residual discriminate among the states when it permits entry? authority over export of electricity or over bank Does the Douglas Amendment permit Connecticut to holding companies were in no sense affirmative grants admit bank holding companies from neighboring Mas- of power to the states to impose undue burdens on sachusetts and other New England States meeting interstate commerce. The Court may have relaxed this certain qualifications regarding reciprocity but not high standard somewhat in White v. Massachusetts from other states even if they were to meet the Council of Construction Employers, 103 S. Ct. 1042 reciprocity qualifications? (1983), where it approved geographic restrictions on It is, therefore, necessary to determine the scope of the hiring of non-resident workers for city-funded authorization, if any, for states to discriminate among construction projects, relying upon the explicit regulaother states in lifting the Douglas Amendment's ban tions of the Department of Housing and Urban Develagainst interstate acquisition of banks by bank holding opment and a general, unspecific authorization in companies. This task is more difficult because, as federal statute for such regulations. noted above, this case involves an unusual form of Based on these requirements for specificity, the discrimination. There is a long history of decisions of Douglas Amendment does not appear on its face to the Supreme Court and lower federal courts involving authorize discrimination by Connecticut in favor of its the application of the Commerce Clause to state laws own residents and those of Massachusetts and other that provide a preference for their own residents as New England states having reciprocal laws, but against those of all other states. No case has been against all other states. The Douglas Amendment's found under the Commerce Clause or generally in the general authorization to the Board of Governors to literature on this Clause, in which a state has provided permit interstate acquisitions if they are " . . . specififor preferential treatment of its own citizens and those cally authorized by the statute laws of the State in of selected other states, while excluding the residents which such bank is located, by language to that effect of all other states from this favored treatment. and not merely by implication," does not appear to In deciding cases where the differential treatment is meet the stringent test of explicitness laid down by the applied against all other states equally, the Supreme Supreme Court. Court requires, in order to find an authorization for BNE and CBT argue, however, that the legislative discrimination in federal statutes, that such authoriza- history of the Douglas Amendment indicates the intention be "expressly"25 or "explicitly"26 or "specifical- tion of the Congress to give the states complete ly"27 stated in federal law. In Sporhase v. Nebraska, discretion in setting the terms of entry of out-of-state 458 U.S. 941, 960 (1982), defendants challenged a bank holding companies without the limitations im- Nebraska law restricting the export of ground water as posed by the Commerce Clause. While reliance on the an impermissible burden on interstate commerce. Ne- legislative history is a valid method of determining that braska argued in defense of its statute that the congres- Congress authorized the lifting of Commerce Clause sional intent to authorize otherwise impermissible restrictions with respect to a particular state enactburdens on interstate commerce was demonstrated by ment, the Supreme Court has expressed reluctance to place undue weight on this type of inquiry in an attempt to find authority from Congress for states to discriminate against the residents of other states. The Court has stated: Reliance on . . . isolated fragments of legislative history in 24. See also Prudential Insurance Company at 423-24. divining the intent of Congress is an exercise fraught with 25. New England Power Co. v. New Hampshire, 455 U.S. 331, 340-41 (1982). hazards, and "a step to be taken cautiously." 26. Western and Southern Life Insurance Co. v. State Board of Equalization, 451 U.S. 648, 653-654 (1981). 27. White v. Massachusetts Council of Construction Employers, New England Power, 455 U.S. at 341, quoting Piper v. Chris-Craft 103 S. Ct. 1042 (1983). Industries, Inc., 430 U.S. 1, 26 (1976). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 When Congress has not expressly stated an intent to to the Commerce Clause, especially where the Supermit state legislation otherwise inconsistent with the preme Court has required such explicit and clear Commerce Clause, the Court has no authority to authorization of discrimination by the Congress berewrite the legislation "based on mere speculation of cause of the fundamental implications of such diswhat Congress probably had in mind." Id. at 343.28 crimination for the federal union. The Douglas Amendment was proposed during the The Board has a limited amount of judicial guidance debate on the Senate floor and there is no committee on this issue. The only court to consider the legislative report or other significant legislative history to clarify history of the Douglas Amendment has been the U.S. its meaning.29 There was very little discussion of the Court of Appeals for the District of Columbia Circuit power of the states to override the interstate banking in Iowa Independent Bankers Association v. Board of ban imposed by the Douglas Amendment and no Governors, 511 F.2d 1288, 1293 (1975). The case discussion of the power of the states to discriminate involved, in part, a challenge under the Equal Protecamong potential out-of-state entrants.30 Congress was tion Clause of the Fourteenth Amendment to the Iowa clearly more concerned with the federal prohibition on statute that permitted, on the basis of their location in interstate acquisitions than on terms under which the the state prior to the enactment of the Bank Holding states could lift this ban. Company Act Amendments of 1970, out-of-state bank In his remarks during the Senate debate, Senator holding companies operating two or more banks in Douglas, sponsor of the Amendment, referred to the Iowa to continue to expand and to acquire new banks ability of the states to permit the entry of out-of-state in Iowa on the same basis as a local bank holding bank holding companies "only to the degree that state company. laws expressly permit them."31 He also stated that the A less stringent standard applies to state action Amendment paralleled the McFadden Act restrictions under the Equal Protection Clause than under the on the power of national banks to branch intrastate Commerce Clause. Under the former provision a state and interstate "in a way contrary to State policy."32 need only show that its economic legislation, presum- Thus it can be persuasively argued that Senator Doug- ing it does not affect fundamental rights or create a las construed his amendment as granting plenary pow- suspect classification, bears a rational relationship to a er to the states to set their own policies and to permit legitimate state purpose. Under the Commerce entry of out-of-state bank holding companies to the Clause, however, discrimination is disabling per se, degree that they chose. However, there is also an and even when a statute only imposes an incidental argument that the excerpts from the Senate debate are burden on interstate commerce it will be struck down too fragmentary and unspecific to show congressional if such burden is clearly excessive in relation to intent to authorize discrimination otherwise contrary expected local benefits. The Court upheld the constitutionality of the Iowa statute under the Equal Protection Clause on the basis that it was actually a statute that conferred grandfather rights on the only out-ofstate bank holding company operating in Iowa. 28. The Court has allowed discrimination against other states generally based upon a clear statement of congressional intent con- The Court then turned to petitioners argument that tained in the legislative history of a federal statute. Relying on the the Iowa statute conflicted with federal law, specificalclearly expressed intention of Congress, derived from the legislative ly with the Douglas Amendment. Petitioners in Iowa history, to leave insurance regulation exclusively to the states, the Court has found the McCarran-Ferguson Act, 15 U.S.C. § 1011 et Independent Bankers advanced the argument that the seq., to authorize discriminatory state statutes that would otherwise Iowa statute conflicted with "implicit . . . prohibition offend the Commerce Clause. Prudential Insurance Company v. Benjamin, 328 U.S. 408, 427-432 (1946), and Western and Southern against discrimination between out-of-state bank hold- Life Insurance Co., supra, 451 U.S. at 465. ing companies,"33 which, they asserted, was intended 29. The pertinent debates are found at 102 Cong. Record 6750-58 by Congress in the Douglas Amendment. They argued and 6854-62 (1956). 30. See Iowa Independent Bankers v. Board of Governors of the that under the Douglas Amendment states may only Federal Reserve System, 511 F.2d 1288 (D.C. Cir.), cert, denied 423 decide "whether to extend the right to acquire in-state U.S. 875 (1975). banks to all out-of-state bank holding companies or to 31. "[W]hat our amendment aims to do is to carry over into the field of holding companies the same provisions which already apply prohibit such acquisitions entirely."34 The Court then for branch banking under the McFadden Act—namely, our amend- reviewed the limited legislative history of the Douglas ment will permit out-of-State holding companies to acquire banks in Amendment and these arguments, finding that Conother States only to the degree that State laws expressly permit them; and that is the provision of the McFadden Act." 102 Cong. Record gress did not intend to bar discrimination like that 6858 (1956). 32. "[The amendment] is a logical continuation of the principles of the McFadden Act, which tried to prevent the Federal power from being used to permit national banks to expand across State lines in a way contrary to State policy and, of course, under the McFadden Act, 33. Iowa Independent Bankers, supra, 511 F.2d at 1296. even to expand within a State." 102 Cong. Record 6860 (1956). 34. Ibid. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

386 Federal Reserve Bulletin • April 1984 embodied in the Iowa statute. The Court also stated broad range of insurance powers.42 The Board has that the Douglas Amendment conferred on the states a approved a number of applications by out-of-state right to control the expansion of interstate banking "so bank holding companies to acquire local banks under that such expansion would not contravene state the credit card or grandfather statutes43 and, as noted policy."35 above, the U.S. Court of Appeals for the District of The Court's review of the legislative history of the Columbia has upheld a Board order under the Iowa Douglas Amendment in Iowa Independent Bankers statute.44 was not conducted for purposes of determining the These statutes obviously result in some burdens on validity of the Iowa statute under the Commerce interstate commerce and appear to assume that the Clause. Therefore, the Court did not focus on the states have full discretion to set the terms of entry of Supreme Court's standard of review under the Clause out-of-state bank holding companies.45 Nothing in the and did not consider whether the alleged legislative history of the Douglas Amendment suggests that the authorization by the Douglas Amendment is express states were to be permitted only to choose between and unambiguous so as to sanction discrimination not allowing out-of-state bank holding companies to against interstate commerce that would otherwise run enter, and allowing completely free entry.46 In approvafoul of the Commerce Clause. ing applications under these statutes, the Board ap- The actions of the states and the Board in interpret- pears to have accepted at least some measure of ing and applying the Douglas Amendment also lend discretion rather than requiring a simple "on and off some support to the position that the Amendment switch." A contrary conclusion would seem to raise authorizes the states to permit restricted or conditional some questions about the validity of the state statutes entry of out-of-state bank holding companies such as cited above, although it would appear that such statsanctioned by CIBA. As early as 1972, Iowa enacted a utes might be viewed as imposing substantially less of statute that accorded certain grandfather rights to a burden on commerce in the furtherance of legitimate expand and to make additional acquisitions to out-of- state objectives than CIBA imposes. state bank holding companies already controlling two or more banks in Iowa36—establishing, in fact, a preference for a particular out-of-state bank holding Home Bancshares, Inc. company against all other non-resident companies. Erie, Kansas Recently, Nebraska enacted a similar statute.37 In addition, Delaware,38 Maryland,39 Virginia40 and Ne- Order Approving Formation of a Bank Holding braska41 have permitted out-of-state bank holding Company and Application to Engage in Creditcompanies to acquire local banks under certain condi- Related Insurance Activities tions, including limitations on activities, number of offices and home office location, which are not im- Home Bancshares, Inc., Erie, Kansas, has applied for posed on in-state bank holding companies. One of the the Board's approval under section 3(a)(1) of the Bank major purposes of such legislation is to gain employ- Holding Company Act (12 U.S.C. § 1842(a)(1)) to ment for local residents and tax revenues for the state without seriously affecting competing local banking businesses; the statutes accomplish this by permitting out-of-state bank holding companies to export their credit card operations to states with less restrictive usury laws. Similarly, South Dakota has recently permitted the entry of out-of-state bank holding com- 42. S.D. Codified Laws Ann. §§ 51-16-40 to 51-16-44 (supp. 1984). panies on a limited basis to acquire a state bank with a 43. See, e.g., Citicorp, 67 FEDERAL RESERVE BULLETIN 181 (1981); J.P. Morgan & Company, Inc., 67 FEDERAL RESERVE BULLETIN 917 (1981); Northwest Bancorporation, 38 Federal Register 21530 (1973). 44. Iowa Independent Bankers Association, supra. 45. To a lesser degree state statutes that permit limited out-of-state acquisition only in the case of a troubled bank in need of financial 35. Id. at 1297. In Conference of State Bank Supervisors v. assistance also allow the states to condition entry. See, for example, Conover, 715 F.2d 604, 615 (1983). The Court of Appeals for the D.C. Wash. Rev. Code Ann. § 30.04.230. Circuit restated its conclusion that the legislative history of the 46. Senator Robertson, Chairman of the Senate Committee on Douglas Amendment allowed a state "to discriminate in admitting Banking and Currency, suggested by his comments in the 1956 debate bank holding companies." on the Bank Holding Company Act that Congress may have intended 36. Iowa Code Ann. § 524.1805. to give the states more authority than merely to allow unrestricted 37. Neb. Rev. Stat. § 8-903 (Supp. 1983). entry of out-of-state bank holding companies. Senator Robertson 38. Del. Code Ann., title 5, § 803. suggested that states should be permitted to retain the authority to 39. Md. Fin. Inst. Code Ann. § 5-901. permit acquisitions by out-of-state bank holding companies in the 40. Va. Code § 6.1-390 to 6.1-397. limited case where a troubled bank might require financial assistance. 41. Neb. Rev. Stat. §§ 8-905, 8-906 (Supp. 1983). 102 Cong. Record 6572 (1956). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 become a bank holding company by acquiring 80 required capital within the Board's guidelines.3 Alpercent of the voting shares of Erie Bancshares, Erie, though consummation of the proposal would effect no Kansas ("Erie"), and, indirectly, its subsidiary, Home anticipated changes in the services offered by Bank, State Bank, Erie, Kansas ("Bank"). considerations relating to the convenience and needs Applicant has also applied for the Board's approval of the community to be served are consistent with under section 4(c)(8) of the Act (12 U.S.C. approval. Accordingly, the Board has determined that § 1843(c)(8)) and section 225.4(b)(2) of the Board's consummation of the transaction would be in the Regulation Y (now codified in the revised Regulation public interest and the application to acquire Bank Y at 12 CFR § 225.23(a)(2)) to engage, through Erie, in should be approved. the sale of life, health and accident insurance related to Applicant has also applied, pursuant to section credit extended by Bank. This activity has been deter- 4(c)(8) of the Act, to engage, through Erie, in the sale mined by the Board to be closely related to banking of life, health and accident insurance related to extenunder section 225.25(b)(8)(i) of Regulation Y (12 CFR sions of credit by Bank. There is no evidence in the § 225.25(b)(8)(i)). record to indicate that approval of this proposal would Notice of these applications, affording an opportuni- result in undue concentration of resources, decreased ty for interested persons to submit comments and or unfair competition, conflicts of interest, unsound views has been given in accordance with sections 3 banking practices or other adverse effects on the and 4 of the Act (48 Federal Register 56851 (1983)). public interest. Accordingly, the Board has deter- The time for filing comments and views has expired mined that the balance of public interest factors it must and the Board has considered the applications and all consider under section 4(c)(8) of the Act is favorable comments received in light of the factors set forth in and consistent with approval of this application. section 3(c) of the Act (12 U.S.C. § 1842(c)) and the Based on the foregoing and other facts of record, the considerations specified in section 4(c)(8) of the Act. Board has determined that the applications under Applicant, a non-operating corporation with no sub- sections 3(a)(1) and 4(c)(8) of the Act should be and sidiaries, was organized for the purpose of acquiring hereby are approved. The transaction shall not be Erie, and thereby, indirectly acquiring Bank. Upon made before the thirtieth calendar day following the acquisition of Bank (total deposits of $17.3 million), effective date of this Order or later than three months Applicant would control the 285th largest of 620 bank- after the effective date of this Order, unless such ing organizations in Kansas, and would hold 0.1 per- period is extended for good cause by the Board or by cent of total deposits in commercial banks in the the Federal Reserve Bank of Kansas City acting state.1 Consummation of the transaction would not pursuant to delegated authority. have any significant adverse effects upon the concen- By order of the Board of Governors, effective tration of banking resources in the state. March 5, 1984. Bank is the third largest of six banks in the Neosho County banking market, controlling 10.2 percent of Voting for this action: Chairman Volcker and Governors deposits in commercial banks in the market.2 Neither Martin, Partee, Rice, and Gramley. Absent and not voting: Governor Teeters. Governor Wallich abstains from voting on Applicant nor any of its principals is a principal of any the application to engage in credit-related insurance activiother banking organization in the market. Thus, conties. summation of the proposal would have no adverse effects upon competition or increase the concentration WILLIAM W. WILES, of banking resources in any relevant area. [SEAL] Secretary of the Board The financial and managerial resources of Applicant, Erie and Bank are considered generally satisfactory and the future prospects for each appear favorable. Although Applicant proposes to incur debt in 3. The Board has analyzed the financial factors of this proposal connection with its proposal, it appears that Applicant under the Board's "Policy Statement for Assessing Financial Factors will be able to service its debt while maintaining in the Formation of Small One-Bank Holding Companies," 66 FEDER- AL RESERVE BULLETIN 320 (1980), as amended by the Board, "Capital Adequacy Guidelines," 68 FEDERAL RESERVE BULLETIN 33 (1982). The guidelines in the policy statement were developed in order to facilitate the transfer of ownership of small, community banks, thereby promoting service to the convenience and needs of the community. The Board has determined that these guidelines are appropriately applied in this instance because this application involves a restructuring of ownership and control from Erie's principal to his 1. All deposit data are as of December 31, 1982, unless otherwise four adult children, who together will acquire all of the shares of noted. Applicant and will be involved in the management of Applicant, Erie, 2. The Neosho County banking market is approximated by Neosho and Bank, through their positions as directors and/or officers of these County, Kansas. entities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

388 Federal Reserve Bulletin • April 1984 Society Corporation the Board has considered the applications and all Cleveland, Ohio comments received in light of the factors set forth in section 3(c) of the Act (12 U.S.C. § 1842(c)) and the Order Approving Merger of Bank Holding considerations specified in section 4(c)(8) of the Act. Companies, Acquisition of Companies Engaged in Applicant is the sixth largest banking organization in Data Processing and Insurance Activities, and Ohio, with 11 subsidiary banks that control deposits of Operation of a Savings and Loan Association $3.2 billion, representing 6.5 percent of total deposits in commercial banks in the state.4 Interstate, with two Society Corporation, Cleveland, Ohio, a bank holding banking subsidiaries and total deposits of $775 million, company within the meaning of the Bank Holding ranks as Ohio's thirteenth largest banking organiza- Company Act ("Act"), has applied for the Board's tion, representing 1.6 percent of total commercial bank approval under section 3(a)(5) of the Act (12 U.S.C. deposits in the state. Upon consummation of the § 1842) to acquire Interstate Financial Corporation, proposed acquisition and all planned divestitures, Ap- Dayton, Ohio ("Interstate"). As a result of the acqui- plicant's share of total deposits in commercial banks in sition, Applicant would acquire indirectly Interstate's the state would increase only to 8.1 percent, and it two subsidiary banks. would become Ohio's fifth largest banking organiza- Applicant also has applied for the Board's approval tion. Accordingly, this merger would have little effect under section 4(c)(8) of the Act (12 U.S.C. on Ohio's banking structure, and it is the Board's view § 1843(c)(8)) and section 225.23 of the Board's Regula- that consummation of the acquisition would not have tion Y (12 CFR § 225.23) to acquire Interstate's any significantly adverse effects on the concentration nonbanking subsidiaries, which include Scioto Savings of commercial banking resources in Ohio. Association, Columbus, Ohio ("Scioto"), a savings Subsidiary banks of both Applicant and Interstate and loan association controlled by Interstate as a compete directly in the Dayton, Ohio, banking marresult of a supervisory acquisition.1 The operation of a ket.5 Interstate's lead bank, Third National Bank and savings and loan association has previously been Trust Company, is the market's second largest organifound by Board order to be closely related to banking.2 zation, controlling $530 million of the market's com- Applicant also has applied under section 4(c)(8) to mercial bank deposits, representing a market share of acquire shares of the Green Machine Network Corpo- 21.3 percent. Offices of Applicant's Springfield, Ohio, ration, Dayton, Ohio, a joint venture engaged in the affiliate, Society National Bank of Miami Valley operation of an automated teller machine ("ATM") ("Springfield Bank"), hold combined market deposits network interchange and related data processing activ- of $40.1 million, representing 1.6 percent of total ities. Finally, Applicant has applied under section commercial bank deposits in the market. Consumma- 4(c)(8) to acquire Interstate's subsidiary which en- tion of this proposal would result in a single banking gages in the reinsurance of credit life and credit organization controlling 22.9 percent of total deposits accident and health insurance with respect to exten- in commercial banks in the market and an increase in sions of credit by its affiliates. These data processing the market's Herfindahl-Hirschman Index ("HHI") and reinsurance activities have been determined by by 68 points to 1925.6 the Board to be closely related to banking and permis- Applicant, however, has committed to divest two of sible for bank holding companies.3 its three offices in the market prior to, or contempora- Notice of the applications, affording opportunity for neously with, consummation of the proposed merger.7 interested persons to submit comments and views, has Applicant will retain one office in the market (with been given in accordance with sections 3 and 4 of the Act (49 Federal Register 3529 (Jan. 27, 1984)). The time for filing comments and views has expired, and 4. Unless otherwise indicated, deposit data are as of June 30, 1983. 5. The Dayton banking market comprises Montgomery, Greene, and Miami Counties; the townships of Bethel and Mad River in western Clark County; and the townships of Clear Creek and Massie in northern Warren County. 6. Under the Department of Justice's Merger Guidelines, in a 1. See Interstate Financial Corporation (Scioto Savings Associa- market where the post-merger HHI is 1800 or more, the Department tion), 68 FEDERAL RESERVE BULLETIN 316 (1982) ("Interstate/Scioto more likely than not would challenge a merger that produces an Order"). increase in the HHI of more than 50 points. 2. See e.g., Old Stone Corporation, 69 FEDERAL RESERVE BULLE- 7. The Board's policy with regard to competitive divestitures TIN 812 (1983) ("Old Stone Order"), Interstate!Scioto Order, supra; requires that divestitures intended to cure the anticompetitive effects Citicorp (Fidelity Federal Savings and Loan Association), 68 FEDER- resulting from a merger or acquisition occur on or before the date of AL RESERVE BULLETIN 656 (1982)("Citicorp Order"). consummation of the merger, to avoid the existence of anticompeti- 3. See 12 CFR §§ 225.25(b)(7) and (9); Interstate Financial Corpo- tive effects. Barnett Banks of Florida, Inc. (First Marine Banks, Inc.), ration (Green Machine Network Corporation), 69 FEDERAL RESERVE 68 FEDERAL RESERVE BULLETIN 190 (1982). See also InterFirst BULLETIN 560 (1983) ("Interstate/Green Machine Order"). Corporation, 68 FEDERAL RESERVE BULLETIN 243 (1982). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 deposits of $1 million), which functions as an opera- which Applicant and Interstate separately compete tions center for its southwestern Ohio affiliates. Ac- meets all four of the proposed guidelines and thus cordingly, Applicant's presence in the Dayton banking intensive investigation of the proposal in any of these market will be de minimis. The combination of Inter- markets is not called for. Interstate operates in three state and Applicant's remaining office in the Dayton markets in which Applicant does not operate. The market would increase commercial bank deposit con- Dayton banking market is not highly concentrated; centration by only 0.04 percent, and would raise the and the other two markets have numerous other post-merger HHI by only two points to 1859. Based potential entrants. upon the foregoing, the Board concludes that consum- Applicant operates in twenty markets in which mation of the proposal, with the attendant divesti- Interstate does not compete. Twelve are rural nontures, will not have any substantial adverse effects on SMSA markets into which there are numerous probaexisting competition. ble future entrants other than Interstate. Moreover, Scioto, Interstate's thrift subsidiary, and one of five of these twelve markets are not highly concentrat- Applicant's commercial banking subsidiaries operate ed. Six of Applicant's eight SMSA markets are not in the Columbus, Ohio, banking market.8 Neither highly concentrated and thus the doctrine of potential institution is a significant competitor in this market. competition is not applicable;" in the seventh market, Although Applicant's affiliate bank is the sixth largest Applicant possesses an insignificant market share; and bank in this market (deposits of $124.9 million), it in the remaining market, there are numerous potential controls only 2.4 percent of total commercial bank entrants. Based on the foregoing and other facts of deposits in the market. Scioto is the 19th largest of 21 record, the Board concludes that consummation of the thrifts in the Columbus market, holding 2.8 percent of proposal would not have any significant adverse eftotal thrift deposits. Thrifts as a whole control 44 fects on probable future competition in any relevant percent of combined thrift and commercial bank de- market. posits in this market. In view of these facts, the Board The financial and managerial resources of Applicant concludes that consummation of this proposal would and its subsidiaries are regarded as generally satisfachave no significant effects on the Columbus, Ohio, tory, and their prospects appear favorable. Moreover, market's competitive structure. acquisition of Interstate will not have any adverse There are 23 markets in Ohio in which either Appli- effect on Applicant's financial resources. Financial cant or Interstate, but not both, competes.9 The Board and managerial considerations are, therefore, consishas considered the effects of the proposal on probable tent with approval of the application. Consummation future competition in these markets and has also of the proposed transaction would provide an expandexamined the proposal in light of the Board's proposed ed range of consumer and corporate banking services guidelines for assessing the competitive effects of to the public in Interstate's markets. Considerations market-extension mergers and acquisitions.10 relating to the convenience and needs of the communi- In view of Applicant's size and Interstate's opera- ties to be served, therefore, lend weight toward aptional history, both may be considered likely entrants proval of the application. into the other's markets. None of the 23 markets in Applicant has applied, pursuant to section 4(c)(8) of the Act, to acquire Scioto, Interstate's thrift subsidiary. Section 4(c)(8) authorizes a bank holding compa- 8. The Columbus market is situated in central Ohio and is com- ny to acquire a nonbank company if the activities of prised of all of Franklin, Fairfield, Delaware, and Licking Counties, the nonbank company are determined by the Board to all Pickaway County except Perry and Salt Creek Townships, the be "so closely related to banking or managing or southern two-thirds of Madison County, and Thorn Township in northwestern Perry County. controlling banks as to be a proper incident thereto." 9. The 8 SMSA markets in which only Applicant operates are: the The Board has determined previously that the opera- Akron, Canton, Cincinnati, Cleveland, Columbus, Springfield, Toledo, and Youngstown/Warren SMSA's. Applicant also competes in the tion of a thrift institution is "closely related" to following 12 non-SMSA banking markets: Ashtabula, Carrollton, banking.12 Although the Board has determined, as a Crawford, Findlay, Fremont, Huron, Mt. Gilead, Oxford, Port Clinton, Salem, Sandusky, and Seneca. The three markets in which only Interstate competes are the Dayton, Mercer County, and Wapakoneta banking markets Applicant has been analyzed as if it were a potential 11. United States v. Marine Bancorp, Inc. 418 U.S. 602, 630 (1974). entrant in the Dayton market, in view of its proposed divestitures in 12. Newport Savings and Loan Ass'n, 58 FEDERAL RESERVE that market. BULLETIN 313 (1972); Old Colony Cooperative Bank, 58 FEDERAL 10. "Proposed Policy Statement of the Board of Governors of the RESERVE BULLETIN 417 (1972); American Fletcher Corp., 60 FEDER- Federal Reserve System for Assessing Competitive Factors Under the AL RESERVE BULLETIN 868 (1974); Profile Bancshares, Inc., FEDERAL Bank Merger Act and the Bank Holding Company Act," 47 Federal RESERVE BULLETIN 901 (1975); D. H. Baldwin & Co., 63, 61 FEDERAL Register 9017 (March 3, 1982) ("Guidelines"). While the proposed RESERVE BULLETIN 280 (1977); Heritage Banks, Inc., 66 FEDERAL policy statement has not been approved by the Board, the Board is RESERVE BULLETIN 590 (1980); First Financial Group, 66 FEDERAL using the Guidelines in its analysis of the effects of a proposal on RESERVE BULLETIN 594 (1980); and BankEast Corporation, 68 FEDprobable future competition. ERAL RESERVE BULLETIN 116 (1982). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

390 Federal Reserve Bulletin • April 1984 general matter, that operating a thrift institution is not Interstate's subsidiary which engages in the reinsura proper incident to banking, the Board has deter- ance of credit life and credit accident and health mined in several instances involving failing thrift insti- insurance with respect to extensions of credit by its tutions that such activities are a proper incident to affiliates. It does not appear that Applicant's acquisibanking.13 tion of these subsidiaries would have any significant On April 4, 1982, the Board approved Interstate's adverse effects upon existing or potential competition. acquisition of Scioto,14 then a failing institution, after Furthermore, there is no evidence in the record to determining that the operation of Scioto by Interstate indicate that approval of this proposal would result in was a "proper incident" to banking. That determina- undue concentration of resources, decreased or unfair tion was based on the Board's finding in that case that competition, conflicts of interest, unsound banking the substantial benefits to the public associated with practices, or other adverse effects on the public intersaving Scioto as a thrift competitor were sufficient to est. Accordingly, the Board has determined that the outweigh the generalized adverse effects of thrift ac- balance of the public interest factors it must consider quisitions previously found by the Board.15 under section 4(c)(8) of the Act is favorable and This proposal involves a merger of bank holding consistent with approval of the applications to acquire companies, as a result of which Applicant will acquire Scioto, Green Machine, and Interstate's reinsurance all of the assets and succeed to all of the rights and subsidiary. obligations of Interstate. Under these circumstances, Based on the foregoing and other facts of record, the the Board believes that Applicant should be entitled to Board has determined that the applications under retain and operate Scioto to the same extent and in the sections 3(a)(5) and 4(c)(8) of the Act should be and same manner as Interstate. In that regard, Applicant hereby are approved, subject to the conditions that: has agreed to abide by commitments made by Inter- complete divestiture of Applicant's two Xenia, Ohio, state in connection with its acquisition of Scioto branch offices of its Springfield Bank subsidiary take concerning the separation of its thrift and banking place on or before the date of consummation of the operations. Accordingly, the Board does not believe merger; that Applicant abide by commitments made that it would be appropriate or consistent with its by Interstate in connection with its acquisition of policy regarding bank/thrift affiliation to require dives- Scioto; that the merger shall not be consummated titure of Scioto. before the thirtieth calendar day following the effective It does not appear that Applicant's acquisition of date of this Order; and that neither the merger nor the Scioto would have any significant adverse effects upon acquisition of the nonbanking subsidiaries shall occur existing or potential competition. Furthermore, there later than three months after the effective date of this is no evidence in the record to indicate that approval of Order, unless such period is extended for good cause this proposal would result in undue concentration of by the Board or by the Federal Reserve Bank of resources, decreased or unfair competition, conflicts Cleveland pursuant to delegated authority. The deterof interests, unsound banking practices or other ad- minations as to Applicant's nonbanking activities are verse effects on the public interest. subject to all of the conditions set forth in Regulation Applicant also has applied pursuant to section Y, including sections 225.4(d) and 225.23(b), and the 4(c)(8) of the Act to acquire Interstate's shares of the Board's authority to require such modification or Green Machine Network Corporation, Dayton, Ohio termination of the activities of a holding company or ("Green Machine"), a joint venture which operates an any of its subsidiaries as the Board finds necessary to ATM network interchange and related data processing assure compliance with the provisions and purposes of services in Ohio. Applicant has agreed to abide by the the Act and the Board's regulations and orders issued terms governing the Board's approval of Interstate's thereunder, or to prevent evasion thereof. acquisition of an interest in Green Machine. See By order of the Board of Governors, effective Interstate/Green Machine Order, supra. Finally, Ap- March 28, 1984. plicant has applied under section 4(c)(8) to acquire Voting for this action: Chairman Volcker and Governors Martin, Wallich, Partee, Teeters, Rice, and Gramley. Governors Wallich and Gramley abstain from voting on the application to engage in the activities of Green Machine Network Corporation. Governor Wallich also abstains from voting on the application to engage in insurance activities. 13. See e.g., Old Stone Order, supra; Citicorp Order, supra. JAMES MCAFEE, 14. Interstate/Scioto Order, supra. 15. D. H. Baldwin & Co., supra. [SEAL] Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 ORDERS APPROVED UNDER BANK HOLDING COMPANY ACT By the Board of Governors During March 1984 the Board of Governors approved the applications listed below. Copies are available upon request to Publications Services, Division of Support Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Board action Applicant Bank(s) (effective date) Concord Bancshares, Inc., College Boulevard National Bank, March 8, 1984 Overland Park, Kansas Overland Park, Kansas Independent Financial, Inc., Whisperwood National Bank, March 21, 1984 Lubbock, Texas Lubbock, Texas McKeesport National Corporation, McKeesport National Bank, March 16, 1984 McKeesport, Pennsylvania McKeesport, Pennsylvania Med Center Bancshares, Inc., Medical Center Bank, March 26, 1984 Houston, Texas Houston, Texas Midland Bancorp, Inc., Hawthorne Bank of Wheaton, March 7, 1984 Chicago, Illinois Wheaton, Illinois NBD Bancorp, Inc., National Bank and Trust Company of March 9, 1984 Detroit, Michigan Traverse City, Traverse City, Michigan Texas Commerce Bancshares, Inc. Texas Commerce Bank-Richardson, March 6, 1984 Houston, Texas N.A., Richardson, Texas Texas Commerce-Brookhollow, N.A., Dallas, Texas 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 Amboy-Madison Bancorpora- Amboy-Madison National Bank, New York March 16, 1984 tion, Old Bridge, New Jersey Old Bridge, New Jersey American Bank Corporation, First State Bank of Afton, Kansas City March 16, 1984 Denver, Colorado Afton, Wyoming American Bank Shares, Inc., American State Bank & Trust Kansas City March 12, 1984 Great Bend, Kansas Company, Great Bend, Kansas American Shares, Inc., Great Bend, Kansas American National Agency, American National Bank, Minneapolis February 29, 1984 Inc., Nashwauk, Minnesota Nashwauk, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

392 Federal Reserve Bulletin • April 1984 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Arrow Bank Corp., The Essex County-Champlain New York March 16, 1984 Glens Falls, New York National Bank, Willsboro, New York Bath County Banking Company, Owingsville Banking Company, Cleveland March 8, 1984 Owingsville, Kentucky Owingsville, Kentucky BOJ Bancshares, Inc., Bank of Jackson, Atlanta February 24, 1984 Jackson, Louisiana Jackson, Louisiana BSB Financial Corporation, The Broad Street National Bank Philadelphia March 13, 1984 Trenton, New Jersey of Trenton, Trenton, New Jersey Bonner Springs Bancshares, Commercial State Bank of Bon- Kansas City February 23, 1984 Inc., ner Springs, Bonner Springs, Kansas Bonner Springs, Kansas Brazosport Corporation, Mercantile National Bank of Dallas February 24, 1984 Freeport, Texas Corpus Christi, Corpus Christi, Texas Bunkie Bancshares, Inc., Bunkie Bank and Trust Atlanta February 27, 1984 Bunkie, Louisiana Company, Bunkie, Louisiana Burlingame Bancorp, Burlingame Bank and Trust Co., San Francisco March 6, 1984 Burlingame, California Burlingame, California Chester County Bancshares, Chester County Bank, St. Louis March 8, 1984 Inc., Henderson, Tennessee Henderson, Tennessee Citizens Dimension Bancorp, Charter Bancshares, Inc., Kansas City March 13, 1984 Inc., Oklahoma City, Oklahoma Muskogee, Oklahoma City National Bancshares, Inc., Trinity Mills National Bank, Dallas February 27, 1984 Carroll ton, Texas Carrollton, Texas Commercial Grayson Banc- The Commercial Bank of Gray- Cleveland March 30, 1984 shares, Inc., son, Grayson, Kentucky Grayson, Kentucky Commonwealth Trust Bancorp, Covington Trust & Banking Cleveland March 7, 1984 Inc., Company, Covington, Kentucky Covington, Kentucky CNB Bancshares, Inc., Citizens National Bank, Atlanta March 9, 1984 Sevierville, Tennessee Sevierville, Tennessee CNBO Bancorp, Inc., Century National Bank of Okla- Kansas City March 28, 1984 Pryor, Oklahoma homa, Pryor, Oklahoma Decatur Financial, Inc., Decatur Bank and Trust Chicago March 1, 1984 Decatur, Indiana Company, Decatur, Indiana Del Rio Bancshares, Inc., Plaza National Bank, Dallas March 15, 1984 Del Rio, Texas Del Rio, Texas Delta Bancshares Company, Eureka Bank, St. Louis March 19, 1984 St. Louis, Missouri Eureka, Missouri Downstate Bancshares, Inc., The First National Bank of St. Louis February 24, 1984 Murphysboro, Illinois Altamont, Altamont, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Elkton Bancshares, Inc. Farmers State Bank of Elkton, Minneapolis February 27, 1984 Elkton, Minnesota Elkton, Minnesota F&M Bank Corp., Farmers and Merchants Bank of Richmond March 1, 1984 Timberville, Virginia Rockingham, Timberville, Virginia FCB Corp., First County Bank, St. Louis March 16, 1984 Collinsville, Illinois Maryville, Illinois First State Bank of Morrisonville, Morrisonville, Illinois FSB Bancshares, Inc., First State Bank, Dallas March 13, 1984 Waco, Texas Coolidge, Texas First State Bank, Mount Calm, Texas First State Bank, Italy, Texas Farmers Bancorp of Nicholas- The Farmers Bank of Nicholas- Cleveland March 16, 1984 ville, Inc., ville, Nicholasville, Kentucky Nicholasville, Kentucky Farmers Bancshares of George- Farmers Bank & Trust Company, Cleveland March 14, 1984 town, Inc., Georgetown, Kentucky Georgetown, Kentucky Financial Holdings, Inc., OMNIBANK Louisville, Kansas City March 5, 1984 Boulder, Colorado Louisville, Colorado First Arkansas Bankstock Cor- First National Bank, St. Louis March 7, 1984 poration, Batesville, Arkansas Little Rock, Arkansas Bank of Newark, Newark, Arkansas First Colonial Bankshares Cor- Northwest American Bankshares Chicago February 23, 1984 poration, Corporation, Chicago, Illinois Chicago, Illinois First Grayson Bancshares, Inc., Security National Bank of Dallas March 27, 1984 Dallas, Texas Whitesboro, Whitesboro, Texas Collinsville State Bank, Collinsville, Texas First Jersey National Corpora- The Peoples National Bank of New York March 28, 1984 tion, Central Jersey, Jersey City, New Jersey Piscataway, New Jersey First Latimer Corporation, Latimer State Bank, Kansas City March 5, 1984 Wilburton, Oklahoma Wilburton, Oklahoma First Laurel Security Co., Security State Bank, Kansas City February 15, 1984 Laurel, Nebraska Allen, Nebraska First National Ban Corp of Ver- First National Bank of Versailles, Cleveland March 16, 1984 sailles, Versailles, Kentucky Versailles, Kentucky First National Bank of the First National Bank of Andalusia, Atlanta March 14, 1984 South, Inc., Andalusia, Alabama Opp, Alabama Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

394 Federal Reserve Bulletin • April 1984 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date First Place Financial Corpora- The First National Bank of Kansas City March 5, 1984 tion, Farmington, Farmington, New Mexico Farmington, New Mexico Farmington Interim National Bank, Farmington, New Mexico First United Bancshares, Inc., United National Bank of Dallas March 7, 1984 Houston, Texas Houston, Houston, Texas Franklin National Bank shares, Franklin National Bank, Dallas March 7, 1984 Inc., Mount Vernon, Texas Mount Vernon, Texas Fresnos Bancshares, Inc., Sunrise Bank, Dallas February 29, 1984 Los Fresnos, Texas Brownsville, Texas FSC Bancshares, Inc., Farmers State Bank, Kansas City March 6, 1984 Cameron, Missouri Cameron, Missouri Gary-Wheaton Corporation, First Security Bank of Chicago March 12, 1984 Wheaton, Illinois Fox Valley, Aurora, Illinois General Bancshares Corporation Anthony Wayne Bank, Chicago March 5, 1984 of Indiana, Fort Wayne, Indiana Fort Wayne, Indiana Georgia Bancshares, Inc., The First State Bank of Atlanta February 24, 1984 Macon, Georgia Fitzgerald, Fitzgerald, Georgia Greencastle Bancorp, Inc., Greencastle Investment Corpora- Chicago February 29, 1984 Greencastle, Indiana tion, Greencastle, Indiana First Citizens Bank and Trust Company, Greencastle, Indiana Greenville Bancshares, Inc., State Bank of Greenville, St. Louis March 29, 1984 Greenville, Missouri Greenville, Missouri Gulf Southwest Bancorp, Inc., Atascocita State Bank, Dallas March 29, 1984 Houston, Texas Atascocita, Texas Hanover Financial Corporation, Hanover Bank of Florida, Atlanta March 28, 1984 Plantation, Florida Plantation, Florida Harvest Bancshares, Inc., The Footville State Bank, Chicago March 9, 1984 Footville, Wisconsin Footville, Wisconsin Hastings State Company, First Savings Company of Kansas City March 9, 1984 Hastings, Nebraska Hastings, Inc., Hastings, Nebraska Independent Bancorp, Inc., Channelview Bank, Dallas March 7, 1984 Channel view, Texas Channelview, Texas Iowa First Bancshares Corp., First National Bank of Musca- Chicago March 1, 1984 Muscatine, Iowa tine, Muscatine, Iowa First National Bank in Fairfield, Fairfield, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Section 3—Continued _ , , Reserve Effective Applicant Bank(s )N BanR datg Kiamichi Bancshares, Inc., The Citizens State Bank, Dallas March 9, 1984 Hugo, Oklahoma Hugo, Oklahoma Kimball Bancorp, Inc., American National Bank of Kansas City March 28, 1984 Kimball, Nebraska Kimball, Kimball, Nebraska Kirbyville Bancshares, Inc., Allied Kirbyville Bank, Dallas March 15, 1984 Beaumont, Texas Kirbyville, Texas Landmark Banking Corporation Landmark Bank of Palm Beach Atlanta February 23, 1984 of Florida, County, Fort Lauderdale, Florida Boca Raton, Florida Preferred Equity Investors of Florida, Knoxville, Tennessee LCB Corporation, Inc., Lincoln County Bank, Atlanta February 24, 1984 Fayetteville, Tennessee Fayetteville, Tennessee Liberty Bancorp, Inc., Liberty National Bank, Richmond February 28, 1984 Charleston, South Carolina Charleston, South Carolina Maple Lake Bancorporation, Maple Lake Bancshares, Inc., Minneapolis March 13, 1984 Minneapolis, Minnesota Maple Lake, Minnesota Security State Bank of Maple Lake, Maple Lake, Minnesota Mercantile Bancorporation, First County Bank, St. Louis February 23, 1984 Inc., Bloomfield, Missouri St. Louis, Missouri Mercantile Texas Corporation, Corpus Christi National Bank- Dallas March 16, 1984 Dallas, Texas South, Corpus Christi, Texas Midlantic Banks, Inc., Union Trust Company of New York March 28, 1984 Edison, New Jersey Wild wood, Wildwood, New Jersey Midwest Banco Corporation, Wilber State Company, Kansas City March 9, 1984 Cozad, Nebraska Wilber, Nebraska Nebraska Bancorporation, Inc. Alliance National Bank and Trust Kansas City February 22, 1984 Alliance, Nebraska Company, Alliance, Nebraska Newton Bancshares, Inc., Allied First National Bank. Dallas March 15, 1984 Beaumont, Texas Newton, Texas Northwest American Bank- All American Bank of Chicago, Chicago February 23, 1984 shares Corporation, Chicago, Illinois Chicago, Illinois Northwest Commerce Bank, Rosemont, Illinois Pioneer Bancorp, Pioneer Bank, San Francisco March 19, 1984 Fullerton, California Fullerton, California Plaquemine Bancshares Corpo- Plaquemine Bank & Trust Atlanta March 29, 1984 ration, Company, Plaquemine, Louisiana Plaquemine, Louisiana Prosperity Bancshares, Inc., Allied First Bank, Dallas February 29, 1984 Edna, Texas Edna, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

396 Federal Reserve Bulletin • April 1984 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Provident Bancorp, Inc. Celina Bancorp Inc., Dallas March 9, 1984 Dallas, Texas Dallas, Texas First State Bank, Wylie, Texas The Security State Bank of Commerce, Commerce, Texas Provident Bank-Dallas, Dallas, Texas DeSoto State Bank, DeSoto, Texas Rake Bancorporation, State Savings Bank, Chicago February 23, 1984 Rake, Iowa Rake, Iowa Rio Salado Bancorp, Rio Salado Bank, San Francisco March 16, 1984 Tempe, Arizona Tempe, Arizona S.B. Corporation, WCN Bancorp, Inc., Chicago February 28, 1984 Wisconsin Rapids, Wisconsin Wisconsin Rapids, Wisconsin The Bank of Fort Atkinson, Fort Atkinson, Wisconsin The Wood County National Bank of Wisconsin Rapids, Wisconsin Rapids, Wisconsin S.B.T. Bancshares, Inc., Security Bank & Trust Company, Atlanta March 5, 1984 Arab, Alabama Arab, Alabama Security Corporation, Cache Road National Bank of Kansas City March 1, 1984 Duncan, Oklahoma Lawton, Lawton, Oklahoma Security Financial Services, Security State Bank of Hibbing, Minneapolis March 6, 1984 Inc., Hibbing, Minnesota Hibbing, Minnesota South Louisiana Financial Cor- South Louisiana Bank, Atlanta March 9, 1984 poration, Houma, Louisiana Houma, Louisiana Southern Minnesota Banc- Security State Bank of Wells, Minneapolis February 24, 1984 shares, Inc., Wells, Minnesota Wells, Minnesota Southland Bank Corp., Citizens State Bank, Atlanta March 5, 1984 Butler, Georgia Butler, Georgia Coffee County Bank, Douglas, Georgia Spectrum Financial Corpora- Security National Bank & Cleveland March 8, 1984 tion, Trust Co., Wheeling, West Virginia Wheeling, West Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date St. Anthony Bancorporation, St. Anthony National Bank, Minneapolis February 24, 1984 Inc., St. Anthony, Minnesota Omaha, Nebraska State Financial Bankshares, State Bank and Trust Company Cleveland March 30, 1984 Inc., of Richmond, Richmond, Kentucky Richmond, Kentucky Sterling Bancorp, Inc., Peoples Bank of Richwood, Inc., Richmond March 16, 1984 Eleanor, West Virginia Rich wood, West Virginia Summit Bancshares, Inc., Camp Bowie National Bank, Dallas March 28, 1984 Fort Worth, Texas Fort Worth, Texas Tascosa Financial Corporation, Tascosa National Bank South, Dallas March 9, 1984 Amarillo, Texas Amarillo, Texas TCBankshares, Inc., Peoples Bancshares, Inc., St. Louis March 29, 1984 North Little Rock, Arkansas Van Buren, Arkansas Terre Du Lac Bancshares, Inc., The Bank of Steele, St. Louis March 14, 1984 Chesterfield, Missouri Steele, Missouri The First Freeman Corporation, The First National Bank of Minneapolis March 12, 1984 Freeman, South Dakota Freeman, Freeman, South Dakota Third National Corporation, First National Bank of Rutherford Atlanta March 13, 1984 Nashville, Tennessee County, Smyrna, Tennessee Thunderbird Bank, Thunderbird Equities, Inc., San Francisco March 29, 1984 Phoenix, Arizona Phoenix, Arizona Two Rivers Bancorp, Inc., The Farmers National Bank of Chicago March 19, 1984 Prophetstown, Illinois Prophetstown, Prophetstown, Illinois The First National Bank of Manlius, Manlius, Illinois Tampico National Bank, Tampico, Illinois Unicorp Bancshares, Inc., Unicorp Bancshares-Houston, Dallas March 6, 1984 Houston, Texas Inc., Houston, Texas United City Corporation, First State Bank of McKinney, Dallas March 9, 1984 Piano, Texas McKinney, Texas United Security Bancshares, United Security Bank, Atlanta February 29, 1984 Inc., Sparta, Georgia Canton, Georgia United Security Bancshares, Bank of Thomasville, Atlanta February 23, 1984 Inc., Thomasville, Alabama Thomasville, Alabama United Vermont Bancor- First Twin-State Bank, Boston March 9, 1984 poration, White River Junction, Vermont Rutland, Vermont Upper Valley Bancorp, Inc., The National Bank of Olyphant, Philadelphia February 28, 1984 Olyphant, Pennsylvania Olyphant, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

398 Federal Reserve Bulletin • April 1984 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Victory Bancorp, Inc., Victory Bancshares, Inc., Kansas City March 14, 1984 Nowata, Oklahoma Nowata, Oklahoma WCN Bancorp, Inc., The Wood County National Bank Chicago February 28, 1984 Wisconsin Rapids, Wisconsin of Wisconsin Rapids, Wisconsin Rapids, Wisconsin Woburn National Corporation, Woburn National Bank, Boston February 27, 1984 Woburn, Massachusetts Woburn, Massachusetts Section 4 Nonbanking Reserve Effective Applicant company Bank date Fifth Third Bancorp, Money Station, Inc., Cleveland March 6, 1984 Cincinnati, Ohio Cincinnati, Ohio Hawarden Bancshares, Inc. Gearhart Insurance Agency, Chicago March 6, 1984 Hawarden, Iowa Hawarden, Iowa Williams Insurance Agency, Hawarden, Iowa Security Pacific Corporation, Security Pacific Brokers, Inc., San Francisco February 22, 1984 Los Angeles, California Los Angeles, California Northern Trust Corporation, Jerome Hickey Associates, Inc. Chicago March 7, 1984 Chicago, Illinois Chicago, Illinois Northern Wisconsin Bank Hold- Laona Agency, Inc., Minneapolis February 24, 1984 ing Company, Laona, Wisconsin Laona, Wisconsin Sections 3 and 4 . .. Bank(s)/Nonbanking Reserve Effective Company Bank date Pacific Inland Bancorp, Pacific Inland Bank, San Francisco February 22, 1984 Anaheim, California Anaheim, California Pacific Inland Management, Inc., Anaheim, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 2>41 PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Federal Reserve Banks in which the Board of Governors is not named a party. Colorado Industrial Bankers Association v. Board of Securities Industry Association v. Board of Gover- Governors, filed January 1984, U.S.C.A. for the nors, et al., filed February 1983, Supreme Court. Tenth Circuit. Association of Data Processing Service Organiza- Financial Institutions Assurance Corp. v. Board of tions, et al. v. Board of Governors, filed August Governors, filed January 1984, U.S.C.A. for the 1982, U.S.C.A. for the District of Columbia Circuit. Fourth Circuit. Wyoming Bancorporation v. Board of Governors, filed First Bancorporation v. Board of Governors, filed May 1982, U.S.C.A. for the Tenth Circuit. January 1984, U.S.C.A. for the Tenth Circuit. Edwin F. Gordon v. Board of Governors, et al., filed Thomas H. Huston v. Board of Governors, filed October 1981, U.S.C.A. for the Eleventh Circuit January 1984, U.S.C.A. for the Eighth Circuit. (two consolidated cases). Ohio Deposit Guarantee Fund v. Board of Governors, Edwin F. Gordon v. John Heimann, et al., filed filed January 1984, U.S.C.A. for the Tenth Circuit. September 1981, U.S.C.A. for the Eleventh Circuit. State of Ohio, et al. v. Board of Governors, filed Allen Wolfson v. Board of Governors, filed September January 1984, for the Tenth Circuit. 1981, U.S.D.C. for the Middle District of Florida. Dimension Financial Corporation, et al. v. Board of Public Interest Bounty Hunters v. Board of Gover- Governors, filed December 1983, U.S.C.A. for the nors, et al., filed June 1981, U.S.C.A. for the Tenth Circuit. Eleventh Circuit. Oklahoma Bankers Association v. Federal Reserve First Bank & Trust Company v. Board of Governors, Board, filed December 1983, U.S.C. A. for the Tenth filed February 1981, U.S.D.C. for the Eastern Dis- Circuit. trict of Kentucky. Independent Insurance Agents of America, Inc. and 9 to 5 Organization for Women Office Workers v. Independent Insurance Agents of Missouri, Inc. v. Board of Governors, filed December 1980, Board of Governors, filed June 1983, U.S.C.A. for U.S.C.A. for the First Circuit. the Eighth Circuit (two cases). A. G. Becker, Inc. v. Board of Governors, et al., filed The Committee for Monetary Reform, et al., v. Board October 1980, U.S.C.A. for the District of Columof Governors, filed June 1983, U.S.D.C. for the bia. District of Columbia Circuit. A. G. Becker, Inc. v. Board of Governors, et al., filed August 1980, Supreme Court. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities Domestic Financial Statistics A18 All reporting banks A19 Banks in New York City A3 Monetary aggregates and interest rates A20 Balance sheet memoranda A4 Reserves of depository institutions, Reserve A20 Branches and agencies of foreign banks Bank credit A21 Gross demand deposits of individuals, A5 Reserves and borrowings of depository partnerships, and corporations institutions A5 Federal funds and repurchase agreements of large member banks FINANCIAL MARKETS A22 Commercial paper and bankers dollar POLICY INSTRUMENTS acceptances outstanding A22 Prime rate charged by banks on short-term A6 Federal Reserve Bank interest rates business loans A7 Reserve requirements of depository institutions A23 Terms of lending at commercial banks A8 Maximum interest rates payable on time and A24 Interest rates in money and capital markets savings deposits at federally insured institutions A25 Stock market—Selected statistics A9 Federal Reserve open market transactions A26 Selected financial institutions—Selected assets and liabilities FEDERAL RESERVE BANKS FEDERAL FINANCE A10 Condition and Federal Reserve note statements All Maturity distribution of loan and security All Federal fiscal and financing operations holdings A28 U.S. Budget receipts and outlays A29 Federal debt subject to statutory limitation A29 Gross public debt of U.S. Treasury—Types and MONETARY AND CREDIT AGGREGATES ownership A30 U.S. government securities dealers— A12 Aggregate reserves of depository institutions Transactions, positions, and financing and monetary base A31 Federal and federally sponsored credit A13 Money stock measures and components agencies—Debt outstanding A14 Bank debits and deposit turnover A15 Loans and securities of all commercial banks COMMERCIAL BANKING INSTITUTIONS A16 Major nondeposit funds A17 Assets and liabilities, last-Wednesday-of-month series Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • April 1984 SECURITIES MARKETS AND International Statistics CORPORATE FINANCE A50 U.S. international transactions—Summary A32 New security issues—State and local A51 U.S. foreign trade governments and corporations A51 U.S. reserve assets A33 Open-end investment companies—Net sales and A51 Foreign official assets held at Federal Reserve asset position Banks A3 3 Corporate profits and their distribution A52 Foreign branches of U.S. banks—Balance sheet A34 Nonfinancial corporations—Assets and data liabilities A54 Selected U.S. liabilities to foreign official A34 Total nonfarm business expenditures on new institutions plant and equipment A35 Domestic finance companies—Assets and liabilities and business credit REPORTED BY BANKS IN THE UNITED STATES A54 Liabilities to and claims on foreigners REAL ESTATE A55 Liabilities to foreigners A57 Banks' own claims on foreigners A36 Mortgage markets A58 Banks' own and domestic customers' claims on A37 Mortgage debt outstanding foreigners A58 Banks' own claims on unaffiliated foreigners A59 Claims on foreign countries—Combined CONSUMER INSTALLMENT CREDIT domestic offices and foreign branches A38 Total outstanding and net change A39 Terms REPORTED BY NONBANKING BUSINESS ENTERPRISES IN THE UNITED STATES FLOW OF FUNDS A60 Liabilities to unaffiliated foreigners A61 Claims on unaffiliated foreigners A40 Funds raised in U.S. credit markets A41 Direct and indirect sources of funds to credit markets SECURITIES HOLDINGS AND TRANSACTIONS A62 Foreign transactions in securities Domestic Nonfinancial Statistics A63 Marketable U.S. Treasury bonds and notes— Foreign holdings and transactions A42 Nonfinancial business activity—Selected measures A42 Output, capacity, and capacity utilization INTEREST AND EXCHANGE RATES A43 Labor force, employment, and unemployment A44 Industrial production—Indexes and gross value A63 Discount rates of foreign central banks A46 Housing and construction A64 Foreign short-term interest rates A47 Consumer and producer prices A64 Foreign exchange rates A48 Gross national product and income A49 Personal income and saving A65 Guide to Tabular Presentation, Statistical Releases, and Special Tables Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Domestic Financial Statistics A3 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent)1 IItteemm 1983 1983 1984 Q1 Q2 Q3 Q4 Oct. Nov. Dec. Jan. Feb. Reserves of depository institutions2 1 Total 5.5 11.8 6.0 .5 .3 -2.4 1.2 7.6 19.1 2 Required 5.1 12.0 5.9 -.1 .1 -3.3 .1 5.9 8.1 3 Nonborrowed 4.9 5.2 2.9 8.0 21.5 -4.6 5.8 9.8 24.6 4 Monetary base3 9.3 10.2 8.2 7.8 7.1 7.2 6.7 12.8 10.6 Concepts of money, liquid assets, and debt* Ml 12.8 11.6 9.5 4.8 6.2 3.2 5.3 10.7 6.6 6 M2 20.5 10.6 6.9 8.5 10.8 8.3 7.7 5.5 8.6 7 M3 10.8 9.3 7.4 9.9 9.4 14.4 8.0 6.0 10.0 8 L 10.7 10.3 9.6 8.9 6.5 12.7 10.7 n.a. n.a. 9 Debt 8.8 12.1 10.1 10.6 9.8 9.6 12.3 12.3 n.a. Nontransaction components . 10 In M25 23.0 10.2 6.1 9.6 12.2 9.9 8.4 3.9 9.2 11 In M3 only6 27.1 3.8 9.8 16.3 2.9 41.4 9.5 8.5 16.1 Time and savings deposits Commercial banks 12 Savings' -47.4 -14.8 -6.3 -6.4 -3.5 -7.9 13.2 -22.3 -18.2 13 Small-denomination time8 -48.7 -21.2 13.7 19.3 23.4 18.1 10.6 -.7 -.3 14 Large-denomination time9'10 -48.8 -14.6 -4.6 -.4 -11.3 13.5 7.0 5.9 5.8 Thrift institutions 15 Savings7 -28.6 -1.3 -2.2 -4.4 -2.0 -6.7 -6.7 -3.4 -8.8 16 Small-denomination time -51.5 -17.0 12.3 18.8 21.4 20.5 12.4 11.2 11.3 17 Large-denomination time9 .6 51.2 63.5 57.6 60.4 34.5 46.0 69.4 63.3 Debt components4 18 Federal 19.4 25.9 15.2 10.1 14.6 7.0 8.4 27.4 n.a. 19 Nonfederal 5.9 8.2 8.7 10.8 8.4 10.3 13.4 8.0 n.a. 1. Unless otherwise noted, rates of change are calculated from average funds. Also excludes all balances held by U.S. commercial banks, money market amounts outstanding in preceding month or quarter. funds (general purpose and broker/dealer), foreign governments and commercial 2. Figures incorporate adjustments for discontinuities associated with the banks, and the U.S. government. Also subtracted is a consolidation adjustment implementation of the Monetary Control Act and other regulatory changes to that represents the estimated amount of demand deposits and vault cash held by reserve requirements. To adjust for discontinuities due to changes in reserve thrift institutions to service their time and savings deposits. requirements on reservable nondeposit liabilities, the sum of such required M3: M2 plus large-denomination time deposits and term RP liabilities (in reserves is subtracted from the actual series. Similarly, in adjusting for discontin- amounts of $100,000 or more) issued by commercial banks and thrift institutions, uities in the monetary base, required clearing balances and adjustments to term Eurodollars held by U.S. residents at foreign branches of U.S. banks compensate for float also are subtracted from the actual series. worldwide and at all banking offices in the United Kingdom and Canada, and 3. The monetary base not adjusted for discontinuities consists of total balances in both taxable and tax-exempt, institution-only money market mutual reserves plus required clearing balances and adjustments to compensate for float funds. Excludes amounts held by depository institutions, the U.S. government, at Federal Reserve Banks plus the currency component of the money stock less money market funds, and foreign banks and official institutions. Also subtracted is the amount of vault cash holdings of thrift institutions that is included in the a consolidation adjustment that represents the estimated amount of overnight RPs currency component of the money stock plus, for institutions not having required and Eurodollars held by institution-only money market mutual funds. reserve balances, the excess of current vault cash over the amount applied to L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term satisfy current reserve requirements. After the introduction of contemporaneous Treasury securities, commercial paper and bankers acceptances, net of money reserve requirements (CRR), currency and vault cash figures are measured over market mutual fund holdings of these assets. the weekly computation period ending Monday. Debt: Debt of domestic nonfinancial sectors consists of outstanding credit Before CRR, all components of the monetary base other than excess reserves market debt of the U.S. government, state and local governments, and private are seasonally adjusted as a whole, rather than by component, and excess nonfinancial sectors. Private debt consists of corporate bonds, mortgages, conreserves are added on a not seasonally adjusted basis. After CRR, the seasonally sumer credit (including bank loans), other bank loans, commercial paper, bankers adjusted series consists of seasonally adjusted total reserves, which include acceptances, and other debt instruments. The source of data on domestic excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt currency component of the money stock plus the remaining items seasonally data Eire on an end-of-month basis. Growth rates for debt reflect adjustments for adjusted as a whole. discontinuities over time in the levels of debt presented in other tables. 4. Composition of the money stock measures and debt is as follows: 5. Sum of overnight RPs and Eurodollars, money market fund balances Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults (general purpose and broker/dealer), MMDAs, and savings and small time of commercial banks; (2) travelers checks of nonbank issuers; (3) demand deposits deposits less the estimated amount of demand deposits and vault cash held by at all commercial banks other than those due to domestic banks, the U.S. thrift institutions to service their time and savings deposit liabilities. government, and foreign banks and official institutions less cash items in the 6. Sum of large time deposits, term RPs, and Eurodollars of U.S. residents, process of collection and Federal Reserve float; and (4) other checkable deposits money market fund balances (institution-only), less a consolidation adjustment (OCD) consisting of negotiable order of withdrawal (NOW) and automatic transfer that represents the estimated amount of overnight RPs and Eurodollars held by service (ATS) accounts at depository institutions, credit union share draft institution-only money market mutual funds. accounts, and demand deposits at thrift institutions. The currency and demand 7. Excludes MMDAs. deposit components exclude the estimated amount of vault cash and demand 8. Small-denomination time deposits—including retail RPs—are those issued deposits respectively held by thrift institutions to service their OCD liabilities. in amounts of less than $100,000. All IRA and Keogh accounts at commercial M2: Ml plus overnight (and continuing contract) repurchase agreements (RPs) banks and thrifts are subtracted from small time deposits. issued by all commercial banks and overnight Eurodollars issued to U.S. residents 9. Large-denomination time deposits are those issued in amounts of $100,000 by foreign branches of U.S. banks worldwide, MMDAs, savings and small- or more, excluding those booked at international banking facilities. denomination time deposits (time deposits—including retail RPs—in amounts of 10. Large-denomination time deposits at commercial banks less those held by less than $100,000), and balances in both taxable and tax-exempt general purpose money market mutual funds, depository institutions, and foreign banks and and broker/dealer money market mutual funds. Excludes individual retirement official institutions. accounts (IRA) and Keogh balances at depository institutions and money market Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Nonfinancial Statistics • April 1983 1.11 RESERVE BALANCES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of daily figures Weekly averages of daily figures for week ending Factors 1984 1984 Jan. Feb. Mar.P Feb. 15 Feb. 22 Feb. 29 Mar. 7 Mar. 14 Mar. 21P Mar. 28p SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 172,027 166,904 168,738 167,033 166,805 166,408 167,085 169,028 169,316 168,956 2 U.S. government securities1 152.481 148,137 149,546 147,720 148,641 147,673 149,196 149,174 149,897 149,620 3 Bought outright 151.482 148,137 149,128 147,720 148,641 147,673 149,196 148,318 149,897 148,623 4 Held under repurchase agreements.... 999 0 418 0 0 0 0 856 0 997 5 Federal agency obligations 8,709 8,573 8,604 8,570 8,568 8,568 8,568 8,610 8,558 8,698 6 Bought outright 8,630 8,573 8,562 8,570 8,568 8,568 8,568 8,564 8,558 8,558 7 Held under repurchase agreements.... 79 0 42 0 0 0 0 46 0 140 8 Acceptances 76 0 14 0 0 0 0 I 0 59 9 Loans 726 588 905 753 634 507 493 886 1,077 1,195 10 Float 1,282 1,100 1,002 1,071 1,002 1,537 459 1,775 1,091 481 11 Other Federal Reserve assets 8,753 8,506 8,667 8,918 7,961 8,124 8,369 8,581 8,692 8,902 12 Gold stock 11,120 11,118 11,115 11,119 11,117 11,116 11,116 11,116 11,114 11,114 13 Special drawing rights certificate account.... 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 14 Treasury currency outstanding 15,757 15,813 15,863 15,808 15,822 15,835 15,843 15,855 15,867 15,879 ABSORBING RESERVE FUNDS 15 Currency in circulation 168,976 167,179 168,317 167,435 167,427 166,996 167,578 168,598 168,634 168,263 16 Treasury cash holdings 478 485 488 482 489 485 482 481 485 494 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,479 4,669 4,012 4,398 4,864 4,415 3,557 2,825 5,327 4,358 18 Foreign 216 214 229 218 215 220 258 224 225 210 19 Service-related balances and adjustments .... 1,941 1,452 1,940 1,574 1,311 1,372 1,457 1,553 1,596 1,548 20 Other 489 549 579 630 566 599 605 525 667 537 21 Other Federal Reserve liabilities and capital 5,617 5,492 5,705 5,497 5,420 537 5,719 5,634 5,570 5,832 22 Reserve balances with Federal Reserve Banks2 21,325 18,414 19,066 18,344 18,070 18,353 19,004 20,776 18,411 19,325 End-of-month figures Wednesday figures 1984 1984 Jan. Feb. Mar.P Feb. 15 Feb. 22 Feb. 29 Mar. 7 Mar. 14 Mar. 21 p Mar. 28? SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 169,225 161,971 170,168 168,462 167,459 161,971 165,964 174,644 170,957 165,262 24 U.S. government securities1 150,254 140,847 150,814 147,571 148,903 140,847 148,280 151,465 150,968 145,670 25 Bought outright 150,254 140,847 150,814 147,571 148,903 140,847 148,280 148,570 150,968 145,670 26 Held under repurchase agreements.... 0 0 0 0 0 0 0 2,895 0 0 27 Federal agency obligations 8,605 8,568 8,558 8,568 8,568 8,568 8,568 8,713 8,558 8,558 28 Bought outright 8,605 8,568 8,558 8,568 8,568 8,568 8,568 8,558 8,558 8,558 29 Held under repurchase agreements.... 0 0 0 0 0 0 0 155 0 0 30 Acceptances 0 0 0 0 0 0 0 5 0 0 31 Loans 418 1,020 8% 2,218 376 1,020 414 2,449 935 718 32 Float 846 3,193 787 2,087 1,527 3,193 -1,181 3,108 1,655 1,240 33 Other Federal Reserve assets 9,102 8,343 9,113 8,018 8,085 8,343 8,883 8,904 8,841 9,076 34 Gold stock 11,120 11,116 11,111 11,118 11,117 11,116 11,116 11,116 11,114 11,114 35 Special drawing rights certificate account . 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 36 Treasury currency outstanding 15,782 15,841 15,889 15,814 15,827 15,841 15,853 15,865 15,877 15,889 ABSORBING RESERVE FUNDS 37 Currency in circulation 166,501 167,206 168,737 167,725 167,633 167,206 168,206 168,863 168,528 168,488 38 Treasury cash holdings 492 484 503 489 486 484 482 484 493 503 Deposits, other than reserve balances with Federal Reserve Banks 39 Treasury 7,153 3,226 3,684 4,877 5,693 3,226 3,564 2,575 5,545 3,838 40 Foreign 252 247 221 260 195 247 294 283 241 187 41 Service-related balances and adjustments . 1,047 1,070 1,103 1,072 1,073 1,070 1,091 1,093 1,104 1,103 42 Other 410 498 562 607 524 498 519 502 550 506 43 Other Federal Reserve liabilities and capital 5,625 5,555 5,912 5,289 5,280 5,555 5,430 5,625 5,409 5,595 44 Reserve balances with Federal Reserve Banks2 19,263 15,260 21,064 19,694 18,136 15,260 17,966 26,819 20,696 16,663 1. Includes securities loaned—fully guaranteed by U.S government securities 2. Excludes required clearing balances and adjustments to compensate for pledged with Federal Reserve Banks—and excludes (if any) securities sold and float. scheduled to be bought back under matched sale-purchase transactions. 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

Depository Institutions A5 1.12 RESERVES AND BORROWINGS Depository Institutions Millions of dollars Monthly averages of daily figures RReesseerrvvee ccllaassssiiffiiccaattiioonn 1981 1982 1983 1984 Dec. Dec. July Aug. Sept. Oct. Nov. Dec. Jan. Feb.P 1 Reserve balances with Reserve Banks' 26,163 24,804 22,139 21,965 20,585 21,059 20,943 20,986 21,325 18,414 2 Total vault cash2 19,538 20,392 20,413 20,035 20,798 20,471 20,558 20,755 22,578 22,269 3 Vault cash used to satisfy reserve requirements3 . 15,755 17,049 16,808 16,695 17,331 17,078 17,201 17,908 18,795 17,951 4 Surplus vault cash4 3,783 3,343 3,605 3,340 3,467 3,393 3,357 2,847 3,782 4,318 5 Total reserves5 41,918 41,853 38,947 38,660 37,916 38,137 38,144 38,894 40,120 36,365 6 Required reserves 41,606 41,353 38,440 38,214 37,418 37,632 37,615 38,333 39,507 35,423 7 Excess reserve balances at Reserve Banks6 312 500 507 446 498 505 529 561 613 942 8 Total borrowings at Reserve Banks 642 697 1,382 1,573 1,441 837 912 745 715 567 9 Seasonal borrowings at Reserve Banks 53 33 172 198 191 142 119 96 86 103 10 Extended credit at Reserve Banks7 149 187 572 490 515 255 6 2 4 5 Weekly and biweekly averages of daily figures for week ending8 1983 1984 Dec. 28 Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 15P Feb. 29p Mar. 14 p Mar. 28P 11 Reserve balances with Reserve Banks' 20,854 22,305 21,443 21,466 20,956 20,798 18,445 18,212 19,874 18,879 12 Total vault cash2 21,292 20,912 21,508 24,027 23,238 22,475 22,774 21,750 19,981 20,935 13 Vault cash used to satisfy reserve requirements3 . 18,149 17,835 18,219 19,617 19,294 18,567 18,406 17,452 16,460 17,091 14 Surplus vault cash4 3,143 3,077 3,289 4,410 3,944 3,908 4,368 4,298 3,521 3,844 15 Total reserves5 39,003 40,140 39,662 41,083 40,250 39,365 36,851 35,664 36,334 35,970 16 Required reserves 38,567 39,182 38,980 40,608 39,670 38,862 35,656 34,943 35,640 35,297 17 Excess reserve balances at Reserve Banks6 436 958 682 475 580 503 1,195 721 694 672 18 Total borrowings at Reserve Banks 753 1,291 563 781 505 677 556 571 690 1,136 19 Seasonal borrowings at Reserve Banks 115 75 69 79 % 109 90 116 118 149 20 Extended credit at Reserve Banks7 3 5 2 4 6 3 3 7 22 31 1. Excludes required clearing balances and adjustments to compensate for adjustments to compensate for float plus vault cash used to satisfy reserve float. requirements. Such vault cash consists of all vault cash held during the lagged 2. Dates refer to the maintenance periods in which the vault cash can be used to computation period by institutions having required reserve balances at Federal satisfy reserve requirements. Under contemporaneous reserve requirements, Reserve Banks plus the amount of vault cash equal to required reserves during the maintenance periods end 30 days after the lagged computation periods in which maintenance period at institutions having no required reserve balances. the balances are held. 6. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy 3. Equal to all vault cash held during the lagged computation period by reserve requirements less required reserves. institutions having required reserve balances at Federal Reserve Banks plus the 7. Extended credit consists of borrowing at the discount window under the amount of vault cash equal to required reserves during the maintenance period at terms and conditions established for the extended credit program to help institutions having no required reserve balances. depository institutions deal with sustained liquidity pressures. Because there is 4. Total vault cash at institutions having no required reserve balances less the not the same need to repay such borrowing promptly as there is with traditional amount of vault cash equal to their required reserves during the maintenance short-term adjustment credit, the money market impact of extended credit is period. similar to that of nonborrowed reserves. 5. Total reserves not adjusted for discontinuities consist of reserve balances 8. Biweekly averages beginning Feb. 15, 1984. with Federal Reserve Banks, which exclude required clearing balances and 1.13 FEDERAL FUNDS AND REPURCHASE AGREEMENTS Large Member Banks1 Averages of daily figures, in millions of dollars 1984 week ending Monday BByy mmaattuurriittyy aanndd ssoouurrccee Feb. 1 Feb. 6 Feb. 13 Feb. 20 Feb. 27' Mar. 5 Mar. 12 Mar. 19 Mar. 26 One day and continuing contract 1 Commercial banks in United States 53,310 57,860 59,207' 58,037 53,719 57,784 58,444 55,056 53,253 2 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 23,324 23,998 26,065 25,325 24,739 24,028 24,534 24,542 24,458 3 Nonbank securities dealers 5,231 5,228 5,318 6,278 5,746 5,334 5,596 5,383 6,223 4 All other 27,630 26,411 26,569 28,316 27,196 26,400 26,646 26,538 25,928 All other maturities 5 Commercial banks in United States 6,522 6,163 6,821 6,273 6,889 7,236 7,787 7,732 77,,445544 6 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 9,303 9,097 9,614 9,065 9,367 9,476 10,010 10,710 10,670 7 Nonbank securities dealers 7,603 7,464' 8,059' 7,115' 7,637 8,097 8,021 8,035 8,209 8 All other 9,830 9,811 10,314 9,182 9,535 9,080 9,169 8,991 9,303 MEMO: Federal funds and resale agreement loans in maturities of one day or continuing contract 9 Commercial banks in United States 23,819 25,799 26,397 27,598 23,646 24,918 24,067 23,013 23,285 10 Nonbank securities dealers 4,784 5,057 5,254 6,798 5,871 6,230 5,371 5,293 4,404 1. Banks with assets of $1 billion or more as of Dec. 31, 1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • April 1983 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Extended credit' SShhoorrtt--tteerrmm aaddjjuussttmmeenntt ccrreeddiitt FFFeeedddeeerrraaalll RRReeessseeerrrvvveee aanndd sseeaassoonnaall ccrreeddiitt First 60 days Next 90 days BBBaaannnkkk of borrowing of borrowing After 150 days EEffffeeccttiivvee ddaattee ffoorr ccuurrrreenntt rraatteess Rate on Effective Previous Rate on Previous Rate on Previous Rate on Previous 3/31/84 date rate 3/31/84 rate 3/31/84 rate 3/31/84 rate Boston 8'/5 12/14/82 9 8'/! 9 9Vi 10 101/2 11 12/14/82 New York 12/15/82 12/15/82 Philadelphia 12/17/82 12/17/82 Cleveland 12/15/82 12/15/82 Richmond 12/15/82 12/15/82 Atlanta 12/14/82 12/14/82 Chicago 12/14/82 12/14/82 St. Louis 12/14/82 12/14/82 Minneapolis 12/14/82 12/14/82 Kansas City .... 12/15/82 12/15/82 Dallas 12/14/82 12/14/82 San Francisco... 12/14/82 9 8V5 9 m 10 101/2 1 12/14/82 Range of rates in recent years2 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. Ba of n k Effective date A le l v l e F l) . — R. Ba o n f k Effective date A le l v l e F l) . — R. Ba of n k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1973 m m 1978— July 3 7-7'/4 7'/4 11998811—— MMaayy 55 13-14 14 1974— Apr. 25 Vh-Z 10 71/4 71/4 88 14 14 3 0 8 Aug. 21 m 73/4 Nov. 2 13-14 13 Dec. 9 73/4-8 73/4 Sept. 22 8 8 6 13 13 16 73/4 73/4 Oct. 16 8-8'/I m Dec. 4 12 12 20 Wi 81/5 1975— Jan. 6 7'A-73A 73/4 Nov. 1 8V5-9l/2 9V5 1982— July 20 11V2-12 11V5 10 VM-VM 7'/4 3 9'/5 91/2 23 11'/5 111/2 24 IVA 71/4 Aug. 2 11-11V5 11 Feb. 5 63/4-7'/4 63/4 1979—July 20 10 10 3 11 11 7 63/4 63/4 Aug. 17 lO-lO'/i 10'/2 16 101/2 10'/5 Mar. 10 6'/4-63/4 6'/4 20 101/5 10'/> 27 10-10V2 10 14 6'/4 6'/4 Sept. 19 10^-11 11 30 10 10 May 16 6-6'/4 6 21 11 11 Oct. 12 91/2-10 9V5 23 6 6 Oct. 8 11-12 12 13 9'/5 91/2 10 12 12 Nov. 22 9-91/2 9 1976— Jan. 19 51/2-6 51/2 26 9 9 23 5'/5 5'/5 1980— Feb. 15 12-13 13 Dec. 14 81/2-9 9 Nov. 22 5'/4-5'/2 51/4 19 13 13 15 81/5-9 81/2 26 5 'A 51/4 May 29 12-13 13 17 81/2 8V5 30 12 12 1977— Aug. 30 5'/4-5.3/4 51/4 June 13 11-12 11 31 5'/4-53/4 53/4 16 Sept. 2 53/4 53/4 July 28 10-11 10 Oct. 26 6 6 29 10 10 Sept. 26 11 11 1978— Jan. 9 6-61/5 6'/5 Nov. 17 12 12 20 61/2 61/2 Dec. 5 12-13 13 May 11 6V5-7 7 13 13 12 7 7 In effect Mar. 31, 1984 8'/5 8'/2 1. Applicable to advances when exceptional circumstances or practices involve In 1980 and 1981, the Federal Reserve applied a surcharge to short-term only a particular depository institution and to advances when an institution is adjustment credit borrowings by institutions with deposits of $500 million or more under sustained liquidity pressures. See section 201.3(b)(2) of Regulation A. that had borrowed in successive weeks or in more than 4 weeks in a calendar 2. Rates for short-term adjustment credit. For description and earlier data see quarter. A 3 percent surcharge was in effect from Mar. 17, 1980, through May 7, the following publications of the Board of Governors: Banking and Monetary 1980. There was no surcharge until Nov. 17, 1980, when a 2 percent surcharge was Statistics, 1914-1941, and 1941-1970; Annual Statistical Digest, 1970-1979, 1980, adopted; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and 1981, and 1982. to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, and to 2 percent effective Oct. 12. As of Oct. 1, the formula for applying the surcharge was changed from a calendar quarter to a moving 13-week period. The surcharge was eliminated on Nov. 17, 1981. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments Al 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Percent of deposits Member bank requirements Depository institution requirements before implementation of the after implementation of the TTyyppee ooff ddeeppoossiitt,, aanndd Monetary Control Act TTyyppee ooff ddeeppoossiitt,, aanndd Monetary Control Act6 ddeeppoossiitt iinntteerrvvaall ddeeppoossiitt iinntteerrvvaall55 Percent Effective date Percent Effective date Net demand2 Net transaction accounts1 -8 7 12/30/76 $0-$28.9 million 3 12/29/83 91/2 12/30/76 Over $28.9 million 1122 1122//2299//8833 $10 million-$100 million 115/4 12/30/76 $100 million-$400 million 123/4 12/30/76 Nonpersonal time deposits9 Over $400 million 16'/4 12/30/76 By original maturity Less than 1 Vi years 3 10/6/83 Time and savings2-3 1V2 years or more 0 10/6/83 Savings 3 3/16/67 Eurocurrency liabilities Time4 All types 3 11/13/80 $0 million-$5 million, by maturity 30-179 days 3 3/16/67 180 days to 4 years 2'/2 1/8/76 4 years or more 1 10/30/75 Over $5 million, by maturity 30-179 days 6 12/12/74 180 days to 4 years 2'/2 1/8/76 4 years or more 1 10/30/75 1. For changes in reserve requirements beginning 1963, see Board's Annual 5. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97- Statistical Digest, 1971-1975, and for prior changes, see Board's Annual Report 320) provides that $2 million of reservable liabilities (transaction accounts, for 1976, table 13. Under provisions of the Monetary Control Act, depository nonpersonal time deposits, and Eurocurrency liabilities) of each depository institutions include commercial banks, mutual savings banks, savings and loan institution be subject to a zero percent reserve requirement. The Board is to adjust associations, credit unions, agencies and branches of foreign banks, and Edge Act the amount of reservable liabilities subject to this zero percent reserve requirecorporations. ment each year for the next succeeding calendar year by 80 percent of the 2. Requirement schedules are graduated, and each deposit interval applies to percentage increase in the total reservable liabilities of all depository institutions, that part of the deposits of each bank. Demand deposits subject to reserve measured on an annual basis as of June 30. No corresponding adjustment is to be requirements were gross demand deposits minus cash items in process of made in the event of a decrease. Effective Dec. 9, 1982, the amount of the collection and demand balances due from domestic banks. exemption was established at $2.1 million. Effective with the reserve maintenance The Federal Reserve Act as amended through 1978 specified different ranges of period beginning Jan. 12, 1984, the amount of the exemption is $2.2 million. In requirements for reserve city banks and for other banks. Reserve cities were determining the reserve requirements of a depository institution, the exemption designated under a criterion adopted effective Nov. 9, 1972, by which a bank shall apply in the following order: (1) nonpersonal money market deposit accounts having net demand deposits of more than $400 million was considered to have the (MMDAs) authorized under 12 CFR section 1204.122; (2) net NOW accounts character of business of a reserve city bank. The presence of the head office of (NOW accounts less allowable deductions); (3) net other transaction accounts; such a bank constituted designation of that place as a reserve city. Cities in which and (4) nonpersonal time deposits or Eurocurrency liabilities starting with those there were Federal Reserve Banks or branches were also reserve cities. Any with the highest reserve ratio. With respect to NOW accounts and other banks having net demand deposits of $400 million or less were considered to have transaction accounts, the exemption applies only to such accounts that would be the character of business of banks outside of reserve cities and were permitted to subject to a 3 percent reserve requirement. maintain reserves at ratios set for banks not in reserve cities. 6. For nonmember banks and thrift institutions that were not members of the Effective Aug. 24, 1978. the Regulation M reserve requirements on net balances Federal Reserve System on or after July 1, 1979, a phase-in period ends Sept. 3, due from domestic banks to their foreign branches and on deposits that foreign 1987. For banks that were members on or after July 1, 1979, but withdrew on or branches lend to U.S. residents were reduced to zero from 4 percent and 1 percent before Mar. 31, 1980, the phase-in period established by Public Law 97-320 ends respectively. The Regulation D reserve requirement of borrowings from unrelated on Oct. 24, 1985. For existing member banks the phase-in period of about three banks abroad was also reduced to zero from 4 percent. years was completed on Feb. 2, 1984. All new institutions will have a two-year Effective with the reserve computation period beginning Nov. 16, 1978, phase-in beginning with the date that they open for business, except for those domestic deposits of Edge corporations were subject to the same reserve institutions that have total reservable liabilities of $50 million or more. requirements as deposits of member banks. 7. Transaction accounts include all deposits on which the account holder is 3. Negotiable order of withdrawal (NOW) accounts and time deposits such as permitted to make withdrawals by negotiable or transferable instruments, pay- Christmas and vacation club accounts were subject to the same requirements as ment orders of withdrawal, and telephone and preauthorized transfers (in excess savings deposits. of three per month) for the purpose of making payments to third persons or others. The average reserve requirement on savings and other time deposits before However, MMDAs and similar accounts offered by institutions not subject to the implementation of the Monetary Control Act had to be at least 3 percent, the rules of the Depository Institutions Deregulation Committee (DIDC) that permit minimum specified by law. no more than six preauthorized, automatic, or other transfers per month of which 4. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent no more than three can be checks—are not transaction accounts (such accounts was imposed on large time deposits of $100,000 or more, obligations of affiliates, are savings deposits subject to time deposit reserve requirements.) and ineligible acceptances. This supplementary requirement was eliminated with 8. The Monetary Control Act of 1980 requires that the amount of transaction the maintenance period beginning July 24, 1980. accounts against which the 3 percent reserve requirement applies be modified Effective with the reserve maintenance period beginning Oct. 25, 1979, a annually by 80 percent of the percentage increase in transaction accounts held by marginal reserve requirement of 8 percent was added to managed liabilities in all depository institutions determined as of June 30 each year. Effective Dec. 31, excess of a base amount. This marginal requirement was increased to 10 percent 1981, the amount was increased accordingly from $25 million to $26 million; and beginning Apr. 3, 1980, was decreased to 5 percent beginning June 12, 1980, and effective Dec. 30, 1982, to $26.3 million; and effective Dec. 29, 1983, to $28.9 was eliminated beginning July 24, 1980. Managed liabilities are defined as large million. time deposits, Eurodollar borrowings, repurchase agreements against U.S. 9. In general, nonpersonal time deposits are time deposits, including savings government and federal agency securities, federal funds borrowings from non- deposits, that are not transaction accounts and in which a beneficial interest is member institutions, and certain other obligations. In general, the base for the held by a depositor that is not a natural person. Also included are certain marginal reserve requirement was originally the greater of (a) $100 million or (b) transferable time deposits held by natural persons, and certain obligations issued the average amount of the managed liabilities held by a member bank, Edge to depository institution offices located outside the United States. For details, see corporation, or family of U.S. branches and agencies of a foreign bank for the two section 204.2 of Regulation D. reserve computation periods ending Sept. 26, 1979. For the computation period beginning Mar. 20, 1980, the base was lowered by (a) 7 percent or (b) the decrease NOTE. Required reserves must be held in the form of deposits with Federal in an institution's U.S. office gross loans to foreigners and gross balances due Reserve Banks or vault cash. Nonmembers may maintain reserve balances with a from foreign offices of other institutions between the base period (Sept. 13-26, Federal Reserve Bank indirectly on a pass-through basis with certain approved 1979) and the week ending Mar. 12, 1980, whichever was greater. For the institutions. computation period beginning May 29, 1980, the base was increased by 7Vi percent above the base used to calculate the marginal reserve in the statement week of May 14-21, 1980. In addition, beginning Mar. 19, 1980, the base was reduced to the extent that foreign loans and balances declined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • April 1983 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 (thrift institutions)' In effect Mar. 31, 1984 In effect Mar. 31, 1984 Type of deposit Percent Effective date Effective date 1 Savings 5'/2 1/1/84 5'/> 7/1/79 2 Negotiable order of withdrawal accounts 51/4 12/31/80 5'/4 12/31/80 3 Negotiable order of withdrawal accounts of $2,500 or more2 1/5/83 1/5/83 4 Money market deposit account2 12/14/82 12/14/82 Time accounts by maturity 5 7-31 days of less than $2,5004 51/5 1/1/84 5'/2 9/1/82 6 7-31 days of $2,500 or more2 1/5/83 1/5/83 7 More than 31 days 10/1/83 10/1/83 1. Effective Oct. 1, 1983, restrictions on the maximum rates of interest payable period is required for this account, but depository institutions must reserve the by commercial banks and thrift institutions on various categories of deposits were right to require seven days notice before withdrawals. When the average balance removed. For information regarding previous interest rate ceilings on all catego- is less than $2,500, the account is subject to the maximum ceiling rate of interest ries of accounts see earlier issues of the FEDERAL RESERVE BULLETIN, the for NOW accounts; compliance with the average balance requirement may be Federal Home Loan Bank Board Journal, and the Annual Report of the Federal determined over a period of one month. Depository institutions may not guarantee Deposit Insurance Corporation before November 1983. a rate of interest for this account for a period longer than one month or condition 2. Effective Dec. 1, 1983, IRA/Keogh (HR10) Plan accounts are not subject to the payment of a rate on a requirement that the funds remain on deposit for longer minimum deposit requirements. than one month. 3. Effective Dec. 14, 1982, depository institutions are authorized to offer a new 4. Deposits of less than $2,500 issued to governmental units continue to be account with a required initial balance of $2,500 and an average maintenance subject to an interest rate ceiling of 8 percent. balance of $2,500 not subject to interest rate restrictions. No minimum maturity Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS Millions of dollars 1983 1984 TTyyppee ooff ttrraannssaaccttiioonn 11998811 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan. Feb. U.S. GOVERNMENT SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 13,899 17,067 18,888 1,768 3,184 309 1,435 33,,669955 0 336688 2 Gross sales 6,746 8,369 3,420 289 214 0 0 0 1,967 828 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 1,816 3,000 2,400 0 500 0 700 0 1,300 600 Others within 1 year 5 Gross purchases 317 312 484 0 0 0 155 00 00 00 6 Gross sales 23 0 0 0 0 0 0 0 0 0 7 Maturity shift 13,794 17,295 18,887 2,212 902 529 2,828 915 573 -2,488 8 Exchange -12,869 -14,164 -16,553 -5,344 -753 -636 -2,930 0 1,530 -4,574 9 Redemptions 0 0 87 0 0 0 0 0 0 0 1 to 5 years 10 Gross purchases 1,702 1,797 1,896 0 0 0 882200 00 00 00 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shift -10,299 -14,524 -15,533 -2,212 -902 -256 -1,684 -915 -487 2,488 13 Exchange 10,117 11,804 11,641 3,130 753 636 1,796 0 1,530 2,861 5 to 10 years 14 Gross purchases 393 388 890 0 0 0 349 00 00 0 15 Gross sales 0 0 0 0 0 0 0 0 300 0 16 Maturity shift -3,495 -2,172 -2,450 516 0 -273 -250 0 -86 97 17 Exchange 1,500 2,128 2,950 1,300 0 0 700 0 0 1,000 Over 10 years 18 Gross purchases 379 307 383 0 0 0 151 00 00 00 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift 0 -601 -904 -516 0 0 -894 0 0 -97 21 Exchange 1,253 234 1,962 914 0 0 434 0 0 713 All maturities 22 Gross purchases 16,690 19,870 22,540 1,768 3,184 309 2,909 33,,669955 0 368 23 Gross sales 6,769 8,369 3,420 289 214 0 0 0 2,267 828 24 Redemptions 1,816 3,000 2,487 0 500 0 700 0 1,300 600 Matched transactions 25 Gross sales 589,312 543,804 578,591 45,989 48,193 53,751 56,858 58,979 54,833 55,656 26 Gross purchases 589,647 543,173 576,908 44,480 47,667 53,367 57,991 56,404 58,096 47,310 Repurchase agreements 27 Gross purchases 79,920 130,774 105,971 2,263 37,211 19,247 33,,225577 33,,664444 1144,,224455 00 28 Gross sales 78,733 130,286 108,291 0 30,223 28,499 3,257 2,260 15,629 0 29 Net change in U.S. government securities 9,626 8,358 12,631 2,234 8,933 -9,326 3,342 2,504 -1,688 -9,407 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchaises 494 0 0 00 00 00 00 00 00 00 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 108 189 292 138 5 6 84 2 40 38 Repurchase agreements 33 Gross purchases 13,320 18,957 8,833 189 2,871 1,960 497 663344 931 0 34 Gross sales 13,576 18,638 9,213 0 2,510 2,510 497 426 1,139 0 35 Net change in federal agency obligations 130 130 -672 51 356 -557 -84 206 -248 -38 BANKERS ACCEPTANCES 36 Repurchase agreements, net -582 1,285 -1,062 209 913 -1,122 0 418 -418 0 37 Total net change in System Open Market Account 9,175 9,773 10,897 2,493 10,203 -11,005 3,258 33,,112288 -2,354 -9,444 NOTE: Sales, redemptions, and negative figures reduce holdings of the System Open Market Account; all other figures increase such holdings. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • April 1983 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month AAccccoouunntt 1984 1984 Feb. 29 Mar. 7 Mar. 14 Mar. 21 Mar. 28 Jan. Feb. Mar. Consolidated condition statement ASSETS 1 Gold certificate account 11,116 11,116 11,116 11,114 11,114 11,120 11,116 11,111 2 Special drawing rights certificate account 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 3 Coin 534 533 529 521 515 498 534 520 Loans 4 To depository institutions 1,020 414 2,449 935 718 418 1,020 896 5 Other 0 0 0 0 0 0 0 0 Acceptances—Bought outright 6 Held under repurchase agreements 0 00 5 00 00 00 00 00 Federal agency obligations 7 Bought outright 8,568 8,568 8,558 8,558 88,,555588 8,605 88,,556688 88,,555588 8 Held under repurchase agreements 0 0 155 0 0 0 0 0 U.S. government securities Bought outright 9 Bills 56,399 64,832 64,122 66,520 6611,,222222 6655,,880066 56,399 66,366 10 Notes 62,921 62,921 62,921 62,921 62,921 63,634 62,921 62,921 11 Bonds 21,527 21,527 21,527 21,527 21,527 20,814 21,527 21,527 12 Total bought outright1 140,847 149,280 148,570 150,968 145,670 150,254 140,847 150,814 13 Held under repurchase agreements 0 0 2,895 0 0 0 0 0 14 Total U.S. government securities 140,847 149,280 151,465 150,968 145,670 150,254 140,847 150,814 15 Total loans and securities 150,435 158,262 162,632 160,461 154,946 159,277 150,435 160,268 16 Cash items in process of collection 11,193 5,943 10,180 8,838 8,181 10,383 11,193 7,698 17 Bank premises 549 549 549 549 549 548 549 549 Other assets 18 Denominated in foreign currencies2 3,915 3,918 3,936 3,937 3,942 3,700 3,915 4,011 19 All other3 3,879 4,416 4,419 4,355 4,585 4,854 3,879 4,553 20 Total assets 186,239 189,355 197,979 194,393 188,450 194,998 186,239 193,328 LIABILITIES 21 Federal Reserve notes 152,383 153,367 154,010 153,665 153,617 151,711 152,383 153,871 Deposits 22 To depository institutions 16,330 19,057 27,912 21,800 17,766 20,361 16,330 22,167 23 U.S. Treasury—General account 3,226 3,564 2,575 5,545 3,838 7,153 3,226 3,684 24 Foreign Official accounts 247 294 283 241 187 252 247 221 25 Other 498 519 502 550 506 359 498 562 26 Total deposits 20,301 23,434 31,272 28,136 22,297 28,125 20,301 26,634 27 Deferred availability cash items 8,000 7,124 7,072 7,183 6,941 9,537 8,000 6,911 28 Other liabilities and accrued dividends4 2,099 2,159 2,335 2,124 2,301 2,188 2,099 2,427 29 Total liabilities 182,783 186,084 194,689 191,108 185,156 191,561 182,783 189,843 CAPITAL ACCOUNTS 30 Capital paid in 1,482 1,493 1,495 1,496 1,498 1,468 1,482 1,499 31 Surplus 1,465 1,465 1,465 1,465 1,465 1,465 1,465 1,465 32 Other capital accounts 509 313 330 324 331 504 509 521 33 Total liabilities and capital accounts 186,239 189,355 197,979 194,393 188,450 194,998 186,239 193,328 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 119,391 117,970 116,645 114,867 117,565 112,311 119,391 113,547 Federal Reserve note statement 35 Federal Reserve notes outstanding 182,185 182,499 182,742 183,088 183,081 180,570 182,185 183,132 36 LESS: Held bv bank5 29,838 29,132 28,732 29,423 29,464 28,859 29,838 29,261 37 Federal Reserve notes, net 152,347 153,367 154,010 153,665 153,617 151,711 152,347 153,871 Collateral held against notes net: 38 Gold certificate account 11,116 11,116 11,116 11,114 11,114 11,120 11,116 11,111 39 Special drawing rights certificate account 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. government and agency securities 136,613 137,633 138,276 137,933 137,885 135,973 136,613 138,142 42 Total collateral 152,347 153,367 154,010 153,665 153,617 151,711 152,347 153,871 1. Includes securities loaned—fully guaranteed by U.S. government securities 4. Includes exchange-translation account reflecting the monthly revaluation at pledged with Federal Reserve Banks—and excludes (if any) securities sold and market exchange rates of foreign-exchange commitments. scheduled to be bought back under matched sale-purchase transactions. 5. Beginning September 1980, Federal Reserve notes held by the Reserve Bank 2. Assets shown in this line are revalued monthly at market exchange rates. are exempt from the collateral requirement. 3. Includes special investment account at Chicago of Treasury bills maturing within 90 days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Reserve Banks; Banking Aggregates A11 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month Type and maturity groupings 1984 Feb. 29 Feb. 29 1 Loans—Total 1,020 414 2,449 935 7)8 418 1,020 2 Within 15 days 941 365 2,394 910 678 387 941 4 3 9 1 1 6 d d a a y y s s t t o o 9 1 0 y d ea a r y s 79 0 49 0 55 0 25 0 40 0 3 0 1 79 0 6 7 5 8 Ac 9 W 1 c 1 6 e i p t d d h t a a i a n y y n s s c 1 e t t 5 o o s — d 9 1 a 0 T y y d s o e a a ta r y l s 0 0 0 0 0 0 0 0 0 0 5 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 U.S. government securities—Total 140,847 149,280 151,465 150,968 145,670 150,254 140,847 10 Within 15 days' 4,499 9,284 10.195 10,251 5,045 6,295 4,499 11 16 days to 90 days 25,076 29,061 30,285 31,510 29,318 35,451 25,076 12 91 days to 1 year 43,925 43,587 43,637 41,859 43,959 43,246 43,925 13 Over 1 year to 5 years 34,521 34,522 34,522 34,522 34,522 34,149 34,521 14 Over 5 years to 10 years 14,196 14,196 14.196 14,196 14,196 13,099 14,196 15 Over 10 years 18,630 18,630 18,630 18,630 18,630 18,014 18,630 16 Federal agency obligations—Total. 8,568 8,568 8,7)3 8,558 8,558 8,605 8,568 17 Within 15 days' 162 61 159 155 188 212 162 18 16 days to 90 days 688 761 844 693 763 685 688 19 91 days to 1 year 1,587 1,627 1,701 1,701 1,668 1,696 1,587 20 Over 1 year to 5 years 4,378 4,356 4,246 4,246 4,176 4,290 4,378 21 Over 5 years to 10 years 1,350 1,360 1,360 1,360 1,360 1,319 1,350 22 Over 10 years 403 403 403 403 403 403 403 1. Holdings under repurchase agreements are classified as maturing within 15 days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 DomesticN onfinancial Statistics • April 1983 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1983 1984 11998800 11998811 11998822 11998833 IItteemm DDeecc.. DDeecc.. DDeecc.. DDeecc.. July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS'' 11 TToottaall rreesseerrvveess22 30.64 31.51 33.63 35.28 35.19 35.22 35.31 35.32 35.25 35.28 35.50 36.07 22 NNoonnbboorrrroowweedd rreesseerrvveess 28.95 30.88 33.00 34.51 33.74 33.67 33.87 34.47 34.34 34.51 34.79 35.50 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt33 28.95 31.03 33.18 34.51 34.32 34.16 34.38 34.73 34.35 34.51 34.79 35.50 44 RReeqquuiirreedd rreesseerrvveess 30.13 31.20 33.13 34.72 34.69 34.77 34.81 34.81 34.72 34.72 34.89 35.12 55 MMoonneettaarryy bbaassee44 150.11 157.82 169.81 184.97 179.31 180.13 181.78 182.85 183.95 184.97 186.94 188.58 Not seasonally adjusted 6 Total reserves2 31.34 32.23 34.35 36.00 34.98 34.71 35.01 35.31 35.35 36.00 37.30 35.65 7 Nonborrowed reserves 29.65 31.59 33.71 35.22 33.53 33.17 33.57 34.47 34.45 35.22 36.59 35.09 8 Nonborrowed reserves plus extended credit3 29.65 31.74 33.90 35.23 34.10 33.66 34.08 34.73 34.45 35.23 36.59 35.09 9 Required reserves 30.82 31.91 33.85 35.44 34.47 34.27 34.51 34.81 34.82 35.44 36.69 34.71 10 Monetary base4 152.80 160.65 172.83 188.23 180.18 180.14 181.24 182.67 185.04 188.23 188.10 185.93 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 40.66 41.93 41.85 38.89 38.95 38.66 37.92 38.14 38.14 38.89 40.12 36.37 12 Nonborrowed reserves 38.97 41.29 41.22 38.12 37.50 37.11 36.48 37.29 37.24 38.12 39.41 35.80 13 Nonborrowed reserves plus extended credit3 38.97 41.44 41.41 38.12 38.07 37.61 36.99 37.55 37.25 38.12 39.41 35.80 14 Required reserves 40.15 41.61 41.35 38.33 38.44 38.21 37.42 37.63 37.62 38.33 39.41 35.42 15 Monetary base4 163.00 170.47 180.52 192.36 185.30 185.40 185.11 186.60 188.97 192.36 192.30 186.67 1. Figures incorporate adjustments for discontinuities associated with the Reserve Banks and the currency component of the money stock less the amount implementation of the Monetary Control Act and other regulatory changes to of vault cash holdings of thrift institutions that is included in the currency reserve requirements. To adjust for discontinuities due to changes in reserve component of the money stock plus, for institutions not having required reserve requirements on reservable nondeposit liabilities, the sum of such required balances, the excess of current vault cash over the amount applied to satisfy reserves is subtracted from the actual series. Similarly, in adjusting for discontin- current reserve requirements. After the introduction of contemporaneous reserve uities in the monetary base, required clearing balances and adjustments to requirements (CRR), currency and vault cash figures are measured over the compensate for float also are subtracted from the actual series. weekly computation period ending Monday. 2. Total reserves not adjusted for discontinuities consist of reserve balances Before CRR, all components of the monetary base other than excess reserves with Federal Reserve Banks, which exclude required clearing balances and are seasonally adjusted as a whole, rather than by component, and excess adjustments to compensate for float, plus vault cash used to satisfy reserve reserves are added on a not seasonally adjusted basis. After CRR, the seasonally requirements. Such vault cash consists of all vault cash held during the lagged adjusted series consists of seasonally adjusted total reserves, which include computation period by institutions having required reserve balances at Federal excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted Reserve Banks plus the amount of vault cash equal to required reserves during the currency component of the money stock and the remaining items seasonally maintenance period at institutions having no required reserve balances. adjusted as a whole. 3. Extended credit consists of borrowing at the discount window under the 5. Reflects actual reserve requirements, including those on nondeposit liabilterms and conditions established for the extended credit program to help ities, with no adjustments to eliminate the effects of discontinuities associated depository institutions deal with sustained liquidity pressures. Because there is with implementation of the Monetary Control Act or other regulatory changes to not the same need to repay such borrowing promptly as there is with traditional reserve requirements. short-term adjustment credit, the money market impact of extended credit is similar to that of nonborrowed reserves. NOTE. Latest monthly and biweekly figures are available from the Board's 4. The monetary base not adjusted for discontinuities consists of total reserves H.3(502) statistical release. Historical data and estimates of the impact on plus required clearing balances and adjustments to compensate for float at Federal required reserves of changes in reserve requirements are available from the Banking Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Aggregates A13 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Billions of dollars, averages of daily figures 1983 1984 1980 1981 1982 1983 DDeecc.. DDeecc.. DDeecc.. DDeecc.. NNoovv.. DDeecc.. JJaann.. FFeebb.. Seasonally adjusted 1 Ml 414.9 441.9 480.5 525.3 523.0 525.3 523.0 532.9 2 M2 1,632.6 1,796.6 1,965.3 2,196.1 2,182.1 2,196.1 2,206.2 2,222.0 M3 1,989.8 2,236.7 2,460.3 2,706.8 2,688.9 2,706.8 2,720.5 2,743.2 4 L 2,326.0 2,598.4 2,868.7 3,175.5 3,147.4 3,175.5 n.a. n.a. 5 Debt2 3,946.9 4,323.8 4,710.1 5,219.0 5,166.1 5,219.0 5,271.9 n.a. Ml components 6 Currency2 116.7 124.0 134.1 148.0 147.2 148.0 149.9 150.2 7 Travelers checks3 4.2 4.3 4.3 4.9 4.9 4.9 4.9 5.0 8 Demand deposits4 266.5 236.2 239.7 243.7 242.8 243.7 244.5 243.8 9 Other checkable deposits5 27.6 77.4 102.4 128.8 128.2 128.8 130.7 133.9 Nontransactions components 10 In M26 1,217.7 1,354.6 1,484.8 1,670.8 1,659.2 1,670.8 1,676.2 1,689.1 11 In M3 only7 357.2 440.2 495.0 510.7 506.7 510.7 514.3 521.2 Savings deposits9 12 Commercial Banks 185.9 159.7 164.9 134.6 136.1 134.6 132.1 130.1 13 Thrift Institutions 215.6 186.1 197.2 178.2 179.2 178.2 177.7 176.4 Small denomination time deposits9 14 Commerical Banks 287.5 349.6 382.2 353.1 350.0 353.1 352.9 352.8 15 Thrift Institutions 443.9 477.7 474.7 440.0 435.5 440.0 444.1 448.3 Money market mutual funds 16 General purpose and broker/dealer 61.6 150.6 185.2 138.2 138.8 138.2 137.9 142.2 17 Institution-only 15.0 36.2 48.4 40.3 40.6 40.3 40.6 41.6 Large denomination time deposits10 18 Commercial Banks" 213.9 247.3 261.8 225.5 224.2 225.5 227.7 227.7 19 Thrift Institutions 44.6 54.3 66.1 100.3 96.6 100.3 106.1 111.7 Debt components 20 Federal debt 742.8 830.1 991.4 1,177.9 1,169.7 1,177.9 1204.8 n.a. 21 Non-federal debt 3,204.1 3,493.7 3,718.7 4,041.0 3,996.4 4,041.0 4067.1 n.a. Not seasonally adjusted 22 Ml 424.8 452.3 491.9 537.8 526.7 537.8 534.8 521.9 23 M2 1,635.4 1,798.7 1,967.4 2,198.0 2,181.2 2,198.0 2,210.0 2,211.8 24 M3 1,996.1 2,242.7 2,466.6 2,712.9 2,689.9 2,712.9 2,726.3 2,735.9 25 L 2,332.8 2,605.6 2,876.5 3,183.3 3,148.6 3,183.3 n.a. n.a. 26 Debt2 3,946.9 4,323.8 4,710.1 5,219.0 5,153.7 5,219.0 5,259.9 n.a. Ml components 27 Currency2 118.8 126.1 136.4 150.5 147.9 150.5 148.4 148.3 28 Travelers checks3 3.9 4.1 4.1 4.6 4.6 4.6 4.6 4.7 29 Demand deposits4 274.7 243.6 247.3 251.6 245.2 251.6 249.4 237.9 30 Other checkable deposits5 27.4 78.5 104.1 131.2 128.9 131.2 132.5 130.9 Nontransactions components 31 M26 1,210.6 1,346.3 1,475.5 1,660.1 1,654.5 1,660.1 1,675.1 1,689.9 32 M3 only7 360.7 444.1 499.2 515.0 508.8 515.0 516.4 524.1 Money market deposit accounts 33 Commercial banks n.a. n.a. 26.3 230.1 227.1 230.1 234.2 238.3 34 Thrift institutions n.a. n.a. 16.6 146.0 145.8 146.0 146.3 147.9 Savings deposits8 35 Commercial Banks 183.8 157.5 162.1 132.0 133.7 132.0 131.3 129.9 36 Thrift Institutions 214.4 184.7 195.5 176.5 178.3 176.5 176.1 175.2 Small denomination time deposits9 37 Commercial Banks 286.0 347.7 380.1 351.0 348.9 351.0 353.7 355.3 38 Thrift Institutions 442.3 475.6 472.4 437.6 434.2 437.6 445.7 450.2 Money market mutual funds 39 General purpose and broker/dealer 61.6 150.6 185.2 138.2 138.8 138.2 137.9 142.2 40 Institution-only 15.0 36.2 48.4 40.3 40.6 40.3 40.6 41.6 Large denomination time deposits10 41 Commercial Banks" 218.5 252.1 266.2 228.9 225.5 228.9 228.8 229.1 42 Thrift Institutions 44.3 54.3 66.2 100.7 98.3 100.7 105.5 110.9 Debt components 43 Federal debt 742.8 830.1 991.4 1,177.9 1,169.7 1,177.9 1,204.8 n.a. 44 Non-federal debt 3,204.1 3,943.7 3,718.7 4,041.0 3,996.4 4,041.0 4,067.1 n.a. For notes see bottom of next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • April 1983 1.22 BANK DEBITS AND DEPOSIT TURNOVER Debits are shown in billions of dollars, turnover as ratio of debits to deposits. Monthly data are at annual rates. 1983 1984 Aug. Sept. Oct. Nov. Dec/ Jan. DEBITS TO Seasonally adjusted Demand deposits2 1 All insured banks 80,858.7 90,914.4 109,642.5 111,538.1 110,700.7 118,407.2 114,466.6 115,381.5 120,954.6 2 Major New York City banks 33,891.9 37,932.9 47,769.4 48,373.3 46,903.7 52,639.9 49,715.8 48,255.7 51,952.5 3 Other banks 46,966.9 52,981.6 61,873.1 63,164.9 63,796.9 65,767.3 64,750.8 67,125.8 69,002.2 4 ATS-NOW accounts3 743.4 1,036.2 1,405.5 1,679.5 1,495.9 1,392.8 1,447.4 1,499.6 1,345.1 5 Savings deposits4 672.7 721.4 741.4 706.3 712.7 643.7 674.9 661.4 620.8 DEPOSIT TURNOVER Demand deposits2 6 All insured banks 285.8 324.2 380.5 385.7 384.7 409.6 398.3 395.7 414.2 7 Major New York City banks 1,105.1 1,287.6 1,528.0 1,526.7 1,508.8 1,703.8 1,645.6 1,541.4 1,650.9 8 Other banks 186.2 211.1 240.9 245.3 248.6 254.7 251.8 257.9 264.9 9 ATS-NOW accounts3 14.0 14.5 15.6 17.9 15.9 14.9 15.5 15.9 13.8 10 Savings deposits4 4.1 4.5 5.4 5.2 5.3 4.9 5.1 5.0 4.7 Not seasonally adjusted DEBITS TO Demand deposits2 11 All insured banks 81,197.9 91,031.9 109,517.7 115,776.6 111,741.3 114,191.9 110,963.9 122,558.3 123,567.2 12 Major New York City banks 34,032.0 38,001.0 47,707.4 49,788.2 48,276.1 49,910.9 47.508.1 52,418.5 52,895.2 13 Other banks 47,165.9 53,030.9 61,810.3 65,988.3 63,465.2 64,280.9 63,455.8 70,139.7 70,672.0 14 ATS-NOW accounts3 737.6 1,027.1 1,397.8 1,468.9 1,388.3 1,373.2 1,327.2 1,465.4 1,601.5 15 MMDA5 0 0 573.5 655.5 641.4 700.3 639.1 745.8 793.4 16 Savings deposits4 672.9 720.0 742.0 694.3 688.9 672.9 635.3 647.1 672.5 DEPOSIT TURNOVER Demand deposits2 17 All insured banks 286.1 325.0 379.9 406.7 387.2 391.1 381.7 407.0 412.3 18 Major New York City banks 1,114.2 1,295.7 1,526.6 1,621.6 1,574.5 1,595.5 1,553.4 1,613.6 1,581.5 19 Other banks 186.2 211.5 240.5 259.8 246.1 246.6 244.0 261.1 265.4 20 ATS-NOW accounts3 14.0 14.3 15.5 16.0 15.0 14.6 14.0 15.1 16.2 21 MMDA5 0 0 2.8 3.0 2.9 3.2 2.8 3.3 3.4 22 Savings deposits4 4.1 4.5 5.4 5.1 5.2 5.1 4.8 4.9 5.2 1. Annual averages of monthly figures. NOTE. Historical data for demand deposits are available back to 1970 estimated 2. Represents accounts of individuals, partnerships, and corporations and of in part from the debits series for 233 SMSAs that were available through June states and political subdivisions. 1977. Historical data for ATS-NOW and savings deposits are available back to 3. Accounts authorized for negotiable orders of withdrawal (NOW) and ac- July 1977. Back data are available on request from the Banking Section, Division counts authorized for automatic transfer to demand deposits (ATS). ATS data of Research and Statistics, Board of Governors of the Federal Reserve System, availability starts with December 1978. Washington, D.C. 20551. 4. Excludes ATS and NOW accounts, MMDA and special club accounts, such as Christmas and vacation clubs. 5. Money market deposit accounts. NOTES TO TABLE 1.21 1. Composition of the money stock measures and debt is as follows: 2. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults commercial banks. Excludes the estimated amount of vault cash held by thrift of commercial banks; (2) travelers checks of nonbank issuers; (3) demand deposits institutions to service their OCD liabilities. at all commercial banks other than those due to domestic banks, the U.S. 3. Outstanding amount of U.S. dollar-denominated travelers checks of nongovernment, and foreign banks and official institutions less cash items in the bank issuers. Travelers checks issued by depository institutions are included in process of collection and Federal Reserve float; and (4) other checkable deposits demand deposits. (OCD) consisting of negotiable order of withdrawal (NOW) and automatic transfer 4. Demand deposits at commercial banks and foreign-related institutions other service (ATS) accounts at depository institutions, credit union share draft than those due to domestic banks, the U.S. government, and foreign banks and accounts, and demand deposits at thrift institutions. The currency and demand official institutions less cash items in the process of collection and Federal deposit components exclude the estimated amount of vault cash and demand Reserve float. Excludes the estimated amount of demand deposits held at deposits respectively held by thrift institutions to service their OCD liabilities. commercial banks by thrift institutions to service their OCD liabilities. M2: Ml plus overnight (and continuing contract) repurchase agreements (RPs) 5. Consists of NOW and ATS balances at all depository institutions, credit issued by all commercial banks and overnight Eurodollars issued to U.S. residents union share draft balances, and demand deposits at thrift institutions. Other by foreign branches of U.S. banks worldwide, MMDAs, savings and small- checkable deposits seasonally adjusted equals the difference between the seasondenomination time deposits (time deposits—including retail RPs—in amounts of ally adjusted sum of demand deposits plus OCD and seasonally adjusted demand less than $100,000), and balances in both taxable and tax-exempt general purpose deposits. Included are all ceiling free "Super NOWs," authorized by the and broker/dealer money market mutual funds. Excludes individual retirement Depository Institutions Deregulation committee to be offered beginning Jan. 5, accounts (IRA) and Keogh balances at depository institutions and money market 1983. funds. Also excludes all balances held by U.S. commercial banks, money market 6. Sum of overnight RPs and overnight Eurodollars, money market fund funds (general purpose and broker/dealer), foreign governments and commercial balances (general purpose and broker/dealer), MMDAs, and savings and small banks, and the U.S. government. Also subtracted is a consolidation adjustment time deposits, less the consolidation adjustment that represents the estimated that represents the estimated amount of demand deposits and vault cash held by amount of demand deposits and vault cash held by thrift institutions to service thrift institutions to service their time and savings deposits. their time and savings deposits liabilities. M3: M2 plus large-denomination time deposits and term RP liabilities (in 7. Sum of large time deposits, term RPs and term Eurodollars of U.S. amounts of $100,000 or more) issued by commercial banks and thrift institutions, residents, money market fund balances (institution-only), less a consolidation term Eurodollars held by U.S. residents at foreign branches of U.S. banks adjustment that represents the estimated amount of overnight RPs and Eurodolworldwide and at all banking offices in the United Kingdom and Canada, and lars held by institution-only money market funds. balances in both taxable and tax-exempt, institution-only money market mutual 8. Savings deposits exclude MMDAs. funds. Excludes amounts held by depository institutions, the U.S. government, 9. Small-denomination time deposits—including retail RPs— are those issued money market funds, and foreign banks and official institutions. Also subtracted is in amounts of less than $100,000. All individual retirement accounts (IRA) and a consolidation adjustment that represents the estimated amount of overnight RPs Keogh accounts at commercial banks and thrifts are subtracted from small time and Eurodollars held by institution-only money market mutual funds. deposits. L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term 10. Large-denomination time deposits are those issued in amounts of $100,000 Treasury securities, commercial paper and bankers acceptances, net of money or more, excluding those booked at international banking facilities. market mutual fund holdings of these assets. 11. Large-denomination time deposits at commercial banks less those held by Debt: Debt of domestic nonfinancial sectors consists of outstanding credit money market mutual funds, depository institutions, and foreign banks and market debt of the U.S. government, state and local governments, and private official institutions. nonfinancial sectors. Private debt consists of corporate bonds, mortgages, consumer credit (including bank loans), other bank loans, commercial paper, bankers NOTE: Latest monthly and weekly figures are available from the Board's H.6 acceptances, and other debt instruments. The source of data on domestic (508) release. Historical data are available from the Banking Section, Division of nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt Research and Statistics, Board of Governors of the Federal Reserve System, data are on an end-of-month basis. Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A15 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1981 1982 1983 1984 1981 1982 1983 1984 Dec.2 Dec. Oct. Nov. Dec/ Jan. Dec.2 Dec. Oct/ Nov/ Dec/ Jan. Seasonally adjusted Not seasonally adjusted 1 Total loans and securities3 1,316.3 1,412.1 1,532.9 1,548.9 1,567.6 1,582.8 1,326.1 1,422.5 1,538.0 1,556.1 1,579.0 1,585.1 2 U.S. Treasury securities 111.0 130.9 182.3 186.2 188.0 189.2 111.4 131.5 180.9 185.0 188.8 188.4 3 Other securities 231.4 239.1 246.5 247.1 247.5 251.2 232.8 240.6 246.8 247.6 249.0 251.4 4 Total loans and leases3 973.9 11,,004422..00 1,104.1 1,115.7 1,132.1 1,142.4 981.8 11,,005500..44 1,110.3 1,123.5 1,141.1 1,145.2 5 Commercial and industrial loans 358.0 392.4 404.7 407.8 413.0 417.6 360.1 394.7 405.4 409.7 415.4 416.2 6 Real estate loans 285.7 303.2 329.2 332.1 335.6 340.5 286.8 304.1 330.5 333.4 336.6 341.2 7 Loans to individuals 185.1 191.8 212.0 215.4 219.7 224.3 186.4 193.1 213.7 216.7 221.2 225.0 8 Security loans 21.9 24.7 25.2 26.2 27.3 27.5 22.7 25.5 25.0 26.7 28.2 27.6 9 Loans to nonbank financial institutions 30.2 31.1 30.4 29.8 29.7 30.8 31.2 32.1 30.6 30.2 30.6 30.9 10 Agricultural loans 33.0 36.1 39.1 39.3 39.6 39.8 33.0 36.1 39.6 39.6 39.6 39.6 11 Lease financing receivables.... 12.7 13.1 13.0 13.0 13.1 13.4 12.7 13.1 13.0 13.0 13.1 13.4 12 All other loans 47.2 49.5 50.6 52.1 54.1 48.4 49.2 51.5 52.6 54.1 56.4 51.2 MEMO 13 Total loans and securities plus loans sold3 4 1,319.1 1,415.0 1,535.5 1,551.4 1,570.0 1,585.2 1,328.9 1,425.4 1,540.5 1,558.6 1,581.4 1,587.5 14 Total loans plus loans sold3 4 976.7 1,045.0 1,106.7 1,118.2 1,134.5 1,144.9 984.7 1,053.3 1,112.9 1,126.0 1,143.5 1,147.7 15 Total loans sold to affiliates3 4.... 2.8 2.9 2.6 2.5 2.4 2.4 2.8 2.9 2.6 2.5 2.4 2.4 16 Commercial and industrial loans plus loans sold4 360.2 394.6 406.7 409.7 414.9 419.4 362.3 396.9 407.4 411.6 417.3 418.1 17 Commercial and industrial loans sold4 2.2 2.3 2.0 1.9 1.8 1.9 2.2 2.3 2.0 1.9 1.8 1.9 18 Acceptances held 8.9 8.5 8.9 8.6 8.3 8.2 9.8 9.5 8.8 8.9 9.1 8.6 19 Other commercial and industrial loans 349.1 383.8 395.8 399.2 404.8 409.4 350.3 385.2 396.6 400.8 406.4 407.7 20 To U.S. addressees5 334.9 373.5 383.2 386.9 394.7 397.0 334.3 372.7 383.9 388.0 393.9 395.5 21 To non-U.S. addressees 14.2 10.3 12.7 12.3 10.1 12.4 16.1 12.4 12.8 12.7 12.5 12.2 22 Loans to foreign banks 19.0 13.5 14.7 14.5 12.7 12.4 20.0 14.5 14.8 14.5 13.6 12.9 1. Includes domestically chartered banks; U.S. branches and agencies of 4. Loans sold are those sold outright to a bank's own foreign branches, foreign banks, New York investment companies majority owned by foreign nonconsolidated nonbank affiliates of the bank, the bank's holding company (if banks, and Edge Act corporations owned by domestically chartered and foreign not a bank), and nonconsolidated nonbank subsidiaries of the holding company. banks. 5. United States includes the 50 states and the District of Columbia. 2. Beginning December 1981, shifts of foreign loans and securities from U.S. banking offices to international banking facilities (IBFs) reduced the levels of NOTE. Data are prorated averages of Wednesday estimates for domestically several items. Seasonally adjusted data that include adjustments for the amounts chartered banks, based on weekly reports of a sample of domestically chartered shifted from domestic offices to IBFs are available in the Board's G.7 (407) banks and quarterly reports of all domestically chartered banks. For foreignstatistical release (available from Publications Services, Board of Governors of related institutions, data are averages of month-end estimates based on weekly the Federal Reserve System, Washington, D.C. 20551). reports from large agencies and branches and quarterly reports from all agencies, 3. Excludes loans to commercial banks in the United States. branches, investment companies, and Edge Act corporations engaged in banking. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • April 1983 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS' Monthly averages, billions of dollars 1981 1982 1983 1984 source Dec. Dec. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Total nondeposit funds 1 Seasonally adjusted2 96.3 83.3 80.3 90.9 88.4 76.5 82.6 83.4 80.2 97.1 100.9' 97.4' 100.4 2 Not seasonally adjusted 98.1 84.9 79.0 90.5 90.1 78.6 87.0 86.1 82.8 99.4 102.4' 99.1' 101.4 Federal funds, RPs, and other borrowings from nonbanks3 3 Seasonally adjusted 111.8 128.1 139.9 146.0 140.9 132.8 130.9 132.3 133.5 141.6 141.2r 138.6' 139.2 4 Not seasonally adjusted 113.5 129.7 138.5 145.6 142.6 134.9 135.3 135.1 136.0 143.9 142.7 140.3' 140.2 5 Net balances due to foreign-related institutions, not seasonally adjusted -18.1 -47.7 -62.5 -57.8 -55.2 -59.9 -50.9 -51.5 -55.8 -47.0 -42.7' -43.4' -41.3 6 Loans sold to affiliates, not seasonally adjusted4 2.8 2.9 3.0 2.8 2.7 2.7 2.6 2.6 2.6 2.5 2.4 2.4 2.5 MEMO 7 Domestically chartered banks' net € positions with own foreign branches, not seasonally adjusted5 -22.4 -39.6 -52.7 -48.7 -49.2 -50.9 -45.3 -46.3 -48.5 -42.9 -39.7 -38.6 -37.4 8 Gross due from balances 54.9 72.2 80.3 76.3 75.8 77.4 73.6 74.7 76.4 76.5 75.2 73.0 71.9 9 Gross due to balances 32.4 32.6 27.6 27.6 26.6 26.5 28.3 28.3 27.9 33.6 35.5 34.5 34.5 10 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted6 4.3 -8.1 -9.8 -9.1 -6.0 -8.0 -6.6 -5.1 -7.3 -4.1 -3.0 -4.8 -3.9 11 Gross due from balances 48.1 54.7 55.9 55.8 53.9 55.2 53.5 53.5 55.4 53.1 53.5 52.9 50.6 12 Gross due to balances 52.4 46.6 46.1 46.7 47.9 47.2 47.0 48.3 48.0 49.0 50.6 48.0 46.7 Security RP borrowings 13 Seasonally adjusted' 59.0 71.2 79.3 84.7 81.4 75.7 74.3 76.1 78.2 84.0 85.2 84.6 87.3 14 Not seasonally adjusted 59.2 71.2 76.3 82.7 81.5 76.2 77.0 77.3 79.1 84.6 85.1 84.6 86.6 U.S. Treasury demand balances8 15 Seasonally adjusted 12.2 11.9 13.5 11.3 13.0 24.0 20.6 16.5 21.7 9.9 11.9 18.9 19.4 16 Not seasonally adjusted 11.1 10.8 14.2 12.5 13.2 21.8 16.4 17.9 24.7 7.5 10.8 19.6 22.3 Time deposits, $100,000 or more9 17 Seasonally adjusted 325.4 350.3 293.3 287.7 287.4 285.1 284.7 283.9 279.0 281.8 285.1 283.6 281.9 18 Not seasonally adjusted 330.4 354.6 296.9 285.5 284.0 281.5 284.4 284.7 280.3 283.0 288.1 287.1 285.0 1. Commercial banks are those in the 50 states and the District of Columbia banks, term federal funds, overdrawn due from bank balances, loan RPs, and with national or state charters plus agencies and branches of foreign banks, New participations in pooled loans. Includes averages of daily figures for member York investment companies majority owned by foreign banks, and Edge Act banks and averages of current and previous month-end data for foreign-related corporations owned by domestically chartered and foreign banks. institutions. 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from 4. Loans initially booked by the bank and later sold to affiliates that are still nonbanks and not seasonally adjusted net Eurodollars and loans to affiliates. held by affiliates. Averages of Wednesday data. Includes averages of Wednesday data for domestically chartered banks and 5. Averages of daily figures for member and nonmember banks. averages of current and previous month-end data for foreign-related institutions. 6. Averages of daily data. 3. Other borrowings are borrowings on any instrument, such as a promissory 7. Based on daily average data reported by 122 large banks. note or due bill, given for the purpose of borrowing money for the banking 8. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at business. This includes borrowings from Federal Reserve Banks and from foreign commercial banks. Averages of daily data. 9. Averages of Wednesday figures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Institutions A17 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series Billions of dollars except for number of banks 1982 1983 Dec. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. DOMESTICALLY CHARTERED COMMERCIAL BANKS1 1 Loans and securities, excluding interbank 1,370.3 1,392.2 1,403.8 1,411.9 1,435.1 1,437.4 1,457.0 1,466.1 11,,448833..00 11,,550022..33 11,,552255..22 2 Loans, excluding interbank 1,000.7 1,001.7 1,005.1 1,007.5 1,025.6 1,029.1 1,043.4 1,049.7 1,060.3 1,075.5 1,095.1 3 Commercial and industrial 356.7 358.0 357.9 356.7 360.1 361.1 363.0 364.0 367.0 372.8 380.8 4 Other 644.0 643.7 647.2 650.8 665.6 668.0 680.4 685.7 693.3 702.7 714.4 5 U.S. Treasury securities 129.0 150.6 155.5 160.9 166.0 165.1 167.5 171.2 176.8 180.4 181.4 6 Other securities 240.5 239.9 243.3 243.5 243.5 243.3 246.1 245.2 245.9 246.4 248.7 7 Cash assets, total 184.4 168.9 170.1 164.5 176.9 168.7 176.9 160.0 164.0 179.0 190.5 8 Currency and coin 23.0 19.9 20.4 20.3 21.3 20.7 21.0 20.8 20.5 22.3 23.3 9 Reserves with Federal Reserve Banks 25.4 20.5 23.9 22.4 18.8 20.6 22.5 15.4 19.7 17.6 18.6 10 Balances with depository institutions . 67.6 67.1 66.1 65.6 69.7 67.1 69.0 66.7 67.1 70.9 75.6 11 Cash items in process of collection ... 68.4 61.5 59.6 56.3 67.1 60.3 64.4 56.9 56.6 69.0 73.0 12 Other assets2 265.3 257.9 252.4 248.3 253.2 254.5 257.2 252.3 253.0 261.9 253.8 13 Total assets/total liabilities and capital ... 1,820.0 1,818.9 1,826.3 1,824.8 1,865.2 1,860.6 1,891.0 1,878.4 1,900.0 1,943.9 1,969.5 14 Deposits 1,361.8 1,374.2 1,368.0 1,370.8 1,402.7 1,396.5 1,420.1 1,408.1 1,419.5 1,459.2 1,482.6 15 Demand 363.9 333.4 329.2 324.5 344.4 334.2 344.7 328.1 331.3 358.1 371.0 16 Savings 296.4 419.2 426.9 440.2 445.3 447.5 449.0 448.8 451.5 458.3 460.7 17 Time 701.5 621.6 611.9 606.1 613.1 614.8 626.4 631.2 636.8 642.8 650.8 18 Borrowings 215.1 211.3 224.0 214.1 221.2 217.5 217.2 217.8 226.8 219.7 216.3 19 Other liabilities 109.2 103.5 102.3 104.7 104.3 105.5 107.6 107.1 106.5 112.6 117.9 20 Residual (assets less liabilities) 133.8 130.0 132.0 135.1 137.0 141.0 146.1 145.4 147.2 152.4 152.8 MEMO 21 U.S. Treasury note balances included in borrowing 10.7 9.6 17.8 2.7 19.3 19.3 14.8 2200..88 2222..55 22..88 88..88 22 Number of banks 14,787 14,819 14,823 14,817 14,826 14,785 14,795 14,804 14,800 14,799 1144,,779966 ALL COMMERCIAL BANKING INSTITUTIONS3 23 Loans and securities, excluding interbank 1,429.7 1,451.3 1,460.8 1,467.6 1,491.5 1,494.1 1,515.4 11,,552255..44 11,,554411..88 11,,556633..22 11,,558866..88 24 Loans, excluding interbank 1,054.8 1,054.5 1,055.7 1,056.4 1,075.2 1,078.8 1,094.9 1,102.5 1,112.2 1,129.2 1,149.3 25 Commercial and industrial 395.3 395.9 393.5 391.7 395.3 397.7 400.6 402.7 405.3 412.0 420.1 26 Other 659.5 658.6 662.2 664.7 679.9 681.2 694.3 699.8 706.8 717.2 729.2 27 U.S. Treasury securities 132.8 155.3 160.2 166.1 171.3 170.3 172.7 176.1 182.0 185.9 186.9 28 Other securities 242.1 241.5 244.9 245.2 245.1 245.0 247.8 246.9 247.7 248.1 250.6 29 Cash assets, total 200.7 185.5 186.3 180.3 193.5 185.2 193.3 174.7 178.4 195.0 205.0 30 Currency and coin 23.0 19.9 20.4 20.3 21.3 20.7 21.1 20.9 20.5 22.3 23.4 31 Reserves with Federal Reserve Banks 26.8 22.0 25.4 23.8 20.0 21.9 24.0 16.6 20.8 19.1 19.7 32 Balances with depository institutions . 81.4 81.0 79.8 78.9 84.0 81.2 82.8 79.3 79.5 83.6 88.0 33 Cash items in process of collection ... 69.4 62.6 60.7 57.3 68.2 61.4 65.4 58.0 57.6 70.0 74.0 34 Other assets2 341.7 325.4 317.8 309.5 318.1 318.7 324.6 320.9 318.8 329.7 321.3 35 Total assets/total liabilities and capital ... 1,972.1 1,962.2 1,964.9 1,957.4 2,003.2 1,998.0 2,033.3 2,021.0 2,039.1 2,088.0 2,113.1 36 Deposits 1,409.7 1,419.5 1,411.0 1,413.1 1,443.8 1,438.1 1,461.4 1,448.9 1,459.0 1,499.4 1,524.8 37 Demand 376.2 345.7 341.1 336.4 356.4 346.4 356.6 340.0 343.2 369.9 383.2 38 Savings 296.7 419.7 427.3 440.7 445.7 448.0 449.5 449.3 452.0 458.8 461.3 39 Time 736.7 654.1 642.6 636.0 641.6 643.8 655.3 659.5 663.8 670.6 680.4 40 Borrowings 278.3 269.9 281.3 269.5 278.2 277.9 280.5 282.6 289.6 282.5 275.1 41 Other liabilities 148.4 141.1 138.6 137.9 142.3 139.1 143.4 142.3 141.5 151.9 158.6 42 Residual (assets less liabilities) 135.7 131.9 133.9 137.0 138.9 142.9 148.0 147.3 149.1 154.2 154.7 MEMO 43 U.S. Treasury note balances included in borrowing 10.7 9.6 17.8 2.7 19.3 19.3 14.8 2200..88 2222..55 2.8 8.8 44 Number of banks 15,329 15,376 15,390 15,385 15,396 15,359 15,370 15,382 15,383 15,382 15,380 1. Domestically chartered commercial banks include all commercial banks in NOTE. Figures are partly estimated. They include all bank-premises subsidiarthe United States except branches of foreign banks; included are member and ies and other significant majority-owned domestic subsidiaries. Data for domestinonmember banks, stock savings banks, and nondeposit trust companies. cally chartered commercial banks are for the last Wednesday of the month. Data 2. Other assets include loans to U.S. commercial banks. for other banking institutions are estimates made on the last Wednesday of the 3. Commercial banking institutions include domestically chartered commercial month based on a weekly reporting sample of foreign-related institutions and banks, branches and agencies of foreign banks, Edge Act and Agreement quarter-end condition report data. corporations, and New York State foreign investment corporations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • April 1983 1.26 ALL LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of $1.4 Billion or More on December 31, 1982, Assets and Liabilities Millions of dollars, Wednesday figures 1984 AAccccoouunntt Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 Feb. 29 1 Cash and balances due from depository institutions 116,438 99,215 99,369 89,700 93,576 81,813 92,277 92,602 86,729 2 Total loans, leases and securities, net 740,333 730,856 730,922 722,645 736,777 731,002 743,989 733,411 742,720 Securities 3 U.S. Treasury and govt, agency 79,837 79,302 78,872 78,127 80,238 79,633 81,381 77,388 80,176 4 Trading account 8,895 9,538 10,346 10,196 11,860 10,534 12,358 8,894 10,951 5 Investment account, by maturity 70,942 69,763 68,525 67,931 68,378 69,099 69,022 68,494 69,224 6 One year or less 19,679 19,371 18,418 17,868 18,202 18,659 18,376 18,089 18,121 7 Over one through five years 38,040 37,450 37,326 37,194 37,303 37,428 37,727 37,878 38,705 8 Over five years 13,222 12,942 12,781 12,870 12,872 13,012 12,919 12,527 12,399 9 Other securities 51,222 50,691 50,257 49,972 49,770 49,218 49,376 49,332 49,343 10 Trading account 4,372 3,834 3,410 3,226 3,208 2,778 3,001 3,045 3,214 11 Investment account 46,850 46,858 46,847 46,746 46,562 46,440 46,375 46,288 46,129 12 States & political subdivisions, by maturity 42,628 42,728 42,676 42,602 42,386 42,214 42,164 42,107 41,950 13 One year or less 5,488 5,426 5,365 5,321 5,356 5,218 5,173 5,202 5,088 14 Over one year 37,140 37,302 37,311 37,281 37,030 36,996 36,991 36,905 36,862 15 Other bonds, corporate stocks and securities 4,222 4,130 4,170 4,144 4,176 4,226 4,211 4,181 4,179 16 Other trading account assets 2,118 2,043 2,439 2,484 2,318 2,137 1,955 1,861 1,853 Loans and leases 17 Federal funds sold1 46,638 43,957 44,258 39,683 46,687 43,191 50,005 42,896 46,880 18 To commercial banks 34,208 31,752 32,663 27,670 32,826 30,620 36,476 29,150 31,653 19 To nonbank brokers and dealers in securities 8,684 7,960 7,813 8,151 8,911 8,657 9,689 9,722 9,409 20 To others 3,747 4,244 3,782 3,862 4,950 3,913 3,840 4,024 5,818 21 Other loans and leases, gross 574,821 569,211 569,434 566,740 572,277 571,508 575,933 576,647 579,239 22 Other loans, gross 563,379 557,748 557,988 555,324 560,826 560,036 564,402 565,174 567,753 23 Commercial and industrial 223,874 221,358 220,955 220,014 221,218 222,717 222,555 223,861 226,991 24 Bankers' acceptances and commercial paper .... 3,492 2,932 3,112 2,932 3,137 3,330 3,200 3,369 3,517 25 All other 220,382 218,426 217,842 217,082 218,081 219,387 219,355 220,492 223,473 26 U.S. addressees 213,147 211,185 210,662 210,018 211,061 212,382 212,314 213,477 216,579 27 Non-U.S. addressees 7,235 7,242 7,180 7,065 7,020 7,005 7,041 7,016 6,894 28 Real estate loans 143,536 143,916 144,177 144,341 144,608 144,796 145,162 145,314 145,438 29 To individuals for personal expenditures 92,390 92,207 92,361 92,570 92,563 92,602 92,762 92,963 93,454 30 To depository and financial institutions 42,608 41,038 41,198 39,948 41,304 40,069 40,871 41,354 40,704 31 Commercial banks in the U.S 8,912 8,612 9,137 8,658 8,434 8,317 8,399 8,788 8,616 32 Banks in foreign countries 7,858 7,049 7,163 6,731 7,054 6,602 7,256 7,743 7,316 33 Nonbank depository and other financial institutions. 25,838 25,378 24,898 24,559 25,816 25,150 25,216 24,824 24,771 34 For purchasing and carrying securities 14,644 14,653 14,352 14,165 15,298 15,190 16,752 15,406 15,699 35 To finance agricultural production 7,540 7,379 7,314 7,318 7,310 7,312 7,338 7,355 7,367 36 To states and political subdivisions 20,010 20,205 20,371 20,282 20,575 20,559 20,624 21,063 20,869 37 To foreign governments and official institutions .... 4,548 4,533 4,527 4,637 4,678 4,644 4,655 4,644 4,499 38 All other 14,229 12,457 12,732 12,048 13,271 12,146 13,682 13,216 12,732 39 Lease financing receivables 11,441 11,463 11,446 11,417 11,450 11,472 11,531 11,472 11,486 40 LESS: Unearned income 5,178 5,184 5,197 5,185 5,147 5,163 5,167 5,182 5,197 41 Loan and lease reserve 9,125 9,163 9,140 9,176 9,366 9,522 9,493 9,531 9,575 42 Other loans and leases, net 560,517 554,864 555,097 552,379 557,763 556,823 561,273 561,933 564,468 43 All other assets 148,079 139,260 138,176 132,033 136,816 136,472 135,295 132,322 138,080 44 Total assets 1,004,851 969,332 968,467 944,378 967,169 949,287 971,561 958,336 967,529 Deposits 45 Demand deposits 213,775 187,113 184,334 172,377 186,119 170.397 188,776 180,736 185,689 46 Individuals, partnerships, and corporations 160,892 143,320 138,862 131,903 139,128 130,562 142,646 136,129 140,468 47 States and political subdivisions 5,642 4,900 5,107 4,916 5,453 4,542 4,968 5,077 5,448 48 U.S. government 1,630 2,248 3,647 1,730 1,106 2,207 2,730 1,295 2,446 49 Depository institutions in U.S 27,983 21,151 21,583 20,360 23,980 19,193 22,131 23,363 22,622 50 Banks in foreign countries 7,320 6,322 5,992 5,421 6,536 5,620 66,,668899 6,922 6,376 51 Foreign governments and official institutions 906 942 789 858 877 788 888800 998 969 52 Certified and officers' checks 9,402 8,227 8,354 7,189 99,,004400 7,485 88,,773322 66,,995511 77,,336600 53 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers).. 35,133 34,403 33,476 31,944 32,910 33,080 32,755 32,435 32,754 54 Nontransaction balances 412,001 412,206 408,723 408,336 408,916 408,684 409,277 409,387 411,118 55 Individuals, partnerships and corporations 382,576 382,474 380,350 379,935 380,501 380,142 380,568 380,582 382,536 56 States & political subdivisions 17,020 17,500 17,296 17,562 17,554 17,822 18,157 18,321 18,245 57 U.S. government 339 353 348 389 392 395 394 418 409 58 Depository institutions in U.S 8,986 8,903 7,803 7,583 7,662 7,515 7,352 7,252 7,145 59 Foreign governments, official institutions and banks .. 3,081 2,974 2,927 2,866 2,807 2,811 2,806 2,814 2,784 60 Liabilities for borrowed money 184,367 179,039 188,072 180,937 186,142 183,721 186,209 183,480 181,489 61 Borrowings from federal reserve banks 769 1,925 2,954 48 983 40 959 12 486 62 Treasury tax-and-loan notes 10,222 8,473 11,781 16,182 16,254 10,629 13,279 16,436 16,207 63 All other liabilities for borrowed money2 173,376 168,641 173,337 164,707 168,904 173,052 171,970 167,031 164,796 64 Other liabilities and subordinated note and debentures 94,544 91,395 88,991 86,045 87,929 88,415 89,499 87,340 91,073 65 Total liabilities 939,819 904,155 903,598 879,640 902,017 884,298 906,515 893,378 902,123 66 Residual (total assets minus total liabilities)3 65,031 65,177 64,869 64,738 65,152 64,990 65,046 64,958 65,406 1. Includes securities purchased under agreements to resell. 3. This is not a measure of equity capital for use in capital adequacy analysis or 2. Includes federal funds purchased and securities sold under agreements to for other analytic uses, repurchase; for information on these liabilities at banks with assets of $1 billion or more on Dec. 31, 1977, see table 1.13. 1.27 LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of $1 Billion or More on December 31, 1977, Assets and LiabilitiesA ASeries Discontinued. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Banks A19 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures 1984 AAccccoouunntt Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 Feb. 29 1 Cash and balances due from depository institutions .... 29,659 29,059 27,457 22,425 25,048 20,218 24,624 20,189 19,057 2 Total loans, leases and securities, net1 155,041 152,527 153,043 150,166 155,528 152,719 158,072 156,430 156,706 Securities <\ 5 Investment account, by maturity 11,376 10,718 10,713 10,541 10,463 10,749 10,601 10,430 10,868 6 One year or less 2,611 2,440 2,289 2,103 2,121 2,512 2,142 1,964 1,885 7 Over one through five years 7,230 6,778 6,968 6,973 6,886 6,777 7,079 7,324 7,796 8 Over five years 1,535 1,500 1,456 1,465 1,456 1,460 1,379 1,142 1,186 Q 10 11 Investment account 9,600 9,643 9,628 9,577 9,542 9,521 9,566 9,560 9,543 12 States and political subdivisions, by maturity 8,864 8,905 8,881 8,828 8,759 8,725 8,748 8,741 8,718 13 One year or less 1,457 1,487 1,486 1,441 1,394 1,346 1,318 1,318 1,292 14 Over one year 7,406 7,418 7,396 7,388 7,365 7,379 7,430 7,423 7,425 15 Other bonds, corporate stocks and securities 736 738 746 748 783 796 818 819 826 16 Loans and leases 17 Federal funds sold3 10,830 10,821 11,321 10,041 13,422 11,312 14,137 13,513 1122,,990022 18 To commercial banks 4,696 5,057 5,504 4,172 6,296 5,152 7,115 5,987 6,206 19 To nonbank brokers and dealers in securities 4,114 3,280 3,696 3,608 4,139 4,176 4,990 5,372 4,208 20 To others 2,021 2,484 2,121 2,261 2,986 1,984 2,032 2,153 2,489 71 Other loans and leases, gross 127,364 125,508 125,544 124,183 126,289 125,394 128,010 127,198 127,684 ?? Other loans, gross 125,283 123,416 123,451 122,092 124,191 123,314 125,929 125,174 125,665 73 Commercial and industrial 58,752 57,771 57,583 57,337 57,464 58,236 57,762 58,006 59,544 24 Bankers' acceptances and commercial paper .... 1,046 683 870 811 1,019 1,066 870 908 876 75 All other 57,706 57,087 56,713 56,526 56,445 57,169 56,892 57,098 58,668 76 U.S. addressees 55,833 55,285 54,954 54,718 54,684 55,432 55,261 55,510 57,124 77 Non-U.S. addressees 1,873 1,803 1,759 1,808 1,760 1,737 1,630 1,588 1,544 28 Real estate loans 20,640 20,671 20,704 20,749 20,754 20,881 20,931 21,054 21,065 29 To individuals for personal expenditures 13,312 13,270 13,222 13,217 13,189 13,260 13,283 13,285 13,337 30 To depository and financial institutions 13,663 13,144 13,203 12,500 13,275 12,522 13,222 13,402 12,746 31 Commercial banks in the United States 2,365 2,278 2,406 2,205 2,010 1,833 1,848 1,748 1,524 32 Banks in foreign countries 2,821 2,626 2,729 2,351 2,698 2,418 3,015 3,360 2,897 33 Nonbank depository and other financial institutions. 8,477 8,240 8,068 7,944 8,567 8,270 8,358 8,295 8,325 34 For purchasing and carrying securities 7,258 7,679 7,678 7,445 8,192 7,729 9,119 7,670 8,045 35 To finance agricultural production 605 602 603 628 598 602 612 624 621 36 To states and political subdivisions 6,017 6,032 6,060 6,052 6,114 6,091 6,133 6,303 6,148 37 To foreign governments and official institutions .... 935 911 870 910 870 889 902 920 735 38 All other 4,101 3,336 3,528 3,253 3,735 3,104 3,965 3,910 3,424 39 Lease financing receivables 2,081 2,092 2,092 2,091 2,099 2,080 2,080 2,025 2,019 40 LESS: Unearned income 1,453 1,442 1,450 1,448 1,428 1,434 1,439 1,446 1,441 41 Loan and lease reserve 2,677 2,722 2,712 2,728 2,760 2,823 2,803 2,825 2,849 4? Other loans and leases, net 123,234 121,344 121,382 120,007 122,101 121,137 123,768 122,928 123,393 43 All other assets4 63,224 60,847 60,517 57,571 62,004 60,375 61,912 56,181 61,843 44 Total assets 247,924 239,433 241,017 230,163 242,579 233,312 244,608 232,800 237,607 Deposits 45 Demand deposits 55,768 48,607 49,498 45,778 50,489 42,976 51,326 46,401 4488,,225544 46 Individuals, partnerships, and corporations 38,560 32,973 33,021 31,871 33,078 29,701 34,346 31,400 32,850 47 States and political subdivisions 725 691 823 782 755 596 785 637 764 48 U.S. government 366 584 934 408 161 502 466 303 632 49 Depository institutions in the United States 6,056 5,114 5,434 4,751 6,586 4,188 5,498 4,962 5,362 SO Banks in foreign countries 5,624 4,877 4,688 4,113 5,217 4,288 5,311 5,428 5,048 51 Foreign governments and official institutions 697 762 595 669 683 596 684 795 800 52 Certified and officers' checks 3,740 3,605 4,004 3,184 4,008 3,104 4,236 2,876 2,796 53 Transaction balances other than demand deposits ATS, NOW, Super NOW, telephone transfers) .. 3,926 3,906 3,744 3,605 3,675 3,700 3,670 3,623 3,651 54 Nontransaction balances 71,493 71,879 70,352 69,839 70,144 70,032 70,630 70,114 71,268 55 Individuals, partnerships and corporations 65,606 65,907 64,541 64,052 64,370 64,126 64,734 64,244 65,526 56 States and political subdivisions 1,889 1,832 1,766 1,850 1,844 1,908 2,090 2,199 2,194 57 U.S. Government 24 15 16 15 18 21 22 20 18 58 Depository institutions in United States 2,819 2,975 2,905 2,803 2,830 2,901 2,722 2,596 2,482 59 Foreign governments, official institutions and banks .. 1,155 1,151 1,124 1,118 1,082 1,076 1,063 1,056 1,048 60 Liabilities for borrowed money 59,683 59,263 63,147 58,083 64,026 61,389 62,637 57,486 57,207 1,225 1,696 800 600 62 Treasury tax-and-loan notes 2,615 2,245 3,082 3,984 3,984 2,673 3,287 3,985 3,984 63 All other liabilities for borrowed money5 57,068 55,793 58,369 54,099 59,242 58,716 58,749 53,502 53,223 64 Other liabilities and subordinated note and debentures.. 36,108 34,799 33,308 31,934 33,107 34,282 35,261 34,089 36,074 65 Total liabilities 226,978 218,454 220,050 209,240 221,441 212,380 223,524 211,715 216,455 66 Residual (total assets minus total liabilities)6 20,946 20,979 20,968 20,923 21,138 20,932 21,083 21,086 21,153 1. Excludes trading account securities. 5. Includes federal funds purchased and securities sold under agreements to 2. Not available due to confidentiality. repurchase. 3. Includes securities purchased under agreements to resell. 6. Not a measure of equity capital for use in capital adequacy analysis or for 4. Includes trading account securities. other analytic uses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • April 1983 1.29 LARGE WEEKLY REPORTING COMMERCIAL BANKS Balance Sheet Memoranda Millions of dollars, Wednesday figures 1984 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. Feb. 15 Feb. 22 Feb. 29 BANKS WITH ASSETS OF $1.4 BILLION OR MORE 1 Total loans and leases (gross) and investments adjusted 711,517 704,840 703,460 700,678 710,030 706,750 713,774 710,186 717,222 2 Total loans and leases (gross) adjusted' 578,339 572,804 571,892 570,095 577,703 575,762 581,063 581,604 585,850 3 Time deposits in amounts of $100,000 or more 147,435 146,811 143,526 142,589 142,080 140,779 140,617 141,352 141,545 4 Loans sold outright to affiliates—total2 2,390 2,530 2,457 2,418 2,417 2,425 2,478 2,531 2,538 5 Commercial and industrial 1,783 1,931 1,861 1,827 1,839 1,825 1,869 1,900 1,912 6 Other 607 599 595 592 577 600 610 631 626 7 Nontransaction savings deposits (including MMDA)... 150,691 150,796 150,263 150,199 151,114 151,680 152,414 152,495 153,206 BANKS IN NEW YORK CITY 8 Total loans and leases (gross) and investments adjusted1-3 . 152,110 149,354 149,295 147,965 151,409 149,991 153,351 152,966 153,268 9 Total loans and leases (gross) adjusted1 131,133 128,993 128,954 127,847 131,405 129,721 133,183 132,976 132,857 10 Time deposits in amounts of $100,000 or more 30,785 30,779 29,242 28,617 28,360 28,345 28,599 28,361 28,717 1. Exclusive of loans and federal funds transactions with domestic commercial nonconsolidated nonbank affiliates of the bank, the bank's holding company (if banks. not a bank), and nonconsolidated nonbank subsidiaries of the holding company. 2. Loans sold are those sold outright to a bank's own foreign branches. 3. Excludes trading account securities. 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS WITH ASSETS OF $1.4 BILLION OR MORE ON JUNE 30, 1980 Assets and Liabilities Millions of dollars, Wednesday figures 1984 AAccccoouunntt Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 Feb. 29 1 Cash and due from depository institutions . 6,185 6,300 6,392 6,165 5,812 5,730 6,296 6,243 6,662 2 Total loans and securities 43,985 41,600 41,215 43,230 41,873 41,646 43,640 43,631 44,619 3 U.S. Treasury and govt, agency securities' 5,186 4,786 4,545 4,456 4,592 4,495 4,664 4,544 4,666 4 Other securities' 657 626 617 613 605 616 610 621 741 5 Federal funds sold2 4,243 2,003 2,547 4,398 3,020 2,401 2,369 3,094 3,933 6 To commercial banks in the United States 4,179 1,754 2,416 4,203 2,752 2,191 2,126 2,918 3,488 7 To others 64 248 131 194 269 210 242 176 445 8 Other loans, gross 33,900 34,185 33,506 33,764 33,656 34,134 35,996 35,373 35,278 9 Commercial and industrial 19,153 18,979 18,459 17,950 17,724 18,289 2200,,554444 1199,,999955 2200,,221122 10 Bankers acceptances and commercial paper 3,398 3,216 3,002 2,869 2,738 2,842 2,970 2,948 2,966 11 All other 15,755 15,763 15,456 15,080 14,986 15,447 17,574 17,047 17,245 12 U.S. addressees 14,016 14,064 13,901 13,529 13,404 13,845 15,964 15,390 15,488 13 Non-U.S. addressees 1,739 1,699 1,555 1,551 1,582 1,602 1,610 1,657 1,757 14 To financial institutions 10,254 10,498 10,372 10,693 10,256 10,146 9,687 9,746 10,069 15 Commercial banks in the United States . 7,956 8,179 8,084 8,279 8,048 7,904 7,454 7,659 7,791 16 Banks in foreign countries 1,591 1,656 1,640 1,628 1,521 1,571 1,561 1,528 1,592 17 Nonbank financial institutions 707 663 648 786 687 671 672 559 685 18 To foreign govts, and official institutions3 .. 753 859 764 751 730 763 779 729 744 19 For purchasing and carrying securities .. 790 904 887 1,090 1,535 1,693 1,675 1,609 924 20 All other3 2,950 2,944 3,024 3,280 3,410 33,,224433 33,,331111 33,,229944 33,,333300 21 Other assets (claims on nonrelated parties) 12,388 12,664 13,001 13,306 13,409 13,423 13,513 13,731 13,863 22 Net due from related institutions 10,816 11,419 11,478 10,338 11,590 10,943 11,049 8,826 8,713 23 Total assets 73,374 71,982 72,086 73,039 72,685 7711,,774433 7744,,449988 7722,,443311 7733,,885566 24 Deposits or credit balances due to other than directly related institutions 20,972 19,857 19,479 19,060 18,832 18,656 19,030 19,278 19,678 25 Credit balances 176 139 153 159 117 126 167 155 192 26 Demand deposits 1,907 1,671 1,854 1,708 1,830 1,632 11,,778888 11,,775588 11,,777799 27 Individuals, partnerships, and corporations 936 810 828 824 829 855 844 804 896 28 Other 971 861 1,026 884 1,002 777 944 954 883 29 Time and savings deposits 18,889 18,047 17,472 17,194 16,884 16,898 1177,,007766 1177,,336644 1177,,770077 30 Individuals, partnerships, and corporations 16,100 15,295 14,777 14,519 14,307 14,391 14,577 14,902 15,165 31 Other 2,789 2,751 2,695 2,675 2,577 22,,550077 22,,449999 22,,446622 22,,554411 32 Borrowings from other than directly related institutions 31,801 32,688 32,384 32,635 33,044 32,576 33,981 31,860 31,792 33 Federal funds purchased4 9,960 10,886 10,331 10,725 11,671 11,299 1122,,990088 1100,,773300 1100,,884488 34 From commercial banks in the United States 7,926 8,978 8,570 8,248 9,142 8,936 10,304 8,053 9,159 35 From others 2,034 1,908 1,761 2,477 2,529 2,363 2,604 2,677 1,689 36 Other liabilities for borrowed money.... 21,841 21,801 22,053 21,909 21,373 2211,,227777 2211,,007733 2211,,113300 2200,,994433 37 To commercial banks in the United States 18,218 18,267 18,402 18,328 17,796 17,777 17,698 17,700 17,712 38 To others 3,623 3,534 3,650 3,582 3,576 3,500 3,375 3,431 3,231 39 Other liabilities to nonrelated parties 13,216 13,520 13,833 14,083 14,292 14,177 14,186 14,235 14,581 40 Net due to related institutions 7,385 5,918 6,389 7,260 6,517 6,333 7,300 7,058 7,806 41 Total liabilities 73,374 71,982 72,086 73,039 72,685 71,743 74,498 72,431 73,856 MEMO 42 Total loans (gross) and securities adjusted5 31,850 31,666 30,715 30,748 31,074 31,551 34,059 33,053 33,339 43 Total loans (gross) adjusted5 26,008 26,254 25,553 25,679 25,877 26,441 28,784 27,889 27,932 1. Prior to Jan. 4, 1984 U.S. Government Agency securities were included in 4. Includes securities sold under agreements to repurchase. other securities. 5. Exclusive of loans to and federal funds sold to commercial banks in the 2. Includes securities purchased under agreements to resell. United States. 3. As of Jan. 4, 1984 loans to foreign governments and official institutions is Digitized for FreRpoArtSedE aRs a separate item. Before that date it was included in all other loans. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

IPC Demand Deposits A21 1.31 GROSS DEMAND DEPOSITS of Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances Commercial banks TTyyppee ooff hhoollddeerr 1982 1983 11997788 1199779922 11998800 11998811 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar. June Sept. Dec. Mar. June 1 All holders—Individuals, partnerships, and corporations 294.6 302.2 315.5 288.9 268.9 271.5 276.7 295.4 283.5 289.5 2 Financial business 27.8 27.1 29.8 28.0 27.8 28.6 31.9 35.5 34.0 35.1 3 Nonfinancial business 152.7 157.7 162.8 154.8 138.7 141.4 142.9 151.7 144.4 147.7 4 Consumer 97.4 99.2 102.4 86.6 84.6 83.7 83.3 88.1 85.5 86.9 5 Foreign 2.7 3.1 3.3 2.9 3.1 2.9 2.9 3.0 3.2 3.0 6 Other 14.1 15.1 17.2 16.7 14.6 15.0 15.7 17.1 16.4 16.8 Weekly reporting banks 1982 1983 11997788 1199779944 11998800 11998811 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar. June Sept. Dec. Mar. June 7 All holders—Individuals, partnerships, and corporations 147.0 139.3 147.4 137.5 126.8 127.9 132.1 144.0 140.7 141.9 8 Financial business 19.8 20.1 21.8 21.0 20.2 20.2 23.4 26.7 25.2 26.3 9 Nonfinancial business 79.0 74.1 78.3 75.2 67.1 67.7 68.7 74.2 72.7 73.1 10 Consumer 38.2 34.3 35.6 30.4 29.2 29.7 29.6 31.9 31.2 30.4 11 Foreign 2.5 3.0 3.1 2.8 2.9 2.8 2.7 2.9 3.0 2.9 12 Other 7.5 7.8 8.6 8.0 7.3 7.5 7.7 8.4 8.6 9.3 1. Figures include cash items in process of collection. Estimates of gross 3. After the end of 1978 the large weekly reporting bank panel was changed to deposits are based on reports supplied by a sample of commercial banks. Types of 170 large commercial banks, each of which had total assets in domestic offices depositors 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 May 1978 BULLETIN. Beginning in March 1979, demand deposit ownership survey sample was reduced to 232 banks from 349 banks, and the estimation estimates for these large banks are constructed quarterly on the basis of 97 sample procedure was modified slightly. To aid in comparing estimates based on the old banks and are not comparable with earlier data. The following estimates in billions and new reporting sample, the following estimates in billions of dollars for of dollars for December 1978 have been constructed for the new large-bank panel; December 1978 have been constructed using the new smaller sample; financial financial business, 18.2; nonfinancial business, 67.2; consumer, 32.8; foreign, 2.5; business, 27.0; nonfinancial business, 146.9; consumer, 98.3; foreign, 2.8; and other, 6.8. other, 15.1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • April 1983 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period 1983 1984 1978 19791 1980 1981 1982 IInnssttrruummeenntt Dec. Dec. Dec. Dec. Dec.2 Sept. Oct. Nov. Dec. Jan. Feb. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 83,438 112,803 124,374 165,455 166,208 176,775 175,924 180,206 185,202' 182,801' 190,700 Financial companies3 Dealer-placed paper* 2 Total 12,181 17,359 19,599 29,904 34,067 39,963 37,323 40,890 40,994 39,775 4411,,667744 3 Bank-related (not seasonally adjusted) 3,521 2,784 3,561 6,045 2,516 2,303 2,195 2,341 2,441 2,087 1,765 Directly placed paper5 4 Total 51,647 64,757 67,854 81,715 84,183 91,600 92,819 93,820 96,487' 97,403' 110022,,555566 5 Bank-related (not seasonally adjusted) 12,314 17,598 22,382 26,914 32,034 34,856 34,622 35,001 35,566 37,560 36,975 6 Nonfinancial companies6 19,610 30,687 36,921 53,836 47,958 45,212 44,977 45,496 47,721 45,623' 46,470 Bankers dollar acceptances (not seasonally adjusted) 7 Total 33,700 45,321 54,744 69,226 79,543 73,569 72,902 77,919 78,309 73,450 74,367 Holder 8 Accepting banks 8,579 9,865 10,564 10,857 10,910 9,205 9,501 10,894 9,355 9,546 9,237 9 Own bills 7,653 8,327 8,963 9,743 9,471 7,986 8,212 9,558 8,125 7,814 7,897 10 Bills bought 927 1,538 1,601 1,115 1,439 1,219 1,289 1,337 1,230 1,732 1,340 Federal Reserve Banks 11 Own account 587 704 776 195 1,480 0 0 0 418 0 0 12 Foreign correspondents 664 1,382 1,791 1,442 949 622 483 573 729 729 777 13 Others 24,456 33,370 41,614 56,731 66,204 64,942 62,917 66,452 68,225 63,174 64,353 Basis 14 Imports into United States 8,574 10,270 11,776 14,765 17,683 14,653 14,829 14,906 15,649 15,028 15,495 15 Exports from United States 7,586 9,640 12,712 15,400 16,328 16,215 16,036 17,209 16,880 16,159 15,818 16 All other 17,541 25,411 30,257 39,060 45,531 42,701 42,036 45,806 45,781 42,262 43,055 1. A change in reporting instructions results in offsetting shifts in the dealer- financing; factoring, finance leasing, and other business lending; insurance placed and directly placed financial company paper in October 1979. underwriting; and other investment activities. 2. Effective Dec. 1, 1982, there was a break in the commercial paper series. The 4. Includes all financial company paper sold by dealers in the open market. key changes in the content of the data involved additions to the reporting panel, 5. As reported by financial companies that place their paper directly with the exclusion of broker or dealer placed borrowings under any master note investors. agreements from the reported data, and the reclassification of a large portion of 6. Includes public utilities and firms engaged primarily in such activities as bank-related paper from dealer-placed to directly placed. communications, construction, manufacturing, mining, wholesale and retail trade, 3. Institutions engaged primarily in activities such as, but not limited to, transportation, and services. commercial, savings, and mortgage banking; sales, personal, and mortgage 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Effective Date Rate Month Average Month rate 16.00 1982—Oct. 14 12.00 1982-—Mar 16.50 1983—Mar 15.75 Nov.22 11.50 Apr 16.50 Apr May 16.50 June 16.50 17.00 1983—Jan. 11 11.00 July 16.26 July 16.50 Feb. 28 10.50 Aug 14.39 Aug 16.00 Aug. 8 11.00 Sept 13.50 Sept 15.50 Oct 12.52 Oct 15.00 1984—Mar. 19 11.50 11.85 14.50 Apr. 5 12.00 Dec 11.50 Dec 14.00 1983-—Jan 11.16 1984—Jan 13.50 1982—Jan.. . . 15.75 Feb 10.98 Feb 13.00 Feb. .. 16.56 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Business Lending A23 1.34 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, February 6-10, 1984 Size of loan (in thousands of dollars) All Item sizes 1-24 25-49 50-99 100-499 500-999 and over SHORT-TERM COMMERCIAL AND INDUSTRIAL LOANS 1 Amount of loans (thousands of dollars) 38,330,316 991,513 549,652 709,274 2,247,241 972,939 32,859,696 2 Number of loans 171,352 125,356 16,856 10,749 12,402 1,483 4,507 3 Weighted-average maturity (months) 1.1 4.6 4.2 3.5 4.2 3.1 .7 4 With fixed rates .7 4.0 3.8 2.0 2.5 1.5 .5 5 With floating rates 2.2 6.1 4.9 5.1 5.2 4.1 1.3 6 Weighted-average interest rate (percent per annum) .. 11.06 14.13 13.45 13.33 12.66 11.99 10.75 7 Interquartile range1 10.45-11.24 13.24-14.93 12.55-14.20 12.13-14.54 11.57-13.80 11.46-12.68 10.40-10.89 8 With fixed rates 10.93 14.44 13.70 13.89 13.03 11.45 10.68 9 With floating rates 11.35 13.53 13.13 12.76 12.49 12.20 10.91 Percentage of amount of loans 10 With floating rate 32.6 33.9 44.7 49.6 69.3 7722..44 2288..33 11 Made under commitment 63.7 33.8 37.8 44.5 58.7 69.8 65.6 12 With no stated maturity 10.4 11.6 12.5 27.4 22.7 35.4 8.4 13 With one-day maturity 40.3 .1 .1 .2 .6 2.2 46.9 1-99 LONG-TERM COMMERCIAL AND INDUSTRIAL LOANS 14 Amount of loans (thousands of dollars) 3,705,613 473,173 351,506 206,780 2,674,153 15 Number of loans 29,580 26,742 1,980 309 548 16 Weighted-average maturity (months) 48.0 40.4 39.6 42.2 50.9 17 With fixed rates 48.5 36.5 37.0 38.2 57.0 18 With floating rates 47.9 43.7 40.9 43.2 49.5 19 Weighted-average interest rate (percent per annum) .. 11.92 14.21 12.13 12.18 11.46 20 Interquartile range1 10.86-12.69 13.00-14.93 11.46-13.10 11.57-12.96 10.65-12.28 21 With fixed rates 12.33 15.24 11.29 12.15 11.33 22 With floating rates 11.78 13.31 12.53 12.18 11.49 Percentage of amount of loans 23 With floating rate 76.0 53.5 68.1 80.5 80.7 24 Made under commitment 73.9 31.1 69.3 81.1 81.5 1-24 25-49 50-99 500 and over CONSTRUCTION AND LAND DEVELOPMENT LOANS 25 Amount of loans (thousands of dollars) 2,278,565 189,847 358,574 249,161 909,700 571,282 26 Number of loans 43,012 23,372 10,406 3,977 4,978 279 27 Weighted-average maturity (months) 8.9 5.3 9.9 5.8 11.2 7.2 28 With fixed rates 4.3 5.4 7.6 5.0 3.2 2.2 29 With floating rates 13.5 5.1 12.0 7.5 20.1 9.3 30 Weighted-average interest rate (percent per annum) .. 13.34 14.03 13.38 13.80 13.77 12.22 31 Interquartile range1 12.00-14.20 13.27-14.45 12.37-14.50 12.92-14.76 12.00-14.21 11.57-12.69 32 With fixed rates 14.13 14.12 13.75 14.29 15.05 11.74 33 With floating rates 12.60 13.79 13.05 12.73 12.42 12.41 Percentage of amount of loans 34 With floating rate 51.3 26.7 53.6 31.5 48.5 71.3 35 Secured by real estate 91.3 80.8 99.5 96.2 97.8 77.1 36 Made under commitment 61.6 36.7 76.5 65.2 46.1 83.8 37 With no stated maturity 49.9 47.9 44.0 51.9 73.4 15.9 38 With one-day maturity 6.0 10.6 .5 18.8 4.3 5.3 Type of construction 39 1- to 4-family 44.1 41.6 55.5 29.4 22.3 78.8 40 Multifamily 2.3 2.7 1.5 1.5 2.8 2.2 41 Nonresidential .0 .0 .0 .0 .0 .0 All sizes 1-9 10-24 25-49 50-99 100-249 250 and over LOANS TO FARMERS 42 Amount of loans (thousands of dollars) 1,352,194 158,661 161,008 194,352 199,351 216,433 422,389 43 Number of loans 64,008 42,006 11,116 5,719 3,212 1,516 438 44 Weighted-average maturity (months) 8.5 8.6 9.5 8.9 8.6 10.6 6.7 45 Weighted-average interest rate (percent per annum) .. 13.50 14.12 14.22 14.12 13.90 14.00 12.27 46 Interquartile range1 12.63-14.45 13.50-14.75 13.66-14.76 13.51-14.93 13.24-14.38 13.08-14.45 11.53-12.75 By purpose of loan 47 Feeder livestock 12.68 14.29 14.24 13.61 13.74 13.71 11.96 48 Other livestock 13.62 13.92 14.06 13.86 (2) (2) 13.04 49 Other current operating expenses 13.81 14.09 14.19 14.15 13.91 14.05 11.94 50 Farm machinery and equipment 13.86 14.05 14.04 (2) (2) (2) (2) 51 Other 13.47 14.42 14.56 14.42 14.05 14.13 12.69 1. Interest rate range that covers the middle 50 percent of the total dollar NOTE. For more detail, see the Board's E.2 (111) statistical release, amount of loans made. 2. Fewer than 10 sample loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • April 1983 1.35 INTEREST RATES Money and Capital Markets Averages, percent per annum; weekly and monthly figures are averages of business day data unless otherwise noted. 1983 1984 1984, week ending IInnssttrruummeenntt 11998811 11998822 11998833 Dec. Jan. Feb. Mar. Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 MONEY MARKET RATES 1 Federal funds1-2 16.38 12.26 9.09 9.47 9.56 9.59 9.91 9.62 9.74 9.79 10.04 9.97 2 Discount window borrowing12-3 13.42 11.02 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 Commercial paper4-5 3 1-month 15.69 11.83 8.87 9.56 9.23 9.35 9.81 9.42 9.54 9.73 10.06 10.04 4 3-month 15.32 11.89 8.88 9.53 9.20 9.32 9.83 9.43 9.56 9.77 10.07 10.09 5 6-month 14.76 11.89 8.89 9.50 9.18 9.31 9.86 9.44 9.58 9.82 10.09 10.11 Finance paper, directly placed4-5 6 1-month 15.30 11.64 8.80 9.51 9.20 9.34 9.76 9.36 9.55 9.67 10.06 9.95 7 3-month 14.08 11.23 8.70 9.16 9.08 9.14 9.54 9.18 9.32 9.45 9.81 9.74 8 6-month 13.73 11.20 8.69 9.11 9.02 9.06 9.38 9.12 9.19 9.29 9.53 9.60 Bankers acceptances5-6 9 3-month 15.32 11.89 8.90 9.52 9.23 9.38 9.88 9.51 9.63 9.79 10.11 10.12 10 6-month 14.66 11.83 8.91 9.45 9.19 9.35 9.91 9.52 9.63 9.88 10.15 10.15 Certificates of deposit, secondary market7 11 1-month 15.91 12.04 8.96 9.67 9.33 9.43 9.91 9.57 9.67 9.80 10.11 10.18 17 3-month 15.91 12.27 9.07 9.69 9.42 9.54 10.08 9.69 9.84 9.99 10.31 10.34 N 6-month 15.77 12.57 9.27 9.85 9.56 9.73 10.37 9.95 10.08 10.35 10.62 10.59 14 Eurodollar deposits, 3-month8 16.79 13.12 9.56 10.08 9.78 9.91 10.40 10.09 10.18 10.31 10.61 10.61 U.S. Treasury bills5 Secondary market9 15 3-month 14.03 10.61 8.61 9.00 8.90 9.09 9.52 9.18 9.29 9.43 9.76 9.72 16 6-month 13.80 11.07 8.73 9.17 9.02 9.18 9.66 9.33 9.43 9.59 9.88 9.85 17 1-year 13.14 11.07 8.80 9.24 9.07 9.20 9.67 9.37 9.45 9.60 9.90 9.86 Auction average10 18 3-month 14.029 10.686 8.63 8.96 8.93 9.03 9.44 9.20 9.24 9.37 9.65 9.76 19 6-month 13.776 11.084 8.75 9.14 9.06 9.13 9.58 9.33 9.37 9.52 9.79 9.88 2200 1 year 1133..115599 1111..009999 8.86 99..1166 99..0044 99..2244 99..6688 99..6688 CAPITAL MARKET RATES U.S. Treasury notes and bonds" Constant maturities12 21 1-year 14.78 12.27 9.57 10.11 9.90 10.04 10.59 10.24 10.33 10.53 10.85 10.79 2? 2-year 14.56 12.80 10.21 10.84 10.64 10.79 11.31 11.00 11.09 11.24 11.52 11.54 ">3 11.25 11.65 24 3-year 14.44 12.92 10.45 11.13 10.93 11.05 11.59 11.24 11.38 11.53 11.77 11.80 25 5-year 14.24 13.01 10.80 11.54 11.37 11.54 12.02 11.75 11.85 11.98 12.17 12.20 26 7-year 14.06 13.06 11.02 11.78 11.58 11.75 12.25 11.97 12.09 12.22 12.40 12.39 27 10-year 13.91 13.00 11.10 11.83 11.68 11.84 12.32 12.05 12.18 12.29 12.46 12.46 28 20-year 13.72 12.92 11.34 12.02 11.82 12.00 12.45 12.21 12.35 12.46 12.60 12.51 29 30-year 13.44 12.76 11.18 11.88 11.75 11.95 12.38 12.15 12.27 12.38 12.52 12.47 Composite14 30 Over 10 years (long-term) 12.87 12.23 10.84 11.44 11.29 11.44 1111..9900 1111..6655 1111..7788 11.89 1122..0022 12.00 State and local notes and bonds Moody's series15 31 Aaa 10.43 10.88 8.80 9.34 9.00 9.04 9.41 9.30 9.40 9.45 9.50 9.40 3? Baa 11.76 12.48 10.17 10.29 10.10 9.94 10.22 10.10 10.20 10.25 10.30 10.25 33 Bond Buyer series16 11.33 11.66 9.51 9.89 9.63 9.64 9.94 9.86 9.94 9.98 10.01 9.93 Corporate bonds Seasoned issues17 34 All industries 15.06 14.94 12.78 13.07 12.92 12.88 13.33 13.09 13.19 13.32 13.44 13.48 35 Aaa 14.17 13.79 12.04 12.57 12.20 12.08 12.57 12.30 12.46 12.58 12.65 12.71 36 Aa 14.75 14.41 12.42 12.76 12.71 12.70 13.22 12.96 13.08 13.24 13.34 13.33 37 A 15.29 15.43 13.10 13.21 13.13 13.11 13.54 13.31 13.39 13.50 13.65 13.70 38 Baa 16.04 16.11 13.55 13.75 13.65 13.59 13.99 13.78 13.84 13.97 14.10 14.15 39 A-rated, recently-offered utility bond18 16.63 15.49 12.73 13.29 12.99 13.05 13.63 13.41 13.55 13.60 13.81 13.80 MEMO: Dividend/price ratio19 40 Preferred stocks 12.36 12.53 11.2 P 11.49 11.35 11.16 11.39 11.19 11.30 11.32 11.40 11.52 41 Common stocks 5.20 5.81 4.40 4.32 4.27 4.59 4.63 4.62 4.70 4.64 4.63 4.57 1. Weekly and monthly figures are averages of all calendar days, where the 12. Yields adjusted to constant maturities by the U.S. Treasury. That is, yields rate for a weekend or holiday is taken to be the rate prevailing on the preceding are read from a yield curve at fixed maturities. Based on only recently issued, business day. The daily rate is the average of the rates on a given day weighted by actively traded securities. the volume of transactions at these rates. 13. Each biweekly figure is the average of five business days ending on the 2. Weekly figures are averages for statement week ending Wednesday. Monday following the date indicated. Until Mar. 31, 1983, the biweekly rate 3. Rate for the Federal Reserve Bank of New York. determined the maximum interest rate payable in the following two-week period 4. Unweighted average of offering rates quoted by at least five dealers (in the on 2-'/2-year small saver certificates. (See table 1.16.) case of commercial paper), or finance companies (in the case of finance paper). 14. Averages (to maturity or call) for all outstanding bonds neither due nor Before November 1979, maturities for data shown are 30-59 days, 90—119 days, callable in less than 10 years, including several very low yielding "flower" bonds. and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and 150- 15. General obligations based on Thursday figures; Moody's Investors Service. 179 days for finance paper. 16. General obligations only, with 20 years to maturity, issued by 20 state and 5. Yields are quoted on a bank-discount basis, rather than an investment yield local governmental units of mixed quality. Based on figures for Thursday. basis (which would give a higher figure). 17. Daily figures from Moody's Investors Service. Based on yields to maturity 6. Dealer closing offered rates for top-rated banks. Most representative rate on selected long-term bonds. (which may be, but need not be, the average of the rates quoted by the dealers). 18. Compilation of the Federal Reserve. This series is an estimate of the yield 7. Unweighted average of offered rates quoted by at least five dealers early in on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of the day. call protection. Weekly data are based on Friday quotations. The Federal Reserve 8. Calendar week average. For indication purposes only. previously published interest rate series on both newly-issued and recently- 9. Unweighted average of closing bid rates quoted by at least five dealers. offered Aaa utility bonds, but discontinued these series in January 1984 owing to 10. Rates are recorded in the week in which bills are issued. Beginning with the the lack of Aaa issues. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the 19. Standard and Poor's corporate series. Preferred stock ratio based on a percentage yield (on a bank discount basis) that they would accept to two decimal sample of ten issues: four public utilities, four industrials, one financial, and one places. Thus, average issuing rates in bill auctions will be reported using two transportation. Common stock ratios on the 500 stocks in the price index. rather than three decimal places. 11. Yields are based on closing bid prices quoted by at least five dealers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets A25 1.36 STOCK MARKET Selected Statistics 1983 1984 IInnddiiccaattoorr 11998811 11998822 11998833 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 74.02 68.93 92.63 96.74 93.96 96.70 96.78 95.36 94.92 96.16 90.60 90.66 2 Industrial 85.44 78.18 107.45 113.21 109.50 112.76 112.87 110.77 110.60 112.16 105.44 105.92 3 Transportation 72.61 60.41 89.36 92.91 88.06 94.56 95.41 97.68 98.79 97.98 86.33 86.10 4 Utility 38.90 39.75 47.00 46.61 46.94 48.16 48.73 48.50 47.00 47.43 45.67 44.83 5 Finance 73.52 71.99 95.34 99.60 95.76 97.00 94.79 94.48 94.25 95.79 89.95 89.50 6 Standard & Poor's Corporation (1941-43 = 10)1 ... 128.05 119.71 160.41 166.96 162.42 167.16 167.65 165.23 164.36 166.39 157.70 157.44 7 American Stock Exchange2 (Aug. 31, 1973 = 100) 171.79 141.31 216.48 244.03 230.10 234.36 223.76 218.42 221.31 224.83 207.95 210.09 Volume of trading (thousands of shares) 8 New York Stock Exchange 46,967 64,617 85,418 79,508 74,191 82,866 85,445 86,405 88,041 105,518 96,641 84,328 9 American Stock Exchange 5,346 5,283 8,215 8,199 6,329 6,629 7,751 6,160 6,939 7,167 6,431 5,382 Customer financing (end-of-period balances, in millions of dollars) 10 Regulated margin credit at brokers-dealers3 14,411 13,325 23,000 19,218 19,437 20,124 21,030 22,075 23,000 23,132 22,557 f 11 Margin stock4 14,150 12,980 22,720 18,870 19,090 19,760 20,690 21,790 22,720 22,870 22,330 1 12 Convertible bonds 259 344 279 347 346 363 339 285 279 261 226 n a. 13 Subscription issues 2 1 1 1 1 1 1 1 1 1 1 Free credit balances at brokers5 14 Margin-account 3,515 5,735 6,620 6,275 6,350 6,550 6,630 6,512 6,620 6,510' 6,420 15 Cash-account 7,150 8,390 8,430 8,145 8,035 7,930 7,695 7,599 8,430 8,230' 8,420 Margin-account debt at brokers (percentage distribution, end of period) 16 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 By equity class (in percent)6 1/ Under 40 37.0 21.0 41.0 21.0 23.0 24.0 35.0 48.0 41.0 43.0 48.0 18 40-49 24.0 24.0 22.0 28.0 28.0 27.0 24.0 22.0 22.0 21.0 20.0 19 50-59 17.0 24.0 16.0 21.0 20.0 21.0 17.0 17.0 16.0 15.0 13.0 n a. 20 60-69 10.0 14.0 9.0 14.0 13.0 12.0 10.0 10.0 9.0 9.0 8.0 21 70-79 6.0 9.0 6.0 9.0 9.0 9.0 7.0 7.0 6.0 6.0 6.0 1 22 80 or more 6.0 8.0 6.0 7.0 7.0 7.0 7.0 6.0 6.0 6.0 5.0 t Special miscellaneous-account balances at brokers (end of period) 23 Total balances (millions of dollars)7 25,870 35,598 58,329 50,580 50,267 51,211 54,029 57,490 58,329 62,670 63,411 [ Distribution by equity status (percent) 24 Net credit status 58.0 62.0 63.0 62.0 62.0 64.0 63.0 63,0 63.0 61.0 59.0 n.a. Debt status, equity of 1 25 60 percent or more 31.0 29.0 28.0 31.0 31.0 29.0 28.0 29.0 28.0 29.0 29.0 1 26 Less than 60 percent 11.0 9.0 9.0 6.0 7.0 7.0 9.0 8.0 9.0 10.0 12.0 t Margin requirements (percent of market value and effective date)8 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 27 Margin stocks 70 80 65 55 65 50 28 Convertible bonds 50 60 50 50 50 50 29 Short sales 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance 6. 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 7. 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 2. Beginning July 5, 1983, the American Stock Exchange rebased its index other collateral in the customer's margin account or deposits of cash (usually sales effectively cutting previous readings in half. proceeds) occur. 3. Margin credit includes all credit extended to purchase or carry stocks or 8. Regulations G, T, and U of the Federal Reserve Board of Governors, related equity instruments and secured at least in part by stock. Credit extended is prescribed in accordance with the Securities Exchange Act of 1934, limit the end-of-month data for member firms of the New York Stock Exhange. amount of credit to purchase and carry margin stocks that may be extended on Besides assigning a current loan value to margin stock generally, Regulations T securities as collateral by prescribing a maximum loan value, which is a specified and U permit special loan values for convertible bonds and stock acquired through percentage of the market value of the collateral at the time the credit is extended. exercise of subscription rights. Margin requirements are the difference between the market value (100 percent) 4. A distribution of this total by equity class is shown on lines 17-22. and the maximum loan value. The term "margin stocks" is defined in the 5. Free credit balances are in accounts with no unfulfilled commitments to the corresponding regulation. brokers and are subject to withdrawal by customers on demand. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • April 1983 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1983 1984 AAccccoouunntt 11998811 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb.P Savings and loan associations 1 Assets 664,167 707,646 730,211 729,920 733,074 741,416 746,998 748,491 756,953 763,365 771,705 772,723' 780,614 2 Mortgages 518,547 483,614 477,593 473,481 474,510 479,322 483,178 482,305 485,366 489,720 493,432 494,682' 498,418 3 Cash and investment securities1 63,123 85,438 99,973 104,245 102,063 102,546 99,812 100,243 101,553 101,553 103,395 101,883' 103,859 4 Other 82,497 138,594 152,645 152,194 156,501 159,548 164,008 165,943 170,034 172,259 174,878 176,158' 178,337 5 Liabilities and net worth 664,167 707,646 730,211 729,920 733,074 741,416 746,998 748,491 756,953 763,365 771,705 772,723' 780,614 6 Savings capital 525,061 567,961 603,187 601.731 605,282 610,826 615,369 618,002 622,577 625,013 634,076 639,694' 645,026 7 Borrowed money 88,782 97,850 83,623 82,731 84,342 84,694 84,267 85,976 87,367 89,235 91,443 86,322' 86,493 8 FHLBB 62,794 63,861 55,933 54,392 54,234 53,579 52,182 52,179 52,678 51,735 52,626 50,880' 50,506 9 Other 25,988 33,989 27,690 28,339 30,108 31,115 32,085 33,797 34,689 37,500 38,817 35,442' 35,987 10 Loans in process2 6,385 9,934 13,478 14,548 15,998 17,094 17,967 18,812 19,209 19,728 21,117 21,498' 21,960 11 Other 15,544 15,602 15,853 17,936 15,140 17,527 18,615 15,496 17,458 19,179 15,275 15,777' 17,581 12 Net worth3 28,395 26,233 27,548 27,522 28,310 28,369 28,626 29,017 29,551 29,938 30,911 30,930' 31,514 13 MEMO: Mortgage loan commitments outstanding4 15,225 18,054 27,968 30,148 30,691 31,733 32,415 32,483 32,798 34,780 32,996 33,504' 36,120 Mutual savings banks5 14 Assets 175,728 174,197 178,826 180,071 181,975 182,822 183,612 186,041 188,021 189,146 193,517 194,225 Loans 15 Mortgage 99,997 94,091 93,311 93,587 94,000 93,998 93,941 94,831 95,181 95,600 97,368 97,699 16 Other 14,753 16,957 18,353 17,893 17,438 18,134 17,929 17,830 18,860 19,674 19,120 20,467 Securities 17 U.S. government6 9,810 9,743 12,364 13,110 13,572 13,931 14,484 14,794 14,774 15,090 15,349 15,169 18 State and local government 2,288 2,470 2,311 2,260 2,257 2,248 2,247 2,244 2,189 2,194 2,177 2,180 19 Corporate and other7 37,791 36,161 38,342 39,142 40,206 40,667 41,045 41,889 41,907 42,625 43,589 43,547 20 Cash 5,442 6,919 6,039 5,960 6,224 5,322 5,168 5,560 4,940 4,990 6,252 4,785 21 Other assets 5,649 7,855 8,107 8,118 8,276 8,522 8,799 8,893 9,051 8,973 9,662 10,378 22 Liabilities 175,728 174,197 178,826 180,071 181,975 182,822 183,612 186,041 188,021 189,146 193,517 194,225 n a. 23 Deposits 155,110 155,196 161,262 162,287 163,990 164,848 165,087 165,887 166,260 169,334 172,639 171,603 24 Regular8 153,003 152,777 158,760 159,840 161,573 162,271 162,600 162,998 163,782 166,984 170,105 171,109 25 Ordinary savings 49,425 46,862 40,379 40,467 40,451 39,983 39,360 39,768 38,129 38,448 38,553 37,999 26 Time 103,578 96,369 84,593 83,506 84,705 85,445 86,446 85,603 90,639 93,051 95,107 96,520 27 Other 2,108 2,419 2,502 2,447 2,417 2,577 2,487 2,889 2,478 2,350 2,534 494 28 Other liabilities 10,632 8,336 7,631 3,114 7,754 7,596 7,884 9,475 8,988 9,192 10,174 11,974 29 General reserve accounts 9,986 9,235 9,352 9,377 9,575 9,684 9,932 9,879 12,245 10,314 18,759 10,333 30 MEMO: Mortgage loan commitments outstanding9 1,293 1,285 1,882 1,860 1,884 1,969 2,046 2,023 2,210 2,418 2,387 n.a. Life insurance companies 31 Assets 525,803 588,163 609,298 620,572 628,224 633,569 638,826 644,295 647,149 652,904 658,979 663,013 Securities 32 Government 25,209 36,499 39,210 42,523 43,348 44,751 45,700 46,109 47,767 47,170 49,417 49,690 33 United States10 8,167 16,529 19,746 20,706 21,141 22,228 22,817 23,134 24,380 24,232 26,364 26,659 34 State and local 7,151 8,664 8,524 10,053 10,355 10,504 10,695 10,739 10,791 10,686 10,796 10,673 9,891 11,306 10,940 11,764 11,852 12,019 12,188 12,236 12,596 12,252 12,257 12,358 255,769 287,126 300,558 309,254 313,510 316,934 318,584 321,568 320,964 325,787 325,015 329,697 n.a. 37 Bonds 208,099 231,406 238,689 245,833 248,248 252,397 253,977 256,131 256,332 260,432 259,591 264,430 38 Stocks 47,670 55,720 61,869 63,421 65,262 64,537 64,607 65,437 64,632 65,355 65,424 65,267 39 Mortgages 137,747 141,989 143,011 143,758 144,725 145,086 146,400 147,356 148,256 148,947 151,599 151,878 40 Real estate 40,094 20,264 21,352 21,344 21,629 21,690 21,749 21,903 22,141 22,278 22,683 22,700 41 Policy loans 48,706 52,961 53,715 53,804 53,914 53,972 54,063 54,165 54,255 54,362 54,518 54,559 42 Other assets 35,815 48,571 51,452 48,889 51,098 51,136 52,330 53,194 53,765 54,360 55,747 54,474 Credit unions12 43 Total assets/liabilities and capital 60,611 69,572 74,896 76,851 78,467 79,084 79,595 80,678 81,033 81,845 82,854 83,182 84,801 39,181 45,483 48,986 50,275 51,430 51,844 52,224 53,033 53,222 53,710 54,372 54,657 55,753 45 State 21,430 24,089 25,910 26,576 27,037 27,240 27,371 27,645 27,811 28,135 28,482 28,525 29,048 46 Loans outstanding 42,333 43,223 43,530 44,055 45,001 45,616 46,880 47,744 48,345 49,102 49,923 50,306 51,861 47 Federal 27,096 27,941 28,133 28,512 29,175 29,577 30,384 30,912 31,287 31,789 32,304 32,631 33,878 48 State 15,237 15,282 15,397 15,543 15,826 16,039 16,496 16,832 17,058 17,313 17,619 17,675 17,983 49 Savings 54,152 62,977 68,663 70,221 71,712 72,438 72,550 73,697 74,187 74,685 75,435 76,068 77,233 50 Federal (shares) 35,25C 41,341 45,165 46,192 47,145 47,713 47,874 48,709 49,044 49,400 49,839 50,387 51,218 51 State (shares and deposits) 18,902 21,636 23,498 24,029 24,567 24,725 24,676 24,988 25,143 25,285 25,596 25,681 26,015 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance All 1.37 Continued 1983 1984 AAccccoouunntt 11998811 11998822 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb.P FSLIC-insured federal savings banks 52 Assets 6,859 22,713 33,667 39,660 41,763 46,191 57,496 59,422 61,717 64,969 69,835 53 Mortgages 3,353 14,345 21,248 25,236 26,494 28,086 34,814 35,637 37,166 38,698 41,754 54 Cash and investment securities' 4,310 5,901 6,675 6,890 7,514 9,245 9,587 9,653 10,436 11,243 55 Other 4.058 6,518 7,749 8,379 10,591 13,437 14,198 14,898 15,835 16,838 56 Liabilities and net worth . 6,859 22,713 33,667 39,660 41,763 46,191 57,496 59,422 61,717 64,969 69,835 57 Savings and capital 5,877 18,598 27,419 32,446 34,108 37,284 47,058 48,544 50,384 53,227 57,195 58 Borrowed money .. 2,719 4,146 4,831 5,008 5,445 6,598 6,775 6,981 7,477 8,048 59 FHLBB 1,979 2,755 3,094 3,131 3,572 4,192 4,323 4,381 4,640 4,751 60 Other 740 1,391 1,737 1,877 1,873 2,406 2,452 2,600 2,837 3,297 61 Other 453 759 755 919 1,142 1,089 1,293 1,428 1,157 1,347 62 Net worth3 943 1,343 1,628 1,728 2,320 2,751 2,810 2,924 3,108 3,245 MEMO 63 Loans in process2 335 650 791 828 934 1,120 1,181 1,222 1,264 1,387 64 Mortgage loan committments outstanding4 722 1,113 1,438 1,743 1,774 2,130 2,064 2,230 2,151 2,974 1. Holdings of stock of the Federal Home Loan Banks are in "other assets." 11. Issues of foreign governments and their subdivisions and bonds of the 2. Beginning in 1982, loans in process are classified as contra-assets and are International Bank for Reconstruction and Development. not included in total liabilities and net worth. Total assets are net of loans in 12. As of June 1982, data include only federal or federally insured state credit process. unions serving natural persons. 3. Includes net undistributed income accrued by most associations. 4. Excludes figures for loans in process. NOTE. Savings and loan associations: Estimates by the FHLBB for all 5. The National Council reports data on member mutual savings banks and on associations in the United States. Data are based on monthly reports of federally savings banks that have converted to stock institutions, and to federal savings insured associations and annual reports of other associations. Even when revised, banks. data for current and preceding year are subject to further revision. 6. Beginning April 1979, includes obligations of U.S. government agencies. Mutual savings banks: Estimates of National Council of Savings Institutions for Before that date, this item was included in "Corporate and other." all savings banks in the United States. 7. Includes securities of foreign governments and international organizations Life insurance companies: Estimates of the American Council of Life Insurance and, before April 1979, nonguaranteed issues of U.S. government agencies. for all life insurance companies in the United States. Annual figures are annual- 8. Excludes checking, club, and school accounts. statement asset values, with bonds carried on an amortized basis and stocks at 9. Commitments outstanding (including loans in process) of banks in New year-end market value. Adjustments for interest due and accrued and for York State as reported to the Savings Banks Association of the State of New differences between market and book values are not made on each item separately York. but are included, in total, in "other assets." 10. Direct and guaranteed obligations. Excludes federal agency issues not Credit unions: Estimates by the National Credit Union Administration for a guaranteed, which are shown in the table under "Business" securities. group of federal and federally insured state credit unions serving natural persons. Figures are preliminary and revised annually to incorporate recent data. 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year Fiscal Fiscal Fiscal Type of account or operation year year year 1982 1983 1983 1984 1981 1982 1983 HI H2 HI Dec. Jan. Feb. U.S. budget 1 Receipts' 599,272 617,766 600,562 322,478 286,338 306,331 58,041 62,537 47,886 2 Outlays' 657,204 728,375 795,917 348,678 390,846 396,477 74,702 68,052 68,267 3 Surplus, or deficit (-) -57,932 -110,609 -195,355 -26,200 -104,508 -90,146 -16,661 -5,515 -20,381 4 Trust funds 6,817 5,456 23,056 -17,690 -6,576 22,680 3,921 1,043 557 5 Federal funds2 3 -64,749 -116,065 -218,410 -43,889 -97,934 -112,822 -20,579 -6,558 -20,938 Off-budget entities (surplus, or deficit (-)) 6 Federal Financing Bank outlays -20,769 -14,142 -10,404 -7,942 -4,923 -5,418 -312 -121 -8 7 Other3 4 -236 -3,190 -1,953 227 -2,267 -528 400 -129 -198 U.S. budget plus off-budget, including Federal Financing Bank 8 Surplus, or deficit (-) -78,936 -127,940 -207,711 -33,914 -111,699 -96,094 -16,572 -5,762 -20,588 Source or financing 9 Borrowing from the public 79,329 134,993 212,425 41,728 119,609 102,538 15,501 23,686 18,172 10 Cash and monetary assets (decrease, or increase (-))4 -1,878 -11,911 -9,889 -408 -9,057 -9,664 -6,092 -21,127 8,722 11 Other5 1,485 4,858 5,176 -7,405 1,146 3,222 7,164 3,202 -6,306 MEMO 12 Treasury operating balance (level, end of period) 18,670 29,164 37,057 10,999 19,773 100,243 11,817 28,544 23,758 13 Federal Reserve Banks 3,520 10,975 16,557 4,099 5,033 19,442 3,661 7,153 3,226 14 Tax and loan accounts 15,150 18,189 20,500 6,900 14,740 72,037 8,157 21,392 20,531 1. Effective Feb. 8, 1982, supplemental medical insurance premiums and 5. Includes accrued interest payable to the public; allocations of special voluntary hospital insurance premiums, previously included in other insurance drawing rights; deposit funds; miscellaneous liability (including checks outstandreceipts, have been reclassified as offsetting receipts in the health function. ing) and asset accounts; seigniorage; increment on gold; net gain/loss for U.S. 2. Half-year figures are calculated as a residual (total surplus/deficit less trust currency valuation adjustment; net gain/loss for IMF valuation adjustment; and fund surplus/deficit). profit on the sale of gold. 3. Other off-budget includes Postal Service Fund; Rural Electrification and Telephone Revolving Fund; Rural Telephone Bank; and petroleum acquisition SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. and transportation and strategic petroleum reserve effective November 1981. Government." Treasury Bulletin, and the Budget of the United States Govern- 4. Includes U.S. Treasury operating cash accounts; SDRs; gold tranche ment, Fiscal Year 1985. drawing rights; loans to International Monetary Fund; and other cash and monetary assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • April 1983 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll FFFiiissscccaaalll SSSooouuurrrccceee ooorrr tttyyypppeee yyyeeeaaarrr yyyeeeaaarrr yyyeeeaaarrr 1982 1983 1983 1984 111999888111 111999888222 111999888333 HI H2 HI Dec. Jan. Feb. RECEIPTS 1 All sources 599,272 617,766 600,563 322,478 286,338 306,331 58,041 62,537 47,886 2 Individual income taxes, net 285,917 297,744 288,938 150,565 145,676 144,550 25,577 33,881 22,190 3 Withheld 256,332 267,513 266,010 133,575 131,567 135,531 24,482 21,070 23,523 4 Presidential Election Campaign Fund ... 41 39 36 34 5 30 0 0 4 5 N on withheld 76,844 84,691 83,586 66,174 20,040 63,014 1,948 12,728 1,501 6 Refunds 47,299 54,498 60,692 49,217 5,938 54,024 854 -82 22,,883388 Corporation income taxes 7 Gross receipts 73,733 65,991 61,780 37,836 25,661 33,522 11,558 2,985 1,892 8 Refunds 12,596 16,784 24,758 8,028 11,467 13,809 636 1,366 11,,883333 9 Social insurance taxes and contributions, net 182,720 201,498 209,001 108,079 94,278 110,521 16,120 21,462 1199,,997722 10 Payroll employment taxes and contributions1 156,932 172,744 179,010 88,795 85,063 90,912 15,435 1199,,444466 1166,,777744 11 Self-employment taxes and contributions2 6,041 7,941 6,756 7,357 177 6,427 0 478 523 12 Unemployment insurance 15,763 16,600 18,799 9,809 6,857 11,146 289 1,112 2,308 13 Other net receipts3 3,984 4,212 4,436 2,119 2,181 2,1% 396 427 369 14 Excise taxes 40,839 36,311 35,300 17,525 16,556 16,904 3,011 3,148 2,693 15 Customs deposits 8,083 8,854 8,655 4,310 4,299 4,010 855 776 839 16 Estate and gift taxes 6,787 7,991 6,053 4,208 3,445 2,883 484 488 570 17 Miscellaneous receipts4 13,790 16,161 15,594 7,984 7,891 7,751 1,072 1,163 1,613 OUTLAYS 18 All types 657,204 728,424 795,917 348,683 390,847 396,477 74,702 68,052 68,267 19 National defense 159,765 187,418 210,461 93,154 100,419 105,072 19,576 18,283 18,515 20 International affairs 11,130 9,982 8,927 5,183 4,406 4,705 2,647 709 780 21 General science, space, and technology ... 6,359 7,070 7,777 3,370 3,903 3,486 480 503 721 22 Energy 10,277 4,674 4,035 2,946 2,059 2,073 534 255 34 23 Natural resources and environment 13,525 12,934 12,676 5,636 6,940 5,892 1,221 963 790 24 Agriculture 5,572 14,875 22,173 7,087 13,260 10,154 1,452 1,835 1,737 25 Commerce and housing credit 3,946 3,865 4,721 1,408 2,244 2,164 565 709 -648 26 Transportation 23,381 20,560 21,231 9,915 10,686 9,918 2,030 1,953 1,517 27 Community and regional development .... 9,394 7,165 7,302 3,055 4,186 3,124 752 434 524 28 Education, training, employment, social services 31,402 26,300 25,726 12,607 12,187 12,801 2,214 2,476 2,305 29 Health 26,858 27,435 28,655] 753 30 Social security and medicare 178,733 202,531 223,311f 150,001s 172,852 184,207 31,189 3300,,445566 21,101 31 Income security 85,514 92,084 106,21lj 8,585 32 Veterans benefits and services 22,988 23,955 24,845 112,782 13,241 11,334 3,336 1,202 2,108 33 Administration of justice 4,696 4,671 5,014 2,334 2,373 2,522 448 487 505 34 General government 4,614 4,726 4,991 2,400 2,322 2,434 364 88 495 35 General-purpose fiscal assistance 6,856 6,393 6,287 3,325 3,152 3,124 64 1,153 201 36 Net interest" 68,726 84,697 89,774 41,883 44,948 42,358 8,712 7,808 9,651 37 Undistributed offsetting receipts7 -16,509 -13,270 -21,424 -6,490 -8,333 -8,885 -889 -1,263 -1,407 1. Old-age, disability, and hospital insurance, and railroad retirement accounts. function. Before February 1984, these outlays were included in the income 2. Old-age, disability, and hospital insurance. security and health functions. 3. Federal employee retirement contributions and civil service retirement and 6. Net interest function includes interest received by trust funds. disability fund. 7. Consists of rents and royalties on the outer continental shelf and U.S. 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous government contributions for employee retirement. receipts. 5. In accordance with the Social Security Amendments Act of 1983, the SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. Treasury now provides social security and medicare outlays as a separate Government" and the Budget of the U.S. Government, Fiscal Year 1985. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance All 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1982 1983 1984 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 1,066.4 1,084.7 1,147.0 1,201.9 1,249.3 1,324.3 1,381.9 1415.3 n.a. 2 Public debt securities 1,061.3 1,079.6 1,142.0 1,197.1 1,244.5 1,319.6 1,377.2 1,410.7 1,463.7 3 Held by public 858.9 867.9 925.6 987.7 1,043.3 1,090.3 1,138.2 1174.4 4 4 Held by agencies 202.4 211.7 216.4 209.4 201.2 229.3 239.0 236.3 i 5 Agency securities 5.1 5.0 5.0 4.8 4.8 4.7 4.7 4.6 n.a. 6 Held by public 3.9 3.9 3.7 3.7 3.7 3.6 3.6 3.5 1 7 Held by agencies 1.2 1.2 1.2 1.2 1.1 1.1 1.1 1.1 t 8 Debt subject to statutory limit 1,062.2 1,080.5 1,142.9 1,197.9 1,245.3 1,320.4 1,378.0 1,411.4 1,464.5 9 Public debt securities 1,060.7 1,079.0 1,141.4 1,196.5 1,243.9 1,319.0 1,376.6 1,410.1 1,463.1 10 Other debt1 1.5 1.5 1.5 1.4 1.4 1.4 1.3 1.3 1.3 11 MEMO: Statutory debt limit 1,079.8 1,143.1 1,143.1 1,290.2 1,290.2 1,389.0 1,389.0 1,490.0 1,490.0 1. Includes guaranteed debt of government agencies, specified participation NOTE. Data from Treasury Bulletin (U.S. Treasury Department), certificates, notes to international lending organizations, and District of Columbia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1983 1984 TTyyppee aanndd hhoollddeerr 11997799 11998800 11998811 11998822 Nov. Dec. Jan. Feb. Mar. 1 Total gross public debt 845.1 930.2 1,028.7 1,197.1 1.389.2 1,410.7 1,437.4 1,457.5 1,463.7 By type 2 Interest-bearing debt 844.0 928.9 1,027.3 1,195.5 1,387.9 1,400.9 1,435.6 1,455.8 1,452.1 3 Marketable 530.7 623.2 720.3 881.5 1.044.3 1,050.9 1,081.9 1,100.1 1,097.7 4 Bills 172.6 216.1 245.0 311.8 335.3 343.8 346.9 349.5 350.2 5 Notes 283.4 321.6 375.3 465.0 575.3 573.4 597.6 608.0 604.9 6 Bonds 74.7 85.4 99.9 104.6 133.8 633.7 137.4 142.6 142.6 7 Nonmarketable1 313.2 305.7 307.0 314.0 343.5 350.0 353.7 355.7 354.4 8 2.2 9 State and local government series 24.6 23.8 23.0 25.7 35.7 36.1 36.7 37.5 38.1 10 Foreign issues3 28.8 24.0 19.0 14.7 10.5 10.4 10.8 9.8 9.9 11 Government 23.6 17.6 14.9 13.0 10.5 10.4 10.8 9.8 9.9 12 Public 5.3 6.4 4.1 1.7 .0 0 .0 .0 .0 13 Savings bonds and notes 79.9 72.5 68.1 68.0 70.9 70.7 71.0 71.2 71.6 14 Government account series4 177.5 185.1 196.7 205.4 226.2 231.9 235.0 237.0 234.6 15 Non-interest-bearing debt 1.2 1.3 1.4 1.6 1.3 9.8 1.8 1.8 1.6 By holder5 16 U.S. government agencies and trust funds 187.1 192.5 203.3 209.4 230.4 236.3 17 Federal Reserve Banks 117.5 121.3 131.0 139.3 149.4 151.9 18 Private investors 540.5 616.4 694.5 848.4 1022.6 19 Commercial banks 96.4 116.0 109.4 131.4 188.9 20 Mutual savings banks 4.7 5.4 5.2 n.a. n.a. 21 Insurance companies 16.7 20.1 19.1 38.7 48.9 22 Other companies 22.9 25.7 37.8 n.a. n a. n.a. n a. n a. n a. 23 State and local governments 69.9 78.8 85.6 113.4 n.a. Individuals 24 Savings bonds 79.9 72.5 68.0 68.3 71.5 25 Other securities 36.2 56.7 75.6 48.2 61.9 26 Foreign and international6 124.4 127.7 141.4 149.4 168.9 27 Other miscellaneous investors7 90.1 106.9 152.3 233.2 n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Data for Federal Reserve Banks and U.S. government agencies and trust tion Administration, depository bonds, retirement plan bonds, and individual funds are actual holdings; data for other groups are Treasury estimates. retirement bonds. 6. Consists of investments of foreign balances and international accounts in the 2. These nonmarketable bonds, also known as Investment Series B Bonds, United States. may be exchanged (or converted) at the owner's option for 1 Vi percent, 5-year 7. Includes savings and loan associations, nonprofit institutions, corporate marketable Treasury notes. Convertible bonds that have been so exchanged are pension trust funds, dealers and brokers, certain government deposit accounts, removed from this category and recorded in the notes category (line 5). and government sponsored agencies. 3. Nonmarketable dollar-denominated and foreign currency-denominated series held by foreigners. NOTE. Gross public debt excludes guaranteed agency securities. 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 States (U.S. Treasury Department); data by holder from Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • April 1983 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions Par value; averages of daily figures, in millions of dollars 1984 1984 week ending Wednesday IItteemm 11998800 11998811 11998822 Jan/ Feb/ Mar. Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 Feb. 29 Immediate delivery1 1 U.S. government securities 18,331 24,728 32,271 45,623 52,445 50,344 38,623' 44,574' 50,989 55,197 51,037 55,040 By maturity 2 Bills 11,413 14,768 18,398 23,140 24,937 23,278 20,407' 21,978' 24,364 23,127 28,165 25,033 3 Other within 1 year 421 621 810 1,119 895 906 865 1,080 801 805 909 999 4 1-5 years 3,330 4,360 6,272 9,615 11,827 11,038 7,593 11,418' 13,163 11,602 10,053 12,653 5 5-10 years 1,464 2,451 3,557 5,647 8,052 7,798 5,118 5,052 6,767 10,186 6,262 9,714 6 Over 10 years 1,704 2,528 3,234 6,102 6,734 7,324 4,641 5,046 5,894 9,479 5,648 6,641 By type of customer 7 U.S. government securities dealers 1,484 1,640 1,769 2,751 4,164 2,050 2,386 2,876 3,907 5,288 4,662 33,,334455 8 U.S. government securities brokers 7,610 11,750 15,659 21,066 24,952 27,263 17,944' 20,002' 24,645 24,898 23,275 27,787 9 All others2 9,237 11,337 15,344 21,806 23,329 21,031 18,293 21,695' 22,437 25,011 23,100 23,907 10 Federal agency securities 3,258 3,306 4,142 6,541 7,577 7,097 6,187' 6,565 7,448 9,161 6,064 7,437 11 Certificates of deposit 2,472 4,477 5,001 4,886 5,324 4,572 3,765 4,338 4,678 5,346 5,870 5,780 12 Bankers acceptances 1,807 2,502 3,119 2,702 2,481 2,595 2,937 2,475 2,405 2,795 3,175 13 Commercial paper 6,128 7,595 8,891 88,,111144 88,,112244 77,,333333 88,,339977 77,,669977 88,,667711 88,,332277 77,,888833 Futures transactions3 14 Treasury bills 3,523 5,031 5,431 6,984 8,557 4,784 4,031 7,549 6,067 7,341 7,319 15 Treasury coupons n a. 1,330 1,490 2,625 3,561 4,630 2,491 1,964 3,402 3,369 2,986 4,733 16 Federal agency securities 234 259 157 302 437 159 140 208 296 232 398 Forward transactions4 17 U.S. government securities 365 835 713 1,616 1,373 772 842 2,178 1,748 1,020 1,484 18 Federal agency securities 1,370 982 2,147 2,595 2,586 1,584 1,962' 3,077 2,863 2,656 1,985 1. Before 1981, data for immediate transactions include forward transactions. from the date of the transaction for government securities (Treasury bills, notes, 2. Includes, among others, all other dealers and brokers in commodities and and bonds) or after 30 days for mortgage-backed agency issues. securities, nondealer departments of commercial banks, foreign banking agencies, NOTE. Averages for transactions are based on number of trading days in the and the Federal Reserve System. period. 3. Futures contracts are standardized agreements arranged on an organized Transactions are market purchases and sales of U.S. government securities exchange in which parties commit to purchase or sell securities for delivery at a dealers reporting to the Federal Reserve Bank of New York. The figures exclude future date. allotments of, and exchanges for, new U.S. government securities, redemptions 4. Forward transactions are agreements arranged in the over-the-counter of called or matured securities, purchases or sales of securities under repurchase market in which securities are purchased (sold) for delivery after 5 business days agreement, reverse repurchase (resale), or similar contracts. 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing Averages of daily figures, in millions of dollars 1984 1984 week ending Wednesday IItteemm 11998800 11998811 11998822 Jan. Feb/ Mar. Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Net immediate1 I U.S. government securities 4,306 9,033 9,328 3,130 1,290 -4,215 4,060 4,943 6,504 4,113 1,434 2 Bills 4,103 6,485 4,837 2,730 3,226 -1,055 2,869 5,821 6,7% 5,722 2,565 3 Other within 1 year -1,062 -1,526 -199 -158 -227 -362 22 -182 -21 97 -235 4 1-5 years 434 1,488 2,932 1,552 -428 -1,959 1,611 729 1,725 1,159 181 5 5-10 years 166 292 -341 -705 -1,610 -326 -506 -1,246 -1,683 -2,270 -1,519 6 Over 10 years 665 2,294 2,001 -288 328 -514 64 -180 -313 -596 441 7 Federal agency securities 797 2,277 3,712 11,236 12,386 16,076 11,773 10,890 11,173 12,035 13,160 8 Certificates of deposit 3,115 3,435 5,531 6,528 7,323 6,913 6,588 6,417 6,747 7,029 6,983 9 Bankers acceptances 1,746 2,832 3,494 3,243 2,819 4,061 3,153 3,273 3,434 3,265 10 Commercial paper 2,658 3,317 2,754 2,771 3,012 2,900 22,,111100 22,,770088 33,,333311 22,,772222 Futures positions 11 Treasury bills -8,934 -2,508 -10,286 -7,796 -1,128 -10,106 -11,852 -11,177 -11,163 -11,076 12 Treasury coupons n a. -2,733 -2,361 758 1,254 2,053 554 533 675 456 1,185 13 Federal agency securities 522 -224 38 -174 201 10 -92 -185 -383 -326 Forward positions 14 U.S. government securities -603 -788 -1,454 -2,257 -714 -1,595 -1,818 -1,577 -3,383 -2,728 15 Federal agency securities -451 -1,190 -7,506 -8,019 -9,747 -8,033 -7,282 -7,037 -7,828 -8,214 Financing2 Reverse repurchase agreements3 16 Overnight and continuing A 14,568 26,754 37,309 39,798 A 37,467 34,989 37,919 38,052 41,957 17 Term agreements | 32,048 48,247 60,280 60,666 | 60,245 60,250 61,547 62,529 5577,,997766 Repurchase agreements4 n.a. n.a. 18 Overnight and continuing 1 35,919 49,695 67,685 70,126 1 67,326 63,540 70,333 69,337 69,935 19 Term agreements 7 29,449 43,410 51,123 52,109 t 52,197 54,778 53,255 53,771 51,448 For notes see opposite page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance All 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1983 1984 AAggeennccyy 11998800.. 11998811 11998822 Sept. Oct. Nov. Dec. Jan. Feb. 1 Federal and federally sponsored agencies 188,665 221,946 237,085 236,610 239,121 240,177 239,716 239,872 241,628 2 Federal agencies 28,606 31,806 33,055 33,744 33,735 33,813 33,940 33,919 33,785 3 Defense Department1 610 484 354 264 258 253 243 234 215 4 Export-Import Bank2'3 11,250 13,339 14,218 14,740 14,740 14,740 14,853 14,852 14,846 5 Federal Housing Administration4 477 413 288 206 203 197 194 173 169 6 Government National Mortgage Association participation certificates5 2,817 2,715 2,165 2,165 2,165 2,165 2,165 2,165 2,165 7 Postal Service6 1,770 1,538 1,471 1,404 1,404 1,404 1,404 1,404 1,404 8 Tennessee Valley Authority 11,190 13,115 14,365 14,840 14,840 14,945 14,970 14,980 14,875 9 United States Railway Association6 492 202 194 125 125 109 111 111 111 10 Federally sponsored agencies7 160,059 190,140 204,030 202,866 205,386 206,364 205,776 205,953 207,843 11 Federal Home Loan Banks 37,268 54,131 55,967 49,283 49,956 49,285 48,930 48,344 48,224 12 Federal Home Loan Mortgage Corporation 4,686 5,480 4,524 6,134 6,950 7,024 6,793 6,679 7,556 13 Federal National Mortgage Association 55,182 58,749 70,052 71,258 71,965 73,531 74,594 74,676 75,865 14 Farm Credit Banks 62,923 71,359 71,896 73,046 73,465 73,474 72,409 73,023 72,856 15 Student Loan Marketing Association (8) 421 1,591 3,145 3,050 3,050 3,050 3,231 3,342 MEMO 16 Federal Financing Bank debt 87,460 110,698 126,424 136,081 134,799 135,361 113355,,779911 135,940 135,859 Lending to federal and federally sponsored 17 Export-Import Bank3 10,654 12,741 14,177 14,676 14,676 14,676 14,789 14,789 14,789 18 Postal Service6 1,520 1,288 1,221 1,154 1,154 1,154 1,154 1,154 1,154 19 Student Loan Marketing Association 2,720 5,400 5,000 5,000 5,000 5,000 5,000 5,000 5,000 20 Tennessee Valley Authority 9,465 11,390 12,640 13,115 13,175 13,220 13,245 13,255 13,150 21 United States Railway Association6 492 202 194 125 125 109 111 111 111 Other Lending10 22 Farmers Home Administration 39,431 48,821 53,261 55,691 55,916 55,916 55,266 54,776 54,471 23 Rural Electrification Administration 9,196 13,516 17,157 18,936 19,093 19,216 19,766 19,927 19,982 24 Other 11,262 12,740 22,774 27,384 25,660 26,070 26,460 26,928 27,202 1. Consists of mortgages assumed by the Defense Department between 1957 7. Includes outstanding noncontingent liabilities: Notes, bonds, and debenand 1963 under family housing and homeowners assistance programs. tures. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 8. Before late 1981, the Association obtained financing through the Federal 3. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter. Financing Bank. 4. Consists of debentures issued in payment of Federal Housing Administration 9. The FFB, which began operations in 1974, is authorized to purchase or sell insurance claims. Once issued, these securities may be sold privately on the obligations issued, sold, or guaranteed by other federal agencies. Since FFB securities market. incurs debt solely for the purpose of lending to other agencies, its debt is not 5. Certificates of participation issued before fiscal 1969 by the Government included in the main portion of the table in order to avoid double counting. National Mortgage Association acting as trustee for the Farmers Home Adminis- 10. Includes FFB purchases of agency assets and guaranteed loans; the latter tration; Department of Health, Education, and Welfare; Department of Housing contain loans guaranteed by numerous agencies with the guarantees of any and Urban Development; Small Business Administration; and the Veterans particular agency being generally small. The Farmers Home Administration item Administration. consists exclusively of agency assets, while the Rural Electrification Administra- 6. Off-budget. tion entry contains both agency assets and guaranteed loans. NOTES TO TABLE 1.43 1. Immediate positions are net amounts (in terms of par values) of securities 3. Includes all reverse repurchase agreements, including those that have been owned by nonbank dealer firms and dealer departments of commercial banks on a arranged to make delivery on short sales and those for which the securities commitment, that is, trade-date basis, including any such securities that have obtained have been used as collateral on borrowings, that is, matched agreements. been sold under agreements to repurchase (RPs). The maturities of some 4. Includes both repurchase agreements undertaken to finance positions and repurchase agreements are sufficiently long, however, to suggest that the securi- "matched book" repurchase agreements. ties involved are not available for trading purposes. Securities owned, and hence dealer positions, do not include securities to resell (reverse RPs). Before 1981, NOTE. Data for positions are averages of daily figures, in terms of par value, data for immediate positions include forward positions. based on the number of trading days in the period. Positions are shown net and are 2. Figures cover financing involving U.S. government and federal agency on a commitment basis. Data for financing are based on Wednesday figures, in securities, negotiable CDs, bankers acceptances, and commercial paper. terms of actual money borrowed or lent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • April 1983 1.45 NEW SECURITY ISSUES of State and Local Governments Millions of dollars 1983 1984 Type of i o s r s u u e s e o r issuer, 11998811 11998822 11998833 June July Aug. Sept. Oct. Nov. Dec. Jan. 1 All issues, new and refunding1 47,732 78,950 85,092 7,555 4,370 6,194 6,160 6,650 5,829 8,854 5,024 Type of issue 2 General obligation 12,394 21,088 21,470 1,550 860 1,614 1,266 1,935 1,679 1,134 1,109 3 U.S. government loans2 34 225 96 7 7 9 14 15 15 15 0 4 Revenue 35,338 57,862 63,622 6,005 3,510 4,580 4,894 4,715 4,150 7,720 3,915 5 U.S. government loans2 55 461 253 16 26 29 35 39 39 39 1 Type of issuer 6 State 5,288 8,406 7,135 277 484 673 452 856 405 198 325 7 Special district and statutory authority 27,499 45,000 50,632 4,260 3,009 3,357 4,199 4,387 3,318 5,790 3,482 8 Municipalities, counties, townships, school districts 14,945 25,544 27,325 3,018 877 2,164 1,509 1,407 2,106 2,866 1,217 9 Issues for new capital, total 46,530 74,613 71,120 6,049 3,884 4,612 5,512 5,187 5,333 8,438 4,037 Use of proceeds 10 Education 4,547 6,444 8,170 887 535 714 527 457 515 744 397 11 Transportation 3,447 6,256 4,353 229 274 261 195 250 336 421 125 12 Utilities and conservation 10,037 14,254 13,547 939 268 285 1,238 605 1,101 1,230 2,027 13 Social welfare 12,729 26,605 26,378 2,120 1,920 2,139 2,334 2,580 2,080 2,676 787 14 Industrial aid 7,651 8,256 7,088 669 393 254 494 323 516 2,317 125 15 Other purposes 8,119 12,797 11,584 1,205 494 959 724 972 785 1,050 576 1. Par amounts of long-term issues based on date of sale. SOURCE. Public Securities Association. 2. Consists of tax-exempt issues guaranteed by the Farmers Home Administration. 1.46 NEW SECURITY ISSUES of Corporations Millions of dollars 1983 1984 Type of issue or issuer, 11998811 11998822 11998833 or use June July Aug. Sept. Oct. Nov. Dec. Jan. 1 All issues1'J 70,441 84,198 98,845 8,165 6,474 5,941 6,568 6,592 8,103 6,812 7,691' 2 Bonds 45,092 53,636 47,266 2,244 2,550 2,547 2,865 3,055 4,075 3,173 5,648' Type of offering 3 Public 38,103 43,838 47,266 2,244 2,550 2,547 2,865 3,055 4,075 3,173 5,648' 4 Private placement 6,989 9,798 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 5 Manufacturing 12,325 13,123 8,133 706 60 200 282 367 22 423 179 6 Commercial and miscellaneous. 5,229 5,681 5,374 425 228 458 353 114 23 201 976' 7 Transportation 2,052 1,474 1,086 115 148 0 0 0 111 105 10 8 Public utility 8,963 12,155 7,066 363 322 355 590 510 910 120 325 9 Communication 4,280 2,265 3,380 250 1,100 0 100 50 0 0 2KK 10 Real estate and financial 12,243 18,938 22,227 385 692 1,534 1,540 2,014 3,009 2,324 3,948 11 Stocks3 25,349 30,562 51,579 5,921 3,924 3,394 3,703 3,842 4,028 3,639 2,043 Type 12 Preferred 1,797 5,113 7,213 665 290 247 644 300 433 253 305 13 Common 23,552 25,449 44,366 5,256 3,634 3,147 3,059 3,542 3,595 3,386 1,738 Industry group 14 Manufacturing 5,074 5,649 14,135 2,449 1,015 1,309 962 744 458 649 427 15 Commercial and miscellaneous, 7,557 7,770 13,112 1,358 1,415 743 997 868 1,598 852 465 16 Transportation 779 709 2,729 109 337 145 165 305 192 413 54 17 Public utility 5,577 7,517 5,001 550 72 263 200 588 622 245 225 18 Communication 1,778 2,227 1,822 138 20 236 0 36 13 12 30 19 Real estate and financial 4,584 6,690 14,780 1,317 1,065 698 1,379 1,301 1,145 1,468 842 1. Figures, which represent gross proceeds of issues maturing in more than one 2. Data for 1983 include only public offerings. year, sold for cash in the United States, are principal amount or number of units 3. Beginning in August 1981, gross stock offerings include new equity volume multiplied by offering price. Excludes offerings of less than $100,000, secondary from swaps of debt for equity. offerings, undefined or exempted issues as defined in the Securities Act of 1933, employee stock plans, investment companies other than closed-end, intracorpo- SOURCE. Securities and Exchange Commission and the Board of Governors of rate transactions, and sales to foreigners. the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Corporate Finance A33 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Asset Position Millions of dollars 1983 1984 IItteemm 11998822 11998833 July Aug. Sept. Oct. Nov. Dec. Jan/ Feb. INVESTMENT COMPANIES' 1 Sales of own shares2 45,675 84,793 6,944 6,032 5,915 6,532 6,341 6,846 10,274 8,229 2 Redemptions of own shares3 30,078 57,120 4,500 4,885 4,412 4,264 3,920 5,946 5,544 5,161 3 Net sales 15,597 27,673 2,444 1,147 1,503 2,268 2,421 900 4,730 3,068 4 Assets4 76,841 113,599 104,279 104,494 109,455 107,314 113,052 113,599 114,839 111,040 5 Cash position5 6,040 8,343 8,815 8,045 8,868 8,256 9,395 8,343 8,963 9,264 6 Other 70,801 105,256 95,464 93,449 100,587 99,058 103,657 105,256 105,876 101,766 1. Excluding money market funds. 5. Also includes all U.S. government securities and other short-term debt 2. Includes reinvestment of investment income dividends. Excludes reinvest- securities. ment 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 comprise substantially all open-end investment companies registered with the another in the same group. Securities and Exchange Commission. Data reflect newly formed companies after 4. Market value at end of period, less current liabilities. their initial offering of securities. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1982 1983 AAccccoouunntt 11998811 11998822 11998833'''' Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 p 1 Corporate profits with inventory valuation and capital consumption adjustment 192.3 164.8 229.1 162.0 166.8 168.5 161.9 181.8 218.2 248.4 268.1 2 Profits before tax 227.0 174.2 207.6 173.2 178.8 177.3 167.5 169.7 203.3 229.1 228.1 3 Profits tax liability 82.8 59.1 76.9 60.3 61.4 60.8 54.0 61.5 76.0 84.9 85.3 4 Profits after tax 144.1 115.1 130.6 112.9 117.4 116.5 113.5 108.2 127.2 144.1 142.9 5 Dividends 64.7 68.7 73.2 67.7 67.8 68.8 70.4 71.4 72.0 73.7 75.9 6 Undistributed profits 79.4 46.4 57.3 45.2 49.5 47.7 43.1 36.7 55.2 70.4 67.0 7 Inventory valuation -23.6 -8.3 -9.2 -5.5 -8.5 -9.0 -10.3 -1.7 -10.6 -18.3 -6.3 8 Capital consumption adjustment -11.0 -1.1 30.8 -5.6 -3.5 .1 4.7 13.9 25.6 37.6 46.2 SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • April 1983 1.49 NONFINANCIAL CORPORATIONS Current Assets and Liabilities Billions of dollars, except for ratio 1982 1983 AAccccoouunntt 11997777 11997788 11997799 11998800 11998811 Q3 Q4 Q1 Q2 Q3 1 Current assets 912.7 1,043.7 1,214.8 1,327.0 1,419.3 1,441.8 1,425.4 1,436.5 1,464.2 1,522.4 2 Cash 97.2 105.5 118.0 126.9 131.8 126.9 144.0 139.7 145.7 148.4 3 U.S. government securities 18.2 17.2 16.7 18.7 17.4 18.9 22.4 25.8 27.5 26.3 4 Notes and accounts receivable 330.3 388.0 459.0 506.8 530.3 534.2 511.0 517.9 534.3 562.7 5 Inventories 376.9 431.8 505.1 542.8 585.1 596.5 575.2 573.2 570.5 591.1 6 Other 90.1 101.1 116.0 131.8 154.6 165.3 172.6 179.9 186.2 193.8 7 Current liabilities 557.1 669.5 807.3 889.3 976.3 1,007.6 977.8 986.3 997.7 1,038.6 8 Notes and accounts payable 317.6 383.0 460.8 513.6 558.8 562.7 552.8 543.2 551.6 578.8 9 Other 239.6 286.5 346.5 375.7 417.5 444.9 425.0 443.1 446.1 459.9 10 Net working capital 355.5 374.3 407.5 437.8 442.9 434.2 447.6 450.2 466.5 483.7 11 MEMO: Current ratio1 1.638 1.559 1.505 1.492 1.454 1.431 1.458 1.456 1.468 1.466 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, Board of Governors of the Federal Reserve System, Washington, D.C. Corporations" in the July 1978 BULLETIN, pp. 533-37. 20551. SOURCE. Federal Trade Commission and Bureau of the Census. 1.50 TOTAL NONFARM BUSINESS EXPENDITURES on New Plant and Equipment Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1982 1983 1984 IInndduussttrryy11 11998822 11998833 1199884411 Q3' Q4 Ql Q2 Q3 Q4 Ql1 Q21 1 Total nonfarm business 316.43 302.50 343.57 313.76 303.18 293.03 293.46 304.70 318.83 332.66 335.40 Manufacturing 2 Durable goods industries 56.44 51.78 62.78 56.61 50.51 50.74 4488..4488 53.06 54.85 59.21 59.01 3 Nondurable goods industries 63.23 59.75 66.93 61.65 59.72 59.12 60.31 58.06 61.50 65.49 67.25 Nonmanufacturing 4 Mining 15.45 11.83 14.34 14.57 13.41 12.03 1100..9911 11.93 12.43 13.57 13.87 Transportation 5 Railroad 4.38 3.92 4.73 4.01 4.35 3.35 3.64 4.07 4.63 4.09 4.85 6 Air 3.93 3.77 2.78 4.07 4.76 4.09 4.10 3.57 3.32 2.42 2.82 7 Other 3.64 3.50 4.49 3.21 3.22 3.60 3.14 3.36 3.91 4.57 4.31 Public utilities 8 Electric 33.40 34.99 35.54 34.73 35.15 33.97 34.86 35.84 35.31 35.51 35.72 9 Gas and other 8.55 7.00 9.24 8.29 7.85 7.64 6.62 6.38 7.37 8.21 8.95 10 Trade and services 86.95 87.94 100.25 86.88 84.36 82.38 85.85 91.06 92.44 98.56 97.93 11 Communication and other2 40.46 38.02 42.47 39.75 39.84 36.11 35.54 37.38 43.05 41.03 40.68 1. Anticipated by business. SOURCE. Survey of Current Business (Department of Commerce). 2. "Other" consists of construction; social services and membership organizations; and forestry, fisheries, and agricultural services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Corporate Finance A35 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities Billions of dollars, end of period 1983 AAccccoouunntt 11997777 11997788 11997799 11998800 11998811 11998822 QL Q2 Q3 Q4 ASSETS Accounts receivable, gross 1 Consumer 44.0 52.6 65.7 73.6 85.5 89.5 89.9 91.3 92.3 92.8 2 Business 55.2 63.3 70.3 72.3 80.6 81.0 82.2 84.9 86.8 95.2 3 Total 99.2 116.0 136.0 145.9 166.1 170.4 172.1 176.2 179.0 188.0 4 LESS: Reserves for unearned income and losses 12.7 15.6 20.0 23.3 28.9 30.5 29.7 30.4 30.1 30.6 5 Accounts receivable, net 86.5 100.4 116.0 122.6 137.2 139.8 142.4 145.8 148.9 157.4 6 Cash and bank deposits 2.6 3.5 1 7 Securities .9 1.3 \ 24.9' 27.5 34.2 39.7 42.8 44.3 45.0 45.3 8 All other 14.3 17.3 J 9 Total assets 104.3 122.4 140.9 150.1 171.4 179.5 185.2 190.2 193.9 202.7 LIABILITIES 10 Bank loans 5.9 6.5 8.5 13.2 15.4 18.6 16.6 16.3 17.0 19.1 11 Commercial paper 29.6 34.5 43.3 43.4 51.2 45.8 45.2 49.0 49.7 53.6 Debt 12 Short-term, n.e.c 6.2 8.1 8.2 7.5 9.6 8.7 9.8 9.6 8.7 11.3 13 Long-term, n.e.c 36.0 43.6 46.7 52.4 54.8 63.5 64.7 64.5 66.2 65.4 14 Other 11.5 12.6 14.2 14.3 17.8 18.7 22.8 24.0 24.4 27.1 15 Capital, surplus, and undivided profits 15.1 17.2 19.9 19.4 22.8 24.2 26.0 26.7 27.9 26.2 16 Total liabilities and capital 104.3 122.4 140.9 150.1 171.4 179.5 185.2 190.2 193.9 202.7 1. Beginning Ql 1979, asset items on lines 6, 7, and 8 are combined. NOTE. Components may not add to totals due to rounding. 1.52 DOMESTIC FINANCE COMPANIES Business Credit Millions of dollars, seasonally adjusted except as noted Changes in accounts Extensions Repayments receivable AAAccccccooouuunnntttsss rrreeeccceeeiiivvvaaabbbllleee TTTyyypppeee ooouuutttssstttaaannndddiiinnnggg 1983 1984 1983 1984 1983 1984 JJJaaannn... 333111,,, 111999888444""" Nov. Dec. Jan. Nov. Dec. Jan. Nov. Dec. Jan. 1 Total 96,728 1,793 2,721 2,973 29,988 27,338 30,660 28,195 24,617 27,687 2 Retail automotive (commercial vehicles) 22,030 1,320 485 959 2,592 1,836 2,347 1,272 1,351 1,388 3 Wholesale automotive 15,331 662 583 625 8,516 7,690 9,392 7,854 7,107 8,767 4 Retail paper.on business, industrial, and farm equipment 28,946 -198 602 449 1,504 1,610 1,525 1,702 1,008 1,076 5 Loans on commercial accounts receivable and factored commercial accounts receivable 10,656 17 121 1,037 15,344 13,441 14,787 15,327 13,320 13,750 6 All other business credit 19,765 -8 930 -97 2,032 2,761 2,609 2,040 1,831 2,706 1. Not seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • April 1983 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1983 1984 IItteemm 11998811 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 90.4 94.6 92.8' 94.4 100.7 95.8 98.0 94.8 2 Amount of loan (thousands of dollars) 65.3 69.8 69.6' 67.3 76.5 72.5 76.7 73.3 3 Loan/price ratio (percent) 74.8 76.6 77. 1' 73.3 78.5 78.4 80.5 79.1 4 Maturity (years) 27.7 27.6 26.7 25.7 27.2 26.9 26.5 27.3 5 Fees and charges (percent of loan amount)2 2.67 2.95 2.40 1.% 2.45 2.33 2.54 2.56 6 Contract rate (percent per annum) 14.16 14.47 12.20 12.01 12.08 11.80 11.82 11.94 Yield (percent per annum) 7 FHLBB series5 14.74 15.12 12.66 12.38 12.54 12.25 12.34 12.42 8 HUD series4 16.52 15.79 13.43 13.90 13.60 13.52 13.48 13.41 SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series)5. 16.31 15.31 13.11 13.78 13.55 13.23 13.23 13.25 10 GNMA securities6 15.29 14.68 12.26 13.01 12.73 12.42 12.51 12.49 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 58,675 66,031 74,847 75,057 75,174 75,665 76,714 78,256 79,049 79,350 12 FHA/VA-insured 39,341 39,718 37,393 36,894 36,670 36,455 36,349 36,211 40,873 35,420 13 Conventional 19,334 26,312 37,454 38,163 38,505 39,210 40,365 42,045 38,177 43,930 Mortgage transactions (during period) 14 Purchases 6,112 15,116 17,554 1,213 1,203 1,244 1,348 2,204 11,,228855 1,507 15 Sales 2 2 3,528 121 464 257 0 250 20 723 Mortgage commitments7 16 Contracted (during period) 9,331 22,105 18,607 1,282 2,739 1,882 997 1,471 1,772 1,930 17 Outstanding (end of period) 3,717 7,606 5.461 5,165 6,684 7,182 6,493 5,461 5,470 5,872 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)* 18 Total 5,231' 5,131' 5,9% 6,149 6,857 6,971' 7,093 7,633 8,049 19 FHA/VA 1,065' 1,027' 974 964 961 955' 940 941 940 20 Conventional 4,166' 4,102' 5,022 5,185 5,8% 6,016 6,153 6,691 7,109 Mortgage transactions (during period) 71 Purchases 3,80c 23,673' 23,089 1,621 2,263 2,886 1,287 1,685 1,419 n.a. 22 3,531 24,170' 19,686 1,588 1,556 2,750 1,143 1,115 984 Mortgage commitments9 23 Contracted (during period) 6,896' 28,179' 32,852 6,367 3,283 2,598 2,093 1,704 1,470 24 Outstanding (end of period) 3,518 7,549 16,964 15,519 16,512 16,198 16,994 16,964 16,994 1. Weighted averages based on sample surveys of mortgages originated by 6. Average net yields to investors on Government National Mortgage Associamajor institutional lender groups; compiled by the Federal Home Loan Bank tion guaranteed, mortgage-backed, fully modified pass-through securities, assum- Board in cooperation with the Federal Deposit Insurance Corporation. ing prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying the 2. Includes all fees, commissions, discounts, and "points" paid (by the prevailing ceiling rate. Monthly figures are unweighted averages of Monday borrower or the seller) to obtain a loan. quotations for the month. 3. Average effective interest rates on loans closed, assuming prepayment at the 7. Includes some multifamily and nonprofit hospital loan commitments in end of 10 years. addition to 1- to 4-family loan commitments accepted in FNMA's free market 4. Average contract rates on new commitments for conventional first mort- auction system, and through the FNMA-GNMA tandem plans. gages; from Department of Housing and Urban Development. 8. Includes participation as well as whole loans. 5. Average gross yields on 30-year, minimum-downpayment, Federal Housing 9. Includes conventional and government-underwritten loans. FHLMC's mort- Administration-insured first mortgages for immediate delivery in the private gage commitments and mortgage transactions include activity under mortgage/ secondary market. Any gaps in data are due to periods of adjustment to changes in securities swap programs, while the corresponding data for FNMA exclude swap maximum permissible contract rates. activity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate Debt A37 1.54 MORTGAGE DEBT OUTSTANDING Millions of dollars, end of period 1982 1983 TTyyppee ooff hhoollddeerr,, aanndd ttyyppee ooff pprrooppeerrttyy 11998811 11998822 11998833 Q4 Ql Q2 Q3 Q4 1 All holders 1,583,264 1,655,013'' 1,824,071'' 1,655,013' 1,681,63c 1,723,052' 1,775,117' 1,824,071' 2 1- to 4-family 1,065,294 1,105,756' 1,214,249' 1,105,756' 1,122,111' 1,146,926' 1,182,356' 1,214,249' 3 Multifamily 136,354 140,542' 150,822' 140,542' 141,500' 144,731' 147,052' 150,822' 4 Commercial 279,889 302,009' 349,539' 302,009' 311,107' 323,427' 336,697' 349,539' 5 Farm 101,727 106,706' 109,461' 106,706' 106,912 107,968 109,012 109,461' 6 Major financial institutions 1,040,827 1,023,541' 1,108,101' 1,023,541' 1,028,802' 1,048,688' 1,079,605' 1,108,101' 7 Commercial banks' 284,536 300,203 329,745 300,203 303,371 310,217 320,299 329,745 8 1- to 4-family 170,013 173,157 182,679 173,157 172,346 174,032 178,054 182,679 9 Multifamily 15,132 16,421 17,971 16,421 16,230 16,876 17,424 17,971 10 Commercial 91,026 102,219 119,862 102,219 106,301 110,437 115,692 119,862 11 Farm 8,365 8,406 9,233 8,406 8,494 8,872 9,129 9,233 12 Mutual savings banks 99,997 97,805 133,325 97,805 105,378 119,236 129,645 133,325 13 1- to 4-family 68,187 66,777 95,249 66,777 73,240 84,349 92,467 95,249 14 Multifamily 15,960 15,305 17,964 15,305 15,587 16,667 17,588 17,964 15 Commercial 15,810 15,694 20,083 15,694 16,522 18,192 19,562 20,083 16 Farm 40 29 29 29 29 28 28 29 17 Savings and loan associations 518,547 483,614' 493,432' 483,614' 477,022' 474,510' 482,305' 493,432' 18 1- to 4-family 433,142 393,323' 389,811' 393,323' 384,718' 377,947' 381,744' 389,811' 19 Multifamily 37,699 38,979' 42,435' 38,979' 39,259' 39,954' 41,334' 42,435' 20 Commercial 47,706 51,312' 61,186' 51,312' 53,045' 56,609' 59,227' 61,186' 21 Life insurance companies 137,747 141,919 151,599' 141,919 143,031 144,725 147,356 151,599' 22 1- to 4-family 17,201 16,743 15,385' 16,743 16,388 15,860 15,534 15,385' 23 Multifamily 19,283 18,847 19,189' 18,847 18,825 18,778 18,857 19,189' 24 Commercial 88,163 93,501 104,279' 93,501 95,158 97,416 100,209 104,279' 25 Farm 13,100 12,828 12,746' 12,828 12,660 12,671 12,756 12,746' 26 Federal and related agencies 126,094 138,185 147,269' 138,185 140,028 142,094 142,224 147,269' 27 Government National Mortgage Association 4,765 4,227 3,395 4,227 3,753 3,643 3,475 3,395 28 1- to 4-family 693 676 630 676 665 651 639 630 29 Multifamily 4,072 3,551 2,765 3,551 3,088 2,992 2,836 2,765 30 Farmers Home Administration 2,235 1,786 2,141 1,786 2,077 1,605 600 2,141 31 1- to 4-family 914 783 1,159 783 707 381 211 1,159 32 Multifamily 473 218 173 218 380 555 32 173 33 Commercial 506 377 409 377 337 248 113 409 34 Farm 342 408 400 408 653 421 244 400 35 Federal Housing and Veterans Administration 5,999 5,228 4,792 5,228 5,138 5,084 5,050 4,792 36 1- to 4-family 2,289 1,980 1,863 1,980 1,867 1,911 2,061 1,863 37 Multifamily 3,710 3,248 2,929 3,248 3,271 3,173 2,989 2,929 38 Federal National Mortgage Association 61,412 71,814 78,256 71,814 73,666 74,669 75,174 78,256 39 1- to 4-family 55,986 66,500 73,045 66,500 68,370 69,396 69,938 73,045 40 Multifamily 5,426 5,314 5,211 5,314 5,296 5,273 5,236 5,211 41 Federal Land Banks 46,446 50,350 51,052' 50,350 50,544 50,858 51,069 51,052' 42 1- to 4-family 2,788 3,068 3,000' 3,068 3,059 3,030 3,008 3,000' 43 Farm 43,658 47,282 48,052' 47,282 47,485 47,828 48,061 48,052' 44 Federal Home Loan Mortgage Corporation 5,237 4,780 7,633' 4,780 4,850 6,235 6,856 7,633' 45 1- to 4-family 5,181 4,733 7,576' 4,733 4,795 6,119 6,799 7,576' 46 Multifamily 56 47 57' 47 55 116 57 57' 47 Mortgage pools or trusts2 163,000 216,654 285,021' 216,654 234,596 252,665 272,611 285,021' 48 Government National Mortgage Association 105,790 118,940 159,850' 118,940 127,939 139,276 151,597 159,850' 49 1- to 4-family 103,007 115,831 155,801' 115,831 124,482 135,628 147,761 155,801' 50 Multifamily 2,783 3,109 4,049 3,109 3,457 3,648 3,836 4,049' 51 Federal Home Loan Mortgage Corporation 19,853 42,964 57,843' 42,964 48,008 50,934 54,152 57,843' 52 1- to 4-family 19,501 42,560 57,206' 42,560 47,575 50,446 53,539 57,206' 53 Multifamily 352 404 637' 404 433 488 613 637' 54 Federal National Mortgage Association3 717 14,450 25,121 14,450 18,157 20,933 23,819 25,121 55 1- to 4-family 717 14,450 25,121 14,450 18,157 20,933 23,819 25,121 56 Farmers Home Administration 36,640 40,300 42,207 40,300 40,492 41,522 43,043 42,207 57 1- to 4-family 18,378 20,005 20,404 20,005 20,263 20,728 21,083 20,404 58 Multifamily 3,426 4,344 5,090 4,344 4,344 4,343 5,042 5,090 59 Commercial 6,161 7,011 7,351 7,011 7,115 7,303 7,542 7,351 60 Farm 8,675 8,940 9,362 8,940 8,770 9,148 9,376 9,362 61 Individual and others4 253,343 276,633 283,680 276,633 278,204 279,605 280,677 283,680 62 1- to 4-family5 167,297 185,170 185,320 185,170 185,479 185,515 185,699 185,320 63 Multifamily 27,982 30,755 32,352 30,755 31,275 31,868 31,208 32,352 64 Commercial 30,517 31,895 36,369 31,895 32,629 33,222 34,352 36,369 65 Farm 27,547 28,813 29,639 28,813 28,821 29,000 29,418 29,639 1. Includes loans held by nondeposit trust companies but not bank trust 5. Includes a new estimate of residential mortgage credit provided by individdepartments. uals. 2. Outstanding principal balances of mortgages backing securities insured or NOTE. Based on data from various institutional and governmental sources, with guaranteed by the agency indicated. some quarters estimated in part by the Federal Reserve in conjunction with the 3. Outstanding balances on FNMA's issues of securities backed by pools of Federal Home Loan Bank Board and the Department of Commerce. Separation of conventional mortgages held in trust. The program was implemented by FNMA in nonfarm mortgage debt by type of property, if not reported directly, and October 1981. interpolations and extrapolations when required, are estimated mainly by the 4. Other holders include mortgage companies, real estate investment trusts, Federal Reserve. Multifamily debt refers to loans on structures of five or more state and local credit agencies, state and local retirement funds, noninsured units. pension funds, credit unions, and U.S. agencies for which amounts are small or for which separate data are not readily available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • April 1983 1.55 CONSUMER INSTALLMENT CREDIT1 Total Outstanding, and Net ChangeA Millions of dollars 1983 1984 HHoollddeerr,, aanndd ttyyppee ooff ccrreeddiitt 11998800 11998811 11998822'' June July Aug. Sept. Oct. Nov. Dec. Jan. Amounts outstanding (end of period) 1 Total 313,472 331,697 344,798 353,012 358,020 363,662 367,604 371,561 376,390 387,927 386,448 By major holder 2 Commercial banks 147,013 147,622 152,069 156,603 159,666 163,313 165,971 168,352 170,823 177,252 177,641 3 Finance companies 76,756 89,818 94,322 96,349 97,319 97,708 97,274 97,370 97,522 97,688 96,471 4 Credit unions 44,041 45,954 47,253 48,652 49,139 50,121 51,123 51,767 52,578 53,471 53,882 5 Retailers2 28,448 29,551 30,202 27,804 27,900 28,067 28,319 28,713 29,668 33,183 31,859 6 Savings and loans 9,911 11,598 13,891 16,207 16,369 16,615 17,130 17,624 18,080 18,568 18,646 7 Gasoline companies ... 4,468 4,403 4,063 4,159 4,356 4,457 4,338 4,243 4,157 4,131 4,300 8 Mutual savings banks.. 2,835 2,751 2,998 3,238 3,271 3,381 3,449 3,492 3,562 3,634 3,649 By major type of credit 9 Automobile 116,838 125,331 130,227 136,183 138,689 141,677 142,477 143,621 144,663 146,078 146,842 10 Commercial banks.. 61,536 58,081 58,851 61,870 63,425 66,065 67,413 68,828 70,034 71,778 73,042 11 Indirect paper. ... 35,233 34,375 35,178 (3) (3) (3) (3) (3) (3) (3) (3) 12 Direct loans 26,303 23,706 23,673 (3) (3) (3) (3) (3) (3) (3) (3) 13 Credit unions 21,060 21,975 22,596 23,269 23,502 23,972 24,451 24,759 25,147 25,574 48,029 14 Finance companies . 34,242 45,275 48,780 51,044 51,762 51,640 50,613 50,034 49,482 48,726 25,771 15 Revolving 58,352 62,819 67,184 64,899 65,856 66,913 67,904 68,921 70,742 77,467 75,652 16 Commercial banks... 29,765 32,880 36,688 36,515 37,173 37,973 38,848 39,576 40,573 43,965 43,262 17 Retailers 24,119 25,536 26,433 24,225 24,327 24,483 24,718 25,102 26,012 29,371 28,090 18 Gasoline companies . 4,468 4,403 4,063 4,159 4,356 4,457 4,338 4,243 4,157 4,131 4,300 19 Mobile home 17,322 18,373 18,988 19,647 19,750 19,882 20,087 20,256 20,366 20,471 20,468 20 Commercial banks... 10,371 10,187 9,684 9,651 9,717 9,741 9,766 9,767 9,761 9,732 9,718 21 Finance companies .. 3.745 4,494 4,965 4,995 4,982 5,012 5,038 5,062 5,043 5,033 5,018 22 Savings and loans ... 2,737 3,203 3,836 4,485 4,530 4,598 4,741 4,878 5,004 5,139 5,161 23 Credit unions 469 489 503 516 521 531 542 549 558 567 571 24 Other 120,960 125,174 128,399 132,283 133,725 135,190 137,136 138,763 140,619 143,911 143,486 25 Commercial banks... 45,341 46,474 46,846 48,567 49,351 49,534 49,944 50,181 50,455 51,777 51,619 26 Finance companies .. 38,769 40,049 40,577 40,310 40,575 41,056 41,623 42,274 42,997 43,929 43,424 27 Credit unions 22,512 23,490 24,154 24,867 25,116 25,618 26,130 26,459 26,873 27,330 27,540 28 Retailers 4,329 4,015 3,769 3,579 3,573 3,584 3,601 3,611 3,656 3,812 3,769 29 Savings and loans ... 7,174 8,395 10,055 11,722 11,839 12,017 12,389 12,746 13,076 13,429 13,485 30 Mutual savings banks 2,835 2,751 2,998 3,238 3,271 3,381 3,449 3,492 3,562 3,634 3,649 Net change (during period)4 31 Total 1,448 18,217 13,096 4,406 4,840 3,388 2,375 4,885 4,671 6,614 4,343 By major holder 32 Commercial banks -7,163 607 4,442 2,422 2,766 2,317 1,829 2,629 2,749 4,688 2,656 33 Finance companies .... 8,438 13,062 4,504 470 909 239 -721 620 205 -24 89 34 Credit unions -2,475 1,913 1,298 573 662 510 646 942 912 731 916 35 Retailers2 329 1,103 651 368 272 5 245 150 251 659 338 36 Savings and loans 1,485 1,682 2,290 456 188 147 507 376 438 513 217 37 Gasoline companies ... 739 -65 -340 77 5 65 -167 131 58 -31 72 38 Mutual savings banks .. 95 -85 251 40 38 105 36 37 58 78 55 By major type of credit 39 Automobile 477 8,495 4,898 1,973 2,421 2,521 285 1,772 1,238 2,019 2,555 40 Commercial banks... -5,830 -3,455 770 1,284 1,482 2,359 1,243 1,499 1,302 2,131 2,042 41 Indirect paper -3,104 -858 803 <3) (3) <3) (3) (3) (3) (3) (3) 42 Direct loans -2,726 -2,597 -33 (3) (3) (3) (3> (3) (3) (3) (3) 43 Credit unions -1,184 914 622 275 328 232 309 451 436 349 85 44 Finance companies .. 7,491 11,033 3,505 414 611 -70 -1,267 -178 -500 -461 428 45 Revolving 1,415 4,467 4,365 1,210 821 313 479 1,145 1,300 1,723 487 46 Commercial banks... -97 3,115 3,808 806 556 217 404 856 999 1,148 100 47 Retailers 773 1,417 897 327 260 31 242 158 243 606 315 48 Gasoline companies . 739 -65 -340 77 5 65 -167 131 58 -31 72 49 Mobile home 483 1,049 609 151 141 70 150 102 107 136 166 50 Commercial banks... -276 -186 -508 28 68 -14 8 -10 0 18 49 51 Finance companies .. 355 749 471 -6 7 15 1 -16 -14 -25 50 52 Savings and loans ... 430 466 633 123 59 64 134 118 111 135 58 53 Credit unions -25 20 14 6 7 5 7 10 10 8 9 54 Other -927 4,206 3,224 1,072 1,457 484 1,461 1,866 2,026 2,736 1,135 55 Commercial banks... -960 1,133 372 304 660 -245 174 284 448 1,391 465 56 Finance companies .. 592 1,280 528 62 291 294 545 814 719 462 -46 57 Credit unions -1,266 975 662 292 327 273 330 481 466 374 479 58 Retailers -444 -314 -246 41 12 -26 3 -8 8 53 23 59 Savings and loans ... 1,056 1,217 1,657 333 129 83 373 258 327 378 159 60 Mutual savings banks 95 -85 251 40 38 105 36 37 58 78 55 • These data have been revised from December 1980 through February 1983. 4. For 1982 and earlier, net change equals extensions, seasonally adjusted less 1. The Board's series cover most short- and intermediate-term credit extended liquidations, seasonally adjusted. Beginning 1983, net change equals outstandings, to individuals through regular business channels, usually to finance the purchase seasonally adjusted less outstandings of the previous period, seasonally adjusted. of consumer goods and services or to refinance debts incurred for such purposes, and scheduled to be repaid (or with the option of repayment) in two or more NOTE: Total consumer noninstallment credit outstanding—credit scheduled to installments. be repaid in a lump sum, including single-payment loans, charge accounts, and 2. Includes auto dealers and excludes 30-day charge credit held by travel and service credit—amounted to, not seasonally adjusted, $80.7 billion at the end of entertainment companies. 1981, $85.9 billion at the end of 1982, and $96.9 billion at the end of 1983. 3. Not reported after December 1982. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Consumer Debt A39 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT Percent unless noted otherwise Aug. Sept Oct. Dec. INTEREST RATES Commercial banks' 1 48-month new car2 16.54 16.83 13.92 13.50 13.46 2 24-month personal 18.09 18.65 16.68 16.28 16.39 3 120-month mobile home2 17.45 18.05 15.91 15.58 15.47 4 Credit card 17.78 18.51 18.73 18.75 18.75 Auto finance companies 5 New car 16.17 16.15 12.58 12.77 13.62 13.54 13.50 13.92 6 Used car 20.00 20.75 18.74 18.25 18.21 18.15 18.16 18.06 OTHER TERMS3 Maturity (months) 7 New car 45.4 46.0 45.9 45.9 46.2 46.2 46.3 46.3 8 Used car 35.8 34.0 37.9 38.0 38.0 38.0 38.0 37.9 Loan-to-value ratio 9 New car 86.1 85.3 86.0 10 Used car 91.8 90.3 92.0 Amount financed (dollars) 11 New car 7,339 8,178 8,787 8,724 8,792 8,982 9,118 9,167 12 Used car 4,343 4,746 5,033 5,103 5,144 5,213 5,316 5,401 1. Data for midmonth of quarter only. 3. At auto finance companies. 2. Before 1983 the maturity for new car loans was 36 months, and for mobile home loans was 84 months. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • April 1983 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1981 1982 1983 HI H2 HI H2 HI' H2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .... 369.8 386.0 343.2 377.2 395.3 509.5 392.4 362.0 356.8 434.8 497.3 521.7 By sector and instrument 2 U.S. government 53.7 37.4 79.2 87.4 161.3 186.6 87.8 86.9 106.9 215.5 231.1 142.1 J Treasury securities 55.1 38.8 79.8 87.8 162.1 186.7 88.3 87.3 108.3 215.9 231.2 142.2 4 Agency issues and mortgages -1.4 -1.4 -.6 -.5 -.9 -.1 -.5 -.4 -1.4 -.4 -.1 -.1 5 Private domestic nonfinancial sectors 316.2 348.6 264.0 289.8 234.1 322.9 304.6 275.1 249.9 219.3 266.2 379.7 6 Debt capital instruments 199.7 211.2 192.0 158.4 152.4 227.9 179.3 137.5 139.7 166.1 221.1 234.7 7 Tax-exempt obligations 28.4 30.3 30.3 21.9 50.5 44.3 21.1 22.6 41.7 59.4 59.8 28.8 8 Corporate bonds 21.1 17.3 26.7 22.1 18.8 15.0 26.1 18.0 10.8 26.9 21.1 9.0 9 Mortgages 150.2 163.6 135.1 114.5 83.0 168.6 132.0 96.9 87.3 79.9 140.2 196.9 10 Home mortgages 112.2 120.0 96.7 75.9 56.6 111.4 92.6 59.2 55.8 58.6 92.9 129.8 11 Multifamily residential 9.2 7.8 8.8 4.3 1.3 9.2 4.9 3.7 4.2 -1.7 6.2 12.1 12 Commercial 21.7 23.9 20.2 24.6 20.0 45.2 25.2 23.9 21.4 18.6 40.1 50.3 13 Farm 7.2 11.8 9.3 9.7 5.2 2.9 9.3 10.1 5.9 4.4 1.0 4.7 14 Other debt instruments 116.5 137.5 72.0 131.5 81.6 95.0 125.3 137.6 110.1 53.2 45.1 145.0 15 Consumer credit 48.8 45.4 4.9 24.1 18.3 54.2 28.9 19.3 19.3 17.4 39.8 68.6 16 Bank loans n.e.c 37.4 51.2 36.7 54.7 54.4 19.1 45.5 63.9 70.1 38.8 6.6 31.6 17 Open market paper 5.2 11.1 5.7 19.2 -3.3 -1.2 12.0 26.3 6.5 -13.0 -16.3 14.0 18 Other 25.1 29.7 24.8 33.4 12.2 23.0 38.9 28.0 14.3 10.2 15.0 30.9 19 By borrowing sector 316.2 348.6 264.0 289.8 234.1 322.9 304.6 275.1 249.9 219.3 266.2 379.7 20 State and local governments 19.1 20.5 20.3 9.7 36.3 35.9 9.1 10.2 29.3 43.3 50.3 21.6 21 Households 169.4 176.4 117.5 120.6 86.3 163.6 139.8 101.3 87.6 86.1 128.5 198.7 22 Farm 14.6 21.4 14.4 16.3 9.0 3.9 20.1 12.5 9.0 9.1 -.4 8.2 23 Nonfarm noncorporate 32.4 34.4 33.7 39.6 29.8 62.0 39.8 39.5 34.6 24.9 51.3 72.7 24 Corporate 80.6 96.0 78.1 103.7 72.7 57.4 95.8 111.5 89.3 56.0 36.5 78.4 25 Foreign net borrowing in United States 33.8 20.2 27.2 27.2 15.7 19.2 31.9 22.5 12.8 18.6 18.5 19.9 26 Bonds 4.2 3.9 .8 5.4 6.6 3.3 3.3 7.6 2.4 10.8 4.4 2.2 27 Bank loans n.e.c 19.1 2.3 11.5 3.7 -6.2 5.9 3.1 4.2 -5.1 -7.2 14.7 -2.8 28 Open market paper 6.6 11.2 10.1 13.9 10.7 6.0 20.6 7.1 12.5 9.0 -4.6 16.5 29 U.S. government loans 3.9 2.9 4.7 4.2 4.5 4.0 4.9 3.5 3.0 6.0 4.0 4.0 30 Total domestic plus foreign 403.6 406.2 370.4 404.4 411.0 528.7 424.4 384.5 369.6 453.4 515.7 541.6 Financial sectors 31 Total net borrowing by financial sectors 74.6 82.5 63.3 85.4 69.3 88.6 87.4 83.4 89.8 48.7 74.1 103.2 By instrument 32 U.S. government related 37.1 47.9 44.8 47.4 64.9 68.1 45.2 49.6 61.3 68.4 68.0 68.3 33 Sponsored credit agency securities 23.1 24.3 24.4 30.5 14.9 1.6 28.9 32.1 23.6 6.3 -2.4 5.7 34 Mortgage pool securities 13.6 23.1 19.2 15.0 49.5 66.5 14.9 15.1 37.0 62.1 70.4 62.5 .4 .6 1.2 1.9 .4 1.4 2.4 g 36 Private financial sectors 37.5 34.6 18.5 38.0 4.4 20.5 42.2 33.8 28.5 -19.7 6.1 35.0 37 Corporate bonds 7.5 7.8 7.1 -.8 2.3 17.2 -.3 -1.4 -1.2 5.8 15.3 19.2 38 Mortgages .1 * -.1 -.5 .1 .1 -.8 -.2 .1 .1 .1 .1 39 Bank loans n.e.c 2.8 -.4 -.4 2.2 3.2 -2.9 3.2 1.1 5.2 1.2 -5.2 -.7 40 Open market paper 14.6 18.0 4.8 20.9 -2.0 13.2 23.5 18.4 14.0 -18.0 8.8 17.6 41 Loans from Federal Home Loan Banks 12.5 9.2 7.1 16.2 .8 -7.0 16.7 15.8 10.4 -8.8 -12.9 -1.2 By sector 42 Sponsored credit agencies 23.5 24.8 25.6 32.4 15.3 1.6 30.3 34.5 24.4 6.3 -2.4 5.7 43 Mortgage pools 13.6 23.1 19.2 15.0 49.5 66.5 14.9 15.1 37.0 62.1 70.4 62.5 44 Private financial sectors 37.5 34.6 18.5 38.0 4.4 20.5 42.2 33.8 28.5 -19.7 6.1 35.0 45 Commercial banks 1.3 1.6 .5 .4 1.2 .6 .2 .5 .7 1.7 .8 .5 46 Bank affiliates 7.2 6.5 6.9 8.3 1.9 8.6 6.9 9.7 9.7 -5.8 6.1 11.1 47 Savings and loan associations 13.5 12.6 7.4 15.5 -3.0 -5.2 16.8 14.1 9.1 -15.2 -10.8 .3 48 Finance companies 18.1 16.6 6.3 14.1 4.9 17.2 18.5 9.7 9.5 .2 10.7 2233..77 49 REITs -1.4 -1.3 -2.2 .2 .1 .1 .2 .2 .1 .1 .1 ..11 All sectors 50 Total net borrowing 478.2 488.7 433.7 489.8 480.3 617.3 511.8 467.9 459.4 502.1 589.8 644.8 51 U.S. government securities 90.5 84.8 122.9 133.0 225.9 254.7 131.8 134.3 167.6 284.0 299.1 210.4 52 State and local obligations 28.4 30.3 30.3 21.9 50.5 44.3 21.1 22.6 41.7 59.4 59.8 28.8 53 Corporate and foreign bonds 32.8 29.0 34.6 26.7 27.7 35.5 29.1 24.2 12.0 43.5 40.7 30.3 54 Mortgages 150.2 163.5 134.9 113.9 83.0 168.6 131.1 96.6 87.3 79.8 140.2 197.0 55 Consumer credit 48.8 45.4 4.9 24.1 18.3 54.2 28.9 19.3 19.3 17.4 39.8 68.6 56 Bank loans n.e.c 59.3 53.0 47.8 60.6 51.4 22.1 51.8 69.3 70.2 32.8 16.1 28.0 57 Open market paper 26.4 40.3 20.6 54.0 5.4 18.0 56.1 51.9 33.0 -22.1 -12.1 48.0 58 Other loans 41.9 42.4 37.8 55.8 17.9 19.9 61.8 49.7 28.4 7.4 6.1 33.7 External corporate equity funds raised in United States 59 Total new share issues 1.9 -3.8 22.2 -3.7 35.4 69.2 10.2 -17.7 23.7 47.0 87.1 51.3 60 Mutual funds -.1 .1 5.2 6.8 18.6 32.6 8.1 5.6 13.2 24.0 38.7 26.4 61 All other 1.9 -3.9 17.1 -10.6 16.8 36.6 2.1 -23.2 10.6 23.0 48.3 24.9 62 Nonfinancial corporations -.1 -7.8 12.9 -11.5 11.4 28.3 .9 -23.8 7.0 15.8 38.2 18.4 63 Financial corporations 2.5 3.2 2.1 .9 4.1 4.4 .5 1.2 3.8 4.4 4.4 4.5 64 Foreign shares purchased in United States -.5 .8 2.1 * 1.3 3.9 .7 -.7 -.2 2.9 5.7 2.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.58 DIRECT AND INDIRECT SOURCES OF FUNDS TO CREDIT MARKETS Billions of dollars, except as noted; half-yearly data are at seasonally adjusted annual rates. 1981 1982 1983 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11997788 11997799 11998800 11998811 11998822 11998833 HI H2 HI H2 HI H2 1 Total funds advanced in credit markets to domestic nonfinancial sectors 369.8 386.0 343.2 377.2 395.3 509.5 392.4 362.0 356.8 434.8 497.3 521.7 By public agencies and foreign 7 Total net advances 102.3 75.2 97.0 97.4 109.3 114.8 113.8 81.0 107.9 111100..88 112299..55 110000..00 3 U.S. government securities 36.1 -6.3 15.7 17.2 17.9 27.7 31.2 3.1 17.7 18.2 51.2 4.2 4 Residential mortgages 25.7 35.8 31.7 23.4 61.1 75.9 21.9 25.0 48.1 74.0 80.7 71.0 5 FHLB advances to savings and loans 12.5 9.2 7.1 16.2 .8 -7.0 16.7 15.8 10.4 -8.8 -12.9 -1.2 6 Other loans and securities 28.0 36.5 42.4 40.6 29.5 18.3 44.1 37.1 31.7 27.4 10.4 26.1 Total advanced, by sector 7 U.S. government 17.1 19.0 23.7 24.1 16.7 9.8 27.9 20.3 14.2 19.1 8.2 11.3 8 Sponsored credit agencies 40.3 53.0 45.6 48.2 65.3 68.9 47.2 49.2 62.5 6688..11 69.1 68.7 9 Monetary authorities 7.0 7.7 4.5 9.2 9.8 10.9 2.4 16.0 .1 1199..55 12.1 9.7 10 Foreign 38.0 -4.6 23.2 16.0 17.6 25.2 36.4 -4.4 31.1 4.1 40.1 10.3 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 37.1 47.9 44.8 47.4 64.9 68.1 45.2 49.6 61.3 6688..44 6688..00 6688..33 12 Foreign 33.8 20.2 27.2 27.2 15.7 19.2 31.9 22.5 12.8 18.6 18.5 19.9 Private domestic funds advanced N Total net advances 338.4 379.0 318.2 354.4 366.6 482.0 355.7 353.1 323.0 411.0 454.2 509.8 14 U.S. government securities 54.3 91.1 107.2 115.9 207.9 227.0 100.6 131.1 149.9 265.8 247.9 206.2 15 State and local obligations 28.4 30.3 30.3 21.9 50.5 44.3 21.1 22.6 41.7 59.4 59.8 28.8 16 Corporate and foreign bonds 23.4 18.5 19.3 19.4 15.4 12.1 20.9 17.9 -1.7 32.4 19.9 4.4 17 Residential mortgages 95.6 91.9 73.7 56.7 -3.3 44.6 75.5 37.9 11.7 -17.2 18.3 70.9 18 Other mortgages and loans 149.3 156.3 94.8 156.9 96.8 146.9 154.3 159.5 131.7 62.0 95.3 198.4 19 LESS: Federal Home Loan Bank advances 12.5 9.2 7.1 16.2 .8 -7.0 16.7 15.8 10.4 -8.8 -12.9 -1.2 Private financial intermediation 20 Credit market funds advanced by private financial institutions 302.3 294.7 262.3 305.2 271.2 368.5 317.3 293.1 272.8 268.9 347.5 389.5 71 Commercial banking 129.0 123.1 101.1 103.6 108.5 135.3 99.6 107.6 109.7 107.1 127.6 143.0 72 Savings institutions 72.8 56.7 54.9 27.2 30.6 128.6 41.5 12.8 29.5 31.0 130.6 126.6 23 Insurance and pension funds 75.0 66.4 74.4 79.3 94.2 102.1 75.3 83.4 95.4 93.0 107.4 96.8 24 Other finance 25.5 48.5 32.0 95.2 37.9 2.6 101.0 89.4 38.1 37.8 -18.0 23.1 25 Sources of funds 302.3 294.7 262.3 305.2 271.2 368.5 317.3 293.1 272.8 268.9 347.5 389.5 26 Private domestic deposits and RPs 141.0 142.0 168.6 211.7 173.4 200.3 213.8 209.6 163.4 182.7 211.6 189.0 27 Credit market borrowing 37.5 34.6 18.5 38.0 4.4 20.5 42.2 33.8 28.5 -19.7 6.1 35.0 28 Other sources 123.8 118.1 75.2 55.5 93.5 147.7 61.3 49.8 80.8 105.9 129.8 165.5 29 Foreign funds 6.5 27.6 -21.7 -8.7 -27.7 17.2 -8.7 -8.7 -30.1 -25.4 -18.9 53.4 30 Treasury balances 6.8 .4 -2.6 -1.1 6.1 -6.0 6.5 -8.7 -2.1 14.1 8.4 -20.4 31 Insurance and pension reserves 62.2 49.1 65.4 73.2 85.9 88.0 62.7 83.8 85.4 86.4 93.1 82.9 32 Other, net 48.4 41.0 34.0 -7.9 29.2 48.4 .8 -16.7 27.6 30.7 47.2 49.6 Private domestic nonfinancial investors 33 Direct lending in credit markets 73.6 118.9 74.4 87.2 99.7 134.0 80.6 93.8 78.7 122.4 112.8 155.3 34 U.S. government securities 36.3 61.4 38.3 47.4 58.1 89.8 37.2 57.6 43.1 72.7 88.0 91.5 35 State and local obligations 3.6 9.9 7.0 9.6 30.9 31.9 9.5 9.7 28.4 33.4 47.7 16.1 36 Corporate and foreign bonds -1.8 5.7 .6 -8.9 -9.4 -6.1 -5.5 -12.4 -26.3 7.4 -19.1 6.8 37 Open market paper 15.6 12.1 -4.3 3.7 -2.0 7.7 -3.3 10.7 6.7 -10.7 -11.2 26.6 38 Other 19.9 29.8 32.9 35.4 22.1 10.8 42.7 28.2 26.8 19.6 7.4 14.2 39 Deposits and currency 152.2 151.4 180.0 221.7 179.4 217.5 222.6 220.7 166.2 192.1 231.9 203.2 40 Currency 9.3 7.9 10.3 9.5 8.4 13.9 8.0 11.0 4.5 12.3 14.1 13.8 41 Checkable deposits 16.2 18.7 5.0 18.1 13.0 22.5 29.8 6.5 6.7 19.1 53.1 -8.0 42 Small time and savings accounts 65.9 59.2 83.1 47.2 137.0 216.6 30.7 63.6 95.1 178.6 295.8 137.4 43 Money market fund shares 6.9 34.4 29.2 107.5 24.7 -44.1 104.1 110.8 39.4 10.0 -84.0 -4.2 44 Large time deposits 44.4 23.0 44.7 36.4 -5.2 -2.3 41.6 31.2 21.2 -31.6 -64.4 59.8 45 Security RPs 7.5 6.6 6.5 2.5 3.8 7.5 7.7 -2.6 1.1 6.6 11.0 4.0 46 Deposits in foreign countries 2.0 1.5 1.1 .5 -2.4 3.3 .8 .2 -1.8 -2.9 6.1 .4 47 Total of credit market instruments, deposits and currency 225.8 270.3 254.4 308.9 279.1 351.6 303.3 314.5 244.9 314.5 344.7 358.5 48 Public holdings as percent of total 25.3 18.5 26.2 24.1 26.6 21.7 26.8 21.1 29.2 24.4 25.1 18.5 49 Private financial intermediation (in percent) 89.3 77.7 82.4 86.1 74.0 76.5 89.2 83.0 84.4 65.4 76.5 76.4 50 Total foreign funds 44.6 23.0 1.5 7.3 -10.2 42.5 27.8 -13.1 1.0 -21.3 21.2 63.7 MEMO: Corporate equities not included above 51 Total net issues 1.9 -3.8 22.2 -3.7 35.4 69.2 10.2 -17.7 23.7 47.0 87.1 51.3 5? Mutual fund shares -.1 .1 5.2 6.8 18.6 32.6 8.1 5.6 13.2 24.0 38.7 26.4 53 Other equities 1.9 -3.9 17.1 -10.6 16.8 36.6 2.1 -23.2 10.6 23.0 48.3 24.9 54 Acquisitions by financial institutions 4.5 9.7 16.8 22.1 27.9 54.4 25.3 18.9 19.3 36.4 68.4 40.3 55 Other net purchases -2.7 -13.5 5.4 -25.9 7.5 14.8 -15.1 -36.6 4.4 10.6 18.6 11.0 NOTES BY LINE NUMBER. 32. Mainly retained earnings and net miscellaneous liabilities. 1. Line 1 of table 1.58. 33. Line 12 less line 20 plus line 27. 2. Sum of lines 3-6 or 7-10. 34-38. Lines 14-18 less amounts acquired by private finance. Line 38 includes 6. Includes farm and commercial mortgages. mortgages. 11. Credit market funds raised by federally sponsored credit agencies, and net 40. Mainly an offset to line 9. issues of federally related mortgage pool securities. 47. Lines 33 plus 39, or line 13 less line 28 plus 40 and 46. 13. Line 1 less line 2 plus line 11 and 12. Also line 20 less line 27 plus line 33. Also 48. Line 2/1 ine 1. sum of lines 28 and 47 less lines 40 and 46. 49. Line 20/line 13. 18. Includes farm and commercial mortgages. 50. Sum of lines 10 and 29. 26. Line 39 less lines 40 and 46. 51. 53. Includes issues by financial institutions. 27. Excludes equity issues and investment company shares. Includes line 19. 29. Foreign deposits at commercial banks, bank borrowings from foreign NOTE. Full statements for sectors and transaction types in flows and in amounts branches, and liabilities of foreign banking agencies to foreign affiliates. outstanding may be obtained from Flow of Funds Section, Division of Research 30. Demand deposits at commercial banks. and Statistics, Board of Governors of the Federal Reserve System, Washington, 31. Excludes net investment of these reserves in corporate equities. D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • April 1983 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures 1967 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1983 1984 MMeeaassuurree 11998811 11998822 11998833 July Aug. Sept. Oct. Nov. Dec. Jan.' Feb.' Mar. 1 Industrial production1 151.0 138.6 147.6 149.7 151.8 153.8 155.0 155.3 156.2' 158.4 160.0 160.7 Market groupings 2 Products, total 150.6 141.8 149.2' 150.9 153.2 154.9 155.6 155.8 157.4' 159.7 160.7 161.2 3 Final, total 149.5 141.5 147.1 149.0 150.7 152.1 152.7 153.2 155.2' 157.5 158.4 159.0 4 Consumer goods 147.9 142.6 151.7 154.8 156.3 157.3 156.9 156.1 157.7' 159.5 159.9 160.3 5 Equipment 151.5 139.8 140.8 141.0 143.1 144.9 147.0 149.1 151.8' 154.7 156.3 157.1 6 Intermediate 154.4 143.3 156.6 158.1 162.2 165.4 166.5 165.5 165.4' 167.8 169.3 169.6 7 Materials 151.6 133.7 145.2 147.8 149.7 152.2 154.0 154.5 154.5' 156.5 158.9 159.8 Industry groupings 8 Manufacturing 150.4 137.6 148.2' 150.6 152.8 155.1 156.2 156.4 156.8' 159.3 161.4 162.1 Capacity utilization (percent)1'2 81.1 9 Manufacturing 79.4 71.1 75.2 76.4 77.3 78.4 78.9 78.8 78.9' 80.0 80.9 81.9 10 Industrial materials industries 80.7 70.1 75.2 76.5 77.4 78.6 79.5 79.6 79.6' 80.5 81.6 11 Construction contracts (1977 = I00)3 111.0 111.0 138.0 137.0 154.0 143.0 139.0 145.0 134.0 150.0 150.0 140.6 12 Nonagricultural employment, total4 138.5 136.2 136.8 137.0 136.4 138.1 138.4 138.8 139.2 139.7 140.3 106.3 13 Goods-producing, total 109.4 102.6 101.5 101.8 102.2 102.7 103.7 104.3 104.7 105.6 106.3 100.5 14 Manufacturing, total 103.7 96.9 96.0 96.3 96.6 97.0 98.0 98.6 99.1 99.7 100.2 94.0 15 Manufacturing, production-worker ... 98.0 89.4 88.7 89.2 89.5 89.9 91.2 91.9 92.5 93.1 93.7 159.3 16 Service-producing 154.4 154.6 156.1 156.3 155.1 157.5 157.5 157.8 158.1 158.4 159.0 17 Personal income, total 386.5 409.3 453.3 436.1 437.5 441.5 446.5 450.0 453.7 460.6 463.9 18 Wages and salary disbursements 349.7 367.2 389.8 391.9 393.6 396.2 400.6 401.7 404.1 409.4 411.5 19 Manufacturing 287.3 286.2 300.4 302.6 304.6 308.2 310.2 312.8 314.3 320.1 323.4 n a, 20 Disposable personal income5 373.7 397.3 426.3 429.0 430.1 434.1 438.8' 442.1' 446.2 453.2' 456.5' 21 Retail sales" 330.6 326.0 1123 380.3 373.7 379.1 385.3 389.8 390.3 399.0 Prices7 22 Consumer 272.4 289.1 298.4 299.3 300.3 301.8 302.6 303.1 303.5 305.2 306.6 23 Producer finished goods 269.8 280.7 285.2 285.7 286.1 285.1 287.9 286.8 287.1 289.4 290.6 1. The capacity utilization series has been revised back to January 1967. 6. Based on Bureau of Census data published in Survey of Current Business. 2. Ratios of indexes of production to indexes of capacity. Based on data from 7. Data without seasonal adjustment, as published in Monthly Labor Review. Federal Reserve, McGraw-Hill Economics Department, Department of Com- Seasonally adjusted data for changes in the price indexes may be obtained from merce, and other sources. the Bureau of Labor Statistics, U.S. Department of Labor. 3. Index of dollar value of total construction contracts, including residential, nonresidential and heavy engineering, from McGraw-Hill Information Systems NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5, and 6, Company, F. W. Dodge Division. and indexes for series mentioned in notes 3 and 7 may also be found in the Survey 4. Based on data in Employment and Earnings (U.S. Department of Labor). of Current Business. Series covers employees only, excluding personnel in the Armed Forces. Figures for industrial production for the last two months are preliminary and 5. Based on data in Survey of Current Business (U.S. Department of Com- estimated, respectively. merce). 2.11 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1983 1984 1983 1984 1983 1984 SSeerriieess Q2 Q3 Q4' Ql Q2 Q3 Q4' Ql Q2 Q3 Q4 Ql Output (1967 = 100) Capacity (percent of 1967 output) Utilization rate (percent) 1 Total industry 144.5 151.8 155.5 159.7 195.5 196.4 197.3 198.3 73.9 77.3 78.8 80.5 2 Mining 112.3 116.1 121.0 124.4 165.3 165.4 165.5 165.7 67.9 70.2 73.1 75.1 3 Utilities 169.6 178.2 178.4 178.9 209.8 211.1 212.4 213.8 80.8 84.4 84.C 83.7 4 Manufacturing 145.2 152.8 156.5 160.9 196.6 197.5 198.4 199.5 73.8 77.4 78.9 80.7 5 Primary processing 145.2 152.8 156.4 159.9 194.8 195.3 195.8 196.4 74.6 78.3 79.9 81.4 6 Advanced processing 145.1 152.8 156.1 161.8 197.6 198.6 199.7 201.0 73.5 76.9 78.2 80.5 7 Materials 141.7 149.9 154.3 158.4 192.9 193.4 194.0 194.7 73.5 77.5 79.6 81.3 8 Durable goods 134.7 144.2 150.3 157.3 195.6 196.0 196.5 197.1 68.9 73.6 76.5 79.8 9 Metal materials 84.9 89.3 93.8 97.0 139.9 139.8 139.6 139.1 60.7 63.9 67.2 69.7 10 Nondurable goods 171.7 179.1 183.5 182.3 218.8 219.6 220.6 221.8 78.5 81.5 83.2' 82.2 11 Textile, paper, and chemical 179.6 188.0 193.2 191.8 230.7 231.6 232.7 234.2 77.9 81.2 83.C 81.9 12 Paper 153.4 162.8 167.4 167.1 166.1 166.9 167.7 168.5 92.3 97.5 99.8' 99.1 13 Chemical 219.4 227.8 235.0 233.3 296.6 298.3 300.1 302.3 74.0 76.4 78.3' 77.1 14 Energy materials 121.5 127.4 127.8 131.5 154.3 154.7 155.3 155.8 78.7 82.3 82.3' 84.4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Labor Market A43 2.11 Continued Previous cycle1 Latest cycle2 1983 1983 1984 High Low High Low Mar. July Aug. Sept. Oct. Nov. Dec/ Jan/ Feb/ Mar. Capacity utilization rate (percent) 15 Total industry 88.4 71.1 87.3 76.5 71.8 76.3 77.3 78.2 78.7 78.7 79.1 80.0 80.7 80.9 16 Mining 91.8 86.0 88.5 84.0 68.1 69.5 70.2 70.8 71.5 73.2 74.7 75.2 75.2 74.7 17 Utilities 94.9 82.0 86.7 83.8 79.4 83.5 85.0 84.8 83.3 83.0 85.7 84.8 82.8 83.4 18 Manufacturing 87.9 69.0 87.5 75.5 71.6 76.4 77.3 78.4 78.9 78.8 78.9 80.0 80.9 81.1 19 Primary processing 93.7 68.2 91.4 72.6 72.1 77.1 78.1 79.7 80.4 80.0 79.2 80.4 81.6 81.7 20 Advanced processing.... 85.5 69.4 85.9 77.0 71.5 76.0 76.9 77.8 77.9 78.0 78.6 79.8 80.5 80.8 21 Materials 92.6 69.3 88.9 74.2 71.5 76.5 77.4 78.6 79.5 79.6 79.6 80.5 81.6 81.9 22 Durable goods 91.4 63.5 88.4 68.4 66.0 72.1 73.6 75.2 76.1 76.5 77.0 78.5 80.2 80.7 23 Metal materials 97.8 68.0 95.4 59.4 58.8 62.3 64.0 65.5 68.0 66.8 66.8 67.3 70.6 71.3 24 Nondurable goods 94.4 67.4 91.7 77.5 76.8 80.7 81.1 82.9 84.1 83.8 81.6 81.8 82.4 82.4 25 Textile, paper, and chemical 95.1 65.4 92.3 75.5 75.8 80.4 80.5 82.6 84.1 83.7 81.2 81.4 82.0 82.1 26 Paper 99.4 72.4 97.9 89.8 90.3 96.7 96.9 99.0 99.4 101.3 98.8 99.3 99.1 n.a. 27 Chemical 95.5 64.2 91.3 70.7 71.9 75.9 75.5 77.8 79.7 79.0 76.2 76.5 77.4 n.a. 28 Energy materials 94.5 84.4 88.7 84.4 79.2 82.6 82.8 81.6 81.4 81.8 83.6 84.2 84.4 84.6 1. Monthly high 1973; monthly low 1975. 2. Preliminary; monthly highs December 1978 through January 1980; monthly lows July through October 1980. 2.12 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data are seasonally adjusted. Exceptions noted. 1983 1984 CCaatteeggoorryy 11998811 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan/ Feb. Mar. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 172,272 174,450 176,414 176,648 176,811 176,990 177,151 177,325 177,733 177,882 178,033 2 Labor force (including Armed Forces)1 110,812 112,383 113,749 114,325 114,438 114,077 114,235 114,340 114,415 114,8% 115,121 3 Civilian labor force 108,670 110,204 111,550 112,117 112,229 111,866 112,035 112,136 112,215 112,693 112,912 4 Nonagricultural industries2 97,030 96,125 97,450 98,035 98,568 98,730 99,349 99,585 99,918 100,496 100,859 5 Agriculture 3,368 3,401 3,383 3,449 3,308 3,240 3,257 3,356 3,271 3,395 3,281 Unemployment 6 Number 8,273 10,678 10,717 10,633 10,353 9,8% 9,429 9,195 9,026 8,801 8,772 7 Rate (percent of civilian labor force) ... 7.6 9.7 9.6 9.5 9.2 8.8 8.4 8.2 8.0 7.8 7.8 8 Not in labor force 61,460 62,067 62,665 62,323 62,373 62,913 62,916 62,985 63,318 62,986 62,912 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 91,156 89,596 89,986 89,748 90,851 91,084 91,355 91,599 91,930 92,347 92,490 10 Manufacturing 20,170 18,853 18,678 18,793 18,871 19,064 19,172 19,280 19,389 19,491 19,551 II Mining 1,132 1,143 1,021 1,023 1,026 1,044 1,045 1,047 1,051 1,053 1,053 12 Contract construction 4,176 3,911 3,949 4,014 4,038 4,060 4,094 4,088 4,177 4,228 4,178 13 Transportation and public utilities 5,157 5,081 4,943 4,341 5,031 5,019 5,019 5,015 5,057 5,067 5,069 14 Trade 20,551 20,401 20,508 20,580 20,612 20,666 20,718 20,781 20,860 20,925 20,941 15 Finance 5,301 5,340 5,456 5,488 5,499 5,503 5,515 5,525 5,553 5,566 5,571 16 Service 20,547 19,064 19,685 19,835 19,913 19,956 20,016 20,093 20,101 20,241 20,365 17 Government 16,024 15,803 15,747 15,674 15,861 15,775 15,776 15,770 15,742 15,776 15,762 1. Persons 16 years of age and over. Monthly figures, which are based on 3. Data include all full- and part-time employees who worked during, or sample data, relate to the calendar week that contains the 12th day; annual data received pay for, the pay period that includes the 12th day of the month, and are averages of monthly figures. By definition, seasonality does not exist in exclude proprietors, self-employed persons, domestic servants, unpaid family population figures. Based on data from Employment and Earnings (U.S. Depart- workers, and members of the Armed Forces. Data are adjusted to the March 1983 ment of Labor). 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

A44 Domestic Nonfinancial Statistics • April 1983 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value Monthly data are seasonally adjusted 1967 1983 1984 pro- 1983 por- avg/ tion Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec/ Jan. Feb.? Index (1967 = 100) MAJOR MARKET 1 Total index 100.00 147.6 140.0 142.6 144.4 146.4 149.7 151.8 153.8 155.0 155.3 156.2 158.4 160.0 2 Products 60.71 149.2 141.6 144.5 146.2 148.1 150.9 153.2 154.9 155.6 155.8 157.4 159.7 160.7 3 Final products 47.82 147.1 139.9 142.8 144.5 146.4 149.0 150.7 152.1 152.7 153.2 155.2 157.5 158.4 4 Consumer goods 27.68 151.7 144.3 147.7 150.4 152.4 154.8 156.3 157.4 156.9 156.1 157.7 159.5 159.9 5 Equipment 20.14 140.8 133.8 136.2 136.5 138.2 141.0 143.1 144.9 147.0 149.1 151.8 154.7 156.3 6 Intermediate products 12.89 156.6 147.8 150.8 152.2 154.5 158.1 162.2 165.3 166.5 165.5 165.4 167.8 169.3 7 Materials 39.29 145.2 137.6 139.7 141.7 143.7 147.8 149.7 152.3 154.0 154.5 154.5 156.5 158.9 Consumer goods 8 Durable consumer goods 7.89 147.5 136.3 140.5 145.5 149.2 152.9 154.2 157.4 156.7 155.9 158.6 163.3 163.2 9 Automotive products 2.83 158.2 142.6 144.9 152.2 160.0 167.0 168.1 172.9 171.3 171.5 178.4 184.3 183.1 10 Autos and utility vehicles 2.03 134.0 116.4 117.8 124.9 135.4 145.4 147.0 153.1 149.2 149.2 157.8 163.3 162.9 11 Autos 1.90 117.4 99.9 102.7 107.4 118.3 129.8 132.0 135.0 129.6 129.4 137.4 140.7 141.2 12 Auto parts and allied goods .80 219.6 209.3 213.6 221.5 222.6 221.9 221.8 223.1 227.4 228.2 230.7 237.4 234.4 13 Home goods 5.06 141.4 132.8 138.1 141.8 143.2 144.9 146.4 148.7 148.4 147.2 147.5 151.6 152.1 14 Appliances, A/C, and TV 1.40 116.4 105.0 106.1 112.8 114.4 116.2 121.2 125.2 129.2 127.0 126.3 136.4 137.1 15 Appliances and TV 1.33 120.1 108.5 109.7 116.1 118.4 119.7 125.0 129.7 133.3 131.3 130.2 140.0 140.6 16 Carpeting and furniture 1.07 178.1 168.3 180.5 181.9 185.6 187.3 187.5 186.3 185.5 182.7 184.0 183.6 179.6 17 Miscellaneous home goods 2.59 139.9 133.3 137.9 140.9 141.3 143.0 143.2 145.9 143.6 143.4 143.9 146.7 148.9 18 Nondurable consumer goods 19.79 153.4 147.5 150.5 152.3 153.6 155.6 157.1 157.5 157.1 156.1 157.3 158.0 158.6 19 Clothing 4.29 20 Consumer staples 15.50 163.7 158.1 161.1 162.8 164.3 166.1 168.0 168.0 167.2 165.4 166.0 166.5 167.1 ?1 8.33 153.5 148.4 150.9 153.2 155.9 156.6 156.3 154.9 156.0 154.5 155.4 156.5 22 Nonfood staples 7.17 175.4 169.4 172.9 174.0 174.1 177.2 181.6 183.2 180.3 178.1 178.3 178.2 178.6 23 Consumer chemical products .... 2.63 231.0 225.6 225.5 227.8 229.0 233.8 239.7 241.5 238.7 232.4 229.9 231.6 233.7 24 Consumer paper products 1.92 132.7 128.1 129.2 128.6 130.1 132.6 137.4 138.2 137.6 136.6 137.2 138.8 139.5 25 Consumer energy products 2.62 150.9 143.3 152.2 153.4 151.2 153.2 155.7 157.7 153.0 154.1 156.5 153.3 151.9 2266 11..4455 117733..44 116666..11 117755..55 117744..33 117700..55 117733..22 117799..99 118822..88 117744..55 117755..88 118855..22 118800..00 Equipment 27 Business 12.63 153.3 143.7 146.9 147.7 150.2 153.3 156.6 158.8 161.3 164.1 167.3 170.9 172.5 28 Industrial 6.77 120.4 113.1 113.5 114.5 116.3 119.9 124.3 125.6 126.6 128.6 130.8 133.4 134.3 29 Building and mining 1.44 159.3 145.3 141.8 146.2 148.7 154.4 159.2 160.8 166.9 175.8 185.3 185.6 181.1 30 Manufacturing 3.85 107.1 99.7 101.7 102.5 105.0 108.9 113.3 115.0 114.6 114.3 115.1 118.9 121.5 31 Power 1.47 117.1 116.2 116.6 115.0 114.1 114.6 119.0 118.8 118.5 119.4 118.4 120.0 121.9 32 Commercial transit, farm 5.86 191.3 179.2 185.4 186.1 189.5 191.9 194.0 196.7 201.3 205.1 209.6 214.2 216.7 33 Commercial 3.26 273.2 255.7 264.3 265.0 270.9 276.0 277.4 281.2 288.1 292.5 298.9 304.1 308.0 34 Transit 1.93 95.2 90.1 92.0 92.6 93.2 92.0 95.9 97.6 100.0 103.2 106.0 111.1 111.4 35 Farm .67 69.5 63.4 70.2 71.3 70.4 70.8 70.8 71.0 70.9 73.5 73.5 73.6 75.7 36 Defense and space 7.51 119.9 117.0 118.2 117.6 118.0 120.4 120.2 121.8 122.9 124.0 125.7 127.6 129.0 Intermediate products 37 Construction supplies 6.42 142.5 133.1 136.4 138.4 142.1 145.8 149.0 151.1 152.3 151.6 151.5 155.5 157.6 38 Business supplies 6.47 170.7 162.3 165.2 166.0 166.8 170.4 175.3 179.3 180.6 179.4 179.3 180.0 180.8 39 Commercial energy products 1.14 184.3 180.3 183.3 183.1 181.4 185.2 186.9 190.2 187.0 187.6 188.0 192.1 190.9 Materials 40 Durable goods materials 20.35 138.6 128.7 132.4 134.7 137.0 141.1 144.2 147.2 149.4 150.3 151.3 154.5 158.1 41 Durable consumer parts 4.58 113.6 104.0 106.5 108.5 109.5 115.6 119.9 123.1 124.9 125.0 127.9 131.4 132.9 42 Equipment parts 5.44 176.4 162.5 167.2 170.6 175.8 180.8 183.6 186.0 188.3 192.5 193.4 198.2 203.8 43 Durable materials n.e.c 10.34 129.9 121.9 125.4 127.5 128.7 131.5 134.2 137.4 139.8 139.3 139.5 141.7 145.2 44 Basic metal materials 5.57 90.2 86.0 87.8 89.3 89.6 90.8 93.1 94.5 98.0 97.1 96.9 97.7 102.1 45 Nondurable goods materials 10.47 174.5 167.5 168.7 172.1 174.3 177.0 178.0 183.4 185.3 184.8 180.3 181.0 182.7 46 Textile, paper, and chemical materials 7.62 182.6 174.3 175.9 180.2 182.8 186.1 186.4 192.0 195.4 194.7 189.6 190.3 192.2 47 Textile materials 1.85 116.2 110.6 110.6 114.6 116.0 119.0 121.5 123.1 124.0 121.9 121.3 119.9 120.6 48 Paper materials 1.62 158.2 149.5 150.8 154.4 155.0 161.1 161.8 165.4 166.3 169.8 166.0 166.9 166.9 49 Chemical materials 4.15 221.7 212.5 214.9 219.6 223.6 225.9 225.1 233.1 238.7 237.0 229.3 230.8 234.0 50 Containers, nondurable 1.70 167.9 163.8 163.2 164.3 166.1 166.5 170.6 179.1 175.9 176.6 173.0 173.4 173.1 51 Nondurable materials n.e.c 1.14 130.5 127.7 129.1 129.7 129.9 131.3 133.0 132.6 131.9 130.6 129.5 130.0 134.0 52 Energy materials 8.48 124.8 121.9 121.6 121.1 121.8 127.7 128.0 126.4 126.3 127.1 130.0 131.1 131.5 53 Primary energy 4.65 114.7 114.4 113.9 113.8 112.6 115.4 113.9 112.8 114.1 115.5 117.6 119.1 119.8 54 Converted fuel materials 3.82 137.0 131.1 131.0 129.9 132.9 142.7 145.2 142.8 141.2 141.1 145.1 145.7 145.7 Supplementary groups 55 Home goods and clothing 9.35 129.9 122.0 126.3 129.2 130.2 132.3 133.3 135.2 135.5 135.9 137.6 140.4 141.0 56 Energy, total 12.23 135.9 131.9 133.9 133.8 133.6 138.5 139.4 139.0 137.7 138.5 141.1 141.5 141.4 57 Products 3.76 161.0 154.5 161.7 162.4 160.4 162.9 165.2 167.5 163.3 164.3 166.0 165.1 163.7 58 Materials 8.48 124.8 121.9 121.6 121.1 121.8 127.7 128.0 126.4 126.3 127.1 130.0 131.1 131.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Output A45 2.13 Continued 1967 1983 1984 SIC pro- 1983 Grouping code por- avg/ tion Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec/ Jan. Feb.? Mar/ Index (1967 = 100) MAJOR INDUSTRY 1 Mining and utilities 12.05 142.9 137.7 138.9 139.7 139.6 143.8 146.0 146.5 145.8 147.2 151.5 151.3 149.3 149.8 2 Mining 6.36 116.6 112.6 111.6 112.8 112.6 115.0 116.1 117.1 118.3 121.1 123.7 124.6 124.6 123.9 3 Utilities 5.69 172.4 165.8 169.3 169.7 169.8 176.0 179.3 179.3 176.5 176.3 182.5 181.0 177.0 178.8 4 Electric 3.88 196.0 188.2 192.7 192.9 192.0 200.9 205.4 204.5 200.7 200.2 208.0 206.8 200.6 202.9 5 Manufacturing 87.95 148.2 140.4 143.1 145.1 147.4 150.6 152.8 155.1 156.2 156.4 156.8 159.3 161.4 162.1 6 Nondurable 35.97 168.1 160.7 163.3 165.4 167.8 170.6 172.9 174.6 175.6 174.8 173.9 175.3 177.0 177.3 7 Durable 51.98 134.5 126.3 129.1 131.0 133.2 136.8 138.8 141.6 142.8 143.6 145.0 148.2 150.7 151.5 Mining 8 Metal 10 .51 80.9 75.2 79.8 84.4 82.9 82.5 80.9 78.7 81.0 84.6 82.3 89.4 101.7 9 Coal 11.12 .69 136.3 127.3 125.3 125.6 124.6 139.9 141.2 140.5 142.7 144.8 145.2 151.5 163.2 164.2 10 Oil and gas extraction 13 4.40 116.6 114.4 112.2 112.5 112.6 113.9 114.7 116.3 117.3 119.8 123.4 122.8 119.4 117.8 11 Stone and earth minerals 14 .75 122.8 114.0 117.7 122.5 121.7 121.2 125.0 126.5 127.4 132.2 133.9 135.0 135.2 Nondurable manufactures 12 Foods 20 8.75 156.4 152.0 153.7 155.6 157.7 159.9 159.3 158.2 157.6 157.1 157.7 159.9 13 Tobacco products 21 .67 112.1 113.4 114.8 112.9 120.0 112.9 117.1 112.7 109.1 109.5 112.3 116.4 14 Textile mill products 22 2.68 140.8 131.9 136.6 139.6 141.8 146.7 147.4 148.7 148.7 145.8 145.0 143.9 144.0 15 Apparel products 23 3.31 16 Paper and products 26 3.21 164.3 156.3 157.0 161.5 163.0 165.1 168.6 170.4 171.5 172.1 170.1 172.1 175.0 176.0 17 Printing and publishing 27 4.72 152.5 145.9 145.7 145.2 147.4 152.0 157.8 161.7 162.7 162.0 161.7 163.4 163.9 164.7 18 Chemicals and products 28 7.74 215.0 205.7 208.5 211.0 214.7 218.3 220.3 224.1 228.4 225.6 221.1 221.8 224.2 19 Petroleum products 29 1.79 120.3 114.8 120.6 123.8 123.0 124.3 123.2 125.1 123.6 125.4 114.4 118.8 126.5 127.9 20 Rubber and plastic products 30 2.24 291.9 272.0 283.0 288.0 293.8 296.1 306.9 310.9 310.8 309.1 314.4 315.0 318.5 21 Leather and products 31 .86 61.9 59.4 58.7 59.6 60.1 62.3 64.4 64.2 64.0 63.2 66.0 63.6 65.5 Durable manufactures 22 Ordnance, private and government 19.91 3.64 95.4 91.9 93.2 92.6 93.3 95.2 96.8 98.0 98.8 99.3 99.8 99.7 99.9 100.0 23 Lumber and products 24 1.64 137.2 128.7 132.1 135.8 137.4 141.3 141.6 142.3 141.7 141.0 143.8 146.4 148.2 24 Furniture and fixtures 25 1.37 170.5 161.0 167.7 169.6 173.1 175.2 179.0 180.7 181.0 177.5 177.9 181.8 183.4 25 Clay, glass, stone products 32 2.74 143.4 135.6 138.3 139.2 141.7 145.8 147.9 151.7 151.9 152.7 153.8 157.0 160.1 26 Primary metals 33 6.57 85.4 81.2 83.1 84.9 84.8 85.5 87.5 90.6 95.3 92.2 90.4 93.2 97.5 97.3 27 Iron and steel 331.2 4.21 71.5 66.9 68.5 69.5 69.7 71.8 75.1 78.2 84.3 79.2 74.1 80.7 86.1 28 Fabricated metal products 34 5.93 120.2 113.9 115.3 115.5 118.5 122.7 126.0 127.4 26.9 128.5 129.2 131.7 133.5 134.1 29 Nonelectrical machinery 35 9.15 150.6 138.6 143.1 146.1 149.5 154.2 157.3 158.3 159.2 161.8 164.3 168.8 172.2 173.7 30 Electrical machinery 36 8.05 185.5 173.8 177.2 180.1 182.4 188.3 189.2 195.8 198.4 200.1 201.5 206.2 210.0 212.5 31 Transportation equipment 37 9.27 117.8 110.1 111.4 113.8 116.6 119.7 121.1 124.7 125.5 127.3 130.8 134.2 135.1 135.8 32 Motor vehicles and parts 371 4.50 137.1 123.2 125.5 130.4 136.2 142.3 144.3 150.9 150.9 152.9 158.9 164.9 165.2 166.7 33 Aerospace and miscellaneous transportation equipment... 372-9 4.77 99.6 97.7 98.1 98.1 98.1 98.5 99.2 100.0 101.6 103.2 104.3 105.3 106.7 106.7 34 Instruments 38 2.11 158.7 154.0 155.1 156.0 156.1 159.3 161.6 163.6 163.0 163.0 164.6 167.0 168.4 168.7 35 Miscellaneous manufactures 39 1.51 146.2 136.9 145.0 149.0 151.0 153.7 153.1 151.7 149.1 148.9 149.3 150.1 152.5 151.9 Gross value (billions of 1972 dollars, annual rates) MAJOR MARKET 36 Products, total 507.4 612.6 584.1 592.6 601.8 610.5 620.5 626.6 637.0 637.8 638.4 645.4 654.0 658.6 659.9 37 Final 390.9 472.6 451.3 457.7 465.6 471.8 478.2 481.8 489.9 490.7 490.8 497.8 504.3 507.7 508.6 38 Consumer goods . 277.5 328.7 313.8 318.8 325.6 330.4 333.7 336.7 341.6 340.2 338.3 341.9 344.8 346.6 347.2 39 Equipment 113.4 144.0 137.5 138.9 140.0 141.4 144.5 145.1 148.4 150.5 152.5 155.9 159.4 161.1 161.4 40 Intermediate 116.6 140.0 132.8 134.9 136.2 138.7 142.3 144.8 147.1 147.1 147.6 147.6 149.8 150.9 151.4 1. 1972 dollar value. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • April 1983 2.14 HOUSING AND CONSTRUCTION Monthly figures are at seasonally adjusted annual rates except as noted. 1983 1984 IItteemm 11998811 11998822 11998833'' May June July Aug. Sept. Oct. Nov/ Dec/ Jan/ Feb. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 986 1,001 1,590 1,635 1,761 1,782 1,652 1,506 1,630 1,642 1,549 1,817 1,941 2 1-family 564 546 891 940 1,013 920 874 837 880 911 898 1,001 1,111 3 2-or-more-family 421 454 699 695 748 862 778 669 750 731 651 816 830 4 Started 1,084 1,062 1,703 1,779 1,743 1,793 1,873 1,679 1,672 1,730 1,694 1,976 2,197 5 1-family 705 663 1,068 1,150 1,124 1,048 1,124 1,038 1,017 1,074 1,021 1,307 1,360 6 2-or-more-family 379 400 636 629 619 745 749 641 655 656 673 669 837 7 Under construction, end of period1 682 720 1,006 900 933 963 977 988 987 1,011 1,023 1,044 8 1-family 382 400 525 518 532 537 542 542 536 543 543 557 9 2-or-more-family 301 320 482 382 400 425 435 446 450 468 479 487 10 Completed 1,266 1,006 1,390 1,353 1,386 1,432 1,729 1,476 1,567' 1,445 1,479 1,560 n a. 11 1-family 818 631 924 851 959 1,000 1,050 966 1,028' 994 986 985 12 2-or-more-family 447 374 466 502 427 432 679 510 539' 451 493 575 13 Mobile homes shipped 241 239 295 289 299 296 307 305 308 313 310 314 Merchant builder activity in I-family units 14 Number sold 436 413 622 654 655 606 558 597 624 636 748 669 721 15 Number for sale, end of period1 278 255 303 273 283 289 296 299 301 304 303 303 301 PPrriiccee ((tthhoouussaannddss ooff ddoollllaarrss))22 MMeeddiiaann 1166 UUnniittss ssoolldd 68.8 69.3 75.5 74.5 75.8 75.2 76.8 81.0 75.9 75.9 76.3 76.5 79.d AAvveerraaggee 1177 UUnniittss ssoolldd 83.1 83.8 89.9 88.8 90.9 89.2 91.3 97.8 89.5 91.4 92.4 92.4 94.1 EXISTING UNITS (1-family) 18 Number sold 2,418 1,991 2,719 2,840 2,820 2,780 2,760 2,770 2,720 2,700 2,850 2,890 2,870 Price of units sold (thousands of dollars)1 19 Median 66.1 67.7 69.8 69.2 71.4 71.8 71.5 69.9 69.8 70.4 69.9 71.3 71.0 20 Average 78.0 80.4 82.5 81.7 84.7 84.2 84.7 82.8 83.0 83.4 82.9 84.8 84.3 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 239,418 232,048 262,668 254,763 264,321 274,205 281,997 285,384 265,626' 265,780 265,319 276,033 295,013 27 Private 186,069 180,979 212,287 206,029 214,729 222,759 228,529 232,561 216,976' 214,920 215,497 225,320 242,770 73 Residential 86,567 74,809 110,708 107,494 113,524 122,297 127,136 129,142 116,478' 110,385 107,973 116,963 128,495 24 Nonresidential, total 99,502 106,170 101,579 98,535 101,205 100,462 101,393 103,419 100,498' 104,535 107,524 108,357 114,275 Buildings 75 Industrial 17,031 17,346 13,143 13,047 13,136 12,227 14,227 13,166 10,532 12,280 12,921 13,091 14,857 76 Commercial 34,243 37,281 36,267 33,291 35,898 35,871 36,277 36,901 36,118 38,081 38,955 40,874 44,790 77 Other 9,543 10,507 11,705 11,237 10,974 11,250 12,038 12,564 12,279 12,001 12,121 13,062 136,311 28 Public utilities and other 38,685 41,036 40,464 40,960 41,197 41,114 38,851 40,788 41,569' 42,173 43,527 41,330 40,997 79 Public 53,346 51,068 50,380 48,734 49,592 51,446 53,469 52,823 48,649' 50,860 49,821 50,713 52,243 30 Military 1,966 2,205 2,536 2,255 1,894 2,655 2,258 2,705 2,458' 3,192 2,977 2,821 2,716 31 Highway 13,599 13,521 14,178 13,044 12,925 14,091 15,906 15,896 14,644 14,360 14,780 13,738 15,439 32 Conservation and development 5,300 5,029 4,823 4,548 4,853 5,608 5,210 5,048 4,253' 3,902 4,8% 4,259 4,653 33 Other 32,481 30,313 28,843 28,887 29,920 29,092 30,095 29,174 27,294' 29,406 27,168 29,895 29,435 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 3. Value of new construction data in recent periods may not be strictly Institute and seasonally adjusted by the Census Bureau, and (b) sales and prices of comparable with data in prior periods because of changes by the Bureau of the existing units, which are published by the National Association of Realtors. All Census in its estimating techniques. For a description of these changes see back and current figures are available from originating agency. Permit authoriza- Construction Reports (C-30-76-5), issued by the Bureau in July 1976. tions are those reported to the Census Bureau from 16,000jurisdictions beginning with 1978. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data, except as noted C m h o a n n t g h e s f e ro a m rl ie 1 r 2 Change ( a f t r o a m nn 3 u a m l o r n at t e h ) s earlier Change from 1 month earlier IIInnndddeeexxx llleeevvveeelll IIIttteeemmm FFFeeebbb... 1983 1983 1984 111999888444 11998833 11998844 (((111999666777 FFeebb.. FFeebb.. === 111000000)))111 Mar. June Sept. Dec. Oct. Nov. Dec. Jan. Feb. CONSUMER PRICES2 1 All items 3.5 4.6 1.2 5.4 4.5 4.0 .4 .4 .2 .6 .4 306.6 7 2.0 4.5 3.2 1.7 1.1 4.3 .4 .2 .4 1.6 .7 302.1 3 Energy items -1.5 3.3 -23.3 19.1 3.4 -1.7 -.2 .1 -.3 -.4 .2 420.2 4 All items less food and energy 4.6 4.8 4.2 4.2 5.9 4.9 .4 .5 .3 .5 .3 295.5 Commodities 6.0 4.5 5.7 3.2 6.8 4.6 .4 .4 .3 .2 .2 248.5 6 Services 3.4 5.0 4.3 4.8 5.2 5.3 .5 .5 .3 .7 .4 349.5 PRODUCER PRICES 7 Finished goods 2.2 2.3 -3.2 2.6 2.0 1.0 .2 -.1 .1 .6 .4 290.6 8 Consumer foods 1.1 5.2 2.3 -.9 2.5 5.4 1.0 -.4 .7 2.7 .7 274.7 9 Consumer energy -5.4 -3.6 -32.3 12.9 -1.3 -9.5 -.5 -1.0 -1.0 -1.2 .4 759.3 10 Other consumer goods 4.1 2.3 1.0 2.2 2.7 1.2 -.1 .2 .2 .2 .2 244.0 11 Capital equipment 3.9 2.4 2.1 1.7 2.1 2.1 .0 .2 .2 .1 .5 292.5 1? Intermediate materials3 -.4 2.2 -3.4 2.8 4.0 2.7 .3 .2 .1' .0 .2 322.1 13 Excluding energy .8 2.8 1.5 2.8 3.6 3.3 .3 .2 .3 .2 .2 300.7 Crude materials 14 .4 4.6 13.3 -5.8 15.6 12.4 .8 .6 1.5 22..22 --33..11 226600..77 15 Energy .4 -1.6 -9.2 -5.1 -1.7 -2.1 -1.0 .3 .2 .4 .0 786.8 16 Other -4.8 14.0 -1.5 49.1 16.6 3.4 -.2 .0 .6 -3.6 .8 271.1 1. Not seasonally adjusted. 3. Excludes intermediate materials for food manufacturing and manufactured 2. Figures for consumer prices are those for all urban consumers and reflect a animal feeds, rental equivalence measure of homeownership after 1982. SOURCE. Bureau of Labor Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • April 1983 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1983 1983' Q4 Q1 Q2 Q3 GROSS NATIONAL PRODUCT 1 Total 2,954.1 3,073.0 3,310.5 3,109.6 3,171.5 3,272.0 3,362.2 By source 2 Personal consumption expenditures 1,857.2 1,991.9 2,158.0 2,046.9 2,073.0 2,147.0 2,181.1 3 Durable goods 236.1 244.5 279.4 252.1 258.5 277.7 282.8 4 Nondurable goods 733.9 761.0 804.1 773.0 777.1 799.6 814.8 5 Services 887.1 986.4 1,074.5 1,021.8 1,037.4 1,069.7 1,083.5 6 Gross private domestic investment 474.9 414.5 471.9 377.4 404.1 450.1 501.1 7 Fixed investment 456.5 439.1 478.4 433.8 443.5 464.6 492.5 8 Nonresidential 352.2 348.3 348.4 337.0 332.1 336.3 351.0 9 Structures 133.4 141.9 131.1 138.6 132.9 127.4 130.9 10 Producers' durable equipment 218.8 206.4 217.2 198.4 199.3 208.8 220.2 11 Residential structures 104.3 90.8 130.0 96.8 111.3 128.4 141.5 12 Nonfarm 99.8 86.0 124.9 91.2 106.7 123.3 136.3 13 Change in business inventories 18.4 -24.5 -6.4 -56.4 -39.4 -14.5 8.5 14 Nonfarm 10.9 -23.1 -2.8 -53.7 -39.0 -10.3 18.4 15 Net exports of goods and services 26.3 17.4 -9.0 5.6 17.0 -8.5 -18.3 16 Exports 368.8 347.6 335.4 321.6 326.9 327.1 341.1 17 Imports 342.5 330.2 344.4 316.1 309.9 335.6 359.4 18 Government purchases of goods and services... 595.7 649.2 689.5 679.7 677.4 683.4 698.3 19 Federal 229.2 258.7 274.8 279.2 273.5 273.7 278.1 20 State and local 366.5 390.5 414.7 400.5 404.0 409.7 420.2 By major type of product 21 Final sales, total 2,935.6 3,097.5 3,316.9 3,165.9 3,210.9 3,286.6 3,353.7 22 Goods 1,291.8 1,280.8 1.366.5 1,264.8 1,292.2 1,346.8 1,388.9 23 Durable 528.0 500.8 548.7 474.0 482.7 536.8 568.9 24 Nondurable 763.9 780.1 817.8 790.8 809.5 810.0 820.0 25 Services 1,374.2 1,511.2 1.635.6 1,560.5 1,588.4 1,623.4 1,651.0 26 Structures 288.0 281.0 308.4 284.3 290.9 301.9 322.3 27 Change in business inventories 18.4 -24.5 -6.4 -56.4 -39.4 -14.5 8.5 28 Durable goods 3.6 -15.5 -3.9 -45.0 -38.2 -8.9 13.1 29 Nondurable goods 14.8 -9.1 -2.5 -11.4 -1.2 -5.7 -4.5 30 MEMO: Total GNP in 1972 dollars 1,513.8 1,485.4 1,535.3 1,480.7 1,490.1 1,525.1 1,553.4 NATIONAL INCOME 31 Total 2,373.0 2,450.4 2.650.1 2,474.0 2.528.5 2,612.8 2,686.9 32 Compensation of employees 1,769.2 1,865.7 1.990.2 1,889.0 1,923.7 1.968.7 2,011.8 3 3 3 3 3 3 4 7 5 6 W Su a G O E p g m p o t e h l v s p e e e l r m a r o n n e y d m n e t r e s a t n c o l t o a n w r a i t n a e r d s g i b e g u s o ti a v o n e n d r s n s m a fo l e a r n r t i s e o s e c n ia t l e r i p n r s i u s r e a s n . c .. e 1 1, , 2 2 4 2 1 8 7 9 0 3 4 6 3 8 2 . . . . . 8 4 2 0 5 1 1 , , 3 5 2 2 1 0 6 9 6 4 8 6 2 7 0 . . . . . 1 0 1 6 9 1 1 , , 3 3 6 3 1 6 2 2 3 5 4 6 6 8 2 . . . . . 1 1 2 4 7 1 1 , , 3 3 5 2 1 1 8 0 7 4 4 6 1 2 2 . . . . . 5 0 5 9 5 1 1 . , 3 3 2 6 1 1 1 1 9 4 0 9 3 1 8 . . . . . 1 2 5 8 6 1 1 , . 6 3 3 3 1 4 2 2 2 5 7 3 1 3 1 . . . . . 1 3 6 8 5 1 1 , , 3 3 6 3 1 3 8 2 5 5 1 0 8 3 3 . . . . . 5 3 4 1 9 38 Other labor income 143.5 156.6 173.4 160.4 164.3 170.1 176.4 39 Proprietors' income1 120.2 109.0 128.5 116.2 120.6 127.2 126.7 40 Business and professional1 89.7 87.4 107.6 90.2 98.4 106.2 111.2 41 Farm1 30.5 21.5 20.9 26.0 22.2 21.0 15.5 42 Rental income of persons2 41.4 49.9 54.8 52.3 54.1 54.8 53.9 43 Corporate profits' 192.3 164.8 229.1 161.9 181.8 218.2 248.4 44 Profits before tax3 227.0 174.2 207.5 167.5 169.7 203.3 229.1 45 Inventory valuation adjustment -23.6 -8.4 -9.2 -10.3 -1.7 -10.6 -18.3 46 Capital consumption adjustment -11.0 -1.1 30.8 4.7 13.9 25.6 37.6 47 Net interest 249.9 261.1 247.5 254.7 248.3 243.8 246.1 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

National Income Accounts A49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1982 1983 AAccccoouunntt 11998811 11998822 11998833rr Q4 Q1 Q2 Q3 Q4' PERSONAL INCOME AND SAVING 1 Total personal income 2,435.0 2,578.6 2,742.1 2,632.0 2,657.7 2,713.6 2,761.9 2,835.2 ? Wage and salary disbursements 1,493.2 1,568.1 1,664.6 1,586.0 1,610.7 1,648.4 1,681.9 1,717.3 3 Commodity-producing industries 509.5 509.2 529.7 499.5 508.6 522.2 537.8 550.0 4 Manufacturing 385.3 383.8 402.8 377.4 385.4 397.4 409.2 419.0 Distributive industries 361.6 378.8 397.2 383.5 386.4 394.3 398.9 409.3 6 Service industries 337.7 374.1 411.5 388.5 396.4 407.3 416.4 425.8 7 Government and government enterprises 284.4 306.0 326.2 314.5 319.2 324.6 328.8 332.1 8 143.5 156.6 173.4 160.4 164.3 170.1 176.4 182.7 9 Proprietors' income1 120.2 109.0 128.5 116.2 120.6 127.2 126.7 139.4 10 Business and professional1 89.7 87.4 107.6 90.2 98.4 106.2 111.2 114.5 11 30.5 21.5 20.9 26.0 22.2 21.0 15.5 25.0 1? Rental income of persons2 41.4 49.9 54.8 52.3 54.1 54.8 53.9 56.2 13 62.8 66.4 70.5 67.9 68.8 69.3 70.9 72.9 14 Personal interest income 341.3 366.2 366.3 363.1 357.2 357.1 369.9 381.1 IS 337.2 374.6 403.6 399.0 398.5 405.3 402.6 408.1 16 Old-age survivors, disability, and health insurance benefits.... 182.0 204.5 222.8 216.5 217.4 221.1 223.8 228.8 17 LESS: Personal contributions for social insurance 104.6 112.0 119.5 112.9 116.5 118.6 120.5 122.5 18 EQUALS: Personal income 2,435.0 2,578.6 2,742.1 2,632.0 2,657.7 2,713.6 2,761.9 2,835.2 19 LESS: Personal tax and nontax payments 387.4 402.1 406.5 404.1 401.8 412.6 400.1 411.4 20 EQUALS: Disposable personal income 2,047.6 2,176.5 2,335.6 2,227.8 2,255.9 2,301.0 2,361.7 2,423.9 21 LESS: Personal outlays 1,912.4 2,051.1 2,222.0 2,107.0 2,134.2 2,209.5 2,245.9 2,298.3 22 EQUALS: Personal saving 135.3 125.4 113.6 120.8 121.7 91.5 115.8 125.6 MEMO Per capita (1972 dollars) 73 Gross national product 6,584.1 6,399.3 6,552.8 6,355.2 6,381.5 6,518.0 66,,662222..55 66,,668877..55 74 Personal consumption expenditures 4,161.5 4,179.8 4,316.7 4,204.5 4,225.7 4,319.1 4,331.4 4,389.8 75 Disposable personal income 4,587.0 4,567.0 4,672.0 4,576.0 4,599.0 4,629.0 4,690.0 4,769.0 26 Saving rate (percent) 6.6 5.8 4.9 5.4 5.4 4.0 4.9 5.2 GROSS SAVING 27 Gross saving 483.8 405.8 439.6 351.3 398.5 420.6 455.4 483.8 7.8 Gross private saving 509.6 521.6 569.8 526.6 541.5 535.0 587.2 615.7 79 Personal saving 135.3 125.4 113.6 120.8 121.7 91.5 115.8 125.6 30 Undistributed corporate profits1 44.8 37.0 78.9 37.5 48.9 70.1 89.7 106.9 31 Corporate inventory valuation adjustment -23.6 -8.4 -9.2 -10.3 -1.7 -10.6 -18.3 -6.3 Capital consumption allowances 3? 202.9 222.0 231.6 227.7 228.3 229.8 223333..11 223355..22 33 Noncorporate 126.6 137.2 145.7 140.5 142.6 143.5 148.6 148.0 34 Wage accruals less disbursements .0 .0 .0 .0 .0 .0 .0 .0 35 Government surplus, or deficit (-), national income and product accounts -26.9 -115.8 —130.2 -175.3 -142.9 -114.4 --113311..88 --113311..88 36 -62.2 -147.1 -181.6 -208.2 -183.3 -166.1 -187.3 -189.9 37 State and local 35.3 31.3 51.4 32.9 40.4 51.7 55.5 58.1 38 Capital grants received by the United States, net 1.1 .0 .0 .0 .0 .0 .0 .0 39 Gross investment 478.9 406.2 437.4 355.5 397.4 417.1 457.9 477.1 40 Gross private domestic 474.9 414.5 471.9 377.4 404.1 450.1 501.1 532.5 41 Net foreign 4.0 -8.3 -34.6 -21.9 -6.7 -33.0 -43.2 -55.3 42 Statistical discrepancy -4.9 .5 -2.2 4.2 -1.2 -3.5 2.5 -6.7 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

A50 International Statistics • April 1984 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1982 1983 IItteemm ccrreeddiittss oorr ddeebbiittss 11998811 11998822 11998833PP Q4 QK Q2' Q3 Q4 P 1 Balance on current account 4,592 -11,211 -40,776 --66,,662211 --33,,666655 -9,747 --1122,,007744 --1155,,229911 --55,,554466 --33,,339955 -8,898 --1144,,110011 --1144,,338822 3 Merchandise trade balance2 -28,067 -36,389 -60,550 -11,354 -8,856 -14,705 -18,178 -18,811 4 Merchandise exports 237,019 211,217 200,203 48,344 49,350 48,757 50,429 51,667 5 Merchandise imports -265,086 -247,606 -260,753 -59,698 -58,206 -63,462 -68,607 -70,478 6 Military transactions, net -1,355 179 483 -26 516 117 -132 -17 7 Investment income, net3 33,484 27,304 23,581 6,008 5,036 5,630 6,881 6,032 8 Other service transactions, net 7,462 5,729 4,309 1,182 1,200 1,034 1,470 604 9 Remittances, pensions, and other transfers -2,382 -2,621 -2,631 -661 -608 -636 -662 -724 10 U.S. government grants (excluding military) -4,549 -5,413 -5,967 -1,770 -953 -1,187 -1,453 -2,375 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -5,078 -5,732 -4,897 -934 -1,053 -1,162 -1,206 -1,476 12 Change in U.S. official reserve assets (increase, -) -5,175 -4,965 -1,196 -1,949 -787 16 529 -953 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -1,823 -1,371 -66 -297 -98 -303 -209 545 15 Reserve position in International Monetary Fund -2,491 -2,552 -4,434 -732 -2,139 -212 -88 -1,996 16 Foreign currencies -861 -1,041 3,304 -920 1,450 531 826 498 17 Change in U.S. private assets abroad (increase, -)3 -100,348 -107,348 -43,204 -16,670 -19,793 570 -8,449 -15,532 18 Bank-reported claims -83,851 -109,346 -24,966 -17,511 -15,935 5,166 -2,025 -12,172 19 Nonbank-reported claims -1,181 6,976 -3,146 2,337 -2,374 -440 -332 n.a. 20 U.S. purchase of foreign securities, net -5,636 -7,986 -7,484 -3,527 -1,808 -3,222 -1,543 -912 21 U.S. direct investments abroad, net3 -9,680 3,008 -7,608 2,031 324 -934 -4,549 -2,448 22 Change in foreign official assets in the United States (increase, +) 5,430 3,172 6,083 1,661 49 1,973 -2,581 6,642 23 U.S. Treasury securities 4,983 5,759 7,140 4,346 3,008 1,955 -538 2,715 24 Other U.S. government obligations 1,289 -670 -464 -556 -371 -170 -363 440 25 Other U.S. government liabilities4 -28 504 318 130 -270 403 207 -22 26 Other U.S. liabilities reported by U.S. banks -3,479 -2,054 877 -1,717 -1,939 611 -1,425 3,630 27 Other foreign official assets5 2,665 -367 -1,788 -542 -379 -826 -462 -121 28 Change in foreign private assets in the United States (increase, +)3 75,248 84,693 76,935 9,856 16,404 8,984 22,028 29,521 29 U.S. bank-reported liabilities 42,154 64,263 51,295 2,823 10,588 919 15,068 24,720 30 U.S. nonbank-reported liabilities 942 -3,104 -1,060 20 -2,136 134 942 n.a. 31 Foreign private purchases of U.S. Treasury securities, net 2,982 7,004 8,599 2,257 2,912 3,072 1,011 1,604 32 Foreign purchases of other U.S. securities, net 7,171 6,141 8,587 1,975 2,986 2,628 1,842 1,132 33 Foreign direct investments in the United States, net3 21,998 10,390 9,514 2,781 2,054 2,231 3,165 2,065 34 Allocation of SDRs 1,093 0 0 0 0 0 0 0 35 Discrepancy 24,238 41,390 7,054 14,657 8,845 -634 1,753 -2,911 1,042 -200 802 -1,361 758 37 Statistical discrepancy in recorded data before seasonal adjustment 24,238 41,390 7,054 13,615 9,045 -1,436 3,114 -3,669 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -5,175 -4,965 -1,196 -1,949 -787 16 529 -953 39 Foreign official assets in the United States (increase, +) 5,458 2,668 5,765 1,531 319 1,570 -2,788 6,664 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) 13,581 7,420 -8,591 -1,162 -1,397 -3,433 -2,104 -1,657 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 680 644 209 158 42 30 49 88 1. Seasonal factors are no longer calculated for lines 12 through 41. 4. Primarily associated with military sales contracts and other transactions 2. Data are on an international accounts (IA) basis. Differs from the Census arranged with or through foreign official agencies. basis data, shown in table 3.11, for reasons of coverage and timing; military 5. Consists of investments in U.S. corporate stocks and in debt securities of exports are excluded from merchandise data and are included in line 6. private corporations and state and local governments. 3. Includes reinvested earnings of incorporated affiliates. NOTE. Data are from Bureau of Economic Analysis, Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trade and Reserve and Official Assets A51 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are seasonally adjusted. 1983 1984 IItteemm 11998811 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments 233,677 212,193 200,486 16,582 17,257 17,033 17,063 17,298 18,326 17,212 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 261,305 243,952 258,048 22,714 22,451 24,333 23,115 22,976 26,586 26,147 3 Trade balance -27,628 -31,759 -57,562 -6,132 -5,195 -7,300 -6,052 -5,678 -8,260 -8,935 NOTE. The data through 1981 in this table are reported by the Bureau of Census not covered in Census statistics, and (2) the exclusion of military sales (which are data of a free-alongside-ship (f.a.s.) value basis—that is, value at the port of combined with other military transactions and reported separately in the "service export. Beginning in 1981, foreign trade of the U.S. Virgin Islands is included in account" in table 3.10, line 6). On the import side, additions are made for gold, the Census basis trade data; this adjustment has been made for all data shown in ship purchases, imports of electricity from Canada, and other transactions; the table. Beginning with 1982 data, the value of imports are on a customs military payments are excluded and shown separately as indicated above. valuation basis. The Census basis data differ from merchandise trade data shown in table 3.10, SOURCE. FT900 "Summary of U.S. Export and Import Merchandise Trade" U.S. International Transactions Summary, for reasons of coverage and timing. On (Department of Commerce, Bureau of the Census). the export side, the largest adjustments are: (1) the addition of exports to Canada 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1983 1984 TTyyppee 11998800 11998811 11998822 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Total 26,756 30,075 33,958 33,066 33,273 33,655 33,747 33,887 34,823 34,978 2 Gold stock, including Exchange Stabilization Fund1 11,160 11,151 11,148 11,128 11,126 11,123 11,121 11,120 11,116 11,111 3 Special drawing rights2 3 2,610 4,095 5,250 5,628 5,641 5,735 5,025 5,050 5,320 5,341 4 Reserve position in International Monetary Fund2 2,852 5,055 7,348 9,399 9,554 9,883 11,312 11,422 11,710 11,709 5 Foreign currencies4 5 10,134 9,774 10,212 6,911 6,952 6,914 6,289 6,295' 6,677 6,817 1. Gold held under earmark at Federal Reserve Banks for foreign and interna- 3. Includes allocations by the International Monetary Fund of SDRs as follows: tional 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. 1, 3.13. Gold stock is valued at $42.22 per fine troy ounce. 1972; $1,139 million on Jan. 1, 1979; $1,152 million on Jan. 1, 1980; and $1,093 2. Beginning July 1974, the IMF adopted a technique for valuing the SDR based million on Jan. 1, 1981; plus transactions in SDRs. on a weighted average of exchange rates for the currencies of member countries. 4. Valued at current market exchange rates. From July 1974 through December 1980, 16 currencies were used; from January 5. Includes U.S. government securities held under repurchase agreement 1981, 5 currencies have been used. The U.S. SDR holdings and reserve position in against receipt of foreign currencies in 1979 and 1980. the IMF also are valued on this basis beginning July 1974. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS Millions of dollars, end of period 1983 1984 AAsssseettss 11998800 11998811 11998822 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Deposits 411 505 328 297 339 360 190 251 246 222 Assets held in custody 2 U.S. Treasury securities' 102,417 104,680 112,544 113,498 116,327 116,398 117,670 117,076 119,499 116,768 3 Earmarked gold2 14,965 14,804 14,716 14,621 14,550 14,475 14,414 14,347 14,291 14,278 1. Marketable U.S. Treasury bills, notes, and bonds; and nonmarketable U.S. NOTE. Excludes deposits and U.S. Treasury securities held for international Treasury securities payable in dollars and in foreign currencies. and regional organizations. Earmarked gold is gold held for foreign and interna- 2. Earmarked gold is valued at $42.22 per fine troy ounce. tional accounts and is not included in the gold stock of the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 International Statistics • April 1984 3.14 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data Millions of dollars, end of period 1983 1984 lyoZ July Aug. Sept. Oct. Nov. Dec. Jan.? All foreign countries 1 Total, all currencies 401,135 462,847 469,432 455,850 452,5% 460,261 458,894 463,467 475,683 453,900 2 Claims on United States 28,460 63,743 91,768 96,963 99,484 101,356 102,497 109,511 114,902 110,969 3 Parent bank 20,202 43,267 61,629 67,731 67,137 65,561 69,655 75,521r 81,004 76,430 4 Other 8,258 20,476 30,139 29,232 32,347 35,795 32,842 33,99C 33,898 34,539 5 Claims on foreigners 354,960 378,954 358,258 340,994 335,036 340,413 337,848 335,518 342,162 323,890 6 Other branches of parent bank 77,019 87,821 91,143 84,872 84,572 89,304 87,543 89,447 92,682 86,662 7 Banks 146,448 150,763 133,640 123,536 119,288 120,177 117,631 114,495 117,538 106,885 8 Public borrowers 28,033 28,197 24,090 25,876 25,147 24,982 25,061 24,256 24,450 23,943 9 Nonbank foreigners 103,460 112,173 109,385 106,710 106,029 105,950 107,613 107,320 107,492 106,400 10 Other assets 17,715 20,150 19,406 17,893 18,076 18,492 18,549 18,438 18,619 19,041 11 Total payable in U.S. dollars 291,798 350,735 361,712 350,507 348,330 354,595 351,483 358,204 370,557 348,380 12 Claims on United States 27,191 62,142 90,048 94,549 %,995 98,510 99.938 107,015 112,748 108,866 13 Parent bank 19,896 42,721 60,973 66,303 65,711 63,716 68.126 73,999' 79,866 75,283 14 Other 7,295 19,421 29,075 28,246 31,284 34,794 31,812 33,016' 32,882 33,583 15 Claims on foreigners 255,391 276,937 259,646 245,188 241,063 245,541 241,221 240,768 247,224 228,845 16 Other branches of parent bank 58,541 69,398 73,512 67,163 66,609 71,273 69,324 71,451 75,153 68,802 17 Banks 117,342 122,110 106,338 97,194 93,806 95,113 92,048 90,143 93,236 82,561 18 Public borrowers 23,491 22,877 18,374 19,108 18,804 18,455 18.644 17,752 17,907 17,670 19 Nonbank foreigners 56,017 62,552 61,422 61,723 61,844 60,700 61,205 61,422 60,928 59,812 20 Other assets 9,216 11,656 12,018 10,770 10,272 10,544 10,324 10,421 10,585 10,669 United Kingdom 21 Total, all currencies 144,717 157,229 161,067 153,209 154,865 156,048 156,803 155,964 158,807 155,016 22 Claims on United States 7,509 11,823 27,354 26,012 29,722 28,947 30,853 32,352 34,405 35,634 23 Parent bank 5,275 7,885 23,017 20,849 22,169 20,816 25,507 26,872' 29,111 29,759 24 Other 2,234 3,938 4,337 5,163 7,553 8,131 5,346 5,480' 5,294 5,875 25 Claims on foreigners 131,142 138,888 127,734 121,757 119,672 121,518 120,660 118,275 119,398 114,083 26 Other branches of parent bank 34,760 41,367 37,000 35,632 35,555 36,382 36,556 35,642 36,565 34,638 27 Banks 58,741 56,315 50.767 46,643 44,303 45,451 43,888 42,683 43,362 40,126 28 Public borrowers 6,688 7,490 6,240 6,440 6,342 6,274 6,280 6,307 5,988 6,056 29 Nonbank foreigners 30,953 33,716 33,727 33,042 33,472 33,411 33,936 33,643 33,483 33,263 30 Other assets 6,066 6,518 5,979 5,440 5,471 5,583 5,290 5,337 5,004 5,299 31 Total payable in U.S. dollars 99,699 115,188 123,740 116,526 119,377 121,238 121,817 121,744 126,087 121,115 32 Claims on United States 7,116 11,246 26,761 25,180 28,905 27,837 30,095 31,671 33,728 34,917 33 Parent bank 5,229 7,721 22,756 20,434 21,720 20,036 25,084 26,537' 28,756 29,414 34 Other 1,887 3,525 4,005 4,746 7,185 7,801 5,011 5,134' 4,972 5,503 35 Claims on foreigners 89,723 99,850 92,228 87,450 86,868 89,530 88,253 86,614 89,035 82,957 36 Other branches of parent bank 28,268 35,439 31,648 30,122 30,053 31,409 31,414 30,371 31,838 29,537 37 Banks 42,073 40,703 36,717 33,159 31,718 33,237 31,796 31,158 32,198 28,756 38 Public borrowers 4,911 5,595 4,329 4,420 4,410 4,329 4,346 4,377 4,284 4,349 39 Nonbank foreigners 14,471 18,113 19,534 19,749 20,687 20,555 20,697 20,708 20,715 20,315 40 Other assets 2,860 4,092 4,751 3,8% 3,604 3,871 3,469 3,459 3,324 3,241 Bahamas and Caymans 41 Total, all currencies 123,837 149,108 145,156 142,432 139,699 143,148 141,311 147,257 151,463 141,293 42 Claims on United States 17,751 46,546 59,403 66,032 63,923 66,547 66,253 71,363 74,702 70,459 43 Parent bank 12,631 31,643 34,653 42,946 40,308 40,152 40,105 44,414 47,703 43,174 44 Other 5,120 14,903 24,750 23,086 23,615 26,395 26,148 26,949 26,999 27,285 45 Claims on foreigners 101,926 98,057 81,450 72,683 72,021 72,826 71,268 71,995 72,814 66,916 46 Other branches of parent bank 13,342 12,951 18,720 15,568 15,354 16,789 15,817 17,993 17,343 15,989 47 Banks 54,861 55,151 42,699 37,381 37,350 36,609 35,964 35,353 36,764 32,451 48 Public borrowers 12,577 10,010 6,413 6,538 6,404 6,461 6,643 5,890 6,084 5,992 49 Nonbank foreigners 21,146 19,945 13,618 13,196 12,913 12,967 12,844 12,759 12,623 12,484 50 Other assets 4,160 4,505 4,303 3,717 3,755 3,775 3,790 3,899 3,947 3,918 51 Total payable in U.S. dollars 117,654 143,743 139,605 136,301 133,233 136,851 134,684 140,841 144,969 134,881 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Overseas Branches A53 3.14 Continued 1983 1984 LLiiaabbiilliittyy aaccccoouunntt 11998800 July Aug. Sept. Oct. Nov. Dec. Jan .P All foreign countries 52 Total, all currencies 401,135 462,847 469,432 455,850 452,596 460,261 458,894 463,467 475,683 453,900 53 To United States 91,079 137,767 178,918 187,713 183,864 182,664 185,599 184,257 187,243 179,305 54 Parent bank 39,286 56,344 75,561 81,752 77,556 78,027 85,028' 79,574' 80,256 76,848 55 Other banks in United States 14,473 19,197 33,368 31,489 29,880 30,982 27,094' 26,264' 29,157 26,725 56 Nonbanks 37,275 62,226 69,989 74,472 76,428 73,655 73,477' 78,419' 77,830 75,732 57 To foreigners 295,411 305,630 270,678 249,823 250,563 259,449 254,634 260,280 269,293 255,728 58 Other branches of parent bank 75,773 86,396 90,148 83,911 82,871 88,055 85,566 88,346 90,860 81,983 59 Banks 132,116 124,906 96,739 84,649 85,433 86,550 84,533 88,023 92,903 86,436 60 Official institutions 32,473 25,997 19,614 18,287 17,830 20,513 19,403 18,377 18,801 19,507 61 Nonbank foreigners 55,049 68,331 64,177 62,976 64,429 64,331 65,132 65,534 66,729 67,802 62 Other liabilities 14,690 19,450 19,836 18,314 18,169 18,148 18,661 18,930 19,147 18,867 63 Total payable in U.S. dollars 303,281 364,447 379,003 368,650 365,583 373,060 369,935 374,425 387,376 365,082 64 To United States 88,157 134,700 175,431 184,215 180,173 178,889 181,692 180,260 183,516 175,486 65 Parent bank 37,528 54,492 73,235 79,496 75,244 75,742 82,660 77,126 78,042 74,503 66 Other banks in United States 14,203 18,883 33,003 31,115 29,334 30,415 26,538' 25,773' 28,623 26,224 67 Nonbanks 36,426 61,325 69,193 73,604 75,595 72,732 72,494' 77,361' 76,851 74,759 68 To foreigners 206,883 217,602 192,348 174,836 175,616 184,354 178,895 184,223 194,131 180,558 69 Other branches of parent bank 58,172 69,299 72,878 67,228 65,679 70,649 68,064 71,011 73,867 64,926 70 Banks 87,497 79,594 57,355 48,062 49,522 50,862 48,264 52,072 57,116 50,490 71 Official institutions 24,697 20,288 15,055 13,517 13,029 15,400 14,630 13,453 13,852 14,686 72 Nonbank foreigners 36,517 48,421 47,060 46,029 47,386 47,443 47,937 47,687 49,296 50,456 73 Other liabilities 8,241 12,145 11,224 9,599 9,794 9,817 9,348 9,942 9,729 9,038 United Kingdom 74 Total, all currencies 144,717 157,229 161,067 153,209 154,865 156,048 156,803 155,964 158,807 155,016 75 To United States 21,785 38,022 53,954 56,959 58,347 56,924 60,903 57,095 55,799 55,623 76 Parent bank 4,225 5,444 13,091 15,011 16,145 16,852 21,385 17,312 14,021 17,080 77 Other banks in United States 5,716 7,502 12,205 12,993 12,462 12,174 10,751 10,176 11,328 10,640 78 Nonbanks 11,844 25,076 28,658 28,955 29,740 27,898 28,767 29,607 30,450 27,903 79 To foreigners 117,438 112,255 99,567 89,198 89,458 92,122 88,727 91,714 95,944 92,268 80 Other branches of parent bank 15,384 16,545 18,361 17,544 17,595 19,365 18,288 18,841 19,045 18,526 81 Banks 56,262 51,336 44,020 37,192 37,571 37,122 35,847 38,888 41,714 38,812 8? Official institutions 21,412 16,517 11,504 10,146 9,588 11,448 10,611 10,071 10.151 10,530 83 Nonbank foreigners 24,380 27,857 25,682 24,316 24,704 24,187 23,981 23,914 25,034 24,400 84 Other liabilities 5,494 6,952 7,546 7,052 7,060 7,002 7,173 7,155 7,064 7,125 85 Total payable in U.S. dollars 103,440 120,277 130,261 123,265 125,656 127,868 128,600 127,234 131,242 126,907 86 To United States 21,080 37,332 53,029 56,081 57,359 55,931 59,824 55,907 54,691 54,540 87 Parent bank 4,078 5,350 12,814 14,812 15,829 16,673 21,145 17,094 13,839 16,843 88 Other banks in United States 5,626 7,249 12,026 12,833 12,223 11,886 10,523 9,880 11,044 10,406 89 Nonbanks 11,376 24,733 28,189 28,436 29,307 27,372 28,156 28,933 29,808 27,291 90 To foreigners 79,636 79,034 73,477 63,818 64,801 68,252 65,347 68,011 73,376 69,557 91 Other branches of parent bank 10,474 12,048 14,300 13,386 13,421 15,166 14,542 15,044 15,410 14,758 9? Banks 35,388 32,298 28,810 23,453 24,447 24,478 23,136 26,343 29,410 26,386 93 Official institutions 17,024 13,612 9,668 8,065 7,630 9,381 8,742 8,029 8,279 8,594 94 Nonbank foreigners 16,750 21,076 20,699 18,914 19,303 19,227 18,927 18,595 20,277 19,819 95 Other liabilities 2,724 3,911 3,755 3,366 3,496 3,685 3,429 3,316 3,175 2,850 Bahamas and Caymans 96 Total, all currencies 123,837 149,108 145,156 142,432 139,699 143,148 141,311 147,257 151,463 141,293 97 To United States 59,666 85,759 104,425 108,623 104,470 104,666 104,198 106,688 110,727 103,943 98 Parent bank 28,181 39,451 47,081 50,777 46,491 45,493 48,235' 46,676' 50,187 44,604 99 Other banks in United States 7,379 10,474 18,466 15,494 14,560 16,191 14,322' 14,117' 15,693 14,398 100 Nonbanks 24,106 35,834 38,878 42,352 43,419 42,982 41,641' 45,895' 44,847 44,941 101 To foreigners 61,218 60,012 38,274 31,560 32,875 36,163 34,734 38,109 38,397 35,110 10? Other branches of parent bank 17,040 20,641 15,796 12,262 12,778 14,698 14,196 17,075 15,123 12,253 103 Banks 29,895 23,202 10,166 8,012 8,737 9,506 9,059 9,618 11,882 9,877 104 Official institutions 4,361 3,498 1,967 2,101 2,170 2,237 1,976 1,624 1,916 2,309 105 Nonbank foreigners 9,922 12,671 10,345 9,185 9,190 9,722 9,503 9,792 9,476 10,671 106 Other liabilities 2,953 3,337 2,457 2,249 2,354 2,319 2,379 2,460 2,339 2,240 107 Total payable in U.S. dollars 119,657 145,284 141,908 139,246 136,227 139,854 137,513 143,603 147,657 137,428 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • April 1984 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1983 1984 IItteemm 11998811 11998822 Aug. Sept. Oct. Nov. Dec/ Jan. Feb.'' 1 Total1 169,735 172,718 172,799 171,550 173,272 173,915 177,906 176,316 176,826 By type 2 Liabilities reported by banks in the United States2 26,737 24,989 22,239 21,914 22,057 22,816 25,422 22,829 23,133 3 U.S. Treasury bills and certificates3 52,389 46,658 50,965 50,374 51,618 52,558 54,341 55,327 56,084 U.S. Treasury bonds and notes 4 Marketable 53,186 67,733 69,295 69,300 69,769 68,995 68,594 69,106 69,151 5 Nonmarketable4 11,791 8,750 7,950 7,950 7,950 7,250 7,250 7,250 6,600 6 U.S. securities other than U.S. Treasury securities5 25,632 24,588 22,350 22,012 21,878 22,2% 22,299 21,804 21,858 By area 7 Western Europe1 65,699 61,298 64,427 63,845 64,835 65,588 67,608 66,113 67,852 8 Canada 2,403 2,070 2,755 2,712 2,816 2,670 2,443 2,516 2,334 9 Latin America and Caribbean 6,953 6,057 5,676 5,501 5,629 6,468 6,217 6,504 7,600 10 Asia 91,607 96,034 93,183 92,876 92,415 91,566 92,589 92,286 90,626 11 Africa 1,829 1,350 1,173 1,1% 1,023 798 958 1,051 1,013 12 Other countries6 1,244 5,909 5,585 5,420 6,554 6,825 8,092 7,846 7,401 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, commer- agencies, and U.S. corporate stocks and bonds. cial paper, negotiable time certificates of deposit, and borrowings under repur- 6. Includes countries in Oceania and Eastern Europe. chase agreements. 3. Includes nonmarketable certificates of indebtedness (including those pay- NOTE. Based on Treasury Department data and on data reported to the able in foreign currencies through 1974) and Treasury bills issued to official Treasury Department by banks (including Federal Reserve Banks) and securities institutions of foreign countries. dealers in the United States. 4. Excludes notes issued to foreign official nonreserve agencies. Includes bonds and notes payable in foreign currencies. 3.16 LIABILITIES TO AND CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in Foreign Currencies Millions of dollars, end of period 1983 IItteemm 11998800 11998811 11998822 Mar. June Sept. Dec. 1 Banks' own liabilities 3,748 3,523 4,844 5,075 5,867 5,943 5,205 2 Banks' own claims 4,206 4,980 7,707 8,097 7,851 7,919 7,256 3 Deposits 2,507 3,398 4,251 3,725 3,911 3,063 2,838 4 Other claims 1,699 1,582 3,456 4,372 3,940 4,856 4,418 5 Claims of banks' domestic customers' 962 971 676 637 684 717 1,059 1. Assets owned by customers of the reporting bank located in the United NOTE. Data on claims exclude foreign currencies held by U.S. monetary States that represent claims on foreigners held by reporting banks for the accounts authorities, of their domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A55 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States Payable in U.S. dollars Millions of dollars, end of period 1983 1984 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998800 11998811AA 11998822 Aug. Sept. Oct. Nov. Dec/ Jan. Feb .P 1 AH foreigners 205,297 243,889 307,056 334,931 337,910 337,766 351,499 371,775 358,626 367,967 2 Banks' own liabilities 124,791 163,817 227,089 248,250 251,421 248,888 262,343 281,193 264,621 270,990 3 Demand deposits 23,462 19,631 15,889 15,672 16,375 17,094 17,198 17,594 16,142 16,625 4 Time deposits' 15,076 29,039 68,035 77,888 81,091 80,468 84,308 90,090 87,644 91,036 5 Other2 17,583 17,647 23,946 23,905 24,956 22,565 23,149 26,100 23,178 23,964 6 Own foreign offices3 68,670 97,500 119,219 130,785 129,000 128,760 137,688 147,408 137,658 139,365 1 Banks' custody liabilities4 80,506 80,072 79,967 86,682 8866,,448888 88,878 89,156 90,582 94,006 96,977 8 U.S. Treasury bills and certificates5 57,595 55,315 55,628 63,939 6644,,006622 65,735 66,746 68,669 71,083 7744,,224488 9 Other negotiable and readily transferable instruments6 20,079 18,788 20,636 17,977 17,292 17,182 17,721 17,529 18,061 17,843 10 Other 2,832 5,970 3,702 4,765 5,135 5,961 4,690 4,385 4,862 4,886 11 Nonmonetary international and regional organizations7 2,344 2,721 4,922 5,555 5,308 4,619 6,321 5,957 4,759 6,781 12 Banks' own liabilities 444 638 1,909 3,433 3,024 3,294 4,897 4,632 2,867 2,267 13 Demand deposits 146 262 106 325 252 452 437 297 271 347 14 Time deposits' 85 58 1,664 2,507 2,168 2,487 4,079 3,885 2,235 1,611 15 Other2 212 318 139 601 605 355 381 449 361 310 16 Banks' custody liabilities4 1,900 2,083 3,013 2,121 2,284 1,325 1,424 1,325 1,892 4,514 17 U.S. Treasury bills and certificates 254 541 1,621 1,294 1,442 441 484 463 1,045 33,,441166 18 Other negotiable and readily transferable instruments6 1,646 1,542 1,392 828 842 884 939 862 847 1,098 19 Other 0 0 0 0 0 0 0 0 0 0 20 Official institutions8 86,624 79,126 71,647 73,205 72,289 73,675 75,374 79,764 78,156 79,217 21 Banks' own liabilities 17,826 17,109 16,640 16,014 16,147 16,532 16,673 19,315 16,549 17,476 22 Demand deposits 3,771 2,564 1,899 1,685 1,930 1,818 2,023 1,837 1,777 1,663 23 Time deposits' 3,612 4,230 5,528 5,990 6,185 6,657 6,709 7,294 7,328 7,578 24 Other2 10,443 10,315 9,212 8,340 8,033 8,057 7,940 10,184 7,444 8,235 25 Banks' custody liabilities4 68,798 62,018 55,008 57,191 56,142 57,144 58,701 60,448 61,607 61,741 26 U.S. Treasury bills and certificates5 56,243 52,389 46,658 50,965 50,374 51,618 52,558 54,341 55,327 56,084 27 Other negotiable and readily transferable instruments6 12,501 9,581 8,321 6,186 5,735 5,489 6,115 6,082 6,257 5,623 28 Other 54 47 28 39 32 36 28 25 23 34 29 Banks' 96,415 136,008 185,881 203,153 205,879 203,637 214,169 229,034 218,004 221,837 30 Banks' own liabilities 90,456 124,312 169,449 182,700 184,811 181,696 192,731 207,494 195,429 199,324 31 Unaffiliated foreign banks 21,786 26,812 50,230 51,914 55,811 52,936 55,043 60,086 57,772 59,959 32 Demand deposits 14,188 11,614 8,675 8,302 8,618 9,102 8,770 8,756 8,150 8,384 33 Time deposits' 1,703 8,720 28,386 29,300 31,468 30,329 32,265 36,726 34,980 37,040 34 Other2 5,895 6,477 13,169 14,312 15,725 13,505 14,008 14,604 14,642 14,535 35 Own foreign offices3 68,670 97,500 119,219 130,785 129,000 128,760 137,688 147,408 137,658 139,365 36 Banks' custody liabilities4 5,959 11,696 16,432 20,454 21,069 21,941 21,438 21,540 22,575 22,513 37 U.S. Treasury bills and certificates 623 1,685 5,809 9,028 9,440 1100,,003366 9,967 10,178 1100,,777766 1100,,775500 38 Other negotiable and readily transferable instruments6 2,748 4,400 7,857 7,581 7,553 7,542 7,251 7,485 7,414 7,395 39 Other 2,588 5,611 2,766 3,845 4,075 4,363 4,221 3,877 4,384 4,368 40 Other foreigners 19,914 26,035 44,606 53,018 54,433 55,834 55,635 57,021 57,707 60,132 41 Banks' own liabilities 16,065 21,759 39,092 46,103 47,439 47,366 48,042 49,751 49,775 51,923 42 Demand deposits 5,356 5,191 5,209 5,360 5,575 5,723 5,968 6,703 5,944 6,231 43 Time deposits 9,676 16,030 32,457 40,091 41,270 40,995 41,255 42,185 43,101 4444,,880077 44 Other2 1,033 537 1,426 652 594 648 819 863 730 888844 45 Banks' custody liabilities4 3,849 4,276 5,514 6,916 6,995 8,468 7,593 7,269 7,932 8,209 46 U.S. Treasury bills and certificates 474 699 1,540 2,652 2,805 3,640 3,737 3,686 33,,993355 33,,999988 47 Other negotiable and readily transferable instruments6 3,185 3,265 3,065 3,383 3,162 3,267 3,415 3,100 3,542 3,727 48 Other 190 312 908 881 1,028 1,562 441 483 455 484 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 10,745 10,747 14,307 10,720 10,336 9,995 10,385 10,407 10,307 9,380 1. Excludes negotiable time certificates of deposit, which are included in 6. Principally bankers acceptances, commercial paper, and negotiable time "Other negotiable and readily transferable instruments." certificates of deposit. 2. Includes borrowing under repurchase agreements. 7. Principally the International Bank for Reconstruction and Development, and 3. U.S. banks: includes amounts due to own foreign branches and foreign the Inter-American and Asian Development Banks. subsidiaries consolidated in "Consolidated Report of Condition" filed with bank 8. Foreign central banks and foreign central governments, and the Bank for regulatory agencies. Agencies, branches, and majority-owned subsidiaries of International Settlements. foreign banks: principally amounts due to head office or parent foreign bank, and 9. Excludes central banks, which are included in "Official institutions." foreign branches, agencies or wholly owned subsidiaries of head office or parent • Liabilities and claims of banks in the United States were increased, foreign bank. beginning in December 1981, by the shift from foreign branches to international 4. Financial claims on residents of the United States, other than long-term banking facilities in the United States of liabilities to, and claims on, foreign securities, held by or through reporting banks. residents. 5. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official institutions of foreign countries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • April 1984 3.17 Continued 1983 1984 AArreeaa aanndd ccoouunnttrryy 11998800 11998811 •• 11998822 Aug. Sept. Oct. Nov. Dec. Jan. Feb.P 1 Total 205,297 243,889 307,056 334,931 337,910 337,766 351,499 371,775' 358,626 367,967 2 Foreign countries 202,953 241,168 302,134 329,377 332,601 333,147 345,178 365,818' 353,867 361,186 3 Europe : 90,897 91,275 117,756 123,607 125,850 126,694 130,091 138,006' 134,858 140,227 4 Austria 523 596 519 556 659 570 641 585 745 756 5 Belgium-Luxembourg 4,019 4,117 2,517 3,116 2,795 2,853 2,465 2,709 2,979 3,176 6 Denmark 497 333 509 573 593 544 538 466 372 385 7 Finland 455 296 748 459 373 372 375 531 298 400 8 France 12,125 8,486 8,171 8,488 8,827 8,638 8,083 9,441' 8,117 10,094 9 Germany 9,973 7,645 5,351 3,537 3,438 4,307 4,337 3,599' 3,820 4,582 10 Greece 670 463 537 636 604 595 544 520 513 512 11 Italy 7,572 7,267 5,626 7,277 6,931 7,703 7,819 8,459 7,622 7,640 12 Netherlands 2,441 2,823 3,362 3,633 3,892 3,735 3,701 4,290 4,008 4,200 13 Norway 1,344 1,457 1,567 1,044 1,457 1,072 1,531 1,673 1,481 1,452 14 Portugal 374 354 388 315 302 297 306 373 377 351 15 Spain 1,500 916 1,405 1,585 1,678 1,592 1,534 1,603' 1,645 1,663 16 Sweden 1,737 1,545 1,390 1,204 1,337 1,489 1,652 1,799 1,843 1,767 17 Switzerland 16,689 18,716 29,066 29,877 29,938 30,725 30,482 32,117' 32,008 32,220 18 Turkey 242 518 296 315 333 277 319 467 334 400 19 United Kingdom 22,680 28,286 48,172 53,768 55,602 54,746 58,007 60,658' 61,772 64,538 20 Yugoslavia 681 375 499 462 506 464 552 562 505 477 21 Other Western Europe1 6,939 6,541 7,006 6,347 6,038 6,102 6,660 7,493' 5,872 5,015 22 U.S.S.R 68 49 50 31 23 37 27 65 62 94 23 Other Eastern Europe2 370 493 576 384 525 576 518 596' 485 506 24 Canada 10,031 10,250 12,232 17,918 16,470 16,325 16,349 16,025 16,268 17,681 25 Latin America and Caribbean 53,170 85,223 114,163 126,631 127,077 127,237 135,056 142,583' 135,624 137,365 26 Argentina 2,132 2,445 3,578 4,249 4,148 4,018 4,377 4,011 4,303 4,537 27 Bahamas 16,381 34,856 44,744 51,992 49,859 51,180 53,551 55,870' 52,306 52,114 28 Bermuda 670 765 1,572 2,849 2,833 2,632 2,582 2,328' 2,745 3,163 29 Brazil 1,216 1,568 2,014 3,046 3,406 3,818 4,150 3,364 2,997 3,449 30 British West Indies 12,766 17,794 26,381 26,967 28,442 27,410 31,695 36,781' 32,489 32,211 31 Chile 460 664 1,626 1,472 1,613 1,697 1,783 1,842 1,811 1,934 32 Colombia 3,077 2,993 2,594 1,674 1,611 1,617 1,645 11,,668899 1,584 1,824 33 Cuba 6 9 9 12 10 10 10 88 9 16 34 Ecuador 371 434 455 601 670 825 1,003 1,047 828 825 35 Guatemala 367 479 670 718 758 750 766 788 800 816 36 Jamaica 97 87 126 106 109 105 234 109' 113 131 37 Mexico 4,547 7,235 8,377 9,445 9,697 9,449 9,463 10,389' 10,994 10,689 38 Netherlands Antilles 413 3,182 3,597 3,486 3,581 3,858 3,941 3,879' 3,773 4,501 39 Panama 4,718 4,857 4,805 5,934 6,079 5,902 5,944 5,924' 5,574 5,540 40 Peru 403 694 1,147 1,129 1,203 1,049 1,090 1,166 1,130 1,140 41 Uruguay 254 367 759 1,033 1,116 1,202 1,173 1,232' 1,278 1,317 42 Venezuela 3,170 4,245 8,417 8,587 8,382 8,202 8,024 8,603' 9,313 9,436 43 Other Latin America and Caribbean 2,123 2,548 3,291 3,331 3,561 3,513 3,626 3,551' 3,576 3,722 44 Asia 42,420 49,822 48,716 52,649 54,583 53,370 54,121 5588,,335511'' 5566,,222211 5555,,339911 China 45 Mainland 49 158 203 176 190 216 183 249 249 168 46 Taiwan 1,662 2,082 2,761 4,086 3,852 3,992 4,063 3,997 4,264 4,294 47 Hong Kong 2,548 3,950 4,465 5,614 6,582 6,507 6,971 6,610 6,201 5,886 48 India 416 385 433 528 712 830 725 464 670 749 49 Indonesia 730 640 857 839 622 871 661 997 1,093 859 50 Israel 883 592 606 823 848 812 808 1,722 850 728 51 Japan 16,281 20,750 16,078 16,922 17,418 17,103 17,138 18,079' 17,250 17,613 52 Korea 1,528 2,013 1,692 1,553 1,478 1,353 1,591 1,648 1,614 1,542 53 Philippines 919 874 770 933 1,181 747 1,012 1,234 1,235 1,280 54 Thailand 464 534 629 531 581 522 569 716 776 622 55 Middle-East oil-exporting countries3 14,453 12,992 13,433 11,764 12,661 12,410 12,492 12,960' 12,491 11,667 56 Other Asia 2,487 4,853 6,789 8,877 8,458 8,007 7,907 9,676' 9,528 9,982 57 Africa 5,187 3,180 3,124 2,853 3,132 2,845 2,694 2,800' 2,917 3,070 58 Egypt 485 360 432 465 488 576 589 645 572 568 59 Morocco 33 32 81 48 84 73 96 84 109 138 60 South Africa 288 420 292 452 520 394 389 449 486 502 61 Zaire 57 26 23 29 34 43 32 87 61 66 62 Oil-exporting countries4 3,540 1,395 1,280 934 963 736 679 620 869 839 63 Other Africa 783 946 1,016 926 1,042 1,023 909 917' 821 957 64 Other countries 1,247 1,419 6,143 5,719 5,490 6,675 6,868 8,053' 7,979 7,452 65 Australia 950 1,223 5,904 5,512 5,284 6,461 6,666 7,857 7,742 7,197 66 All other 297 196 239 208 206 214 202 196' 237 255 67 Nonmonetary international and regional organizations 2,344 2,721 4,922 5,555 5,308 4,619 6,321 5,957' 4,759 6,781 68 International 1,157 1,661 4,049 4,861 4,674 3,944 5,556 5,273' 4,174 6,139 69 Latin American regional 890 710 517 441 445 437 415 419 433 457 70 Other regional5 296 350 357 252 189 238 350 265 152 186 1. Includes the Bank for International Settlements. Beginning April 1978, also 5. Asian, African, Middle Eastern, and European regional organizations, includes Eastern European countries not listed in line 23. except the Bank for International Settlements, which is included in "Other 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German Western Europe." Democratic Republic, Hungary, Poland, and Romania. A Liabilities and claims of banks in the United States were increased, beginning 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and in December 1981, by the shift from foreign branches to international banking United Arab Emirates (Trucial States). facilities in the United States of liabilities to, and claims on, foreign residents. 4. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A57 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1983 1984 AArreeaa aanndd ccoouunnttrryy 11998800 11998811AA 11998822 Aug. Sept. Oct. Nov. Dec.' Jan. Feb.p 1 Total 172,592 251,589 355,705 372,387 375,536 372,790 374,597' 388,699 371,183 376,043 2 Foreign countries 172,514 251,533 355,636 372,068 374,939 372,730 374,527' 388,535 371,119 375,879 3 32,108 49,262 85,584 87,996 90,522 88,718 89,976' 91,148 89,485 91,161 4 Austria 236 121 229 338 351 334 395 401 354 416 5 Belgium-Luxembourg 1,621 2,849 5,138 5,898 5,650 5,503 5,548 5,667 5,900 6,146 6 Denmark 127 187 554 1,124 1,131 1,103 1,272 1,295 1,296 1,240 7 460 546 990 637 697 789 822 1,044 945 972 8 2,958 4,127 7,251 8,589 7,869 7,390 7,885 8,769 7,979 8,333 9 Germany 948 940 1,876 1,168 1,428 1,095 1,256 1,294 1,058 1,009 in 256 333 452 375 408 369 412 476 508 549 n Italy 3,364 5,240 7,560 7,412 7,038 7,686 8,432 9,256 7,864 7,826 l? Netherlands 575 682 1,425 1,048 1,189 1,071 1,390 1,302 1,407 1,324 n Norway 227 384 572 634 550 575 590 690 652 648 14 Portugal 331 529 950 848 861 893 891 939 954 944 11 993 2,095 3,744 3,373 3,389 3,128 3,634 3,630 3,381 3,304 16 Sweden 783 1,205 3,038 2,836 3,081 3,059 3,249' 3,378 3,373 3,316 17 Switzerland 1,446 2,213 1,639 1,630 1,765 1,579 2,112 1,856 1,452 1,300 18 Turkey 145 424 560 594 616 660 693 812 795 880 19 United Kingdom 14,917 23,849 45,781 47,863 50,780 49,841 47,607' 46,372 47,621 49,040 70 Yugoslavia 853 1,225 1,430 1,351 1,369 1,468 1,582 1,694 1,718 1,704 21 Other Western Europe1 179 211 368 406 529 394 426' 477 493 547 ?? U.S.S.R 281 377 263 232 215 206 176 192 163 169 23 Other Eastern Europe2 1,410 1,725 1,762 1,640 1,606 1,575 1,603' 1,603 1,573 1,494 24 Canada 4,810 9,193 13,678 17,501 16,525 15,885 16,379' 16,330 15,874 15,964 71 Latin America and Caribbean 92,992 138,347 187,969 195,281 194,391 195,109 197,629' 203,827 193,913 197,144 76 Argentina 5,689 7,527 10,974 11,334 11,444 11,618 11,899 11,854 11,747 11,753 77 29,419 43,542 56,649 54,687 55,009 56,220 56,071' 58,351 52,287 53,124 78 Bermuda 218 346 603 390 578 489 620' 566 941 450 79 10,496 16,926 23,271 24,231 24,282 24,202 24,532' 24,593 24,821 24,928 30 British West Indies 15,663 21,981 29,101 32,266 30,877 30,796 32,180' 34,921 31,240 32,922 31 Chile 1,951 3,690 5,513 5,404 5,792 5,740 5,860 6,112 6,163 6,285 3? Colombia 1,752 2,018 3,211 3,592 3,665 3,648 3,734 3,785 3,652 3,534 33 Cuba 3 3 3 0 0 3 0 0 0 195 34 1,190 1,531 2,062 2,014 2,020 2,154 2,262 2,353 2,367 2,354 35 Guatemala3 137 124 124 100 112 115 122 129 189 127 36 Jamaica3 36 62 181 204 214 203 210 215 218 219 37 Mexico 12,595 22,439 29,552 33,689 33,740 33,521 33,722' 34,836 34,544 34,655 38 Netherlands Antilles 821 1,076 839 838 897 988 1,164 1,053 971 1,043 39 Panama 4,974 6,794 10,210 10,093 9,189 8,835 8,336 7,857 7,847 8,805 40 Peru 890 1,218 2,357 2,421 2,470 2,434 2,469 2,593 2,467 2,418 41 Uruguay 137 157 686 820 857 883 903 978 982 908 4? Venezuela 5,438 7,069 10,643 11,045 11,037 10,881 11,088 11,343 11,247 11,169 43 Other Latin America and Caribbean 1,583 1,844 1,991 2,152 2,209 2,379 2,457 2,290 2,230 2,255 44 39,078 49,851 60,952 62,585 64,751 63,772 61,212' 67,677 62,575 61,780 China 45 Mainland 195 107 214 179 227 295 249 292 420 337 46 Taiwan 2,469 2,461 2,288 1,644 1,829 1,618 1,574' 1,908 1,812 1,700 47 Hong Kong 2,247 4,132 6,787 8,022 8,704 8,287 8,753' 8,429 8,211 7,391 48 India 142 123 222 275 259 324 305 330 344 253 49 Indonesia 245 352 348 635 688 697 711 805 853 899 50 1,172 1,567 2,029 1,648 1,726 1,780 1,817 1,795 1,557 1,478 51 21,361 26,797 28,379 27,438 28,563 28,239 25,783' 30,573 27,174 27,787 5? 5,697 7,340 9,387 9,696 9,634 9,314 9,629' 9,909 9,489 9,439 53 Philippines 989 1,819 2,625 2,540 2,777 2,369 2,427 2,105 2,408 2,349 54 876 565 643 735 806 831 867 1,021 1,016 1,035 55 Middle East oil-exporting countries4 1,432 1,581 3,087 4,654 4,142 4,630 4,255' 4,939 4,636 4,261 56 Other Asia 2,252 3,009 4,943 5,119 5,395 5,388 4,843' 5,571 4,656 4,850 57 2,377 3,503 5,346 6,527 6,482 6,889 6,808 6,649 6,571 7,153 58 Egypt 151 238 322 529 596 623 670 725 738 709 59 223 284 353 444 444 462 461 440 435 481 60 South Africa 370 1,011 2,012 2,630 2,719 2,582 2,892 2,634 2,684 2,867 61 94 112 57 40 38 38 37 33 29 16 6? Oil-exporting countries5 805 657 801 1,052 964 1,481 1,039 1,091 1,052 1,125 63 Other 734 1,201 1,802 1,832 1,722 1,703 1,709 1,727 1,631 1,955 64 Other countries 1,150 1,376 2,107 2,178 2,267 2,357 2,522 2,904 2,702 2,676 65 859 1,203 1,713 1,637 1,675 1,692 1,899 2,272 2,105 2,008 66 All other 290 172 394 542 593 664 624 632 597 669 67 Nonmonetary international and regional organizations6 78 56 68 319 598 60 70 164 64 164 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 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German "Other Western Europe." Democratic Republic, Hungary, Poland, and Romania. NOTE. Data for period before April 1978 include claims of banks' domestic 3. Included in "Other Latin America and Caribbean" through March 1978. customers on foreigners. 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and A Liabilities and claims of banks in the United States were increased, United Arab Emirates (Trucial States). beginning in December 1981, by the shift from foreign branches to international banking facilities in the United States of liabilities to, and claims on, foreign residents. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • April 1984 3.19 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 1983 1984 TTyyppee ooff ccllaaiimm 11998800 11998811AA 11998822 Aug. Sept. Oct. Nov.' Dec.' Jan. Feb.P 1 Total 111111199999998888888,,,,,,,666666699999998888888 222222288888887777777,,,,,,,555555555555557777777 333333399999996666666,,,,,,,000000011111115555555 444444411111111111111,,,,,,,666666633333339999999 444444422222222222222,,,,,,,666666644444442222222 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss ,, 111111177777772222222,,,,,,,555555599999992222222 222222255555551111111,,,,,,,555555588888889999999 333333355555555555555,,,,,,,777777700000005555555 372,387 333333377777775555555,,,,,,,555555533333336666666 372,790 374,597 333333388888888888888,,,,,,,666666699999999999999 371,183 376,043 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 22222220000000,,,,,,,888888888888882222222 33333331111111,,,,,,,222222266666660000000 44444445555555,,,,,,,444444422222222222222 52,009 55555553333333,,,,,,,666666699999999999999 54,770 56,026 55555557777777,,,,,,,888888833333330000000 57,941 58,530 44 OOwwnn ffoorreeiiggnn ooffffiicceess11 66666665555555,,,,,,,000000088888884444444 99999996666666,,,,,,,666666655555553333333 111111122222227777777,,,,,,,222222299999993333333 137,166 111111133333337777777,,,,,,,333333388888882222222 141,971 137,464 111111144444443333333,,,,,,,999999977777778888888 138,266 140,845 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 55555550000000,,,,,,,111111166666668888888 77777774444444,,,,,,,777777700000004444444 111111122222221111111,,,,,,,333333377777777777777 120,732 111111122222221111111,,,,,,,999999900000000000000 114,390 118,150 111111122222223333333,,,,,,,000000088888880000000 114,447 115,690 66 DDeeppoossiittss 8888888,,,,,,,222222255555554444444 22222223333333,,,,,,,333333388888881111111 44444444444444,,,,,,,222222222222223333333 47,345 44444448888888,,,,,,,111111177777779999999 44,613 44,503 44444446666666,,,,,,,444444400000002222222 42,313 44,393 77 OOtthheerr 44444441111111,,,,,,,999999911111114444444 55555551111111,,,,,,,333333322222222222222 77777777777777,,,,,,,111111155555553333333 73,386 77777773333333,,,,,,,777777722222221111111 69,777 73,647 77777776666666,,,,,,,666666677777778888888 72,134 71,297 88 AAllll ootthheerr ffoorreeiiggnneerrss 33333336666666,,,,,,,444444455555559999999 44444448888888,,,,,,,999999977777772222222 66666661111111,,,,,,,666666611111114444444 62,480 66666662222222,,,,,,,555555555555556666666 61,658 62,956 66666663333333,,,,,,,888888811111111111111 60,529 60,978 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss22 22222226666666,,,,,,,111111100000006666666 33333335555555,,,,,,,999999966666668888888 44444440000000,,,,,,,333333311111110000000 33333336666666,,,,,,,111111100000002222222 33333333333333,,,,,,,999999944444443333333 1100 DDeeppoossiittss 888888888888885555555 1111111,,,,,,,333333377777778888888 2222222,,,,,,,444444499999991111111 2222222,,,,,,,666666655555554444444 2222222,,,,,,,999999966666669999999 11 Negotiable and readily transferable 11111115555555,,,,,,,555555577777774444444 22222226666666,,,,,,,333333355555552222222 33333330000000,,,,,,,777777766666663333333 22222227777777,,,,,,,555555555555550000000 22222225555555,,,,,,,111111100000004444444 12 Outstanding collections and other 9999999,,,,,,,666666644444448888888 8888888,,,,,,,222222233333338888888 7777777,,,,,,,000000055555556666666 5555555,,,,,,,888888899999998888888 5555555,,,,,,,888888877777770000000 13 MEMO: Customer liability on 22222222222222,,,,,,,777777711111114444444 22222229999999,,,,,,,999999955555552222222 33333338888888,,,,,,,111111155555553333333 33333334444444,,,,,,,555555588888885555555 33333337777777,,,,,,,333333322222224444444 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States4 ... 24,468 40,369' 42,186' 42,504' 42,529' 45,160' 47,905' 44,366' 44,788 n.a. 1. U.S. banks: includes amounts due from own foreign branches and foreign 4. Includes demand and time deposits and negotiable and nonnegotiable subsidiaries consolidated in "Consolidated Report of Condition" filed with bank certificates of deposit denominated in U.S. dollars issued by banks abroad. For regulatory agencies. Agencies, branches, and majority-owned subsidiaries of description of changes in data reported by nonbanks, see July 1979 BULLETIN, foreign banks: principally amounts due from head office or parent foreign bank, p. 550. and foreign branches, agencies, or wholly owned subsidiaries of head office or A Liabilities and claims of banks in the United States were increased, parent foreign bank. beginning in December 1981, by the shift from foreign branches to international 2. Assets owned by customers of the reporting bank located in the United banking facilities in the United States of liabilities to, and claims on, foreign States that represent claims on foreigners held by reporting banks for the account residents. of their domestic customers. NOTE. Beginning April 1978, data for banks' own claims are given on a monthly 3. Principally negotiable time certificates of deposit and bankers acceptances. basis, but the data for claims of banks' own domestic customers are available on a quarterly basis only. 3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States Payable in U.S. Dollars Millions of dollars, end of period 1983 Maturity; by borrower and area 1981A June Sept. Dec. 1 Total 106,748 154,590 228,150 230,112 232,126 233,676 243,935 By borrower 2 Maturity of 1 year or less1 82,555 116,394 173,917 174,152 174,570 174,629 176,293 3 Foreign public borrowers 9,974 15,142 21,256 21,768 23,030 25,519 24,310 4 5 Ma A t l u l r o it t y h e o r f f o o v r e e r i g 1 n e y r e s a r1 7 2 2 4 , , 5 1 8 9 1 3 1 3 0 8 1 , , 1 2 9 5 7 2 1 5 5 4 2 , ,6 2 6 3 1 3 1 5 5 5 1 , , 9 3 6 8 0 4 1 5 5 7 1 , ,5 5 4 5 1 6 1 5 4 9 9 , ,1 0 1 4 1 6 1 6 5 7 1 , , 6 9 4 8 2 3 6 7 A Fo ll r e o i t g h n e r p f u o b r l e ic i g b n o e r rs r owers .... 1 14 0 , , 0 1 4 5 1 2 2 1 2 5 , , 6 5 0 89 8 2 3 3 1 , , 1 09 3 5 7 2 3 4 1 , , 8 1 5 0 9 0 2 3 6 1 , , 2 3 0 49 6 2 3 7 1 , , 0 9 7 7 7 0 3 3 3 4 , , 0 6 0 3 6 6 By area Maturity of 1 year or less1 8 Europe 18,715 28,130 50,500 54,109 52,039 52,665 55.550 9 Canada 2,723 4,662 7,642 6,861 7,055 6,443 6,200 10 Latin America and Caribbean 32,034 48,717 73,291 75,122 74,768 76,031 74,287 11 Asia 26,686 31,485 37,578 32,753 35,327 33,442 34.551 1 1 2 3 Ma A A tu l f l r r i i o c ty t a h e o r f 2 over 1 year1 1, 6 75 4 7 0 2,4 9 5 4 7 3 3 1 , , 6 2 8 2 0 6 3 1 , , 8 4 7 3 2 5 3 1 , , 8 5 5 2 4 7 4 1 , , 6 3 5 9 7 1 4 1 , , 2 4 0 9 6 9 14 Europe 5,118 8,100 11,636 11,986 12,238 11,613 13,571 15 Canada 1,448 1,808 1,931 1,924 1,861 1,756 1,857 16 Latin America and Caribbean 15,075 25,209 35,247 35,842 36,671 38,254 43,868 17 Asia 1,865 1,907 3,185 3,573 4,053 4,581 4,859 1 1 8 9 A Af l r lo ic t a h er2 5 1 0 7 7 9 9 27 0 2 0 1, 7 4 4 9 0 4 1 1 , , 4 1 8 5 5 0 1 1 , ,0 66 6 7 6 1 1 , , 1 7 0 34 8 2 1 , , 2 19 9 1 6 1. Remaining time to maturity. • Liabilities and claims of banks in the United States were increased 2. Includes nonmonetary international and regional organizations. beginning in December 1981, by the shift from foreign branches to international banking facilities in the United States of liabilities to, and claims on, foreign residents. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks' Billions of dollars, end of period 1982 Area or country Mar. June Sept. Dec Mar. June Sept. Dec 1 Total 303.9 352.0 415.2 419.6 435.3 438.2 438.6 440.6 436.5 2 G-10 countries and Switzerland 138.4 162.1 175.5 174.5 176.3 175.4 179.7 182.1 176.7 3 Belgium-Luxembourg 11.1 13.0 13.3 13.2 14.1 13.6 13.1 13.7 13.3 4 France 11.7 14.1 15.3 16.0 16.5 15.8 17.1 17.1 17.1 5 Germany 12.2 12.1 12.9 12.5 12.7 12.2 12.7 13.4 12.6 6 Italy 6.4 8.2 9.6 9.0 9.0 9.7 10.3 10.2 10.5 7 Netherlands 4.8 4.4 4.0 4.0 4.1 3.8 3.6 4.3 4.0 8 Sweden 2.4 2.9 3.7 4.1 4.0 4.7 5.0 4.3 4.7 9 Switzerland 4.7 5.0 5.5 5.3 5.1 5.1 5.0 4.6 4.8 10 United Kingdom 56.4 67.4 70.1 70.3 69.4 70.3 72.1 72.9 70.2 11 Canada 6.3 8.4 10.9 11.6 11.4 11.0 10.4 12.4 10.8 12 Japan 22.4 26.5 30.2 28.5 29.9 29.3 30.2 29.2 28.7 13 Other developed countries 19.9 21.6 28.4 30.7 32.1 32.7 33.7 33.9 34.4 14 Austria 2.0 1.9 1.9 2.1 2.1 2.0 1.9 2.1 2.1 15 Denmark 2.2 2.3 2.3 2.5 2.6 2.5 2.4 3.3 3.4 16 Finland 1.2 1.4 1.7 1.6 1.6 1.8 2.2 2.1 2.1 17 Greece 2.4 2.8 2.8 2.9 2.7 2.6 3.0 2.9 2.9 18 Norway 2.3 2.6 3.1 3.2 3.2 3.4 3.3 3.3 3.4 19 Portugal .7 .6 1.1 1.2 1.5 1.6 1.5 1.4 1.4 20 Spain 3.5 4.4 6.6 7.2 7.3 7.7 7.5 7.0 7.2 21 Turkey 1.4 1.5 1.4 1.6 1.5 1.5 1.4 1.5 1.4 22 Other Western Europe 1.4 1.7 2.1 2.1 2.2 2.1 2.3 2.2 2.0 23 South Africa 1.3 1.1 2.8 3.3 3.5 3.6 3.7 3.6 3.9 24 Australia 1.3 1.3 2.5 3.0 4.0 4.0 4.4 4.6 4.5 25 OPEC countries2 22.9 22.7 24.8 25.4 26.4 27.3 27.4 28.5 28.2 26 Ecuador 1.7 2.1 2.2 2.3 2.4 2.3 2.2 2.2 2.2 27 Venezuela 8.7 9.1 9.9 10.0 10.1 10.4 10.5 10.4 10.4 28 Indonesia 1.9 1.8 2.6 2.7 2.8 2.9 3.2 3.5 3.2 29 Middle East countries 8.0 6.9 7.5 8.2 8.7 9.0 8.7 9.3 9.5 30 African countries 2.6 2.8 2.5 2.2 2.5 2.7 2.8 3.0 3.0 31 Non-OPEC developing countries 63.0 77.4 96.3 97.5 103.6 104.0 107.0 107.6 108.2 Latin America 32 Argentina 5.0 7.9 9.4 10.0 9.6 9.2 8.9 9.0 9.4 33 Brazil 15.2 16.2 19.1 19.7 21.4 22.4 22.9 23.1 22.5 34 Chile 2.5 3.7 5.8 6.0 6.4 6.2 6.3 6.0 5.8 35 Colombia 2.2 2.6 2.6 2.3 2.6 2.8 3.1 2.9 3.2 36 Mexico 12.0 15.9 21.6 22.9 25.2 25.0 24.5 25.1 25.2 37 Peru 1.5 1.8 2.0 1.9 2.5 2.6 2.6 2.4 2.6 38 Other Latin America 3.7 3.9 4.1 4.1 4.0 4.3 4.0 4.2 4.3 Asia China 39 Mainland .2 .2 .2 .2 40 Taiwan 4.9 5.2 5.1 5.1 41 India .5 .6 .4 .5 42 Israel 1.9 2.3 2.0 2.3 43 Korea (South) 9.3 10.8 10.8 10.8 44 Malaysia 1.8 2.1 2.5 2.6 45 Philippines 6.0 6.3 6.6 6.4 46 Thailand 1.3 1.6 1.6 1.8 47 Other Asia 1.3 1.1 1.4 1.2 Africa 48 Egypt .6 1.1 1.3 1.3 1.2 49 Morocco .6 .7 .7 .7 .7 .7 50 Zaire .2 .2 .2 .2 .2 .1 .1 .1 .1 51 Other Africa3 1.7 2.1 2.3 2.3 2.3 2.2 2.4 2.3 2.2 52 Eastern Europe 7.3 7.4 7.8 7.2 6.7 6.3 6.2 5.8 5.7 53 U.S.S.R .7 .4 .6 .4 .4 .3 .3 .3 .4 54 Yugoslavia 1.8 2.3 2.5 2.5 2.4 2.2 2.2 2.2 2.3 55 Other 4.8 4.6 4.7 4.3 3.9 3.8 3.7 3.3 3.0 56 Offshore banking centers 40.4 47.0 63.7 65.7 72.0 72.1 66.8 66.1 67.3 57 Bahamas 13.7 13.7 19.0 20.2 24.1 21.4 19.0 17.3 19.5 58 Bermuda .8 .6 .7 .7 .7 .8 .9 1.0 .8 59 Cayman Islands and other British West Indies 9.4 10.6 12.4 12.1 12.3 13.6 12.9 11.9 12.1 60 Netherlands Antilles 1.2 2.1 3.2 3.2 3.0 3.3 3.3 3.1 2.6 61 Panama4 4.3 5.4 7.7 7.2 7.4 8.1 7.6 7.1 6.6 62 Lebanon .2 .2 .2 .2 .2 .1 .1 .1 .1 6 6 4 3 H Si o n n g g a p K o o re n g 4 6 . . 5 0 5 8 . . 9 1 1 8 1 . . 7 8 1 9 2 . . 3 9 1 9 4 . . 9 3 1 9 5 . . 8 0 1 9 3 . . 1 9 1 10 5 . . 3 2 1 1 4 1 . . 5 0 65 Others5 .4 .3 .1 .1 .1 .0 .0 .0 .0 66 Miscellaneous and unallocated6 11.7 14.0 18.8 18.5 18.4 20.3 17.9 16.7 16.1 1. The banking offices covered by these data are the U.S. offices and foreign 2. Besides the Organization of Petroleum Exporting Countries shown individbranches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. ually, this group includes other members of OPEC (Algeria, Gabon, Iran, Iraq, Offices not covered include (1) U.S. agencies and branches of foreign banks, and Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates) as well (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are as Bahrain and Oman (not formally members of OPEC). adjusted to exclude the claims on foreign branches held by a U.S. office or another 3. Excludes Liberia. foreign branch of the same banking institution. The data in this table combine 4. Includes Canal Zone beginning December 1979. foreign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims 5. Foreign branch claims only. of U.S. offices in table 3.18 (excluding those held by agencies and branches of 6. Includes New Zealand, Liberia, and international and regional organizaforeign banks and those constituting claims on own foreign branches). tions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • April 1984 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States' Millions of dollars, end of period 1982 1983 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11997799 11998800 11998811 Sept. Dec/ Mar/ June Sept. 1 Total 17,433 29,434 28,618 25,149 25,568 23,285 22,531r 24,595' 2 Payable in dollars 14,323 25,689 24,909 22,051 22,375 20,302 19,625' 21,728' 3 Payable in foreign currencies 3,110 3,745 3,709 3,099 3,193 2,983 2,906' 2,867' By type 4 Financial liabilities 7,523 11,330 12,157 10,855 10,906 10,831 10,866' 10,779' 5 Payable in dollars 5,223 8,528 9,499 8,565 8,734 8,795 8,823' 8,809' 6 Payable in foreign currencies 2,300 2,802 2,658 2,291 2,172 2,036 2,043' 1,971' 7 Commercial liabilities 9,910 18,104 16,461 14,294 14,662 12,454 11,665' 13,815' 8 Trade payables 4,591 12,201 10,818 8,084 7,707 5,627 6,026' 7,056' 9 Advance receipts and other liabilities 5,320 5,903 5,643 6,209 6,955 6,827 5,640 6,760 10 Payable in dollars 9,100 17,161 15,409 13,486 13,641 11,507 10,802' 12,919 11 Payable in foreign currencies 811 943 1,052 808 1,021 947 864' 896 By area or country Financial liabilities 12 Europe 4,665 6,481 6,825 6,389 6,369 6,233 6,220' 5,978' 13 Belgium-Luxembourg 338 479 471 494 505 410 436 379 14 France 175 327 709 672 731 725 756' 785' 15 Germany 497 582 491 446 470 487 460 454' 16 Netherlands 829 681 748 759 711 699 728 730 17 Switzerland 170 354 715 670 753 702 621' 530' 18 United Kingdom 2,477 3,923 3,565 3,212 3,070 3,081 3,069' 2,943' 19 Canada 532 964 963 753 746 733 865' 788' 20 Latin America and Caribbean 1,514 3,136 3,356 2,969 2,724 2,707 2,435 2,658' 21 Bahamas 404 964 1,279 938 899 827 695 771' 22 Bermuda 81 1 7 9 14 18 10 13 23 Brazil 18 23 22 28 28 39 34 32 24 British West Indies 516 1,452 1,241 981 1,010 1,009 932 972r 25 Mexico 121 99 102 85 121 149 151 185' 26 Venezuela 72 81 98 104 114 121 124 117 27 Asia 804 723 976 714 1,039 1,124 1,319 1,322 28 Japan 726 644 792 479 715 781 943 957 29 Middle East oil-exporting countries2 31 38 75 67 169 168 205 201 30 Africa 4 11 14 17 17 20 17 19 31 Oil-exporting countries3 1 1 0 0 0 0 0 0 32 All other4 4 15 24 13 12 13 9 15 Commercial liabilities 33 Europe 3,709 4,402 3,770 3,957 3,649 3,443 3,368' 3,384 34 Belgium-Luxembourg 137 90 71 50 52 45 41 Al 35 France 467 582 573 762 597 578 617' 506 36 Germany 545 679 545 436 467 455 439' 461 37 Netherlands 227 219 220 277 346 351 342 243 38 Switzerland 316 499 424 358 363 354 357 448 39 United Kingdom 1,080 1,209 880 1,001 850 679 633' 786 40 Canada 924 888 897 1,197 1,490 1,433 1.465 1,407 41 Latin America and Caribbean 1,325 1,300 1,044 1,235 1,008 1,066 1024' 1,067 42 Bahamas 69 8 2 6 16 4 1 1 43 Bermuda 32 75 67 48 89 117 76 76 44 Brazil 203 111 67 128 60 51 49 48 45 British West Indies 21 35 2 3 32 4 22 14 46 Mexico 257 367 340 499 379 355 399' 429 47 Venezuela 301 319 276 269 165 198 236' 217 48 Asia 2,991 10,242 9,384 6,641 7,160 5,437 4,799 6,852 49 Japan 583 802 1,094 1,192 1,226 1,235 1,236 1,294 50 Middle East oil-exporting countries2 5 1,014 8,098 7,008 4,178 4,531 2,803 2,294 4,072 51 Africa 728 817 703 669 704 497 492 506 52 Oil-exporting countries3 384 517 344 248 277 158 167 204 53 All other4 233 456 664 595 651 578 518 600 1. For a description of the changes in the International Statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. July 1979 BULLETIN, p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 5. Revisions include a reclassification of transactions, which also affects the United Arab Emirates (Trucial States). totals for Asia and the grand totals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A61 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1982 1983 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11997799 11998800 11998811 Sept. Dec. Mar. June Sept. 1 Total 31,299 34,482 36,185 30,232 28,411'' 31,189' 31,421' 31,649' 2 Payable in dollars 28,096 31,528 32,582 27,571 25,784' 28,472' 28,778' 28,773' 3 Payable in foreign currencies 3,203 2,955 3,603 2,661 2,628 2,718' 2,643 2,877' By type 4 Financial claims 18,398 19,763 21,142 18,356 17,429' 20,220' 20,812' 20,831' 5 Deposits 12,858 14,166 15,081 13,241 12,893' 15,569' 15,976' 15,987' 6 Payable in dollars 11,936 13,381 14,456 12,828 12,467' 15,092' 15,549' 15,542' 7 Payable in foreign currencies 923 785 625 413 426 478 426 445' 8 Other financial claims 5,540 5,597 6,061 5,115 4,536 4,651 4,836' 4,845' 9 Payable in dollars 3,714 3,914 3,599 3,419 2,895 3,006 3,238' 3,019' 10 Payable in foreign currencies 1,826 1,683 2,462 1,696 1,641 1,645 1,598 1,826 11 Commercial claims 12,901 14,720 15,043 11,877 10,982' 10,969' 10,609 10,818 12 Trade receivables 12,185 13,960 14,007 10,770 9,973' 9,765' 9,241 9,519 13 Advance payments and other claims 716 759 1,036 1,106 1,010 1,203 1,367 1,299 14 Payable in dollars 12,447 14,233 14,527 11,324 10,422' 10,374' 9,991 10,212 15 Payable in foreign currencies 454 487 516 552 561 595' 618 606 By area or country Financial claims 16 Europe 6,179 6,069 4,596 4,967 4,835' 6,196' 6,817' 6,202' 17 Belgium-Luxembourg 32 145 43 16 10 58 12 25 18 France 177 298 285 326 134 98' 140' 135' 19 Germany 409 230 224 215 178 127 217' 151 20 Netherlands 53 51 50 119 97 140 136 89' 21 Switzerland 73 54 117 60 107 107' 37' 34' 22 United Kingdom 5,099 4,987 3,546 3,859 4,044' 5,414' 6,040' 5,547' 23 Canada 5,003 5,036 6,755 4,386 4,287 4,613' 4,881' 4,958' 24 Latin America and Caribbean 6,312 7,811 8,812 7,948 7,420' 8,520 8,040' 8,609' 25 Bahamas 2,773 3,477 3,650 3,435 3,236' 3,806' 3,244 3,389' 26 Bermuda 30 135 18 16 32' 21' 93' 62 27 Brazil 163 96 30 76 62 50 48 49' 28 British West Indies 2,011 2,755 3,971 3,411 3,161' 3,365' 3,339' 3,932' 29 Mexico 157 208 313 268 274 352 348 315 30 Venezuela 143 137 148 133 139 156 152 137' 31 601 607 758 846 698 712 772' 764' 32 Japan 199 189 366 268 153 233 288 257' 33 Middle East oil-exporting countries2 16 20 37 30 15 18 14 8 34 Africa 258 208 173 165 158 153 154 151 35 Oil-exporting countries3 49 26 46 50 48 45 48 45' 36 All other4 44 32 48 44 31 25 149 148 Commercial claims 37 Europe 4,922 5,544 5,405 4,231 3,777' 3,594' 3,410 3,349 38 Belgium-Luxembourg 202 233 234 178 150 140 144 131 39 France 727 1,129 776 646 473 489 499 486 40 Germany 593 599 561 427 356 424' 364 378 41 Netherlands 298 318 299 268 347 309 242 282 42 Switzerland 272 354 431 291 339 227 303 270 43 United Kingdom 901 929 985 1,035 808' 754 739 734 44 Canada 859 914 967 666 632' 648' 716 788 45 Latin America and Caribbean 2,879 3,766 3,479 2,772 2,521' 2,699' 2,722 2,864 46 Bahamas 21 21 12 19 21 30 30 15 47 Bermuda 197 108 223 154 259 172 108 242 48 Brazil 645 861 668 481 258 402' 512 611 49 British West Indies 16 34 12 7 12 21 21 12 50 Mexico 708 1,102 1,022 869 774' 894' 956 897 51 Venezuela 343 410 424 373 351 288 273 282 52 3,451 3,522 3,959 3,098 3,048' 3,128' 2,871 2,929 53 Japan 1,177 1,052 1,245 973 1,047' 1,115 949 1,037 54 Middle East oil-exporting countries2 765 825 905 777 751' 702' 700 719 55 Africa 551 653 772 661 588 559 528 562 56 Oil-exporting countries3 130 153 152 148 140 131 130 131 57 All other4 240 321 461 448 417' 342 361 326 1. For a description of the changes in the International Statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. July 1979 BULLETIN, p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • April 1984 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1984 1983 1984 TTrraannssaaccttiioonnss,, aanndd aarreeaa oorr ccoouunnttrryy 11998822 11998833 Jan.- Feb. Aug. Sept. Oct. Nov. Dec. Jan. Feb.'' U.S. corporate securities STOCKS 1 Foreign purchases 41,881 69,890 11,683 5,181 5,516 5,530 4,849' 6,020 5,442 6,241 2 Foreign sales 37,981 64,472 11,625 5,168 5,116 5,392 4,785' 5,745 5,798 5,826 3 Net purchases, or sales (-) 3,901 5,418 58 13 400 138 64' 275 -357 414 4 Foreign countries 3,816 5,320 138 14 392 134 64 28Y -346 484 5 Europe 2,530 3,980 -13 71 261 -99 -59' -278 -160 147 6 France -143 -100 -168 -77 -10 -36 -66 -64 -71 -96 7 Germany 333 1054 211 54 48 55 53 -51 95 116 8 Netherlands -63 -110 0 -13 -49 -15 24 13 0 1 9 Switzerland -579 1,313 190 56 123 -18 -97 -208 -92 282 10 United Kingdom 3,117 1,808 -255 79 171 -136 21 51 -87 -168 11 Canada 222 1,149 407 75 154 124 -1' 183 83 324 12 Latin America and Caribbean 317 531 167 -98 106 -41 17 239 124 43 13 Middle East> 366 -807' -405 -88 -178 49 45' 13 -365 -41 14 Other Asia 247 403 -12 75 51 103 63 122' -48 36 15 Africa 2 42 14 7 4 -1 1 2 5 10 16 Other countries 131 24 -19 -28 -6 -1 -3 1 16 -34 17 Nonmonetary international and regional organizations 85 98 -81 -1 8 4 0 -7 -11 -70 BONDS2 18 Foreign purchases 21,639 23,966 3,879 2,141 1,888 2,537 2,039 1,661 1,766 2,113 19 Foreign sales 20,188 23,076 3,666 1,995 1,960 2,492 1,304 1,493 1,800 1,867 20 Net purchases, or sales (-) 1,451 890 213 146 -72 45 735 168 -33 246 21 Foreign countries 1,479 875 136 44 -77 142 715 I6<y -23 158 22 Europe 2,082 892 51 115 14 303 458 -87 2 49 23 France 305 -89 -6 -6 0 2 -31 -4 -1 -5 24 Germany 2,110 286 -71 25 41 66 53 -10 -38 -32 25 Netherlands 33 51 28 -3 1 11 5 3 3 25 26 Switzerland 157 632 16 -1 -19 7 15 78 12 5 27 United Kingdom -589 429 161 112 32 136 390 -126 59 101 28 Canada 24 123 -34 -3 -10 22 46 -22 -24 -10 29 Latin America and Caribbean 159 100 25 -21 4 24 -6 20 9 16 30 Middle East' -752 -1,134' 4 -121 -105 -249 116 42' -26 30 31 Other Asia -22 841 93 74 19 45 101 207 18 75 32 Africa -19 0 -1 0 2 0 0 0 -1 0 33 Other countries 7 52 -3 0 -2 -4 0 0 0 -2 34 Nonmonetary international and regional organizations -28 15 -77 102 6 -97 20 7 -11 87 Foreign securities 35 Stocks, net purchases, or sales (-) -1,341 -3,849' 189 -214 -106 -14 -17 -190 -122 311 36 Foreign purchases 7,163 13,124 2,653 1,032 1,297 1,140 906 1,126' 1,201 1,453 37 Foreign sales 8,504 16,973 2,464 1,246 1,403 1,154 923 1,317 1,323 1,141 38 Bonds, net purchases, or sales (-) -6,631 -3,677 100 -463 -54 -172 173 -689 154 -53 39 Foreign purchases 27,167 35,626 7,173 2,708 3,714 3,902 3,113 3,072 3,272 3,901 40 Foreign sales 33,798 39,302 7,072 3,171 3,768 4,075 2,940 3,761 3,118 3,954 41 Net purchases, or sales (—), of stocks and bonds .... -7,972 -7,526' 290 -677 -160 -186 155 -879 32 258 42 Foreign countries -6,806 -7,028 211 -684 -146 -235 51 -719' 3 207 43 Europe -2,584 -5,630 -444 -301 124 -338 -417 -448 -39 -405 44 Canada -2,363 -1,582 78 -97 -355 6 37 -64 -105 183 45 Latin America and Caribbean 336 1,120 302 62 23 5 135 17 113 188 46 Asia -1,822 -912 288 23 105 90 160 -81' 37 252 47 Africa -9 141 -16 14 16 11 1 0 -5 -11 48 Other countries -364 -164 3 -385 -59 -10 135 -143 2 1 49 Nonmonetary international and regional organizations -1,165 -498 79 7 -14 49 105 -161 28 50 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, 2. Includes state and local government securities, and securities of U.S. Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). government 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

Investment Transactions and Discount Rates A63 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Holdings and Transactions Millions of dollars 1984 1983 1984 Country or area 11998822 11998833 F Ja e n b. . - Aug. Sept. Oct. Nov. Dec. Jan. Feb. p Holdings (end of period)1 1 Estimated total2 85,220 88,990 87,483 88,661 90,988 89,559' 88,990 2 Foreign countries2 80,637 83,895 82,790 82,763 84,358 83,743' 83,895 3 Europe2 29,284 35,482 32,996 33,370 34,415 35,051' 35,482 4 Belgium-Luxembourg 447 16 95 58 18 2 16 5 Germany2 14,841 17,290 16,119 16,156 16,570 17,092 17,290 6 Netherlands 2,754 3,129 3,234 3,034 2,987 3,048 3,129 7 Sweden 677 842 644 666 714 758 842 8 Switzerland2 1,540 1,118 965 1,087 1,177 1,064 1,118 9 United Kingdom 6,549 8,524 8,270 8,289 8.629 8,626 8,524 10 Other Western Europe 2,476 4,563 3,669 4,081 4,321 4,461' 4,563 11 Eastern Europe 0 0 0 0 0 0 0 12 Canada 602 1,301 1,063 1,265 1,225 1,301 13 Latin America and Caribbean 1,076 863' 800 774 695 914 863' 14 Venezuela 188 64 62 65 66 64 64 15 Other Latin America and Caribbean 656 716 622 631 540 674 716 16 Netherlands Antilles 232 83 116 78 89 176 83 17 Asia 49,543 46,129 47,733 47,430 47,849 46,430' 46,129 18 Japan 11,578 13,910 13,007 13,210 13,446 13,600 13,910 19 Africa 77 79 79 79 79 79 79 20 All other 55 40 94 48 56 43 40 21 Nonmonetary international and regional organizations 4,583 5,095 4,693 5,898 6.630 5,816 5,095 22 International 4,186 4,404 4,086 5,421 6,094 5,030 4,404 23 Latin American regional 6 6 6 6 6 0 6 Transactions (net purchases, or sales (-) during period) 24 Total2 14,972 3,769 1,288 -1,350 1,178 2,327 -1,422 -576' 25 Foreign countries2 16,072 3,258 578 -826 -26 1,595 -615 152' 26 Official institutions 14,550 559 -885 5 468 -774 -401' 27 Other foreign2 1,518 2,414' 20 59 -31 1,126 159 554' 28 Nonmonetary international and regional organizations -1,097 506 708 -523 1,205 731 -729 MEMO: Oil-exporting countries 2 3 9 0 A M f i r d i d c l a e 4 East3 7 -5 ,5 5 7 2 5 -5,3 - 9 1 7 -1,31 0 6 -1,764 0 -305 0 -373 0 -968 0 -60 0 1. Estimated official and private holdings of marketable U.S. Treasury securi- 2. Beginning December 1978, includes U.S. Treasury notes publicly issued to ties 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 United Arab Emirates (Trucial States). foreign countries. 4. Comprises Algeria, Gabon, Libya, and Nigeria. 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per annum Rate on Mar. 31, 1984 Rate on Mar. 31, 1984 Rate on Mar. 31, 1984 Country Country Country Per- Month Per- Month Per- Month cent effective cent effective cent effective Austria.. 4.25 Mar. 1984 France1 12.0 Dec. 1983 Norway 8.0 June 1979 Belgium . 11.0 Feb. 1984 Germany, Fed. Rep. of 4.0 Mar. 1983 Switzerland 4.0 Mar. 1983 Brazil... 49.0 Mar. 1981 Italy 16.0 Feb. 1984 United Kingdom2. Canada.. 10.78 Mar. 1984 Japan 5.0 Oct. 1983 Venezuela May 1983 Denmark 7.0 Oct. 1983 Netherlands 5.0 Sept. 1983 1. As of the end of February 1981, the rate is that at which the Bank of France or makeS advances against eligible commercial paper and/or government commerdiscounts Treasury bills for 7 to 10 days. cial banks or brokers. For countries with more than one rate applicable to such 2. Minimum lending rate suspended as of Aug. 20, 1981. discounts or advances, the rate shown is the one at which it is understood the central bank transacts the largest proportion of its credit operations. NOTE. Rates shown are mainly those at which the central bank either discounts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • April 1984 3.27 FOREIGN SHORT-TERM INTEREST RATES Percent per annum, averages of daily figures 1983 1984 CCoouunnttrryy,, oorr ttyyppee 11998811 11998822 11998833 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Eurodollars 16.79 12.24 9.57 9.82 9.54 9.79 10.08 9.78 9.91 10.40 2 United Kingdom 13.86 12.21 10.06 9.63 9.34 9.26 9.34 9.40 9.35 8.90 3 Canada 18.84 14.38 9.48 9.35 9.31 9.40 9.83 9.84 9.85 10.40 4 Germany 12.05 8.81 5.73 5.83 6.13 6.26 6.43 6.07 5.91 5.82 5 Switzerland 9.15 5.04 4.11 4.40 4.07 4.11 4.29 3.65 3.47 3.60 6 Netherlands 11.52 8.26 5.58 6.15 6.07 6.17 6.20 6.01 5.95 6.09 7 France 15.28 14.61 12.44 12.42 12.42 12.31 12.16 12.22 12.36 12.53 8 Italy 19.98 19.99 18.95 17.42 17.51 17.71 17.75 17.75 17.40 17.28 9 Belgium 15.28 14.10 10.51 9.25 9.44 9.89 10.50 10.68 11.43 12.02 10 Japan 7.58 6.84 6.49 6.68 6.52 6.35 6.45 6.35 6.34 6.41 NOTE. Rates are for 3-month interbank loans except for Canada, finance company paper; Belgium, 3-month Treasury bills; and Japan, Gensaki rate. 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1983 1984 CCoouunnttrryy//ccuurrrreennccyy 11998811 11998822 11998833 Oct. Nov. Dec. Jan. Feb. Mar. 1 Australia/dollar1 114.95 101.65 90.14 91.37 91.59 90.04 90.60 93.48 95.13 2 Austria/schilling 15.948 17.060 17.968 18.305 18.900 19.383 19.815 19.028 18.285 3 Belgium/franc 37.194 45.780 51.121 53.034 54.538 55.939 57.354 55.279 53.135 4 Brazil/cruzeiro 92.374 179.22 573.27 784.35 870.21 943.43 1022.81 1131.37 1266.64 5 Canada/dollar 1.1990 1.2344 1.2325 1.2320 1.2367 1.2469 1.2484 1.2480 1.2697 6 China, P.R./yuan 1.7031 1.8978 1.9809 1.9664 1.9940 1.9920 2.0490 2.0628 2.0646 7 Denmark/krone 7.1350 8.3443 9.1483 9.4172 9.6791 9.9530 10.1793 9.8549 9.5175 8 Finland/markka 4.3128 4.8086 5.5636 5.6390 5.7468 5.8515 5.9385 5.7892 5.6136 9 France/franc 5.4396 6.5793 7.6203 7.9526 8.1646 8.3839 8.5948 8.3051 8.0022 10 Germany/deutsche mark 2.2631 2.428 2.5539 2.6032 2.6846 2.7500 2.8110 2.6984 2.5973 11 Greece/drachma n.a. 66.872 87.895 92.968 96.229 98.815 102.601 101.80 102.40 12 Hong Kong/dollar 5.5678 6.0697 7.2569 8.0947 7.8120 7.8044 7.7968 7.7883 7.7942 13 India/rupee 8.6807 9.4846 10.1040 10.229 10.378 10.4895 10.7152 10.744 10.714 14 Ireland/pound1 161.32 142.05 124.81 119.15 115.85 112.91 110.20 114.21 117.88 15 Israel/shekel n.a. 24.407 55.865 77.808 89.344 100.599 116.728 130.21 146.40 16 Italy/lira 1138.60 1354.00 1519.30 1582.81 1625.79 1666.88 1706.63 1666.39 1614.17 17 Japan/yen 220.63 249.06 237.55 232.89 235.03 234.46 233.80 233.60 225.27 18 Malay sia/ringgit 2.3048 2.3395 2.3204 2.3451 2.3450 2.3407 2.3411 2.3363 2.2933 19 Mexico/peso 24.547 72.990 155.01 157.18 162.36 164.84 166.33 168.49 172.93 20 Netherlands/guilder 2.4998 2.6719 2.8543 2.9206 3.0078 3.0856 3.1602 3.0455 2.9326 21 New Zealand/dollar1 86.848 75.101 66.790 66.162 65.854 65.120 64.860 65.810 66.714 22 Norway/krone 5.7430 6.4567 7.3012 7.3244 7.4696 7.7237 7.8763 7.6937 7.5028 23 Philippines/peso 7.8113 8.5324 11.0940 13.750 14.050 14.050 14.050 14.050 14.186 24 Portugal/escudo 61.739 80.101 111.610 124.41 127.82 131.91 136.29 135.01 131.70 25 Singapore/dollar 2.1053 2.1406 2.1136 2.1350 2.1334 2.1317 2.1309 2.1279 2.0893 26 South Africa/rand1 114.77 92.297 89.85 88.82 84.23 82.15 79.54 81.31 82.10 27 South Korea/won n.a. 731.93 776.04 791.37 796.32 799.23 800.33 799.06 794.51 28 Spain/peseta 92.396 110.09 143.500 151.30 154.66 158.01 159.832 154.20 149.68 29 Sri Lanka/rupee 18.967 20.756 23.510 24.410 24.572 24.767 25.181 25.270 25.177 30 Sweden/krona 5.0659 6.2838 7.6717 7.7844 7.9201 8.0608 8.1782 7.9976 7.7323 31 Switzerland/franc 1.9674 2.0327 2.1006 2.1122 2.1701 2.1983 2.2380 2.2050 2.1490 32 Taiwan/Dollar n.a. n.a. n.a. 39.420 38.780 39.613 40.202 40.236 40.078 33 Thailand/baht 21.731 23.014 22.991 22.990 22.990 22.992 23.006 23.000 23.004 34 United Kingdom/pound1 202.43 174.80 151.59 149.69 147.66 143.38 140.76 144.17 145.57 35 Venezuela/bolivar 4.2781 4.2981 10.6840 13.088 12.782 12.834 13.021 13.023 13.470 MEMO United States/dollar2 102.94 116.57 125.34 127.50 130.26 132.84 135.07 131.71 128.07 1. Value in U.S. cents. description and back data, see "Index of the Weighted-Average Exchange Value 2. Index of weighted-average exchange value of U.S. dollar against currencies of the U.S. Dollar: Revision" on p. 700 of the August 1978 BULLETIN. of other G-10 countries plus Switzerland. March 1973 = 100. Weights are 1972-76 global trade of each of the 10 countries. Series revised as of August 1978. For NOTE. Averages of certified noon buying rates in New York for cable tranfers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A65 Guide to Tabular Presentation, Statistical Releases, and Special Tables GUIDE TO TABULAR PRESENTATION Symbols and Abbreviations c Corrected 0 Calculated to be zero e Estimated n.a. Not available p Preliminary n.e.c. Not elsewhere classified r Revised (Notation appears on column heading when IPCs Individuals, partnerships, and corporations about half of the figures in that column are changed.) REITs Real estate investment trusts * Amounts insignificant in terms of the last decimal place RPs Repurchase agreements shown in the table (for example, less than 500,000 SMSAs Standard metropolitan statistical areas when the smallest unit given is millions) Cell not applicable General Information Minus signs are used to indicate (1) a decrease, (2) a negative obligations of the Treasury. "State and local government" figure, or (3) an outflow. also includes municipalities, special districts, and other politi- "U.S. government securities" may include guaranteed cal subdivisions. issues 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 rounding. STATISTICAL RELEASES List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 1983 A84 SPECIAL TABLES Published Irregularly, with Latest Bulletin Reference Assets and liabilities of commercial banks, December 31, 1982 April 1983 A70 Assets and liabilities of commercial banks, March 31, 1983 August 1983 A70 Assets and liabilities of commercial banks, June 30, 1983 December 1983 A68 Assets and liabilities of commercial banks, September 30, 1983 March 1984 A68 Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1982 April 1983 A76 Assets and liabilities of U.S. branches and agencies of foreign banks, March 31, 1983 August 1983 A76 Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1983 December 1983 A74 Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1983 March 1984 A74 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Federal Reserve Board of Governors PAUL A. VOLCKER, Chairman HENRY C. WALLICH PRESTON MARTIN, Vice Chairman J. CHARLES PARTEE OFFICE OF BOARD MEMBERS OFFICE OF STAFF DIRECTOR FOR MONETARY AND FINANCIAL POLICY JOSEPH R. COYNE, Assistant to the Board DONALD J. WINN, Assistant to the Board STEPHEN H. AXILROD, Staff Director STEVEN M. ROBERTS, Assistant to the Chairman DONALD L. KOHN, Deputy Staff Director FRANK O'BRIEN, JR., Deputy Assistant to the Board STANLEY J. SIGEL, Assistant to the Board ANTHONY F. COLE, Special Assistant to the Board NORMAND R.V. BERNARD, Special Assistant to the Board WILLIAM R. JONES, Special Assistant to the Board NAOMI P. SALUS, Special Assistant to the Board DIVISION OF RESEARCH AND STATISTICS LEGAL DIVISION JAMES L. KICHLINE, Director EDWARD C. ETTIN, Deputy Director MICHAEL BRADFIELD, General Counsel MICHAEL J. PRELL, Deputy Director J. VIRGIL MATTINGLY, JR., Associate General Counsel JOSEPH S. ZEISEL, Deputy Director GILBERT T. SCHWARTZ, Associate General Counsel JARED J. ENZLER, Associate Director RICHARD M. ASHTON, Assistant General Counsel ELEANOR J. STOCKWELL, Associate Director NANCY P. JACKLIN, Assistant General Counsel DAVID E. LINDSEY, Deputy Associate Director MARYELLEN A. BROWN, Assistant to the General Counsel FREDERICK M. STRUBLE, Deputy Associate Director HELMUT F. WENDEL, Deputy Associate Director MARTHA BETHEA, Assistant Director OFFICE OF THE SECRETARY ROBERT M. FISHER, Assistant Director SUSAN J. LEPPER, Assistant Director WILLIAM W. WILES, Secretary THOMAS D. SIMPSON, Assistant Director BARBARA R. LOWREY, Associate Secretary LAWRENCE SLIFMAN, Assistant Director JAMES MCAFEE, Associate Secretary STEPHEN P. TAYLOR, Assistant Director PETER A. TINSLEY, Assistant Director LEVON H. GARABEDIAN, Assistant Director DIVISION OF CONSUMER (Administration) AND COMMUNITY AFFAIRS GRIFFITH L. GARWOOD, Director DIVISION 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, Senior Associate Director CHARLES J. SIEGMAN, Senior Associate Director LARRY J. PROMISEL, Associate Director DIVISION OF BANKING DALE W. HENDERSON, Deputy Associate Director SUPERVISION AND REGULATION SAMUEL PIZER, Staff Adviser RALPH W. SMITH, JR., Assistant Director JOHN E. RYAN, Director WILLIAM TAYLOR, Deputy Director FREDERICK R. DAHL, Associate Director DON E. KLINE, Associate Director JACK M. EGERTSON, Assistant Director ROBERT S. PLOTKIN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 and Official Staff NANCY H. TEETERS LYLE E. GRAMLEY EMMETT J. RICE OFFICE OF OFFICE OF STAFF DIRECTOR FOR STAFF DIRECTOR FOR MANAGEMENT FEDERAL RESERVE BANK ACTIVITIES S. DAVID FROST, Staff Director THEODORE E. ALLISON, Staff Director EDWARD T. MULRENIN, Assistant Staff Director JOSEPH W. DANIELS, SR., Advisor, Equal Employment STEPHEN R. MALPHRUS, Assistant Staff Director for Office Opportunity Programs Automation and Technology DIVISION OF FEDERAL RESERVE DIVISION OF DATA PROCESSING BANK OPERATIONS CHARLES L. HAMPTON, Director CLYDE H. FARNSWORTH, JR., Director BRUCE M. BEARDSLEY, Deputy Director ELLIOTT C. MCENTEE, Associate Director GLENN L. CUMMINS, Assistant Director DAVID L. ROBINSON, Associate Director NEAL H. HILLERMAN, Assistant Director C. WILLIAM SCHLEICHER, JR., Associate Director RICHARD J. MANASSERI, Assistant Director WALTER ALTHAUSEN, Assistant Director ELIZABETH B. RIGGS, Assistant Director CHARLES W. BENNETT, Assistant Director WILLIAM C. SCHNEIDER, JR., Assistant Director ANNE M. DEBEER, Assistant Director ROBERT J. ZEMEL, Assistant Director JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director * JOHN F. SOBALA, Assistant Director DIVISION OF PERSONNEL DAVID L. SHANNON, Director JOHN R. WEIS, Assistant Director CHARLES W. WOOD, Assistant Director OFFICE OF THE CONTROLLER GEORGE E. LIVINGSTON, Controller BRENT L. BOWEN, Assistant Controller DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director WALTER W. KREIMANN, Associate Director *On loan from the Federal Reserve Bank of New York. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 Federal Reserve Bulletin • April 1984 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE PAUL A. VOLCKER, Chairman ANTHONY M. SOLOMON, Vice Chairman EDWARD G. BOEHNE LYLE E. GRAMLEY J. CHARLES PARTEE ROBERT H. BOYKIN KAREN N. HORN EMMETT J. RICE E. GERALD CORRIGAN PRESTON MARTIN NANCY H. TEETERS HENRY C. WALLICH STEPHEN H. AXILROD, Staff Director and Secretary RICHARD G. DAVIS, Associate Economist NORMAND R.V. BERNARD, Assistant Secretary DONALD L. KOHN, Associate Economist NANCY M. STEELE, Deputy Assistant Secretary RICHARD W. LANG, Associate Economist MICHAEL BRADFIELD, General Counsel DAVID E. LINDSEY, Associate Economist JAMES H. OLTMAN, Deputy General Counsel MICHAEL J. PRELL, Associate Economist JAMES L. KICHLINE, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist (International) GARY H. STERN, Associate Economist JOSEPH E. BURNS, Associate Economist JOSEPH S. ZEISEL, Associate Economist JOHN M. DAVIS, Associate Economist PETER D. STERNLIGHT, Manager for Domestic Operations, System Open Market Account SAM Y. CROSS, Manager for Foreign Operations, System Open Market Account FEDERAL ADVISORY COUNCIL JOHN G. MCCOY, President JOSEPH J. PINOLA, Vice President VINCENT C. BURKE, JR., N. BERNE HART, AND LEWIS T. PRESTON, Directors ROBERT L. NEWELL, First District ROGER E. ANDERSON, Seventh District LEWIS T. PRESTON, Second District WILLIAM H. BOWEN, Eighth District GEORGE A. BUTLER, Third District E. PETER GILLETTE, JR., Ninth District JOHN G. MCCOY, Fourth District N. BERNE HART, Tenth District VINCENT C. BURKE, JR., Fifth District NAT S. ROGERS, Eleventh District PHILIP F. SEARLE, Sixth District JOSEPH J. PINOLA, Twelfth District HERBERT V. PROCHNOW, Secretary WILLIAM J. KORSVIK, Associate Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 and Advisory Councils CONSUMER ADVISORY COUNCIL WILLARD P. OGBURN, Boston, Massachusetts, Chairman TIMOTHY D. MARRINAN, Minneapolis, Minnesota, Vice Chairman RACHEL G. BRATT, Medford, Massachusetts FREDERICK H. MILLER, Norman, Oklahoma JAMES G. BOYLE, Austin, Texas MARGARET M. MURPHY, Columbia, Maryland GERALD R. CHRISTENSEN, Salt Lake City, Utah ROBERT F. MURPHY, Detroit, Michigan THOMAS L. CLARK, JR., New York, New York LAWRENCE S. OKINAGA, Honolulu, Hawaii JEAN A. CROCKETT, Philadelphia, Pennsylvania ELVA QUIJANO, San Antonio, Texas MEREDITH FERNSTROM, New York, New York JANET J. RATHE, Portland, Oregon ALLEN J. FISHBEIN, Washington, D.C. JANET SCACCIOTTI, Providence, Rhode Island E.C.A. FORSBERG, SR., Atlanta, Georgia GLENDA G. SLOANE, Washington, D.C. STEVEN M. GEARY, Jefferson City, Missouri HENRY J. SOMMER, Philadelphia,Pennsylvania RICHARD F. HALLIBURTON, Kansas City, Missouri WINNIE F. TAYLOR, Gainesville, Florida LOUISE MCCARREN HERRING, Cincinnati, Ohio MICHAEL M. VAN BUSKIRK, Columbus, Ohio CHARLES C. HOLT, Austin, Texas CLINTON WARNE, Cleveland, Ohio HARRY N. JACKSON, Minneapolis, Minnesota FREDERICK T. WEIMER, Chicago, Illinois KENNETH V. LARKIN, San Francisco, California MERVIN WINSTON, Minneapolis, Minnesota THRIFT INSTITUTIONS ADVISORY COUNCIL THOMAS R. BOMAR, Miami, Florida, President RICHARD H. DEIHL, LOS Angeles, California, Vice President JAMES A. ALIBER, Detroit, Michigan NORMAN M. JONES, Fargo, North Dakota GENE R. ARTEMENKO, Chicago, Illinois ROBERT R. MASTERTON, Portland, Maine J. MICHAEL CORNWALL, Dallas, Texas JOHN T. MORGAN, New York, New York JOHN R. EPPINGER, Villanova, Pennsylvania FRED A. PARKER, Monroe, North Carolina SARAH R. WALLACE, Newark, Ohio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES, REPORT OF THE JOINT TREASURY-FEDERAL RESERVE STUDY Mail Stop 138, Board of Governors of the Federal Reserve OF THE U.S. GOVERNMENT SECURITIES MARKET. 1969. System, Washington, D.C. 20551. When a charge is indicat- 48 pp. $.25 each; 10 or more to one address, $.20 each. ed, remittance should accompany request and be made JOINT TREASURY-FEDERAL RESERVE STUDY OF THE GOVpayable to the order of the Board of Governors of the Federal ERNMENT SECURITIES MARKET; STAFF STUDIES—PART Reserve System. Remittance from foreign residents should 1, 1970. 86 pp. $.50 each; 10 or more to one address, $.40 be drawn on a U.S. bank. Stamps and coupons are not each. PART 2, 1971. Out of print. PART 3, 1973. 131 pp. accepted. $1.00; 10 or more to one address, $.85 each. OPEN MARKET POLICIES AND OPERATING PROCEDURES— STAFF STUDIES. 1971. 218 pp. $2.00 each; 10 or more to THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- one address, $1.75 each. TIONS. 1974. 125 pp. REAPPRAISAL OF THE FEDERAL RESERVE DISCOUNT MECHA- ANNUAL REPORT. NISM. Vol. 1. 1971. 276 pp. Vol. 2. 1971. 173 pp. Vol. 3. FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or 1972. 220 pp. Each volume, $3.00; 10 or more to one $2.00 each in the United States, its possessions, Canada, address, $2.50 each. and Mexico; 10 or more of same issue to one address, THE ECONOMETRICS OF PRICE DETERMINATION CONFER- $18.00 per year or $1.75 each. Elsewhere, $24.00 per ENCE, October 30-31, 1970, Washington, D.C. 1972. 397 year or $2.50 each. pp. Cloth ed. $5.00 each; 10 or more to one address, BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint $4.50 each. Paper ed. $4.00 each; 10 or more to one of Part I only) 1976. 682 pp. $5.00. address, $3.60 each. BANKING AND MONETARY STATISTICS. 1941-1970. 1976. FEDERAL RESERVE STAFF STUDY: WAYS TO MODERATE 1,168 pp. $15.00. FLUCTUATIONS IN HOUSING CONSTRUCTION. 1972. 487 ANNUAL STATISTICAL DIGEST pp. $4.00 each; 10 or more to one address, $3.60 each. 1971-75. 1976. 339 pp. $ 5.00 per copy. LENDING FUNCTIONS OF THE FEDERAL RESERVE BANKS. 1972-76. 1977. 377 pp. $10.00 per copy. 1973. 271 pp. $3.50 each; 10 or more to one address, 1973-77. 1978. 361 pp. $12.00 per copy. $3.00 each. 1974-78. 1980. 305 pp. $10.00 per copy. IMPROVING THE MONETARY AGGREGATES: REPORT OF THE 1970-79. 1981. 587 pp. $20.00 per copy. ADVISORY COMMITTEE ON MONETARY STATISTICS. 1980. 1981. 241 pp. $10.00 per copy. 1976. 43 pp. $1.00 each; 10 or more to one address, $.85 1981. 1982. 239 pp. $ 6.50 per copy. each. 1982. 1983. 266 pp. $ 7.50 per copy. ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— FEDERAL RESERVE CHART BOOK. Issued four times a year in Regulation Z) Vol. I (Regular Transactions). 1969. 100 February, May, August, and November. Subscription pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each includes one issue of Historical Chart Book. $7.00 per volume $1.00; 10 or more of same volume to one year or $2.00 each in the United States, its possessions, address, $.85 each. Canada, and Mexico. Elsewhere, $10.00 per year or FEDERAL RESERVE MEASURES OF CAPACITY AND CAPACITY $3.00 each. UTILIZATION. 1978. 40 pp. $1.75 each; 10 or more to one HISTORICAL CHART BOOK. Issued annually in Sept. Subscrip- address, $1.50 each. tion to the Federal Reserve Chart Book includes one THE BANK HOLDING COMPANY MOVEMENT TO 1978: A issue. $1.25 each in the United States, its possessions, COMPENDIUM. 1978. 289 pp. $2.50 each; 10 or more to Canada, and Mexico; 10 or more to one address, $1.00 one address, $2.25 each. each. Elsewhere, $1.50 each. IMPROVING THE MONETARY AGGREGATES: STAFF PAPERS. SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- 1978. 170 pp. $4.00 each; 10 or more to one address, RIES OF CHARTS. Weekly. $15.00 per year or $.40 each in $3.75 each. the United States, its possessions, Canada, and Mexico; 1977 CONSUMER CREDIT SURVEY. 1978. 119 pp. $2.00 each. 10 or more of same issue to one address, $13.50 per year FLOW OF FUNDS ACCOUNTS. 1949-1978. 1979. 171 pp. $1.75 or $.35 each. Elsewhere, $20.00 per year or $.50 each. each; 10 or more to one address, $1.50 each. THE FEDERAL RESERVE ACT, as amended through April 20, INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; 1983. with an appendix containing provisions of certain 10 or more to one address, $1.25 each. other statutes affecting the Federal Reserve System. 576 PUBLIC POLICY AND CAPITAL FORMATION. 1981. 326 pp. pp. $7.00. $13.50 each. REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- NEW MONETARY CONTROL PROCEDURES: FEDERAL RE- ERAL RESERVE SYSTEM. SERVE STAFF STUDY. 1981. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 SEASONAL ADJUSTMENT OF THE MONETARY AGGREGATES: Truth in Leasing REPORT OF THE COMMITTEE OF EXPERTS ON SEASONAL U.S. Currency ADJUSTMENT TECHNIQUES. 1981. 55 pp. $2.75 each. What Truth in Lending Means to You FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; updated at least monthly. (Requests must be prepaid.) Consumer and Community Affairs Handbook. $60.00 per year. STAFF STUDIES: Summaries Only Printed in the Bulletin Monetary Policy and Reserve Requirements Handbook. $60.00 per year. Studies and papers on economic and financial subjects that Securities Credit Transactions Handbook. $60.00 per year. are of general interest. Requests to obtain single copies of Federal Reserve Regulatory Service. 3 vols. (Contains all the full text or to be added to the mailing list for the series three Handbooks plus substantial additional material.) may be sent to Publications Services. $175.00 per year. Rates for subscribers outside the United States are as follows and include additional air mail costs: 113. BELOW THE BOTTOM LINE: THE USE OF CONTINGEN- Federal Reserve Regulatory Service, $225.00 per year. CIES AND COMMITMENTS BY COMMERCIAL BANKS, by Each Handbook, $75.00 per year. Benjamin Wolkowitz and others. Jan. 1982. 186 pp. WELCOME TO THE FEDERAL RESERVE. 114. MULTIBANK HOLDING COMPANIES: RECENT EVI- PROCESSING BANK HOLDING COMPANY AND MERGER APPLI- DENCE ON COMPETITION AND PERFORMANCE IN CATIONS BANKING MARKETS, by Timothy J. Curry and John T. SUSTAINABLE RECOVERY: SETTING THE STAGE, November Rose. Jan. 1982. 9 pp. 1982. 115. COSTS, SCALE ECONOMIES, COMPETITION, AND PROD- REMARKS BY CHAIRMAN PAUL A. VOLCKER, AT ANNUAL UCT MIX IN THE U.S. PAYMENTS MECHANISM, by HUMAN RELATIONS AWARD DINNER, December 1982. David B. Humphrey. Apr. 1982. 18 pp. REMARKS BY CHAIRMAN PAUL A. VOLCKER, AT DEDICATION 116. DIVISIA MONETARY AGGREGATES: COMPILATION, CEREMONIES: FEDERAL RESERVE BANK OF SAN FRAN- DATA, AND HISTORICAL BEHAVIOR, by William A. CISCO, March 1983. Barnett and Paul A. Spindt. May 1982. 82 pp. RESTORING STABILITY. REMARKS BY CHAIRMAN PAUL A. 117. THE COMMUNITY REINVESTMENT ACT AND CREDIT VOLCKER, April 1983. ALLOCATION, by Glenn Canner. June 1982. 8 pp. CREDIT CARDS IN THE U.S. ECONOMY: THEIR IMPACT ON 118. INTEREST RATES AND TERMS ON CONSTRUCTION COSTS, PRICES, AND RETAIL SALES, July 1983. 114 pp. LOANS AT COMMERCIAL BANKS, by David F. Seiders. July 1982. 14 pp. 119. STRUCTURE-PERFORMANCE STUDIES IN BANKING: AN UPDATED SUMMARY AND EVALUATION, by Stephen A. Rhoades. Aug. 1982. 15 pp. 120. FOREIGN SUBSIDIARIES OF U.S. BANKING ORGANIZA- TIONS, by James V. Houpt and Michael G. Martinson. CONSUMER EDUCATION PAMPHLETS Oct. 1982. 18 pp. Short pamphlets suitable for classroom use. Multiple copies 121. REDLINING: RESEARCH AND FEDERAL LEGISLATIVE available without charge. RESPONSE, by Glenn B. Canner. Oct. 1982. 20 pp. 122. BANK CAPITAL TRENDS AND FINANCING, by Samuel H. Talley. Feb. 1983. 19 pp. Out of print. Alice in Debitland 123. FINANCIAL TRANSACTIONS WITHIN BANK HOLDING Consumer Handbook to Credit Protection Laws COMPANIES, by John T. Rose and Samuel H. Talley. The Equal Credit Opportunity Act and . . . Age May 1983. 11 pp. The Equal Credit Opportunity Act and . . . Credit Rights in 124. INTERNATIONAL BANKING FACILITIES AND THE EU- Housing RODOLLAR MARKET, by Henry S. Terrell and Rodney The Equal Credit Opportunity Act and . . . Doctors, Law- H. Mills. August 1983. 14 pp. yers, Small Retailers, and Others Who May Provide Inci- 125. SEASONAL ADJUSTMENT OF THE WEEKLY MONETARY dental Credit AGGREGATES: A MODEL-BASED APPROACH, by David The Equal Credit Opportunity Act and . . . Women A. Pierce, Michael R. Grupe, and William P. Cleve- Fair Credit Billing land. August 1983. 23 pp. Federal Reserve Glossary 126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR- Guide to Federal Reserve Regulations KET INTERVENTION, by Donald B. Adams and Dale How to File A Consumer Credit Complaint W. Henderson. August 1983. 5 pp. If You Borrow To Buy Stock *127. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- If You Use A Credit Card VENTION: JANUARY-MARCH 1975, by Margaret L. Instructional Materials of the Federal Reserve System Greene. Series on the Structure of the Federal Reserve System *128. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- The Board of Governors of the Federal Reserve System VENTION: SEPTEMBER 1977-OcTOBER 1981, by Marga- The Federal Open Market Committee ret L. Greene. Federal Reserve Bank Board of Directors *129. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- Federal Reserve Banks VENTION: OCTOBER I98O-OCTOBER 1981, by Margaret Organization and Advisory Committees L. Greene. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All 130. EFFECTS OF EXCHANGE RATE VARIABILITY ON IN- REPRINTS OF BULLETIN ARTICLES TERNATIONAL TRADE AND OTHER ECONOMIC VARIA- Most of the articles reprinted do not exceed 12 pages. BLES: A REVIEW OF THE LITERATURE, by Victoria S. Farrell with Dean A. DeRosa and T. Ashby McCown. January 1984. 21 pp. Survey of Finance Companies. 1980. 5/81. 131. CALCULATIONS OF PROFITABILITY FOR U.S. DOLLAR- Bank Lending in Developing Countries. 9/81. DEUTSCHE MARK INTERVENTION, by Laurence R. The Commercial Paper Market since the Mid-Seventies. 6/82. Jacobson. October 1983. 8 pp. Applying the Theory of Probable Future Competition. 9/82. 132. TIME-SERIES STUDIES OF THE RELATIONSHIP BE- International Banking Facilities. 10/82. TWEEN EXCHANGE RATES AND INTERVENTION: A U.S. International Transactions in 1982. 4/83. REVIEW OF THE TECHNIQUES AND LITERATURE, by New Federal Reserve Measures of Capacity and Capacity Kenneth Rogoff. October 1983. 15 pp. Utilization. 7/83. 133. RELATIONSHIPS AMONG EXCHANGE RATES, INTER- Foreign Experience with Targets for Money Growth. 10/83. VENTION, AND INTEREST RATES: AN EMPIRICAL IN- Intervention in Foreign Exchange Markets: A Summary of VESTIGATION, by Bonnie E. Loopesko. November Ten Staff Studies. 11/83. 1983. 20 pp. A Financial Perspective on Agriculture. 1/84. 134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET INTERVENTION: A REVIEW OF THE LITERATURE, by Ralph W. Tryon. October 1983. 14 pp. *135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET INTERVENTION: APPLICATIONS TO CANADA, GERMA- NY, AND JAPAN, by Deborah J. Danker, Richard A. Haas, Dale W. Henderson, Steven A. Symansky, and Ralph W. Tryon. 136. THE EFFECTS OF FISCAL POLICY ON THE U.S. ECONO- MY, by Darrell Cohen and Peter B. Clark. January 1984. 16 pp. 137. THE IMPLICATIONS FOR BANK MERGER POLICY OF FINANCIAL DEREGULATION, INTERSTATE BANKING, AND FINANCIAL SUPERMARKETS, by Stephen A. Rhoades. February 1984. 8 pp. *The availability of these studies will be announced in a forthcoming BULLETIN. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 Index to Statistical Tables References are to pages A3 through A64 although the prefix "A" is omitted in this index ACCEPTANCES, bankers, 9, 22, 24 Demand deposits—Continued Agricultural loans, commercial banks, 18, 19, 23 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 21 Banks, by classes, 17-19 Turnover, 14 Domestic finance companies, 35 Depository institutions Federal Reserve Banks, 10 Reserve requirements, 7 Foreign banks, U.S. branches and agencies, 20 Reserves and related items, 3, 4, 5, 12 Nonfinancial corporations, 34 Deposits (See also specific types) Savings institutions, 26 Banks, by classes, 3, 17-20, 26 Automobiles Federal Reserve Banks, 4, 10 Consumer installment credit, 38, 39 Turnover, 14 Production, 44, 45 Discount rates at Reserve Banks and at foreign central banks (See Interest rates) BANKERS acceptances, 9, 22, 24 Discounts and advances by Reserve Banks (See Loans) Bankers balances, 17-19 (See also Foreigners) Dividends, corporate, 33 Bonds (See also U.S. government securities) New issues, 32 Rates 3 EMPLOYMENT, 42, 43 Branch banks, 14, 20, 52 Eurodollars, 24 Business activity, nonfinancial, 42 Business expenditures on new plant and equipment, 34 FARM mortgage loans, 37 Business loans (See Commercial and industrial loans) Federal agency obligations, 4, 9, 10, 11, 30 Federal credit agencies, 31 CAPACITY utilization, 42 Federal finance Capital accounts Debt subject to statutory limitation and types and Banks, by classes, 17 ownership of gross debt, 29 Federal Reserve Banks, 10 Receipts and outlays, 27, 28 Central banks, discount rates, 63 Treasury financing of surplus, or deficit, 27 Certificates of deposit, 20, 24 Treasury operating balance, 27 Commercial and industrial loans Federal Financing Bank, 27, 31 Commercial banks, 15, 20, 23 Federal funds, 3, 5, 16, 18, 19, 20, 24, 27 Weekly reporting banks, 18-20 Federal Home Loan Banks, 31 Commercial banks Federal Home Loan Mortgage Corporation, 31, 36, 37 Assets and liabilities, 17-19 Federal Housing Administration, 31, 36, 37 Business loans, 23 Federal Land Banks, 37 Commercial and industrial loans, 15, 20, 23 Federal National Mortgage Association, 31, 36, 37 Consumer loans held, by type, and terms, 38, 39 Federal Reserve Banks Loans sold outright, 19 Condition statement, 10 Nondeposit fund, 16 Discount rates (See Interest rates) Number, by classes, 17 U.S. government securities held, 4, 10, 11, 29 Real estate mortgages held, by holder and property, 37 Federal Reserve credit, 4, 5, 10, 11 Time and savings deposits, 3 Federal Reserve notes, 10 Commercial paper, 3, 22, 24, 35 Federally sponsored credit agencies, 31 Condition statements (See Assets and liabilites) Finance companies Construction, 42, 46 Assets and liabilities, 35 Consumer installment credit, 38, 39 Business credit, 35 Consumer prices, 42, 47 Loans, 18, 38, 39 Consumption expenditures, 48, 49 Paper, 22, 24 Corporations Financial institutions Profits and their distribution, 33 Loans to, 18, 19, 20 Security issues, 32, 62 Selected assets and liabilities, 26 Cost of living (See Consumer prices) Float, 4 Credit unions, 26, 38 (See also Thrift institutions) Flow of funds, 40, 41 Currency and coin, 17 Foreign banks, assets and liabilities of U.S. branches and Currency in circulation, 4, 13 agencies, 20 Customer credit, stock market, 25 Foreign currency operations, 10 Foreign deposits in U.S. banks, 4, 10, 18, 19 DEBITS to deposit accounts, 14 Foreign exchange rates, 64 Debt (See specific types of debt or securities) Foreign trade, 51 Demand deposits Foreigners Adjusted, commercial banks, 14 Claims on, 52, 54, 57, 58, 59, 61 Banks, by classes, 17-20 Liabilities to, 19, 51, 52-56, 60, 62, 63 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 GOLD REAL estate loans Certificate account, 10 Banks, by classes, 15, 18, 19, 37 Stock, 4, 51 Rates, terms, yields, and activity, 3, 36 Government National Mortgage Association, 31, 36, 37 Savings institutions, 26 Gross national product, 48, 49 Type of holder and property mortgaged, 37 Repurchase agreements, 5, 16, 18, 19, 20 HOUSING, new and existing units, 46 Reserve requirements, 7 Reserves INCOME, personal and national, 42, 48, 49 Commercial banks, 17 Industrial production, 42, 44 Depository institutions, 3, 4, 5, 12 Installment loans, 38, 39 Federal Reserve Banks, 10 Insurance companies, 26, 29, 37 U.S. reserve assets, 51 Interbank loans and deposits, 17 Residential mortgage loans, 36 Interest rates Retail credit and retail sales, 38, 39, 42 Bonds, 3 Business loans of banks, 23 SAVING Federal Reserve Banks, 3, 6 Flow of funds, 40, 41 Foreign central banks and foreign countries, 63, 64 National income accounts, 49 Money and capital markets, 3, 24 Savings and loan associations, 8, 26, 37, 38, 40 (See also Mortgages, 3, 36 Thrift institutions) Prime rate, commercial banks, 22 Savings deposits (See Time and savings deposits) Time and savings deposits, 8 Securities (See specific types) International capital transactions of United States, 50-63 Federal and federally sponsored credit agencies, 31 International organizations, 54, 55-57, 60-63 Foreign transactions, 62 Inventories, 48 New issues, 32 Investment companies, issues and assets, 33 Prices, 25 Investments (See also specific types) Special drawing rights, 4, 10, 50, 51 Banks, by classes, 17, 19, 26 State and local governments Commercial banks, 3, 15, 17-19, 20, 37 Deposits, 18, 19 Federal Reserve Banks, 10, 11 Holdings of U.S. government securities, 29 Savings institutions, 26, 37 New security issues, 32 Ownership of securities issued by, 18, 19, 26 LABOR force, 43 Rates on securities, 3 Life insurance companies (See Insurance companies) Stock market, 25 Loans (See also specific types) Stocks (See also Securities) Banks, by classes, 17-19 New issues, 32 Commercial banks, 3, 15, 17-19, 20, 23 Prices, 25 Federal Reserve Banks, 4, 5, 6, 10, 11 Insured or guaranteed by United States, 36, 37 Student Loan Marketing Association, 31 Savings institutions, 26, 37 TAX receipts, federal, 28 MANUFACTURING Thrift institutions, 3 (See also Credit unions, Mutual Capacity utilization, 42 savings banks, and Savings and loan associations) Production, 42, 45 Time and savings deposits, 3, 8, 13, 16, 17-20 Margin requirements, 25 Trade, foreign, 51 Member banks (See also Depository institutions) Treasury currency, Treasury cash, 4 Federal funds and repurchase agreements, 5 Treasury deposits, 4, 10, 27 Reserve requirements, 7 Treasury operating balance, 27 Mining production, 45 UNEMPLOYMENT, 43 Mobile homes shipped, 46 U.S. government balances Monetary and credit aggregates, 3, 12 Commercial bank holdings, 17, 18, 19 Money and capital market rates (See Interest rates) Treasury deposits at Reserve Banks, 4, 10, 27 Money stock measures and components, 3, 13 U.S. government securities Mortgages (See Real estate loans) Bank holdings, 16, 17-19, 20, 29 Mutual funds (See Investment companies) Dealer transactions, positions, and financing, 30 Mutual savings banks, 8, 18-19, 26, 29, 37, 38 (See also Federal Reserve Bank holdings, 4, 10, 11, 29 Thrift institutions) Foreign and international holdings and transactions, 10, 29, 63 NATIONAL defense outlays, 28 Open market transactions, 9 National income, 48 Outstanding, by type and holder, 26, 29 Rates, 3, 24 OPEN market transactions, 9 U.S. international transactions, 50-63 Utilities, production, 45 PERSONAL income, 49 Prices VETERANS Administration, 36, 37 Consumer and producer, 42, 47 Stock market, 25 Prime rate, commercial banks, 22 WEEKLY reporting banks, 18-20 Producer prices, 42, 47 Wholesale (producer) prices, 42, 47 Production, 42, 44 Profits, corporate, 33 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 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 P. Henderson Frank E. Morris Thomas I. Atkins James A. Mcintosh NEW YORK* 10045 John Brademas Anthony M. Solomon Gertrude G. Michelson Thomas M. Timlen Buffalo 14240 M. Jane Dickman John T. Keane PHILADELPHIA 19105 Robert M. Landis Edward G. Boehne Nevius M. Curtis Richard L. Smoot CLEVELAND* 44101 William H. Knoell Karen N. Horn E. Mandell de Windt William H. Hendricks Cincinnati 45201 Vacant Charles A. Cerino Pittsburgh 15230 Milton G. Hulme, Jr. Harold J. Swart RICHMOND* 23219 William S. Lee Robert P. Black Leroy T. Canoles, Jr. Jimmie R. Monhollon Baltimore 21203 Robert L. Tate Robert D. McTeer, Jr. Charlotte 28230 Henry Ponder Albert D. Tinkelenberg Culpeper Communications John G. Stoides and Records Center 22701 ATLANTA 30301 John H. Weitnauer, Jr. Robert P. Forrestal Bradley Currey, Jr. Jack Guynn Birmingham 35283 Martha A. Mclnnis Fred R. Hen- Jacksonville 32231 Jerome P. Keuper James D. Hawkins Miami 33152 Sue McCourt Cobb Patrick K. Barron Nashville 37203 C. Warren Neel Jeffrey J. Wells New Orleans 70161 Sharon A. Perlis Henry H. Bourgaux CHICAGO* 60690 Stanton R. Cook Silas Keehn Edward F. Brabec Daniel M. Doyle Detroit 48231 Russell G. Mawby William C. Conrad ST. LOUIS 63166 W.L. Hadley Griffin Theodore H. Roberts Mary P. Holt Joseph P. Garbarini Little Rock 72203 Sheffield Nelson John F. Breen Louisville 40232 Sister Eileen M. Egan James E. Conrad Memphis 38101 Patricia W. Shaw Paul I. Black, Jr. MINNEAPOLIS 55480 William G. Phillips E. Gerald Corrigan John B. Davis, Jr. Thomas E. Gainor Helena 59601 Ernest B. Corrick Robert F. McNellis KANSAS CITY 64198 Doris M. Drury Roger Guffey Irvine O. Hockaday, Jr. Henry R. Czerwinski Denver 80217 James E. Nielson Wayne W. Martin Oklahoma City 73125 Patience Latting William G. Evans Omaha 68102 Robert G. Lueder Robert D. Hamilton DALLAS 75222 Robert D. Rogers Robert H. Boy kin John V. James William H. Wallace El Paso 79999 Mary Carmen Saucedo Joel L. Koonce, Jr. Houston 77252 Paul N. Howell J.Z. Rowe San Antonio 78295 Lawrence L. Crum Thomas H. Robertson SAN FRANCISCO 94120 Caroline L. Ahmanson John J. Balles Alan C. Furth Richard T. Griffith Los Angeles 90051 Bruce M. Schwaegler Richard C. Dunn Portland 97208 Paul E. Bragdon Angelo S. Carella Salt Lake City 84125 Wendell J. Ashton A. Grant Holman Seattle 98124 John W. Ellis 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

A76 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories yorfc January 1978 ALASKA mmhkw \ © Xv YYP LEGEND Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities Boundaries of Federal Reserve Branch • Federal Reserve Branch Cities Territories Federal Reserve Bank Facility Q Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT sumer credit protections. This 44-page booklet ex- PUBLICATIONS plains how to use the credit laws to shop for credit, apply for it, keep up credit ratings, and complain about an unfair deal. The Federal Reserve Board publishes a series of Protections offered by the Electronic Fund Transfer pamphlets covering individual credit laws and topics, Act are explained in Alice in Debitland. This booklet as pictured below. The series includes such subjects as offers tips for those using the new "paperless" syshow the Equal Credit Opportunity Act protects wom- tems for transferring money. en against discrimination in their credit dealings, how Copies of consumer publications are available free to use a credit card, and how to use Truth in Lending of charge from Publications Services, Mail Stop 138, information to compare credit costs. Board of Governors of the Federal Reserve System, The Board also publishes the Consumer Handbook Washington, D.C. 20551. Multiple copies for classto Credit Protection Laws, a complete guide to con- room use are also available free of charge. The Equal Credit LGCMO Opportunity Act LE4SING I The and . .. LE4SMG I' Equal Credit LE4SMG I Opportunity Act and TRUTH IN LE4SING Credit Rights ' In Housing What Thithln Lending Means To You The The Equal Equal Credit Opportunity Credit Actr~ Opportunity Act and... WOMEN ...andI Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE REGULATORY SERVICE The Securities Credit Transactions Handbook contains Regulations G, T, U, and X, dealing with exten- To promote public understanding of its regulatory sions of credit for the purchase of securities, together functions, the Board publishes the Federal Reserve with all related statutes, Board interpretations, rul- Regulatory Service, a three-volume looseleaf service ings, and staff opinions. Also included is the Board's containing all Board regulations and related statutes, list of OTC margin stocks. interpretations, policy statements, rulings, and staff The Consumer and Community Affairs Handbook opinions. For those with a more specialized interest in contains Regulations B, C, E, M, Z, AA, and BB and the Board's regulations, parts of this service are associated materials. published separately as handbooks pertaining to mon- For domestic subscribers, the annual rate is $175 for etary policy, securities credit, and consumer affairs. the Federal Reserve Regulatory Service and $60 for These publications are designed to help those who each handbook. For subscribers outside the United must frequently refer to the Board's regulatory materi- States, the price including additional air mail costs is als. They are updated at least monthly, and each $225 for the Service and $75 for each Handbook. All contains conversion tables, citation indexes, and a subscription requests must be accompanied by a check subject index. or money order payable to Board of Governors of the The Monetary Policy and Reserve Requirements Federal Reserve System. Orders should be addressed Handbook contains Regulations A, D, and Q plus to Publications Services, Mail Stop 138, Federal Rerelated materials. For convenient reference, it also serve Board, 20th Street and Constitution Avenue, contains the rules of the Depository Institutions N.W., Washington, D.C. 20551. Deregulation Committee. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis